Archive for the ‘Economy/Society’ Category

The ninth principle of the concentration of wealth and power deals with one of Chomsky’s abiding themes, i.e., the mechanisms through which thought control—or the manufacturing of consent—takes place in a liberal democracy.


Chomsky begins by referring to the origins of the public relations and advertising industries at the turn of the twentieth-century:

The public relations industry, the advertising industry, which is dedicated to creating consumers, it’s a phenomenon that developed in the freest countries, in Britain and the United States, and the reason is pretty clear. It became clear by, say, a century ago, that it was not going to be so easy to control the population by force. Too much freedom had been won. Labor organizing, parliamentary labor parties in many countries, women starting to get the franchise, and so on. So, you had to have other means of controlling people. And it was understood and expressed that you have to control them by control of beliefs and attitudes.

Here, Chomsky is answering a critical question: How does the ruling class maintain its control over the population despite the growing consciousness of civil rights and democratic freedoms? During most of civilized history, elite control of the population was maintained largely through the threat and use of organized violence, and to a lesser extent through religious legitimation of the status quo. Every now and then popular rebellions did occur, but they tended to be ruthlessly crushed by the rulers. From the rise of cities to the beginning of the industrial age, violent force remained the main instrument employed by the ruling classes for keeping the masses obedient and for discouraging any fantasies of rebellion against the established order. This dynamic started to change, however, in the wake of the Glorious Revolution (1688) and the French Revolution (1789). As the ideals of human equality and popular sovereignty started to gain wide acceptance, it became increasingly difficult for the elite to rule through force alone. To the extent that violence or the threat of violence were no longer effective in controlling the masses, it became imperative for them to solicit and gain the support and consent of the masses—or risk losing their legitimacy.

In the United States, a number of key freedoms and rights were won during the Progressive Era—developments that were correctly seen by the elites as threats to their economic and political interests. As a result, a need arose at the beginning of the twentieth-century for managing the perceptions of the population in increasingly subtle and sophisticated ways. The public relations and advertising industries came into being at that time precisely to meet that need, and just in time for President Woodrow Wilson to use them for his own project: gaining public support for American entry in the First World War. The aim of these new industries and associated professions was to apply the latest scientific discoveries concerning human motivation and behavior in the service of the rich and powerful; this was to be achieved through using the print media and other forms of mass communication for shaping popular beliefs and attitudes.

Chomsky has previously discussed the political aspects of this phenomenon in his 1988 Massey lectures, subsequently published as Necessary Illusions: Thought Control in Democratic Societies (1989). In the preface to that book, Chomsky explains that a major contradiction is inherent within the structure of capitalist democracies: Capitalism tends to concentrate power in the hands of the wealthy, while democracy requires that power be widely distributed among the population. For Chomsky, the manufacturing of consent through mass media is the most common way in which the ruling elite have typically sought to overcome that contradiction:

In capitalist democracies there is a certain tension with regard to the locus of power. In a democracy the people rule, in principle. But decision-making power over central areas of life resides in private hands, with large-scale effects throughout the social order. One way to resolve the tension would be to extend the democratic system to investment, the organization of work, and so on. That would constitute a major social revolution, which, in my view at least, would consummate the political revolutions of an earlier era and realize some of the libertarian principles on which they were partly based. Or the tension could be resolved, and sometimes is, by forcefully eliminating public interference with state and private power. In the advanced industrial societies the problem is typically approached by a variety of measures to deprive democratic political structures of substantive content, while leaving them formally intact. A large part of this task is assumed by ideological institutions that channel thought and attitudes within acceptable bounds, deflecting any potential challenge to established privilege and authority before it can take form and gather strength.

To paraphrase, a society that claims to follow both capitalism and democracy at the same time, such as the United States, must somehow deal with the following tension: on the one hand, democracy requires that people enjoy the right to participate in any decision that affects them, while, on the other hand, capitalism requires that private owners of capital enjoy the right to manage their capital without any interference. This means that the requirements of democracy are incompatible with the requirements of capitalism, making it impossible for both of them to coexist in the same society. According to Chomsky, this tension between democracy and capitalism can be resolved in one of the three ways: (1) by extending the principle of democracy to the realm of capital; (2) by using violent force to obtain people’s compliance; or (3) by using the mass media and institutions of socialization to shape public opinion in favor of the established order. The first option violates the basic principle of capitalism and will be unacceptable to the elite classes, while the second option foregoes any pretense to democracy and will be unacceptable to the masses. The third option is what is actually practiced in liberal democracies: it involves maintaining a facade of democratic institutions to placate the population while allowing the elites to keep their power and privilege. Such an arrangement inevitably requires extensive ideological management of the population, which is basically propaganda without any overt use of force, threats, or other authoritarian tactics. Propaganda has replaced violence.


Much of the ideological management of the population—also known as “thought control” (Chomsky’s phrase) or “manufacture of consent” (Walter Lippmann’s phrase)—takes place through news and political commentary in the mass media, a topic that Chomsky has discussed in detail in Manufacturing Consent: The Political Economy of the Mass Media, which he co-authored with Edward S. Herman. In Requiem, Chomsky focuses on the role of advertising and public relations industries. He points out that the contemporary culture of relentless consumption is by no means a manifestation of natural human desires; it is, rather, the result of sophisticated manipulation of people’s feelings at a mass scale.

One of the best ways to control people in terms of attitudes is what the great political economist Thorstein Veblen called “fabricating consumers.” If you can fabricate wants, make obtaining things that are just about within your reach the essence of life, they’re going to be trapped into becoming consumers.

The consumer culture serves two main objectives for the ruling classes. First, it keeps the vast majority of population preoccupied with the most superficial pursuits, such as fashion and gadgetry,  thereby diverting their attention away from gross injustices and the continuous erosion of their rights. Second, it keeps the treadmill of production and consumption moving at an ever-increasing pace, a process that is essential for capital accumulation. In effect, consumer culture undermines democracy, causing it to loses more and more of its substance until it is reduced to nothing more than a shell.

Incidentally, the theory behind “fabricating consumers” and “manufacturing consent” is shared by conservatives and liberals alike: it is the idea that the vast majority of human beings are incapable of critical thinking, that people don’t know what is good for them, and that they shouldn’t therefore be allowed to make major decisions that affect their lives. The masses are like little children, not mature enough to understand how the world actually works and therefore undeserving of actual participation in public affairs. Consequently, the reasoning goes, the population must be led by an elite minority, i.e., by those who deserve to rule by virtue of their worldly knowledge, maturity, and superior intellect. The notion that society can only function on the basis of a natural hierarchy has been central to conservative thought, but Chomsky argues that many so-called progressives have embraced it too, either explicitly or implicitly: Walter Lippmann is a case in point.


Walter Lippmann, The Phantom Pubic (1927), p. 145.

