The Senate committee hearings that Pecora led probed the causes of the Wall Street Crash of 1929 that launched a major reform of the American financial system. Pecora, aided by John T. Flynn, a journalist, and Max Lowenthal, a lawyer, personally undertook many of the interrogations during the hearings, including such Wall Street personalities as Richard Whitney, president of the New York Stock Exchange, George Whitney (a partner in J.P. Morgan & Co.) and investment bankers Thomas W. Lamont, Otto H. Kahn, Albert H. Wiggin of Chase National Bank, and Charles E. Mitchell of National City Bank (now Citibank). Because of Pecora's work, the hearings soon acquired the popular name the Pecora Commission, and Time magazine featured Pecora on the cover of its June 12, 1933 issue.
Pecora's investigation unearthed evidence of irregular practices in the financial markets that benefited the rich at the expense of ordinary investors, including exposure of Morgan’s “preferred list” by which the bank’s influential friends (including Calvin Coolidge, the former president, and Owen J. Roberts, a justice of Supreme Court of the United States) participated in stock offerings at steeply discounted rates. He also revealed that National City sold off bad loans to Latin American countries by packing them into securities and selling them to unsuspecting investors, that Wiggin had shorted Chase shares during the crash, profiting from falling prices, and that Mitchell and top officers at National City had received $2.4 million in interest-free loans from the bank’s coffers.
What Happened to the Moral Center of American Capitalism?
President Reagan had an idea about how the world should run. He deregulated Big Business. That is, he removed the restrictions put in place that kept companies from cheating. He removed, primarily economic oversight. He said that it was unAmerican that in this capitalist society that such oversight, such restrictions should exist. To him, these concepts flew in the face of that illusive, figmentary idea we like to call freedom. He wanted Big Business to have the freedom to do what it will and believed that in doing so, said companies would check themselves. They would check themselves because it was in their best economic interest to do so
Reagan, Deregulation, and the Fruit It Now Bears
The entire package added up to a decade of economic misery as Americans endured a new and seemingly intractable problem dubbed "stagflation"—stagnation in growth and employment, combined with inflation in consumer prices. According to the Keynesian economic doctrines that had dominated American thinking about the economy since the time of Franklin Roosevelt, stagflation was not even supposed to be possible; most liberal economists before the 1970s believed that inflation would only occur in times of rapid economic growth. Sky-high inflation in a time of slow growth and rising unemployment was unprecedented, and incredibly painful for ordinary Americans whose standard of living began dropping precipitously. The Nixon, Ford, and Carter Administrations all intervened clumsily in the economy to try to rectify the situation by applying heavy-handed measures such as Nixon's wage and price controls, but none came close to finding success. The deep economic malaise of the 1970s seemed to prove that the liberal economic order established in the 1930s had run out of fresh ideas.
An Alternative Vision
Something different was exactly what Ronald Reagan promised to provide. Reagan argued that half a century of misguided liberal policies had sapped the free market of much of its natural vitality by burdening it with too many government taxes, too much government spending, and too heavy government regulation. Reagan promised to restore prosperity by getting "the government off the backs of the American people" by cutting taxes, slashing spending, and deregulating the economy.18 While Reagan was ultimately able to implement those policies only imperfectly, his broad vision nonetheless proved quite compelling. Reagan's deep faith in his free-market principles proved to be almost contagious, helping to restore confidence in the future of the American economy
Economy in The Reagan Era
This leads to Reagan's greatest failure; during an era of global prosperity, and while Japan and Germany enhanced their export industries, America started its monotonically increasing deficit in its surplus account. As the graph above shows, 1983
1983 was a fatal year for the United States; the year it became a global debtor nation and depended upon outside investment in order to survive. During the Reagan decade, Japan's current account balance went from a record deficit of US$10.7 billion in 1980 to a record surplus of US$87 billion in 1987 before declining to US$57.1 billion in 1989. Similarly, the Federal Republic of Germany, after experiencing deficits during 1979–81, had its current accounts balance rebound to about a DM 9.9 billion surplus in 1982 and increase to DM 76.5 billion in 1986. While Reagan talked mellifluously, the world's principal nations trade (including an emerging China) flowed with honey. Examine all the graphs and tables and he conclusion becomes obvious: Reagan's policies, which increased federal and private debt at exponential rates, decreased manufacturing employment, and turned a positive current account into an ever mounting negative, established the trends towards America's eventual economic problems.
