Tag Archives: austerity

One in four need work if we calculate a “true” unemployment rate

How many people are out of work? What is the real unemployment rate? We don’t know. What we do know is that the true number is far higher than the unemployment rate at any given time.

There are some measures that purport to give a better answer than the standard unemployment rate, such as the U-6 in the United States and R8 in Canada, which, because they use more expansion definitions, tend to yield numbers around twice as high as the standard definition does. But even those numbers almost certainly underestimate the true extent of unemployment and underemployment.

One attempt at calculating a true figure, published by the Ludwig Institute for Shared Economic Prosperity, says that the true rate for the United States is 24.3 percent. This statistic, what the Institute calls the “True Rate of Unemployment,” measures “the functionally unemployed, defined as the jobless plus those seeking, but unable to find, full-time employment, and those in poverty-wage jobs.” That is calculated by using Bureau of Labor Statistics data and adds to the more expansive definition of unemployment (the U-6) those who earn US$25,000 or less annually before taxes, which the Ludwig Institute defines as below a living wage.

By contrast, the official U.S. unemployment rate for June 2025 is 4.1 percent and the U-6 unemployment rate is 7.7 percent, up three-tenths of a percentage point from a month earlier. The official unemployment rate, used by governments around the world, is the standard International Labour Organization definition: those collecting unemployment benefits and are actively searching for work (often the latter is necessary to qualify for the former). If your unemployment benefits have run out, congratulations — you are no longer unemployed! The U-6 number represents all who are counted as unemployed in the “official” rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up).

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An altered version of a Depression-era image. (Image by Mike Licht, NotionsCapital.com)

The Ludwig Institute says its goal is to establish a more accurate gauge “by preventing bad jobs and parttime jobs from looking better than they are on paper — something that the [Bureau of Labor Statistics] unemployment rate fails to do.” A better measurement is needed: “Although not technically false, the low rate reported by the BLS is deceiving, considering the proportion of people who are categorized as technically employed, but are employed on poverty-like wages (below $20,000 a year) and/or on a reduced workweek that they do not want. Neither of these factors [are] conducive to prospering, nor to providing for a family.”

Calculating its “True Rate of Unemployment” back to 1995, the Ludwig Institute finds that unemployment has never been lower than 22 percent and reached a peak of 34.8 percent in February 2010, when the world’s economy was still struggling in the wake of the 2008 economic collapse. The closest the official rate and the true rate were was in April 2020, when the Covid-19 pandemic caused an economic shutdown; that month, the official U.S. rate was 14.2 percent and the Ludwig true rate was 34.2 percent.

“The harsh reality is that far too many [in the United States] are still struggling to make ends meet, and absent an influx of dependable, good-paying jobs, the economic opportunity gap will widen,” Institute chair Gene Ludwig said. “Amid an already uncertain economic outlook, the rise in functional unemployment is a concerning development. This uncertainty comes at a price, and unfortunately, the low- and middle-income wage earners ultimately end up paying the bill.”

Undercounting the unemployed is the norm

Finding similar statistics for other countries is more difficult, but the past has shown that unemployment is similarly underreported in other countries. Canada’s official unemployment rate for June 2025 is 6.9 percent and its R8 unemployment rate for that month is 8.6 percent, a drop of a half a percentage point from May. The Canadian R8 counts people in part-time work, including those wanting full-time work, as “full-time equivalents,” thus underestimating the number of under-employed. How much does it undercount? A lot it would appear. Unifor, Canada’s largest private-sector union, issues its own monthly report. For May 2025, Unifor reported the Canadian underemployment rate was 15.9 percent. That number “adds to the unemployment rate all involuntary part-time workers and the marginally attached (i.e. those who wanted to work but who were not able to actively search for jobs due to extenuating circumstances).”

Unifor also reports that 21 percent of Canadians earn low wages, defined as hourly wage earners earning less than two-thirds of the median hourly wage. As there must be some low-wage workers who are already counted in the underemployment rate, it would take research to determine a Canadian underemployment number akin to the Ludwig “true rate” for the United States. But it would seem likely that any such Canadian rate would at least approach the U.S. rate. 

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We could repeat this exercise for other countries. The latest British official unemployment is 4.6 percent while the economic inactivity rate is 21.3 percent; the latter is defined as “people not in employment who have not been seeking work within the last 4 weeks and/or are unable to start work within the next 2 weeks.” For the European Union, the latest reported unemployment rate, for May 2025, is 5.9 percent, while the “labour market slack” was reported at 12 percent for 2023, the latest figure available. Here again, if it were possible to calculate a “true rate” for underemployment, such a rate would be considerably higher.

It is fair to conclude that employment in the capitalist world is more precarious and less available than we are led to believe. One additional measure of how capitalism continues to fail to provide sufficient work is the labor participation rate; a straightforward measure of how many people of working age are actually working. In the United States, this rate has consistently declined since 2001, when two-thirds were employed. That rate is now down to 62 percent. Finally, we can examine how much of gross domestic product goes to wages. That number is also declining. Having peaked at 62 percent in 1969, in 2024 only 42 percent of GDP went toward wages. Yes, you are earning less.

Even with declining wages, bloated corporate profits, greater inequality and ever more money shoveled into the gaping pockets of financiers through dividends and stock buybacks, what do representatives of capital tell us? Commentaries by orthodox economists, conservative think tanks and business publications such as Forbes say the problem is that wages are too high. The U.S. Federal Reserve, the world’s most important central bank, agrees that wages are too high. Yet there were untold trillions of dollars to give to financial titans. For example, the US$10 trillion handout to the financial industry through programs artificially propping up financial markets in just the first two years of the Covid-19 pandemic, on top of the further trillions handed out to business in those years while employees received crumbs and layoff notices. And all that followed the $16.3 trillion committed to the financial industry by the world’s four largest economies in the wake of the 2008 collapse despite the fact that the same industry was responsible for the collapse.

If you have regular work, you are among the fortunate

All these statistics reflect the state of working people in advanced capitalist countries. If we were to zoom out and examine trends in work for the world as a whole, conditions are considerably worse. The International Labour Organization, in its World Employment and Social Outlook for May 2025, reports that 2 billion people — representing 58 percent of all employed workers worldwide — have only informal work. People with informal work outnumber those with formal work, and the rise in informal work is faster than that of formal jobs. This trend is particularly strong in Africa, where the International Labour Organization (ILO) estimates that 85 percent of workers are informal. The ILO also reports that, globally, the share of labor income has been declining, and if the labor share had stayed constant since 2014, the world’s workers would have made a composite US$1 trillion more in 2024.

I’ve thrown all these numbers around to conclude what you have likely already concluded: We are getting more screwed. So we are. People of Color are even more under the gun than White people, and women are more under the gun than men. You are not alone if you are out of work.

Can this be reformed? The answer clearly must be no. Unfortunately, the usual weak-tea prescriptions are on offer from the International Labour Organization in its report. The ILO, in its conclusion, advocates “active labour market policies, social protection measures and robust public employment services” and suggests “dialogue between governments, employers, and workers.” Those would be nice if they could be achieved, but given that capitalism presses down ever harder, and has done so throughout its history in the absence of a strong, sustained, militant movement — and when the movement quiets, the reforms are taken back — if such activities were to work they would have already been done. History is quite clear here, and has been for a very long time. For centuries. 

Speaking nicely to corporate executives and financiers and the political office holders who carry out the preferred policies of those executives and financiers, and expecting them to have an epiphany is, to put it mildly, quite unlikely. And those few executives who might be personally inclined to ease up and hand out some nice raises as a reward for hard work and high profits are constrained from doing so due to the unrelenting pressure of capitalist competition. Nobody controls the capitalist system; it has its own momentum to which all companies must bow to remain competitive and, ultimately, in business. The unceasing competition of capitalism, its relentless drive to enclose ever more human activity within its logic of profit at any cost, mandates the world we now live in.

Stagnation, declining wages and the ability of capitalists to shift production around the globe in a search for the lowest wages and the weakest safety standards — completely ignored in the orthodox hunt for economic scapegoats — are the norm. Our need to sell our labor, the resulting reduction of human beings’ labor power to a commodity, and the endless competitive pressures on capitalists to boost profits underlie the world economic system. A race to the bottom is what global capitalism has to offer, and all it can offer. 

You can’t keep imposing austerity and expect the corporate party to last forever

The failures of the neoliberal brand of capitalism — and capitalism as a system itself — were once again on display in the February 23 German elections. In a political vacuum, with mainstream parties unable to offer anything other than the austerity that has been imposed for decades, the extreme right gains adherents. The 21 percent vote total and second-place finish of the Alternative for Germany (AfD) is another unmistakable klaxon.

Although the political “firewall” against the fascist-tinged AfD appears that it will hold, with yet another “Grand Coalition” of the Christian Democrats and Social Democrats almost certainly to be the outcome of negotiations, the doubling of the AfD vote stands out. That was by far the biggest improvement of any party’s increase, dwarfing the four percent increases enjoyed by the Christian Democrats and the Left Party (Die Linke). 

A glance at the German electoral map is sobering: Districts in the five states of the former East Germany almost uniformly put the AfD first, with only Berlin and a couple of other constituencies excepted; the eastern part of Berlin put the Left Party first. By contrast, the states of the former West Germany are nearly uniformly black for the Christian Democrats, with one exception being the Social Democratic vote in urban centers including Hamburg and Bremen. The Christian Democrats and the AfD earned nearly half the vote between them, and add in the vote for the business party, the Free Democrats, and the right won a majority. Celebrations of the late surge of the Left, gaining nine percent, a strong increase from the previous election, don’t seem that much to celebrate given the surge for the right. And the new Sahra Wagenknecht Alliance, combining Left economics with conservative calls to halt immigration, fell flat; the BSW failed to reach the five percent needed to enter the Bundestag, the German parliament.

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Stocksberg Castle with its vineyards in the autumn (photo by Roman Eisele)

The disastrous result of the Social Democrats (SPD), finishing with their worst result since the revival of German formal democracy after World War II, is the culmination of years of imposing austerity and not merely a referendum on the outgoing administration of Chancellor Olaf Scholz, a point to which we will return below.

