Only to the extent it protects the powerful and wealthy

Only to the extent … Posting 1

Western governments help you and me only to the extent that it helps protect the position of the powerful and wealthy.

This posting and subsequent ones in the series are about why all Western governments, to a greater or lesser degree, whatever their ideology, work, or end up working, in the way they do – a neoliberal way.

I intend to follow this governing idea in my writing of subsequent postings. None of them will attempt to be comprehensive to the chosen related idea; the intention will be to follow the related idea as if a fragile thread to be made stronger, perhaps, in later postings. Some of the postings will consider how the governing idea applies to New Zealand political history, the Key government, the present Labour Party, the poor, inequality, international relations, and education.

My readers from schools may ask what all this has to do with them. The answer: Hekia Parata acts the way she does because she is both driven and captured by a neoliberal imperative much wider in application than education.

The idea that neoliberalism is dying, something moved on from – is wrong, dangerously wrong. Neoliberalism is very much with us, dominating as it does every nook, elevation, and cranny of our social and economic lives. But it has transmuted into another form, some might say transmogrified, but no, the change was entirely predictable. The transmutation was required to make neoliberalism acceptable to sufficient numbers of people (including many disadvantaged by it) so that political parties based on the ideology were electable; and to entrap political parties supposedly opposed to it, to reluctantly accept or even embrace it (think David Lange’s government).

And the resulting transmutation has a name, euphemistic, of course, well more a sentiment – in New Zealand it is often called ‘compassionate conservatism’. John Armstrong used it in his column (NZ Herald, 1 November, 2014) when he said of ‘… John Key’s brand of “compassionate conservatism” … [that] there must be doubt as to whether he can shift National any further to the left.’

Armstrong’s columns I want to say are the fairest of any; their characteristic is stark realpolitik. If Armstrong had thought deeper, though, he might have said that the reason why Key might find it difficult to move any further to the left was because he didn’t need to – the election result meant he didn’t need to make any apparent shifts to the left to protect his Party’s electability meaning he could now pursue his neoliberal ideology more openly though still deceptively, still using the cover of ‘compassionate conservatism’.  An obvious misnomer because the impulse is not compassion but political survival and the main political outcome not conserve but destroy and then rebuild in the interests of Key’s real constituency the powerful and wealthy. The compassion is displayed so the neoliberal conservativism can be enacted.

The main tests to determine the strength and reach of neoliberalism in a society are to examine the centrality to economic practice of the ‘trickle-down theory’,  and in government institutions the centrality of the organisational theory of the need to avoid what is described as ‘provider capture’.

The organisational determination to avoid provider capture has the anti-democratic purpose of taking power away from the people, to be allocated to nominees of the government to the advantage of neoliberal governments. This serves to enable neoliberal governments to distribute their neoliberal power throughout all parts of society as a means to successfully propagandise, create myths, befuddle, threaten, scaremonger, as a way to consolidate their power and ideology.

It will be an understanding of the postings in this series that the world financial system is a giant Ponzi scheme. There was a partial collapse in 2008 but the system was rescued with something euphemistically called quantitative easing (QE), a practice mainly introduced in America but also England. QE results in the purchasing of financial assets mainly from non-bank financial assets. The advocates of QE declare that the intention is to stimulate spending in the economy. This is a misleading shorthand because it glosses over who, in the end, most benefits from the trickle-down form of QE. The trickle-down form of quantitative easing acts to strengthen further the powerful and wealthy even though it is conveyed to the public as being implemented to lift employment, wages, and help in housing affordability.

QE has some merit but not in the way it is presently applied which is structurally advantageous to the powerful and wealthy therefore structurally disadvantageous to the unequal and poor – if it wasn’t structured that way it wouldn’t be acted on by Western governments, and it won’t be structured differently any time soon, as Western societies have been propagandised to believe there is no alternative (TINA). Translated by those opposed to neoliberalism, it means there is no alternative; that is no other way to advantage the powerful and wealthy while still being able to put on a good a show that all are benefiting.

To understand how QE is working (also, to some extent, most Western government financial policies), think of cocktail glasses arranged in a pyramid façade. The cocktails are poured from the central bank glass to gush into the glasses of non-bank financial companies; to rush into the glasses of companies involved in a range of activities (many unproductive – in America 40% of the money goes into defence spending); to flow into the glasses of rich investors (much into speculation and property investment – with profits going into tax havens); and finally to trickle into the glasses of a public  much disconcerted in the meantime by house price inflation significantly contributed to by the preceding gush, rush, and flow.

Just as the cocktail is trickling into the bottom layer of glasses, austerity measures are introduced to ‘keep a lid on things’ (translated that means to protect the position of the powerful and wealthy) in the form of increased interest rates; anti-union legislation; legislation increasing work place ‘flexibility’ that results in the loss of penal rates, increased casualisation; and reduced government spending on social housing.  As well, any improved technology and automation introduced, is accompanied by only meagre increases to funding for retraining of displaced workers. To avoid genuinely increasing funding for education at all levels – neoliberal governments find it cheaper to import skilled labour. To compound the austerity measures that always result from QE or associated practices, governments then proceed to reduce the size of the social welfare net and enlarge the area of the individual webbing.

