The Dark Age of Money

by JAMES C. KENNEDY
CounterPunch Oct. 24, 2012

EXCERPT...

Monetary Fascism was created and propagated through the Chicago School of Economics. Milton Friedman’s collective works constitute the foundation of Monetary Fascism. Knowing that the term ’Fascism’ was universally unpopular; Friedman and the Chicago School of Economics masquerade these works as ‘Capitalism’ and ’Free Market’ economics.

SNIP...

The fundamental difference between Adam Smith’s free market capitalism and Friedman’s ‘free market capitalism’ is that Friedman’s is a hyper extractive model, the kind that creates and maintains Third-World-Countries and Banana-Republics, without geo-political borders.

If you say that this is nothing new, you miss the point. Friedman does not differentiate between some third world country and his own. The ultimate difference is that Friedman has created a model that sanctions and promotes the exploitation of his own country, in fact every country, for the benefit of the investor, money the uber-wealthy. He dressed up this noxious ideology as ‘free market capitalism’ and then convinced most of the world to embrace it as their economic salvation.

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Monetary Fascism, as conceived by Friedman, uses the powers of the state to put the interest of money and the financial class above and beyond all other forms of industry (and other stake holders) and the state itself.

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Money has become the state and the traditional state is forced to serve money’s interests. Everywhere the Financial Class is openly lording over sovereign nations. Ireland, Greece and Spain are subject to ultimatums and remember Hank Paulson’s $700 billion extortion from the U.S. Congress. The $700 billion was just the wedge. Thanks to unlimited access to the Discount Window, Quantitative Easing and other taxpayer funded debt-swap bailouts the total transfers to the financial industry exceeded $16 trillion as of July 2010 according to a Federal Reserve Audit. All of this was dumped on the taxpayer and it is still growing.

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http://www.counterpunch.org/2012/10/24/the-dark-age-of-money/

“I don’t see why we need to stand by and watch a country go communist due to the irresponsibility of its people. The issues are much too important for the Chilean voters to be left to decide for themselves.” -- Henry Kissinger

A Critique of the Chicago School of Economics:

CHILE: THE LABORATORY TEST

EXCERPT...

Chile's privatized pensions

One of the most trumpeted "successes" of Chile's economic miracle is the privatization of its public social security system. It's most vocal supporter is Chilean economist José Piñera, who was once Pinochet's Minister of Labor, and therefore one of the most hated men in Chile. Today he is an international salesman of sorts, selling other nations on the idea of Chile's retirement program. Journalist Fred Solowey writes:

"In his speeches and articles, Piñera credits the Chilean pension model with producing just about everything short of the second coming of Christ: pensions that are 40-50 percent higher than under Social Security; security for the old; lower costs due to the 'fact' that the private sector is much more efficient than the public; a rate of savings rivaling that in an Asian 'tiger' economy; and even the end of class conflict in Chile." (38)

Piñera is co-chairman of a $2 million war being waged against U.S. Social Security by the Cato Institute. Their goal is to privatize the program along Chilean lines. Converts to their cause include Newt Gingerich, and, apparently, Time magazine. In a cover story entitled "The Case for Killing Social Security," Time included a sidebar on "How Chile Got it Right." (39) The operative word here is right, as in right-wing — Time's article quotes all the usual conservative think tanks, but not a single dissenting voice.

The Chilean retirement system is only a success to those companies who are pulling down outrageous profits from it. For the working people of Chile, it is a disaster in the making. According to SAFP, the government agency which regulates the private pensions, 96 percent of the known work force were enrolled in the private pensions as of February, 1995, but 43.4 percent of the account owners were not adding to their funds. Perhaps as many as 60 percent do not contribute regularly. Given the rising poverty in Chile, it is not difficult to understand why. Unfortunately, regular contributions are necessary to receive full benefits.

By 1988, about one fourth of Chilean workers were contributing enough to make the program's minimum benefits: $1.25 a day! (40) Critics charge that only 20 percent of the contributors will actually receive good pensions.

Worse, much of the plan's supposedly higher benefits are projected from the surging economic growth rates of the late 80s. But this growth followed a deep economic depression in 1983, and was bound to be high for many years following. Now that actual growth has caught up to potential growth, the Chilean economy is slowing down. The pensions are therefore not going to be as profitable as their cheerleaders claim.

When the current system was created in the early 80s, the government gave the people their choice: stay in the public program, or start contributing to private pensions. Over 90 percent of the people switched over to the private plan. This was carried out, however, under a mixture of threats, coercion and short term incentives. Many employers simply switched their employees' plans for them. The cash-starved public also received short-term pay increases by switching to private pensions, whereas the cost of the public programs went up for those who stayed in them.