Of interest is the pattern of voting when broken down by age, education and sex. German women voted noticeably to the left of German men, those with higher education voted to the left of those with less education, and the Left Party received the most votes from those ages 18 to 24 and placed second for those ages 25 to 34. These results, particularly the women/men breakdown and the education split, mirror what has become routine in the United States over recent national elections. The German results also mirror the voting patterns of the 2024 British election, although the female/male split there was not as pronounced.

So what conclusions might we draw from all this? Given that the Labour landslide in Britain was more a reaction to the disastrous years of Conservative rule, a rout magnified by the single-seat, winner-take-all format of its Parliamentary elections, and not a mandate for Keir Starmer’s Conservative-lite (and barely “lite”) policies, the pattern seen across the advanced capitalist countries is clear. With a wholesale abandonment of anything progressive or pro-working people by mainstream “center-left” parties and austerity enforced no matter who is in office, the siren songs of the far right are reaching more ears. Even the incoming Chancellor, Friedrich Merz, sounded this alarm. “This is really the last warning to the political parties of the democratic centre in Germany to come to common solutions,” he said the night of the Christian Democratic victory.

That is not simply a coded message to the SPD to join in a coalition — given the results, that coalition seems a foregone conclusion — but a warning that the AfD can’t be held off indefinitely. And although Chancellor Merz is coming from a perspective of political survival, it is a warning with content even if somewhat hypocritical given his party’s increasing adaptation of AfD talking points. The disastrous showing of the SPD, should it wish to heed it, certainly is a ringing alarm. That same alarm is ringing for the Democratic Party in the U.S., the Liberal Party in Canada and other “center-left” parties.

Leave voters behind and they’ll eventually look elsewhere

The continual moves to the right, tailing the “center-right” parties that move rightward themselves, go beyond the personal failings of this or that political leader. When Bill Clinton, Barack Obama, Joe Biden, Jean Chrétien, Justin Trudeau, Tony Blair, Gordon Brown, Keir Starmer, François Hollande, Gerhard Schröder, Olaf Scholz, José Luis Rodríguez Zapatero and Romano Prodi all fall to their knees in front of industrialists and financiers, when each speedily implements neoliberal austerity policies despite leading the supposed “center-left” opposition to the conservative parties that openly stand for corporate domination, there is something other than personal weakness at work. That something is structural — a political system wholly captured by the most powerful possessors of economic power in a system of massive inequality.

When voting for traditional parties doesn’t change conditions, some people will begin to look at something different. With the collapse of Left alternatives, the “something different” on offer comes from the far right — the AfD in Germany, the neofascists in Italy, Trump in the U.S. and the anti-democratic governments that have held, or still hold, office in Poland, Hungary, Argentina and elsewhere. Germany serves as an exemplar here.

The strong German economy of the first two decades of the 21st century (strong in terms of exports, gross domestic product (GDP) and corporate revenue) was built on the backs of German workers. The “secret” to Germany’s economic dominance within the European Union was cuts to German wages. Germany undercut other countries that use the euro as their currency by suppressing wages, a process that took form under a Social Democratic government. In 2012, at the height of German economic performance, German wage increases to that point from 2001 averaged half of one percent per year, consistently below the German inflation rate, according to the International Labour Office. To put it another way, the ILO calculated that German productivity had remained virtually unchanged in relation to the productivity of all countries that use the euro, while German wages declined by more than ten percent relative to the composite wages of all other euro-zone countries.

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Because every space is a canvas for advertising (photo by Michael F. Mehnert)

The prosperity of German manufacturers had come at the price of a decade of wage cuts (adjusted for inflation) suffered by German workers. Sound familiar? Reduced income leads to reduced consumption, so exports accounted for a steadily rising portion of German GDP. In relative terms, it became more difficult for other European Union countries to compete with German products, particularly in other countries using the euro, because German manufacturers increasingly could undercut them. Manufacturing capacity elsewhere is shuttered, reinforcing German dominance and increasing unemployment in the countries on the receiving end of the exports.

A 2011 paper written by a British economist, Engelbert Stockhammer, described this phenomenon bluntly: “Germany has pursued a policy of aggressive wage restraint resulting in large current account surpluses. German gains in competitiveness (since the introduction of the Euro) have not been founded on superior technological performance, but on more effective wage suppression. … Simply put, German wage suppression rather than fiscal profligacy is at root of the crisis of the Euro system. … Europe needs a set of economic institutions and policy rules that addresses such imbalances and their underlying mechanisms.”

It was none other than the SPD that brought about this wage suppression. In 2003, Schröder, then the Social Democratic chancellor, pushed through his “Agenda 2010” legislation. Schröder said at the time, “We must not get trapped in defending our past achievements, but instead must work to our future.” Since those “past achievements” included old-fashioned concepts such as good wages and pensions, Schröder said, “The core challenges before us are accepting the reality of globalization, the ‘digitalization’ of our economy and an aging society.” Classic Right-wing code words. “Accepting” this “reality,” Agenda 2010 cut business taxes while reducing unemployment pay and pensions.

The structures of corporate domination

The European Union, for all that some Germans might gain from it, is nonetheless a purveyor of austerity itself; it is designed to benefit large capital, in particular finance capital, and suppress conditions for working people. European capital can’t compete with U.S. capital without a similarly large political economic unit behind it; the EU serves as a vehicle to elevate European competitiveness in global capitalism at the same time EU governments keep themselves subordinate to the United States. 

The EU is a supra-national institution to impose corporate domination on a reluctant population. National governments are not insulated from popular opinion, but a supra-national structure can impose dictates on those governments, which can then tell citizens that it has “no choice” but to adhere to them so that the country can remain “part of Europe.” European capitalists’ need for the combined clout of a united continent underlies the anti-democratic push to steadily tighten the EU, including mandatory national budget benchmarks that require cutting social safety nets and policies that are designed to break down solidarity among wage earners across borders by imposing harsher competition through imposed austerity. The EU, in its current capitalist form, is a logical step for business leaders who desire greater commercial power on a global basis: It creates a “free trade” zone complete with suppression of social accountability while giving muscle to one of two currencies that has any potential (albeit small) of challenging the U.S. dollar as the world’s pre-eminent currency.

Having become dependent on exports, what happens when demand in other countries declines? Trouble, as Germany is currently undergoing. Throw in higher energy costs because the cost of U.S. liquified natural gas is higher than the natural gas previously piped in from Russia, and it is no surprise that many Germans are struggling, and looking for anyone who addresses their struggles. And, it could be added, the costs of housing are skyrocketing, further cutting into German living standards. The shortage of affordable housing units is calculated to be in the millions. Neither renters or homeowners can afford to stay where they are.

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Demonstration for a basic income in Berlin, November 2010 (photo by “PD”)

It is only natural that more people seek different solutions, and the siren songs of the far right, even those with fascist elements, such as the AfD, and those who aspire to install themselves as a fascist dictator, such as Trump, begin to sound appealing to the politically naïve because their problems appear to be addressed where others fail to do so. But the “solutions” the far right puts forth are the usual scapegoating — immigrants are taking your jobs, elites look down on you, diversity and inclusion are poisons to a pure national people, etc., as they play on people’s emotions. Anything to deflect attention from the socioeconomic system and its inherent inequality and harshness that is the actual root cause. When U.S. Democrats, Canadian Liberals, German Social Democrats, French “Socialists,” British Labourites and other European center-left parties join their center-right rivals in imposing austerity, then there isn’t much reason to vote for them other than to keep Republicans, Conservatives and their equivalents out of office. Voting becomes a sterile exercise in voting for the lesser evil to keep something even worse out of office, and after enough rounds of this, more voters will decide to just sit it out, as just happened with millions of liberals in the U.S. election.

Interestingly, Germany bucked this pattern, with the turnout of 84 percent the highest since reunification. Perhaps fear of the AfD had something to do with that turnout; perhaps more so those who previously felt they had nobody to vote for decided they had something at stake this time. The AfD gained 2 million votes from those who didn’t vote in the previous federal election, by far the highest of any party, and picked up another 1 million from those who had voted for the Christian Democrats.

However you wish to parse the numbers, the rise of parties flirting with fascism is an ominous development, one now years in the making across the Global North. The Europe of the 1930s and the Latin America of the 1970s gives us grim history lessons in what happens when fascists are able to gain and exploit power. Germany’s formal democratic structures are holding but that cannot be said to the case everywhere, especially given the dangerous stress the Trump gang is placing on U.S. institutions at the moment, compounded by the willingness of many heads of government to pander to the Orange One-Man Crime Wave and illustrated by the willingness of Trump’s de facto co-president, Elon Musk, to blatantly interfere in the German election and other government matters.

If we want a better world to be our future, there is an enormous amount of work to be done. The fascist takeovers of the past, while by no means destined to be repeated, nonetheless give a warning of the shape of the future if we don’t fight back.

The cost of corporate profit in U.S. health care reaches $2 trillion

As has long been the case, the U.S. health care system is by far the world’s most expensive while providing the worst results among the world’s advanced capitalist countries. And that expense continues to get larger and more unaffordable.

Just how large is the cost of private profit in health care? Almost two trillion dollars! Unbelievable? It certainly seems so. But that is indeed how much more money the people of the United States spent on health care in 2022 than they would otherwise have spent if the U.S. had a single-payer system. This is the direct result of a health care system that is designed to extract maximum profits rather than deliver health care. A system unique in the world in the extent that corporations such as insurance and pharmaceutical companies are allowed to play such a large role.

Health care spending in the U.S. is so extreme that the spending by the U.S. government alone is higher than the total spending (as a percentage of gross domestic product) of any other country. Incredibly, the government was banned from negotiating drug prices until the Inflation Reduction Act of 2022 was signed into law, but only some drug prices in some programs can be negotiated, a bountiful windfall for Big Pharma. Spending on health care in the U.S. in 2022 reached 16.6 percent of the country’s GDP with government spending alone accounting for 14 percent of GDP. The country with the next highest total, Germany, saw total health care spending account for 12.7 percent of its GDP.

