David Sirota

Partisan War Syndrome rages across the progressive blogosphere. The Wall Street faction of the Democratic Party hides its corporate fealty by declaring a new era of “The Common Good,” claiming as their own a term their arch enemy, Noam Chomsky, coined years ago. Democratic lawmakers cheer about bringing a “change” to Washington, talk up important efforts to better-fund education, then quietly begin reassuring K Street that all will be the same when it comes to structural economic issues. And lost in the din is the most important question: will free market fundamentalism finally be openly challenged?

That is the question I pose in today’s San Francisco Chronicle in an op-ed entitled “Flattening the Great Education Myth.” The piece describes a recent community meeting here in Helena, Montana and how local officials, hamstrung by a national trade policy that undermines their communities, are forced to focus exclusively on education as the way to build the economy. But, as the hard data shows, we cannot simply educate our way out of the problems associated with a globalization policy whereby our economy is regulated exclusively to enhance multinational corporate profits - and not to enhance ordinary people’s lives.

Admittedly, challenging Washington’s free market fundamentalism that has created this situation for local communities is a taboo subject considering the era we live in - an era where billions are spent each year on political campaigns that champion the “free market”, think tanks on both sides of the partisan divide spew refuse to challenge the excesses of unbridled capitalism, and the leading voice on a major television network demands the elimination of one of the oldest states in the union because people there had the gall to elect a - gasp! - democratic socialist to the U.S. Senate (McCarthyist red-baiting may be among the longest-surviving epithets in American political history). But taboos are taboos because they touch on what we all know are the real issues, yet are too embarrassed or intimidated to discuss.

The Washington pundits and million-dollar political consultants today bloviate over the need for everyone to show “unity” (read: conformity) after the 2006 election – all while the world’s rage burns brightly, both here at home and abroad, thanks to skyrocketing economic inequality brought on by what I and others have called free market fundamentalism. This religion, whose highest profile prophets are the Friedman Twins - Milton and Thomas - teaches that so-called “open markets,” deregulation, privatization, and trade policies prioritizing the rights of capital over the rights of labor will lead society to nirvana. No matter that global poverty and inequality have risen under this religion - the religion persists, thanks to the fundamentalists who, like cheap cult roadshow prosteltizers, are making a fast buck off the orthodoxy.

To understand how deeply rooted this fundamentalism is, consider not only my new San Francisco Chronicle op-ed, but also two recent articles from publications on the opposite sides of the political spectrum.

The Unfree Market

The first piece is by Chris Hayes in the progressive magazine In These Times. From a first-hand look at the University of Chicago (where Milton Friedman originally started out), he explores how free market fundamentalism is now hard-wired into the academic discipline of economics. First he traces the history:

“[Free-market fundamentalism] transformed what had been conservatism’s moral argument about capitalism bestowing the most benefits on those who worked the hardest — and the inherent injustice of a coercive state forcibly redistributing capital — into a technical argument about the inefficiencies associated with non-free-market solutions and the perverse incentives that made any social programs destined to fail. Thus, arguments about the way the world should be were converted into assertions about how the world actually was. Or, to put in terms that economists favor, normative arguments became positive ones.”

Hayes points out that, in fact, there is ample evidence that the “non-free-market” (aka. the government) often does things far more efficiently than the free market. For instance, consider how much money we’ve wasted by stripping the military and government agencies of various responsibilities for Iraq security and reconstruction and handing those responsibilities over to private contractors. Consider also that, as discussed in Hostile Takeover, while Medicare spends about 4 cents of every dollar on administration, the private health care market spends about 18 cents.