According to Chomsky, consumerism plays a central role in keeping the “bewildered herd” preoccupied with childish concerns, allowing the elite to maintain an exploitative political-economic order behind the facade of democracy. Commercial advertising is the main engine of consumerism, inculcating a sense of inadequacy, deficiency, and alienation—a sense of existential lack that can only be overcome by acquiring the latest gadget, the newest car, or the most fashionable dress or accessory. The relief, of course, is short-lived, and the cycle keeps repeating itself over and over again. The resulting consumer culture serves the ruling classes by eroding community and solidarity, producing a type of individualism that isolates people from each other and drains their collective power, reducing citizens to consumers. Chomsky explains:

The ideal is what you actually see today, where, let’s say, teenage girls, if they have a free Saturday afternoon, will go walking in the shopping mall, not to the library or somewhere else. The idea is to try to control everyone, to turn the whole society into the perfect system. Perfect system would be a society based on a dyad, a pair. The pair is you and your television set, or may be now you and the Internet, in which that presents you with what the proper life would be, what kind of gadgets you should have. And you spend your time and effort gaining those things, which you don’t need and you don’t want, and may be you’ll throw them away, but that’s the measure of a decent life.

Chomsky notes that the purpose of commercial advertising is the exact opposite of what is taught in economic theory. The avalanche of advertisements to which we are subjected daily through television, billboards, and the Internet is intended to deceive, not educate. Advertising is not meant to inform the viewers so they can make wise choices; the aim, rather, is to indoctrinate them into desiring the goods and services they don’t actually need and often can’t afford.

If you’ve ever taken an economics course, you know that markets are supposed to be based on “informed consumers” making “rational choices.” Well, if we had a system like that, a market system, then a television ad would consist of, say, General Motors putting up information, saying “here’s what we have for sale.” That’s not what an ad for a car is. An ad for a car is a football hero, an actress, the car doing some crazy think like going up a mountain or something. The point is to create uninformed consumers who will make irrational choices. That’s what advertising is all about.

The principles and strategies that have proven so successful for selling cars and cigarettes and for branding corporations are widely used for selling political candidates and their agendas as well, come election time. This is the main reason why running for public office is such an unusually expensive undertaking, and why candidates who spend more money on their campaigns than their opponents win the elections 90% of the time. It is also for this reason that electoral campaigns are run just like any other marketing campaign, and that high-profile races, such as the Presidential elections in the United States, are managed by some of the most highly-paid advertising executives.

And when the same institution, the PR system, runs elections, they do it the same way. They want to create uninformed electorate which will make irrational choices, often against their own interests, and we see it every time one of these extravaganzas take place. Right after the election, President Obama won an award from the advertising industry for the best marketing campaign. It wasn’t reported here, but if you go the international business press, executives were euphoric. They said, we’ve been selling candidates, marketing candidates like toothpaste ever since Reagan and this is the greatest achievement we have.

The characteristic features of contemporary political campaigns include uncritical celebration of personal charisma, absence of specific promises, and vague appeals to emotions—features that are already familiar to us from commercial advertising. Barack Obama’s 2008 election campaign was a highly successful example of this model. His electoral/marketing campaign won the Advertising Age’s “marketer of the year” award with 36.1% votes, defeating Apple, Zappos, and Nike. Just like most commercial advertising, Obama’s election campaign was designed to sell, not to inform, which is why it consisted of empty rhetoric that his audience were supposed to fill with their own ideas. As Chomsky notes, Obama never actually promised to deliver anything specific in his speeches. Rather, he used generic and vague slogans—emotionally charged words like “hope” and “change”—that the listeners could interpret in any way they wished. Large crowds at Obama’s rallies enthusiastically chanted “Yes We Can,” without noticing that the slogan was a meaningless claim that strategically avoided any commitment or standard on which the candidate’s performance could be evaluated.



The tenth and final principle of the concentration of wealth and power consists of the imperative to “marginalize the population.” According to Chomsky:

One of the leading political scientists, Martin Gilens, came out with a study of the relations between public attitudes and public policy. What he shows is that about 70% of the population has no way of influencing policy. They might as well be in some other country.

Chomsky is referring to a study published in 2014 by Martin Gilens of Princeton University (co-written with Benjamin Page of Northwestern). Gilens also published the expanded version of his research in book form as Affluence and Influence: Economic Inequality and Political Power in America. In the original article, the authors begin by asking: Who really controls policy-making in the United States? Overall, there is a strong status quo bias, which means that it is very hard to get any kind of change happen through the political process. But when change does happen, it almost always favors the economic elite rather than the average citizen. The data shows that when the economic elites want to have a policy changed, the probability that the change will be enacted increases as the number of people supporting it rises. On the other hand, when the average citizens want to have a policy changed, and their preference is not in alignment with what the economic elites want, then such a policy has virtually no chance of being enacted—regardless of how many people support it.


downloadWhat Martin Gilens has shown, in effect, is that the United States may be a representative democracy in the technical sense but it is by no means an actual, functioning democracy. This is because government policies in our country do not reflect the preferences of the majority; rather, they reflect the preferences of a tiny economic elite. The term for this sort of arrangement is oligarchy, not democracy. When Gilens’ study was first published, it attracted significant attention in the media. The study is groundbreaking in that it proves through hard data and statistical analysis that the United States is, in fact, ruled by an economic elite. This conclusion, however, is something that most people already know and understand, even without any help from academic researchers. Chomsky makes the same point in Requiem. He also seems to predict that the resulting frustration and resentment could lead to adverse social and political consequences that we are, in fact, witnessing in the age of Donald Trump.

And the population knows it. What it has led to is a population that’s angry, frustrated, hates institutions. It’s not acting constructively to try to respond to this. There is popular mobilization and activism, but in very self-destructive directions. It’s taking the form of unfocused anger, attacks on one another, and on vulnerable targets. That’s what happens in cases like this. It is corrosive of social relations, but that’s the point. The point is to make people hate and fear each other, and look out only for themselves, and don’t do anything for anyone else.

The attempt to implement the ideals of democracy and capitalism at the same time leads to a serious contradiction, as mentioned above. While political power remains firmly in the hands of a small group of wealthy elites, the population is constantly told that they are the actual sovereigns who control their own destiny. The gap between dreams and ambitions on the one hand and the frustrating reality on the other hand goes on widening, leading to “unfocused anger” that demagogues are then able to channel towards scapegoats, i.e., religious and ethnic minorities. Trump’s victory in the 2016 elections, along with the rise of the ultra-right and white supremacy, seem to vindicate Chomsky’s analysis.

The disempowerment of ordinary people is evidenced, according to Chomsky, in how Americans feel about paying taxes.

April 15 is kind of a measure, the day you pay your taxes, of how democratic the society is. If a society is really democratic, April 15 would be a day of celebration. It’s a day when the population gets together, decides to fund the programs and activities that they have formulated and agreed upon. What could be better than that? So, you should celebrate it. It’s not the way it is in the United States. It’s a day of mourning. It’s a day in which some alien power that has nothing to do with you, is coming down to steal our hard-earned money, and you do everything you can to keep them from doing it. That is a kind of measure of the extent to which, at least in popular consciousness, democracy is actually functioning.