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Organizing for health care in Iowa (photo by IowaPolitics.com)

Where does the total of nearly two trillions dollars come from? To calculate that figure, I took the per capita health care spending of the three largest EU countries — France, Germany and the United Kingdom — and the neighbor of the U.S., Canada, and compared that average of those four countries to U.S. per capita spending, each for 2022, the most recent year for which statistics are available. The composite average for Canada, France, Germany and the United Kingdom is US$6,613 per capita, converted to U.S. dollars adjusted to create purchasing power parity as reported by the Organisation for Economic Cooperation and Development (OECD). Per capita health care spending in the U.S. for 2022 was US$12,555, or not far from double the composite average of the four peer countries to which it is being compared. The U.S. population in 2022 was 333 million, so multiplying that total against the per capita figure gives us a total of $1.979 trillion.

That is the cost of private profit in health care. And that total is steadily increasing. When I last did this exercise, in 2017, I calculated that the excess money paid to obtain health care for United Statesians was $1.4 trillion for the years 2011 to 2016. As a comparison, excess health care spending averaged $1.15 trillion for the period of 2001 to 2010 and $685 billion for the 1990s. Those ever higher insurance premium payments you are making as your employer forces you to shoulder more of the cost each year — if you are lucky enough to even have health insurance — are most definitely not your imagination.

And unlike other countries, where national health care systems cover everybody, there were 27 million people without health insurance in the United States. And for those with insurance, that does not mean the results are something to be proud about.

The most expensive and the worst results

In a survey of 10 countries — the five countries under discussion here along with Australia, Netherlands, New Zealand, Sweden and Switzerland — the U.S. ranked dead last in health care system performance. This survey was conducted by the Commonwealth Fund, an institution more than 100 years old that supports “independent research on health care” and seeks better health care outcomes. The Commonwealth Fund’s report, “Mirror, Mirror 2024: A Portrait of the Failing U.S. Health System,” pulled no punches in its conclusion: “The U.S. continues to be in a class by itself in the underperformance of its health care sector. While the other nine countries differ in the details of their systems and in their performance on domains, unlike the U.S., they all have found a way to meet their residents’ most basic health care needs, including universal coverage.”

The Fund assessed the 10 countries’ health care systems through 70 health system performance metrics covering five areas: access to care, care process, administrative efficiency, equity and health incomes. Among the five broad areas, the U.S. was ranked last in access to care and health outcomes, and next to last in administrative efficiency and equity. Australia came out first among the 10 countries in this survey; interestingly, by a narrow margin Australia spent the least.

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Another sobering result of U.S. health care is that United Statesians “live the shortest lives and have the most avoidable deaths.” The Commonwealth Fund reports pulls no punches about this sad result:

“The U.S. ranks last on four of five health outcome measures. Life expectancy is more than four years below the 10-country average, and the U.S. has the highest rates of preventable and treatable deaths for all ages as well as excess deaths related to the pandemic for people under age 75. The ongoing substance use crisis and the prevalence of gun violence in the U.S. contribute significantly to its poor outcomes, with more than 100,000 overdose deaths and 43,000 gun-related deaths in 2023 — numbers that are much higher than in other high-income countries.”

The report notes that physicians in the “uniquely complex U.S. system” necessitates that all must “spend enormous amounts of time and effort billing insurers. Denials of services by insurance companies are also common, necessitating burdensome appeals by providers and patients.” In contrast, “High performers on equity, including Australia, Germany, and the United Kingdom, have limits on cost sharing (or in the case of the U.K., no cost sharing at all) to ensure that the ability to pay does not constitute a significant barrier to obtaining needed health services. In Germany, out-of-pocket expenses are capped, with the cost of coverage being income-based.” Australia offers free care in public hospitals, something unimaginable in the U.S., and Canberra regulates medicine costs.

The Commonwealth Fund report points to several factors that make the U.S. health care system perform so poorly, including lack of investment in primary care, administrative inefficiency, consolidation of hospitals, underfunding and decentralization.

There is nothing new here; a 2011 Commonwealth report ranked the U.S. last among 16 high-income, industrialized nations when measuring deaths that could potentially have been prevented by timely access to effective health care.

Delivering profits, not health care

What is not said directly in reports such as the above is the very fact that health care in the U.S. is designed to deliver corporate profits, not health care for individuals. Endlessly propagated capitalist ideology tries to convince us that the private sector is always better than anything provided by a government. So it is ironic indeed that the health care system with the most private-sector involvement performs the worst. But when we stop and think about it in a logical manner, freeing ourselves from ideology, this makes sense. Government doesn’t have to earn a profit; private enterprise expects to and will pack its bags if it doesn’t. Just as privatization invariably results in higher costs and often poorer quality than when the service was provided by a government agency as a public good, health care is provided far more efficiently when in public hands.

It’s the “magic of the market” at work. And if you are in need of health care in the U.S., that magic converts your money into fantastic profits. One big way this magic works is to steer as many seniors into Medicare Advantage. Medicare is the government-funded health care system that all who are 65 years of age and older are eligible for. The Medicare Advantage is a privatization of Medicare whereby insurance companies get their hands on health care money provided by the federal government. A June 2024 article published in Journal of the American Medical Association found that — surprise! — this corporate intervention provides less care at higher cost. 

The three authors of the report, Adam Gaffney, Stephanie Woolhandler and David U. Himmelstein, flatly declare the health insurance industry’s trade group proclamation that Medicare Advantage is a good deal for taxpayers is false. The authors note that the non-partisan agency Medicare Payment Advisory Commission reported to the U.S. Congress that Advantage “overpayments added $82 billion to taxpayers’ costs for Medicare in 2023 and $612 billion between 2007 and 2024.”

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Following up on this report, Corporate Crime Reporter interviewed Dr. Ana Malinow, who works with National Single Payer, a group working toward a single-payer system in the United States. In this interview, Dr. Malinow said, “The Medicare Advantage companies want to pick the healthiest patients out there, because you know that those patients traditionally are not going to cost you a lot of money.” How it works, she explained, is that Medicare Advantage pays a set amount per patient, with more for sicker patients, so that the incentive is to “make their patients appear as sick as possible, often without providing additional treatment.” As a result, “a program devised to help lower health care spending has instead become substantially more costly than the traditional government program it was meant to improve.”

Because of these systematic overpayments, Medicare Advantage is a cheaper option than traditional Medicare. Several of the biggest insurance companies have been charged with fraud by legal authorities, but Dr. Malinow notes that paying fines is merely a cost of business for them. A separate report, by the research group KFF, calculated that insurance companies’ gross margins per enrollee is roughly double the profits made on ordinary group and individual insurance plans.

And providing health insurance is highly profitable. For 2022, UnitedHealth Group reported profits of US$28.4 billion. Cigna had $6.7 billion, Elevance Health made $6 billion and CVS Health made $4.2 billion. “All told, America’s largest health insurers raked in more than $41 billion of profits in 2022,” the Pennsylvania Capital-Star reported. Denying care is one way for these insurance companies to boost their profits. The Capital-Star report said, “An American Medical Association survey found 94% of physicians surveyed said that prior authorizations lead to delays in receiving care and 80% said that prior authorizations can lead to treatment abandonment.”

Big Pharma grabs big profits

Let us not leave out the pharmaceutical companies. Another article in the peer-reviewed Journal of the American Medical Association found that the profit margins for pharmaceutical makers was “significantly greater” than for all others. To determine this, the article’s authors, led by Fred D Ledley, compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. The Big Pharma outfits had gross profit margins (the difference between the cost of goods sold and total revenue) double those of other corporations and net income close to double.

Want more? A report put out by the University of Southern California (not peer-reviewed) found that, adjusted for inflation, pharmaceutical company revenue more than doubled from 1979 to 2018:

“Based on 4,923 firm-year observations, we find that U.S. drugmakers’ sales revenue has increased from $139 billion in 1979 to $321 billion in 2018 (both numbers are in 2018 dollars). A large portion of the increases went to profit, increasing from 15.3% of sales in 1979 to 23.4% of sales in 2018. A much larger increase went to research and development (R&D), which increased from 4.6% of sales in 1979 to 19% of sales in 2018. Expenditures on acquiring drugs developed by other companies also increased from 0.1% of sales in 1979 to 5.2% of sales in 2018. These two categories represent the total costs of developing new drugs, both internally and externally.”

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An investigation published by NYRequirements, a provider of health care education, found that the pharmaceutical industry, on a global basis, racked up an astonishing $1.4 trillion in profits for 2022. Pfizer topped the list with $31.4 billion in net income, with five more reporting more than $10 billion. And with that a lot of lobbying to keep themselves in the saddle can be done — Big Pharma spent $372 million on lobbying the U.S. government in 2022. Another €40 million is spent by the pharmaceutical industry to lobby in the EU.

How do these companies grab so much money? Corporate Watch offers five factors:

  • Research and development is directed to “patients who are high-value and who will use the drugs long term.” On the other hand, “one-shot vaccines for epidemics that mainly affect poorer countries” are of no interest.
  • The patent system prevents cheaper generic medications from being produced so that original manufacturers can collect windfall profits.
  • “Price much, much higher than costs.” Although the industry spending 20 percent of revenue on R&D is higher than almost any other industry, “sales cover costs many times over.”
  • Big Pharma spends less than it suggests on developing new drugs; most of what they ultimately market was developed in university and government labs, or in those of smaller research companies, and then bought. The U.S. National Health Institutes provides $39 billion a year to universities, medical schools and other research organizations.
  • Massive lobbying, both in the U.S. and the European Union.

Corporate Watch provides examples of unconscionable profiteering. They write:

“Insulin usually costs less than $6 a vial to make, but sells for as much as $275 in the US (one example given by the campaign group Patients for Affordable Drugs). In Europe, pharma giant Gilead charged an average of €55,000 for a 12 week Hepatitis C treatment — when pills cost less than €1 per pill to manufacture. Such extreme examples illustrate a general pattern. One academic study found US pharma companies have an average 71% “gross profit” margin on drug sales — the money they make from a drug after the cost of producing it, but before company-wide costs such as marketing, taxes or executive bonuses.”

