Brave New First-World Order

excerpted from the book

Brave New World Order

by Jack Nelson-Pallmeyer

Orbis Books, 1992, paper

p18
Kevin Phillips, The Politics of Rich and Poor

The forces of the late twentieth century have required double entry bookkeeping: new wealth in profusion for the bright, the bold, the educated and the politically favored; economic carnage among the less fortunate. In short, the United States of the 1980s.

Poor people living in third-world countries are not the only victims of the so-called new world order. At the heart of this "new" order is a troubling paradox: Poor people within the United States, and the country as a whole, are getting poorer at the same time as the rich within the United States are getting richer. The massive wealth drain from third-world countries to first-world elites has not prevented the economic decline of the United States. Its pressing national problems mirror those of many third-world countries. The infant mortality rate in inner cities like Detroit and Washington, D.C., exceeds that of impoverished Honduras. The United States, in less than two decades, went from being the world's largest creditor nation to being the world's largest debtor. It is also a country of stark contrasts including billionaires and homeless people, measles epidemics and military bands, crack babies and Wall Street speculators.

The most disturbing parallel between the United States and the Third World is that massive wealth transfers from the third world poor to the first-world rich have a domestic counterpart.

During the 1980s there was a dramatic shift in wealth from poor and working-class Americans to U.S. elites. This upward redistribution of wealth was accompanied by a radical shift in relative wealth and economic power from the United States to Japan and Western Europe. There is one other paradox that is central to understanding U.S. goals within the new world order: The nation's declining economic power is accompanied by and linked to United States ascendancy as the world's undisputed leader in military power.

Domestic Hunger and Poverty

... The Reagan and Bush years produced, according to Kevin Phillips, a Republican party strategist, "one of U.S. history's l most striking concentrations of wealth." This wealth concentration occurred "as the American dream was beginning to crumble not just in inner-city ghettos and farm townships but in blue collar centers and even middle-class suburbs.'' The gap between the richest and poorest U.S. citizens is now greater than at any time since the Census Bureau began collecting such data in 1947. The poorest twenty percent of the U.S. population receive 3.8 percent of national income; the richest twenty percent get 46.1 percent.

If talk of victory in the Cold War sounded bitterly ironic to poor people living in third-world countries allied with the United States, it is doubly so for people living in third-world conditions within the United States. The following litany of ills provides ample evidence of a nation in crisis:

* One in four children in the United States is born into poverty.

* More than thirty-five million U.S. citizens lack any type of health insurance. Millions more have only limited coverage.

* The United States ranks twenty-second in infant mortality, behind most of our industrial allies.

* Most of the poor in the United States are full-time workers or their dependents. This reflects a serious deterioration in the wages and benefits of significant sectors of the U.S. work force.

* In 1985, 20.4 percent of all infants below age 1 were not fully vaccinated against polio, 41.5 percent of infants of color.

* One-fourth of the poorest low-income households spend more than seventy-five percent of their incomes for rent.

* The United States has the world's largest per capita prison population; 426 of every 100,000 people are in jail. By way of comparison, the incarceration rates per 100,000 people are 333 in South Africa, 268 in the Soviet Union, 97 in Great Britain, l 76 in Spain, and 40 in the Netherlands.

* The United States, according to a United Nation's Development Program report, also has the highest murder rate and l highest incidence of reported rape among industrialized countries.

These acute social problems are a consequence of national policies and priorities that enrich certain sectors at the expense of others. These policies include enormous tax cuts for the richest Americans, major cuts in social services, huge trade and budget deficits, and massive infusions of foreign capital. They reward speculative rather than productive investment and emphasize military production and power over socially useful production. By describing in general terms the economic changes that occurred over the past decade, and the winners and losers from these changes, we can discover the forces and constituencies giving shape to the new world order.

