FEAR
New Zealand's Hostile Underworld Of Extremists
by Byron C Clark, Harper/Collins, Auckland, 2023

After reading his book, I concluded Clark was the perfect person to investigate and write about this topic. He's thorough in his research, candid and above all keen to understand the people drawn into the modern far Right's worldview of victimhood and vengeance. Although his own research started after the 2019 massacres at two Christchurch mosques, he starts the book with the violence which ended 23 days of occupation at New Zealand's Parliament in 2022, when many were asking where this came from. Clark points out that we should have been asking this question much earlier, that "things which supposedly couldn't happen here had actually been occurring with alarming frequency".

Just before the occupation, in February 2022, Prime Minister Ardern visited a Christchurch primary school to be greeted by protestors chanting "traitor" and holding signs claiming that she would be "put on trial". Ideas like this take time to develop. They are refined by individuals and organisations with an agenda to sell. This is the story told by Clark in "Fear", of a new wave of Rightwing activism built through online networks and technology.

"Gamergate"

Clark traces the movement's origins from "Gamergate", a large-scale Internet harassment campaign where men spending too much time online found a convenient scapegoat in female game developer Zoe Quinn. They used the new tools of the Internet to create a one-sided campaign of real-world harassment, reinforced by a culture of anything-goes abuse in their closed forums.

Groups which prefer to hide their real agenda spotted the opportunity and followed. Trump, the Armed Forces of the Philippines and Myanmar, Putin and Prigozhin, and our own National Party-Whale Oil link to name just a few. Then the covid pandemic and lockdowns created a parallel "infodemic". With more people influenced by misinformation, covid provided the perfect soft cover for the Right. Groups with much darker hidden agendas were able to portray themselves as "voices of freedom" suppressed by politically correct over-government.

Clark got their real message though when he started investigating the Right: we know where you live, we know where you work, we know how to find you, and as long as you're criticising us, you can never be sure that you're safe. That same harassment is increasingly being felt by politicians, spokespersons and activists. There are many sides to this story which Clark covers: who is behind these movements and what is their real agenda; the techniques used to sell their soft public face; how they organise; why people are drawn in; how they silence opposing voices; and what risks do they pose for democracy.

He starts with the Gamergate movement from the US. This is a complex story but perhaps the key themes are the size of gaming (video games make more money than movies now); the closed forums with their stylised jargon and myths, tropes and memes; the organised and abusive demonisation of women's views; and the victim subculture around incels (involuntary celibacy, blamed of course on feminists).

New Zealand content in the online 4chan forum used by gamers supported Winston Peters as our guy "to get rid of the Indians and Chinese". In the same thread (online conversation), a user wrote: "We need to come up with a way of making Leftists, SJWs (social justice warriors) think we are more powerful/more of a threat than we are. I suggest we use this thread to brainstorm possible ways of portraying ourselves as such".

Two weeks later, posters with the slogans "White lives matter" and "Let's take our country back" appeared on the Auckland University campus, promoted by a group which called themselves Western Guard. Their Website popularised "the great replacement theory", a far-Right belief that there is a deliberate plan to "replace" white populations with people of colour.

This small group disappeared but others followed, like the South Island Independence Movement and the Dominion Movement, "building a brotherhood of New Zealanders bound by blood, culture and flag, committed to fulfilling our duty to our nation". A campaign was built around the UN's Global Compact for Safe, Orderly and Regular Migration, billing it as a plan by a shady "global elite" to flood the West with migrants. The following year, the Christchurch terrorist had written on one of his weapons the words: "here's your migration compact!".

Fringe Christian magazines like Evidence in New Zealand and Above Rubies in America have been pushing the "great replacement theory" since at least 2010, along with homeschooling, homebirth and natural or no family planning. New Zealand evangelicals were also keen to form their own political parties, like ONE party and Brian and Hannah Tamaki's Vision New Zealand, whose policies include a 97% cut to immigration, paying refugees not to come here, and a ban on construction of mosques, temples and other foreign places of worship.

In total "Fear" includes 20 chapters, each devoted to very different alt-Right groups in Aotearoa. From Colonial "White New Zealand" to Tauranga's homage museum to Rhodesian nostalgia today, from fringe Catholicism to Hindutva supremacy, from Action Zealandia to the Outdoors Party, it's easy to get sucked into simple solutions when times are tough.

YouTube Key Enabler Of Alt-Right

Clark attributes today's higher alt-Right profile to YouTube's algorithms, which drive users towards divisive content, as well as its sluggish progress on restricting and removing extremist content. For example, online videos by Lee Williams - who was visited by the police after he sent a video of the Christchurch terrorist attack to 30 people and asked one to modify it by adding a cross-hairs and kill count - reached 78,000 views.

Some key figures on the alt-Right also brought with them backgrounds in multi-level marketing or conservative political parties, so were able to transfer their messaging and fundraising skills. All these groups have this in common: a small central group with a self-serving agenda and a lot of followers. The more their aims and methods are exposed, the less credible they look.

