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Economic Growth: The United States (B)

Updated on November 9, 2016
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The first step is to know what you do not know. The second step is to ask the right questions. I reserve the right to lean on my ignorance.



There are four macroeconomic topics I want to talk about very quickly: subsidies and protectionism; privatization of government functions; the increasing "paramilitarization" of business, especially international business; and the government role in stimulating the private economy.

  • I want to talk about these four things as predictable and invariable outgrowths of the phenomena of the "financialization" of a nation's capitalist economy.
  • I want to talk about these four things as deepening and broadening trends in the U.S. economy and global capitalist economy in general, since the 1970s.
  • In short, what I mean by "financialization" is that, in a capitalist economy the finance half is turbo-charged and sent into hyper-drive, as a direct result of a weakness in production, of one kind or another, in that "real" economy of making actual things. Finance grows ever distant from actual, underlying real value.


Before we begin, we must return to the basic analogy we've constructed, so that, what I'm about to do, will make sense.

The human body, for our purposes, is composed of the metabolism and the body proper, that is, the muscle, bones, blood, organs, nerves and synapses, and the like. We understand the metabolism to be the mechanism which breaks down incoming food into their constituent vitamins, minerals, amino acids, and so forth --- and distributes them throughout the body as needed.

We generally understand that if one gets a good balance of rest, exercise, and what's called a balanced and nutritious diet, the metabolism, as the distributing agent, so to speak --- will facilitate good health, helping the body function at something like the optimal level.

If there should be a deterioration in the quality and/or quantity of rest, exercise, and diet, the metabolism will have to work much harder to extract anything at all of value from these poorer inputs, to keep the body going in any way at all, in some form or fashion.

In a desperate situation of actual starvation, let's say, the metabolism will react in an equally desperate way. The metabolism will force the body to consume itself --- in order to keep that very same body alive.

It works this way on the macroeconomic level. A modern capitalist economy, like, say, the United States, for example, is composed of the financial architecture and the real economy of manufacturing production, the making of things.

The financial architecture fulfills the role of the metabolism, so that we might devise the term: finance-metabolism.

The real economy of manufacturing production fulfills the role of body (blood, muscle, bone, etc.), so that we might devise the term: real economic-body.

To simplify things, let's just say, for now, that the job of finance is to make the real economy work better.

Let's begin.

Privatization of Government Services

The first thing to say is that across the late-1960s, 1970s, 1980s, 1990s, 2000s to the present, the United States of America underwent a process known as deindustrialization. This means that lots and lots and lots companies that made things relocated their operations overseas, in search of much cheaper and much more malleable labor markets. High-paying, good benefit jobs in manufacturing (which did not require advanced education) were replaced by "hamburger-flipper" jobs.

That process is known as the casualization of labor.

Real wages in the United States of America have been basically held flat since the late-1970s. Real wages are the wages you make against the prices you have to pay for stuff to keep you alive (food, clothing, shelter, etc.). Real wages, then, are not the same as absolute wages.

Real wages are about how your salary is doing as against the rate of inflation. The real wage today for blue collar workers, today, is about where it was in 1979 (1). This process is known as wage repression.

My point: The processes of deindustrialization, casualization of labor, and wage repression can be thought of as a reduction in both the quantity and quality of the "food supply" in the American economic body. This means that the finance-metabolism will have to work much harder to extract anything of value from the situation, so as to keep the American real economic-body functioning in some way, to keep it going in some form or fashion.

Does that make sense?

The real economic-body must look for another "food source" to sustain itself.

Let us say that one available food source is the government itself, the privatization of government services.

The hunger of the private (mostly corporate) economy

The first thing to recall is that this process of privatization is also, sometimes, known as the "reduction of government," --- you know, one of those constant obsessions of American "conservatives."

Economic journalist, David Cay Johnston, also puts the term conservative between quotation marks, in the figurative sense. He describes the process this way:

"Despite all the deregulation rhetoric , government grows ever bigger. The number of federal government workers shrinks, but the ranks of people who are hired on contract at much greater cost increases. In 2000 workers hired on contract cost our federal government $207 billion. By 2006 this had swelled to $400 billion --- rivaling the expense of either Social Security or interest on the federal government's growing debt" (2).