"America's richest 5 percent (and richest 1 percent in particular)," writes Kevin Phillips, "were the ... beneficiaries" of major changes in the U.S. tax code. Tax reforms benefited the rich in several ways. The top personal tax bracket rate dropped from seventy percent to twenty-eight percent over seven years. At the same time the rate of federal tax receipts from corporate income tax revenues continued to plummet from 32.1 percent in 1952, to 12.5 percent in 1980, to an all-time low of 6.2 percent in 1983.7 The burden of taxation shifted further onto low-income households as social security tax rate hikes accompanied lower income tax rates. According to Senator George Mitchell this resulted in "a shift of about $80 billion in annual revenue collections from the progressive income tax to the regressive payroll tax." In the first five years following the passage of the 1981 Economic Recovery Tax Act the superrich "shared a half-trillion dollar victory." These tax changes translated into deepening disparities between the incomes of the rich and poor. Between 1977 and 1988, according to a Congressional Budget Office report, the incomes of the wealthiest fifth of U.S. households increased thirty-four percent, the incomes of the middle fifth grew four percent and the incomes of the poorest fifth dropped by ten percent. The top one percent benefited most. Their incomes rose by 122 percent, rising from an average of $203,000 in 1977 to $451,000 in 1988.l° According to the 1991 Green Book from the House Ways and Means Committee, the after-tax income of the richest one percent of all U.S. citizens in 1988 was as great as the combined after-tax income of the bottom forty percent. By way of contrast, the after-tax income of the bottom forty percent in 1977 was more than double the total after-tax income of the richest one percent.

In addition to tax breaks for the rich the Reagan administration increased military spending by thirty-eight percent from 1982 through 1986. Burgeoning military expenditures further traumatized the federal budget, which had already lost hundreds of billions of dollars of potential tax revenues. The results were huge deficits that drained the federal budget because of rising interest payments. Annual federal expenditures on interest for the federal debt rose from $96 billion in 1981 to $216 billion in 1988.

The policies that led to unprecedented wealth for the richest Americans and renewed power for the military industrial complex resulted in a budget deficit "crisis." Ironically, this budget crisis itself offered additional profit opportunities for the rich. However, the crisis was real and immediate for the poor. It shackled both present and future generations of poor and working-class Americans who bore-and will bear-the weight of elite imposed "solutions."

Tax breaks for the rich, military spending increases, and rising interest payments were paid for in part by substantial cuts in programs that most directly benefited the poor. During 1982-86, a period of huge military expenditures and concentrated wealth, there were dramatic cuts in social programs. Federal spending, corrected for inflation, included budget cuts in the following areas:

housing 82%
employment and training 52%
mass transit 28%
community development 20%
education 14%
AFDC (Families with Dependent Children) 11%
health 8%

In addition the federal food stamp program was cut $6.8 billion from FY 1982 to FY 1985.

U.S. policies border on economic apartheid as U.S. elites, like their third-world counterparts, impose austerity measures on the poor. Most graphically, as economic opportunities and federally funded housing units are severely limited by budget cuts the poor find "alternative housing" in prisons. The United States not only has the highest rate of imprisonment of any nation in the world, it has the most racially biased prison system. One of four black males is in the criminal justice system-in jail, on trial, awaiting trial or on parole. South Africa's incarceration rate for blacks is 729 per 100,000. The U.S. rate is 3,109.l6 If present trends continue, shortly after the middle of the next century one-half of all U.S. citizens will be in jail!

***

p23
David Gordon of the New School of Social Research

"The most important story about the U.S. economy in the eighties, is the economic warfare that the wealthy and powerful have been waging against the vast majority of Americans."

p26
A financial column for the Philadelphia-Inquirer noted similarities between the economic situation of 1986 and the 1920s

Then as now, banks, investment houses and brokerage firms created the debt that made money-making excursions in Wall Street possible. Money was used primarily to make money, not to producing goods and services and raise people's living standards.

p27
Seymour Melman summarizes the relationship between military production and U.S. economic decline - 1988:

While the arms race with its unspeakable hazards proceeds, it has generated a catastrophe in slow motion for the American people. The United States has been transformed into a second rate industrial economy. The Pentagon degraded the growth of efficiency in US industry, first by replacing cost-minimizing with cost-maximizing as a main managerial method. Second, by preempting trillions of dollars of capital resources since World War II the Pentagon drained off real wealth from productive use, finally proving even American wealth has limits.

***
p27
... there are different approaches to restoring the competitiveness of the U.S. economy. The most pragmatic approach would require a fundamental shift in the priorities of research and investment. Another option is to try to make U.S. goods and services internationally competitive by devaluing the dollar. This approach was tried in the mid-1980s. It resulted in a massive foreign takeover of U.S. businesses and real estate.

U.S. goods became somewhat more competitive but at the ^~7, expense of the economic sovereignty of the country. Another way to improve one's competitive position is to reduce the wages and living standards of workers. Ironically, in 1985 the President's Commission on Industrial Competitiveness ruled out that approach, which is now central to U.S. economic strategy within the new world order:

Competitiveness is the degree to which a nation can, under free and fair market conditions, produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens.... It is not our goal to compete by decreasing the real incomes of our people. Other nations may compete by having low wage levels, but that is not an option America would choose.

