January 13th 2001

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Articles from this issue:



Part A: Globalism - the theory and the reality

Corporate capitalism: the product of government intervention

Part B: A history of economic rationalism in Australia

Part C: How Globalism undermines the family

Part D: The cultural revolution and the new economy

Part E: A policy agenda for Australia's future prosperity

Some remarks on the new economic disorder

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Part D: The cultural revolution and the new economy

by News Weekly

News Weekly, January 13, 2001
Henry Ford - master of the modern assembly line and founder of the Ford Motor Company - decided to double his workers' wages to $5 a day and cut their day to eight hours in 1914. It reduced staff turnover, improved morale, and workers were able to buy the cars they were producing. It made good economic sense because he could sell more cars, at the same time as he was helping workers and families.

The same pro-family social principle underlined the understanding that was reached by Western governments after World War II. This understanding between governments, businesses and unions, provided that:

• governments would provide long lines of low interest credit and other encouragement for business investment;

• governments would legislate and business would accept the principle of a basic living wage, supplemented with family allowances;

• an effective social welfare net would be implemented to assist those in need; and

• the Bretton Woods Agreement would regulate the international financial system so that governments could set their own policies without fear of foreign capital being withdrawn and collapsing their economies.

This unwritten "social contract," which dominated economic policy across the West until the 1970s, did not come about easily. The Great Depression was a massive, disastrous failure of corporate capitalism. It led to the rise of Adolf Hitler and World War II. The fear of the rise of Soviet communism finally galvanised the Western political and economic institutions into action. Governments and businesses had to be "mugged" by history before corporate capitalism was bridled, to save it from self-destruction.

In effect, this "social market" was designed to give governments control over their own economies, allowing them to provide full employment so that families could thrive on a single family income, supplemented with tax concessions and family allowances.

Not only did the policies of the time work, but arguably the growing, prosperous middle class that was created brought about record economic growth.

So why did governments abandon such noble social and economic principles in favour of globalism and economic rationalism?

First "economic rationalism" emerged in the 1970s, in response to the excessive bureaucratisation of Australian society. It was accompanied by demands that governments reduce the level of regulation, which undoubtedly contributed to a chronic lack of economic growth, inflation and growing unemployment.

The solution put forward by economic rationalists was that government services be "corporatised" or privatised, the labor market be deregulated and government protection of Australian manufacturers and primary producers be abolished, in the interests of "free trade."

These policies intersected with the emerging ideology of "Globalisation," a set of economic policies based on the assumption that global prosperity would be maximised when all artificial barriers to the transfer of capital, goods and services throughout the world were removed.

Second, society's Judeo-Christian values were strongly challenged by the cultural revolution of the 1960s and 1970s.

The laws, the culture, the post-war economy had all been pro-family, based on the Judeo-Christian ethic. The cultural revolution changed the attitude of the elites, those who control our society's levers of power, about marriage and family. Suddenly the secular humanist agenda of population control, homosexuality, radical feminism, abortion, secularism, liberalising drug laws, easy divorce, etc, challenged Judeo-Christian values about the family. The core humanist mantra was, "I have a right to do as I please."

These new ideas had an economic component. Whereas the post-war social contract emphasised a just distribution of wealth, concern for the common good of society and the need for a family income, the new post-60s values were different. They emphasised individual rights, "getting ahead", unrestricted personal ambition. Gordon Gekko summed it up in the movie Wall Street, when he said, "Greed is good." The new generation of elites has no values to guide it on how to order society, other than to allow unrestrained personal ambition.

Into such philosophical soil, the globalist, economic rationalist policies of deregulation and privatisation easily took root.

Today the overriding concerns of governments and the corporate elite are to maximise short-term business profits, shareholders' returns and executive salaries. While middle class incomes have stagnated or gone backwards, Chief Executive Officer (CEO) salaries have soared. In 1960, American CEO salaries were 41 times a typical worker's wage. By 1995, they were 157 times a worker's income.

Unstable economic system

Large capital flows destabilise economies causing booms and busts. The sudden flight of capital from Asia in 1997 collapsed the economies of Thailand, South Korea, Malaysia and Indonesia, then precipitated a collapse in Russia.

These "earth tremors" in the international financial system have not resulted in any serious measures to re-regulate the system. Yet people in high places know that the world financial system potentially has a long way to fall.

Dr Eisuke Sakakibara, also known as Mr Yen, is Japan's former top finance minister. Now a professor and adviser to Citibank, he recently warned: "The US authorities have manoeuvred the situation very skilfully, but the basic structure of global capitalism is unchanged. The basic problem of this globalised and virtualised economy ... is huge amounts of money, highly leveraged, moving across borders very quickly. The US right now is the centre of global capitalism, and if the centre collapses, the world system could collapse. And the situation in the US is not sustainable."

One of America's leading economists, Paul Krugman, of the Massachusetts Institute of Technology, has further warned, "If you have a sense of history, you can see that the tequila crises in Mexico were just a rehearsal for the Asian crisis. Now we have to ask ourselves, what was the Asia crisis a rehearsal for?"

Michel Camdessus, the world's chief financial markets crisis manager, on his last day on the job at the International Monetary Fund, gave a chilling warning. He said, "I am ringing the alarm bell to our member countries to tell them that we run the risk of a new financial crisis." The world economy had entered "a dangerous period of twilight" (AFR, September 23-24, 2000).

These warnings are in effect saying that the instability of the deregulated, globalised international financial markets is a threat to more than just to the economic stability of nations. It is a serious threat to social stability, to the economic foundation of the family, and to democracy.

It has been the moral corrosion of Western values, with the ascendancy of the "I have a right to do as I please" philosophy in economics, that is casting this dark shadow.

That is the view of the prophetic Nobel Prize winning Russian historian, novelist and former Soviet dissident, Aleksandre Solzhenitsyn. He has also commented:

"The 1920 and 1930s provide a stark and disturbing reminder of just how quickly faith in markets and openness can be overwhelmed by political events.

"Although the earthly ideal of Socialism-Communism has collapsed, the problems it purported to solve remain: the brazen use of social power and the inordinate power of money, which often direct the very course of events. And if the global lesson of the twentieth century does not serve as healing inoculation, then the vast red whirlwind may repeat itself in entirety" (New York Times, November 28, 1993).

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