Why would government do this?

Marxist geographer and theorist on the political-economy, David Harvey, gives us the answer in one of his books.

Dr. Harvey first explains that ever since the crisis of 1973-1982, it has been harder and harder for "capital" to "find profitable outlets for their profits" (3). In other words, for our conceptual purposes, since the crisis of 1973-1982, it has been harder and harder to the U.S. real economic-body to "find something to eat," so to speak. As I said, the government itself was fastened upon as a "food source."

Dr. Harvey put it this way:

"In a desperate attempt to find more places to put the surplus capital, a vast wave of privatization swept around the world carried on the backs of the dogma that state-run enterprises are by definition inefficient and lax and that the only way to improve their performance is to pass them over to the private sector" (4).

What the good doctor is telling us, is that the federal government allowed certain of its functions to be privatized --- in response to the desperately weak business situation of the private corporate sector.

Question: Where did this "dogma that state-run enterprises are by definition inefficient and lax and that the only way to improve their performance is to pass them over to the private sector" come from?

Answer: You don't expect the "captains of industry" to publicly admit weakness, do you? Furthermore, you don't expect their social class-mates in the senior reaches of government, to "dime them out" to the public, do you?

Another analogy

Think of it this way: Let's suppose I am a big time movie director, very successful, on a roll, and all that. "You," whoever you may be, are an actor and a friend of mine.

Let's say that you and I haven't seen each other in ten years. We bump into each other, accidentally, somewhere and adjourn to a coffee shop for a spot of tea, talk, and catch up on old times.

Although we haven't seen each other in many years, I, the big time movie director, have kept tabs on you.

I happen to know that you, my friend, have been having a hard time. I know that your divorce of five years ago was emotionally and financially draining for you. I know that there have been some unfortunate investments; and that certain people who were supposed to be watching your financial back, haven't been as ethical you'd like.

I know that you could use some money. But I don't want to "insult" you by coming right out, pulling out my checkbook and offering you a loan before you have asked. You may not feel quite comfortable directly asking for a loan; but there is something I can do to get some cash into your hands!

You want to know what it is?

Well, let us say that I, the big time movie director, am hard at work on my latest "blockbuster," with all kinds of heartthrob, name-brand talent, and all that.

I "suddenly" look at you speculatively and say, "You know..." and go on to explain that you would be a perfect addition to my latest blockbuster.

I throw in a "How about coming down for an 'audition'?"

I get the feeling that you, my friend, will get the part, a part that I may need to have written in especially for you.

Now, I, the director, am never going to be so stupid as to publicly say that the reason I gave you the part was because I wanted to help out an old friend who was hard up.

You, the actor, are never going to be so stupid as to publicly admit that you "know" that I gave you the role because you were seriously hurting for money.

Such "full disclosure" would not make either one of us look very good!

Do you see what I mean?

Let's move on.

Subsidies and Tariffs

Another "food source" for a "real economic-body," perhaps on the edge of "starvation," are subsidies and tariffs, the economics of protectionism.

Remember, as I said before, the processes of deindustrialization, casualization of labor, and wage repression have seriously deteriorated both the quality and quantity of the "food supplies," for the "real economic-body" of the United States.

Therefore, the tendency would be to carefully "ration" what remaining "food supplies" there are. One way to do this is to protect domestic industry by doling out subsidies to guarantee profits; and impose tariffs to keep foreign competition at bay.

In a book published in 2008, the Italian economist, Loretta Napoleoni pointed out that the rich countries of the Global North impose agricultural tariffs against the produce of the Global South; and hand out $300 million a year in subsidies to their own farmers (5).

Dr. Napoleoni believed that cutting out the tariffs and subsidies could have increased African agricultural profits by $100 million, which was $20 billion more than the $80 billion that the industrialized countries sent to Africa in aid in 2006. She believed that ending subsidies and tariffs, in the developed world, would have allowed African products to generate an inflow of $500 billion --- enough to lift 150 million Africans out of poverty by 2015 (6).

