From The Welfare State To The Neo-Liberal State

L’Aut journal


This article is translated from L’Aut Journal, a rather eclectic left-wing monthly newspaper from Quebec. It contains a good characterization of the change in the main bourgeois policies from the welfare state to neo-liberalism, in the U.S. as well as in most other imperialist countries, over about the last decades. The welfare state included policies of granting some concessions to the working class in the imperialist countries, not only in terms of increased wages, but also providing a certain degree of health care, vacations, pensions, etc. These policies, as the article points out, were an attempt to pacify the workers at home while the imperialists, especially the U.S., fought to consolidate their rule over the neo-colonial and dependent countries. (It must be pointed out however that these concessions were only minimally, if at all, granted to the workers of the oppressed nations and nationalities, e.g. African-Americans, Chicanos/Mexicanos, Puerto Ricans, Asian-Americans, etc.) Since about 1973, coinciding with the defeat of U.S. imperialism in Vietnam, the imperialists have been trying to reverse the gains of the working class. Since that time, there have been declining real wages, privatization and reduction of social services, and the beginnings of the resistance of the U.S. working class. These facts are well-outlined in the article in L’Aut journal.

The article also correctly notes the contradiction among the ruling circles of the U.S. (as the prolonged conflict over the latest presidential elections show), Europe and Japan, with the U.S. dominant, even though these contradictions are still mainly in the context of general collusion against the dependent countries. (It should be noted that these contradictions became more noticeable during the Vietnam War, when the U.S. was bogged down in its futile effort to crush the resistance of the people of Vietnam and the rest of Indo-China, and its rivals stepped in to increase their share of investment in U.S. neo-colonies, as Japan did in south Korea and the other ‘Asian tigers.’) The article also contains good material on the role of the ruling circles in Canada, their attempt to assert some vague independence in relation to the U.S. rulers, and their final capitulation.

However, the article also has some major shortcomings. In particular, it overemphasizes the contradictions within different circles in the ruling class, which it splits into the multinationals and ‘national’ capitalists, with the military-industrial complex included among the latter. It also ties these splits in a mechanical way to different regional interests, identifying the multinationals with the Eastern and Mid-Western groups and the ‘national’ capitalists with the Sunbelt group. Certainly there are differences between the various capitalist groups, but these are mostly in regard to the different policies that they adopt depending on their tactical needs at that time. Thus, the article tends to downplay the class struggle of the bourgeoisie as a whole against the working class, in comparison to the struggle between different groups within the ruling class.

Similarly, in describing the infighting between the different capitalist groups, the article tends to see history in terms of ‘conspiracy theories.’ It may well be true that the Kennedys were assassinated on the orders of a rival group of capitalists centred in the Sunbelt, or that Nixon was ‘politically assassinated’ by elements connected to the Eastern or Mid-Western capitalists, But while the class struggle (on the part both of the bourgeoisie and of the working class) includes the use of conspiratorial methods, the class struggle itself must not be downgraded to the level of a conspiracy.

George Gruenthal

Chronicle of the year zero

In the preceding chronicle of the Year Zero (L’Aut journal no. 187), we saw how the total domination of the United States, the policies of the reconstruction of Europe and Japan to counteract the Eastern Bloc and the adoption of Keynesian measures in the capitalist countries in the framework of collaboration between the representatives of Capital and Labour, were at the origin of thirty years of economic prosperity, the Glorious Thirty Years.

However, this prosperity was being eroded slowly but surely. From the beginning of the 1960s, the rate of profit of enterprises began to fall and the rate of unemployment began to increase. As Hobsbawm emphasizes, the cycle of prosperity ended with the oil crisis in 1973 when world industrial production fell 10% in one year and international trade fell 13%. The profits of enterprises were in free-fall except, of course, for those of the oil companies. The increase resumed afterwards, but it was interrupted by profound stagnation in 1974-75, in 1980-82 and at the end of the 1980s.

