"Starving The Beast."
How the Corporatocracy Sets the Rules of the "Game" To Create
By Thom Hartmann
Clearing House" -- --
One of the most pernicious claims the corporatocracy makes is
that business flourishes best in a perfectly "free" market. And
when business flourishes, they say, all of society does better.
It's the old trickle-down philosophy that inevitably produces a
nation of peons.
Always get suspicious when you see the words free market. Let's
go back to the story of Mrs. Flores, whom you met in chapter 2--
the woman who lost her job at Levi Strauss when that venerable
American company closed all of its factories here in the USA and
moved them overseas.
Cons argue that "productivity" is responsible for the loss of
American jobs. They love to quote nineteenth-century economist
David Ricardo (1772�"1823) as saying in his 1817 work On
Wages, "Labour, like all other things which are purchased
and sold, and which may be increased or diminished in quantity,
has its natural and its market price."
Thus, they say, it's natural that American wages should have
been in a free fall ever since Bill Clinton signed NAFTA and
GATT: America's roughly 100 million workers now have to compete
"on a level playing field" with 5 billion impoverished people
around the world. Offshoring is simply the normal extension,
they say, of Ricardo's classic view of economics.
What they conveniently forget is that Ricardo didn't say the
market price was the natural price. On the contrary, he wrote,
"The natural price of labour is that price which is necessary to
enable the labourers, one with another, to subsist and to
perpetuate their race, without either increase or diminution."
In other words labor is part of the game of business, and one of
the first goals of the game of business is to "perpetuate" the
existence of the laborers themselves. That's the natural price.
If businesses want to keep their workers, according to Ricardo,
they must make sure that the market price of labor is at least
as much as the natural price of labor. And the natural price is
the "subsistence" price-- just enough to survive-- which brings
us back to Dickens's world.
On the other hand, when in 1914 Henry Ford raised his workers'
pay to $5 per day (about double what other manufacturers were
paying), he said he was doing so in part because he wanted his
employees to be able to buy his cars. If the American workforce
can't make a decent living, they'll stop buying products made in
America, which will lead to fewer people making a decent
living-- this death spiral for an economy and a nation's middle
class that we are now seeing as a result of Reagan/Clinton/Bush
trade and economic policies.
Everybody knows that games played without rules won't work.
Boxers are divided into weight categories to ensure relative
fairness in fights; baseball rules define the type of bats that
can be used; football players are limited in how they can use
their hands so they don't injure opponents or gain unfair
What's lost on many Americans is that business is a game, too.
And We the People define its rules through our elected
representatives. The goal of the game is to provide for the
life, liberty, and pursuit of happiness of American citizens.
Gaming the System
If government can create conditions that cause a middle class to
emerge, by implementing fair rules for business, progressive
taxation, and free public education, the opposite is also true:
government can create a corporatocracy by deregulating business,
by cutting taxes on extreme wealth, and by privatizing as much
of the commons as possible. Cons call this "starving the beast."
Here's how you starve the beast: you put through tax cuts for
the rich, which cuts back the revenues of the federal government
to the point that, if you got rid of all the social programs,
you'd have a balanced budget. No more Social Security, no more
spending for education, no more spending for Medicare and
Medicaid; have the government simply keep the armies, prisons,
and police. Let's shrink government-- that's their philosophy.
When you cut all those social programs, you lose the middle
class and in its place create a very small, very wealthy elite
and a large underclass of starvation-wage workers. You lose
democracy and instead create corporatocracy. You change the
rules of the game; We the People lose, and the feudal lords win.
Cons have been winning this particular game of "starve the
beast" since Reagan first started seriously playing it in 1981.
They've done it in large part by lying to the American people;
and they've had to do that because if they told the truth the
majority of Americans would throw them out of office.
This is, after all, still a democracy. If the majority of us
agree to get rid of Social Security so that only the wealthy can
have retirement benefits and the old are left to fend for
themselves, so be it. If a guy breaks his back and can't work
and the majority of us decide not to help people who are
disabled, and as a result he has to beg on the street, well, we
can democratically decide to screw him and ourselves.