In an actual, functioning democracy, the general population will have control over how their tax dollars are spent. Americans hate paying taxes because they know, deep down, that they have no control over policy-making. They don’t see government as a manifestation of their own will, which would be the case in a real democracy, but as an alien entity that is more or less completely unresponsive to their needs and preferences. This is another way of saying that the ruling classes in the United States have successfully marginalized the population, and that they have done so as a matter of conscious policy.


The consequences are hardly surprising: When people lack any actual power to affect policy, they often show a tendency to become increasingly selfish, deciding that they must live according to the maxim “every man for himself.” But human beings can only flourish through cooperation and mutual goodwill. A society that’s based on the pursuit of narrowly defined self-interest will only destroy everything that comes in its path, and will eventually destroy itself.

The tendencies that we’ve been describing within American society, unless they’re reversed, it’s going to be an extremely ugly society. I mean, a society that’s based on Adam Smith’s vile maxim “all for myself, nothing for anyone else,”a society in which normal human instincts and emotion of sympathy, solidarity, mutual support … [are] driven out. … If the society is based on control by private wealth, it will reflect the values that it, in fact, does reflect. The value that is greed, and the desire to maximize personal gain, at the expense of others. Now … a small society based on that principle is ugly, but it can survive. A global society based on that principle is headed for massive destruction.

Read Full Post »

principle-7Large corporations and super-rich individuals can spend more money in a single election than the vast majority of people will earn in a lifetime. While one citizen can cast only one vote, concentrated wealth can allow you to shape the views of thousands of voters. Campaigns are expensive, and the availability of funds is often the decisive element. A candidate who is able to outspend his/her opponent wins the election nine out of ten times. Even if your favorite candidate doesn’t win, the money you’re able to contribute to the winner’s next election campaign can still buy you a significant amount of influence. Corporations tend to support both political parties, though their relative contributions can vary from one industry to another and also from one election cycle to another. This means that corporate funding is important not just for participation in elections but also for the day to day management of the party structure. Since both major political parties are constantly in the fundraising mode, they have little choice but to pay attention to the likes and dislikes of their big money donors.

Chomsky returns to a point he made earlier in the documentary:

Concentration of wealth yields concentration of political power, particularly so as the cost of elections skyrockets, which forces the political parties into the pockets of major corporations.

The U.S. Congress has tried to limit how much control big money interests can have on the electoral process, but it has not been able to go very far, thanks largely to a whole series of corporate-friendly decisions by the Supreme Court going back to the nineteenth century. Most people are at least vaguely aware of the Citizens United decision, but that particular Supreme Court ruling didn’t come out of the blue; it has, rather, a very interesting backstory. Chomsky suggests that we take a close look at history, so that’s what we’ll do.

“Corporations,” says Chomsky, “are  state-created legal fictions.” Basically, a corporation is an imaginary entity that is brought into existence when State agrees to give it certain legal rights. A corporation is considered a “legal person,” because it has the right to own property, make contracts, and hire employees, and because it is subject to applicable laws, just like an actual citizen. Everybody understands that corporations are not really persons—they don’t eat, drink, breathe, feel sad or happy, get sick, or die; rather, they are treated as persons only for the purposes of law, taxation, and so on. Throughout the nineteenth and twentieth centuries, however, corporations have acquired more and more rights that were originally intended only for real persons.


The first major step in this direction was Dartmouth College v. Woodward, the 1819 Supreme Court decision that turned the corporate charter from a government-granted privilege into a contract that cannot be altered by government, making it difficult for the government to control corporations; it also held that corporations have standing in the Constitution. However, the most important developments in the expansion of corporate personhood rights took place after the Civil War, when corporate lawyers decided to take advantage of the word “person” as used in the Fourteenth Amendment.

In the wake of the Civil War, the Congress passed three amendments to the Constitution. These were meant to (1) abolish slavery, (2) expand the rights of personhood to former slaves, and (3) to give African American men the right to vote. Thus, the Thirteenth Amendment (1865) said in part “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to its jurisdiction.” The Fourteenth Amendment (1868) said in part “All persons born or naturalized in the United States and subject to the jurisdictions thereof, are citizens of the United States and of the States wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” The Fifteenth Amendment (1870) said in part “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of substitute.”

The context of these three amendments make it abundantly clear that the word “person” was used in the Fourteenth Amendment with reference to the legislature’s concern for safeguarding the civil rights of former slaves in particular and African Americans more generally. There is no ambiguity here. Yet, as Noam Chomsky says in “Requiem,” that’s now how it was interpreted.

The fourteenth amendment has a provision that says no person’s rights can be infringed without due process of law. And the intent, clearly, was to protect freed slaves. So, okay, they’ve got the protection of the law. I don’t think it’s ever been used for freed slaves, if ever, [may be] marginally. Almost immediately, it was used for businesses, corporations. Their rights can’t be infringed without due process of law.

The issue first came up in San Mateo County v. Southern Pacific Railroad, an 1882 Supreme Court case. Among the railroad company’s lawyers was Roscoe Conkling, a former U.S. Senator and Representative from New York who had served on the committee that drafted the Fourteenth Amendment. Arguing before the Supreme Court in 1882, Conkling claimed that the drafting committee had decided to use the word “person” instead of “citizen” so as to ensure that corporations were covered under the equal protection clause (which turned out be a lie). The Court did not address the issue of corporate personhood in its ruling. Soon afterwards, in a related but separate case, Santa Clara County v. Southern Pacific Railroad (1886),the Chief Justice was reported to have said before the hearing began: “The Court does not wish to hear argument on the question of whether the 14th Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to corporations. We are all of the opinion that it does.” This opinion of the Chief Justice was not included in the Court’s final ruling, yet it was recorded by the court reporter in the “headnotes” and was subsequently treated by other courts as if was, in fact, part of the Supreme Court’s official verdict.

The rest, of course, is history: Since Santa Clara County v. Southern Pacific Railroad, corporations steadily increased their power and were even able to successfully claim for themselves the various provisions of the Bill of Rights, sometimes at the expense of the rights of natural persons. Chomsky finds this phenomenon a moral outrage.

So they gradually became “persons” under the law. Corporations are state-created legal fictions. May be they’re good; may be they’re bad. But to call them “persons” is kind of outrageous. So they got personal rights back about a century ago, and that extended through the 20th century. They gave corporations rights way beyond what persons have. … While the notion of person was expanded to include corporations, it was also restricted. If you take the Fourteenth Amendment literally, then no undocumented alien can be deprived of rights, if they’re persons. Undocumented aliens who are living here and building your buildings, cleaning your laws, and so on, they’re not persons, but General Electric is a person—an immortal super-powerful person.

