Social Imbalance: The Piper Pays

Introduction

According to John Kenneth Galbraith’s “theory of social balance,” consumption of private goods requires a facilitating or regulating mechanism from the public sector, some form (or several forms) of public goods. The classic example is the automobile. Their private ownership and use (consumption) requires streets, highways, traffic control systems, parking spaces, police, emergency services, and pollution control regimes.

However, the consumption of private goods always outpaces the provision of public goods, leading to “private opulence and public squalor.” There are a number of reasons for this. First is what Galbraith calls the “dependence effect,” where increased consumption is dependent on increased production. This operates through two mechanisms, one passive (Thorstein Veblen’s “pecuniary emulation,” otherwise known as “keeping up with the Joneses”), the other active (commercial advertising, which creates increasing demand in the mind of the consumer) (Sackrey and others 2002).

According to Galbraith, a second reason for this imbalance is the differences in the way that the public and private sectors obtain money fro people. Government coerces money out of people through taxation. Corporations, acting with much more finesse, con money out of people through psychological warfare. Therefore, it is argued that the less money that government compels from the citizen, the more freedom the consumer has to spend as he desires. A larger public sector means less freedom of choice.

Another barrier to public spending is the “private good, government bad” mentality. Government is painted as being inefficient, corrupt, wasteful, and stupid. “The market is rational. Government is dumb,” intones Representative Dick Armey (R-TX), who holds a PhD in economics from the University of Oklahoma (Armey 1988, Armey n.d.).

Of course, there are a number of fallacies to these arguments. For instance, the more public schools there are, the more choices are available to the public, not only between different public school systems, but between public and private schools. The more highways government builds, the more the rugged individualist can enjoy the freedom of the road. Another reality side-stepped in the pro-private/anti-public argument is that in state and local jurisdictions, the decision to build roads and schools is usually put to the voter, and in this context government spending does not represent a constraint on individual choice, but is rather the outcome of the aggregate of individual choices.

The pro-private/anti-public message to some extent also tells people something they want to hear, that they can dance all night long and never pay the piper. You can buy that sexy new car, but you don’t have to pay for the streets and highways on which you drive. You can buy that big, new house in the suburbs, but you don’t have to pay the firefighters and police to protect it. You can get that cushy, high-salary job, but you don’t have to pay for the education that enabled you to get it. Any reasonably bright person understands this cannot possibly be true, yet most of us act as though we believed it anyway.

This is “rational?”

Certainly not, but then, how could it be otherwise? How can the citizen-consumer make rational choices between civic responsibility and personal gratification in the constant blare and din of the advertising media? This points up another fallacy in the free choice argument. How free can someone be who has been brainwashed from birth?

Another possible reason that the consumption of private goods always outpaces the provision of public goods, not discussed in Sackrey et al. (2002a), is that the provision of public goods is often reactive (rather that proactive) to private consumption whose future trends are far from perfectly predictable, thus public services are usually playing catch-up.

Neoliberalism and Social Balance in the South

While neoliberalism is patiently dismantling social balance in the United States brick by brick, it is taking a wrecking ball to it in the underdeveloped global South. It may pay to advertise in the developed North, but in the South the power asymmetries are so overwhelming that there is no need to waste so much time and money seducing the target audience; neoliberals can cut to the chase and rape with wild abandon, while smiling in the victim’s face, “Hey, it’s good for you!”

The rules are different in the South because the object of the game is different. This is not the Affluent Society. Here there are few middle-class people who can afford to buy more than they need--the new gas-guzzling SUV, the palatial house. Of course, corporate advertising targets these fortunate few. After all, those who can afford to certainly want to live like Northerners (pecuniary emulation, augmented by advertising). But for the most part, here the name of the game is to cut society’s overhead, reduce the cost of keeping workers alive and reproducing, get down to the bottom line, and extract as much surplus labor value as possible.

