Yves Smith on The Finance-led Counterrevolution and the Rush to Destroy the Safety Net

by Polly Cleveland | October 30, 2012

Yves Smith has said it better than I could in her blog, Naked Capitalism:

“My sense is that the widespread sense of gloom, the increased level of aggression in many walks of life (and on the Internet) isn’t just due to the lousy state of the economy, although that certainly isn’t helping. In the last year, it has become increasingly evident that a very ugly set of changes that will have broad social impact is moving forward with surprising speed.

“We are in the midst of a finance-led counterrevolution. The long standing effort to roll back New Deal reforms has moved from triumph to triumph. The foundation was laid via increasingly effective public relations efforts to sell the Ayn Randian world view that granting individuals unfettered freedom of action would produce only virtuous outcomes, since the talented would flourish and the rest would deservedly be left in the dust. In fact, societies that have moved strongly in that direction such as Pinochet’s Chile and Russia under Yeltsin, have seen plutocratic land grabs, declining standards of living (and even lifespans), and a rise in authoritarianism or (in the case of Colombia) organized crime. Those who won these brawls did flourish, but at tremendous cost to society as a whole.

“In the US, the first step was making taxation less progressive. A second, parallel measure was deregulation, particularly in financial services. Together, they fostered the growth of an uber wealthy cohort that increasingly lives apart from middle class and poor citizens. The rich can thus tell themselves they have little to gain from the success of ordinary people. And, perversely, the global financial crisis has worked to the advantage of the financial elite. As former IMF chief economist Simon Johnson described in a May 2009 Atlantic article, the US instead suffered a quiet coup, with the top end of the financial services industry becoming more concentrated, and more firmly in charge of the political apparatus. And you see more vivid evidence of the financial takeover in Europe, where technocrats are stripping countries of their sovereignty and breaking them on the rack via failing austerity programs, so as to avoid exposing the insolvency of French and German banks. In the US, the events of the last year are less dramatic but no less telling, including a coordinated 17-city paramilitary crackdown on Occupy Wall Street, a “get out of jail almost free” settlement for the mortgage-industrial complex, and an election where the two candidates are indistinguishable in their enthusiasm for cutting Medicare and Social Security, and murder by drone.

“The implications of gutting social protections are far more serious than they might appear. Dial the clock back eighty years, and most people lived in or near the communities they grew up in. They could turn to extended family, or other members of the community for support if they suffered a serious setback. Informal social safety nets stood in the place of the government provided ones we have now.

“Broadly shared prosperity and government safety nets are essential underpinnings of a modern, mobile society. The American nuclear family isn’t just an outgrowth of the automobile era; it’s also the result of union jobs in an industrial economy helping create a wage foundation, and the high confidence most men (in those days, it was men) had in continued employment, and the existence of social protections if something bad happened (Social Security’s disability programs have raised entire families, for instance) made it viable to move far from one’s hometown in pursuit of opportunity.

“But as the population has become more mobile, the role of community, and their local support mechanisms, has faded. Yes, when people get desperate, they might still move in with a parent or child. But anecdotally, that seems far less common today than it was a few generations ago. So when government provided social insurance programs are gutted, the broader social impact is much greater than taking us back to the era right before they were implemented. Michael Hudson has described the changes under way as neo-feudalism. We are moving towards the sort of stratified society we had not in the 1920s, but in the early Industrial Revolution with a landed aristocracy, a small haute bourgoisie, some well remunerated craftsmen, and a large agricultural/servant class. In other words, the effort to roll back the New Deal is in fact going much further, in terms of reinstitutionalizing class stratification, lack of mobility, and a resulting large new “lower order” that will live in stress and often squalor. A new, more brutal society is being created before our eyes, and it seems such an incredible development that many people are still in denial about what is happening.”

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