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<html>
<head>
<title>D.2 What influence does wealth have over politics?
</title>
</head>
<body>
<p>
<H1>D.2 What influence does wealth have over politics?</H1>
<p>
The short answer is: a great deal of influence, directly and indirectly. 
We have already touched on this in section B.2.3 (<a href="secB2.html#secb23">"How does the ruling class
maintain control of the state?"</a>) Here we will expand on those remarks. 
<p>
State policy in a capitalist democracy is usually well-insulated from popular
influence but very open to elite influence and money interests. Let's consider 
the possibility of direct influence first. It's obvious that elections cost 
money and that only the rich and corporations can realistically afford to 
take part in a major way. Even union donations to political parties cannot 
effectively compete with those from the business classes. For example, in 
the 1972 US presidential elections, of the $500 million spent, only about $13 
million came from trade unions. The vast majority of the rest undoubtedly 
came from Big Business and wealthy individuals. For the 1956 elections, the 
last year for which direct union-business comparisons are possible, the 
contributions of 742 businessmen matched those of unions representing 17 
million workers. And this was at a time when unions had large memberships 
and before the decline of organised labour.
<p>
Therefore, logically, politics will be dominated by the rich and powerful
-- in fact if not in theory -- since only the rich can afford to run and
only parties supported by the wealthy will gain enough funds and
favourable press coverage to have a chance (see section D.3, <a href="secD3.html">"How does
wealth influence the mass media?"</a>). Even in countries with strong union
movements which support labour-based parties, the political agenda is
dominated by the media. As the media are owned by and dependent upon
advertising from business, it is hardly surprising that independent
labour-based political agendas are difficult to follow or be taken
seriously. Moreover, the funds available for labour parties are always
less than those of capitalist supported parties, meaning that the ability
of the former to compete in "fair" elections is hindered. And this is ignoring the fact that the state 
structure is designed to ensure that real power lies not in the hands of elected representatives but 
rather in the hands of the state bureaucracy (see <a href="secJ2.html#secj22">section J.2.2</a>) 
which ensures that any pro-labour 
political agenda will be watered down and made harmless to the interests of the ruling class.
<p>
To this it must be added that wealth has a massive <b>indirect</b> influence
over politics (and so over society and the law). We have noted above that
wealth controls the media and their content. However, beyond this there
is what can be called "Investor Confidence," which is another important
source of influence. If a government starts to pass laws or act in ways
that conflict with the desires of business, capital may become reluctant
to invest (and may even disinvest and move elsewhere). The economic
downturn that results will cause political instability, giving the
government no choice but to regard the interests of business as
privileged. "What is good for business" really is good for the 
country, because if business suffers, so will everyone else. 
<p>
David Noble provides a good summary of the effects of such indirect
pressures when he writes firms <i>"have the ability to transfer production
from one country to another, to close a plant in one and reopen it 
elsewhere, to direct and redirect investment wherever the 'climate' is
most favourable [to business]. . . . [I]t has enabled the corporation to
play one workforce off against another in the pursuit of the cheapest
and most compliant labour (which gives the misleading appearance of
greater efficiency). . . [I]t has compelled regions and nations to
compete with one another to try and attract investment by offering
tax incentives, labour discipline, relaxed environmental and other 
regulations and publicly subsidised infrastructure. . . Thus has
emerged the great paradox of our age, according to which those nations
that prosper most (attract corporate investment) by most readily
lowering their standard of living (wages, benefits, quality of life,
political freedom). The net result of this system of extortion is a
universal lowering of conditions and expectations in the name of
competitiveness and prosperity."</i> [<b>Progress Without People</b>, 
pp. 91-92]
<p>
And, we must note, even when a country <b>does</b> lower its standard of
living to attract investment or encourage its own business class to
invest (as the USA and UK did by means of recession to discipline
the workforce by high unemployment), it is no guarantee that capital
will stay. US workers have seen their companies' profits rise while 
their wages have stagnated and (in reward) hundreds of thousands have 
been "down-sized" or seen their jobs moved to Mexico or South East Asia
sweatshops. In the far east, Japanese, Hong Kong, and South Korean workers
have also seen their manufacturing jobs move to low wage (and more 
repressive/authoritarian) countries such as China and Indonesia.