In relation to the engineering of elections, the most relevant Supreme Court rulings are those that applied the “free speech” clause of the First Amendment to corporations.

In 1971, the Congress passed the Federal Election Campaign Act (FECA), requiring candidates to disclose sources of campaign contributions and expenditures. A scandal erupted in 1972 when an insurance magnate, W. Clement Stone, contributed $2 million to President Nixon’s election campaign, prompting Congress to thoroughly revise the FECA in 1974. The amended law included statutory limits on contributions by individuals to election campaigns as well as to political action committees (PACs), new disclosure requirements, campaign spending limits. It also created the Federal Election Commission (FEC) as an enforcement agency.

The provisions limiting campaign expenditures, however, were soon declared unconstitutional by the Supreme Court. In Buckley v. Valeo (1976), the Supreme Court ruled that political spending was equivalent to speech, and the First Amendment’s protections included financial contributions to candidates and political parties. Earlier, in Grosjean v. American Press Co. (1936), the Supreme Court had ruled that a newspaper corporation had a First Amendment liberty right to freedom of speech. In First National Bank of Boston v. Bellotti (1977), the Court decided that non-media corporations had the right to spend money on ballot initiative campaigns.


Given the consistent tendency of the Supreme Court to give more and more rights of natural persons to for-profit corporations, the Citizens United ruling in January 2010 did not come as a complete surprise. That case, essentially, centered on the constitutionality of “soft money.” In the late 70s, the FEC had allowed donors to contribute unlimited money to political parties (but not to individual candidates) so long as it was used for “party building activities” as opposed to election campaigns. In reality, both the Republican and Democratic parties freely spend this “soft money” to support candidates, and efforts at bringing such spending under control by Presidents George H. W. Bush and Bill Clinton did not succeed in Congress. In 1995, Senators John McCain (R) and Russ Feingold (D) started working on campaign finance reform to address the problem. The resulting legislation was blocked by Senate Republicans in 1998, but it passed the Congress in 2002 as the Bipartisan Campaign Reform Act (BCRA) and was signed into law by President George W. Bush .

In Citizens United v. Federal Election Commission (2010), the Supreme Court overturned most provisions of the McCain-Feingold legislation that restricted corporate money in federal elections. The Supreme Court ruling declared as unconstitutional the prohibition on corporations (both for-profit and nonprofit) as well as unions regarding political advocacy through “independent expenditures” and the financing of electioneering communications. The ruling allows corporations and unions to spend unlimited sums on political advertising and other forms of advocacy aimed at convincing voters to support or reject particular candidates. Neither corporations nor unions were permitted to donate money directly to election campaigns or political parties, but they were now free to spend as much money as they want on promoting or undermining a candidate so long as there was no “coordination” with any campaign. As a result, the Citizens United decision made possible the rise of Super PACs—which are basically PACs on steroids.

Political Action Committees or PACs are organizations that collect funds and make them available to political parties of their choice, or donate them to a candidate’s election campaign. There are various legal restrictions on PACs in terms of who can donate to them and how much they can spend. For example, donations to traditional PACs are capped at $5,000 per year.

Two months after the Citizens United ruling, the federal Court of Appeals for the D.C. Circuit held in Speechnow.org v. FEC that PACs that did not make direct contributions to candidates or political parties were allowed to receive unlimited contributions and to spend those contributions for political advocacy.


This decision, along with Citizens United, led to the proliferation of “independent expenditure only committees” or Super PACs. Such organizations can receive unlimited donations from individuals, unions, and corporations (both for-profit and nonprofit), and they can spend these funds to support a cause or a candidate, but are prohibited from “coordinating” their activities with any political party or election campaign. They are also required by law to disclose who their donors are.

The above rulings have not only opened the floodgates of political spending by both wealthy individuals  and business corporations, they have also created a legal loophole that allows unlimited spending by donors who prefer to remain in the shadows. This phenomenon has been aptly named “dark money.” Certain nonprofit organizations—mainly 501(c)(4) “social welfare” organizations—can act as Super PACs so long as political advocacy is not their primary function. Since these nonprofit organizations are not required to disclose who their donors are, they can receive unlimited money while shielding their donors from public scrutiny, and, at the same time, channeling these anonymous donations to political action committees. This nonprofit loophole has given rise to a relatively new phenomenon called “dark money.” Probably no one has exploited this loophole more than the Koch Brothers and the billionaire members of their secretive network.

The following chart (courtesy of Open Secrets) depicts political spending by outside groups. The term “outside spending” refers to political expenditures made by groups or individuals independently of a candidate’s election campaign. Groups in this category include conventional party committees, super PACs, and 501(c) nonprofit organizations. Notice the impact of Citizens United by comparing outside spending in the 2006 midterm elections to that in the 2010 midterm elections.


Another major blow to the proponents of campaign finance reform came in 2014, when the Supreme Court declared Section 441 of the Federal Election Campaign Act (FECA) to be unconstitutional. The relevant law dealt with aggregate limits on individual spending per election cycle. For the 2013–14 election cycle, for example, an individual could give no more than $2,600 to a candidate for federal office, with an aggregate limit of $48,600. Moreover, individuals were prohibited from donating more than $74,600 to political parties and PACs. The total aggregate limit was therefore $123,200 per election cycle. In McCutcheon v. Federal Election Commission, the Supreme Court upheld the spending limit per candidate per election cycle, but struck down all the aggregate limits—allowing individual donors to support as many candidates per election cycle as they want. This decision paved the way for “joint fundraising committees,” which allow candidates to band together and legally raise large sums of money from the same individuals.



Chomsky identifies the eighth principle of the concentration of wealth and power in terms of the necessity, from the viewpoint of the elite, to prevent the working class from organizing and demanding its rights.

There is one organized force which [has] traditionally … been in the forefront of efforts to improve the lives of the general population. That’s organized labor. It’s also a barrier to corporate tyranny. A major reason for the concentrated, almost fanatic attack on unions, on organized labor, is that they are a democratizing force. They provide a barrier that defends workers’ rights, but also popular rights generally. That interferes with the prerogatives and power of those who own and manage the society.

The working class constitutes the overwhelming majority of the population. Unlike the plutocrats and the oligarchs, however, the working class is not as organized as it needs to be in order to safeguard its collective interests. There have been periods in the U.S. history when the working class did manage to organize itself through labor unions and socialist parties, and whenever it was so organized it was successful in gaining new rights. These include some of the most common features of the American workplace that we today take for granted, such as minimum wage laws, an 8-hour workday, overtime pay, lunch breaks, paid vacations, sick leave, wrongful termination laws, health insurance, sexual harassment laws, pensions, workers’ compensation, unemployment insurance, and the weekend. From the viewpoint of the elite, of course, this tendency of the working class to organize and successfully demand rights and seek improvements is simply intolerable. The United States has a long and violent history of repression against workers who dared to protest their conditions or sought to organize. By the 1920s, much of the labor movement had been successfully crushed by business interests. It was only in the wake of the Great Depression that it was able to resurrect and reorganize itself.