In the course of this decade, inflation and unemployment together gave rise to stagflation. The Keynesian measures could no longer revive the economy and only led to the state debt. The ruling class had to find another solution: this was neo-liberalism. We will see how it was imposed.


The year 2000, the year zero, the turning point between two centuries, the 20th century, which is being buried and the 21st, which the experts tell us will not begin until 2001! It is an occasion to make an assessment of the past century, to draw the lessons and lay the bases for the century to come, using as a principal tool the book by Eric J. Hobsbawm, The Age of Extremes, The Short 20th Century, from 1914-1991. This is the object of this chronicle.

At the beginning of the 1970s U.S. economic domination, which had been uncontested since the end of the Second World War, was contested by Europe and Japan whose commodities were sold cheaper on the U.S. and world markets.

The Nixon Measures and the Oil Crisis

The Nixon administration responded with a unilateral action that would considerably modify the relations between capitalist countries that had existed since the Second World War. In 1971, Nixon abandoned the convertibility of the dollar into gold and with that the stability of the international system of payments disappeared. Then he imposed a 10% surtax on foreign products. These two measures led to the reduction of prices of U.S. products abroad and the increase of prices of imports into the United States.

The contradictions also intensified with the oil crisis of 1973 and the breathtaking increase in the price of oil. The Arab oil producing countries responded to the one-sided support by the Nixon administration to Israel in the Yom Kippur War and took advantage of the weakening of the power of the U.S., which was mired in Vietnam. Subsequently, the great majority of third world countries followed along by demanding the raising of prices of raw materials, in demands to the UN and to other international authorities for a New International Economic Order.

These policies of the Nixon administration were taken without consultation with those countries that were allies of the United States in the framework of the policy of containment of the USSR. This set off a world crisis between the United States and its partners, but also within the U.S. ruling class. Nixon came to the defence of the interests of the U.S. industrialists, who were hurt by European and Japanese competition in the U.S. market, but he ran counter to the interests of the U.S. multinationals and, above all, he shook up the Western coalition that had been set up to contain the influence of the USSR.

The Creation of the Trilateral Commission

Stalin had written some time before his death in Economic Problems of Socialism in the USSR that contradictions would not fail to develop between the United States and its Japanese and German allies, emphasizing that the USSR could eventually take advantage of these splits within the Western camp.

The most farsighted elements of the U.S. bourgeoisie were evidently aware of this perspective and the Nixon crisis set off a round of infighting. The Rockefeller family took a dim view of the development of contradictions with Europe and Japan but also with all the countries of the third world. Moreover the Rockefellers disapproved of Nixon’s policy of one-sided support to Israel in the Middle East, where they had immense oil interests and were more favorable to a more ‘evenhanded’ policy of alliances, particularly with Saudi Arabia. All this was in a context in which the opposition movement against the Vietnam War was raging within the United States itself.

The Rockefeller family at that time took the initiative to form a semi-secret organization having as its objective the coordination, under U.S. leadership, of the activities of the capitalists of the three key geographic regions of world capitalism: North America, Europe and Japan. The name of the future organization, the Trilateral Commission, would reflect this fundamental characteristic (see Insert A).

A similar organization had already existed since the end of the Second World War. the Bilderberg Organization, created by Prince Bernard of the Netherlands and including the main elements of the ruling classes of Europe and the United States, but from which the Japanese had been excluded.

It was principally to fill this gap that the Trilateral Commission was created. Rockefeller wanted, on the one hand, to prevent at all costs the increase of contradictions between Japan and the United States, and sought, on the other hand, to utilize the influence of Japan, whose trade relations with the USSR were reduced, to counter the opening to the East, the Ostpolitik of the European countries.

What was Behind Watergate

The opposition between Nixon and the Trilateral Commission reflected the divergences between the two main interest groups of the U.S. ruling class, divergences which have marked the history of U.S. policy during the last thirty years. The Trilateral Commission mainly represents the interests of the capitalist groups of the East Coast and of the Midwest, while the other group comprises above all the interests of the South (Sunbelt) and of California, at the heart of which is the military-industrial complex and the Las Vegas Mafia. Nixon, let us remember, came from California.