Hayes then uncovers the faith-based nature of free market fundamentalism, and its inherent hypocrisy, recounting an exchange between University of Chicago Professor Allen Sanderson and students:

“Sanderson argues that liberalized trade creates more jobs than it destroys. ‘Free trade creates winners and it also creates losers. It turns out that winners are quantitatively larger than the losers.’ A student asks, flat out, ‘Why are we to believe that?’ Sanderson restates his point, but the student holds his ground, saying he’s read that there simply doesn’t exist an accurate measure to figure out how many jobs are being created and destroyed. Sanderson concedes that this is true, but insists it ‘must’ be a net positive…One student asks about attaching labor or environmental protections to trade deals. Sanderson replies that such stipulations (like requiring workers be paid $ 14 an hour) simply operate like tariffs, raising the price of goods and ’saving jobs in the U.S., union jobs that are relatively high paid, and taking people in developing countries who are not well off and making them poorer. I tend to be against laws that make poor people poorer.’ ‘OK,’ responds the student, who with a beard and long hair looks a bit like the student radical who’s been missing all quarter. ‘Let’s say the standards are not ridiculous. The workers have a right to organize, or we can’t pollute the only source of the village’s water supply.’ ‘How do we define what’s ridiculous?,’ Sanderson shoots back. ‘Once you start, it’s very difficult to draw the line…’ ‘We do draw the line every day,” the student responds, not bothering to raise his hand this time. There are hands up all over and the class has now devolved into a free-for-all. ‘We don’t trade with Burma. We didn’t trade with Iraq. We do trade with Saudi Arabia. It’s not impossible to re-imagine how to draw the line.’ Sanderson is not winning this argument. ‘These are tough issues,’ he says, and the class ends.”

So, this esteemed professor has no proof that the free market fundamentalism he preaches actually creates the jobs he says it creates. Even worse, he pretends to actually support for a free market when in fact, he does not, and when in fact political and economic experts really know we actually don’t live in a free market at all. As the student points out, “we draw the line all the time” in our economic policies. And that gets us to a key point that no one wants to openly admit: we don’t live in a free market - we live in a highly-regulated totally unfree market.

Of course, that’s not necessarily a problem unto itself. The real problem is that the laws and regulations making our market not free are crafted to reward those who already have wealth and power, and help them concentrate that wealth and power further.

Our trade policies, for instance, are chock full of protections for intellectual property, patents and copyrights, but free of similar protections for worker rights. When Sen. John Kerry (D-MA) tried to grant workers the same rights as corporations in the recent Central American Free Trade Agreement, he was voted down. Multinational companies have crafted laws allowing them to import cheap food from other countries that goes through almost no health inspection, while pharmaceutical companies have bought legislation to prohibit consumers from purchasing lower-priced FDA-approved medicines from Canada. Hell, when Bill O’Reilly or Sean Hannity scream from their television perches about how important the so-called free market is, they are using the highly-regulated cable and public airwaves to distribute their propaganda.

Even Thomas Friedman, the billionaire high priest of free market fundamentalism, inadvertently acknowledges he’s not interested in the free market. He’s so supposedly devoted to the free market and to free trade that he has appeared on national television bragging that he used his New York Times column to advocate for trade pacts he didn’t even bother to read. Yet, he also uses his columns to demand the government intervene in the so-called free market to mandate a hike in automobile fuel efficiency standards, and thus prohibit cars from being sold in the United States that don’t meet these standards. While this is certainly an admirable goal, are we to simply accept as a law of nature Friedman’s inherent premise that the best unfree market is one where we mandate raising fuel efficiency standards but refuse to make sure people aren’t paid slave wages? No.

The Great Education Myth

While free market fundamentalists rarely admit these hypocrisies or the faith-based nature of their religion, some have at least begun to acknowledge things aren’t going as swimmingly as they predicted. What they propose to do about these shortfalls leads us to the next article – the cover story from the most recent edition of that not-exactly-liberal publication, Businessweek.

The article is brilliant, really. As Corporate America’s bible, the magazine designed the piece specifically to make the incoming Democratic Congress believe that it cannot do anything to fix economic inequality. “Global forces have taken control of the economy,” the magazine says breathlessly. “And government, regardless of party, will have less influence than ever” (this is a tried and true tactic of the free market fundamentalists: making us believe that all of the consequences of their religion – poverty, inequality, economic dislocation – are just forces of nature that no one can do anything about).