How Ronald Reagan Sank America
The U.S. federal effective corporate tax rate has become much lower than the nominal rate because of tax shelters such as tax havens.https://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States
Federal corporate income tax receipts have declined relative to corporate profits.
Robert Menzies: He served over 18 collective years, first from 1939 to 1941 and from 1949 to 1966, and is Australia's longest-serving prime minister.
John Curtin: 14th Prime Minister of Australia from 1941 to 1945 and the Leader of the Labor Party from 1935 to 1945
Malcolm Fraser 1975-1983
Bob Hawke from 1983 to 1991.
Paul Keating from 1991 to 1996.
John Howard from 11 March 1996 to 3 December 2007.
Libertarian economist Milton Friedman after 1960 attacked Social Security from a free market view stating that it had created welfare dependency.[https://en.wikipedia.org/wiki/New_Deal#Tax_policy
While the president subsequently pulled back from pushing for FAP's legislative enactment, offering an important explanation for the measure's failure, his anti-welfare rhetoric was politically successful, providing subsequent national conservative leaders with a political formula for utilizing anti-welfare rhetoric to build support among white working- and middle-class voters.http://onlinelibrary.wiley.com/doi/10.1111/j.1741-5705.2012.03989.x/abstract
Mr. Nixon’s stab to the left was punctuated on August 15, 1971 when he unilaterally imposed Wage and Price Controls, torpedoed the Gold Standard Act and imposed a 10% import surcharge.
Of course these accomplishments would be a footnote if Nixon had succeeded in passing radical health care reform. It was Nixon who announced on February 6, 1974: “Comprehensive health insurance is an idea whose time has come in America…There has long been a need to assure every American financial access to high quality health care. As medical costs go up, that need grows more pressing….Indeed, let us act sensibly. And let us act now–in 1974–to assure all Americans financial access to high quality medical care.”
Today Nixon couldn’t fit under the Republican pup tent. He would not pass the Tea Party’s litmus test. The 2012 Republican bus tour would run Nixon out of town and put him in the historical storage closet with other liberal and moderate Republicans.
Neoliberal Globalization: Is There an Alternative to Plundering the Earth?
Self-interest and individualism; segregation of ethical principles and economic affairs, in other words: a process of ‘de-bedding’ economy from society; economic rationality as a mere cost-benefit calculation and profit maximization; competition as the essential driving force for growth and progress; specialization and the replacement of a subsistence economy with profit-oriented foreign trade (‘comparative cost advantage’); and the proscription of public (state) interference with market forces
This goes as far as claiming that the common good depends entirely on the uncontrolled egoism of the individual and, especially, on the prosperity of transnational corporations. The allegedly necessary “freedom” of the economy – which, paradoxically, only means the freedom of corporations – hence consists of a freedom from responsibility and commitment to society.
The maximization of profit itself must occur within the shortest possible time; this means, preferably, through speculation and “shareholder value”. It must meet as few obstacles as possible. Today, global economic interests outweigh not only extra-economic concerns but also national economic considerations since corporations today see themselves beyond both community and nation. A “level playing field” is created that offers the global players the best possible conditions. This playing field knows of no legal, social, ecological, cultural or national “barriers”. As a result, economic competition plays out on a market that is free of all non-market, extra-economic or protectionist influences – unless they serve the interests of the big players (the corporations), of course. The corporations’ interests – their maximal growth and progress – take on complete priority.
The difference between the new and the old economic liberalism can first be articulated in quantitative terms: after capitalism went through a series of ruptures and challenges – caused by the “competing economic system”, the crisis of capitalism, post-war “Keynesianism” with its social and welfare state tendencies, internal mass consumer demand (so-called Fordism), and the objective of full employment in the North. The liberal economic goals of the past are now not only euphorically resurrected but they are also “globalized”.