The struggle between these two groups to determine U.S. policy has often taken violent turns. As the film by Oliver Stone on Kennedy and many other books published in the U.S. suggest, one may believe that the Sunbelt group was responsible for the assassination of John Kennedy in Dallas, as well as of his brother Bob in Los Angeles, both in the home territory of those whose interests were opposed to the East Coast, which the Kennedys represented.

The retaliation would come with the ‘political’ assassination of Richard Nixon after Watergate, in which the CIA was involved. We must emphasize that Nixon tried to snatch control of the CIA from the Rockefellers. Since its creation, the CIA was a hunting ground of the Rockefellers. The great majority of its directors since Allen Dulles came from the Council on Foreign Relations, an organization controlled by the Rockefellers.

Nixon had forced the director, Jesse Helms, to resign and had named an outsider, James Schlesinger, to do his bidding. At the same time certain information was leaked to the media on the role of the CIA and of ITT in Chile to discredit it temporarily.

At this point The Washington Post and the newspapers of the East Coast discredited Nixon with Watergate so that he would have to hand in his resignation in August of 1974 in order to avoid being removed. So that he would not be replaced by Vice President Spiro Agnew, who was anti-Rockefeller, a scandal about him was leaked that forced him to resign. He was replaced by Gerald Ford, a member of the Trilateral Commission, who succeeded Nixon, with Nelson Rockefeller in the Vice Presidency, one of whose first mandates was to retake control of the CIA! It should be emphasized that Gerald Ford was the first U.S. president to make a visit to Japan, thus fulfilling one of the principal objectives of the Trilateral Commission.

Jimmy Carter, the Trilateral Commission’s President

After the Watergate scandal, it was evident that the Republicans could no longer lead the country. A change was necessary. The Trilateral Commission prepared carefully at the time of the presidential election of 1976, praising the candidacy of one of its founding members, Jimmy Carter, the former governor of Georgia. While he was still governor, Carter had shown that he shared the orientation of the Trilateral Commission by opening offices of Georgia in Eastern Europe and in Japan.

Ford was discredited by the media, which presented him as a clumsy buffoon who couldn’t walk and chew gum at the same time, and Carter was elected. To his cabinet were named twenty members of the Trilateral Commission including the Vice President, Walter Mondale, Secretary of Defence Brown, Secretary of the Treasury Blumenthal, and above all the National Security Counselor, Zbigniew Brzezinski, who had been the lynch pin in setting up the Trilateral Commission and its first director.

But the Carter administration could not solve the problems of the U.S. economy. An important network of lobbies set up by interests opposed to those of the Trilateral Commission, of the Council on Foreign Relations and of the Brookings Institute succeeded in blocking in Congress the majority of the policies of President Carter.

On international policy, Carter set up a recommendation of the Trilateral Commission, the Summit of industrialized countries of North America, Europe and Japan, the G-7. But in 1979, the Iranian revolution provoked a new oil crisis and the seizure of hostages at the U.S. embassy ended up in totally discrediting Carter, who lost the election of 1980 to Ronald Reagan. The hostages were freed immediately after the election, substantiating the thesis that there was an agreement between Oliver North, Reagan’s representative, Iran and Israel. This was called Irangate.

Before leaving the presidency, Jimmy Carter took a decision that would mark the 1980s. He named Paul Volcker, a banker of the Rockefeller-owned Chase Manhattan Bank and a member of the Trilateral Commission, to the head of the U.S. Federal Reserve, the central bank of the United States (see Insert C).

The Reagan Years

Former governor of California, Ronald Reagan represented roughly the same Sunbelt interests as Nixon and the neo-liberal current that had developed in the United States (see Insert C). Under his leadership he had the upper hand over George Bush, a member of the Trilateral Commission.