<p>
As well as the mobility of capital, there is also the threat posed by
public debt. As Doug Henwood notes, <i>"[p]ublic debt is a powerful way of
assuring that the state remains safely in capital's hands. The higher
a government's debt, the more it must please its bankers. Should bankers
grow displeased, they will refuse to roll over old debts or to extend
new financing on any but the most punishing terms (if at all). The 
explosion of [US] federal debt in the 1980s vastly increased the
power of creditors to demand austere fiscal and monetary policies to
dampen the US economy as it recovered . . . from the 1989-92 slowdown."</i>
[<b>Wall Street</b>, pp. 23-24] And, we must note, Wall street made a 
fortune on the debt, directly and indirectly.
<p>
Commenting on Clinton's plans for the devolution of welfare programmes
from Federal to State government in America, Noam Chomsky makes the
important point that <i>"under conditions of relative equality, this could
be a move towards democracy. Under existing circumstances, devolution is
intended as a further blow to the eroding democratic processes. Major
corporations, investment firms, and the like, can constrain or directly
control the acts of national governments and can set one national
workforce against another. But the game is much easier when the only
competing player that might remotely be influenced by the 'great beast' is
a state government, and even middle-sized enterprise can join in. The
shadow cast by business [over society and politics] can thus be darker,
and private power can move on to greater victories in the name of freedom."</i>
[Noam Chomsky, <i>"Rollback III"</i>, <b>Z Magazine</b>, March, 1995]
<p>
Economic blackmail is a very useful weapon in deterring freedom.
<p>
<a name="secd21"><h2>D.2.1 Is capital flight really that powerful?</h2>
<p>
Yes. By capital flight, business can ensure that any government which
becomes too independent and starts to consider the interests of those who
elected it will be put back into its place. Therefore we cannot expect a
different group of politicians to react in different ways to the same
institutional influences and interests. It's no coincidence that the
Australian Labour Party and the Spanish Socialist Party introduced
"Thatcherite" policies at the same time as the "Iron Lady" implemented them
in Britain. The New Zealand Labour government is a case in point, where
<i>"within a few months of re-election [in 1984], finance minister Roger
Douglas set out a programme of economic 'reforms' that made Thatcher and
Reagan look like wimps. . . .[A]lmost everything was privatised and the
consequences explained away in marketspeak. Division of wealth that had
been unknown in New Zealand suddenly appeared, along with unemployment,
poverty and crime."</i> [John Pilger, <i>"Breaking the one party state,"</i> <b>New
Statesman</b>, 16/12/94]
<p>
An extreme example of capital flight being used to "discipline" a naughty
administration can be seen in the 1974 to '79 Labour government in
Britain. In January, 1974, the FT Index for the London Stock Exchange
stood at 500 points. In February, the Miner's went on strike, forcing
Heath (the Tory Prime Minister) to hold (and lose) a general election. 
The new Labour government (which included many left-wingers in its
cabinet) talked about nationalising the banks and much heavy industry. In
August, 1974, Tony Benn announced plans to nationalise the ship building
industry. By December, the FT index had fallen to 150 points. By 1976 the
Treasury was spending $100 million a day buying back its own money to
support the pound [<b>The Times</b>, 10/6/76].
<p>
<b>The Times</b> noted that <i>"the further decline in the value of the pound has
occurred despite the high level of interest rates. . . . [D]ealers said
that selling pressure against the pound was not heavy or persistent, but
there was an almost total lack of interest amongst buyers. The drop in the
pound is extremely surprising in view of the unanimous opinion of bankers,
politicians and officials that the currency is undervalued."</i> [27/5/76]
<p>
The Labour government, faced with the power of international capital,
ended up having to receive a temporary "bailing out" by the IMF, which
imposed a package of cuts and controls, to which Labour's response was, in
effect, <i>"We'll do anything you say,"</i> as one economist described. The social costs of
these policies were disastrous, with unemployment rising to the then
unheard-of-height of one million. And let's not forget that they <i>"cut
expenditure by twice the amount the IMF were promised"</i> in an attempt to
appear business-friendly. it [Peter Donaldson, <b>A Question of 
Economics</b>, p. 89]
<p>
Capital will not invest in a country that does not meet its approval. In
1977, the Bank of England failed to get the Labour government to abolish
its exchange controls. Between 1979 and 1982 the Tories abolished them and
ended restrictions on lending for banks and building societies:
<p><blockquote> <i>"The
result of the abolition of exchange controls was visible almost
immediately: capital hitherto invested in the U.K. began going abroad. In
the <b>Guardian</b> of 21 September, 1981, Victor Keegan noted that 'Figures
published last week by the Bank of England show that pension funds are now
investing 25% of their money abroad (compared with almost nothing a few
years ago) and there has been no investment at all (net) by unit trusts in
the UK since exchange controls were abolished'"</i> [Robin Ramsay, <b>Lobster</b> 
no. 27, p. 3].
