Why are democratic governments now putting themselves out of business by selling their companies and assets, and giving control of national infrastructures and economies over to multinationals? The present phase of the process began in the latter 20th century.
After World War II most countries were in an economic mess. Governments were the only entities large enough to get economies repaired and moving again. The governments took control of the commanding heights of their national economies. Government directed economies were based upon the idea that Government knows best .
For three decades after WW2 the government led economies worked reasonably well. However, the US monetary system had a problem left over from a 1930's quick fix, and this problem began to catch up by the 1970’s. In 1971 the US economy was technically as good as bankrupt. President Nixon took an easy way out by severing the link between the US dollar and gold. This allowed the US to have adequate money supply, where previously gold had stifled it. While this fixed the short-term problem for the US, it created several long-term problems globally.
Now US dollars had become freed from the restraint of a gold standard and the US banks could create as much money as they chose to, virtually without effective regulation. The ensuing flood of money aggravated economic malfunctions within many other countries that were still on the US dollar standard. As nations floundered economically, they contaminated other trading partner economies. Stagflation, stagnant economies with rampant inflation, became like an epidemic sweeping around the world.
Let us look at how inflation works. When money is in short supply (credit squeeze, recession), interest rates go down to stimulate more lending, which puts more money into circulation. However, when there is an oversupply of money (inflation) interest rates go up to curb lending, which removes money from circulation.
After global currencies lost the regulation of gold, the raising of interest rates no longer curbed borrowing like it did under the gold standard. During the earlier 1980's so much money continued pouring into circulation that many people could afford the higher interest rates and they kept on borrowing, which took inflation even higher.
The global banking fraternity could have regulated the inflation chaos that occurred after the US severed its link to gold, but they did not. All the banks had to do was cut back on the number of loans they granted, but instead banks kept on lending to the unwary world. Why? Because the banks knew that the day of reckoning would come, when the interest burden of the loans inevitably caught up with and stalled the free flow of money. It is similar to a pyramid sale scheme, but instead of the patsies ending up with a garage full of soap, they end up with a life or business full of debt.
Why did the banks encourage an economic situation that they knew would stall itself? Because the banks knew that when it stalled, they would be in a position to take control of vast amounts of property and businesses, when the people that built them inevitably defaulted their loans. It was good business. As nations became debt burdened, privatisation and deregulation did effectively deliver public property and businesses into multinational control to pay off national debts.
The 1980’s and 1990’s were the decades of crippling inflation and stagnant economies. In Africa and South America the 1980’s are referred to as the lost decade. Great Britain was brought to its knees, and the Mexico currency crisis nearly destroyed the global economy. The 1990’s were when Japan, SE Asia and the USSR crashed economically. The real cause of the economic instability was the willingness of the global banking fraternity to oversupply a faulty money system. This was quietly ignored. The blame for the world's economic woes was instead cast upon government interference and ineptitude in economics.
The global crashes of the 1980’s and 1990’s were caused by deregulation of the global financial system and business decisions made by banks, not government ineptitude. No government could have survived what the banks were doing (and continue to do). Banks reaped an economic harvest across the Earth while the cause of the problem was deflected in the direction of national government incompetence. The governments had run up huge debts, therefore they must be inept at running business. Its logical.
Through privatisation and deregulation, banks and other multinationals could now begin to purchase and control infrastructures and businesses that had previously been run by national governments for reasons of national security. Much of the essential business of running countries was now being put on the market for sale through privatisation. The banks and their multinational affiliates began to purchase the infrastructures of countries, while governments signed away national rights of control through international laws in the World Trade Organization (WTO).
In the early 1980’s, England under Thatcher was the first country to embrace the principles of privatisation and deregulation, which the Chicago School of US economists had been promoting since the 70's. The USA under Ronald Reagan quickly joined in. As other countries around the world fell into economic chaos, the US economists were close at hand to sell them the benefits of government privatisation and deregulation. The magic fix of the market led deregulated economy seemed to work in the failing economies, and the economies began to stabilize. But as countries bit the bullet through loss of national assets and jobs, all that really happened was that their economies were being painfully reset to an even ledger again after selling the farm to pay off crippling debts. New debt would continue to accumulate as it had before. Getting out of debt made governments look impressive to voters and gave the voters false hope that perhaps now the economy might be fixed.
The illusion was that the globalisation mantra of Business knows best’ was an axiom of economic reality, a fundamental truth. This was because government privatisation and deregulation seemed to stabilise economies. However, the quick fix of privatisation and deregulation was not a long-term solution for the global economy because the debt fault still remained. This meant that nations would eventually fall victim to uncontrollable, escalating debt again.