At the nominating convention, the Trilateral Commission sought to impose former president Gerald Ford, a member of the Trilateral Commission, as Reagan’s running mate on the Republican ticket. Moreover, since the position of vice-president in the United States is politically insignificant, they wanted to grant him powers on economic matters and on foreign policy. Kissinger, a former employee of the Rockefellers, who had been part of the Nixon government but never had anything to do with economic policy, concerned himself with this task together with Allen Greenspan, today the director of the Federal Reserve. But the manoeuvre failed and Bush was named vice-president.

Once elected, Reagan applied the same formulas as the Iron Lady in England (see Insert D). He sought to break the back of the trade union movement by dismissing the air traffic controllers of PATCO during a strike and deregulating the principal economic sectors: airlines, railroads, transport, telephone, electricity, financial sectors, health and education.

On the international scene, he revived the cold war with the USSR, supporting the ‘freedom fighters’ in Afghanistan and in Central America, before invading Grenada. But above all, he launched the Strategic Defense Initiative, commonly known as Star Wars, which led to an exponential increase in military spending for the greatest benefit of the military-industrial complex.

Reagan acted in a unilateral fashion with regard to the U.S. allies and the G-7 was reduced to a token role. The policy of high interest rates drained the world’s money supply to the United States to finance the military effort, and the inflated dollar caused a record deficit of the balance of trade which increased by a factor of five in ten years.

The members of the Trilateral Commission disagreed with Reagan’s economic policies and maybe it was not by chance that he was the victim of an assassination attempt on the very day that he was to meet with members of the Commission!

Progressively, the Trilateral Commission succeeded in imposing its members on the Reagan administration with the nomination of George Schultz to the State Department, Frank Carlucci to the Defence Department and, above all, James Baker to the Treasury.

Baker imposed the need to coordinate policies with the allied countries, particularly within the G-7. Next came a currency reevaluation, a devaluation of the dollar and a reduction of the U.S. trade deficit. Japan was urged to stimulate its internal demand.

It is said that it was James Baker who was the source of the policy of free trade with Canada. An intimate friend of George Bush, his campaign manager in 1988, he was named to be the next Secretary of State.

The Triumph of a Single Thought

In 1991, a major event took place that would considerably transform world politics: the collapse of the Soviet Union. The cold war was now over. For the capitalist class, the sentence was final: capitalism had definitively triumphed over socialism.

U.S. imperialism dominated with arrogance. The peoples of the world had to hold tight, as one can see in the wars in the Persian Gulf and in Kosovo. As for the workers, they had to face neo-liberal policies that were imposed throughout the world, so that one could now speak of a single thought shared by different political parties.

The Keynesian measures, put in place right after the war to counter Soviet influence and to pacify the workers’ movement, no longer had a reason for existence. The return to 19th century capitalism was evident; socialism had been nothing but a bad dream. It was the return to business as usual, with the spectra looming of a major world economic crisis.

Canadian Business and the Trilateral Commission

Although the principal objective of the Trilateral Commission had been to reaffirm the links of the United States with Europe and Japan, Canada was also a subject of preoccupation of the Rockefeller group.

Indeed, in the context of the explosion of oil prices in 1973, the Trudeau government sought to profit from the immense oil resources of Canada to affirm its economic and political independence with regard to the United States. A new energy policy was adopted to allow Canadian industry, concentrated in Ontario, to take advantage of the abundance of oil at a low price from the Western provinces and to tighten control over foreign investments.

As the continuation of what had been the ‘National Policy’ of John A. MacDonald, the Canadian ruling class sought to counter the attraction of North-South economic relations to the advantage of the historic Montreal-Toronto axis.

The Balkanization of Canada

The United States, on the contrary, saw its interest in the Balkanization of Canada and the U.S. oil and natural resources monopolies supported the demands for provincial sovereignty over oil by the government of Peter Lougheed of Alberta. In 1973, David Rockefeller himself affirmed, during a trip to Canada, that he recognized the French factor in Quebec, which was interpreted as possible support for a plan of sovereignty.

