Last Piece of Eight
Last Piece of Eight
Exploring the intricacies of wealth, markets, and economic policy; or, Who takes home the leftovers?
Since starting Radio Free Pizza, I’ve set a mental target for the first eight posts. I picked the number because restaurants usually serve pizza pies in eight slices (when they’re not cut into squares), and there’s some utility for me in staying faithful to a theme, even if it’s something as absurd as “developing a ‘personal brand’” solely from the username I’ve staked out across platforms.
Of course, this sometimes misleads people into thinking I write about pizza or pizzerias. I’ve decided that’s an acceptable tradeoff, though in truth I probably only enjoy pizza about as much as the average American. (I assure you, it’s only a coincidence that I just ate two slices from last night’s leftovers before sitting down to write this paragraph.)
In fact, I had other subjects in mind. In the post-before-last and in its successor, I started addressing the headline topics: “society, culture, politics, economics, and media.” With the first five dispatches spent introducing myself and my work, it was time for me to get down to business.
While I might have liked to address each subject in isolation, looking too closely at any one of them reveals that it’s inextricable from the rest. Still, since following the aforementioned branding theme yields a potential analogy between the pizza pie and history’s “pieces of eight,” let’s call this post the one about economics.
My last dispatch covered how the American political system advances the economic interests of the wealthy. Since the United States remains the world’s largest economy as measured by GDP (though for a decade now the Chinese consumer has had higher PPP), it stands to reason that the country’s fiscal and monetary policies would find complements in international finance. Therefore, comparing the American domestic economy to its global counterpart will help us examine the intricate market forces and global economic trends shaping societies today.
For a snapshot of U.S. policy’s consequences, consider the country’s distribution of wealth. According to a September 2022 report from the Congressional Budget Office examining the period from 1989 to 2019:
The share of total wealth held by families in the top 10 percent of the distribution increased from 63 percent in 1989 to 72 percent in 2019, and the share of total wealth held by families in the top 1 percent of the distribution increased from 27 percent to 34 percent over the same period, CBO estimates. By contrast, the share of total wealth held by families in the bottom half of the distribution declined over that period, from 4 percent to 2 percent.
The trend of increasingly unequal wealth distribution has accelerated since 2019, with Michael E. Kannell reporting that, at the end of 2021, the top 1 percent held 36.4% of the nation’s wealth, while the share belonging to bottom 50 percent sank to 0.8%.
If these findings don’t in themselves substantiate the argument of my last dispatch, that American fiscal policies favor private interests over the working class—that its government behaves as a republic that represents capital first—then they demonstrate at least that these policies have had equivalent results.
Turning from the United States to the global economy, one observes the same trend of rising inequality in the distribution of wealth. According to Credit Suisse’s Global Wealth Report 2022:
[T]he top tier of high net worth (HNW) individuals (i.e. USD millionaires) […] now numbers 62.5 million, or 1.2% of all adults […] These HNW adults are increasingly dominant in terms of total wealth ownership […] [Their] aggregate wealth has grown five-fold, from USD 41.4 trillion in 2000 to USD 221.7 trillion in 2021, and their share of global wealth has risen from 35% to 48% over the same period.
While the same report notes too that, on longer timeframes, “global wealth inequality has fallen this century due to the faster growth achieved in emerging markets,” the benefits of economic growth (like those of American fiscal policy) since the start of the coronavirus pandemic have disproportionately advantaged the already-wealthy.
Though one might have expected the pandemic to have had a deleterious effect on the international economy, my own calculations from the data of Aaron O’Neill show that while global GDP fell ~2.74% from 2019 to 2020, it rose ~13.4% in 2021 and another ~4.05% in 2022 to stand ~14.8% above its pre-pandemic levels three years prior.
Meanwhile, during the same timeframe, Oxfam reported in January 2023 that, worldwide, “The richest 1 percent grabbed nearly two-thirds of all new wealth worth $42 trillion created since 2020, almost twice as much money as the bottom 99 percent of the world’s population.”