Medical corporations invent new ways to profit off you

There is one additional culprit in this sad story. Another unique aspect of U.S. health care: pharmacy benefit managers (PBMs), who are “driving up drug costs for millions of people, employers and the government,” according to a report in The New York Times. The Times report, published in June 2024 and written by Rebecca Robbins and Reed Abelson, said the job of these pharmacy benefit managers is to reduce costs but “frequently do the opposite.” These PBMs are “middlemen overseeing prescriptions” for more than 200 million people and owned by giant health care companies such as CVS Health, Cigna and UnitedHealth Group. The Times authors explain: 

“They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees, a New York Times investigation found. Most Americans get their health insurance through a government program like Medicare or through an employer, which pay for two different types of insurance for each person. One type covers visits to doctors and hospitals, and it is handled by an insurance company. The other pays for prescriptions. That is overseen by a P.B.M. The P.B.M. negotiates with drug companies, pays pharmacies and helps decide which drugs patients can get at what price.”

Instead of saving money, more money is extracted. Overcharges for drugs, well beyond ordinary profiteering, are frequent, while small independent drug stores are underpaid, driving them out of business. (The PBMs are responsible for paying pharmacies on behalf of employers.) “[T]he P.B.M.s’ business practices touch virtually every American family,” the Times report says. “Even people who don’t take prescription drugs end up paying higher insurance premiums and taxes as a result of inflated drug costs.”

Perhaps none of the above should come as a shock considering that, last decade, when U.S. life spans were beginning to shorten, this was cheered as a “silver lining” because pension costs would be lower and in this decade, the Covid-19 pandemic was delayed being brought under control due to corporate greed. Huge profits were racked up as governments heavily subsidized newly developed vaccines but the pharmaceutical companies kept all the profits; in the case of Moderna minting several billionaires.

Vaccine makers refused to loosen their patent rights, clinging to intellectual property (IP) law, heavily skewed in their favor, to maintain a monopoly. Capitalist governments have rolled over for corporate interests for decades, making IP laws ever more rigid. It is unconscionable, or should be, when IP rules are used to keep life-saving vaccines away from most of the world’s people. A comprehensive waiver of World Trade Organization rules would have, even if temporary for the duration of the emergency, set aside Big Pharma’s IP rights and allowed all manufacturers of vaccines, wherever they are, to produce Covid-19 vaccines. The governments of India and South Africa proposed, in October 2020, just such a waiver to allow the production of one or more of the Covid-19 vaccines with most of the world’s governments behind them. The world waited in vain; the EU openly and the U.S. more subtly ensured IP rules were not touched. Corporate profits were more important than millions of lives.

What do these numbers and dispiriting results tell us? That health care should be a human right, not a good to be exploited for massive profiteering. The more private capital injects itself into health care, the more expensive it becomes with worse results. When denying care is what boosts profits, should we expect anything different? Some years ago I met a Canadian woman who complained about how much she disliked her country’s health care system. I told her of a friend of mine who had recently died. He had a bad heart and was in need of heart medication but the insurance company refused to allow it for him and he died because of that. “Does that happen in Canada?,” I asked. I was met with silence. It’s one thing to have to wait for medical attention sometimes in a non-emergency situation, upsetting as that can be, and not being able to access health care at all. Tens of millions can’t in the U.S., even those with insurance. 

More than 26,000 die in the United States yearly because of a lack of health insurance and hundreds of thousands go bankrupt due to the costs. That is the price of private profit in health care. Or, more to the point, the price of capitalism.

Capitalism attacks Argentine workers and you may be next

As always when a representative of the right wing tells you he or she is campaigning to bring “freedom,” be afraid. Very afraid. For “freedom” in these cases means freedom for the richest financiers and industrialists to do whatever they want.

For them, “Freedom” is for capital, not for human beings without capital to invest. Today’s exhibit is the offensive against working people that is taking place in Argentina, where the new extreme right president, Javier Milei, is determined to see how far capitalist ideology can be pushed. So far, Argentines have pushed back but Milei, cheered on by domestic and international big business leaders, is nothing if not determined to ram through his austerity packages. And he has shown no inclination to allow mere democracy to stand in his way.

Nonetheless, there is no surprise here. President Milei ran on a program of extreme austerity, brandishing a chainsaw at his election rallies. Unfortunately, enough Argentines bought his siren songs, or were desperate enough to try anything given the country’s punishing inflation, to elect him, ending a one-term period in executive office by the ordinarily dominant Peronists. Alas, doing something new for the sake of doing something new, when it is aimed at you, rarely works. And here there is actually nothing new. President Milei simply promoted standard hard right ideology, albeit promoting it with unusual vigor. Snake oil is snake oil, as Argentine working people are already finding out. 

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People filled the streets of Buenos Aires and Argentina’s biggest cities to demand “memory, truth and justice” for the victims of state violence (photo by Izquierda Diario)

Still waiting for benefits to trickle down, aren’t you? For more than 40 years, the same tired propaganda has been peddled, and has been implemented in various countries, starting with Augusto Pinochet’s murderous military dictatorship in 1973, in Chile, and gaining speed with the election of Margaret Thatcher in Britain in 1979 and Ronald Reagan in the United States in 1980. “Neoliberalism” is the term that the world came to adopt for this vicious austerity. (The term references how the world outside of North America uses the word “liberal” to mean minimal government regulation to enable decisions to be made by market forces; this is termed “libertarianism” in North America. Capitalist “markets,” however, are nothing more than the aggregate interests of the biggest financiers and industrialists and are not the neutral arbiters loftily sitting in clouds even-handedly dispensing justice as conservative propagandists would have us believe.)

The ideology that undergirds austerity programs has a long history and has to be incessantly promoted, all the more so because traditional “laissez-faire” ideas had become discredited during the Great Depression, leading to post-World War II Keynesianism becoming entrenched. The need for capitalists to give concessions to save their system due to the mass revolts of the 1930s and the failure of fascism as a “solution” to capitalists’ difficulties in maintaining profits helped the temporary acceptance of (or resignation to) Keynesianism. Perhaps the most influential ideologue of laissez-faire/neoliberal economics is Friedrich Hayek, who went so far as to assert that solidarity, benevolence and a desire to work for the betterment of one’s community are “primitive instincts” and that human civilization consists of a long struggle against those ideals. “The discipline of the market” is the provider of civilization and progress, he wrote. His most prominent student, Milton Friedman, would supply the Pinochet dictatorship with its economic program, the first modern case of “shock therapy” being imposed with maximum force because there was no other way it could be implemented.

What Thatcherism had in store for Britons was demonstrated by her crushing of the miners’ strike and Reaganism in turn showed its teeth by crushing the air traffic controllers’ strike. Punishing austerity was to follow on both sides of the Atlantic as declining profits and increasingly stiffer and more globalized competition required pushing down wages and working conditions, reducing or eliminating regulations and outsourcing production to wherever labor was cheaper and regulations fewer. Making all this work required dropping barriers to trade, thus bringing on the age of so-called “free trade” agreements that put regulation outside political or democratic control, and cracking open countries outside the capitalist core of the Global North to expose those economies to plunder with legal defenses stripped away by unaccountable multinational organizations. Debt is used to enforce these prerogatives, with multinational lending organizations such as the World Bank and International Monetary Fund imposing draconian conditions on loans that are used to pay off earlier loans, sending Global South countries into deeper debt. The European Union is another neoliberal offensive, a supranational organization run by and for bankers that overrules democratically elected governments at the national level.

The Milei offensive in not new to Argentina

Argentina, although among the biggest countries outside the capitalist core, has suffered multiple rounds of neoliberal austerity. President Milei’s draconian attempts to maximize corporate profits are not new.

The fascistic military dictatorship of 1976 to 1983 laid waste to the Argentine economy while unleashing horrific human rights abuses. Upon seizing power, the military handed over economic policy to a well-connected industrialist, José Alfredo Martínez de Hoz, who ruthlessly implemented a severe neoliberal program of shock therapy, backed by a savage campaign of torture, “disappearances” and killings waged by the military and two allied fascist groups. The CGT union federation was abolished, strikes outlawed, prices raised, wages tightly controlled and social programs cut. As a result, real wages fell by 50 percent within a year. Because of the collapse of internal consumption caused by this austerity, ten percent of Argentina’s workforce was laid off in 1976 alone. For the last five years of the military junta, 1978 to 1983, Argentina’s foreign debt increased to US$43 billion from $8 billion, while the share of wages in national income fell to 22 percent from 43 percent.

Upon the return of formal democracy, the debt did not go away. A civilian president, Carlos Menem, imposed an austerity program in the early 1990s in conjunction with selling off state enterprises at below-market prices. This fire sale yielded $23 billion, but the proceeds went to pay foreign debt mostly accumulated by the military dictatorship — after completing these sales, Argentina’s foreign debt had actually grown. The newly privatized companies then imposed massive layoffs and raised consumer prices. By 1997, about 85 percent of Argentines were unable to meet their basic needs with their income. In contrast, banks underwriting Argentine government bonds earned an estimated $1 billion in fees between 1991 and 2001, profiting from public debt. As one example, an investment bank that arranged a restructuring of Argentina’s debt, under which a brief pause in the payment schedule was granted in exchange for higher interest payments, increasing Argentina’s debt, racked up a fee of $100 million.

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Argentines participating in the March 24, 2024, truth and justice demonstration in Buenos Aires draw parallels between the military dictatorship and Palestine (photo by 1985Idea)

It all finally imploded at the end of 2001, when the government froze bank accounts and the country experienced so much unrest that it had five presidents in two weeks. The last of these presidents, Néstor Kirchner, suspended debt payments. Had Argentina resumed scheduled payments in 2005, interest payment alone on the debt would have consumed 35 percent of total government spending. Kirchner announced that Argentina intended to pay only 25 percent of what was owed and any group that refused negotiations would get nothing; in the end, Argentina paid 30 percent to bondholders who agreed to talk.

Almost all of Argentina’s debtors accepted the 30 percent, seeing 30 percent as better than nothing. Many of Argentina’s creditors were not the financial institutions that originally made the loans; much of the debt had been sold to speculators. There were two notable holdouts, however — the hedge funds Elliott Capital Management and Aurelius Capital Management. These two speculators demanded full payment of the face value of the debt that they bought for pennies on the dollar. How to extract money out of a country where living conditions had already sunk to perilous lows? The head of Elliott Capital and its NML Capital affiliate impounded an Argentine Navy ship docked in Ghana, tracking the ship and waiting for it to reach the country that would be most favorable to its tactic of seizing an asset. This was no aberration; that speculator, Paul Singer, has a documented history of buying debt owed by poor Global South countries for pennies on the dollar and demanding to be paid full face value, no matter how dire that country’s condition.

