Street art in Vancouver (Granville Island), Canada,
by artist Os Gemeos.
Photo by Vancouver Biennale / Roaming-the-Planet.
By Nancy Hanover
28 August 2014
In a statewide effort with national implications, for-profit charter schools and the right-wing American Legislative Exchange Council (ALEC) are attempting to amend the Ohio State Constitution. Those positioned to cash in financially are seeking to eliminate the requirement for a “thorough and efficient system of common schools throughout the state.”
The constitutional provision, adopted in 1851, provided the strongest possible mandate for the development of uniform public schools throughout the state. Eleven other US states have similar constitutional requirements to make “thorough and efficient” provisions for public schools, with eight others requiring a “general and uniform” system of schools.
Leading the effort to legally renounce Ohio’s current commitment to public education is Chad Readler, chairman of both the Ohio Alliance of Public Charter Schools and the education committee of the Ohio Constitutional Modernization Commission (OCMC), created by the state’s legislature in 2012. The Ohio Alliance of Public Charter Schools, created in 2006, is composed of 200 charter schools and was funded by the Walton Family Foundation and the Gates Foundation.
In response, public school advocates have emphasized that since US federal law does not enshrine education as a fundamental right, weakening or eliminating state constitutional strictures is a core attack. One of the chief effects of the constitutional change would be to block the use of the courts to enforce public rights or to provide oversight of educational standards, of particular importance in the state of Ohio.
The OCMC’s proposed changes to Article VI, Section 2 remove the passage stating “The General Assembly shall make such provision, by taxation, or otherwise … [as] will secure a thorough and efficient system of common schools throughout the state” and substitutes “The General Assembly shall provide for the organization, administration and control of the public school system of the state supported by public funds …”
This Orwellian “modernization” serves the profit interests of charter operators in two ways: by eliminating the requirement of a system of public schools throughout the state and by discarding the “thorough and efficient” standard.
Bill Phillis, longtime executive director of the Ohio Coalition for Equity & Adequacy of School Funding, said the change would virtually eliminate public accountability for school funding. “The ‘thorough and efficient’ standard has held the legislature’s feet to the fire for 160 years. Without a standard, public education could be diminished markedly and citizens would have no viable recourse via the courts,” he said.
In fact, historically the courts have relied upon the Ohio Constitution’s “thorough and efficient” language to require significant funding increases and other improvements for Ohio’s poorest school districts. A series of decisions, known as DeRolph, began in 1991 and were battled out in the courts for 12 years.
The stage was set when, in 1994, Perry County Court Judge Linton Lewis, Jr. ruled that “public education is a fundamental right in the state of Ohio” and that the state legislature had to provide a better and more equitable means of financing education.
Attorney Nick Pittner, who argued the DeRolph case for 500 poorer districts, pointed to children in the Appalachian-area of Vinton County, where the school had no cafeteria and they therefore had to cross a busy highway to eat at a diner, and to another school, where scaffolding was erected to prevent children from being hit by bricks falling from the walls.
In the 1997 DeRolph I ruling, the Ohio Supreme Court returned to the constitutional issues, stating “ …The delegates to the 1850-1851 Constitutional Convention … were concerned that the education to be provided to our youth not be mediocre but be as perfect as could humanly be devised. These debates reveal the delegates’ strong belief that it is the state’s obligation, through the General Assembly, to provide for the full education of all children within the state.” He summed up, stating, “The facts documented in the record lead to one inescapable conclusion — Ohio’s elementary and secondary public schools are neither thorough nor efficient.”
In fact, DeRolph did lead to billions of additional state funding dollars for education in the form of building construction and renovation for over 1,000 school buildings for kindergarten through 12th grade. These new buildings “wouldn’t be there without ‘thorough and efficient,’” Phillis pointed out.
Three subsequent high court rulings in 2000, 2001 and 2002 affirmed the unconstitutionality of Ohio’s school-funding system due to inequality across districts. Eventually the court backed down, stating that Ohio had made a “good faith effort,” thus reversing the earlier rulings.
Nevertheless, the court rulings and above all the constitutional mandate remain a thorn in the side to those forces attempting to institute market-driven education throughout the state. The deliberate and systematic defunding of public education and the parallel rise of charter chain schools have dramatically intensified education inequality in the state.
Presently, 45% of the state’s school children receive free or reduced school lunches (often used as a poverty benchmark), and in seven counties (Champaign, Coshocton, Crawford, Defiance, Greene, Miami and Medina) the child poverty rate has increased 90% or more in the last decade.
Heavily hit by deindustrialization and the 2008 crash, state funding for education in Ohio has been systematically cut. The state model forces school districts to make up the difference through their own tax levies. While business taxes have been cut, the burden of school funding has been shifted to homeowners, rising from 46% of the total in 1991 to a whopping 70% today.