The fall of oil prices in 1983 marked the end of the inclination towards independence of the Canadian ruling class. It made a 180-degree turn and rallied to the plan of free-trade put forward by the U.S. Trudeau resigned, his mission of subduing Quebec having been accomplished with his victory in the referendum of 1980 and the repatriation of the Constitution.

Brian Mulroney, former president of a natural resource company and former employee of Conrad Black, completed the plan of economic integration of Canada with the United States and applied Reagan’s economic policies in Canada.

The Business Council on National Issues

To understand these transformations, it is necessary to go back to 1976 when the Business Council on National Issues (BCNI) was created on the model of the Business Roundtable of the United States. The initiative fell to W.O. Twaits of Imperial Oil and Alfred Powis of Noranda.

The BCNI is the business council of Canada. It groups together the major corporations of the country and its president since 1980 has been Tom d’Aquino, undoubtedly the most influential man in Canada. The BCNI is nothing more nor less than the Canadian branch of the Trilateral Commission.

The BCNI spent millions via the Alliance for Trade and Job Opportunities led by Peter Lougheed, Donald MacDonald and David Culver of Alcan, to assure the victory of Mulroney in the election concerning free trade.

The BCNI also managed to impose its program of deregulation of gas and oil prices, of lowering federal taxes on businesses and replacing subsidies to corporations with less obvious tax deductions. It also has to its credit the introduction of the TPS and the debt psychosis, which served as a pretext for the budget cuts of the last years. In sum, the BCNI planned the dismantling of the Welfare State and its replacement with the Neo-Liberal State. This appears clearly with the example of the Fraser Institute.

The Fraser Institute

The founder of the BCNI, Alfred Powis of Noranda, was originally from the Fraser Institute, the principal neo-liberal think-tank in Canada. Its founder, Michael Walker, was a racquetball partner of Milton Friedman and he had links with the Mont-Pelerin Society.

In 1996, the Fraser Institute bragged that 3,108 references to its researches could be found in the media. It is not surprising, therefore, that people like Barbara Amiel, the wife of Conrad Black, have seats on the administrative body of the Institute.

From Keynesianism to Neo-liberalism

Today, the Canadian ruling class, particularly its financial and natural resource sectors, is integrated into the U.S. bourgeoisie to such an extent that it has begun to consider the adoption of the U.S. dollar as the ‘national’ currency of Canada.

Once partisans of Keynesianism, the Canadian ruling class today has completed its alignment with neo-liberal positions.


1. Hobsbawm, L’Age des Extrêmes (The Age of Extremes).

2. Michel Bernard, L’utopie néolibérale (The Neo-Liberal Utopia), Renouveau Québécois publishers, 1997, 318 p.p.

3. Daniel Yergin and Joseph Stanislaw, The Commanding Heights, Simon & Schuster, 1998, 457 p.p.

4. Stephen Gill, American Hegemony and the Trilateral Commission, Cambridge University Press, 1990, 295 p.p.

5. William Greider, Secrets of the Temple, How the Federal Reserve Runs the Country, Simon & Schuster, 1987, 800 p.p.

6. John B. Judis, The Paradox of American Democracy, Pantheon Books, NY, 2000, 305 p.p.

7. Murray Dobbin, The Myth of the Good Corporate Citizen, Stoddart, 1998, 330 p.p.

8. Tony Clarke, Silent Coup, CCPA, 1997, 273 p.p.

‘L’Aut journal’, Quebec, April 2000; translated from the French by George Gruenthal.


A: Friedrich von Hayek and Milton Friedman

Friedrich von Hayek was the theoretician of neo-liberal thought He developed his theories immediately after the First World War in Vienna, Austria. In 1923 he studied in New York, then returned to Vienna before being invited to the London School of Economics in 1931. In 1946 he published The Road to Servitude, a resume of which was published in the Reader’s Digest.

Hayek’s central theory is that it is impossible to plan the economy, since the centre never has enough information at its disposal to make a decision. Under these conditions there is nothing else to do but to leave it to the market in postulating that individual decisions made by the millions of economic agents for their particular interests will represent the collective interest.