The speculators on Argentine debt could use the tactic of impounding ships because a U.S. federal judge had issued a series of rulings declaring that Argentina must pay the full amount to the holdouts. Those rulings were not isolated instances of an out-of-control judge; the U.S. Supreme Court would later issue two rulings that fully backed the speculators. The Foreign Sovereign Immunities Act of 1976 is supposed to bar lawsuits in U.S. courts against non-U.S. governments, but a 7-1 bipartisan majority of the Supreme Court decided that the law is malleable when not convenient. The Argentine bonds had been sold with a provision that New York law would be used to settle disputes related to them, which gave U.S. courts the excuse needed to extend U.S. law to Argentina. In essence, the high court ruled that financiers are more sovereign than a national government.

Standing up to finance capital

Nonetheless, the administrations of Néstor Kirchner and Cristina Fernández refused to kneel. Their left-wing populism has been overstated — they left capitalist relations untouched and at best merely tolerated the movement of recovered factories — but they did consistently put the interests of Argentine working people ahead of international financiers. That came to an end when a new right-wing president, Mauricio Macri, took office and fulfilled his campaign promises to put an end to the country’s sovereignty. As a reward, Buenos Aires was again allowed to borrow on international financial markets — so that it can borrow money for the sole purpose of paying billions of dollars to speculators. The Macri administration committed itself to paying $6.4 billion to the holdouts, which could only be paid off by more borrowing.

President Macri served only one term, with the Peronists regaining office. Now a hard right president is again in power. President Milei wasted no time implementing a program that is a dream for Argentine capitalists; his chainsaw is not an empty metaphor. Acting immediately — after all, “shock therapy” is also not just a metaphor — President Milei devalued the peso by 50 percent, reduced transportation and utility subsidies, lifted price controls and dissolved half of the government’s ministries. He also announced a new “protocol” to limit public protests and the creation of a “registry” under which activist organizations would be sent bills for the expenses of the state repressing their public protests. The purported purpose of this protocol is, you guessed it, to achieve “peace and order.”

This program, naturally, has drawn rapturous praise from business interests. Elon Musk, he of the mass firings, poor pay and notorious hostility to unions and regulations that protect employees, has endorsed President Milei, and “top Argentine CEOs” “heap praise” on him, Bloomberg reports. The president has in turn lavished praise on Margaret Thatcher, calling her “brilliant.” 

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Entre Rios province, Argentina (photo by Felipe Gonzalez)

Those who are at the receiving end of the Milei administration’s attacks, and those who represent them, have a decidedly different take. The General Secretary of the International Trade Union Confederation (ITUC), Luc Triangle, said, “The IMF is celebrating the budget surplus in Argentina, but it’s indefensible to ignore the human cost of this economic shock therapy. Pensions have been slashed, thousands of public sector workers fired, public services are on the verge of collapse, unemployment is growing and food poverty spreading. These kinds of misguided, far-right economic measures deepen inequality and erode democratic foundations. It is no surprise that Milei also wants to bypass Congress and repress civil liberties — this is the anti-democratic ideology at the centre of his regime.”

What is it that the International Monetary Fund is celebrating? Inflation that had reached 160 percent in November, on the eve of President Milei’s inauguration, has steadily increased, reaching almost 290 percent in March. The Organisation for Economic Co-operation and Development (OECD), the club of advanced capitalist countries and large Global South countries, predicts that Argentina’s inflation will be 251 percent for 2024 and that its economy will shrink 3.3 percent for 2024, easily the worst performance among G20 economies.

Democracy? What democracy?

The decrees mentioned above were only the beginning. Days into office, President Milei in December 2023 issued an 83-page “Necessity and Urgency Decree” intended to eliminate hundreds of regulations, erode labor rights and open the door to mass privatizations of state-owned enterprises. Both houses of Argentina’s National Congress must vote in their majorities to overturn the decrees, or they go into effect. The Senate voted it down but has not yet faced a vote in the Chamber of Deputies. In the interim, a court, hearing a challenge by the CGT trade union federation, voided some of the decree, suspending it until the Congress fully considers it. But there was still more to come.

Following up on his decree, President Milei a week later introduced an omnibus bill with the Orwellian name of “Foundations and Starting Points for the Freedom of the Argentine People,” a 351-page document that contains 664 articles. If passed, this bill would declare an “economic emergency” and delegate more than 1,000 powers from the legislative to the executive branch until December 31, 2025. This would enable the president to bypass Congress. Noting that President Milei said “the state is an enemy,” Professor Tom McDowell, writing in CounterPunch, summarized this offensive:

“Grounded in the same logic as neoliberalism’s conventional demand for freedom from the state, democratic institutions increasingly appear as impediments to the logic of the marketplace. … The anti-parliamentarism at the core of the neoliberal theoretical outlook has increasingly transformed into a populist program that mobilizes a general dissatisfaction with politicians against democratic institutions as such. Neoliberal politicians, such as Milei, use this reasoning to manufacture the conditions for the ongoing use of emergency powers and the concentration of authority in the executive branch.”

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The Puerto Madero district of Buenos Aires. (Photo by Juan Ignacio Iglesias)

Following a one-day general strike in which 1.5 million people took to the streets, the omnibus bill was voted down in Congress. The fight was still not over, because the omnibus bill was trimmed and sent back to Congress, with the new version passed by the Chamber of Deputies on April 30. The Senate is debating the bill with a May 25 deadline to act; although the pro-Milei parties do not have a majority in the Senate, one of the left-wing parties that voted against it in the Chamber, Frente de Izquierda, does not have a Senate seat, leaving the outcome uncertain, according to the Buenos Aires Herald. The revised bill would still privatize nine state-owned enterprises, down from 41, implement “reforms” to pensions and labor law, make “maximizing profit obtained from exploiting natural resources” state policy and cut taxes for foreign companies.

The need to step up the fightback

Despite the militant action that stopped the December decree, opponents of the Milei administration on the Left decry a lack of resolve by mainstream labor organizations. Samuel Karlin, writing for Left Voice, writes that union bureaucracies and center-left parties are containing the ability of the working class to fight back. He writes:

“Months later the law is once again advancing due in large part to the refusal of the CGT — the country’s largest federation of trade unions — to mobilize workers against the attacks. The CGT — in addition to not holding assemblies or promoting the organization of the working class and a plan of struggle until the law falls — negotiates behind closed doors with the government, preventing the workers’ strength from being expressed against the adjustment and the law in the streets and workplaces. The CGT is more afraid of the mobilized workers than of the Milei government itself. Meanwhile, the centrist and center-left Peronists who lead the union bureaucracies and social movements have sought to negotiate the terms of the attacks rather than wage a fight against it.”

Nonetheless, militant pushback is happening, demonstrated by 800,000 students, educators and allies protesting cuts to public universities, including reductions in teacher pay and the closures of some schools. Mr. Karlin notes, “Milei is advancing U.S. imperialist penetration in Latin America and developing the Far Right movement internationally. As Israel becomes increasingly isolated due to its genocide of Palestinians, Milei has become one of the Zionist state’s fiercest allies. Milei wants to use Argentina as a laboratory for his far-right reaction, instead we should use it as a laboratory for fighting back the Far Right.”

Another dangerous initiative of the Milei administration is its denial of the massive crimes committed by the fascistic military regime of 1976 to 1983. The total of those murdered, “disappeared,” arrested, tortured and/or forced into exile likely is in the hundreds of thousands, with an estimated 30,000 killed. The administration’s ministers, including the president himself, either deny the toll the military regime took or attempt to justify it. Thus an annual demonstration in March against the military dictatorship drew large crowds, who had an increased sense of urgency.

What has the new government achieved? Argentina’s poverty rate has risen to 57 percent, the highest rate in two decades. The president openly celebrated firing 50,000 state workers, with plans to fire another 70,000, and the removal of 200,000 from social-benefit programs. In addition, reductions to pensions were the largest in 30 years. The previous hard-right president, Mauricio Macri, took out a $57 billion loan from the International Monetary Fund and the cuts demanded by the IMF in exchange led to austerity, a downward cycle that threatens to accelerate.

Regardless of what country we live in, we all have a stake in the Argentine people’s success in fighting off the Milei austerity package. Industrialists and financiers, and the public office holders who love them, are undoubtedly watching closely the events in Argentina. If a country with one of the most militant working classes can have extreme austerity imposed on them, similar offensives will soon be on the way elsewhere. Capitalists around the world understand well their common class interest. The working people of the world, the overwhelming majority of Earth’s population on whose backs the wealth of those elites is built, need to understand their common interest.

Call it whitewashing or greenwashing, World Bank subterfuge doesn’t fool us

Every so often, the World Bank puts out a paper that calls for better social protection or at least a somewhat better deal for working people. The public relations people there evidently believe we have very short memories.

No, dear reader, the World Bank has not changed its function, nor have elephants begun to fly. Without any hint of irony, the World Bank’s latest attempt at selective amnesia is what it calls its “Social Protection and Jobs” strategy, in which it purports to advocate that the world’s national governments “greatly expand effective coverage of social protection programs” and “significantly increase the scale and quality of economic inclusion and labor market programs.” Hilariously, the World Bank titles its 136-page report fleshing out this strategy “Charting a Course Towards Universal Social Protection: Resilience, Equity, and Opportunity for All.”

In that report, the World Bank, with a straight face, writes that it “recognizes that the progressive realization of universal social protection (USP), which ensures access to social protection for all whenever and however they need it, is critical for effectively reducing poverty and boosting shared prosperity.” Furthermore, the report builds on a previous document that allegedly offers “an overarching framework for understanding the value of investing in social protection programs and outlined how the World Bank would work with client countries to further develop their social protection programs and systems.” The report asserts goals of achieving equity, resilience and opportunity for all people, especially the developing world’s most vulnerable, and “to create opportunity by building human capital and helping men and women to access productive income-earning opportunities.”