Who are the heavyweight drivers and potential beneficiaries of the constitutional rewrite? They are the American Legislative Exchange Council (ALEC) and Ohio’s wildly profitable charter school chains. A notorious corporate “reform” group (also spearheading the national assault on public workers’ pensions), ALEC seeks to “replace” public schools with “private market-driven education thrift stores.” Education historian Diane Ravitch observed, in an apt phrase, ALEC “owns the Ohio legislature,” providing statistics on the number of Ohio legislators who are members of ALEC, on ALEC “scholarships,” or attending ALEC conferences.
Among the charter operators, the key players in Ohio are William Lager and David Brennan, as well as the publicly-traded national online charter K12. The biggest charter in the state is Lager’s Electronic Classroom of Tomorrow (ECOT), a cyber or online-only charter that enrolls 14,486 students statewide, netting about $64 million annually. ECOT schools are rated academically near the very bottom of 613 districts in the state. Lager has contributed $1 million to state politicians since 2001, according to Ravitch.
David Brennan’s White Hat Management operates 30 schools in Ohio and is the largest chain school, collecting about $100 million annually from state coffers for his for-profit charter empire.
Brennan and his family have donated millions of dollars to state politicians including Governor John Kasich. White Hat lobbyists have played significant roles in directly writing charter legislation. Brennan’s cyber charter, Ohio Distance and Electronic Learning Academy, graduates a scandalous 35.9% of its students. His Alternative Education Academy had a 22.8% graduation rate.
The Ohio charter industry has also been characterized by outright criminality. In June, 11 FBI agents raided Horizon Science Academy charter school in Cincinnati as part of a federal investigation into sexual misconduct and test tampering at the 19 schools managed by Concept Schools. The Dayton location of the chain has also been accused of discriminating against black students, falsifying attendance records and hiding sexual misconduct. 6,700 Ohio students attend the various Concept Schools academies.
Not surprisingly, given the role of ALEC and charter school operators in crafting state legislation, Ohio’s lax regulations hold the state’s 391 charter schools to lower performance standards than traditional public schools. Despite these diminished expectations, the state has closed 157 charters for lack of academic achievement since 2000.
The threat to eliminate state constitutional protection of public schools signals the fact that profit interests are already dismantling large swathes of public education in this country, if not its entire edifice, in the interests of monetizing education. Public education—like the right to municipal water, utilities or health care—is no longer considered by the ruling elite to be necessary for the masses of people, particularly if it can instead be packaged and sold at a profit.
|Juniper: Streaming Will Drive Digital Music Sales Through 2019…But Sloooooowly
Juniper Research has released a new report that indicates the digital music industry will experience slow revenue growth over the next five years, expanding from $12.3 billion in 2014 to $13.9 billion in 2019. As reported by Fierce Mobile IT, the research suggests a strong performance in the robust streaming music sector largely will be offset by a decrease in revenues from legacy services, including ringtones, ring-back tones, and music sales.
According to the new report titled “Digital Music: Streaming, Download, and Legacy Services 2014-2019,” the market will be characterized by consumer migration to cloud-based services. Such pure play music providers as Spotify and Pandora increasingly will find themselves competing with personalized services from the leading over-the-top (OTT) players, including Apple and Google. Additionally, piracy will remain a significant factor responsible for “major revenue leakage,” particularly in emerging markets (think China), where only a small percentage of content is legally acquired.
The report strongly suggests music consumption is set to become a highly sociable activity, with features such as music discovery and social media integration that connects music fans. However, finding ways to expand the pool of music subscribers while increasing the ease of discovery remains a key challenge for streaming companies. In a statement, Juniper said smartphones and tablets will be the primary platforms of growth, although digital music revenues on the PC/laptop will remain robust over the forecast period. Additionally, emerging markets are expected to strengthen in terms of digital music consumption, as disposable income levels continue to rise and streaming services expand into these regions.
|McDonald’s To Customers: Do You Want Some Digital Music With That?
Two all-beef patties, special sauce, lettuce, cheese pickles, onions, on a sesame seed bun…with a side of digital music. McDonald’s apparently has launched an “online music experience” designed to expand its digital presence, modernize the brand, and drive customers through a new online food-ordering app. Specifically, the fast-food chain has hired Ticketmaster’s Julia Vander Ploeg to create a “variety of digital music and entertainment experiences that McDonald’s will provide to customers, to reward the most enthusiastic customers and drive frequency.”
According to several sources, Vander Ploeg joins the company as a chief member of its Global Digital Team, which is focused on customer engagement, eCommerce, service delivery, and digital content. While no specifics are available, the McDonald’s website has posted a listing for a product director for music and entertainment, whose role would include crafting the strategy and product roadmap “for a variety of digital music and entertainment experiences that McDonald’s will provide to customers.” This person also will “establish multi-channel music and emerging entertainment programs to reward our most enthusiastic customers and drive frequency.”