What we are witnessing are completely new phenomena: instead of a democratic “complete competition” between many small enterprises enjoying the freedom of the market, only the big corporations win. In turn, they create new market oligopolies and monopolies of previously unknown dimensions. The market hence only remains free for them, while it is rendered unfree for all others who are condemned to an existence of dependency (as enforced producers, workers and consumers) or excluded from the market altogether
Anti-trust laws have lost all power since the transnational corporations set the norms. It is the corporations – not “the market” as an anonymous mechanism or “invisible hand” – that determine today’s rules of trade, for example prices and legal regulations. This happens outside any political control. Speculation with an average twenty percent profit margin edges out honest producers who become “unprofitable”. Money becomes too precious for comparatively non-profitable, long-term projects,
By delinking the dollar from the price of gold, money creation no longer bears a direct relationship to production”. Moreover, these days most of us are – exactly like all governments – in debt. It is financial capital that has all the money – we have none.
Small, medium, even some bigger enterprises are pushed out of the market, forced to fold or swallowed by transnational corporations because their performances are below average in comparison to speculation – rather: spookulation – wins. The public sector, which has historically been defined as a sector of not-for-profit economy and administration, is “slimmed” and its “profitable” parts (“gems”) handed to corporations (privatized). As a consequence, social services that are necessary for our existence disappear. Small and medium private businesses – which, until recently, employed eighty percent of the workforce and provided normal working conditions – are affected by these developments as well.
If there are any new jobs, most are precarious, meaning that they are only available temporarily and badly paid. One job is usually not enough to make a living. This means that the working conditions in the North become akin to those in the South, and the working conditions of men akin to those of women – a trend diametrically opposed to what we have always been told. Corporations now leave for the South (or East) to use cheap – and particularly female – labor without union affiliation. This has already been happening since the 1970s in the “Export Processing Zones” (EPZs, “world market factories” or “maquiladoras”), where most of the world’s computer chips, sneakers, clothes and electronic goods are produced. The EPZs lie in areas where century-old colonial-capitalist and authoritarian-patriarchal conditions guarantee the availability of cheap labor
Many jobs have disappeared entirely due to computerization, also in administrative fields. The combination of the principles of “high tech” and “low wage”/”no wage” (always denied by “progress” enthusiasts) guarantees a “comparative cost advantage” in foreign trade. This will eventually lead to “Chinese wages” in the West
The means of production become concentrated in fewer and fewer hands, especially since finance capital – rendered precarious itself – controls asset values ever more aggressively. New forms of private property are created, not least through the “clearance” of public property and the transformation of formerly public and small-scale private services and industries to a corporate business sector. This concerns primarily fields that have long been (at least partly) excluded from the logic of profit – e.g. education, health, energy or water supply/disposal.
The destruction of the welfare state also destroys the notion that individuals can rely on the community to provide for them in times of need. Our existence relies exclusively on private, i.e. expensive, services that are often of much worse quality and much less reliable than public services. (It is a myth that the private always outdoes the public.)
People believe in the market as if it was a god. There seems to be a sense that nothing could ever happen without it. Total global maximized accumulation of money/capital as abstract wealth becomes the sole purpose of economic activity. A “free” world market for everything has to be established – a world market that functions according to the interests of the corporations and capitalist money.
The fact that abstract wealth is not real wealth will become obvious, and so will the answer to the question of which wealth modern economic activity has really created. In the end it is nothing but monetary wealth (and even this mainly exists virtually or on accounts) that constitutes a monoculture controlled by a tiny minority.
The primacy of politics over economy has been lost. Politicians of all parties have abandoned it. It is the corporations that dictate politics. Where corporate interests are concerned, there is no place for democratic convention or community control. Public space disappears
In the 1980s, Ronald Reagan and Margaret Thatcher introduced neoliberalism in Anglo-America. In 1989, the so-called “Washington Consensus” was formulated. It claimed to lead to global freedom, prosperity and economic growth through “deregulation, liberalization and privatization”. This has become the credo and promise of all neoliberals. Today we know that the promise has come true for the corporations only – not for anybody else.
Neoliberalism and war are two sides of the same coin. Free trade, piracy and war are still “an inseparable three” – today maybe more so than ever. War is not only “good for the economy” but is indeed its driving force and can be understood as the “continuation of economy with other means
2. Details about these incidents can be followed up here: https://en.wikipedia.org/wiki/Timeline_of_labor_issues_and_events