Hayek denounced the Keynes’s theory saying that it would institutionalize inflation if it were applied. From the beginning, he affirmed that Keynesianism is not an economic theory but a political theory developed specifically to put an end to the political crisis that prevailed in Britain immediately after the Second World War.

In 1950, Hayek went to the University of Chicago, which he left in 1960 to go to the Alps where he had founded the Mont-Pelerin Society in 1947. Already, at the end of the 1950s, one could speak of an economic school distinct from the Keynesian school, which was a school more preoccupied with the power of government than with that of the multinationals.

In 1974, Hayek attained fame by receiving, together with Gunnar Myrdal, the Nobel Prize in Economics, created in 1969 and awarded by the Bank of Sweden. One should remember that the prize was only granted to him as a counterpart to the prize given to the Keynesian Myrdal, a great figure of Swedish socialism.

Milton Friedman and the Chicago Boys

In 1946, a professor at the University of Chicago, Milton Friedman, made his first trip to Europe to participate in a seminar given by Friedrich von Hayek in the context of the activities of the Mont-Pelerin Society.

Friedman published Capitalism and Freedom in 1962. He was economic advisor to the candidate Barry Goldwater in the presidential election of 1964.

After the coup d’etat in Chile in 1973, Friedman and the Chicago Boys advised the government of General Pinochet and tried out their economic theories. They put into practice the liberalization of prices, trade and the activities of the financial sector. Privatization went into full gear, to the extent that, from 1973 to 1980 the number of state enterprises fell from 500 to 25.

In 1980, Friedman abandoned teaching and was employed by the Hoover Institute, which assured him a direct link with President Reagan and his advisors.

The Dominant Economic Ideology

The works of Hayek and Friedman have shifted the centre of gravity of economic thought from Keynesianism to neo-liberalism. Since 1974, eight professors from the University of Chicago and eleven others associated with the work of this university have won the Nobel Prize in Economics.

The innumerable research institutes, heavily subsidized by businesses, that have been set up in different countries, have imposed the neo-liberal ideology on public opinion worldwide. Its main principles are well-known to us today: that economic problems follow not from the action of businesses, but from those of the government; that inflation is caused by governmental deficits and not by the profits of enterprises; that the weakness of growth follows not from the overcapacity of production and the weakness of demand, but from governmental regulation and salaries that are too high.


B: The Trilateral Commission

At the origin of the Trilateral Commission was the Council on Foreign Relations (CFR), a key institution on the U.S. political scene. It was created in 1921 after the First World War by the J.P. Morgan empire which, going into decline at the end of the 1940s, entered into an economic alliance with the Rockefeller family.

During the following decades, the CFR was the source of people who held key positions in foreign policy within the U.S. administration. More then 45% of those who have occupied these positions have taught classes at the CFR, with a high of 57% under Johnson but only one-third under Nixon.

Linked to the CFR are two other important organizations, the Brookings Institute and the Ford Foundation. Founded in 1916, the Brookings Institute has, for example, defined the domestic policies and the international trade policies of the Kennedy administration. As to the Ford Foundation, it financed to the extent of $500,000 the creation of the Trilateral Commission, the Rockefeller family advancing another $150,000.

The Trilateral Commission was set up to coordinate the activities of the ruling classes of North America, Europe and Japan in the context of the Cold War. It had 190 members in 1975 and 320 members in 1986.

The interests of the transnational corporations, of the great capitalist families, of the banks and the financial institutions are represented. In the environment of the 1980s, two-thirds of the largest enterprises held seats.

‘National’ capital has not taken part; there are few representatives of the military-industrial complex and the third world is absent.

Except during the first years of the Reagan administration, the agenda of the meetings of the G-7 was the same as that of the Trilateral Commission. The Trilateral Commission is evidently very influential in the World Bank, the IMF, the OECD and the WTO. The leader of NATO, Lord Carrington, comes from the Trilateral Commission.

The Canadian Section

Since 1991, the Canadian Section has been headed by Allan Gotlieb, former ambassador of Canada to the United States and advisor at Burson-Marsteller, the largest public relations and lobbying firm.