“As digital consumer engagement models and retail business opportunities evolve, McDonald’s will continue to create an eCommerce platform that will enable us to reach even more customers and support McDonald’s global digital business and technology growth,” the company’s website says. “Our eCommerce platform will revolutionize how McDonald’s interfaces with our customers by removing physical boundaries to allow our customers to connect to,, and order McDonald’s any time or place, globally.”
|Vinyl Album Sales Grow To Still-MinusculeNumber Because Of “Enhanced Quality”
Every few months some analyst looking at the recorded music industry notices that vinyl album sales keep ticking upwards, which triggers yet another look at analog music sales within the greater digital universe. The most recent of these reviews is offered by TheStreet.com’s Jason Notte, who this week noted that “vinyl record sales have jumped a whopping 40.4% since the first six months of last year.” Noting that vinyl accounts for only a small percentage of total album sales (which in the first quarter of this year were down nearly 15% from the same period last year), he explained that sales of the old LP format rose from 2.9 million records in the first six months of 2013 to 4 million in the first half of this year.
“That’s a fairly small number when you consider that, even without Nielsen Soundscan’s ‘Track Equivalent Album’ and ‘Streaming Equivalent’ album measures that turn individual tracks into album sales, there were 121 million albums sold in the U.S. in the first half of 2014,” Notte writes. “Even the ‘dead’ CD still managed 63 million sales during that time.”
Still, it’s interesting to note – and Notte does – that vinyl sales are up 250% over the past 20 years while overall music sales slid 50%. As music fans have continued to embrace streaming music, “vinyl has become streaming’s aesthetic counterweight,” he says. “It’s a $20 to $30 luxury purchase made not only for its enhanced quality, but for its historic value. It’s a purchase reserved for standout releases and made by only the most dedicated listeners willing to invest in the music and the equipment to play it.”
|The Guardian: Hi-Res Digital Music Is Better, But Can Lead To Disappointment
“Why are we still listening to over-compressed music through low-quality headphones when advances in bandwidth, storage capacity, and speakers means we could be listening to high-quality uncompressed audio all the time?” This is the very valid question The Guardian recently asked its U.K. readers, noting that in an era of 24-bit audio, virtually all music sold and streamed today is available only in a much lower quality 16-bit CD or even the more highly compressed MP3 format. All conventional industry wisdom, theories, and testing aside, the question remains: can listeners actually tell the difference between high- and low-resolution?
This is the question three audiophiles at The Guardian asked themselves. After listening to a number of tracks played in 128kbps and 320kbps MP3; CD; and 24-bit studio master, the answer was…yes, although not necessarily in a transformative way. “The difference between MP3 and CD was most striking, [but] I struggled to differentiate much from CD to studio master,” said Tim Jonze, The Guardian‘s music editor. “Ultimately the difference is there but it’s subtle and it depends on how you listen to music.” Jason Phipps, The Guardian‘s head of audio, noted “there’s a distinct quality difference between the kind of compressed, middling MP3 commonly downloaded from the major platforms and the 24-bit high-res studio master.”
And Guardian correspondent Samuel Gibbs added, “Overall the studio masters sounded fuller…but that difference wasn’t always a good thing. It was disappointing to hear a recording of Pavarotti’s ‘Nessun Dorma’ sound worse in studio master, as it exposed the fact that the orchestra and the tenor’s tracks were recorded separately in different environments. Still, what was very apparent is just how bad a poor-quality MP3 sounded, how good a 320kbps MP3 and CD sounded, and how cutting out the middle man in the audio production chain with a studio master could have unexpected results.”
|Gracenote Hires New CEO To Expand RoleOf Metadata In The “Digital Ecosystem”
Most online music fans have never heard of Gracenote, but the provider of audio and video metadata and recognition services – owned by Tribune Media Co. – has hired former M-Go chief John Batter, to serve as its new CEO. This is a somewhat big deal because Batter’s new role is to expand the company’s services “internationally and aggressively” and “expand the role metadata plays in the digital ecosystem and experience.”
Consumers encounter Gracenote services via such services as Google Play, Xbox Music, and MTV, usually without even knowing it. As explained by Billboard, the company’s MusicID service uses metadata to let listeners identify songs whether downloaded or ripped from CDs, and its “scan and match” technology helps cloud services (e.g. Amazon Cloud Player) sync offline and online music collections. Such technologies facilitate discovery and ease of use, two vital aspects of today’s digital music services.
“Tribune Media has decided to focus its digital investment strategy on growing its metadata business globally, which today includes Gracenote and What’s-On,” said Tribune CEO Peter Liguori in a statement. “It is becoming very clear that metadata will help drive the evolution of next-generation TV and music experiences and we believe Gracenote is in an excellent position to drive the industry forward.”
A publication of Bunzel Media Resources © 2014
27 August 2014
Thousands of workers and youth participated in funeral services for Michael Brown on Monday, an expression of widespread outrage over the police murder of the unarmed 18-year-old. However, the funeral service itself, attended by three representatives of the Obama administration and presided over by Democratic Party operative Al Sharpton, was a thoroughly establishment, right-wing affair.
The aim of the ceremony, paid for and run by Sharpton’s organization, was to obscure the class issues raised by the killing of Brown, legitimize the de facto imposition of martial law in Ferguson, Missouri, and channel social opposition back behind the political establishment.
