Corporatism & Neo-Liberalism

Written By: - Date published: 12:58 pm, April 23rd, 2011 - 36 comments
Categories: capitalism - Tags:

One of the corollaries or supporting ideologies behind Neo-Liberalism is the cult of Management.

The idea that individual shareholders, managers or directors are the main contributors to the success of a corporation, and thence the economy. And deserve the greatest share of the rewards. The jobs and income of all other employees and State servants is a generous charitable gift from these people.

Except, maybe in the case of genuine entrepreneurs, we all know this is not true.

Many corporations and State or private enterprises run despite management, not because of them. In fact, the constant parade of new brooms trying to make a name for themselves, with rapid changes and cost cutting, cause competent staff to resign and demoralise the rest.

Many times, within a company, when you want the person who get things done. You ignore the suits staring out the windows in the corner offices and talk to the person, usually a women, who actually does things. Normally someone several pay grades below the suits. Or when you are ordering something, the bright well dressed manager calls some wizened old guy from the shop floor to ask if it can be done.

The corporations with the largest income gap between Directors/Managers and employees have proven to be the least functional.

The star managers paid in millions have proven to be much less effective than, lesser paid, experienced promotions from within the organisation.

Outsiders are typically good at rapid cost-cutting and divestment, but over time, those opportunities tend to dry up.

Highly paid directors have led many corporations into oblivion. Enron, SCF, Hanover and many others.

The highest paid of all, financial managers, destroy at least 7 times as much wealth as they create. Which makes them parasites, getting wealth for themselves by destroying more of others’.

We are so bamboozled by the cult of management we made one of those Prime Minister.

At the same time, corporations decry the decreasing loyalty of other employees while they reduce the pay and responsibility they show towards them.

This all comes from the Neo-Liberal idea that those who work for others are somehow being charitably given jobs.
The fact is all the overpaid managers, greedy directors and parasitic shareholders could not even live, let alone have fortunes without the efforts of cleaners, technicians, plumbers, lath hands, secretaries and rubbish collectors.

People who do productive work more than earn their pay. They contribute much more in relation to their income than those at the top.

Unions and, once upon a time, Labour helped the rest of us towards getting our fair share of the wealth we produce.

Past time Labour decided they are not national lite and repudiated the entire Neo-Liberal canon of faith. They should not be just another vehicle, like National, to transfer wealth to corporate parasites.

Stop the waffle (Thanks QOT) and shooting themselves in the foot and come out strongly for New Zealanders.

Then they may get back the votes of ordinary people.

– KJT

36 comments on “Corporatism & Neo-Liberalism ”

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  1. Afewknowthetruth 1
    23 April 2011 at 1:39 pm

    Quite correct, neoliberalism is dysfunctional (functions but generates bad outcomes) ideology, and all the economic mantra that goes with it is utter garbage.

    The fact is, we have all been lied to from birth about many aspects of society, but most people are content to be lied to  -bought off by the trinkets of consumerism for the moment. Of course, consumenrism was made possible by cheap fossil fuels. That game is nearly over.

    Corporations have wielded inordinate and unjustifiable power since the 1600s, but they are now more or less in complete control of the world and write most government policies. As peak oil bites harder and harder global corporations will presumably become even more powerful.

    The good news is:  this entire system is slowly progressing towards the collapse because after around 500 years of planetary looting there is little left to loot. We are living in a post-peak-everything world and EROEI is falling.

    The bad news is: the bulk of the populace are still not interested in dealing with reality and still seem to think wealth will keep arriving at their doorstep for little effort.

    I’m not holding my breath for Labour to face up to reality: they are just as firmly locked into denial as all the other ignorant clowns in parliament. 