Chomsky explains how the credit for the New Deal can’t be given solely to President Roosevelt or the Democratic Party. These reforms would never have been implemented without the popular pressure from the masses, i.e., from organized labor and socialist parties.

Franklin Delano Roosevelt, he himself was rather sympathetic to progressive legislation that would be in the benefit of the general population, but he had to somehow get it passed. So he informed labor leaders and others, “force me to do it.” What he meant is, go out and demonstrate, organize, protest, develop the labor movement. When the popular pressure is sufficient, I’ll be able to put through the legislation you want. So, there was kind of a combination of sympathetic government, and by the mid-30s, very substantial popular activism [which made the New Deal possible]. There were industrial actions. There were sit-down strikes, which were very frightening to ownership. You have to recognize that sit-down strike is just one step before saying, “we don’t need bosses; we can run this by ourselves.” And business was appalled. You read the business press, say, in the late 30s, they were talking about the “hazard facing industrialists” and the “rising political power of the masses,” which has to be repressed.

Chomsky notes that the business interests returned to the task of marginalizing labor unions in the immediate aftermath of the Second World War. At that point, quarter of the workforce was unionized, and the labor movement’s promise to avoid going on strikes during the war was no longer in effect. Prompted by business lobbies, the Congress passed the Taft–Hartley Act in 1947, severely restricting the power of labor unions. It amended the National Labor Relations Act of 1935, also known as the Wagner Act and nicknamed the “labor’s bill of rights.” The earlier law had given workers the right to organize and join labor unions, to strike, and to bargain collectively. It had also prohibited business owners from attempting to dominate or influence a labor union, and from encouraging or discouraging union membership through any special conditions of employment or through discrimination against union or non-union members in hiring. In effect, the Wagner Act had permitted a “closed shop” (when an employer agrees to hire only union members) as well as a “union shop” (when an employer agrees to require new employees to join the union). When the Republican Party gained control of the Congress in the 1946 midterm elections, one of its first priorities was to attack and weaken as many New Deal laws as possible. The first target was labor unions, hence the Congress’ gutting of the Wagner Act.


The Taft–Hartley Act, also known as the Labor Management Relations Act of 1947, was the first step in the decades long process of dismantling the New Deal. It prohibited jurisdictional strikes, wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, and monetary donations by unions to federal political campaigns. Closed shops were prohibited and union shops were heavily restricted. States were allowed to pass “right to work” laws that outlawed closed or union shops. The act allowed the president to block or prevent the continuation of a strike on the grounds that it would endanger national health or safety. Democrats denounced the law as s “new guarantee of industrial slavery.”

Chomsky continues:

Then McCarthyism was used for massive corporate propaganda offensives to attack unions. It increased sharply during the Reagan years. I mean, Reagan pretty much told the business world, if you want to illegally break organizing efforts and strikes, go ahead. It continued in the 90s and, of course, with George W. Bush, it went through the roof. By now, less than 7% of private sector workers have unions.

The union membership in the private sector reached a peak in the 1950s and has since been on the decline. In 1954, about 35% of private sector workers were unionized; today, that figure is only 6.5%. The public sector unions have remained stable since the 1980s at about 11–12%. Labor unions act as barriers to economic inequality. When unions decline, the rich get richer while the working class incomes stagnate or plunge downwards, as depicted in the following chart. Notice how the share of income going to the richest tenth of the population (red line) came close to 50% on two occasions—1929 and 2008—just before the system crashed.

According to Chomsky, the post-WWII attacks on labor unions have virtually dissolved the main counter-force to the expanding power of the business class. As a result, when worker productivity and real wages started to diverge in the 1970s, there was no organized labor to speak of that could challenge the exploitation.



The decline of labor unions is also correlated with a decline in class consciousness among the working people. In sharp contrast, class consciousness is alive and well among the elite. In the United States, the plutocrats and oligarchs are busy exploiting the working class, which is the only reasonable explanation for the fact that all economic indicators show rising inequality. Yet, anyone who mentions this is immediately accused of causing division or fomenting class warfare. Strangely enough, Americans have, for the most part, grown allergic to the word “class.” The only time it is okay to use the word  is when someone is referring to the “middle class.” Apparently, neither the upper class nor the lower class exists anymore—we are all part of the middle class.

Chomsky explains how class consciousness has declined since the late nineteenth century, when the Republican Party represented the progressive element in the U.S. politics and regarded wage labor as nothing more than a type of slavery.

Now, if you’re in a position of power, you want to maintain class-consciousness for yourself, but eliminate it everywhere else. Go back to the 19th century, in the early days of the Industrial Revolution in the United States, working people were very conscious of this. They in fact overwhelmingly regarded wage labor as not very different from slavery, different only in that it was temporary. In fact, it was such a popular idea that it was the slogan of the Republican party. That was a very sharp class-consciousness. In the interest of power and privilege, it’s good to drive those ideas out of people’s heads. You don’t want them to know that they’re an oppressed class. So this is one of the few societies in which you just don’t talk about class.

The concept of class has to do with three main variables: wealth, income, and power. Your location in the class hierarchy is determined by how much of these you possess. Chomsky, in his inimitable style, simplifies the concept down to its bare essence: “Who gives the orders? Who follows them? That basically defines class.”

Read Full Post »


Chomsky’s fourth principle of the concentration of wealth and power is to “Shift the Burden.” He uses the word “burden” in the sense of the responsibility for maintaining and managing the society in which one lives. Morality demands that people who have greater wealth and bigger incomes ought to be held responsible at a higher level for meeting the needs of their community—they should contribute more to society because they’ve taken more from society. This means that the rich ought to pay a larger percentage of their wealth and income in the form of taxes. The idea behind the fourth principle is that, in violation of basic social ethics, the rich try to shift their tax burden onto the middle and lower classes. They do this by paying less than their fair share of taxes, thereby forcing everyone else to pay more than their fair share.

In “Requiem,” Noam Chomsky explains that wealthy individuals and business corporations used to pay very high taxes in the United States all the way up to the 1960s. Over the subsequent fifty years or so, however, they have succeed in changing the tax codes and other regulations so that today they are able to get away with paying only a tiny fraction of their fair share.

The higher taxes on corporations were put in place by President Roosevelt in the 1930s, despite vehement opposition from some sectors of the business class. The American economy expanded considerably during this period of high taxation. In the quarter-of-a-century following the Second World War, when Japan and much of Europe were struggling to recover from the devastation of war, United States experienced a period of rapid economic growth. This generated new wealth, which, coupled with the various welfare state policies established by Presidents Roosevelt and Johnson, led to increasing prosperity for large parts of the population. Even though economic disparities remained, they were prevented from growing out of control through government regulations. People generally felt that anyone who was willing to work hard would be able to escape poverty and achieve a relatively comfortable lifestyle.