There are thirty Canadian members on the Trilateral Commission, including Conrad Black, Paul Desmarais, Jacques Bougie of Alcan, Mickey Cohen of Molson and Yves Fortier. This former ambassador of Canada to the United States was the Canadian prosecutor in the case of three questions submitted by the government of Canada to the Supreme Court regarding the question of Quebec and at the centre of the quasi-martial measures in force at Parthenais during the trial linked to the events of October of 1970.


C: The Key Role of the U.S. Federal Reserve

Paul Volcker came from Chase Manhattan Bank, owned by the Rockefellers, and was recognized for his participation in the Bilderberg and the Trilateral Commissions. He was named as the head of the U.S. Federal Reserve in order to quash the inflation arising from astronomic military expenses and expansionist policies.

If inflation benefited the middle class homeowners whose property assessment increased in value at the same time as mortgage payments were lowered, it was the enemy of the 10% of the U. S. families who possess 86% of the financial assets of the country. Moreover, inflation provoked the fall of the U.S. dollar and the further depreciation of loans by U.S. banks abroad.

Volcker, who had disciples of Hayek as teachers in Princeton, was, as the U.S. economic elite became at the beginning of the 1980s, a partisan of the ‘monetarist’ dogmas of the Chicago Boys of Milton Friedman. Their credo was that, to quash inflation it was necessary to reduce the circulation of money by the Federal Reserve and to slow down the economy by increasing interest rates. In those years, the rates reached 20% and the U.S. economy entered into a recession.

The Federal Reserve had turned things around. The market changed from a borrower’s market to a lender’s market. The small Savings & Loans banks, whose portfolios were filled with mortgage loans, were driven into bankruptcy. The U.S. dollar reached new heights and from 1981 to 1983 the imports of manufactured goods increased 55% and the exports fell 19%. Industrial production fell 12%. Businesses demanded concessions from their workers or they would move to the third world. The holders of capital liquidated their industrial assets and began to throw themselves into financial speculation.

The Strangulation of the Third World

In 1980 the U.S. banks held 40% of the debt of the third world countries and the explosion of interest rates assured them of large revenues. When countries such as Mexico went into technical bankruptcy, the Federal Reserve, which had watched the bankruptcy of industrial giants without reacting, immediately came to the rescue of the banks in difficulty.

It forced the small banks to come to the aid of the large ones, forced the taxpayers of other countries to make a contribution by making an appeal to the IMF and the World Bank and came to the rescue of institutions such as Continental Illinois Bank by nationalizing them purely and simply so that they would avoid bankruptcy.

While Volcker was replaced by Allen Greenspan, the current President of the Federal Reserve, the same policy is being pursued. Today, Volcker is the representative of the Trilateral Commission for North America and sits, among other things, on the administrative body of the Power Corporation of Paul Desmarais. Also, it should not be surprising that the Central Bank of Canada has servilely followed the policies of the U.S. Federal Reserve in the course of the last decades.


D: Hayek and the Iron Lady

If the ideas of the neo-liberal theoretician Friedrich von Hayek have become the dogmas of governments throughout the world, the merit goes first and foremost to Keith Joseph, a minister in Thatcher’s government, about whom the Iron Lady stated that she could not have accomplished anything without him.

They year 1973 had been an annus horribilis [horrible year] for the English bourgeoisie. To the oil crisis was added a miners’ strike. Inflation reached 15%. That was the moment when Keith Joseph, who had been a minister in the Heath government, decided to set up a right-wing think tank, the Institute of Economic Affairs (IEA) to pay tribute to Friedrich von Hayek and Milton Friedman. The latter would later declare that without the IEA, the Thatcherite revolution would not have taken place.

To this rather academic institute K. Joseph tied the Center for Policy Studies (CPS) which had as its aim the conversion of the Conservative Party to neo-liberal ideas. He named to the vice-presidency of the CPS Madam Thatcher, who had met Hayek and knew his works very well.