Restoring the competitive position of the United States would require a major revision of the tax code to encourage productive investment, a dramatic shift of resources out of the military sector, and huge investments in the education and health of our people. These changes also would require challenging the groups that dominate the new world order. Clearly, the goal of the United States within the new order is to improve the competitive position of the United States at the expense of U.S. and foreign workers. According to Forbes:

Over the next 20 years, the U.S. could face a severe labor shortage. Mexico by contrast has at least 5 million unemployed workers and will add as many as a million job seekers in each of the next five years. That's ten million workers willing to work for $1 an hour, available to add value to U.S. produced goods and services and to keep U.S. products world-competitive. It is not important whether the Mexicans work in the U.S. or in U.S.-owned factories in Mexico. The important thing is that a better way be found to marry U.S. investment with Mexican labour.

The "labor shortage" in the United States is, of course, a shortage of workers willing to work for a dollar an hour. "Until we get real wage levels down much closer to those of the Brazils and Koreas," a vice president of the Goodyear Corporation said, "We cannot pass along productivity gains to wages and still be competitive."

The benefits to U.S. corporations from poorly paid foreign workers go beyond the goods they produce. Foreign wages of one dollar an hour push U.S. wages lower and therefore make the U.S. economy "more competitive." The fact that the majority of poor people in the United States are full-time workers or their dependents signals an already serious decline in wages and benefits. In 1985 seventy percent of the uninsured were full-time, full-year workers or their families. A minimum-wage jobs today pays seventy-one percent of the federal poverty line for a family of three. In the 1960s a minimum-wage job lifted a family above the poverty line. Weekly wages for U.S. workers in the fall of 1988 were 2.4 percent below 1980 levels and were falling at a rate of more than one percent a year. The Government Accounting Office has reported in virtually all sections of the country the resurgence of sweatshops-businesses that violate wage, child labor, safety, and health laws.

***

p29
... exploitation of underdeveloped countries is a central feature of the new world order. Free-trade agreements between the United States and other weaker economic partners such as Mexico are a means by which U.S. corporations can capitalize on cheap labor costs in order to improve their competitive position. The United States is confident that third-world indebtedness will provide the United States with permanent leverage over third-world economies and workers. SAP provisions, such as currency devaluations, will ensure that U.S. corporations never experience a "labor shortage" in Mexico. Free-trade agreements will also accelerate the already disturbing trend of U.S. companies seeking to become competitive by lowering the living standards of U.S. workers.

In the 1980s the rich grew richer and the military more powerful through governmental policies that impoverished the country and slashed social programs and spending. The individual and corporate greed that fueled these policies aggravated numerous social problems. Hunger, homelessness, deteriorating education and health care, drug epidemics, and burgeoning prison populations were some of the negative social by-products of the period. Ironically, these social problems also contribute to the deterioration of the U.S. economy. The Committee for Economic Development, in a report entitled Children in Need: Investment Strategies for the Economically Disadvantaged, notes: [1989]

This nation cannot continue to compete and prosper in the global arena when more than one-fifth of our children live in poverty and a third grow up in ignorance. And if the nation cannot compete, it cannot lead. If we continue to squander the talents of millions of our children America will become a nation of limited human potential. It would be tragic if we allow this to happen. America must become a land of opportunity-for every child.

***

Conclusion

p31
The end of the Cold War ... offered hope for the United States, where economic problems were well advanced but not terminal. Judicious use of hundreds of billions of dollars of savings from the long-awaited "peace dividend," coupled with major tax, economic, and social reforms, offered possibilities for hope and revitalization. The world was standing at the threshold of a new world order. Unfortunately, the possibility of an authentically new order threatened entrenched interests and was quickly dashed. The possibility of meaningful reforms lay dead in the sand, a premeditated casualty of the Gulf War. It was replaced with a "brave new world order" that suited elite U.S. interests. As President Bush's popularity soared and as the nation reveled in its "victory," a tragic symbol of the new order quietly struggled to enter our consciousness: amid daily articles praising U.S. military technology and war-making capabilities there were reports of a measles epidemic sweeping through the United States while an epidemic of cholera spread through Peru to other Latin American countries. U.S. militarism had triumphed. There was a role for the United States in the post-Cold War period that didn't involve offending the military-industrial complex, addressing third-world poverty, reforming the U.S. economy, or redistributing wealth. The new world order, rooted in the injustice of the old, apparently needed a global military enforcer. The U.S. National Security Establishment would lead the country down a deadly path as it carved out a niche for the United States in the aftermath of the Cold War.

Brave New World Order

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