And so, globalized finance capital interests can act through international quasi-governmental institutions and exercise coercive power undreamed of by governments in the industrialized democracies of the North to tear down the public goods of the South or privatize them where it looks like money can be made.

In the name of “structural adjustment,” the International Monetary Fund insists on drastic reductions in government spending in countries already in desperate straits (or they wouldn’t have gone to the IMF for “help” in the first place). In return for IMF loans, governments must:

1. Reduce their payrolls, thus increasing unemployment.

2. Reduce public services, such as in health, education, and welfare, thus increasing the cost of living for those who can afford to pay for private services, and decreasing the quality of life for those (including laid off government employees) who cannot.

3. Reduce subsidies, thus driving up prices, usually for necessities such as food.

4. Sell public assets to private interests: mass transit, electrical power generation and distribution, gas distribution, and increasingly, water and sewage systems.

At least three of these four measures contribute to impoverishing the people, and it is arguable whether the fourth improves the delivery of services at reduced cost, or accomplishes the opposite. In any case, what we see is a systematic demolition of the public sector to the detriment of the many and the enrichment of the few.

Meanwhile, it is interesting to note that IMF prescriptions for gutting government generally do not extend to reducing police and military forces. After all, capital investment must be assured of property rights and security.

In addition to reducing government spending, recipients of IMF structural adjustment loans must also take steps to improve the investment climate in their countries:

1. Dilute minimum wage laws, thus reducing corporate costs and the wage earner’s standard of living.

2. Lower product and workplace health and safety standards, thus reducing corporate costs and the quality of life of consumers and workers.

3. Lower environmental protection standards, thus reducing corporate costs, public health in the present, and the nation’s ability to sustain production in the future.

4. Deregulate the economy, allowing more mergers and buyouts, especially by transnational corporations, creating more oligopolies that have the power to manipulate the market and enrich themselves by robbing the public.

All of the above serves to exalt private opulence (mostly in the North), while simultaneously degrading the public in both the North and the South into the most abysmal squalor. As David Reed of the World Wildlife Fund observed:

Sustainable development in the social, economic, and environmental sense, has… been ignored in [structural adjustment programs]. Many reform programs have been accompanied by increases in poverty and unemployment, worsening income distribution, and the collapse of social services, environmental protection and state institutional capacities (Reed 1996).

Neoliberalism and Social Balance in the North

As globalized capitalism expands into what Immanuel Wallerstein calls the “periphery” in search of the cheapest labor, the most deregulated economies, and the most permissive business environments, it has been claimed that this puts competitive downward pressure on wages in the North (Wallerstein 1999). Similarly, it can be posited that destroying the social balance of the South creates competitive pressure to downsize public services in the North.

Recent trends tend to confirm this. The neoliberal movement to privatize water systems is gaining momentum in both the global North and South. However, Public Citizen reports:

Water privatization schemes throughout the world have a track record of skyrocketing prices, water quality problems, deteriorating service and a loss of local control.

Privatization advocates argue--usually without any supporting evidence--that switching from publicly owned and operated utilities to private sector firms will lead to greater economic efficiency, stabilized rates, reduced public debt and improved budgetary management.

In reality, privatization more often than not fulfills none of these promises, and instead creates a number of new problems. Vulnerable to corruption and operating according to a profit-driven corporate agenda fundamentally incompatible with delivering an essential service, private water companies are failing to provide citizens with safe, affordable water. Private corporations seek to increase profit margins by cutting costs; hence privatization is almost always accompanied by lay-offs (Public Citizen 2003).

It can hardly be claimed by the neoliberals that the deregulation of California’s energy market served the public interest during that state’s 2000-2001 energy crisis. Rather, it provided energy speculators with golden opportunities to manipulate the market, reaping fast and fabulous profits, while driving to near-insolvency or to actual bankruptcy the private utility companies that deliver energy to rate-payers. In the business climate created by deregulation, it only makes sense for a utility company to break itself apart into smaller companies so that less of its operations will be subject to the California Public Utilities Commission, while more of its operations will fall under the more permissive regime of the Federal Energy Regulatory Commission. The clear result is that much local control will be lost, while it is not at all clear that the result will be better value and service to the consumer, or that the kinder, gentler corporate culture that was possible for a regulated monopoly will survive in the brave new world of deregulation.