Hayek Under Study

Elected in 1970, Thatcher named K. Joseph as Secretary of State for Industry, and he made all the members of his ministry study the works of Hayek.

Right after the election, the Thatcher government began its programmes of savage cutbacks in the context of a new oil crisis. Her popularity ratings in the polls fell to 23% and it was only by stirring up chauvinism with the Malvinas War that she succeeded in reestablishing her popularity and in being reelected in a landslide in 1983.

Thatcher and Joseph identified two major obstacles to putting their policies into effect: the state monopolies and the trade union monopolies. Strengthened by their new majority, Thatcher and Joseph attacked the trade union monopolies during the famous miners’ strike led by Arthur Scargill in March of 1984. One year later, the miners’ union had to recognize its defeat. An indication of the extent of the defeat of the workers’ movement: in 1979, for each 1,000 workers, there had been 1,274 workdays lost to strikes. In 1990 this number was no more than 108.

As the head of the Ministry of Industry, K. Joseph attacked the monopolies by privatizing the oil, gas, airports, telephone, electricity, water, etc. In fact, it was K. Joseph who invented the word ‘privatization,’ since he thought that the word ‘denationalization’ had a too negative connotation.


E: The Organizations of the U.S. Republican Right-Wing

In the course of the 1970s, U.S. industry was struck by foreign competition. Sectors such as construction and steel were particularly affected. To deflect government policies and to counteract the dominating influence of the financial sectors such as the Rockefeller family, in 1973 they decided to create a business group: the Business Roundtable.

Parallel to this, they set up think tanks, right-wing research institutes. Irving Kristol, a former Trotskyite who had become a columnist for the Wall Street Journal, was particularly active in this area. In his articles, he attacked all the organizations linked to the Rockefeller group and to the financiers of the East Coast: the Council on Foreign Affairs, the Brookings Institute, the Ford Foundation, the New York Times and the Washington Post, the social sciences departments of Harvard and Yale Universities.

The American Enterprise Institute and the Heritage Foundation

Two research institutes founded at this time played a key role in the spread of neo-liberalism: the American Enterprise Institute (AEI) and the Heritage Foundation. The AEI recruited Milton Friedman to its ranks and its budget reached $9.7 million in 1980, a half-million more than that of the Brookings Institute. Six hundred corporations contributed financially to the AEI. It advised Nixon in the 1970s and after Reagan’s election in 1980, thirty of its members joined his administration.

Founded in 1973, the Heritage Foundation had as its specific objective to be a counterweight to the Brookings Institute. It was financed from the beginning by the beer brewer Joseph Coors and by Richard Mellon Scaife, heir to the Mellon fortune. This latter injected $3.8 million into the foundation over 8 years. In 1985, the budget of the Heritage Foundation was greater than that of the Brookings Institute and of the AEI.

The Growth of the Lobbies

At the same time as many other institutes of the same kind were created, there developed a series of business lobbies charged with intervening in Congress to block all legislation that was hostile to business. Their growth was phenomenal. In 1971, there were 175 enterprises registered as lobbies in Washington; in 1982 there were 2,445! In 1978, the business world had spent $2 billion in lobbying activities in Washington.

These different lobbies succeeded in blocking the majority of the progressive policies proposed by Jimmy Carter. They did the same under Bill Clinton, particularly his attempt, at the beginning of his presidency, to introduce a public health system copied from the Canadian model.

These groups, together with conservative religious groups, succeeded in taking control of the Republican Party and, above all, in imposing the neo-liberal ideology as the dominant ideology of the United States.

Even the Brookings Institute began to produce studies favouring deregulation and, in 1979, the Ford Foundation changed its orientation and defended some of the same conservative ideas. The New York Times and the Washington Post have not become voices of the Business Roundtable and the Heritage Foundation, but they have shown that they can be intimidated by the pressures exercised by the large corporations, such as Mobil Oil or Proctor and Gamble which created the Media Institute to watch over the coverage of the business world by the big media.

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