</blockquote><p>
Why? What was so bad about the UK? Simply stated, the working class was
too militant, the trade unions were not <i>"shackled by law and subdued,"</i> as
<b>The Economist</b> recently put it [February 27, 1993], and the welfare state
could be lived on. The partial gains from previous struggles still existed, and
people had enough dignity not to accept any job offered or put up with an
employer's authoritarian practices. These factors created "inflexibility"
in the labour market, so that the working class had to be taught a lesson
in "good" economics.
<p>
By capital flight a rebellious population and a slightly radical government 
were brought to heel.
<p>
<a name="secd22"><h2>D.2.2 How extensive is business propaganda?</h2>
<p>
Business spends a lot of money to ensure that people accept the status
quo. Referring again to the US as an example (where such techniques are
common), various means are used to get people to identify "free
enterprise" (meaning state-subsidised private power with no infringement
of managerial prerogatives) as "the American way." The success of these
campaigns is clear, since many working people now object to unions as
having too much power or irrationally rejecting all radical ideas as
"Communism" regardless of their content. 
<p>
By 1978, American business was spending $1 billion a year on grassroots
propaganda (known as "Astroturf" by PR insiders, to reflect the appearance 
of popular support, without the substance, and "grasstops" whereby influential 
citizens are hired to serve as spokespersons for business interests). In 
1983, there existed 26 general purpose foundations for this purpose with 
endowments of $100 million or more, as well as dozens of corporate 
foundations. These, along with media power, ensure that force -- always 
an inefficient means of control -- is replaced by the "manufacture
of consent": the process whereby the limits of acceptable expression are
defined by the wealthy. 
<p>
This process has been going on for some time. For example <i>"[i]n April 1947,
the Advertising Council announced a $100 million campaign to use all media
to 'sell' the American economic system -- as they conceived it -- to the
American people; the program was officially described as a 'major project
of educating the American people about the economic facts of life.' 
Corporations 'started extensive programs to indoctrinate employees,' the
leading business journal <b>Fortune</b> reported, subjected their captive
audiences to 'Courses in Economic Education' and testing them for
commitment to the 'free enterprise system -- that is, Americanism.' A
survey conducted by the American Management Association (AMA) found that
many corporate leaders regarded 'propaganda' and 'economic education' as
synonymous, holding that 'we want our people to think right'. . . [and
that] 'some employers view. . . [it] as a sort of 'battle of loyalties'
with the unions' -- a rather unequal battle, given the resources available."</i>
[Noam Chomsky, <b>World Orders, Old and New</b>, pp. 89-90]
<p>
Various institutions are used to get Big Business's message across, for
example, the Joint Council on Economic Education, ostensibly a charitable
organisation, funds economic education for teachers and provides books,
pamphlets and films as teaching aids. In 1974, 20,000 teachers
participated in its workshops. The aim is to induce teachers to present
corporations in an uncritical light to their students. Funding for this
propaganda machine comes from the American Bankers Association, AT&T, the
Sears Roebuck Foundation and the Ford Foundation.
<p>
As G. William Domhoff points out, <i>"[a]lthough it [and other bodies like
it] has not been able to bring about active acceptance of all power elite
policies and perspectives, on economic or other domestic issues, it has
been able to ensure that opposing opinions have remained isolated, suspect
and only partially developed."</i> [<b>Who Rules America Now?</b>, 
pp. 103-4] In
other words, "unacceptable" ideas are marginalised, the limits of
expression defined, and all within a society apparently based on 
"the free marketplace of ideas."
<p>
The effects of this business propaganda are felt in all other aspects of
life, ensuring that while the US business class is extremely class
conscious, the rest of the American population considers "class" a swear
word!
<p>
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