So, we see rising wealth inequality across the world, not just in the United States, and it’s unequal in terms of both the share of total wealth and the share of new wealth created. What accounts for this disproportionate accumulation? That is to say, why did that economic growth so disproportionately benefit such a small class of economic actors?
Clara E. Mattei of the New School for Social Research addresses a similar question. In fact, cites the same Oxfam report mentioned above while presenting her November 2022 book The Capital Order: How Economists Invented Austerity and Paved the Way for Fascism, starting at ~3:52:
There’s a new Oxfam report that came out in concomitance with the Davos meetings, and just the headline of it is that, “The richest 1% bagged nearly twice as much wealth as the rest of the world put together over the past two years.” So, inequality keeps rising, it does not stop, and the increasing inequality is the result of what I call in my book the “success” of austerity, and in fact, we are in a moment [...] that austerity is back with a vengeance [...] it underlies the main tropes of contemporary policies: the hike in interest rates that we are seeing now for more than six months all around the globe, together with cuts, especially in the social sector—the fact that while we’re spending more money of course on the military sector, there is a constant transfer of resources away from schools, from hospitals, from all sorts of public benefits—and [...] constant privatization, deregulation of the labor market, and direct attacks on organized labor.
I’m sure many of you may remember austerity from the 2007–2008 global financial crisis, in the aftermath of which many countries worldwide adopted austerity policies to reduce government spending and implement structural reforms, with the goal of shrinking budget deficits and stabilizing economies. Intended to restore confidence in financial markets with fiscal consolidation and reduced public debt, critics contended at the time that such measures would result in a prolonged period of low economic growth, high unemployment, and rising social inequality.
While many supporters of austerity may defend it as only a rational response to downturn informed by nothing more than economics, Mattei offers another explanation for its implementation, which she describes at ~6:04:
Austerity has not worked in its purported goals of balancing the budget, cutting debt, and boosting economic growth […] However, in a way, if we look at it from the lens of class analysis […] austerity is successful in something much deeper [...] the idea is that capital as wealth, capital as GDP growth, requires capital as the fundamental social relation that governs our society, by which we all accept our condition as low-paid wage workers [...] Austerity is persistent because it protects the capital order […] In moments in which the capital order is challenged, austerity helps preserve our condition of market dependence precariousness, thus the possibility of keeping wages low and expectations for profits high [...] Austerity functions politically to safeguard the foundations of our capitalist socioeconomic system, which is the fact that wage relations and private property of the means of production cannot be contested.
Mattei’s description here of austerity’s social function in freezing the economic class structure carries an intriguing echo of social engineering, as discussed last time on Radio Free Pizza. In that case, a kind of profit-driven social engineering arose as a strategy of the American financial industry to promote identity politics and to suppress any political movement for reducing wealth inequality. In the case of austerity, however, we find no propped-up decoy, and so its function as a strategy to prevent any reorganization of the socioeconomic structure becomes even more blatant.
Importantly, Mattei doesn’t just offer austerity as an answer to our earlier question of what accounts for the unequal distribution and accumulation of wealth among those with the highest net worths. She also locates its historical origins as economic policy, as she begins discussing at ~9:43:
The Great War (1914–1918) was a moment of enormous shock for the laissez faire economic order […] the fact that state actually became the main employer and the main producer fundamentally shook the idea that private property of the means of production and wage relations were somehow natural givens […] So this fundamental re-politicization of the economic sphere brought about varieties of practical alternatives [...] which called fundamentally for forms of economic democracy of various types [...] Of course, a reaction, a very powerful reaction emerged [...] For the first time economists were called […] to advise governments, and with the governments of the whole of Europe a new financial code based on austerity was put together [...] The emergence of the expert […] came hand-in-hand with a very classist ambition of disciplining the population by using economics as this apolitical weapon that could tell people, ‘You have nothing to contribute here, because you’re ignorant, you’re stupid, leave the economic sphere to the experts, we will tell you what is good for everyone.’ And, of course, ‘what is good for everyone’ […] results in wage suppression […] and a surge in the profit rate.
