January 20th 1981 marked the beginning of an era; an era of neo-liberalism. Market fundamentalism is an extreme comparable only to communist command economies yet it was happily implemented by the Reagan administration justified by increasing efficiency and consumer benefits. Taxes and regulations were cut together with the Economic Recovery Tax Act which was implemented in order to recover the recession which his ideological compatriot Paul Volcker agreed with and even increased interest rates to double digits. Yet like market fundamentalism’s communist counterpart the reality is inefficiency through the increase in the periodicity of economic downturn, which was realized in 1989 when restrictions to S&Ls were re-imposed through the FIRREA.
The Economic Recovery Tax Act is in fact quiet interesting and contradictory. It cut the marginal tax rate from 70% to 28% and reduced the capital gains tax to 20%. Yet social security was going bankrupt, so Reagan eventually would increase taxes on the working poor and middle class, he would race payroll tax. This was the beginning of the class warfare of the financial capitalist class on the poor.
Classical economic policies spread across the world and institutions such as the IMF and the WTO were setup to ensure the spread of the teachings of “The Wealth of Nations”. These organizations are centered around the Washington Doctrine and impose them with ideological dogma like the communist’s insistence on collectivization at any cost. Yet capital market liberalization has been an act of suicide as we have seen first in South East Asia and Russia in the late 1990s but also for its own exporters as we have seen with the recent crisis in which southern Europe has been plunged in fiscal crisis which is now threatening the north. Capital market liberalization allows short term and speculative capital investments to occur which are harmful to the stability of the economy as it causes excessive inflation.
But what allowed this policy-making to occur? It was a coup, perhaps even a revolution of the financial sector or more specifically the banks. The Fortune predicted two months before the presidential election that Wall Streets campaign donations would surpass 170 million dollars which is the highest in history. Essentially the banks are buying politicians as they did with Reagan in 1980 in order to implement supply-sided economics and capital market liberalization so that more money could be concentrated in their own hands.
Yet the spontaneous coup was not only limited to the political arena but also in the media which convinced and still convinces that trickle down policies are legitimate. If you watch BBC or CNN news network the commercial breaks are filled with various commercial banks and investment banks and their cheesy advertisements, but the banks are not depended on CNN or BBC they make enough money, CNN and BBC are depended on the banks for a chunky amount of their revenue comes from advertisement. This way the BBC and CNN are forced to bring on Reaganites and economist from the Chicago school to criticize rational political economy and praise Reagan trickle down policies. And so this market fundemantalist dogma has persuaded the public just like communist propaganda.
Perhaps this is a social revolution- a change the social relations by the alteration of the forces of production-according the dialectical materialism. Maybe its a transitional stage into a new mode of economy or super structure where the means of production are owned by another class, a class of lenders and investors; the banks. This however is perhaps a silly thesis because it first of all makes little sense in marxist terms in which the theory is derived from.
On a more serious notion we must look at the effects of the coup and the effects of neo-liberalism which are unfortunate, in fact the results of market fundementalism are much more detremental than post-Stalinist policies in the U.S.S.R. In fact before the market liberalization imposed on Russia by the IMF it was a Second World country, now it is undoubtedly a Third. Similarly the IMF imposed policies in favor of the banks dictated by the Washington Doctrine in Asia in the 90s and Europe in 2008 when entire financial systems collapsed-yet magazines like The Economist still call for capital market liberalization.
The development is alarming; it is centralizing the political spectrum and limiting our democracy through false claims of prosperity. The banks are essentially taking over government by controlling politics and the media and are making Europe and the US-like Noam Chomsky says-”commit suicide”.