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A demonstration in Oslo during the World Bank conference in June 2002 (photo by Vindheim)

We arrive at that favorite set of code words, “human capital.” We’ll return to that shortly. But before we highlight the actual record of the World Bank and its role in imposing devastating austerity on countries around the world, at enormous human cost, let’s take a brief look at the International Trade Union Confederation response. The ITUC, which represents 200 million workers in 163 countries and has 338 national affiliates, says its “primary mission is the promotion and defence of workers’ rights and interests.” Readers may recall that the ITUC issues a yearly report on the state of labor, consistently finding that not a single country fully upholds workers’ rights.

In its four-page summary of the World Bank declaration, the ITUC said it agrees with the World Bank’s stated goals, and “agrees with the Bank that the lack of social protection for the majority of the world’s workers in the informal economy is a challenge that needs to be urgently addressed.” Nonetheless, the ITUC “has a number of considerable reservations to some of the policy messages” and disputes “the rigor of the analysis underpinning some of the policies proposed.”

The ITUC writes: “The Bank’s vision of universal social protection appears to prioritise the extension of targeted non-contributory social assistance at the expense of social security, when both forms of support serve distinct and complementary functions.” Further, it “disagrees with the Bank’s critique of social security schemes, especially pensions, as an undue burden on public finances and ‘regressive’ in nature.” The World Bank’s “solution” to make pension and social security systems sustainable “mainly involve reducing public subsidies to social security, strengthening the link from contributions to entitlements through defined-contribution schemes [retirement plans in which you pay into but have no guarantees as to payout], as well as strengthening the role of voluntary and private pensions.”

In other words, it’s work until you drop! That is already a long-term goal of right-wing ideologues and corporate interests not only in the United States but around the world.

Underneath the rhetoric, the usual right-wing prescriptions

And, true to right-wing form, the World Bank places the onus for unemployment squarely on individuals. The ITUC critique says: “the onus of addressing unemployment appears to focus on the individual, rather than on the broader structural forces at play. The [bank report] disregards in particular the measures that governments can take to create new, quality jobs, such as proactive industry planning, public sector job creation, and public investment – including in labour intensive sectors with strong social and environmental dividends, such as infrastructure, care and the green economy.” Finally, the World Bank claims that labor regulations are “excessive” and threaten employment, and advocates lowering already meager worker protections.

Once again, the World Bank has not forgotten its raison d’être; it has not suddenly changed its stripes. Elephants will continue to not fly.

Did we really expect otherwise? A look at the World Bank’s record provides all the evidence anyone could want of it being one of the world’s most destructive agencies, an organization dedicated to enhancing corporate plunder and imposing punishing austerity. A one-two punch with the International Monetary Fund. Both organizations do the bidding of the Global North’s multi-national corporations through playing complementary roles.

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Three Gorges Dam, a project funded by the World Bank that displaced 1.3 million people (photo by Christoph Filnkössl)

When I last checked in at the World Bank, in 2018, the bank was in the process of completing its “World Development Report 2019: The Changing Nature of Work,” which opened with quotes from Karl Marx and John Maynard Keynes. That was merely a feint. What we soon read in examining the report is that the problem is “domestic bias towards state-owned or politically connected firms, the slow pace of technology adoption, or stifling regulation.” Sure, jobs are disappearing, but that’s no problem because “the rise in the manufacturing sector in China has more than compensated for this loss.” Essentially, the World Bank was advocating that we become sweatshop workers in China. What else to do? “Early investment in human capital” — in other words, pay lots of money for advanced degrees you won’t be able to use — and “more dynamic labor markets,” which is code for gutting labor protections and making it easier to fire workers.

Elephants didn’t, after all, fly five years ago, either. 

The World Bank has even declared itself above the law. Unfortunately, at least one U.S. court agrees. A lawsuit filed in federal court in Washington on behalf of Indian farmers and fisherpeople ended with a ruling that the World Bank is immune from legal challenge. The bank provided $450 million for a power plant that the plaintiffs said degraded the environment and destroyed livelihoods. The court agreed with the World Bank’s contention that it has immunity under the International Organizations Immunities Act. The World Bank thus was declared the equivalent of a sovereign state, and in this context is placed above any law as if it possesses diplomatic immunity. Another suit, however, also filed by EarthRights International against the World Bank for its role in turning a blind eye to alleged systematic human rights violations by a palm oil company in Honduras for a project it financed, was allowed to proceed by the U.S. Supreme Court in 2019. That case, however, appears to yet be decided by the trial court. So the World Bank can sometimes be sued in the United States legal system but it remains to be seen if it will have to shoulder any responsibility.

The World Bank has a long history of ignoring the human cost of the projects it funds. The World Development Movement, a coalition of local campaign groups in Britain, reports that the World Bank has provided more than US$6.7 billion in grants to projects that are destructive to the environment and undermine human rights, a total likely conservative. To cite merely three of the many examples, the World Bank:

  • Loaned an energy company in India more than $550 million to finance the construction of two coal-fired power plants. Local people, excluded from discussions, were beaten, their homes bulldozed and reported reduced food security and deteriorating health as a result of the power stations.
  • An Indonesian dam, made possible by the World Bank’s $156 million loan, resulted in the forcible evictions of some 24,000 villagers, who were subject to a campaign of violence and intimidation.
  • In Laos, a hydropower project made possible by World Bank guarantees displaced at least 6,000 Indigenous people and disrupted the livelihoods of around 120,000 people living downstream of the dam who can no longer depend on the rivers for fish, drinking water and agriculture.

A study of World Bank policies, “Foreclosing the Future” by environmental lawyer Bruce Rich, found that:

“Drawing on Bank studies, project evaluations and sectoral reviews, it is shown that the World Bank still suffers from a pervasive ‘loan approval culture’ driven by a perverse incentive system that pressures staff and managers to make large loans to governments and corporations without adequate attention to environmental, governance and social issues. In 2013, Bank Staff who highlight social risks and seek to slow down project processing still risk ‘career suicide.’ … [The bank] has continued to binge on enormous loans to oil and gas extraction, coal-fired power stations and large-scale mining generating environmental damage, forest loss and massive carbon emissions.”

Destroying the environment in the service of short-term profits

Want more? The World Bank has provided nearly $15 billion in financing for fossil fuel projects since the 2015 signing of the Paris Climate Accords. An October 2022 report by Big Shift Global, a coalition of 50 environmental organizations across the Global North and South, notes that despite World Bank claims that it would end financing for upstream oil and gas production, it has other avenues to promote fossil fuels. One of these methods is to send funds to a financial institution, which in turns sends the money to the fossil fuel project. Another is to provide non-earmarked funds but make the money conditional on instituting reforms encouraging fossil fuels.

The biggest fossil fuel funding, according to the Big Shift Global report, is $1.1 billion for the Trans-Anatolian Pipeline, a gas distribution project in Azerbaijan. Another $600 million went toward a gas storage project in Turkey and another eight projects were given at least $100 million by the World Bank. Projects that the World Bank has financed include expansion of coal. Other work by the World Bank includes $2.8 billion so that Ghana could move its energy mix from mostly hydropower to majority fossil fuels, and pressured Ghana to enter into gas contracts that causes it to pay $1.2 billion annually for gas it doesn’t use, which also has put a greater debt burden on the country. 

The World Bank also encouraged Guyana to use a Texas law firm that has Exxon as a major client to rewrite its petroleum laws, while providing money for oil and gas development in Guyana. That development will benefit Exxon as the fossil fuel multinational snagged a contract under which Guyana doesn’t receive any of the profits until the costs of the field are paid off. In other words, the Big Shift Global report says, “Exxon can continue to charge Guyana for every newly developed oil field. It could take decades before the money trickles down to the people.” 

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Protest at the World Bank (photo by “Jenene from Chinatown,” New York City)

The World Bank attempted the same whitewashing stunt with its fossil fuel funding, once issuing a report lamenting global warming while completely ignoring its role in worsening global warming. At the time of that whitewashing report, the bank was providing billions of dollars to finance new coal plants around the world. By any reasonable standard, the World Bank is a key organization in the concatenation of processes that has brought the world to the brink of catastrophic climate change. The policies of the World Bank and its sibling, the International Monetary Fund, have constituted non-stop efforts to impose multi-national corporate control, dismantle local democratic institutions and place decision-making power into the hands of corporate executives and financiers, the very people and institutions that profit from the destruction of the environment.

A trail of evictions, displacements, gross human rights violations (including rape, murder and torture), widespread destruction of forests, financing of greenhouse-gas-belching fossil-fuel projects, and destruction of water and food sources has followed the World Bank. It works in conjunction with the International Monetary Fund, whose loans, earmarked for loans to governments to pay debts or stabilize currencies, always come with the same requirements to privatize public assets (which can be sold far below market value to multi-national corporations waiting to pounce); cut social safety nets; drastically reduce the scope of government services; eliminate regulations; and open economies wide to multi-national capital, even if that means the destruction of local industry and agriculture. This results in more debt, which then gives multi-national corporations and the IMF, which enforces those corporate interests, still more leverage to impose more control, including heightened ability to weaken environmental and labor laws.

The World Bank compliments this by funding massive infrastructure projects that tend to enormously profit deep-pocketed international investors but ignore the effects on local people and the environment. The two institutions are working as intended, to facilitate the upward distribution of wealth, regardless of human and environmental cost.

Central banks are a symptom, capitalism is the cause

Wishing for central banks to act in the interest of working people rather than the financial industry is about as fruitful as hoping a starving wolf won’t eat the chicken that was just placed next to it. Pigs will fly, the Amazon will freeze over and Wall Street will give all its money away before a central bank in the capitalist core goes against its raison d’être.

We need no fresh reminders of central bank behavior. Consider that just five central banks — the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada — handed out about US$10 trillion (€8.8 trillion) to artificially prop up financial markets in the first two years of the Covid-19 pandemic on top of the US$9.36 trillion (or €8.3 trillion at the early 2020 exchange rate) that was spent on propping up financial markets in the years following the 2008 global economic collapse.