In austerity’s origins with economists advising the governments of Europe on how to recover from World War I’s devastating consequences, I’m sure many of you will have undoubtedly seen traces of an ideological relative of technocracy.
(Those of you who didn’t see those traces but would like to learn more, I would direct you to The Corbett Report for further investigation into other manifestations of the technocratic ideology discernible today.)
As a form of governance under which decision-making power is vested in experts and professionals based on their technical knowledge, we might call technocracy just social engineering writ in capitals: relying on credentialed specialists to guide policy and shape the future, its supporters argue that technocracy offers us the best model for grappling with the complex challenges that resulted from a society’s industrial development.
That economic austerity should call technocracy to my mind has its own historical origins: I recall my introduction to the term at the age of 24, upon reading a 2012 article in The Economist (or was it one of these?) praising Mario Monti’s imposition of austerity upon Italy. To me it’s an interesting coincidence, worth mentioning here because (at ~23:20) Mattei herself turns to Italy, and quotes Montagu Norman, Governor of the Bank of England from 1920 to 1944, praising Mussolini in a private 1926 letter to Jack Morgan of J.P. Morgan & Co.: “‘Fascism has surely brought order out of chaos over the last few years. Something of the kind was no doubt needed if the pendulum was not to swing too far in quite the other direction. The Duce was the right man at a critical moment.’”
As Mattei goes on, she makes the link between austerity and fascism even more explicit:
Y’know, [Norman] was so happy, he was just saying, ‘Strikes are over, finally savings are back up, the deficit has been solved, now Italy is finally in a situation where we can finance the Italian state to go back to the gold standard,’ and in fact [Italy] received many loans thanks to the austerity, and of course the parallelism with what happens with the IMF in countries today is quite obvious. So, the typical case of Augusto Pinochet in Chile with the Chicago Boys in the ‘70s is not the first case of the whole international liberal establishment supporting authoritarian governments once it’s about economic efficiency to suppress what is considered a restless population, such as the Italian one after the First World War.
Interestingly, Mattei isn’t the only academic I’ve watched speaking recently who has linked austerity so explicitly to fascism and authoritarian governments.
In the July 2023 edition of Global Capitalism, “Capitalism Turns to the Authoritarian State,” Dr. Richard Wolff examines in more detail how the same dynamics of Mattei’s capital order—of, that is, the technocratic imposition of austerity through monetary, fiscal, and industrial policy to prevent any structural changes that might affect how a country’s economy distributes its wealth—has produced the political and economic circumstances defining our world today.
As Wolff reports (beginning at ~5:13), the global capital order’s fetish for economic efficiency over the last half-century has produced in the United States an authoritarian drive toward market interventions, and compares these to the policies which the capital order formerly acclaimed:
Private capitalism is turning more and more to an authoritarian state […] all the word “private” means is that the capitalists, the employers, are not operatives of a state […] they are private individuals who undertake privately run, [privately] owned production, and they have been for most of the history of capitalism leery of authoritarian states [...] Why then might they today be turning to an authoritarian state? [...] A state that is not only allowed, but welcomed, to intervene in the economy in all kinds of ways that used to be taboo [...] The shift is unmistakable [...] words which were until recently celebrated are now denounced. “Globalization”: we were told from the 1960s onward that as corporations expanded around the world they could become more efficient […] they could take advantage of lower wages [...] our political leaders (Republican and Democrat alike) fell all over themselves cheerleading for globalization, and for [...] “Neoliberalism,” whose idea was simply, “Let these companies go around the world, don’t hold them back, don’t limit them, don’t regulate them, let ‘em go.” [...] “Let the private [capitalists] do what they want, the government should keep out of it.”