The trickle down behaviour should be called the ‘funny money, gush, rush, flow, trickle, gone’ theory.

All this will lead to an increased underclass, in New Zealand largely comprising Maori and Pasifika people, but the vulnerability of both lower and middle-classes will also be heightened. When the Ponzi-like world financial system collapses, as it must, it will be a calamity. International debt levels are much higher than in 2008. For the 2008 collapse, interest rates in some important countries were 0%, where can the financial system go from there?

I am not opposed to quantitative easing if applied fairly and much more directly to the general population, leads to productive activity, and involves important protections. Two important protections would be a capital gains tax to keep the cost of housing down and a stop to overseas investors speculating in New Zealand housing. And an obvious way to meet the other criteria would be a huge increase in the funding of education, including making university study much more affordable and the retraining of the unemployed a high priority.

A decisive way to make quantitative easing and everyday bank functioning work for New Zealanders is to buy the banks. Ninety-seven per cent of the money that comes into existence comes from credit created by the banks out of nothing. That money should be ours, not transferred overseas in the form of profits. But excepting Kiwi Bank, because of the neoliberal domination of ‘every nook, cranny, and elevation’, a New Zealand bank owned by you and me, able to make that money work for you and me – a profit for you and me – won’t be coming to a neighbourhood near you or me, anytime soon

America and England found it highly convenient to apply the trickle-down form of the QE policy because it protected and advantaged the powerful and wealthy while lending itself to a glib cover story that it benefited everybody. They said they did it for society as a whole, especially to help in employment, wages, and housing.  Rubbish! It was a rushed, self-serving patch-up job that has only delayed the day of reckoning. The argument of this posting and the postings to follow is that any financial or economic policies introduced by Western governments are introduced to help you and me only to the extent that it helps to protect the position of the powerful and wealthy.

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6 Responses to Only to the extent it protects the powerful and wealthy

  1. kmccready says:

    Glad you didn’t completely knock QE. I’d add a further dimension – biology. The basic biology of humans and other primates comes in two forms: one form makes them fearful and inclined to want to wipe out other humans for their advantage, the other form makes them outgoing and more cooperative. There is good science on how these traits are genetic and how they translate into political behaviour. We need both in the gene pool. Unfortunately the former type results in neoliberalism. Somehow we need to balance them for a better society. I currently look to Denmark as an example of this in practice.

  2. kellyned says:

    Hi Kelvin,
    Well said. I have long maintained that bank ownership is a key to the prosperity of the country. However there is also the issue of fractional banking. It seems to me that it is a license for banks to print money and is hard to justify by any rational means – unless you happen to own the bank, which of course JK does!
    It is unfortunate that so many live in the realm of false consciousness (Marx theory) which sees people protect and support the status quo under the illusion that they can some day become rich and powerful too.

  3. Mike Shennen says:

    Greetings Kelvin.I don;t know if you have been told yet but the Government and Parata get an editorial serve in next week’s Listener [and I get a letter in there as well!]I should have added to my letter something along the lines of ‘But those in the Education sector are not holding their collective breathe ,given that the sector has to deal with the likes of a twenty four year South Island MP somehow qualifies as an ‘adviser’ to Parata! His educational qualifications include being at kindergarten with one kid of Bill English! [Mind you perhaps that’s the level of input this Minister,like Tolley, could get their heads around.Not much else seems to sink in]

  4. Kelvin says:

    Thanks mccready and Kellyned for your ways interesting contributions. In a way, mccready I touched on the matter you raised in the Strangelove posting.
    Hi Mike – great to hear from you. Thanks for the heads up on the Listener editorial and your letter, also the kid adviser.
    You will all enjoy, I think, the posting I’m working on to do with Hekia, neoliberalism, and education.

  5. John Carrodus says:

    There are two (economic) realities (1) Everything always did and always will get down to money. (2) other than number 1 above, all the old rules no longer apply ( or work ) anymore. However, the banksters are losing their grip as crypto currencies and direct lending catch on. Add to this mix falling commodity prices, zero interest and hypo-deflation- the future is a whole new ballgame. As our Western populations age and decline, the main driver in this brave new world – so advanced that we no longer need millions of neurological units ( humans – god help the young! ) to produce goods and services nobody wants, at least in historical quantities is the painful reality. Most of what we now consume can be produced by robots and low cost slave labour in countries exchanging their natural resources and ecology for money. As real incomes decline further and political tensions increase, it is vital that the enlightening role of education in bringing knowledge and change to the spirit of man be pushed to the fore. We are lucky in our country that we probably have the natural, economic and social stability ( for now) which gives us more chance than most to achieve this- if there is the POLITICAL WILL. Your forum here Kelvin is vital to this “enlightenment”. But as the Budist Monk said…”After enlightenment, do the laundry!”

  6. Kelvin says:

    Thank you John – inspiring stuff, as usual.

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