The ruling class responded to the spontaneous eruption of protests over the killing of Brown with a two-pronged strategy. First, the repressive apparatus of the state was mobilized, including militarized SWAT teams toting automatic weapons, driving armored vehicles, and firing tear gas, rubber bullets and bean bags at peaceful protesters. More than 200 people were arrested in the police crackdown.
Ferguson became a test case for imposing police-state conditions on an American city in response to social unrest. Journalists were threatened, arrested and assaulted. The National Guard was called in. A curfew was imposed and the constitutional right to assemble was effectively suspended under the “state of emergency” declared by Governor Jay Nixon, a Democrat.
Sheer repression did not suffice to silence the protests, however. Hence the second prong of the ruling class strategy. Figures such as Sharpton along with local preachers and Democratic Party politicians were mobilized to promote racial politics and direct the protests along safe channels. The Obama administration sent Attorney General Eric Holder, an African American, to Ferguson, and Governor Nixon appointed Highway Patrol Captain Ron Johnson, also an African American, to head up the police response.
This dual strategy found expression in the funeral eulogy delivered by Sharpton—both in what he said, and what he did not say. The one-time FBI informant spoke not as a partisan of the workers and youth of Ferguson, but rather as an emissary of the capitalist state, i.e., of the very forces that killed Brown and sought to crush the subsequent protests.
Most significant in Sharpton’s remarks was the absence of any reference to the social and economic issues underlying the killing of Brown (and hundreds of other police killings across the country) and the mass repression that followed. There was no mention of the unemployment and poverty that characterize Ferguson and cities throughout the country, nor was there any reference to the immense social inequality that drives the ruling class to employ increasingly violent means to suppress social anger and unrest.
Instead, Sharpton devoted much of his remarks to vile slurs against African-American youth in general and the protesters in Ferguson in particular. He complained that too many people are “sitting around having ghetto pity parties.” Celebrating the fact that a section of African Americans like himself have “got some positions of power,” he denounced those who “decide it ain’t black no more to be successful.” He continued, “Now you wanna be a n****r and call your woman a ho.”
These foul remarks, dripping with contempt, were combined with an open defense of the state. “We are not anti-police, we respect police,” proclaimed Sharpton. The murder of youth like Brown is the product only of a few “bad apples,” he declared, which can be corrected with measures like hiring more African-American police officers.
While avoiding any criticism of the massive military-police response to the protests over Brown’s killing, Sharpton repeated all the tropes used by the state to justify its repression. He bemoaned the fact that Brown’s parents “had to break their mourning to ask folks to stop looting and rioting,” adding, “Michael Brown must be remembered for more than disturbances.”
The use of the word “disturbances,” part of the lexicon of the police and military, is significant, carrying with it the implication that the protests were illegitimate. The police repression, Sharpton implied, was a necessary response to violence by the protesters.
He made no mention of the connection between domestic repression and the waging of aggressive wars abroad, ignoring the fact, noted by many Ferguson workers and youth who spoke to the World Socialist Web Site, that even as the National Guard was being deployed to Ferguson, Obama was once again ramping up the US military’s involvement in Iraq.
Sharpton’s support for the police crackdown reflects what he is: an agent of the state and representative of a section of the corporate establishment and upper-middle class that has amassed great wealth even as the great majority of the population, including African-American workers and youth, has seen its living standards plummet. This privileged and corrupt social layer has long promoted identity politics to conceal the basic class divide in society and sow divisions within the working class.
In particular, Sharpton spoke as a representative of the Obama administration. He has developed the closest ties with administration officials, coordinating his actions and remarks with the White House. This is an administration that has intensified the assault on the working class and overseen an enormous growth of social inequality, while increasing the militarization of the police.
The financial aristocracy reacts to any expression of social opposition with repression. In the 1960s, the ruling class responded to urban uprisings with violence, but that was followed by pledges to address inequality and poverty and the implementation of limited social reforms. Today, the ruling class has nothing to offer but more repression.
The events in Ferguson are an expression of the explosive character of social relations in the United States. The financial aristocracy is petrified over the revolutionary implications of the open emergence of class conflict. Hence the resort to violence on the one hand and reliance, on the other, on Sharpton and other so-called “civil rights” leaders to complement state terror with diversions and lies.
Many liberal economists envisioned a new dawn of Keynesianism in the 2008 financial meltdown. Nearly six years later, it is clear that the much-hoped-for Keynesian prescriptions are completely ignored. Why? Keynesian economists’ answer: “neoliberal ideology,” which they trace back to President Reagan.
This study argues, by contrast, that the transition from Keynesian to neoliberal economics has much deeper roots than pure ideology; that the transition started long before Reagan was elected President; that the Keynesian reliance on the ability of the government to re-regulate and revive the economy through policies of demand management rests on a hopeful perception that the state can control capitalism; and that, contrary to such wishful perceptions, public policies are more than simply administrative or technical matters of choice—more importantly, they are class policies.
