by Ross Gittins
December 31, 2012
If you have ever suspected politics is
increasingly being run in the interests of big business, I have news:
Jeffrey Sachs, a highly respected economist from Columbia University,
agrees with you - at least in respect of the United States.
In his book, The Price of Civilization, he says the US economy is
caught in a feedback loop.
"Corporate wealth translates into political
power through campaign financing, corporate lobbying and the revolving
door of jobs between government and industry; and political power
translates into further wealth through tax cuts, deregulation and
sweetheart contracts between government and industry. Wealth begets
power, and power begets wealth," he says.
Sachs says four key sectors of US business
exemplify this feedback loop and the takeover of political power in America
by the "corporatocracy".
is the well-known
"As [President] Eisenhower famously
warned in his farewell address in January 1961, the linkage of the
military and private industry created a political power so pervasive
that America has been condemned to militarization, useless wars and
fiscal waste on a scale of many tens of trillions of dollars since
then," he says.
Wall Street-Washington complex, which
has steered the financial system towards control by a few politically
powerful Wall Street firms, notably,
...and a handful of other financial firms.
These days, almost every US Treasury secretary - Republican or Democrat
- comes from Wall Street and goes back there when his term ends.
The close ties between Wall Street and
"paved the way for the 2008 financial
crisis and the mega-bailouts that followed, through reckless
deregulation followed by an almost complete lack of oversight by
Big Oil-transport-military complex,
which has put the US on the trajectory of heavy oil-imports dependence
and a deepening military trap in the Middle East, he says.
"Since the days of John D. Rockefeller
and the Standard Oil Trust a century ago, Big Oil has loomed large
in American politics and foreign policy. Big Oil teamed up with the
automobile industry to steer America away from mass transit and
towards gas-guzzling vehicles driving on a nationally financed
Big Oil has consistently and successfully
fought the intrusion of competition from non-oil energy sources,
including nuclear, wind and solar power.
It has been at the side of the Pentagon in making sure that America
defends the sea-lanes to the Persian Gulf, in effect ensuring a $US100
billion-plus annual subsidy for a fuel that is otherwise dangerous for
national security, Sachs says.
"And Big Oil has played a notorious role
in the fight to keep climate change off the US agenda. Exxon-Mobil,
Koch Industries and others in the sector have underwritten a
generation of anti-scientific propaganda to confuse the American
is the 'healthcare'
industry, America's largest industry, absorbing no less than
17 per cent of US gross domestic product.
"The key to understanding this sector is
to note that the government partners with industry to reimburse
costs with little systematic oversight and control," Sachs says.
"Pharmaceutical firms set sky-high
prices protected by patent rights; Medicare [for the aged] and
Medicaid [for the poor] and private insurers reimburse doctors and
hospitals on a cost-plus basis; and the American Medical Association
restricts the supply of new doctors through the control of
placements at medical schools.
The result of this pseudo-market system
is sky-high costs, large profits for the private healthcare sector,
and no political will to reform."
Now do you see why the industry put so much
effort into persuading America's punters that Obamacare was rank
They didn't succeed in blocking it, but the
compromised program doesn't do enough to stop the US being the last rich
country in the world without universal healthcare.
It's worth noting that, despite its front-running cost, America's
healthcare system doesn't leave Americans with particularly good health
- not as good as ours, for instance. This conundrum is easily explained:
America has the highest-paid doctors.
Sachs says the main thing to remember about
the corporatocracy is that it looks after
"There is absolutely no economic crisis in
"Consider the pulse of the corporate sector as opposed to the pulse of
the employees working in it: corporate profits in 2010 were at an
all-time high, chief executive salaries in 2010 rebounded strongly from
the financial crisis, Wall Street compensation in 2010 was at an
all-time high, several Wall Street firms paid civil penalties for
financial abuses, but no senior banker faced any criminal charges, and
there were no adverse regulatory measures that would lead to a loss of
profits in finance, health care, military supplies and energy," he says.
The 30-year achievement of the corporatocracy
has been the creation of America's rich and super-rich classes, he says.
And we can now see their tools of trade.
"It began with globalization, which pushed
up capital income while pushing down wages. These changes were magnified
by the tax cuts at the top, which left more take-home pay and the
ability to accumulate greater wealth through higher net-of-tax returns
Chief executives then helped themselves to their
own slice of the corporate sector ownership through outlandish awards of
stock options by friendly and often handpicked compensation committees,
while the Securities and Exchange Commission looked the other way. It's not
all that hard to do when both political parties are standing in line to do
your bidding, Sachs concludes.
Fortunately, things aren't nearly so bad in Australia. But it will require
vigilance to stop them sliding further in that direction.