The Sydney Morning Herald, Ross Gittins, December 31, 2012
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| Illustration: Michael Mucci. |
IF YOU'VE
ever suspected politics is increasingly being run in the interests of big
business, I have news: Jeffrey Sachs, a highly respected economist from
Columbia University, agrees with you - at least in respect of the United States.
In his
book, The Price of Civilisation, he says the US economy is caught in a feedback
loop. ''Corporate wealth translates into political power through campaign
financing, corporate lobbying and the revolving door of jobs between government
and industry; and political power translates into further wealth through tax
cuts, deregulation and sweetheart contracts between government and industry.
Wealth begets power, and power begets wealth,'' he says.
Sachs says
four key sectors of US business exemplify this feedback loop and the takeover
of political power in America by the ''corporatocracy''.
First is
the well-known military-industrial complex. ''As [President] Eisenhower
famously warned in his farewell address in January 1961, the linkage of the military
and private industry created a political power so pervasive that America has
been condemned to militarisation, useless wars and fiscal waste on a scale of
many tens of trillions of dollars since then,'' he says.
Second is
the Wall Street-Washington complex, which has steered the financial system
towards control by a few politically powerful Wall Street firms, notably
Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and a handful of other
financial firms.
These days,
almost every US Treasury secretary - Republican or Democrat - comes from Wall
Street and goes back there when his term ends. The close ties between Wall
Street and Washington ''paved the way for the 2008 financial crisis and the
mega-bailouts that followed, through reckless deregulation followed by an
almost complete lack of oversight by government''.
Third is
the Big Oil-transport-military complex, which has put the US on the trajectory
of heavy oil-imports dependence and a deepening military trap in the Middle
East, he says.
''Since the
days of John D. Rockefeller and the Standard Oil Trust a century ago, Big Oil
has loomed large in American politics and foreign policy. Big Oil teamed up
with the automobile industry to steer America away from mass transit and
towards gas-guzzling vehicles driving on a nationally financed highway
system.''
Big Oil has
consistently and successfully fought the intrusion of competition from non-oil
energy sources, including nuclear, wind and solar power.
It has been
at the side of the Pentagon in making sure that America defends the sea-lanes
to the Persian Gulf, in effect ensuring a $US100 billion-plus annual subsidy
for a fuel that is otherwise dangerous for national security, Sachs says.
''And Big
Oil has played a notorious role in the fight to keep climate change off the US
agenda. Exxon-Mobil, Koch Industries and others in the sector have underwritten
a generation of anti-scientific propaganda to confuse the American people.''
Fourth is
the healthcare industry, America's largest industry, absorbing no less than 17
per cent of US gross domestic product.
''The key
to understanding this sector is to note that the government partners with
industry to reimburse costs with little systematic oversight and control,''
Sachs says. ''Pharmaceutical firms set sky-high prices protected by patent
rights; Medicare [for the aged] and Medicaid [for the poor] and private
insurers reimburse doctors and hospitals on a cost-plus basis; and the American
Medical Association restricts the supply of new doctors through the control of
placements at medical schools.
''The
result of this pseudo-market system is sky-high costs, large profits for the
private healthcare sector, and no political will to reform.''
Now do you
see why the industry put so much effort into persuading America's punters that
Obamacare was rank socialism? They didn't succeed in blocking it, but the
compromised program doesn't do enough to stop the US being the last rich
country in the world without universal healthcare.
It's worth
noting that, despite its front-running cost, America's healthcare system
doesn't leave Americans with particularly good health - not as good as ours,
for instance. This conundrum is easily explained: America has the highest-paid
doctors.
Sachs says
the main thing to remember about the corporatocracy is that it looks after its
own. ''There is absolutely no economic crisis in corporate America.
''Consider
the pulse of the corporate sector as opposed to the pulse of the employees
working in it: corporate profits in 2010 were at an all-time high, chief
executive salaries in 2010 rebounded strongly from the financial crisis, Wall
Street compensation in 2010 was at an all-time high, several Wall Street firms
paid civil penalties for financial abuses, but no senior banker faced any
criminal charges, and there were no adverse regulatory measures that would lead
to a loss of profits in finance, health care, military supplies and energy,''
he says.
The 30-year
achievement of the corporatocracy has been the creation of America's rich and
super-rich classes, he says. And we can now see their tools of trade.
''It began
with globalisation, which pushed up capital income while pushing down wages.
These changes were magnified by the tax cuts at the top, which left more
take-home pay and the ability to accumulate greater wealth through higher
net-of-tax returns to saving.''
Chief
executives then helped themselves to their own slice of the corporate sector ownership
through outlandish awards of stock options by friendly and often handpicked
compensation committees, while the Securities and Exchange Commission looked
the other way. It's not all that hard to do when both political parties are
standing in line to do your bidding, Sachs concludes.
Fortunately,
things aren't nearly so bad in Australia. But it will require vigilance to stop
them sliding further in that direction.
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