  2. dave brown 2
    23 April 2011 at 2:24 pm

    There is nothing ‘fair’ about capitalism since one class must live off the labour of another.
    The good thing is that despite the ongoing illusions of the liberal left that it is possible to reform capitalism to achieve income equality, reality is intervening and teaching us a lesson.
    Capitalism cannot continue without falling into worsening crises. Not just collapses of the banking system which is symptomatic, but of falling profits which dictate increasing exploitation and growing poverty of the masses. Marx called it ‘immiseration’. An this amounts to a destruction of humanity and nature.
    We are witnessing this on a world scale, and Aotearoa/NZ fits into the pattern as a small, dependent semi-colony of the US, Australia and increasingly China.
    The evidence for this is that capitalism only survives by making the working masses pay for its crisis by forcing down living standards. And in many places the masses have had enough – Tumeke! The common element is that that unemployed and literate youth are the first to rise up. The Arab spring is noted for the ‘no fear!’ youth. This means that capitalism has to use force to suppress mass uprisings which exhaust what remaining legitimacy it has. The empire has no clothes.
    The global crisis explains why the NACTs are going for broke and exposing themselves by dressing up in the new see thru outfit of lying, corruption and corporate crony capitalism. It has to declare an open class war between the global capitalist class and its local lackeys, and the NZ working class or die.
    The working class has to make the global capitalist class pay for its own crisis. That means ‘no fear’, walking like Egyptians, and fighting like Libyans. In Aotearoa/NZ we can see the important fights shaping up. One is the fight to save working class Christchurch from from Gerry and the Placemakers. Two is the fight to keep big oil out of the foreshore and seabed. Three is to push the anti-terrorist laws back down the throats of the reborn white settler gentry who want to turn NZ back into a farm and quarry for their imperialist masters.
    Four will be the fight to keep the state from smashing the welfare provisions that keep the working class from immisseration.
    For the working class to live, capitalism must die!

  3. Colonial Viper 3
    23 April 2011 at 3:19 pm

    I am looking for Labour to champion unequivocally the causes of modern democratic socialism.
     
    That includes providing support for the creation of worker owned co-operatives, collective enterprises, and not-for-profit organisations, as well as increasing the diversity of roles SOE’s play in the economy.
     
    Then consumers and customers can decide who they choose to buy their goods and services from: run of the mill corporate behemoths, or businesses run and owned by ordinary NZ workers.
     
    As you suggest KJT, there is no time left for half measures or pussy footing.

    • Alwyn 3.1
      23 April 2011 at 6:30 pm

      Can we assume that you regard AMI as a wonderful example of the sort of business we should be encouraging. It has been, after all, an example of the co-operative approach to organising an Insurance company, with the owners being the people holding policies. Unfortunately when these policy holders need the cover it isn’t there. Instead the only people who seem to be being paid are those who nsured with a properly organised privately owned company.

      • McFlock 3.1.1
        23 April 2011 at 7:53 pm

        Let’s see, one mutual company in difficulty vs half a dozen financial corporations that went under?
         
        The profits exported by the international insurers are probably more than the liquidity *option* that AMI might need.
         
        But I agree that the better model is that of the EQC.

      • Colonial Viper 3.1.2
        24 April 2011 at 4:21 pm

        Can we assume that you regard AMI as a wonderful example of the sort of business we should be encouraging.

        wrt AMI, every AMI employee should have had access to AMI’s books and details of reinsurance.
         
        It would have been immediately obvious to all that their senior management had left their firm too unprotected.
         
        When I talk about co-operative and collective enterprises I am talking about democractic ones – ones where information is freely available to every level of the organisation.

  4. El Mutante 4
    23 April 2011 at 3:54 pm

    That was one of the more rousing calls to arms I’ve heard in quite a while Dave. I like the cut of your jib.

  5. Rex Widerstrom 5
    23 April 2011 at 5:41 pm

    Except, maybe in the case of genuine entrepreneurs, we all know this is not true.

    Tangenital to your main point KJT (with which I agree – great post).

    But oh how I yearn for a party to come up with a set of policies that reward entrepreneurial activity. I know from my time in the media and then politics that NZ is bursting with people who have brilliant ideas and just need a bit of capital to get it going. Sure some would fail, but I’m prepared to bet those who succeed would generate wealth – for themselves, yes, but also for those they employed and the country as a whole – far in excess of the cost of any failures.