The only thing government can do, according to Businessweek, “is to boost government spending for R&D and education.” The first part of this prescription – “boost government spending for R&D” – has long been a euphemism for corporate welfare, rather than government R&D. Hand over more tax breaks to the private pharmaceutical industry that’s already swimming in cash, and miraculously we’ll create more life saving drugs. And yeah, let’s pay for that corporate welfare by cutting government agencies like the National Institutes of Health, despite the fact that, as Knight Ridder has reported, the government itself funds more than one third of all medical and health-related R&D, resulting in an uncountable number of innovations.

But it is the admissions that Businessweek makes that gives away the free market fundamentalists’ weakness. Even if you believe that, yes, all we have to do is give away taxpayer money to companies for R&D and put more money into education – there is no evidence to suggest that will work. “The problem is that it’s tough to make a direct connection between federal R&D spending and the creation of high-tech jobs,” the magazine admits flippantly. “Despite the U.S. prominence in medical research, the pharmaceutical, biotech, and medical devices industries have added only 19,000 workers in the past five years.”

Similarly, “real wages for young Americans with a bachelor’s degree have declined by almost 8% over the past three years.” Why? “Nobody knows the reason for sure, but some economists suspect that global competition has something to do with it.” Uh-huh. A nebulous “some” merely “suspect” that forcing Americans to compete with slave labor in the Third World may have “something to do with” stagnating wages and with the fact that their education-alone-will-save-the-world myth is just that: a myth.

The Fair Market Agenda

The fundamentalists would have us believe that the counter to their religion is Marxism, Stalinism or something else out of a George Orwell novel that would turn America’s economy into one long Soviet-style bread line.

What the cartoonish caricatures hide is basic American history. The lovechildren of free market fundamentalism are Enron, Worldcom, Arthur Anderson, HMO profiteering, low wages and Chinese sweatshops stealing American jobs. The offspring of progressive government intervention – call it the Fair Market Agenda - are public power, the SEC, Medicare, Social Security, the minimum wage and the International Labor Organization, to name just a few.

Even in the political arena itself, we see the difference. Free market fundamentalism has translated into a hands-off approach to regulating even the system we use to elect our representatives. Consequently, America’s “democracy” is one in which special interests are “free” to brazenly buy lawmakers through campaign contributions and PACs – with the results being a government wholly owned by Corporate America. By contrast, a political market subject to some modicum of intervention has led, at least in some states, to publicly financed elections, whereby candidates can run without having to be experts at shaking down Big Money for cash.

A Fair Market Agenda is one that embraces at least partial public ownership of infrastructure and services essential to human survival. This means the basics: security, transportation, energy and health care assets. Instead of handing away subsidies to private companies, public dollars can be used to wholly or partially own what taxpayers fund. Less handouts to private HMOs, and more expansion of the public health system. Fewer tax subisides to oil and drug companies, and more public ownership of energy facilities and investment in government pharmaceutical research.

A Fair Market Agenda is also one that supports regulations not just because they protect the environment, consumers and workers, but because they also create money-making markets. Every time the market is limited or shaped by a regulation, someone benefits economically. Take, for instance, state mandates such as the one pushed by Montana Gov. Brian Schweitzer (D) that force energy companies to produce a certain amount of their capacity from renewable sources. The coal companies scream about being “over-regulated” – but the wind, solar and hydroelectric industries have dollar signs in their eyes, as a market is created for their products. Same thing with the minimum wage. Low-wage employers whine about being “over-regulated,” but their competitors already providing better pay are rewarded because the wage playing field is equalized.

A Fair Market Agenda supports aggressive use of government power to protect the integrity of the capitalist system. New York Attorney General Eliot Spitzer understood that prosecuting securities fraud was, in fact, the most pro-Wall Street action he could take, because rooting out abuse helped preserve the rules that make America’s financial system work. The same strategy can be applied to enforcing anti-trust laws because, after all, capitalism does not function in the presence of monopoly or collusion.