So about $20 trillion — that’s the equivalent of a year’s gross domestic product of Japan, Germany, India, the United Kingdom, France and Italy combined — to reward the most parasitic portion of the economy, an industry that confiscates money not only from all of you who work for a living but from industrial capital as well. What did you get? Little or, more likely, nothing. Actually, what you have been getting for the past year is worse than nothing. And that brings us to the topic of interest rates. Although we ordinary mortals are not supposed to comprehend the mystical alchemy of the practitioners of high finance as they conjure the forces of capitalism to magically guide the economy to a steady course, in reality there is no mystery. 

Given a choice among the Federal Reserve’s three congressionally mandated goals  — maximum employment, stable prices, and moderate long-term interest rates — employment is what is jettisoned every time. The European Central Bank is a little more honest by listing its single goal to be to “maintain price stability.” The Bank of Canada is somewhere between those two by stating that its mandate is “to promote the economic and financial welfare of Canada.”

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Bank of Canada facade 

Of course, with bankers defining “welfare of Canada,” we need not hold our breath in anticipation of how that “welfare” will be determined. Although there are reasons for the sudden appearance of price inflation from early 2022, this really isn’t a mystery, either. Ongoing supply-chain disruptions due to the Covid-19 pandemic, drastic rises in fuel prices due to Russia’s invasion of Ukraine and Western cutoff of Russian energy in response, and good old fashioned corporate greed account for the past year’s inflation, not wage increases. How to respond? The world’s central banks responded in unison — throw people out of work to dampen the economy.

Indeed, when the only tool you have is a hammer, every problem is a nail to be hit hard. Perhaps central bank officials do have other tools, but can’t seem to find anything other than the hammer. The hammer here is interest rates, and they have been using their one and only inflation-fighting tactic of rapidly raising interest rates to slow down the economy. By making it more expensive to borrow money, business and consumer spending will slacken and when that happens, layoffs follow.

When the hammer is the only tool and it is used on you

Inflation is not good, but central bank officials are not using their hammer because they are upset that you are paying more for groceries but rather because inflation reduces the value of speculators’ financial assets. Just as the then chair of the Federal Reserve, Paul Volcker, plunged the United States into what was then the steepest recession since the Great Depression by raising interest rates to unprecedented highs, and thereby causing unemployment to skyrocket to 10.8% — with the enthusiastic support of the Reagan administration even though Volcker was an appointee of Jimmy Carter — interest rates have risen sharply this year. Nowhere near to the extent of the early 1980s, yet, but enough to make a recession a real possibility in 2023.

Here are a few numbers to illustrate this:

  • The Federal Reserve raised its benchmark interest rate to 4.375% in December 2022, up from 0.125% at the start of 2022, with more to come.
  • The European Central Bank has raised its benchmark rate for lending to banks to 2.5%, up from years of 0%, with more raises expected.
  • The Bank of Canada raised its policy interest rate seven times in 2022, to 4.25% from 0.25% in March.
  • The Bank of England raised its interest rate eight times in 2022, reaching 3.5% in December 2022, with further raises expected.

The bottom line is that you’ll pay more to use your credit card and the price of mortgages (and rents) will rise even higher; housing costs are already obscenely high because housing is a commodity. Bank profits, however, will go up — and there is nothing more important than that for bankers, in or out of central bank offices.

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The European Central Bank in Frankfurt (photo by DXR)

So although there are always a few spare trillions dollars or euros or pounds or yen lying around to shovel into the bottomless pockets of financiers, it’s crumbs for you if you are lucky. Thus central banks are acting in the interest of speculators with these rapid-fire interest rate increases just as they did for years following the 2008 economic crash that financiers caused and then again in the wake of the sudden 2020 downturn triggered by the pandemic. Their standard solution to recessions is to throw more money at banks and inflate another stock-market bubble. Now that wages have temporarily ceased falling (and even slightly nudged upward) and unemployment has fallen sharply, it’s time to apply a different medicine, one that, in a remarkable coincidence, also punishes working people and rewards speculators.

So, are central banks simply evil people? Is it time to “end the Fed” as Federal Reserve critics frequently call for in the United States? Or to put an end to other central banks?

Ironically, the answer is no.

That answer certainly is counter-intuitive. Why shouldn’t we be rid of institutions that do so much to perpetuate, and widen, inequality, and which are run by bankers for the benefit of bankers despite being formally government institutions? Simply put, if you don’t like what the Federal Reserve, or the European Central Bank, or any other central bank does, what you actually don’t like is the capitalist system. The Federal Reserve, for example, is surely (as its critics accurately charge) a far too secretive, unaccountable branch of government that protects the interests of financiers at the expense of everybody else. Nothing unique there. The European Central Bank is perhaps the world’s most undemocratic central bank — it is the most powerful entity in the European Union and is completely unaccountable to anyone, openly operating on behalf of European finance capital.

Recall how Greece was treated by the European Central Bank during the country’s financial crisis of the mid-2010s. The ECB issued a series of diktats that cut off all funding for the Greek government, including from Greek banks, in order to bring the new Syriza government to its knees and force a full surrender to punishing austerity imposed by it, the European Union and International Monetary Fund. So harsh were these measures that the IMF reportedly said the ECB was too extreme in its austerity measures! The Greek economy was crushed to ensure banks that lent to Athens, in particular French and German banks, would be repaid in full no matter the cost to Greeks.

No sense reforming what can’t be reformed

Democratically accountable central banks that promulgated policies to increase employment and toward a socially responsible financial system would be welcome reforms. But such a reform is an impossibility, and not simply because central banks are outside any democratic accountability under the official rationale of lessening “political interference” in economic decision-making but in reality because finance capital is so powerful that it can demand, and has received, the right to act without constraints in its own interests. As much as powerful capitalists possess the ability to bend government politics toward their preferred outcomes, finance is the only industry that has government departments dedicated to it, that its executives manage independently of any other government entity.

If it can’t be reformed, why not get rid of it? Eliminating central banks while keeping the rest of capitalism in place is a pointless idea because they are a necessity in advanced capitalist countries, which is why each has one. And, perversely, eliminating the central bank would actually increase the dominance of financiers and would make the booms and busts of the capitalist business cycle sharper than they already are. 

Strange as it seems today, there was a populist component to the creation of the Federal Reserve. Populists of the late 19th century wanted a more elastic currency so that the government could extend emergency credit when the economy collapsed (as it then frequently did) rather than be handcuffed by the gold standard. In those days, when a crash happened, the U.S. government had to turn to the biggest robber barons of the day, such as J.P. Morgan, and ask them directly for a bailout.

Banks hoarded their reserves during crashes, making the downturns worse, and could issue their own banknotes, helping to fuel bubbles. But, since we are talking about the United States, it took a consensus on Wall Street and not popular demand for a central bank to be created in 1913. Financiers had come to believe that a central bank would temper the extremes of booms and busts, thereby stabilizing the economy. Industrialists joined financiers in that consensus.

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The Federal Reserve Annex in Washington (photo by AgnosticPreachersKid)

Needless to say, the capitalists and not the populists were the drivers of Fed policy from the beginning. But a central bank does, albeit in a highly inegalitarian manner, stabilize a national economy through regulating credit and alternately tightening and loosening monetary policy. Central banks in all advanced capitalist countries manage domestic money supplies and currencies, a crucial task in today’s world in which markets subject to wild swings set prices for everything.

Somewhat similarly, the Bank of England, created in 1694 by royal charter, “was founded to ‘promote the public Good and Benefit of our People,’ ” according to its website. Despite that lofty sentiment, the bank admits it was created primarily to fund a war against France. The Bank of England was nationalized in 1946 and although it remains wholly owned by the British government, it, like central banks generally, is “independent” — in other words, completely free of democratic accountability. That independence” was granted by Prime Minister Tony Blair in 1997. Not for nothing did Margaret Thatcher say her greatest accomplishment was “Tony Blair and New Labour.”

It won’t come as a surprise that financial institutions are skilled at finding ways around central bank policies. Not that central banks don’t act in those interests — the Fed under Alan Greenspan encouraged the 1990s stock market bubble and the real estate bubble of the 2000s, and following the 2008 crash, Ben Bernanke was focused on the then long non-existent phantom of inflation while ignoring the all too real problem of high unemployment. The European Central Bank is, if anything, even more guilty of that than the Federal Reserve.

If central banks went away, financiers wouldn’t

The entire capitalist system acts to benefit capitalists (industrialists and financiers) to the detriment of working people. Why should we expect an arm of a capitalist government to act any different? If central banks were eliminated, the exact same powerful capitalist interests would continue to bend government policy to their preferred outcome and would continue to exercise the same dominance over government, social institutions and the mass media. The only difference would be that the economy would become more unstable than it already is because there would be less ability on the part of governments to dampen excesses. Why would that be good?

Capitalism is an unstable system that will always have booms and busts, and as time goes on the busts tend to worsen. (That tendency was temporarily kept at bay after the Great Depression by significant reforms, but those reforms have been undone and the tendency has reasserted itself.) Capitalism is a system in which those who amass the capital thereby amass power, and power translates into the ability to bend the rules to preferred outcomes or to bypass the rules. Money concentrates into fewer hands and wages are squeezed to facilitate the upward flow of money. Those who succeed are the people endowed with outsized desires to acquire and the personality traits that enable those desires to be met.

Yes, those people so endowed can and do create policy for central banks. Eliminating those banks wouldn’t touch the ability of people so endowed to suffuse their viewpoints and favored policy outcomes throughout a capitalist society, nor would it touch their ability to leverage their outsized wealth and the power their wealth gives them to shape government policy and public opinion making to benefit themselves. Getting rid of government would actually intensify the dominance of industrialists and financiers in all spheres of life. The dominance of a globalized class that maintains power through a web of institutions and scrambles to manage ceaseless instability — not a small cabal of bankers who somehow control everything, an idea rooted in Right-wing conspiracy theories that easily shade off into anti-Semitism.

None of the foregoing is to suggest that we should simply accept the brutal, dehumanizing capitalist system. But rather than hankering for reforms that might actually make it worse, a better world with an economy designed for human needs is what we should be after. If we blame central banks instead of the system that it is a component of, then we are doing nothing more than blaming the messenger. Capitalist markets are nothing more than the composite expression of the interests of the largest industrialists and financiers, and allowing those markets even greater freedom is what we should be fighting, not tacitly helping.

