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OpEdNews Op Eds    H4'ed 10/11/12

Change and Cycles Equal Hard Times for America

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I understand that China is implementing a neo- liberal capitalist model in its economy. China, being a communist nation, it is a little hard to swallow this news. This news made me think about economic systems and how they change over time.


Venezuela has a socialist government and is implementing a socialist model for its economy. Hugo Chavez has changed the top-down system to a socialist bottom-up system. The country was basically a plutocracy.  There were several attempts to install a socialist system and there were socialists elected to the presidency. In 1989, Carlos Andres Perez (AD), was elected president again against the background of economic depression (foreign reserves were depleted, balance of payments had largest deficit in history), which necessitates another austerity program, an IMF loan and entry into the GATT. El Gran Viraje relied on macroeconomic stabilization, trade liberalization, privatization, and deregulation. Barriers to foreign investment and exports were lifted, and bureaucratic interference was minimized. Social and political upheaval includes riots, in which between 300 and 2,000 people are killed, martial law and a general strike.


The move towards the neo-liberal economic system was a disaster. In1992, some 120 people are killed in two attempted coups; the first led by future president Colonel Hugo Chavez, and the second carried out by his supporters. Chavez is jailed for two years before being pardoned. Ramon Jose Velasquez became the interim president, and this also led the nation towards another disaster when he took out another IMF loan. He was also charged with embezzlement and corruption and he was tried and sent to prison for his actions.


Hugo Chavez was elected president in 1998. In April 2002, Chavez was captured by the army in a U.S. backed coup. The people rallied against the new government and Hugo Chavez was re-installed when the people demanded that he be returned as president after two days of confinement. The country paid off the IMF loans and he brought the country to a socialist economy while allowing capitalism to continue. He instituted land reforms, breaking up huge commercial farming companies, and gave people living in the barrios deeds to their property. Education became a central theme of the government and miraculously, the people of Venezuela have 100% literacy.   

What's happening in China is what the United States has been doing since the 70's. Neo-liberal economics favored the wealthiest people in the U.S. The middle class in the US saw wages stagnate for the last 35 years. Meanwhile, the top 20% saw their wealth increase


 In the United States, wealth is highly concentrated in a relatively few hands. As of 2010, the top 1% of households (the upper class) owned 35.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 53.5%, which means that just 20% of the people owned a remarkable 89%, leaving only 11% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.1%. Table 1 and Figure 1 present further details, drawn from the careful work of economist Edward N. Wolff at New York University (2012).


This is the result of neo-liberal economic policies. Meanwhile, the people in Venezuela that hardly remember the disparity of wealth in their nation, and the rigors that the underclass had to endure, are largely forgotten. They see media coverage of the wealthy in the US and other nations and are drawn to capitalism. I predict that in ten years, the country will face either a coup or a neo-liberal capitalist will win the presidency.


The same thing is happening in China. This time though, it is the government that has been drawn to neo-liberal policies. They are dropping the socialist model and replacing it with this type of capitalism. With the huge cache of money that the government has, this system could last for some time.


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Tim Gatto is Ret. US Army and has been writing against the Duopoly for the last decade. He has two books on Amazon, Kimchee Days or Stoned Colds Warriors and Complicity to Contempt.

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