The early 1970s brought into relief the internal contradictions of the capitalist system of production and distribution. This was never more evident than in Britain at the time. The trade unions, previously illegal had become more powerful and integrated as they defended the rights of their members. The very existence of the union movement exposed the conflictual nature of capitalism. The trade unions caused havoc in Britain in the early 1970s. But before we consider the role of the trade unions, it is important to understand what was happening on the capital side at the time. After the Monetarist ideas of Milton Friedman and his colleagues at the University of Chicago and beyond had seeped out of the academy into the policy and lobbying circles, it became obvious that capital would mount a major action against the unions and governments that gave them succour. Corporations and big money were far from passive. They didn’t buy the line that the Left has been lured into believing that the state had become increasingly powerless as capitalism became more global. Far from it. They got more organised than ever! The British Labour Party became lambs for the …
The Powell Manifesto – 1971 – a major turning point
He published the ‘Powell Memo’ (or Powell Manifesto) just two months before he assumed a position as US Supreme Court Judge, courtesy of the corrupt Richard Nixon. The contents of the ‘Memo’ were not made public prior to his elevation.
The Memo was a major turning point in the way the corporate sector approached the political system.
Prior to assuming that position, Powell had represented the Tobacco industry in many cases.
The story of Powell and the Tobacco industry was an early example of what would become the large-scale abuse of corporate power in the modern era of capitalism.
What we now see in the form of the various concessions granted under so-called free trade agreements and the apparent immunity of the financial sector from prosecution despite the corrupt behaviour that led to the GFC, was all on show in the Powell era during the 1960s.
Before his rise to the Supreme Court, Powell had been a director of the Phillip Morris tobacco company. He was appointed to that position in 1964.
Earlier in that year (January 11, 1964), the US Surgeon General’s Advisory Committee on Smoking and Health released its first report – Smoking and Health – on the dangers of smoking.
The report was an exhaustive study of the subject and catalogued the extensive evidence that had been accumulated to that date.
It used the accepted statistical methods (which remain robust today) concluded categorically that cigarette smoking was a cause of various forms of cancer in both men and women and other chronic diseases (such as, bronchitis).
The evidence produced was sensational and “the report furnished newspaper headlines across the country and lead stories on television newscasts. Later it was ranked among the top news stories of 1964” (Source).
So what is the relevance of that? In their excellent examination of corporate abuse, Jeffrey Clements and Bill Moyers (2012) trace the link between Powell and the tobacco companies and how the sector’s lobbying organisation, the Tobacco Institute had for decades deployed “phony science and false statements to create a fraudulent ‘debate’ about smoking and health.”
They argue that “ideas expressed by Powell in his 1971 memorandum to the Chamber of Commerce came out of his personal involvement in the aggressive resistance of the cigarette corporations to efforts to address the devastating social and public costs of its lethal products” (Source).
They write that:
Powell shared responsibility for the fraudulent attack on the conclusions of scientists and the surgeon general by the cigarette industry and for its false insistence for years that ‘no proof’ showed cigarettes to be unhealthy.
[Reference: Clements, J. and Moyers, B. (2012) Corporations Are Not People: Why They Have More Rights Than You Do and What You Can Do About It, San Francisco, Berret-Koehler Publishers.]
In his memo, Powell wrote that:
No thoughtful person can question that the American economic system is under broad attack … what now concerns us is quite new in the history of America. We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts …
The day is long past when the chief executive officer of a major corporation discharges his responsibility by maintaining a satisfactory growth of profits, with due regard to the corporation’s public and social responsibilities. If our system is to survive, top management must be equally concerned with protecting and preserving the system itself. This involves far more than an increased emphasis on “public relations” or “governmental affairs” — two areas in which corporations long have invested substantial sums.
He appreciated that “In the final analysis, the payoff — short-of revolution — is what government does”. The Left might have bought the line that the State is now powerless in the face of globalisation, but the Right certainly understood that to get things done they had to work through the political process – “short-of revolution” that is.
He thus advocated aggressive action to influence the political process:
Business must learn the lesson, long ago learned by labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be assidously (sic) cultivated; and that when necessary, it must be used aggressively and with determination.
In addition to urging business leaders to become explicitly political, he also urged the Chamber of Commerce to “address the campus origin of hostility”, a reference to his claim that universities had become hotbeds of dissident, left-wing activism deeply opposed to the free market system. He claimed that universities were increasingly pumping out “bright young men” who wanted to “change a system which they have been taught to distrust — if not, indeed ‘despise'” and who were infiltrating “the centers of the real power and influence in our country”.