    The truly parasitical use of money isn’t shareholdings but property “investment”. One of the nightly “current affairs” shows here in Australia paraded the “success” os someone who, at 25, owns 30 leveraged properties, does no real work, and drives round in his ute congratulating himself on how clever he is. At least the shareholders of a public company are contributing to keeping some people in work.

    Perhaps the starting point for an entrepreneurial policy is to cut all the tax breaks on investment properties and start offering them on venture cpaital investments. Net cost to the government may well turn out to be less (as at least some of the companies that would progress to be net tax payers) and the benefit to the nation would be immeasurable.

    • Colonial Viper 5.1
      23 April 2011 at 6:03 pm

      +1
       
      Development Finance Corporation Mk II (with a few more safeguards and a bit more action oriented this time)

      • Afewknowthetruth 5.1.1
        23 April 2011 at 7:12 pm

        Development is not the answer. Development is the problem. 

        The more an economy develops, the more dependent on energy and other resources finite it becomes. The more a society develops, the more unsustainable that society becomes, and the harder it will fall when energy and resources are no longer available. The alarm has been ringing loudly for several years, but most people still are not taking any notice.  

        Permaculture and powerdown are arguably the only sane responses to the predicament we are in. But they are not glamorous.

        • Draco T Bastard 5.1.1.1
          23 April 2011 at 8:35 pm

          Research and development is part of the answer. Overuse of resources is the problem.

        • JD 5.1.1.2
          24 April 2011 at 11:14 am

          Last time I recall seeing the consequences of particular ideology was when I was traveling in Cambodia.

        • KJT 5.1.1.3
          24 April 2011 at 1:51 pm

          Development, of more sustainable energy use and production, is the answer.

          This is only going to happen if the best and brightest are attracted into these activities rather than into non-productive financial juggling.

          Nothing wrong with an economic stimulus and growth from activities like insulating houses, solar efficient buildings, lower energy use transport and agriculture and distributed small scale  generation. To name only a few.

          I forget what the actual ratio is. Someone will know of a link. But with venture capital the net return over a large number of entrepreneurs is high.

          Some fail, some break even and some return the investment many times over. More than enough to cover the ones that do not succeed.
          A DFC which used factual criteria, not cronyism, to allocate funding would most likely make enough profit to keep even a Don Brash happy.
          A better investment for our future than depending on endlessly compounding ponzi interest from money markets. A safer place for Mum and Pop to invest than cooked finance companies.
          Governments in Singapore, Europe, South Korea and the USA up until the 70’s did pick winners and protect nascent industries. It has worked for all these places.

          I have no problem with pragmatic corporate welfare for sustainable entrepreneurs which has net benefits to NZ. Cheaper than propping up financial failures as we do at present.

          It could even be made for TV. A panel of savvy people pick amongst ideas submitted for the best sustainable and marketable.

          Muldoon was not entirely wrong. We have to invest in the future of NZ or there will be no production to support any of us.
          Two of the think big projects I have personal knowledge of would have made good profits for NZ if the real returns had not been hidden by transfer pricing until they were  given away. One for less money than its first year profits in private hands.
           

          • Rex Widerstrom 5.1.1.3.1
            24 April 2011 at 3:35 pm

            It could even be made for TV. A panel of savvy people pick amongst ideas submitted for the best sustainable and marketable.

            Like The Dragons’ Den. Or The New Inventors.

            With some tweaks both these could form the basis of a workable model. But tap into the “wisdom of crowds” with public comment, and perhaps votes, as to what would work… taxpayers having direct input into how their own money was spent.

            Sadly, even the channel most likely to screen such a show, TVNZ7, is dying under this government 🙁

            But if we ever get an administration that uses “investment” as anything other than code for “we’re giving more of your money to our mates” I think you’re onto something KJT.

        • Colonial Viper 5.1.1.4
          24 April 2011 at 2:29 pm

          Focussing development for the next five to six years on resilient infrastructure, energy generation and facilities which are going to last for 150-200 years is key.
           
