The roots and realities of economic propaganda

Any customer can have a car painted any color he wants so long as it is black.

 – Henry Ford

The corporations don’t have to lobby the government anymore. They are the government.

 – Jim Hightower

Democracy, despite its limitations, is in the end the only way to ensure that policies do not simply benefit the privileged few.

 – Ha-Joon Chang

If we choose, we can live in a world of comforting illusion.

 – Noam Chomsky

It’s axiomatic that the economic systems by which the majority of the world is sustained aren’t designed to provide the greatest possible equality. Contrary to what ideologues would claim, the so-called free markets on which capitalism is supposedly based don’t produce outcomes which are at the same time maximally beneficial for consumers and sellers, and thus the economy as a whole. However, even though this is borne out by experience, particularly in the wake of the Global Financial Crisis (GFC) and as inequality continues to climb in the US and around the world, the important question is, “Why is the experience of free-market capitalism so starkly different from the concept given to us by its proponents?” That’s the question addressed by this post.

There are two areas to this post which relate to the same question, though in different ways. The first shows that, despite the fairness supposedly inherent to the free-market capitalist system, inequality is bound to occur and, if left unchecked, naturally increase as time goes by. The second shows that people are (at least at first) reasonably told to respect the economy as the means by which we’re collectively sustained, and that this premise has been gradually exploited for the purposes of wealthy and powerful elites. Together, these two areas will demonstrate why and how the economic systems by which we’re all sustained and ensnared are unfair; why and how they deliberately and consciously generate inequality; and what role propaganda has played, and still plays, in these developments.

Before continuing, though, it’s important to note that, in truth, inequality was already extant, and then institutionalised, when these systems were created, and was so for very straightforward reasons. But those reasons, while straightforward, still need some fleshing out, as does the propaganda which attempts to disguise them. However, though relevant, they’re not the subject of this post. To read my discussion of them, please read my prior post on the origin and evolution of classes and class warfare. Although I think to best understand the discussion it’s ideal to read the entire post, it’s quite long, so if you prefer you can start at the ninth paragraph and read until the narrative reaches the emergence of ruling classes. That will cover all the relevant reasons to do with why inequality already existed when the current economic systems were created. Further, that post discusses why, how and when the ideology used to support the systems emerged, and demonstrates that the ideology was never correct, and only ever meant to be a propaganda tool to disguise the enduring, but recently more clandestine, supremacy of ruling classes. Now, back to the two areas mentioned above for a deeper look at what the ideology behind them supposes.

As for the first area, the dogma which surrounds it goes something like this. Capitalism is an economic ideology which advocates and even compels individual initiative and entrepreneurship as a means of survival. This, however, might lead to destructive outcomes whereby consumers are deceived by savvy entrepreneurs and businesses who exploit them in order to maximise profits. Therefore, these possibilities are counteracted by free markets, which pit sellers against one another in competition for consumers. Free markets thereby supposedly lower prices for consumers, since the sellers compete with one another so that people prefer their products and/or services and choose to more regularly purchase them over other options, which thus benefits the sellers who most successfully appeal to consumers. In short, sellers compete with one another, which benefits consumers. Next, the profits made by sellers will, in their own capacity as consumers, be distributed throughout the society, at least to some degree. This won’t generate total equality, but it will, the ideology goes, be as fair as possible given the difficulties imposed by an unfair and imperfect world. This view is reinforced by the proposition, in my opinion erroneous, that there are no other genuine candidates to replace this system. Some degree of inequality is therefore unavoidable, the ideology reasons, but fairness and equality are supposedly intrinsic elements of economies based on free-market capitalism.

The possible candidates to replace the present system and the reasons why they’ve been so maligned and dismissed are an important part of this puzzle which deserve a post of their own. For the moment, though, it’s enough to say that the malignancy they face, and have long faced, is not because they’re faulty, but in fact because, in my view, if the goal of an economic system is to sustain the society as fairly as possible, they would probably work much better than capitalism ever could. The problem is that the ruling classes which principally profit from capitalism won’t allow it to be replaced without a fight, and the bulk of ordinary people who ought to oppose it are too confused by propaganda from the elites to know what’s best to do. The current post is a necessary foundation to discuss these long-maligned alternatives, a key few of which I’ll discuss in a later post. For now, though, back to the roots and realities of economic propaganda.

As for the second area, the key supposition made by advocates of free-market capitalism goes like this. It begins with the reasonable and, at least initially, correct premise that we are all collectively sustained by the prevailing economic system which supports our society. This can of course be whatever system people choose, but, following from the first area discussed just above, the advocates of free-market capitalism propose it as the best and fairest system available which can sustain our societies, especially complex, modern-day ones like ours. Therefore, they argue that it ought to be the system upon which all current societies are based. Further, they argue that because we are collectively sustained by the system, our security must then depend on its prosperity, which, for our own sakes, enjoins us to preserve the system at all costs. As you’ll soon see, this has extremely important consequences for the reality of free-market capitalism, and for the propaganda levelled against those whom this economic system abandons and exploits.