Right-wing attempts to eliminate constitutional protections are no joke

Donald Trump’s recent rant that the U.S. Constitution should be “terminated” so that he can be installed as president for life merits no response, given the Orange one-man crime wave’s tenuous connection to reality. Laughter is the appropriate riposte as Trump’s futile attempts at becoming the fascist dictator he clearly aspires to be become ever more futile.

But is his latest childish tantrum really something to be laughed off? Having skipped the “tragedy” phase and gone straight to “farce,” Trump is facing what is likely to become a politically terminal case of irrelevancy as new contenders for Mussolini’s crown, most notably but not only Ron DeSantis, emerge. The nascent fascist movement that has coalesced around Trump, and the varieties of extreme right menace that shade into it that are now expressed through the Republican Party, are no laughing matter. And while embarrassed silence or a quick change of subject might be Republicans’ default position when asked to comment on Trump’s increasing irrationality due to their fear of the Frankenstein monster they have let loose, eviscerating the Constitution is actually on their agenda.

Let us have no illusions about the U.S. Constitution, the world’s oldest. Hopelessly archaic and undemocratic, it is a document that was designed to keep the country’s slave owners and commercial bourgeoisie firmly in power — going so far as to enshrine slavery in its text — through setting up institutions like the Electoral College and the Senate (the world’s most undemocratic legislative body) to ensure that power could never be extracted from the hands of the commercial and plantation elite. Ambiguously written to exclude women, Blacks, Indigenous peoples and the poor, its stilted language is open to interpretation by judges who see protection of the most powerful and wealthy capitalists, and the maintenance of inequality, as their holy mission. 

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Cartoon by Polyp.

This mission has reached such proportions that the absurd doctrine of “originalism” is not only proclaimed with straight faces, but judges on courts up to the Supreme Court rely on it to impose their hard right political agendas. “Originalism” is the farce of an idea that asserts only those rights explicitly mentioned in the Constitution exist, and that any interpretation of its text has to be based on what the writers of the Constitution — the “Framers” as they are usually called in legal circles — intended. In other words, judges must read the minds of people dead for more than 200 years to decide cases. By a remarkable coincidence, those long-dead minds are opposed to all social progress.

It must be difficult for the rest of the world to imagine such laughably transparent silliness being offered as legitimate legal theory, but such is the state of politics in the global hegemon. We might go so far as to suggest U.S. politicians will do anything for a laugh, but as the Supreme Court erases one right after another, there is nothing funny going on here.

What is certainly not funny is the quite serious, albeit quiet, movement by the hard right to put an end to constitutional rights through wholesale changes to the Constitution. Their chosen route to do this is the convening of a constitutional convention, and this movement has moved forward by a frightening amount.

Massive corporate funding behind convention agitation

Among the leading voices for a new constitutional convention — one that would have few if any limitations on its power — is none other than the American Legislative Exchange Council (ALEC). Lavishly funded with undocumented millions of dollars, ALEC is a secretive group that writes “model legislation” for state legislatures across the United States that benefits corporate interests. The watchdog group Center for Media and Democracy’s ALEC Exposed website calls ALEC “much more powerful” than a typical lobbyist or front group. “ALEC is a pay-to-play operation where corporations buy a seat and a vote on ‘task forces’ to advance their legislative wish lists and can get a tax break for donations, effectively passing these lobbying costs on to taxpayers,” ALEC Exposed reports.

What do legislators who work with, or are members of, ALEC do with the organization’s “model” bills? According to ALEC Exposed:

“Participating legislators, overwhelmingly conservative Republicans, then bring those proposals home and introduce them in statehouses across the land as their own brilliant ideas and important public policy innovations—without disclosing that corporations crafted and voted on the bills. ALEC boasts that it has over 1,000 of these bills introduced by legislative members every year, with one in every five of them enacted into law. ALEC describes itself as a ‘unique,’ ‘unparalleled’ and ‘unmatched’ organization. We agree. It is as if a state legislature had been reconstituted, yet corporations had pushed the people out the door.”

Extreme-right state legislators met at an ALEC conference in late 2021, vowing to push for a constitutional convention. The ALEC proposal calls for a balanced-budget amendment and term limits for political office holders. The first is dangerous enough, given that forcing the federal government to balance its budget every year would mean permanent austerity would be imposed; working people would be hit hard by any such limitations on government spending. Not only would the government be unable to respond to a recession, basic programs like Social Security would be put at risk. Medicare and government pensions would also be subject to budgetary axes. That outcome is of course very much intended. But any constitutional convention would not have to limit itself to a finite set of topics. Because there are no rules or laws governing what a convention could do, a seated convention could easily become a runaway body, imposing a full set of far-right and corporate wish lists. Calls for retrogressive legislation, including bans on abortion, are routinely called for by proponents of seating a convention.

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The movie “Greed” (1924)

The far right drive for a convention to wipe out as many gains achieved by social movements as possible has been quietly going on for years. In 2017, for example, Truthout reported on an effort by state legislators affiliated with ALEC and promoted by another shadowy group, Citizens for Self Governance, whose co-leaders have strong ties to the Koch Brothers and who routinely label Black Lives Matter and other Left groups as “thugs” and “criminals.” A year earlier, the group practiced for a constitutional convention by holding a mock convention in which it passed a far-right wish list that included making it easier to repeal federal regulations, requiring a supermajority to impose federal taxes and eliminating federal taxation by repealing the 16th amendment. 

To help guarantee the far-right outcome desired, this initiative would “appoint seven delegates to the convention, and attempts to provide for the replacement of delegates if they go off-script,” Truthout reported. The intended script could be very dangerous. “[A]ny convention call, no matter how narrowly written, could result in a ‘runaway’ convention,” the report said. “Why? Because the Constitution doesn’t provide any guidance or constraints on how a convention would operate once called. State politicians or Congress could write their own agenda and rules about the way delegates are chosen, the number of delegates allowed from each state, and whether or not a supermajority is required to approve amendments. Once in the room, delegates to a convention can ignore [any] limits.”

As recently as last month, an ALEC conference in Washington was attended by some of the most notorious extreme-right mouth-frothers, including former House of Representatives Speaker Newt Gingrich and several current members of Congress. A rouges’ gallery of far-right pressure groups, including some who agitate for a total ban on abortion. Among the offensives endorsed at this conference were to fight “woke capitalism” (what this chimera might be was not specified) and a bill that would “bar companies with 10 or more employees from receiving state contracts if they take into account any ‘social, political, or ideological interests’ to limit their commercial relationships with fossil fuel, logging, mining, or agriculture businesses—and that instructs legislatures to ‘insert additional industries if needed.’ ” In other words, promotion of fossil fuels would become mandatory. Another ALEC “model bill” promoted at the conference was legislation intended to enforce right-wing censorship in public universities.

How close is the United States to a convention?

To seat a constitutional convention, two-thirds of the states (34) would need to ratify a resolution. Although current constitutional law mandates that three-quarters of the states (38) would then have to approve, a convention could change the ratification requirements to whatever it wanted, with no constraints. There is precedence for this — the only constitutional convention in U.S. history, in 1787, “went far beyond its mandate,” the Center on Budget and Policy Priorities (CBPP) wrote. “Charged with amending the Articles of Confederation to promote trade among the states, the convention instead wrote an entirely new governing document” and drastically altered the approval process.

How many states have ratified? Convention proponents claim that 28 states have already passed resolutions. The CBPP, by contrast, reports that since ALEC released “a handbook for state legislators that includes model state legislation calling for a constitutional convention” in 2010, only 12 states have adopted it. ALEC gets to 28 states by counting any state that has ever passed any resolution calling for a convention, no matter different wording nor that some of these resolutions are more than three decades old. “Whether Congress would agree to count all such other state resolutions is unknown” the CBPP wrote. “The question is important, because the Constitution grants solely to Congress the power to determine whether the 34-state threshold has been met.”

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“Greed” (Nicholas Kwok)

Alternate counts include the 19 states claimed by a pro-convention group calling itself “Convention of States Project” that avoids any mention of who or what might be behind the group but quotes Ron DeSantis and Sean Hannity among a host of far-right extremists. Another shadowy group that fails to mention its backers, “US Term Limits,” admits that only five states have ratified its favored version but claims that if other versions are included, the total reaches 19. The right-wing news magazine Newsweek claims 17 states have ratified. The liberal citizens’ group Common Cause writes that “more than a dozen state legislatures” have passed balanced-budget convention resolutions since 2011, while five states have rescinded resolutions since 2016. Fortunately, the far-right drive to re-write the Constitution has not been well organized, although there is significant danger that the backing of ALEC will likely put this retrograde movement on firmer footing.

None of the above is in any way intended to deny that the U.S. Constitution is badly out of date. A better world for United Statesians certainly would mean a far more progressive constitution, one guaranteeing democratic rights and expanding the concept of rights to economic questions, and creating new legislative bodies based on democratic outcomes. Such a document would be much different than the current Constitution. Although it would be natural for the Left to be tempted to support a convention to advance progressive reforms, the current balance of social forces quickly puts a kibosh on such ideas. Given the vast power that the corporate mass media holds, the relentless promotion of right-wing talking points as “news,” and the hold the Republican Party has on state legislatures across the country, the time for a convention is nowhere near. 

The Democratic Party certainly isn’t going to be of any help, given the intellectual dead end of liberalism that it exemplifies and the austerity it has embraced, as this month’s vote to force a bad contract on rail workers was the latest demonstration in an endless series of capitulations to capitalists.

Any move for a convention needs to wait until the balance of forces is tilted in favor of the Left, and that can only come about through a sustained mass movement sure of its goals. In such a scenario, movements would likely be aiming much higher than a constitutional convention — a better world necessitates drastically different ways of organizing politics and the economy than what currently exists. There would be no need to tinker with an archaic document long overdue for replacement; it would be necessary to re-imagine what a constitution should be. For now, we are in the world we are in, and while we remain on the defensive, any convention would be for the worse. Capitalist formal democracy is already farcical. The current backsliding toward a harder right-wing domination doesn’t need yet more impetus.