Chomsky notes:

The American Dream, like many [other] ideals, was partly symbolic, but partly real. So in the 1950s and 60s, say, there was the biggest growth period in American economic history—the Golden Age. It was pretty egalitarian growth, so the lowest fifth of the population was improving almost as much as the upper fifth. And there were some welfare state measures which improved life for much of the population. It was, for example, possible for a black worker to get a decent job at an auto plant, buy a home, get a car, have his children go to school, and so on. And the same across the board.

In fact, many business leaders understood that their profits depended on the ability of ordinary people to buy their products, and therefore paying higher salaries made perfect business sense. They knew that if they didn’t pay good wages to their workers, those workers wouldn’t have enough money to spend, and that lower spending would mean lower consumption, which would mean lower profits. But this was true only when the workers and the consumers were essentially the same people. As Chomsky explains, for the super-rich in the United States, that is no longer the case.

When the U.S. was primarily a manufacturing center, it had to be concerned with its own consumers, here. Famously, [in 1914] Henry Ford raised the salary of his workers so they’d be able to buy cars. When you’re moving into an international “plutonomy,” as the banks like to call it—the small percentage of the world’s population that is gathering increasing wealth—what happens to American consumers is much less a concern, because most of them aren’t going to be consuming your products anyway, at least not on any major basis. Your goals [if you’re a business executive] are: profit in the next quarter, even if it’s based on financial manipulations; high salary, high bonuses [for yourself and your friends]; produce overseas if you have to and produce for the wealthy classes here and their counterparts abroad.

In the above quotation, notice the keyword “plutonomy.” Chomsky says that this is the word that banks use to describe an economy where only the super-rich matter, for they’re the main investors and the main consumers. What he doesn’t say is where that word came from, which is an interesting and very revealing story in its own right. Simply google the phrase “Citibank Memos” and you’ll find the information that’s missing from the film.

What about the rest? Well, there’s a term coming into use for them, too. They’re called the “precariat”—precarious proletariat. The working people of the world who live increasingly precarious lives.

Chomsky is referring to the term that was first used by French sociologists in the 1980s to describe the class of temporary workers. More recently, the term has been popularized by Guy Standing, an economist at the University of London, through his book The Precariat: The New Dangerous Class (2011). According to Standing, the precariat is a new class produced by the neoliberal policies of the last thirty or so years. This new class is defined by the precarious, uncertain life conditions of its members; they are forced to do a great deal of hard work that is neither recognized nor properly compensated, with no sense of security about their immediate or long-term future. Writing for Policy Network in 2011, Standing defined the precariat as follows:

It consists of a multitude of insecure people, living bits-and-pieces lives, in and out of short-term jobs, without a narrative of occupational development, including millions of frustrated educated youth who do not like what they see before them, millions of women abused in oppressive labour, growing numbers of criminalised tagged for life, millions being categorised as ‘disabled’ and migrants in their hundreds of millions around the world. They are denizens; they have a more restricted range of social, cultural, political and economic rights than citizens around them.

In Requiem, Chomsky goes on to talk about the issue of taxation.

During the period of great growth of the economy—the 50s and 60s, but in fact earlier—taxes on the wealthy were far higher. Corporate taxes were much higher, taxes on dividends were much higher, simply taxes on wealth were much higher. The tax system has been redesigned [during the subsequent decades], so that the taxes that are paid by the very wealthy are reduced, and, correspondingly, the tax burden on the rest of the population is increased.

In the following graph from Wikipedia, notice the ups and downs in the marginal tax rate for the lowest and highest earners over a hundred year period. According to Investopedia, “A marginal tax rate is the amount of tax paid on an additional dollar of income.” Taxpayers are divided into various tax brackets depending on their income; as they move from lower tax brackets to higher ones, the rate at which they are taxed goes up. In other words, “As income increases, what is earned will be taxed at a higher rate than the first dollar earned.” The exact rates of increase from one tax bracket to another is up to the legislature to decide, which is where the influence of the affluent comes into play. The trends are clear, or, as Chomsky puts it, “the numbers are striking.”


There is a crucial distinction between the marginal tax rate and the effective tax rate. According to Investopedia, “The marginal tax rate refers to the tax bracket into which a business’s or individual’s income falls.” This, however, does not reflect the actual rate at which the income of the said business or individual is taxed, which depends on numerous factors, rules, and loopholes besides the income. For this reason, it is the effective tax rate that is “a more accurate representation of tax liability than an individual or business’s marginal tax rate.”

The tax on corporations is essentially a burden on members of the upper classes who own the most stocks and shares, which is why they invest considerable time and money to get the government to reduce the effective corporate tax rate. In practice, however, there are plenty of ways that allow the corporations to avoid paying even the reduced effective tax rate—such as hiding their wealth in tax havens like Delaware or the Cayman Islands.

The following graph from Wikipedia shows the ups and downs in the effective corporate tax rates over a sixty year period. Notice the downward trend.


Compare the downward trend in the effective corporate tax rate shown above with the upward trend in corporate profits over the same period. The latter is depicted in the following graph, also from Wikipedia.


Chomsky then goes on to say:

Now the shift is towards trying to keep taxes just on wages and on consumption—which everyone has to do—not, say, on dividends, which only go to the rich.

Dividend is basically the cash payment that a company pays on a regular basis out of its profits to those who own the company’s stocks; such income is taxable. When the value of an investment or real estate increases above its purchase price, that’s called a “capital gain.” When that asset is sold, a capital gains tax is applied. Taxes on both dividends and capital gains are to be paid only by the wealthy, which is why there has been a trend towards lowering these taxes. When the tax burden is reduced on the upper classes, it has to be shouldered by the rest of society. As a result, taxes on wages and salaries are increased, as well as the consumption taxes that the government imposes on the sale of goods and services. These latter taxes are collected mainly from the middle and lower classes.

The unfairness of the U.S. tax system is pretty obvious. The top 0.1% of the population gets to increase its wealth while bankrupting the working classes. Worker productivity has consistently increased since the 1970s, but the wages during the same period have been stagnant or declining (when corrected for inflation). Corporations are earning record amounts of profits but are refusing to pay their fair share of taxes to sustain the very society that is allowing them to earn those profits. The public bailouts and stimulus packages after the crash of 2008 helped create an “economic recovery,” but almost the entire new wealth generated during this period has gone to the super-rich, leaving a few crumbs for the rest of the population.


By considering the above facts, anyone can reach the conclusion that the U.S. system of taxation is basically unacceptable and needs to be dismantled. Yet, we don’t see masses of people in the streets carrying the proverbial pitchforks and torches. This is so because while there is a great deal of discontent, there is very little clarity on allocating responsibility. It is all too tempting under such circumstances to look for saviors and to blindly follow charlatans and false prophets.