Most of these reforms, of course, will not happen without the Fair Market Agenda being applied first to the political system itself. Better regulating how election campaigns are financed is the only way to allow political leaders to reject the free market fundamentalism pushed by moneyed interests. Publicly finance campaigns, and suddenly candidates do not have to embrace the extremism of privatization and deregulation as a prerequisite to obtaining adequate campaign resources.

The End of Free Market Fundamentalism?

Thus, we return to the question: will free market fundamentalism finally be challenged after the tidal wave election of 2006? Will political leaders start challenging the orthodoxy that says the private economy is always better than government, free trade is always better than fair trade, education alone can get us out of our problems, and the market is free when it actually isn’t? Signs say both yes and no.

On the yes side of the ledger is the ascendance of the People Party - the group of lawmakers in Washington who have defined themselves and their public images on issues of economic justice. This group is still very much outnumbered by the Money Party. But the People Party is surging, especially with the election of red-state economic populists like Senators-elect Sherrod Brown (D-OH), Jim Webb (D-VA) and Jon Tester (D-MT), and the scores of other candidates who used their opposition to free trade to bludgeon their opponents in political campaigns across the country. No longer can the pundits in Washington - who rarely bother to visit the heartland - argue with a straight face that economic populism can’t win red states (an argument thrown at my by corporate front groups like the DLC and commentators like Ruy Teixeira after I published this cover story in the American Prospect in 2004 and Hostile Takeover in 2006). Free trade fundamentalism – whether deliberately or not – was put on trial in 2006, and in many districts, was found guilty by voters. And in the days after the election, politicians seemed acutely responsive to this mandate, with lawmakers in the lame-duck Congress rejecting President Bush’s latest lobbyist-written trade deal, this one with Vietnam.

On the other hand, the Money Party seems prepared to dig in. The New York Times and Wall Street Journal both published articles recently about the cadre of K Street lobbyists – many former Democratic Hill staffers - who are salivating at the chance to exploit the new Democratic majority for their corporate clients’ gain. They are the new Freddy Kruegers in Washington’s never-ending Nightmare on K Street – and they are banking on Democrats refusing to deviate from a pay-to-play, business-as–usual culture.

At least some are already obliging. Rep. Barney Frank (D-MA) announced what he called a “grand bargain,” telling business leaders he will use his chairmanship of the Financial Services Committee to further deregulate the economy and pass more free-trade deals in exchange for the most bare minimum of wage increases for workers. In other words, the lowest wage workers would in the short-term get a few bucks more in their pocket in exchange for the government continuing to push a trade policy that undermines the structure of the country’s job base, and new efforts to eviscerate workplace, environmental and union protection regulations that would solidify wage gains for the long term. Wow, what a bargain.

Meanwhile, though much has been made of new investment in Democratic “infrastructure,” no one would claim with a straight face that progressives have a serious intellectual operation in Washington devoted to counter the still-powerful free market fundamentalism of organizations like the Heritage Foundation or the American Enterprise Institute. There certainly has been a recent proliferation of anti-right-wing, Republican-bashing outfits, but nothing that openly, publicly and ideologically challenges free-market fundamentalism. The same can be said of parts - though not all - of the netroots. Up to this point, the progressive blogosphere has been far more driven by an affinity for Democrats and despise for Republicans than it has been driven by any cohesive – much less conventional-wisdom-challenging - economic ideology (a phenomenon I entitled “Partisan War Syndrome” in an earlier article).

To be sure, Washington can have all the cocktail party bipartisanship and Capitol Hill unity it likes, and pundits, pollsters and political professionals can say “common good” and “American Dream” until they are blue in the face. But if these gestures come without a real challenge to destructive economic orthodoxies like the Great Education Myth and free market fundamentalism, we will continue to live in a country where opportunity is achievable for only a select few, rather than to all.

Sirotablog

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