In short, the two core premises drawn from the advocates of free-market capitalism are that it’s the best system available, and that the preservation of that system is in everyone’s best interest, since the system sustains both every individual and the society as a whole. However, contrary to this ideology, the reality of free-market capitalism is rather striking. For the moment, since it’s not the present focus, we’ll set aside any long analysis of the fact that inequality already existed when free-market capitalist economies were developed during the 19th century following the Industrial Revolution, and that the new systems which emerged then institutionalised that inequality, rather than reducing it. Besides, my post about the origin and evolution of classes and class warfare, mentioned above, already covers those points as quite recent historical developments. To continue, it’s enough to acknowledge that inequality existed when free-market capitalism emerged and that this was a contributing factor to the developments which have led the world to where it is today.

Venturing now from ideology to reality, broadly speaking, the real events unfold like this. Inequality means that some people have greater access to capital than others. When societies are sustained by economies based on a monetary system, capital of any kind provides the means by which to survive. This, in turn, makes capital the source of power and influence in societies sustained by such an economy, which therefore means that inequality translates to inequality of power and influence. So long as this inequality doesn’t get out of control, societies may be able to function more or less fairly. However, even if the level of existing inequality was quite low, it’s bound to increase over time if left unchecked. This is because even though capital may become more or less valuable depending on rates of inflation and deflation, the currency itself doesn’t decay or degrade.

That’s different from the past when smaller, more primitive societies got by using barter economies which naturally imposed a limit on the amount of wealth a person could accumulate. If you had excellent oxen you could only trade them for so many chickens because there was a limit to how many you could use. Likewise, there was a limit to the number of oxen you could maintain for sale and personal use, since the uses you had for them and the uses to which they could be put by your customers were also limited. Essentially, it was a good system for surviving, but not one geared to allow people to become wealthy in any sense we’d recognise today. However, the introduction of monetary systems of currency changed the situation by destroying the natural equilibrium inherent to barter-based economies. This is because people can then accumulate their own private capital which doesn’t decay and, though it’ll become more or less valuable according to inflation and deflation, will more or less remain valuable, excluding some economic catastrophe such as the 1923 hyperinflation in Weimar Germany.

Thus, in principle, monetary system-based economies enable people to develop concentrations of wealth, which then translates to power. Slowly, then, as time goes by, some people are bound to thrive in the society more than others. Some will rise and become wealthy and others will fall and become or remain either ordinary or poor. Gradually, concentrations of wealth and power emerge and the people who control them are able to impose themselves on society as members of the ruling class. For my account of exactly how this happens, please read the paragraphs mentioned above in my post on the origin and evolution of classes and class warfare. For now, though, suffice it to say that these monetary system-based economies long predate free-market capitalism, which only arose and developed during the 19th century due to the Industrial Revolution.

Therefore, when free-market capitalism first developed it was integrated into societies which featured wealthy and powerful ruling classes and the institutions of domination and supremacy which they had already established for themselves. Since then, wealth has become concentrated in fewer and fewer hands, as reflected by the scandalous inequality seen in the US and around the world. Incidentally, this means that ownership and thus control over not just businesses but entire industries has also become concentrated, thereby reducing competition and effectively removing the free market as a supposed counterweight to the previously-mentioned inherent threats which capitalist systems pose to vulnerable consumers and to the wider public in general.

The important point to take away is that wealthy and powerful elites never allow themselves to be exposed to the free market because it might, at least to some extent, protect the majority of the population from the ruling class. Obviously, this stands in stark contrast to the ideology of free-market capitalism. Though important in itself, this also has very significant consequences for the premise that preserving the economy by which we’re collectively sustained needs to be an essential priority for the good of every individual and society as a whole.

In short, the argument goes that because as a society we all depend on the economy, we must protect it from whatever threatens its stability. If it were the case that, within the capitalist system, businesses, entrepreneurs and corporations were, at least to some degree, contained by free markets, this argument might be reasonable enough. However, because institutionalised and growing inequality equates to a powerful ruling class, and as the ruling class doesn’t let itself be subject to free markets, this reasoning therefore breaks down. In that case, preserving the economy for the sake of the greater good isn’t necessarily the best thing to do. Indeed, when the ruling class removes the barriers to domination and exploitation which, according to the ideology, free-market capitalism supposedly erects, maintaining the system can become a way of sheltering the reigning elites from failure by having the public’s taxes bail out institutions and corporations which would otherwise collapse. Clearly, this is a fundamental violation of free-market capitalism, since businesses and corporations are meant to rise and fall by how well their goods and/or services satisfy consumers, and should never be protected from failure by the very people they deceive and exploit. In the real world, economic dogma aside, the way things develop goes like this.