An important cause for the lack of clarity has to do with how our ideology has been shaped by powerful interests, as discussed under Principle #2. Whenever a grossly unjust arrangement is put into place, some form of justification is required to make this unfairness palatable to the exploited masses. Even when large numbers of people do not swallow the given ideology, those who do tend to make substantial change that much harder.


The most common justification for lowering taxes on wealthy individuals and business corporations, while increasing it on wages and consumer goods, is called “trickle-down economics.” But this is sheer falsehood, since there is no concrete evidence that cutting taxes on the rich somehow “increases investment and increases jobs.” As already mentioned, the exact opposite seems to be the case: the period of maximum economic growth in the United States was a period with some of the highest marginal and effective tax rates. As Chomsky explains: “If you want to increase investment, give money to the poor and the working people. They have to keep alive, so they [will] spend their incomes. That stimulates productions, stimulates investment, leads to job growth, and so on.”



Noam Chomsky’s fifth principle of the concentration of wealth and power is “Attack Solidarity,” which is basically refers to the same idea as “divide and conquer.” Chomsky defines the word solidarity simply as “caring for others,” but it’s a little deeper than that. Solidarity is the social form of altruism.

Solidarity is quite dangerous, from the viewpoint of the masters. You’re only supposed to care about yourself, not about other people. This is quite different from the people they claim are their heroes, like Adam Smith, who based his whole approach to the economy on the principle that sympathy is a fundamental human trait, but that has to be driven out of people’s heads. You’ve got to be for yourself, follow the vile maxim, don’t care about others—which is okay for the rich and powerful but is devastating for everyone else.

The economic ideology that has been dominant over the last half-a-century is known as “neoliberalism.” According to neoliberal doctrine, individuals are naturally selfish and, if everyone is allowed to follow his or her own (narrowly defined) self-interest then the whole society ends up benefiting. Exactly how does selfish behavior on the part of a society’s individual members lead to the overall benefit of that society is a mystery, usually explained by the magic of the free market as orchestrated by the “invisible hand.” In popular mythology, the eighteenth century Scottish philosopher Adam Smith (1723–1790) is believed to have discovered this phenomenon. For anyone who takes the trouble of actually studying Smith’s work, neoliberal ideology turns out to be the exact antithesis of everything he stood for.

Adam Smith was a moral philosopher and one of the first political economists; he was also a leading figures of the Scottish Enlightenment. His two most important books are titled The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). Smith’s economic theory is grossly misunderstood, or deliberately misinterpreted, primarily because the relationship between his two books is not widely appreciated, and also because he is frequently quoted out of context. Smith believed that sympathy, or benevolence, which is the foundation of solidarity, is one of the most basic human sentiments. We are the kind of creatures who’re naturally inclined to help our fellow human beings. While we often act from self-interest, no society can function if its members are lacking in sympathy.

In sharp contrast, neoliberal ideology emphasizes the pursuit of self-interest as the main human motivation. Since it gets human nature wrong, neoliberalism has to convince people through education and propaganda that they are supposed to be individualistic in their goals and that emotions like sympathy, benevolence, and altruism are to be shunned. We’re told that a society functions best when its individual members act entirely or almost entirely in their own self-interest, and that any attempt by society to restrain that motive is counterproductive to its own well-being. When people are brainwashed into thinking that they have no obligation to help their fellow human beings, they turn against each other and lose their capacity to resist and oppose the powers that be.

In “Requiem,” Chomsky discusses two major American institutions that are based on the principle of solidarity, both of which are under relentless attack—Social Security and public education.

Social Security means, I pay payroll taxes so that the widow across town can get something to live on. For much of the population, that’s what they survive on. It’s of no use to the very rich, so therefore there’s a concerted attempt to destroy it. One of the ways is defunding it. You want to destroy some system? First defund it. Then, it won’t work. People will be angry. They want something else. That’s a standard technique for privatizing some system.

In the United States, the Social Security Act was originally signed into law by President Franklin Roosevelt in 1935, and is now codified as U.S. Code, Title 42, Chapter 7. It is the foundation of the welfare state measures established in the wake of the Great Depression. The two Social Security Trust Funds are funded through payroll taxes collected by the IRS. It is the major source of income for the elderly, people with disabilities, and families needing temporary assistance. Attacks on Social Security include the argument that it reduces private ownership and redistributes wealth through government intervention rather than through free markets. Conservative and libertarian think tanks have been lobbying for the privatization of Social Security since the 1990s. In 1997, President Bill Clinton and Speaker of the House Newt Gingrich reached a secret agreement to “reform” Social Security. Clinton was supposed to make the announcement in his State of the Union address in January 1998, but this was derailed due to the Monica Lewinsky scandal. President George W. Bush also tried to privatize Social Security at the beginning of his second term, but he failed to receive sufficient popular support, while the Democratic victories in the 2006 midterm election basically killed Bush’s proposal in the Congress. Even though Social Security has so far survived privatization attempts, proposals for reducing benefits in a variety of ways keep appearing on a regular basis.

Another way in which the principle of solidarity has been institutionalized is public education, including K-12 schools and state funded colleges and universities. Chomsky calls public education “one of the jewels of American society.” Both sets of institutions are under attack. Writing in the Indypendent, scholar and activist Lois Weiner notes that the neoliberal assault on K-12 public education includes such tactics as “privatization of schools and services; charter schools, public-school closings, fragmentation of the school system’s administrative apparatus; budget cuts, high-stakes standardized testing and the destruction of the teacher unions.”

According to Chomsky:

Public schools are based on the principle of solidarity. I no longer have children in school; they’re grown up. But the principle of solidarity says, I happily pay taxes so that the kid across the street can go to school. Now that’s normal human emotion. You have to drive that out of people’s heads. I don’t have kids in school. Why should I pay taxes? Privatize it. The public education system, all the way from kindergarten to higher education is under severe attack.

Chomsky then goes on to discuss how public support for college education has declined in the United States and how this decline has contributed to huge student debt that only serves the interests of the wealthy elite.

You go back to the Golden Age again, the great growth period in the 50s and 60s. A lot of that was based on free public education. One of the results of the Second World War was the GI Bill of Rights, which enabled veterans, and remember, that’s a large part of the population then, to go to college. They wouldn’t have been able to, otherwise. U.S. was way in the lead in developing extensive mass public education at every level. By now, in more than half the states, most of the funding for colleges comes from tuition, not from the state. That’s a radical change.



Perhaps the most important means for preventing huge concentrations of wealth and power involves appropriate government regulations on business, banking, and finance. The sixth principle, “Run the Regulators,” is meant to circumvent that problem. Chomsky explain the phenomenon of “regulatory capture,” whereby the foxes become guards at the hen house.

If you look over the history of regulation—say, railroad regulation, financial regulation and so on—you find that quite commonly it’s either initiated by the economic concentrations that are being regulated, or it’s supported by them. And the reason is because they know that, sooner or later, they can take over the regulators. And it ends up with what’s called “regulatory capture.” The business being regulated is in fact running the regulators. Bank lobbyists are actually writing the laws of financial regulation—it gets to that extreme. That’s been happening through history and, again, it’s a pretty natural tendency when you just look at the distribution of power.