"With the information I now have," says Cecilia Prado, a 17-year public employee, "I never would have switched. Under a democratic government they never could have imposed it on us. And if they ever passed a law allowing people to go back, there would be a great exodus." (41)

What many defenders of Chile's current program do not reveal is that under the old public plan, workers received not only pensions, but health care, low-interest housing loans from pension funds, and many other benefits. And that program covered 75 percent of all Chileans. When the private pensions went into effect, all these other services were dropped. As a result, Chile's "welfare pensions" for the desperately needy quickly rose 400 percent — up to the legal limit.

It is also extremely telling that when Pinochet introduced the program, his army and police were allowed to keep their own generous public plans. The private plans that were suitable for the masses apparently weren't good enough for those in charge of the country.

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http://www.huppi.com/kangaroo/L-chichile.htm

"The Chicago Boys in Chile: Economic Freedom's Awful Toll"

Orlando Letelier
August 28, 1976

EXCERPT...

The Economic Prescription and Chile's Reality

SNIP...

These are the basic principles of the economic model offered by Friedman and his followers and adopted by the Chilean junta: that the only possible framework for economic development is one within which the private sector can freely operate; that private enterprise is the most efficient form of economic organization and that, therefore, the private sector should be the predominant factor in the economy. Prices should fluctuate freely in accordance with the laws of competition. Inflation, the worst enemy of economic progress, is the direct result of monetary expansion and can be eliminated only by a drastic reduction of government spending.

Except in present-day Chile, no government in the world gives private enterprise an absolutely free hand. That is so because every economist (except Friedman and his followers) has known for decades that, in the real life of capitalism, there is no such thing as the perfect competition described by classical liberal economists. In March 1975, in Santiago, a newsman dared suggest to Friedman that even in more advanced capitalist countries, as for example the United States, the government applies various types of controls on the economy. Mr. Friedman answered: I have always been against it, I don't approve of them. I believe we should not apply them. I am against economic intervention by the government, in my own country, as well as in Chile or anywhere else (Que Pasa, Chilean weekly, April 3, 1975).

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A Rationale tor Power

SNIP...

Until September 11, 1973, the date of the coup, Chilean society had been characterized by the increasing participation of the working class and its political parties in economic and social decision making. Since about 1900, employing the mechanisms of representative democracy, workers had steadily gained new economic, social and political power. The election of Salvador Allende as President of Chile was the culmination of this process. For the first time in history a society attempted to build socialism by peaceful means. During Allende's time in office, there was a marked improvement in the conditions of employment, health, housing, land tenure and education of the masses. And as this occurred, the privileged domestic groups and the dominant foreign interests perceived themselves to be seriously threatened.

Despite strong financial and political pressure from abroad and efforts to manipulate the attitudes of the middle class by propaganda, popular support for the Allende government increased significantly between 1970 and 1973. In March 1973, only five months before the military coup, there were Congressional elections in Chile. The political parties of the Popular Unity increased their share of the votes by more than 7 percentage points over their totals in the Presidential election of 1970. This was the first time in Chilean history that the political parties supporting the administration in power gained votes during a midterm election. The trend convinced the national bourgeoisie and its foreign supporters that they would be unable to recoup their privileges through the democratic process. That is why they resolved to destroy the democratic system and the institutions of the state, and, through an alliance with the military, to seize power by force.

In such a context, concentration of wealth is no accident, but a rule; it is not the marginal outcome of a difficult situation -- as they would like the world to believe -- but the base for a social project; it is not an economic liability but a temporary political success. Their real failure is not their apparent inability to redistribute wealth or to generate a more even path of development (these are not their priorities) but their inability to convince the majority of Chileans that their policies are reasonable and necessary. In short, they have failed to destroy the consciousness of the Chilean people. The economic plan has had to be enforced, and in the Chilean context that could be done only by the killing of thousands, the establishment of concentration camps all over the country, the jailing of more than 100,000 persons in three years, the closing of trade unions and neighbourhood organizations, and the prohibition of all political activities and all forms of free expression.

While the Chicago boys have provided an appearance of technical respectability to the laissez-faire dreams and political greed of the old landowning oligarchy and upper bourgeoisie of monopolists and financial speculators, the military has applied the brutal force required to achieve those goals. Repression for the majorities and economic freedom for small privileged groups are in Chile two sides of the same coin.

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http://www.ditext.com/letelier/chicago.html

President Clinton and the Chilean Model.

By José Piñera

Midnight at the House of Good and Evil

"It is 12:30 at night, and Bill Clinton asks me and Dottie: 'What do you know about the Chilean social-security system?'” recounted Richard Lamm, the three-term former governor of Colorado. It was March 1995, and Lamm and his wife were staying that weekend in the Lincoln Bedroom of the White House.