But the cons are not having this debate in an open and honest
fashion. They are not asking We the People if we want to get rid
of, for example, the Head Start program. They could ask, "Do we
want to invest in our youth now or not?" We know that if we
invest in educating the very young, fewer of them will become
criminals. It will save us money over the long term. But if the
majority of us say, "No, we would rather pay $50,000 to imprison
them later than pay $300 to put them in Head Start now," then
fine, it's a democracy.
But that's not the way the cons are doing it.
Instead of explaining why it would be better for Americans to
give all their money to a corporate elite, they're giving huge
tax cuts to the rich while pretending that the tax cuts benefit
Instead of arguing that Americans should not expect the right to
health care or security in their old age, they are prompting a
government crisis by handing to the rich money they're borrowing
from China, Japan, and Korea in the name of our grandkids. We
are borrowing so much money from these countries that if they so
much as blink, our currency could crash.
And that's just what the most ideological of the con elite want.
They want an economic crisis because they figure that's the only
way they can force a cut in spending on social programs.
In 2004 they thought they had starved the beast enough and sent
Bush out on the campaign trail to advocate getting rid of Social
Security-- privatizing it, putting it in the hands of Wall
Street. But it didn't work. Turns out We the People apparently
like Social Security. So the cons went back to starving the
beast. Bush instead passed a new series of tax cuts, with more
The cons are trying to play the game so that the rich benefit
while the rest of us lose out. They get tax cuts, and we get
program cuts. That's not the "free" market. That's a market
that's being created for the benefit of the rich at the expense
of the middle class.
How the Game Works
The question Americans have faced since the first arguments
between Thomas Jefferson and Alexander Hamilton in the 1780s was
whether the game of business should be played with the primary
goal of enriching the few, or-- while allowing the few to enrich
themselves-- enhancing the quality of life of the many.
The cons suggest that if the rich win first, benefits will
"trickle down" to the rest of us. Protecting workers, they say,
will produce abnormalities and dislocations from the "free"
market. For example, they suggest that when minimum wages are
fixed by government, and labor can lawfully bargain to increase
wages by increasing scarcity of labor through union actions, the
result is an increase in prices, ultimately "hurting the working
But the economist they most often cite on this thinking, David
Ricardo, disagreed that raising wages first increased prices. He
noted, "On the contrary, a rise of wages, from the circumstance
of the labourer being more liberally rewarded, or from a
difficulty of procuring the necessaries on which wages are
expended, does not, except in some instances, produce the effect
of raising price, but has a great effect in lowering profits."
In other words, all the talk about keeping wages down to keep
prices down is a smokescreen: business owners want to keep wages
down to keep profits up.
And when wages go down, profits do indeed go up. American wages
have been falling steadily since Reagan first reintroduced con
economics in 1980, and American corporations are generally more
profitable than they've been in decades. In part this is not
only because wages are going down within the United States but
also because U.S.-level wages are being replaced by India- and
China-level wages through outsourcing and offshoring.
"But offshoring isn't the problem for American workers!" the
cons shout. "It's the increase in productivity. American
businesses need fewer workers because automation and hard work
have made our workers more productive."
This is a tragic lie, and it's been bought hook, line, and
sinker by most American politicians and even many economists.
Productivity is, very simply, the measure of how many products
or services can be produced for how many dollars of labor
expended. But offshoring distorts productivity figures in two
First, foreign labor is cheaper, but it produces nearly
identical amounts of product or service. The result is
Second, many corporations don't list offshore labor on their
balance sheets as a labor expense. Because they hire offshore
companies as subcontractors to do work previously done by their
own employees, they get to reduce the number and the cost of
their employees while having an only slightly increased line
item for the subcontractor on their profit-and-loss statements.
The result implies that the remaining employees are getting more
done because the offshore employees are no longer counted in the
But the Indians and the Chinese know something you won't hear on
con "business" programs: while China and India eagerly let
multinational corporations move work to their nations from the
United States, they fiercely protect their own domestic
industries primarily through the use of tariffs-- taxes on
imported goods-- and the strict regulation of imported labor.
Winning the Game for America
To return balance to the international game of business, America
should follow the lead of the Chinese and the Indians. We can
use tariffs to balance trade relationships.