The study further argues that the Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view, which attributes the plague of unemployment to the “misguided policies of neoliberalism.” Likewise, the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle .
Deeper than “Neoliberal Ideology”
The questioning and the gradual abandonment of the Keynesian demand management strategies took place not simply because of purely ideological proclivities of “right-wing” Republicans or the personal preferences of Ronald Reagan, as many liberal and radical economists argue, but because of actual structural changes in economic or market conditions, both nationally and internationally. New Deal–Social Democratic policies were pursued in the aftermath of the Great Depression as long as the politically-awakened workers and other grassroots, as well as the favorable economic conditions of the time, rendered such policies effective. Those favorable conditions included the need to invest in and rebuild the devastated post-war economies around the world, the nearly unlimited demand for U.S. manufactures, both at home and abroad, and the lack of competition for both U.S. capital and labor. These propitious circumstances, along with the pressure from below, allowed U.S. workers to demand respectable wages and benefits while at the same time enjoying higher rates of employment. The high wages and the strong demand then served as a delightful stimulus that precipitated the long expansionary cycle of the immediate post-war period in the manner of a virtuous circle.
By the late 1960s and early 1970s, however, both U.S. capital and labor were no longer unrivaled in global markets. Furthermore, during the long cycle of the immediate post-war expansion U.S. manufacturers had invested so much in fixed capital, or capacity building, that by the late 1960s their profit rates had begun to decline as the enormous amounts of the so-called “sunk costs,” mainly in the form of plant and equipment, had become too high .
More than anything else, it was these important changes in the actual conditions of production, and the concomitant realignment of global markets, which occasioned the gradual reservations and the ultimate abandonment of the Keynesian economics. Contrary to the repeated claims of the liberal/Keynesian partisans, it was not Ronald Reagan’s ideas or schemes that lay behind the plans of dismantling the New Deal reforms; rather, it was the globalization, first, of capital and, then, of labor that rendered Keynesian-type economic policies no longer attractive to capitalist profitability, and brought forth Ronald Reagan and neoliberal austerity economics .
It should be emphasized that Keynesian stabilization policies were not abandoned for purely ideological reasons; i.e., because, as many critics of neo-liberalism argue, a laissez-faire animus spread from Chicago, infecting politicians of all parties and persuading them of the benefits of free markets. . . . Keynesian systems of financial regulation (capital controls and managed exchange rates) could not withstand the growing pools of unregulated international credit, the Euromarkets, which came to dominate international finance .
When financial regulations, capital controls and a new international monetary system were established at the Bretton Woods (NH, New England) Conference in the immediate aftermath of WW II, international financial or credit markets were effectively non-existent. The U.S. dollar (and to lesser extent gold) was, by and large, the only means of international trade and credit. Under those circumstances, international credit took place largely through the International Monetary Fund (IMF) and the central banks of the lending/borrowing countries—hence, the enforceability of controls.
This picture of international credit/financial markets, however, gradually changed; and by the late 1960 and early1970s, those markets had grown to the tune of hundreds of billions of dollars, thereby allowing international credit transactions outside of the IMF–central banks channels. The two major factors that significantly contributed to drastic inflation of international financial markets were (a) the computer-generated international credit, and (b) the immense proliferation of Eurodollars, i.e. U.S. dollars deposited in overseas banks. The footloose-and-fancy-free global finance/credit has grown so big during the past several decades that it has made domestic or national controls and regulations virtually ineffectual:
Critics of international finance have made various proposals to stabilize the system and make it more appropriate to the purposes of economic and social development. The most common suggestion has been a return to the cross-border capital controls that existed during the 1940s and the 1950s. Such controls, in many cases, were not eliminated until the 1990s. However, international bank deposits and financial assets held abroad are now so large that it would be difficult to enforce such controls. Indeed, the main reason for getting rid of such regulations was precisely because they could not be enforced .
It is obvious, then, that the weakening or undermining of control and/or regulatory safeguards was brought about not so much by purely ideological tendencies of certain politicians or policy makers as it was by the actual developments in international financial markets.
It Started Long Before Reagan Arrived in the White House
The claim that the abandonment of Keynesian policies in favor of neoliberal ones began with the 1980 arrival of Ronald Reagan in the White House is factually false. Indisputable evidence shows that the date on the Keynesian prescriptions expired at least a dozen years earlier. Keynesian policies of economic expansion through demand management had run out of steam (i.e., reached their systemic limits) by the late 1960s and early 1970s; they did not come to a sudden, screeching halt the moment Reagan sat at the helm.
As Professor Alan Nasser of Evergreen State College points out, arguments that “policies of economic equity represented costly trade-offs in terms of efficiency” were made by economic advisors of the Democratic administrations long before Reaganomics solemnized such arguments. Arthur Okun and Charles Schultze had each served as chair of the Council of Economic Advisors to Democratic presidents. In his Equality and Efficiency: The Big Tradeoff, Okun (1975) argued that “the interventionist goal of greater equality had inefficiency costs that injured the private economy.” Schultze (1977) likewise claimed that “government policies which impact markets in the name of fairness and equality are necessarily inefficient,” and that such policies were “bound to disadvantage the very people policymakers intended to protect, and to destabilize the private economy in the process” .