Thus Wolff offers an overview of the latter half of the 20th century, during which the private interests of the global capital order encouraged and exploited economic globalization—the elimination of tariffs and other trade barriers to expand markets and, therefore, opportunities for economic growth—according to a neoliberal ideology of deregulated markets and industrial privatization to foster growth and generate wealth. Business-friendly governments in both industrially developed countries and in emerging markets encouraging entrepreneurship and investment through minimal state intervention, except when necessary to preserve the domestic class hierarchy. Meanwhile, privatizing state assets, services, and enterprises—under the belief that Wolff’s “private capitalists” will more efficiently allocate resources in society as they deploy production to profit from market forces—reduced the cost burden on the public sector, with a commensurate decrease to taxes imposed on private capital.
In short, the dynamics of the global capital order, and the mechanisms devised to impose it, consist of the technocratic application of austerity policies guided by the neoliberal ideology under the economic conditions of globalization. While in moments of crisis the budgets of capitalist republics may balloon as the state distributes relief packages, like the CARES Act (covered in our last dispatch), I suspect that each historical case may have resulted in that example’s same effect of amplifying the inequality of wealth distribution in the country.
Returning to this latest episode of Global Capitalism, we learn more from Wolff (starting at ~9:19) about the specific circumstances of capitalists’ purported pivot toward authoritarian governments more inclined to economic intervention:
Over the last 30 to 40 years, as capitalists globalized, going to China as well as many other countries [...] the Chinese managed the process quite differently [...] The Chinese made sure it would go to the advantage of development in and by China, so that […] it got a bigger gain out of neoliberal globalization than the countries that invented [it] [...] China [and] its allies, the so-called BRICS (Brazil, Russia, India, China, and South Africa) [...] are now a bigger economic powerhouse than the G7 [...] The BRICS alliance produces about 33% of the world's output; the United States and its G7 alliance produce about 29% [...] In many fundamental ways the dominance of the old western centers of capitalism—Western Europe, North America, and Japan—is over [...] Replaced by the ascendancy of the BRICS alliance.
The threat of a rival bloc that might soon encompass a relocated center of global finance, argues Wolff, inspired the Western capitalist republics’ recent turn toward authoritarianism. For him, that turn is evident first in the unexpected shift from neoliberal globalization toward policies of trade protectionism, as he elaborates at ~12:29:
The United States’s reaction, and that of Europe as well, to the rise of China and the BRICS has been a major adjustment in the direction of wanting the activity of an authoritarian state. In the place of neoliberalism and globalization, we are turning to economic nationalism [...] the United States government is threatening and sanctioning enterprises and governments around the world that trade with China [...] forbidding export of private companies’ private outputs to China, particularly in the area of microchips [...] President Trump hit China with tariffs, making every Chinese product more expensive in the United States [...] We have trade wars: the Biden administration has continued them. There is a governmental interference in our economy which would have made earlier generations totally outraged because it violates the notion that private capitalism is best left alone by a non-interfering, non-intervening government.
Certainly that trade protectionism contradicts the free market ideology of neoliberalism. Under globalization, neoliberalism allowed the capital order to extract astounding returns from foreign direct investment in China—which “averaged 25% during 1978-1993, fell during 1993-1998, and has become flat at roughly 20% since 1998” according to a 2006 working paper from the Becker Friedman Institute for Economics at the University of Chicago, from which Mattei’s technocratic “Chicago Boys” derive their name—since the start of China’s open-door policy in 1978.
Clearly, the success of neoliberalism for the capital order has resulted in a consequent loss of industrial production for the centers of global finance, as readers surely know. According to a report from the U.S. Bureau of Labor Statistics, “In June 1979, manufacturing employment reached an all-time peak of 19.6 million” and suffered “a 34-percent net loss over the 40 years following the peak” to about 12.8 million in 2019.