Suppose a city’s public streets were privatized. It sounds far-fetched at first, but then consider that there are such things as turnpikes and toll bridges. There are already transponder systems at toll plazas to automatically charge drivers, and there are cameras at certain street intersections to catch red light runners. It is conceivable that eventually it will be economical to place some sort of detection system at every street intersection in a city, feed the information to a central database, calculate the total “street use” of a particular vehicle in a given month, and process a bill for accounts receivable. Since private enterprise is so much more efficient than the public sector, why not?

Of course, some people might find monstrous the prospect of a private corporation tracking every movement of your automobile, but there are concerns more fundamental than this. Consider, as more and more public places become privatized, what happens to the right of the people to peaceably assemble, or to freedom of speech? During the Second Gulf War, a man was arrested in a privately owned shopping mall in Albany, NY simply for wearing an anti-war T-shirt--a T-shirt that had been purchased at the same mall earlier that day (Vann 2003). This is what happens when the public square becomes corporate fare.

Meanwhile, the neoliberals dance on like Meredith Willson’s music man, with most of us mesmerized under their con man’s spell:

I don’t know how he does it, but he lives like a king and he dallies and he gathers and he plucks and he shines, and when the man dances, certainly boys, what else? The piper pays him! (Willson 1957)

And why do they get away with it? Because we don’t realize that it is we who are the pipers and it is they who call the tune. And, “You gotta know the territory!”

References

Armey, Dick. n.d. Congressman Dick Armey (biography). Freedom Works: Home page of the office of the house majority leader. Internet. Available from http://www.freedom.gov/library/dabio.asp; accessed 28 April 2003.

Armey, Dick. 1988. The road away from serfdom. Liberty Haven. Reprinted from Imprimis, the monthly journal of Hillsdale College. February 1988, Vol. 17, No. 2. Internet. Available from http://www.libertyhaven.com/politicsandcurrentevents/taxesandtaxation/roadaway.shtml; accessed 27 April 2003.

Public Citizen. 2003. Why oppose privatization of water? Internet. Available from http://www.citizen.org/cmep/Water/general/whyoppose/; accessed 6 May 2003.

Reed, David. 1996. Structural adjustment, the environment, and sustainable development. The Courier ACP-EU, No. 159, September-October 1996: p. 82-83. Internet. Available from http://www.euforic.org/courier/159e_ree.htm; accessed 28 April 2003.

Sackrey, Charles, and Geoffrey Schneider with Janet Knoedler. 2002. Thorstein Veblen and the predatory nature of contemporary capitalism. In Introduction to political economy, p. 58-78. Cambridge, Massachusetts. Economic Affairs Bureau, Inc.

Sackrey, Charles, and Geoffrey Schneider with Janet Knoedler. 2002a. John Kenneth Galbraith and the theory of social balance. In Introduction to political economy, p. 132-156. Cambridge, Massachusetts. Economic Affairs Bureau, Inc.

Vann, Bill. 2003. Peace T-shirt arrest sparks protests in New York. World Socialist Website, 8 March. Internet. Available from http://www.wsws.org/articles/2003/mar2003/down-m08.shtml; accessed 6 May 2003.

Wallerstein, Immanuel. 1999. Patterns and perspectives of the capitalist world-economy. In International relations theory, ed. Paul R. Viotti and Mark V. Kauppi, p. 369-376. Boston, Massachusetts. Allyn and Bacon.

Willson, Meredith. 1957. Rock Island. The music man. Internet. Available from http://www.endresnet.com/RockIsland.txt; accessed 6 May 2003.