Jerome Kalur also points out, “Chamber of Commerce and Business Roundtable efforts to gain control of government regulatory decision-making were initiated at least nine years before” the election of Ronald Reagan to presidency, “when corporate attorney Lewis Powell submitted to the Chamber his now well-known memorandum ‘Attack of American Free Enterprise System’” . In concert with Powel’s legal offensive against labor and regulatory standards, big business moved swiftly to “impede union organizing” and “to eliminate regulatory controls via streams of think-tank propaganda from the likes of The American Enterprise Institute (1972), The Heritage Foundation (1973), and the Cato Institute (1977)” . Kalur further writes:
When Powell handed his memorandum to the Chamber, American business had 175 registered lobbyist firms at its service. By 1982, the number of K Street corporate financed arm-twisters had grown to 2,500. Corporate supported PACs numbered 400 in the early 70s and 1,200 by 1980. In short, big business was already causing a decline in union memberships, strongly influencing federal agencies and laws, and mastering the SEC long before the advent of the Reagan presidency. With Powell elevated to the Supreme Court corporate America was by 1978 advancing toward its goal of un-restricted campaign contributions through clandestine vehicles .
While theoretical turnaround from New Deal–Keynesian economics by the luminaries of the Democratic Party pre-dated President Carter, policy implementation of such theories began under the Carter administration. Reagan picked up the Democrat’s copy of gradual agenda of neoliberalism and ran with it, replacing the rhetoric of capitalism-with-a-human-face with the imperious, self-righteous rhetoric of rugged individualism that greed and self-interest are virtues to be nurtured. Neither President Clinton eased the supply-side economic policies of the Reagan years, nor is President Obama hesitating to carry out such policies.
The Role of the State: Hopes, Myths and Illusions
The Keynesian view that the government can fine-tune the economy through fiscal and monetary policies to maintain continuous growth is based on the idea that capitalism can be controlled or manipulated by the state and managed by professional economists from government departments in the interest of all. The effectiveness of the Keynesian model is, therefore, based largely on a hope, or illusion; since in reality the power relation between the state and the market/capitalism is usually the other way around. Contrary to the Keynesian perception, economic policy making is more than simply an administrative or technical matter of choice; more importantly, it is a deeply socio-political matter that is organically intertwined with the class nature of the state and the policy making apparatus.
The Keynesian illusion has been nurtured or masked by two major myths. The first myth stems from the perception that attributes the implementation of the New Deal and Social Democratic economic reforms that followed the Great Depression and WW II to the genius of Keynes. Evidence shows, however, that implementation of those reforms, and therefore the rise of Keynes to prominence, were more a product of the fierce class struggles and overwhelming pressures from the grassroots than the brains of experts like Keynes. Indeed, beyond narrow academic circles, Keynes was not even heard of in the United States when most of the New Deal reforms were put in place.
The second myth stems from the view that attributes the long economic expansion of the 1948–68 period in the U.S. to the efficacy or success of Keynesian policies of demand management. While it is certainly true that expansive government policies of the time played a big role in the fantastic economic developments of that period, additional favorable conditions or factors also contributed to the success of that expansion. These included the need to invest and rebuild the devastated post-war economies around the world, the need to supply the vast post-war global demand for consumer as well as capital goods, lack of competition for U.S. products and capital in global markets—in short, the fact that there was enormous room for growth and expansion in the immediate post-war period.
Harboring these myths and illusions, Keynesian economists envisioned a silver-lining in the 2008 financial meltdown and the ensuing Great Recession: an opportunity for a new dawn of Keynesian economics. Nearly six years later, it is abundantly clear that Keynesian policy prescriptions are falling on deaf ears.
Shunned, Keynesian hopes and illusions have turned into disappointment and anger. For example, using his New York Times’ column, Professor Paul Krugman frequently lashes out at the Obama administration for ignoring the Keynesian policies of economic expansion and job creation:
The truth is that creating jobs in a depressed economy is something government could and should be doing. . . . Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office .
At the heart of Keynesian economists’ frustration or disappointment is the unrealistic perception that economic policies are intellectual products, and that policy making is primarily a matter of technical expertise and personal preferences. What these economists overlook is the fact that economic policy making is not simply a matter of choice, that is, of “good” vs. “bad” policy. More importantly, it is a matter of class policy.
It is not enough to have a good heart or a compassionate soul; it is equally important not to lose sight of how public policy is made under capitalism. It is not enough to repeatedly bash Ronald Reagan as a wicked king and praise FDR as a wise king. The more important task is to explain why the ruling class ousted the wise king and ushered in the wicked one. As Professor Peter Gowan of London Metropolitan University puts it, “Keynesians make an essentially false argument in favor of re-regulation when they fail to see the oneness of the State and the Wall Street” .