           

      • Rex Widerstrom 5.1.2
        23 April 2011 at 9:50 pm

        I wondered if someone would mention the DFC… very brave of you CV 🙂

        It’s seen – mainly by those who don’t really know their history – as Muldoonist intervention of the worst kind. But that overlooks the fact that booming economies (including Australia’s) have supports in place for R & D (small grants at the very early stages, though mainly dollar-for-dollar tax breaks). Of course they screw it up by encouraging property speculation.

        The DFC was knobbled by those who cried that it wasn’t government’s place to “pick winners”. Oddly enough, these same people, or their current equivalents, think it’s perfectly fine for government to back losers… as long as those losers are “too big to fail”.

        • Colonial Viper 5.1.2.1
          24 April 2011 at 2:53 pm

          The DFC was knobbled by those who cried that it wasn’t government’s place to “pick winners”.

          I’ve just been looking at what Singapore is doing today around “picking winners”, and what they have done over the last 10-15 years.
           
          As you know, whoever was crying that govt has no role in this simply has no idea of what can be done and has been done in other parts of the world.

    • Draco T Bastard 5.2
      23 April 2011 at 6:38 pm

      But oh how I yearn for a party to come up with a set of policies that reward entrepreneurial activity.

      I don’t think that lack of reward is the problem so much as lack of encouragement and support. As you say, there’s lots of people out there with ideas so we need to ask why those ideas aren’t being worked upon. Part of the answer, IMO, seems to be because the capitalists hold all the money and won’t let it go unless they can get a guaranteed return so an idea that doesn’t make a return but may have benefit to society anyway doesn’t get a look in.
       
      Then there’s the fact that a lot of those people with ideas don’t know where to go to get the necessary resources to implement them. A corollary to that is maybe that some of them have tried before, been ripped off by some unscrupulous bastard and just won’t trust anyone enough to try again.
       
      Then there’s patents and other IP laws that get in the way of independent research and development. Really, really need to look at those. Modern IP laws actually prevent innovation (which, of course, is what they’re supposed to do so as to keep present corporations viable).
       
      We need some way to get the necessary resources to these people with ideas that doesn’t rely on capitalists.

      • Rex Widerstrom 5.2.1
        23 April 2011 at 10:02 pm

        Capitalists, a you rightly point out, want as close to a guaranteed return as possible. Right now that means buying a property and renting it out to someone for every last dollar you can possibly extract from them – 50% of their income or more.  

        That’s because our tax system makes it so. An even better scam, apparently, is to buy a second home close to the beach then rent it out as a holiday home. Because you’re deriving income from it everything is deductible. You then set about buying things like a enormous plasma TV “for the holiday home” (wink, wink… not like the tax man is going to check it’s in the lounge down there). So suddenly your amassing of consumer goods becomes tax deductible. “Everything from towels to toilet paper” as one “capitalist” described it to me.

        Simplest fix would seem to be to disincentivise this sort of carry-on by making it (and property investment generally) no longer deductible – or else, if we’re feeling generous, remove the ability to use it for negative gearing.

        Then offer the same incentives but this time for venture capital. Sure it’s riskier but the returns are potentially higher even than property speculation is presently. And for the really important ideas, some form of government underwriting to provide security.

        Capitalism as currently practised is the problem but, if practised differently, it also has some of the answers.

        And your point about IP law is well made. As with most things, the pendulum has swung from one extreme to another and created a morass, as the situation with Trevor Rogers illustrates. Not an area I have any knowledge of, but it must surely be possible to write IP laws that aren’t a lawyer’s wet dream?!