In one of his books published in 1999, scholar, professor emeritus, activist, and public intellectual, Dr. Noam Chomsky quoted from a review of the Reagan years in the White House. The review was done by a senior fellow for International Finance at the Council on Foreign Relations.

According to this report, there seemed to be a certain irony that "the postwar chief executive with the most passionate love of laissez-faire, presided over the greatest swing toward protectionism since the 1930s" (7).

Furthermore, the Reagan administration not only provided more protectionist measures for American business, than any of his postwar predecessors --- Reagan provided more protection for American business than all of his post-World War Two predecessors combined (8).

This was emblematic of a 'sustained assault on [free trade] principles, led by the rich and powerful countries from the early 1970s,' according to a review by the General Agreement on Tariffs and Trade (GATT) secretariat economist, Patrick Low. Low estimated that the restrictive effects of the Reaganite measures was about three times those of the leading industrial countries (9).


A 1992 United Nations Development Report stated that the gap between the rich and poor countries had grown since 1960 and that this was 'substantially attributable to the protectionist measures of the rich countries.' A 1994 UN Development Report concluded that 'the industrialized countries, by violating the principles of free trade, are costing the developing countries an estimated $50 billion a year --- nearly equal to the flow of foreign assistance.' And, of course, much of that "foreign assistance" was publicly subsidized export promotion (10).

A 1996 Global Report of the U.N. Industrustrial Development Organization estimated that the disparity between the richest and poorest 20 percent world population had increased over 50 percent from 1960 to 1989; and predicted that 'a growing world inequality resulting from the globalization process' (11).

Let's remember what we're looking at here.

What we see is that around 1980 or so, maybe a little earlier, the United States and the other "rich countries" experienced a weakness in production.

This weakness in production caused a decisive deterioration of the quantity and quality of "food sources" need to make those "real economic-bodies" function.

As a result of the deterioration in the quantity and quality of "food sources," the ruling classes of those countries needed to carefully ration and preserve what "food sources" they had left; and they did this, led by the U.S., through policies of protectionism --- quite contrary to free market ideology, and all that.

The Government's Overwhelming Role in Economic Development and Growth --- Especially in Response to Private Sector Complacency and/or Incompetence

I'm just going to take one example. By the 1970s, the American business community were becoming concerned about low rates of productivity and investment growth. American corporations were failing to keep up with more advanced foreign methods. The U.S. business press was calling for the 'reindustrialization of America' (12).

A major program was rolled out by the Pentagon, known as MANTECH (manufacturing technology). This program doubled its outlays when Reagan entered the White House. One of MANTECH's tasks was to build the 'factory of the future,' integrating computer technology and automation in production and design, developing flexible manufacturing technology and efficiency, in an effort to catch up with Europe and Japan (13).

Under Reagan the Pentagon-supported research promoted new technologies in many areas, including supercomputers, information technology, and further improvements to the Internet (14).

We're quoting Dr. Chomsky again, but from a different book, in which he wrote:

"The Reagan administration also virtually doubled protective barriers, breaking all postwar records in protectionism. The purpose was to keep out superior Japanese products: steel, automotive, semiconductors, computers, and others. The goal was not only to save domestic industries that could not compete, but also to place them in a dominant position for the 1990s --- now called a 'triumph of the market,' thanks in large measure to public subsidies, public sector innovation and development, protection, straight bailouts, and other devices" (15).


Do you know what this reminds me of?

A family of birds in a nest. You have the mother bird and her brood of small baby birds. The mother bird goes out and feeds and then returns home to feed her baby birds. She feeds them right out of her own mouth. She deposits pre-chewed food from her mouth directly into the mouths of her helpless, dependent baby birds.

And furthermore

A technical study by Winifried Ruigrock and Rob van Tulder found that 'virtually all of the world's largest core firms have experienced a decisive influence on their strategy and competitive position' and 'at least twenty companies in the 1993 Fortune 100 would not have survived at all as independent companies, if they had not been saved by their respective governments,' through bailouts or state takeover (16).

One such organization was Lockheed Martin, which would save from collapse by massive government loan guarantees (17).