He wanted the Chamber to vet appointments, promote the public recognition of known supporters of free enterprise, “evaluate” textbook use, and build influence in the “graduate schools of business” by demanding “specific courses in such schools” which will provide “essential training for the executives of the future”.
He also wanted to establish “scholarly journals” explicitly to give access to publication of free market literature – parading as academic research.
He wanted similar influence exerted in the secondary school system.
In the public sphere he outlined a plan to use monitor “national television networks” and the “radio and press” harass the relevant organisation that dared to deviate from the free market message he sought to promote.
He claimed that:
The news stands — at airports, drugstores, and elsewhere — are filled with paperbacks and pamphlets advocating everything from revolution to erotic free love.
He wanted an organised effort to produce material on “our side” to counter what he considered to be a socialist insurgency via the popular media.
Finally, Powell also understood that the US courts influenced the terrain the the corporate sector had to operate within.
In that context he said:
Under our constitutional system, especially with an activist-minded Supreme Court, the judiciary may be the most important instrument for social, economic and political change.
He was advocating an “activist-minded Supreme Court” to ensure corporate interests were prioritised and embodied within the law just two months before he was to become a Supreme Court judge.
History tells us that he (ab)used his position as a Supreme Court judge to put that ideological belief into practice (the so-called concept of “corporate speech” in the First Amendment – see Clements and Moyers).
The upshot of the Powell Memo combined with the increasingly hostile messages coming from the academy about the evils of government intervention into the econmomy motivated the US Chamber of Commerce and increasingly organised corporate donors to create (Source):
… a powerful array of institutions designed to shift public attitudes and beliefs over the course of years and decades. The memo influenced or inspired the creation of the Heritage Foundation, the Manhattan Institute, the Cato Institute, Citizens for a Sound Economy, Accuracy in Academe, and other powerful organizations. Their long-term focus began paying off handsomely in the 1980s, in coordination with the Reagan Administration’s ‘hands-off business’ philosophy.
See also the – Archive – at Washington and Lee University of the “significant follow-up communications to the Powell Memo”. It gives you an idea of how this stategy unfolded.
Bill Moyers’ article (September 14, 2012) – The Powell Memo: A Call-to-Arms for Corporations – traces some of the background to the Powell intervention. Above all, the memo “was just one of many who pushed to reinvigorate the political clout of employers”.
He documents that:
The number of corporations with public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, nearly 2,500 did. The number of corporate PACs increased from under 300 in 1976 to over 1,200 by the middle of 1980.
This was a concerted movement to retain and enlarge the hegemony of capital. There was no hints that globalisation was eroding the relevance of the state.
The state and its legislative and judicial machinery became the focus of intensified right-wing efforts to push the free market agenda.
The movement became international in nature. Right-wing ‘think tanks’ and lobbying organisations multiplied in the 1970s.
In the UK, the Centre for Policy Studies was founded by Tory MPs Keith Joseph and Margaret Thatcher to develop material that would “limit the role of the state, to encourage enterprise and to enable the institutions of society – such as families and voluntary organizations – to flourish”. In other words, as long as the state was promoting and nurturing corporations then all was well.
Similarly, the influential Adam Smith Institute was formed in the 1970s as part of this global movement to advance the interests of the corporate sector.
As these organisations infiltrated the major political parties through the promotion of free market thinking, government, itself, started to fund them to advance the neo-liberal agenda.
The way the British Labour Party under Tony Blair embraced the neo-liberal agenda exemplifies how deeply these lobby groups had penetrated the political process.
On June 19, 2002, the then Secretary of State for International Development in the British government, Clare Short, was responding to issues in a – Debate on International Trade – in the House of Commons.
She responded to a statement from a Liberal Democrat MP advancing the proposition that water in poor nations “could be cheaper under a privatised system”
The Minister responded:
Privatisation is the only way to get the investment that those countries need in things like banking, tourism, telecommunications and services such as water under good regulatory arrangements. I agree that the campaign saying that there should not be a voluntary scheme to open up services in that way is misguided.
Her own Department for International Development was funding the Adam Smith Institute through a consultancy arm it established – Adam Smith International – to push their radical free-market ideas in developing nations.
It quickly became a major supplier of services to facilitate the privatisation of water, electricity etc in thse nations.