        • terryg 5.2.1.1
          24 April 2011 at 5:43 pm

          I’m just waiting for Jeff Baker to invent the memory crystal. that’ll kill copyright 🙂  (I just re-read misspent youth)
          IMO the length of a patent is a serious problem. Pre-computing & WWW, 17 years was probably about right. Now its just ridiculous – most modern inventions are superceded within a few years.
          With Moores law, in 17 years computing power goes up by a factor of ~3000 (doubles every 18 months, and has since the 1960s). so any computing thingy is not just obsolete, its archaic.
          The other problem is that the USPTO will literally patent any old shit.A patent is NOT supposed to be “obvious to one skilled in the art”.
          I hold the naming rights to a number of patents (good on a CV, no reward other than salary but). One circuit, for dimming LED lamps without flickering, is literally in every power electronics textbook in the world, and has been since before I was born/man landed on the moon – a Pulse Width Modulator. The “invention” process comprised me being asked for my suggestions as I walked past a bunch of engineers in NC, and OTTOMH sketching up said PWM circuit on a whiteboard. The implementation is almost exactly as first drawn – it really is that well known.
          I bloody near fell off my chair laughing when patent docs showed up – but the USPTO were happy, the argument being “But nobody has used it to dim LED lamps without flickering” – aaargh!
          Now the only way to have it overturned is with expensive litigation.
          So if I want to design a LED lamp dimming circuit that isnt for BQDD (I’m sorry Dave, I cant let you do that), I’ll have to think up something that isnt in my textbooks, and its all my fault 🙁
          and thats nowhere near as stupid as many SW and business process patents – shopping baskets and one-click ordering anyone? I could rant about this for weeks……
           
          Copyright is far, far worse than patents though. Copyrights are used to turn us all into renters. FFS mickey mouse is STILL copyrighted, and is over 70 years old.

  6. Pascal's bookie 6
    23 April 2011 at 6:03 pm

    Good post KJT.

    If you’ve not read it, The Economics of Innocent Fraud by JK Galbraith is very good on the subject. It’s short readable, and can be read for free. Just google the title and it usually comes up in the first link, as a google book. 

  7. Herodotus 7
    23 April 2011 at 6:31 pm

    From “The Persian Expedition” – Xenophon book 7 ch 2 the pay gap of foot soldier to generals 380 bc ”  each soldier a starter of Cyzicus every month, double pay for a captain and 4 times as much for a general …” Now way back 2400 years there was a very flat pay scale from the boss down to those who were cannon foder !!!
     – A wee history lesson on pay scales. ps There was no PAYE tax back then either
    Sometimes those old timers had a better perspective on things !! 😉

    • locus 7.1
      24 April 2011 at 8:15 pm

      “Sometimes those old timers had a better perspective on things” http://en.wikipedia.org/wiki/Slavery_in_antiquity

      I’m not sure that I agree. The generals in many ancient civilisations were the rich and powerful, and benefited from the large numbers of slaves they took following conquests – to work on the lands that they plundered. The wealth of the Egptians, Persians, Greeks, Romans etc was largely derived from slavery and heavy taxation of the conquered nations.

  8. mickysavage 8
    23 April 2011 at 7:35 pm

    Can I also commend you on your post KJT and also recommend something.  I saw the film “Inside Job” recently and can commend it as a succinct but devastating review of the global financial crisis.  The end of the movie is great as the interviewer’s questions of various participants gets closer and closer to the bone and you can see them squirm.  The film does not pull any punches either, it calls greed by its proper name.

    If I can give a really basic summary of the film’s conclusions it is that a number of players were in on it and their collective greed brought capitalism to its knees.

    The participants included:

    1.  The banking executives who started to lend for volume’s sake rather than with a view to the future and the need to make sure that loans were secure.  Collateral Debt Instruments removed the need to worry if the loan was going to be repaid. Added to this was a bonus system that rewarded volume instead of security.
    2.  The merchant bankers that sold Collateral Debt Instruments.  Subsequently disclosed Goldman Sach emails described CDIs as a “piece of crap” at the time they were being sold vigorously.
    3.  The companies that valued the CDIs at AA or AAA weeks before they collapsed without value.  They were hooked into the valuation fees that were paid and went along for the ride.
    4.  Economics lecturers who augmented modest income by being on boards of directors of merchant bankers or writing pro free market papers for right wing institutions.  They let the fees cloud their judgment and expoused the free market without critical thought.
    5.  Politicians who cut into the budgets of the institutions that should have been overseeing and regulating the market in the vain hope that unbridled capitalism would turn out OK.
    6.  And last but not least political parties who relied on the campaign contributions from the large corporates and then went easy on them.

