(c) Copyright 1998: Graham L. Strachan
Recalling the ad featuring the man with an electric razor who ‘was so impressed with the product he bought the company’, one might imagine a conversation between two monopoly capitalists. One says to the other, ‘What do you think of Australia?’ The other replies, ‘Australia? We were so impressed with the country we bought the government’. How does big business come to own and control governments? The answer is simple: DEBT.
To understand how this comes about, one has to realise that practically all of the world’s money is in private hands, and not too many hands at that. A few wealthy international banking houses control nearly all of it. Most governments have the Constitutional power to create and issue their own (even interest-free) money as a medium of exchange, but few elect to do so. Why they don’t is another story, but generally their power over the nation’s money is limited to the minting of currency which, compared to the total amount of ‘money’ in circulation, amounts to little more than loose change.
The practice has developed that, if governments need more money than they collect in taxes, instead of simply issuing some more, which they could, they borrow it from private international bankers at interest. There are government-sounding banks like the Bank of England, the American Federal Reserve System, and the International Monetary Fund (IMF), but they are not government owned or controlled. They are private corporations claiming the right to create the world’s money as interest bearing debt (1).
Between the Great Depression of the 1930s and the late 1970s, most of the governments in the world were induced to borrow money from international bankers at interest, and what we now call the ‘national debt’ became a part of economic life. Australia owes around $220 billion, while the American national debt is a staggering $5 trillion! Yes, the world’s richest country is $5 trillion in debt to private international bankers.
The economic theory which induced countries to borrow this money was called Keynesianism, after its inventor John Maynard (Lord) Keynes (2). According to this theory, the ups and downs of the ‘business cycle’ were to be smoothed out by government spending. Governments would increase spending during recessions, and decrease it during boom times. Predictably the latter requirement was soon forgotten, especially when governments realised they could buy votes by directing spending at ‘voting blocs’.
In addition, a whole series of socialist welfare schemes were devised by governments, providing benefits from cradle to grave, and all of which cost money. The shortfall between what governments collected in taxes and the costs of all these schemes was borrowed from international bankers at interest. On top of that, by some strange accounting convention, private corporate debt (money borrowed for acquisitions and mergers) came to be lumped in with government debt and called ‘national’. [Though I have been assured that the Australian people are not ‘responsible’ for the private component, I frankly am not convinced that is true].
The result was that by the late 1970s most governments in the developed world were up to their ears in debt, and as the saying goes, ‘the borrower is servant to the lender’. During the early 1980s, representatives of the lenders were moved into Treasury Departments, including Australia’s, and preparations were made for a new sort of economic policy to be implemented (3).
In Britain it was called ‘Thatcherism’, in America ‘Reaganomics’, in Australia ‘economic rationalism’, but wherever it was applied it was identifiable by the same programme: ‘deregulation’ of economies through the removal of tariffs and subsidies for small/medium sized businesses and family farmers; abolition of exemptions for small/medium sized businesses under anti-monopoly legislation; removal of controls over the entry and activities of multinational corporations; dismantling of collective bargaining (unions) and central wage-fixing; floating of currencies; removal of restrictions on the flow of money in and out of the country; deregulating banking systems to allow in foreign banks; winding down industries producing for the local economy, producing instead for export while importing even basic foodstuffs; the ‘privatisation’ of public utilities by selling them to multinational consortiums; and so on. Justifying all this were slogans about ‘increased competition’ and ‘level playing fields’, ‘J-curves’, ‘trickle-down’ theories, and ‘market forces’(4).
All this sounded very much like neo-classical free market economics risen from the dead, and many economists took it (and apparently still do) to be exactly that. It was nothing of the sort, as will be shown.
Overnight, the ‘caring sharing compassionate society’ which characterised the welfare state was turned on its head. The world was now to be organised to suit the purposes of big business, while the fate of the citizenry was to be abandoned, by its own government, to the care of ‘market forces’. According to economic rationalists these, like the Pied Piper’s flute, were going to lead the world to a capitalist Utopia, a consumer heaven. The reality is going to be something very different, as we shall see.