People are convinced that the ideology is correct and that it’s incumbent on everyone to preserve the economy for the greater good of society. However, unbeknownst to the public, the elites don’t play by the rules and never intended to. They privatise public institutions, arguing that the rules of competition in the free market (which they have no intention of following) will make the institutions function more efficiently, lower costs for consumers and benefit everyone who depends on them. These include financial institutions such as banks and insurance companies; infrastructure such as roads, bridges and railroads; educational and medical institutions such as universities and Social Security in the US; electricity, water and gas companies; and so on.

They then set about maximising profits as quickly as possible. To do so, they could of course provide the services they are supposed to provide and make profits from improving productivity by investing in better pay, training and working conditions for staff; supporting research and development to drive innovation; and fostering loyalty from satisfied customers who happily return to dependable products and/or services. However, since the threat posed by the free market is removed, and since in the short term it’s cheaper, easier and faster, they instead tend to maximise profits by, among other things, lowering wages, cutting and/or automating jobs, and moving production to where labour is cheaper and you don’t need to pay too much attention to laws and regulations. Aside from privatised institutions, this pattern of course holds the same for outright businesses and corporations, which are actually legally bound to increase profits and are rarely made to pay particular attention to the consequences of their actions.

Often, this naturally produces disasters for those who depend on the goods and/or services, not to mention the unemployment and instability caused by layoffs and wage suppression. However, because it tends to be the same ruling class in government which controls the corporations, as is demonstrated by, among many examples, the well-known revolving door between high public- and private-sector offices, it may be possible to have lower-level players prosecuted, but it’s increasingly difficult to have the people truly responsible even indicted for their actions. As a result, it’s difficult to prevent the looming calamity for the economy by any other means than a public bailout, thus socialising the consequences of the actions of the ruling elites. In the US, that was a leading cause of the GFC and was essentially what happened in its aftermath, though of course particular details varied. Naturally, there have been exceptions to this pattern, but they’re very rare and, for obvious reasons, even more rarely discussed in proper context by corporate media. Further, the public-private ruling class collusion enables elites to remove other mechanisms which the free-market capitalist ideology says ought to protect consumers and attempt to keep inequality in check, such as laws, regulations and taxation. Elites around the world have been particularly busy with this since the late 1970s.

Ultimately, in cases such as these, bailouts which save deservedly ailing corporations, businesses and/or institutions only abet the people responsible. Further, they ensure that the perpetrators can be more neatly indemnified once the incident, depending on its scale, is far enough in the past. The best tool to accomplish all of this, to smooth the crises over and make them go away, is, of course, the economic propaganda surrounding free-market capitalism. If it were understood by enough people that, although it might seem to make some sense, free-market capitalist ideology can’t succeed because it bears no relation to reality, then these events would gradually become fewer and less damaging until, ideally, they no longer occurred. That is the purpose of this post, to dismantle the ideology which confuses people in order to prevent them from doing something about the domination under which they live. I hope it does that.

I think lots of people are already intuitively aware on some level that what I’m saying is true. It’s no revelation that the system doesn’t work as we’re told it should. People notice when their life savings are obliterated or their homes are foreclosed on because of corporate greed. But when people have to work in order to survive, which takes up the majority of their day-to-day lives, they haven’t got the time or the energy to dissect the system which deceives and abuses them. They can’t pinpoint the facts through the fog of propaganda, and they’re left frustrated and unable to do anything to improve their situations other than work and hope for the best. If this post can help people to understand why things occur and then to channel their disaffection in constructive directions, then its job will be done.

This post drew on and was influenced by many sources. They’re too many and tedious to list in total, but the two books below both provide excellent analyses of the propaganda case that’s commonly made for so-called free market capitalism, as opposed to the reality. Dean Baker and Ha-Joon Chang are both highly-credentialed economists who’ve each published several books on economics and related topics. Ha-Joon Chang was even one of Prospect Magazine’s top 20 World Thinkers for 2013. His books I’ve found especially helpful, though others such as Gar Alperovitz, Joseph Stiglitz and Noam Chomsky are also exceptional and extremely useful for anyone interested in looking into the issues raised by this post and others like it. I own and have read many of their books. If anyone would like to find out more about them or anything else, please feel free to send me any questions you have and if I can help I will.

Baker, D., 2006. The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. 1st ed. Washington, DC: Center for Economic and Policy Research.

Chang, H.-J., 2009. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. 1st ed. New York: Bloomsbury Press.

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One thought on “The roots and realities of economic propaganda

  1. Pingback: What are free trade agreements and why are they bad? | Matthew Williams-Spooner

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