    Barack Obama does not escape criticism.  He has a number of ex Wall Street people on his staff.  Instead of bailing the companies out he should have nationalised them, prosecuted the big players for fraud, and put caps on their bonuses.

    Compelling stuff.  It makes you wonder when the revolution is going to start …

    • Carol 8.1
      23 April 2011 at 7:48 pm

      As I recall, during the presidential primaries, some people were saying that Obama had backing from Goldman Sachs.  This  tended to undercut the popular notion that he broke the mould and was funded by lots of small contributions as a result of his use of the Internet.
       
      Certainly this website reckons they have evidence Sachs was a major contributor, as does a CNN article.
       
      But I think it’s also something the Republicans/teabaggers are trying to tie to Obama.

      • Pascal's bookie 8.1.1
        23 April 2011 at 7:55 pm

        Sachs contributes to both, and most heavily to whoever looks like winning.

        • Afewknowthetruth 8.1.1.1
          23 April 2011 at 8:52 pm

          Not just Goldman Sachs. A long list of corporations and Wall St banksters contributed to both parties … ensuring whoever took office would be under proper control.

          However, the revolving door between Wall St and the US administrations  does particularly favour senior GS executives.    

          • terryg 8.1.1.1.1
            24 April 2011 at 2:29 pm

            hear hear!
            the only difference between democans and republicrats is what they say.
            If you look only at what they do, they are indistinguishable.
             

            • Colonial Viper 8.1.1.1.1.1
              24 April 2011 at 5:53 pm

              +1
               
              Both parties captured by big money in an election cycle where candidates need to raise millions of dollars just to stand.
               
              The US courts have now allowed big money to dominate US democracy by defining “free speech” as the same as maximum mass media speech with maximum repetitions. The inevitable conclusion: to have free speech there cannot be any spending limits on election campaigning.
               
              Which neatly extinguishes the presence of all other speech which cannot afford an advertising budget of tens of millions of dollars, silencing ordinary people in favour of multimillionaires and billionaires.

              • terryg …
                24 April 2011 at 10:48 pm

                I lived in Boston for a few years last century (I love being able to say “last century”), and boy am I glad I dont live there now. But even then it was clear USA was a superposition of both a 1st and a 3rd world country, and that it had been done deliberately.
                Fascism in the US is growing exponentially, and its well past the knee. We live in interesting times, and they are going to get a lot more interesting.
                Did George Carlin had the right idea – give up on society, and become an observer? I hope not.
                Unless, of course, we cant reign in big finance – global GDP is something like $12trillion per annum, and the global financial markets trade something like $300trillion.
                The only question is how.

                • Colonial Viper …
                  24 April 2011 at 10:52 pm

                  Yeah it seems like a few of us get it.

                  • terryg …
                    25 April 2011 at 9:03 am

                    Indeed CV, and I am so pleased to have found many more here – yourself, Rex, AFKTT, r0b…..
                    Alas we can beg, plead and grovel – hell, we can whinny bleat and moo, to no avail…..

  9. Bored 9
    24 April 2011 at 8:39 am

    When you are on the end of the production line on minimum wages the theoretical differences between corporatism and neo liberalism are of no consequence. The only thing you need to know is that the bastards would not have you doing something unless there was money in it for them, and the less they can give you the more they make. You can also be pretty sure the buggers would not soil their mits doing what you do.

    • terryg 9.1
      24 April 2011 at 3:53 pm

      It was once possible to pull oneself up from the production line by ones bootstraps. I did. All it took was years of hard work and study, a publicly funded tertiary education system, and being born into a working class family whos parents valued education, in a country where that was actually possible.
      In other words, way more good luck than good management.
      And this is why I dont mind paying my share. Which Shonkey kindly reduced for me, whilst further eroding the conditions that predicated my success, thereby ensuring others cannot follow.
      Way to go NACT.

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