I read about this surprising midnight conversation in an article by Jonathan Alter (Newsweek, May 13, 1996), as I was waiting at Dulles International Airport for a flight to Europe. The article also said that early the next morning, before he left to go jogging, President Bill Clinton arranged for a special report about the Chilean reform produced by his staff to be slipped under Lamm's door.

That news piqued my interest, so as soon as I came back to the United States, I went to visit Richard Lamm. I wanted to know the exact circumstances in which the president of the world’s superpower engages a fellow former governor in a Saturday night exchange about the system I had implemented 15 years earlier.

Lamn and I shared a coffee on the terrace of his house in Denver. He not only was the most genial host to this curious Chilean, but he also proved to be deeply motivated by the issues surrounding aging and the future of America. So we had an engaging conversation. At the conclusion, I ventured to ask him for a copy of the report that Clinton had given him. He agreed to give it to me on the condition that I do not make it public while Clinton was president. He also gave me a copy of the handwritten note on White House stationery, dated 3-21-95, which accompanied the report slipped under his door. It read:

Dick,
Sorry I missed you this morning.
It was great to have you and Dottie here.
Here's the stuff on Chile I mentioned.
Best,
Bill.

Three months before that Clinton-Lamm conversation about the Chilean system, I had a long lunch in Santiago with journalist Joe Klein of Newsweek magazine. A few weeks afterwards, he wrote a compelling article entitled,[font color="green"] "If Chile can do it...couldn´t North America privatize its social-security system?" [/font color]He concluded by stating that "the Chilean system is perhaps the first significant social-policy idea to emanate from the Southern Hemisphere." (Newsweek, December 12, 1994).

I have reasons to think that probably this piece got Clinton’s attention and, given his passion for policy issues, he became a quasi expert on Chile’s Social Security reform. Clinton was familiar with Klein, as the journalist covered the 1992 presidential race and went on anonymously to write the bestseller Primary Colors, a thinly-veiled account of Clinton’s campaign.

“The mother of all reforms”

While studying for a Masters and a Ph.D. in economics at Harvard University, I became enamored with America’s unique experiment in liberty and limited government. In 1835 Alexis de Tocqueville wrote the first volume of Democracy in America hoping that many of the salutary aspects of American society might be exported to his native France. I dreamed with exporting them to my native Chile.

So, upon finishing my Ph.D. in 1974 and while fully enjoying my position as a Teaching Fellow at Harvard University and a professor at Boston University, I took on the most difficult decision in my life: to go back to help my country rebuild its destroyed economy and democracy along the lines of the principles and institutions created in America by the Founding Fathers. Soon after I became Secretary of Labor and Social Security, and in 1980 I was able to create a fully funded system of personal retirement accounts. Historian Niall Ferguson has stated that this reform was “the most profound challenge to the welfare state in a generation. Thatcher and Reagan came later. The backlash against welfare started in Chile.”

But while de Tocqueville’s 1835 treatment contained largely effusive praise of American government, the second volume of Democracy in America, published five years later, strikes a more cautionary tone. He warned that “the American Republic will endure, until politicians realize they can bribe the people with their own money.” In fact at some point during the 20th century, the culture of self reliance and individual responsibility that had made America a great and free nation was diluted by the creation of [font color="green"] “an Entitlement State,”[/font color] reminiscent of the increasingly failed European welfare state. What America needed was a return to basics, to the founding tenets of limited government and personal responsibility.

[font color="green"]In a way, the principles America helped export so successfully to Chile through a group of free market economists needed to be reaffirmed through an emblematic reform. I felt that the Chilean solution to the impending Social Security crisis could be applied in the USA.[/font color]

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http://www.josepinera.org/articles/articles_clinton_chilean_model.htm

In an important sense, his political education was now nearly complete. He’d traveled from a three-and-a-half-room apartment in Flatbush and the close interdependency of a family of first- and second-generation Eastern European Jewish immigrants who showed their children snapshots of relatives murdered by the Nazis, to Chicago in the 1960s and the disillusioning discovery of institutional complicity in racism and war. He’d gone back to New York and personal turmoil and then had found release into self-sufficiency and social withdrawal in rural Vermont, where utopianism, protest, and anti-establishment lifestyles and practical politics all huddled together inside the Liberty Union tent, which, though it turned out to be rather fragile cover against the prevailing winds of 1970s party politics in Vermont, nevertheless taught Sanders that he had valuable skills as an organizer and as a public speaker and that at least one medium, television, found him extremely attractive.

-- http://www.theatlantic.com/politics/archive/2015/10/bernie-sanders-mayor/407413/