Regulatory capture occurs when the government agencies responsible for ensuring that businesses follow the regulations allow themselves to become complacent; instead of actively preventing problems from arising in the first place, they lose interest in anticipating or detecting possible problems. They become “captured,” in effect, by the very entities they’re duty bound to keep under control. As Scott Hempling points out, regulatory capture is not the same thing as corruption. Illegal acts like “financial bribery, threats to deny reappointment, promises of a post-regulatory career” do occur, but they are examples of corruption carried out by the entity being regulated. In contrast, regulatory capture describes the attitudes, actions, and non-actions on the part of regulatory agencies that prevent regulations from being fully or properly enforced. According to Hempling:

A regulator is “captured” when he is in a constant state of “being persuaded”: persuaded based on a persuader’s identity rather than an argument’s merits. Regulatory capture is reflected in a surplus of passivity and reactivity, and a deficit of curiosity and creativity. It is evidenced by a body of commission decisions or non-decisions—about resources, procedures, priorities, and policies, where what the regulated entity wants has more influence than what the public interest requires.

In “Requiem,” Chomsky explains that the enormous expansion of lobbying in the 1970s constitute a direct response of the business elite to the restrictions imposed on them by government regulations, the purpose of which was, and continues to be, the control of legislation so that it serves the interests of businesses, and not those of workers, the general public, or the natural environment.

The business world was pretty upset by the advances in public welfare in the 60s, in particular by Richard Nixon. It’s not too well understood that he was the last New Deal president, and they regarded that as class treachery. In Nixon’s administration, you get the consumer safety legislation, safety and health regulations in the workplace, the EPA (the Environmental Protection Agency). Business didn’t like it, of course. They didn’t like the high taxes. They didn’t like the regulation. And they began a coordinated effort to try to overcome it. Lobbying sharply increased.

Business corporations have learned that the money they spent on lobbying is part of their normal cost for doing business in American.


The success of the lobbying initiative could be seen almost immediately, as deregulation began in the Carter administration and gained tremendous momentum during the Reagan era. Chomsky notes how President Reagan bailed out banks like Continental Illinois. Instead of letting the bank fail, the FDIC spent $4.5 billion to bail it out; this was the largest government bailout at the time. That’s also when the term “too big to fail” became popular, after it was used by Congressman Stewart McKinney during a 1984 Congressional hearing. A company that’s “too big to fail” is basically too strong to be regulated by any government agency; it can indulge in questionable practices with the assurance that the taxpayers will rescue it if it starts to go down. One of the highlights of the Reagan presidency was the Savings & Loans crisis, which led to large bailouts. Financial regulations were weakened even further when the Glass-Steagal Act was dismantled under President Clinton, as already discussed under Principle #3. In 2008–09, the Bush and Obama bailouts of Wall Street set a new record. As a result of the Savings & Loans scandal of the 1980s, however, more than a thousand bankers were jailed. Nothing like that happened after the global financial meltdown of 2008. As Matt Taibbi explains here, the individuals and institutions responsible for the suffering of millions of people were never held accountable, let alone convicted or punished, mainly because of their deep financial ties with the Washington elite.


Illustration by Victor Juhasz

According to Chomsky, all of these bailouts violate the ideology of neoliberal capitalism, since governments are not supposed to intervene in the functioning of the “free markets.” Conservatives use the term “nanny state” to criticize public assistance like Social Security or publicly funded programs like schools. In practice, however, they are eager to ask for taxpayer bailouts every time a major corporation is about to go bankrupt or an investment bank is about to face the consequences of its own irresponsible behavior.

In a capitalist economy, you wouldn’t do that. In a capitalist system that would wipe out the investors who made risky investments. But the rich and powerful, they don’t want a capitalist system. They want to be able to run to the nanny state as soon as they’re in trouble, and get bailed out by the taxpayer. That’s called “too big to fail.”

While happily accepting government bailouts, the American oligarchs continue to preach the free market ideology and the need for small government to everyone else.

Meanwhile, for the poor, let market principles prevail. Don’t expect any help from the government. “Government is the problem, not the solution.” That’s essentially neoliberalism. It has this dual character which goes right back in economic history: one set of rules for the rich; opposite set of rules for the poor.

It didn’t have to be that way. When President Obama took office in January 2009, he could have listened to the advice of experts on how to fix the financial sector. Some even thought that the tremendous mandate that Obama had received in the elections meant that the had a once-in-a-lifetime chance of bringing about real change—that he could become a worthy successor to FDR. It soon became apparent that these hopes for change were illusory, as the President surrounded himself with the same people whose policies and actions had previously produced one crisis after another.

There are Nobel laureates in economics who significantly disagree with the course that we’re following. People like Joe Stiglitz, Paul Krugman, and others, and none of them were even approached. The people picked to fix the crisis were those who created it—the Robert Rubin crowd, the Goldman Sachs crowd—they created the crisis [and] are now more powerful than before.

Chomsky is fond of saying that the increasing concentration of wealth and power should not surprise anyone. It is not by accident or bad luck. It is the natural and expected result of the policies that our representatives have supported for decades. If the individuals who run large corporations and financial institutions end up as chief government regulators, there is no reason to think that they would suddenly become defenders of the rights and interests of the general population.

Nothing surprising about this. It’s exactly the dynamics you’d expect. … Everywhere you look, policies are designed this way, which should come as absolutely no surprise to anyone. That’s what happens when you put power into the hands of a narrow sector of wealth, which is dedicated to increasing power for itself, just as you’d expect.

Members of the United States Congress are responsible for safeguarding the rights and interests of the American people whose votes elect them. In practice, they tend to pay a lot more attention to what lobbyists want than what their voters need. Every member of the Congress has to spend about 30% of his or her time asking people for money, and each of them must raise about $10,000 a week for the next election campaign. Most lobbyists represent the biggest donors, and the policies they favor cannot be ignored. American business has certainly taken the advice of the Powell Memorandum. Writing in the Atlantic, Lee Drutman points out that business corporations spend approximately $2.6 billion on lobbying. “Of the 100 organizations that spend the most on lobbying, 95 consistently represent business.” Large corporations often have more than a hundred lobbyists working for them in Washington DC, “allowing them to be everywhere, all the time.” Which citizens’ group can possibly match the spending power and ubiquitous reach of Exxon Mobile or Goldman Sachs? “For every dollar spent on lobbying by labor unions and public-interest groups together, large corporations and their associations now spend $34.” Is it any wonder, then, that laws and policies are made that consistently increase the wealth and power of business corporations? Or that regulatory agencies like the EPA or the SEC are essentially powerless to enforce public interest regulations? No surprises here. You can’t put the foxes in charge of guarding the hen house and still hope to see your brood cackling in the morning.

Read Full Post »

Older Posts »