The company was embroiled in scandal in 2005 when a water privatisation scheme failed in Tanzania.
The UK Guardian article (May 25, 2005) – Flagship water privatisation fails in Tanzania – reported at the time that:
The $140m (£76.5m) World Bank-funded privatisation scheme – which was supported by the UK government – was one of the most ambitious in Africa and was intended to be a model for how the world’s poorest communities could be lifted out of poverty and countries could meet their millennium development goal targets.
We learn that:
The Department for International Development paid Adam Smith International, sister organisation of the free market UK thinktank Adam Smith Institute, more than £500,000 to provide advice to the Tanzanian government.
More than £250,000 of that sum was spent by Adam Smith International on a video which included the words: “Our old industries are dry like crops and privatisation brings the rain.”
The British goverment “paid more than £36m” between 1998-2005 “Adam Smith International and PricewaterhouseCoopers to advise countries on privatising utilities.”
The Tanzanian government was coerced into accepting the privatisation scheme by – you guessed it – the IMF – as part of a debt deal:
The International Monetary Fund forced water privatisation on one of the poorest countries in the world in order to benefit western water companies
The Tanzanian government “cancelled its deal with” the company supplying the services because, as the spokesperson said at the time “no new domestic pipework has been installed, the company has not spent the money it had promised, water quality has declined, and that revenue has decreased.”
The series so far
This is a further part of a series I am writing as background to my next book on globalisation and the capacities of the nation-state. More instalments will come as the research process unfolds.
The series so far:
The blogs in these series should be considered working notes rather than self-contained topics. Ultimately, they will be edited into the final manuscript of my next book due later in 2016.
The next instalment in the series will consider the rise of trade union power and their role in the inflation in Britain in the 1970s. I expect some criticism of the view I take from those on the Left!
But like always I have a very reliable flame suit and usually the Left-sourced criticisms come from those who think I am a Tory in disguise (laughing a lot). They also seem to not have understood what has happened to the Left anyway and certainly do not fully grasp the underpinning macroeconomics.
FINALLY – Introductory Modern Monetary Theory (MMT) Textbook
I will write a separate blog about this presently, but today we finally published the first version of our MMT textbook – Modern Monetary Theory and Practice: an Introductory Text – today (March 10, 2016).
The long-awaited book is authored by myself, Randy Wray and Martin Watts.
It is available for purchase at:
1. Amazon.com (60 US dollars)
2. Amazon.co.uk (£42.00)
3. Amazon Europe Portal (€58.85)
4. Create Space Portal (60 US dollars)
By way of explanation, this edition contains 15 Chapters and is designed as an introductory textbook for university-level macroeconomics students.
It is based on the principles of Modern Monetary Theory (MMT) and includes the following detailed chapters:
Chapter 1: Introduction
Chapter 2: How to Think and Do Macroeconomics
Chapter 3: A Brief Overview of the Economic History and the Rise of Capitalism
Chapter 4: The System of National Income and Product Accounts
Chapter 5: Sectoral Accounting and the Flow of Funds
Chapter 6: Introduction to Sovereign Currency: The Government and its Money
Chapter 7: The Real Expenditure Model
Chapter 8: Introduction to Aggregate Supply
Chapter 9: Labour Market Concepts and Measurement
Chapter 10: Money and Banking
Chapter 11: Unemployment and Inflation
Chapter 12: Full Employment Policy
Chapter 13: Introduction to Monetary and Fiscal Policy Operations
Chapter 14: Fiscal Policy in Sovereign nations
Chapter 15: Monetary Policy in Sovereign Nations
It is intended as an introductory course in macroeconomics and the narrative is accessible to students of all backgrounds. All mathematical and advanced material appears in separate Appendices.
A Kindle version will be available the week after next.
Note: We are soon to finalise a sister edition, which will cover both the introductory and intermediate years of university-level macroeconomics (first and second years of study).
The sister edition will contain an additional 10 Chapters and include a lot more advanced material as well as the same material presented in this Introductory text.
We expect the expanded version to be available around June or July 2016.
So when considering whether you want to purchase this book you might want to consider how much knowledge you desire. The current book, released today, covers a very detailed introductory macroeconomics course based on MMT.
It will provide a very thorough grounding for anyone who desires a comprehensive introduction to the field of study.
The next expanded edition will introduce advanced topics and more detailed analysis of the topics already presented in the introductory book.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.