From the founding of this country, our operational principle
was: If there's a dollar's worth of labor in a pair of shoes
made here, and you can make the same shoes in some other "cheap
labor" country with 10 cents' worth of labor, there will be a
90-cent import tax (tariff) when you bring them into the
country, to protect our domestic industries and our
manufacturing jobs. Tariffs level the field for both
American business and American labor. Without tariffs the only
winners are the East India Company's modern incarnations-- the
multinational corporations (which is why the multinationals push
so hard for the WTO and other such institutions, treaties, and
This is not a new idea, by the way-- it's how America has
protected its economy from the founding of this nation right up
until Clinton signed NAFTA and GATT. The first law imposing
tariffs was in place before the Constitution was ratified in
1789. Tariffs represented 100 percent of federal government
revenues from the founding of this nation until around the time
of the Civil War and about a third of our total federal revenues
up to World War I. They were still a major source of revenue
right into the 1980s, when Reagan first took a whack at them.
For example, Jefferson wrote in his diary on March 11, 1792:
"Hamilton had drawn [Jean Baptiste] Ternant into a conversation
on the subject of the treaty of commerce recommended by the
National Assembly of France to be negotiated with us." France
wanted concessions from America as a way of enhancing
international relations but was unwilling to reduce its own
tariffs. Jefferson noted, "Hamilton communicated this to the
President, who came into it, and proposed it to me. I
disapproved of it, observing, that such a volunteer project
would be binding on us, and not them; that it would enable them
to find out how far we would go, and avail themselves of it."
George Washington was more of Hamilton's mind. "However,"
the President thought it worth trying, and I acquiesced. I
prepared a plan of treaty for exchanging the privileges of
native subjects, and fixing all duties forever as they now
stood. Hamilton did not like this way of fixing the duties,
because, he said, many articles here would bear to be
raised, and therefore, he would prepare a tariff. He did so,
raising duties for the French, from twenty-five to fifty per
cent. So they were to give us the privileges of native
subjects, and we, as a compensation, were to make them pay
The deal ultimately fell through-- Jefferson saw it as a
Machiavellian scheme by Hamilton to try to irritate England--
but it shows how tariffs were an important aspect of American
foreign policy from the administration of George Washington up
until Bill Clinton got us into the World Trade Organization,
thus eliminating most tariffs and trade "restrictions," letting
multinational corporations instead of sovereign nations write
the rules of international business.
To solve the crisis of the disappearance of America's middle
class, the United States should follow Jefferson's lead and
protect American workers. We should pull out of the WTO, NAFTA,
CAFTA, and other multilateral treaties that give corporations
the power to enforce their will on our government and our
workers. This will again allow us to impose leveling tariffs on
work done overseas. Offshore labor can then be set in price-- by
adding tariffs to it-- to equal a living wage in the United
If a company wants to hire people to answer the phone in India
for $2 per hour, fine. Let them do it-- and pay a $10-per-hour
tariff on top of the $2 hourly wage. If somebody wants to
manufacture a computer in China with $10 worth of labor that
would be worth $100 in the United States, no problem-- just
impose a $90 tariff on it when it's imported. Most companies
will simply return to the United States for their labor, and
those that don't will enhance government coffers with funds that
can be used for national health care and the education of our
This is easily doable. By walking away from the Anti-ballistic
Missile Treaty and the Kyoto accords, George W. Bush showed
Americans that we really do have the power to simply ignore or
disavow international treaties to which we've already committed.
It's time to apply that experience to the WTO, GATT, and NAFTA
and return to our Founders' ideal of a nation in which the rules
of trade and business are, as Jefferson said, "very much guided"
by the interests of We the People rather than by a handful of
Excerpted from Thom Hartmann's newest book,
The Undeclared War Against the
Middle Class -- And What We Can Do About It
See also: Real Video: :
Thom Hartmann: Screwed: The Undeclared War Against the Middle
Class -- And What We Can Do About It: Air America
talk radio host Thom Hartmann argues that government policies
are endangering the middle class. He alleges that conservatives
are creating rules and conditions that value corporations over
Thom Hartmann is a Project
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