While manufacturing jobs left the United States, anti-labor policies—Mattei’s “industrial austerity”—eroded the rights of remaining workers. The most visible recent example appeared with the federal strike-breaking of late 2022, which prevented Railroad Workers United from striking and imposed on them a contract that denied them even seven days of paid sick leave. That example’s high visibility, of course, stems even more from the catastrophic 2023 train derailment in East Palestine, OH, which came just over two months after the federal government broke the strike.
Decades of neoliberal economic policies that exported U.S. manufacturing abroad and attacked organized labor at home have coincided with the accelerating inequality in the nation’s distribution of wealth described at the start of this dispatch. Certainly the connection between austerity and inequality isn’t lost on Wolff, who discusses their relationship and its results at ~15:56:
Like every other empire in the history of the world, this one [...] is now in decline. And turning to a government is what capitalists here do hoping to slow, if not stop and reverse, that decline [...] We don’t have the kind of wealth growth that other parts of the world do, and that means the pie isn’t getting larger so that everybody can get a bigger piece. Those who are rich and powerful in the United States hold on in a shrinking situation to what they have [...] People who aren’t at the top are going to suffer a diminution, a decline in the standard of living. The mass of Americans are paying for the costs of a dying empire [...] shrink[ing] the quality and quantity of public services to the mass of the American people. Since inflation is already shrinking what they can afford to buy themselves, the addition of a government austerity [...] is a way in which you burden the mass of people [...] it causes bitterness, anger, upset in the mass of people [...] the condition of the American working class is in deep trouble [...] and we’re getting a divided society.
Having already covered Mattei’s argument that austerity fosters fascist governments, so long as they implement economic policies favorable to the capital order, we can therefore predict where the divisions and internecine resentments of the contemporary American population will lead.
Accordingly, as Wolff argued at the beginning of his presentation, the capitalists of the United States have found themselves more and more amenable to state intervention and economic protectionism. Following the thought further (at ~46:59), he asks “Are we moving in a direction that might have a merger in which big capitalist corporations and the government become intertwined?” and reminds us, “Fascism is the name for that merger [...] We are now doing something similar […] the Twitter Files showed us how closely the Twitter executives and government agencies worked [to decide what] Twitter would and wouldn’t allow [to reach] the public of the United States”—for more info on which, see Matt Taibbi.
Of course, during periods of economic crisis or social upheaval, when governments follow the advice of economic technocrats to implement severe austerity policies that disproportionately affect the most vulnerable segments of society, it can create a fertile ground for discontent and social unrest. However, as Mattei and Wolff both make clear, the policies of the intervening years—that is to say, those conforming to the ideology of neoliberalism—set the stage for any nascent fascist movement to exploit public frustration and disillusionment with the promise of economic stability and national revival in exchange for submitting to an authoritarian government.
While I suspect I would be quite mistaken to assume that technocrats played no role in developing China’s social market economy, it’s worth noting here an implied difference between economic ascendancy as neoliberalism would chart it in comparison to China’s own path. Repeating Wolff again, as quoted above, “the Chinese made sure it would go to the advantage of development in and by China”: not, in other words, to the advantage of their foreign investors’ portfolios.
Technocratic governance can offer pragmatic solutions to complex problems. Austerity can balance a budget. Fascism can oversee an economy with rising GDP. These three statements may be true, but it is nonetheless crucial to recognize that concentrating power in the hands of technocratic elites necessarily risks eroding democratic values, as it did in Chile and elsewhere. Therefore, fostering economic policies aimed at a more equitable distribution of wealth—one directed not at enriching a minority or at leveling a population, but at developing the productive forces of one’s economy to generate a common prosperity—requires that countries surrender the capital order’s pipeline from technocracy to austerity to fascism. Only after doing so can they work toward building societies that prioritize social equity, democratic governance, and sustainable economic prosperity that all people can enjoy together.