The same study by van Tulder and Ruigrock, pointed out that government intervention has 'been the rule rather than the exception over the past two centuries... [and] has played a key role in the development and diffusion of many products and process innovations --- particularly in aerospace, electronics, modern agriculture, materials technologies, energy, and transportation technology,' as well as telecommunications and information technologies in general, and in an earlier period, textiles, steel, and energy (18).

Moreover, government policies 'have been an overwhelming force in shaping the strategies and competitiveness of the world's largest firms,' according to van Tulder and Ruigrock. Other technical studies reached the same conclusion (19).

The Paramilitarization of Business

When I use the word "paramilitarization" I am not talking about the PMCs (private military contractors) such as that formerly known as "Blackwater," and so forth.

I am talking about private intelligence companies.

Anyway, there has been an increasing "para-militarization" of business (especially international business) since the end of the Cold War. A journalist with the Politico organization, called Eamon Javers, has investigated this; his book is called Broker, Trader, Lawyer, Spy.

Corporate espionage firms come in several flavors: firms staffed by ex-FBI agents; firms staffed by ex-CIA agents; firms staffed by ex-Secret Service agents; firms staffed by ex-British intelligence (counterintelligence, MI5) officers. There are hundreds of these organizations around the world. They can be hired in Britain, America, Europe, Asia, and the Middle East (20).

It seems that there is at least one firm staffed with ex-KGB and old Soviet military intelligence officers, located in suburban Virginia, not too far from CIA headquarters (21).

"To be clear," Eamon Javers wrote, "corporate spying doesn't necessarily involve anything illegal or even unethical. To call people spies simply means that they use intelligence techniques or are veterans of government intelligence services" (22).

Here is the point, a central thing Mr. Javers seems to want the reader to understand. It goes like this:

"Even as it remains a largely hidden industry, the private spying business is becoming an integral part of the way companies do business around the world. The past several years have made it abundantly clear that there are far more hidden, and dangerous, secrets at work in the global economy than even many sophisticated businesspeople once thought. For nervous financiers and executives, ramping up private intelligence capability is an understandable response to the confusing and sometimes deadly situations that surround them. The global economy is a paranoid place" (23).

Wrapping Up

So, how does this business about corporate espionage firms fit into our theoretical formulation?

Remember, we're talking about the macroeconomic phenomenon of the "financialization" of a capitalist country's economy. The turn to a finance-driven strategy is always the result of a "weakness in production" of one kind or another.

This weakness in production brings about a deterioration in both the quantity and quality of the "real economic-body's" "food sources." The ruling class, in this situation, must find other "food sources" to sustain the body of the economy.

This being the case, what that means is that individual firms within national "real economic-bodies" on the edge of "starvation," must also, individually, find other "food sources" to sustain their individual operations.

The corporate espionage firms in question, then, can be thought of as sophisticated "food search agents."

And, incidentally, when you think about it, you have a structure here, that is reminiscent of the British East India Company of the seventeenth and eighteenth centuries.

Alright, I'll leave it there. Thank you for reading!


1. Desilver, D. (2014, October 09). For Most Workers, Wages Have Barely Budgded For Decades. Retrieved November 9, 2016, from

2. Johnston, David Cay. Free Lunch: How The Wealthiest Americans Enrich Themselves At Government Expense (And Stick You With The Bill). Portfolio, 2007. 20

3. Harvey, David. The Enigma of Capital And The Crises of Capitalism. Oxford University Press, 2010. 28

4. ibid, 28

5. Napoleoni, Loretta. Rogue Economics. Seven Stories Press, 2008. 195

6. ibid

7. Chomsky, Noam. Profit Over People: Neoliberalism and Global Order. Seven Stories Press, 1999. 66

8. ibid, 67

9. ibid

10. ibid, 112

11. ibid

12. Chomsky, Noam. Hopes and Prospects. Haymarket Books, 2010. 88

13. ibid

14. ibid, 88-89

15. ibid, 89

16. Chomsky, N. Profit Over People. 38

17. ibid

18. ibid

19. ibid

20. Javers, Eamon. Broker, Trader, Lawyer, Spy: The Secret World of Corporate Espionage. Harper Collins, 2010. x

21. ibid, x-xi

22. ibid, xi

23. ibid, xiii


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