Growth and Employment: Keynes vs. Marx
Not only is the liberal economists’ account of the actual developments that led to the demise of Keynesianism and the rise of neoliberalism inaccurate, so is their explanation of the ongoing problems of unemployment and economic stagnation. By blaming the persistently high rates of unemployment on “neoliberal capitalism,” instead of capitalism per se, proponents of Keynesian economics tend to lose sight of the structural or systemic causes of unemployment: the secular and/or systemic tendency of capitalist production to constantly replace labor with machine, and to thereby create a sizeable pool of the unemployed, or a “reserve army of labor,” as Karl Marx put it.
The fundamental laws of demand and supply of labor under capitalism are heavily influenced, Marx argued, by the market’s ability to regularly produce a reserve army of labor, or a “surplus population.” The reserve army of labor is therefore as important to capitalist production as is the active (or actually employed) army of labor. Just as a regular and timely adjustment of the level of a body of water behind an irrigation dam is crucial to a smooth or stable use of water, so is an “appropriate” size of a pool of the unemployed critical to the profitability of capitalist production:
The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour-army; during the periods of over-production and paroxysm, it holds its pretensions in check. Relative surplus population is therefore the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient to the activity of exploitation and to the domination of capital .
In the era of globalization of production and employment, the reserve army of labor has drastically expanded beyond national borders. According to a recent report by the International Labor Organization (ILO), between 1980 and 2007 the global labor force grew by 63 percent. The report further shows that, due to worldwide urbanization and/or de-peasantization, the ratio of the active to reserve army of labor is less than 50%, that is, more than half of the global labor force is unemployed .
It is this vast and readily available pool of the unemployed, along with the relative ease of moving production anywhere in the world—not some “evil intentions of right-wing Republicans or wicked neoliberals,” as many Keynesians argue—that has forced the working class, especially in the core capitalist countries, into submission: going along with the brutal austerity schemes of wage and benefit cuts, of layoffs and union busting, of part-time and contingency employment, and the like.
This also explains why repeated Keynesian calls of the recent years for embarking on Keynesian-type stimulus packages in order to help end the recession and alleviate unemployment continue to sound hollow. Under the changed conditions of production from national to global level, and in the absence of overwhelming political pressure from workers and other grassroots, there are simply no refills for Dr. Keynes’s prescriptions, which were issued under radically different socioeconomic conditions, under national circumstances or frameworks, not international or global ones.
Theoretically, the Keynesian strategy of a “virtuous circle” of high rates of growth and employment is both simple and reasonable: massive government spending in the face of a serious economic downturn would raise employment and wages, inject a strong purchasing power into the economy, which would, in turn, spur producers to expand and hire, thereby further raising employment, wages, demand, supply . . . ad infinitum. But while the strategy sounds relatively simple and fairly reasonable, it suffers from a number of flaws.
To begin with, it implicitly assumes that employers and government policy makers are genuinely interested in bringing about full employment, but somehow do not know how to achieve this goal. Full employment production, however, may not necessarily be the ideal or profit-maximizing level of capitalist production; which means it may not be a real objective of business and/or government decision makers. As noted earlier, a sizeable pool of the unemployed is as essential to capitalist profitability as is the number of workers needed to be actually employed. In its drive to keep the labor cost as low as possible, by keeping the working class as docile as possible, capitalism tends to often prefer high unemployment and low wages to low unemployment and high wages.
This explains why, for example, the stock market often tends to rise when there is a report of rising unemployment, and vice versa. It also explains why, taking advantage of the long (and ongoing) recessionary cycle, the ruling business–government policy makers in the core capitalist countries have embarked on an unprecedented austerity program of spending cuts and public-sector downsizing whose main objective is to weaken the labor and reduce the labor cost.
Secondly, the Keynesian argument that a “virtuous circle” of high employment, high wages and high growth is relatively easily achievable only if it were not due to the “bad” policies of neoliberalism or opposition of employers is based on the assumption that employers/producers are somehow oblivious to their own self-interest. If only they were mindful of the benefits of the proverbial “Ford wages” to their sales, the argument goes, could they help both themselves and their workers, and bring about economic growth and prosperity for all. The well-known liberal professor (and former Labor Secretary under President Clinton) Robert Reich’s view on this issue is typical of the Keynesian argument:
For most of the last century, the basic bargain at the heart of the American economy was that employers paid their workers enough to buy what American employers were selling. . . . That basic bargain created a virtuous cycle of higher living standards, more jobs, and better wages. . . . The basic bargain is over. . . . Corporate profits are up right now largely because pay is down and companies aren’t hiring. But this is a losing game even for corporations over the long term. Without enough American consumers, their profitable days are numbered. After all, there’s a limit to how much profit they can get out of cutting American payrolls .
There are two major problems with this argument. The first problem is that it assumes (implicitly) that U.S. producers depend on domestic workers not only for employment but also for sale of their products—as if it were a closed economy. In reality, however, U.S. producers are increasingly becoming less and less dependent on domestic labor for either employment or sales as they steadily expand their production and sales markets abroad: “On both the supply [employment] side and the demand side, the U.S. worker/consumer is perceived as incrementally inessential” .
The second problem with the argument is that wages and benefits are micro- or enterprise-level categories that are decided on by individual employers or corporate managers, not by some macro or national level planners of aggregate demand (as in a centrally-planned economy). Individual producers (large or small) view wages and benefits first, and foremost, as a major cost of production that needs to be minimized as much as possible; and only secondarily, if ever, as part of the national aggregate demand that may (in roundabout ways) contribute to the sale of their products.
Marx characterized capitalism’s willingness and ability to create a big pool of the unemployed (in order to create a largely poor and meek working class) as “immiseration” and submission of labor force—a built-in mechanism that is essential to the “general law” of capitalist accumulation:
It follows therefore that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. The law, finally, that always equilibrates the relative surplus population, or industrial reserve army, to the extent and energy of accumulation, this law rivets the labourer to capital more firmly than the wedges of Vulcan did Prometheus to the rock. It establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital .
The Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view that attributes the plague of unemployment to the “misguided” or “bad” policies of neoliberalism. Likewise, the Marxian theory of subsistence or poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized or nationwide predominance of misery, can go hand-in-hand with high levels of corporate profits and/or stock markets than the Keynesian perceptions, which view a high level of wages as a necessary condition for an expansionary economic cycle.
Perhaps more importantly, the Marxian view that meaningful, lasting economic safety-net programs can be carried out only through overwhelming pressure from the masses—and only on a coordinated global scale—provides a more logical and promising solution to the problem of economic hardship for the overwhelming majority of the world population than the neat, purely academic and essentially apolitical Keynesian stimulus packages on a national level. No matter how long or loud or passionately the good-hearted Keynesians beg for jobs and other New Deal-type reform programs, their pleas for the implementation of such programs are bound to be ignored by governments that are elected and controlled by powerful moneyed interests. The fundamental flaw of the Keynesian demand-management prescription is that it consists of a set of populist proposals that are devoid of class politics, that is, of political mechanisms that would be necessary to carry them out. Only by mobilizing the masses of workers (and other grassroots) and fighting, instead of begging, for an equitable share of what is truly the product of their labor can the working majority achieve economic security and human dignity.
Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He is the author of Beyond Mainstream Explanations of the Financial Crisis (Routledge 2014), The Political Economy of U.S. Militarism (Palgrave–Macmillan 2007), and the Soviet Non-capitalist Development: The Case of Nasser’s Egypt (Praeger Publishers 1989). He is also a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press 2012).
 This article is essentially a (significantly) shortened version of Chapter 5 of my book, Beyond Mainstream Explanations of the Financial Crisis: Parasitic Finance Capital (Routledge 2014).
 Anwar Shaikh, “The Falling Rate of Profit and the Economic Crisis in the U.S.,” in Robert C. et al. (eds.) The Imperiled Economy, Book I, New York, NY: Union for Radical Political Economy, 1987.
 Harry Shutt, The Trouble with Capitalism: An Enquiry into the Causes of Global Economic Failure, London: Zed Books, 1998.
 Jan Toporowski, Why the World Economy Needs a Financial Crash and Other Critical Essays on Finance and Financial Economics, London: Anthem Press, 2010, P. 18.
 Ibid., p. 25.
 As quoted in Alan Nasser, “New Deal Liberalism Writes Its Obituary,” <http://www.counterpunch.com/nasser09212009.html>.
 Jerome S. Kalur, Review of Andrew Kliman’s The Failure of Capitalist Production, <http://www.amazon.com/gp/cdp/member-reviews/A1WTYY0ETLH4VQ/ref=cm_pdp_rev_more?ie=UTF8&sort_by=MostRecentReview#R2ZKCGGBY64VF3>.
 Paul Krugman, “No, We Can’t? Or Won’t?” http://www.nytimes.com/2011/07/11/opinion/11krugman.html?_r=0.
 Peter Gowan, “The Crisis in the Heartland,” in M. Konings (ed.) The Great Credit Crash, London and New York: Verso, 2010.
 Karl Marx, Capital, vol. 1, New York: International Publishers, 1967, p. 639.
 International Labor Organization (ILO), The Global Employment Challenge, Geneva, 2008; as cited in John Bellamy Foster, Robert W. McChesney and R. Jamil Jonna, “The Global Reserve Army of Labor and the New Imperialism,” http://www.globalresearch.ca/index.php?context=va&aid=27549.
 Robert Reich, “Restore the Basic Bargain,” <http://robertreich.org/post/13469691304>.
 Alan Nasser, “The Political Economy of Redistribution: Outsourcing Jobs, Offshoring Markets,” <http://www.counterpunch.org/2011/12/02/outsourcing-jobs-offshoring-markets/>.
 Karl Marx, Capital, vol. 1, New York: International Publishers, 1967, p. 645.