A chapter on the Sovereign Citizens belief is one of several interesting summaries of mythologies cobbled together to bolster alt-Right ideas. Believers claim the right to live outside the law, simply by using set phrases which evoke "sovereign law". In the real world of courts and police, they haven't had much success.

The chapter on Hindutva in Aotearoa, a nationalist movement which aims to privilege Hindus in India, was particularly interesting. The party is backed by Prime Minister Modi, which was a reminder that the rise of divisive race-based politicians isn't just about oddballs like Trump and crazy places like America. Race-based policies in Aotearoa are also covered, including Don Brash's infamous 2004 Orewa speech - "We are one country with many peoples - not simply a society of Pākehā and Māori where the minority has a birthright to the upper hand". He clearly didn't get out much.

After reading this book and also "How Civil Wars Start", reviewed below, the divisiveness of our main conservative parties is what worries me more than the fringe groups. Trump's followers storming the Capitol made it very plain how far the Right can go when you have a Rightwing government supporting Rightwing activists.

Clark ends his book by saying: "Increasingly I've found myself thinking that the combination of far-Right and conspiracy-theorist movements we've seen grow during the pandemic is a dress rehearsal for what we'll see once the impact of climate change becomes more significant. Ultimately, we need to tackle the major issues of our times: wealth inequality - both within nations and between them - and the consequences of climate change".

"We face the greatest challenge humanity has encountered, and to make it harder, we do so in a world where people increasingly have not just a difference of political opinion but also differences in terms of the reality that they live in. I can't possibly provide the answers to this problem, but I implore you to think about what you can do to be part of the solution, and not to delay".

SECRET HISTORY
State Surveillance In New Zealand 1900 - 1956 Volume 1
by Richard S Hill & Steven Loveridge, Auckland University Press, Auckland, 2023

This is a short preview to highlight this newly released New Zealand book. I couldn't do justice to its 385 pages before the Watchdog deadline, so will provide a full review in the next issue (December 2023). My impression so far is that New Zealand had a simpler approach to early political surveillance than Europe in the first half of the 20th Century, assigning designated officers from within the Police force.

This lack of specialisation is a product of organisational models learned from UK policing, New Zealand's small size and budget, and our relatively limited wars. As the authors note, the State's efforts to control opposition increase exponentially in wartime. Remember the BBC ban on Tim Finn's relationship song "Six Months In A Leaky Boat" during the 1982 Falklands War?

The book tells the story of both the surveillers and the surveilled, so it opens up interesting new windows on our social history. The first chapter too-briefly covers pre-1900 colonial New Zealand, when intelligence gathering on tribal alliances and openness to trade was a priority, lest conflict impede profit for the Empire.

The authors conclude: "By the time the decision was made in London to formally acquire the territory, sufficient information existed to avoid bloodshed in the process of acquisition. The Treaty of Waitangi, signed with many chiefs in 1840, bought time to build British might and authority before the adverse ramifications of settlement for indigenous authority and resources became apparent and produced armed Māori resistance".

Police Run On Paramilitary Lines

On the culture of the surveillers, here's a long but telling quote: "At this time (pre-1900) almost all of the colony's police were of working-class, especially rural, backgrounds and were poorly educated. This social stratum was the preferred recruiting pool because of its general disposition to reflect the conservative values of the countryside; its acceptance of low wages was another advantage to the authorities. Police recruiters sought young men with the unquestioning attitude towards authority that was crucial for a disciplined force run on paramilitary organisational lines. They needed, however, to be capable of internalising long-developed Police perspectives on how to view society and control it".

"Recruits who did not fully live up to such requirements, especially those from urban areas, needed in essence to be 'reprogrammed' into appropriate perspectives and behaviour before they could go out onto the beat. One policeman recalled of his training experience in 1911 that the non-commissioned officers (NCOs) would seek to 'break you down' so that they could start with an empty slate upon which to inscribe 'police knowledge'. He learnt to divide the populace into the reliable versus the radical, the compliant versus the criminal, the respectable versus the disreputable".

The chapters are chronological, moving from pre-war pursuit of spies and seditionists to suppression of opposition during the 1914-18 war, searching for and undermining subversives through the Depression, then a return to more open coercion during the 1939-45 war and finally Cold War surveillance. Underneath these big themes we also hear the stories of workers and their organisations, government and dissidents, as seen through the eyes of the spies.

Their brief summary of the 1930s' Depression is worth remembering today: "Best estimates indicate that some 28% of the male workforce and 46% of the female workforce found itself out of work. Over the period 1929-35, successive Governments' approaches to the Depression focused on retrenchment and relief schemes, operating on a no-work no-pay philosophy". Grim times, radicalising times for labour, busy times for surveillers.

The book concludes: "During the history covered by this book, accountability for the operation of the secret world rested, in theory, with the political Executive, but Ministers were told little - and asked little. The answer to Juvenal's question of 'who watches the watchers' inside the New Zealand Police Force and its surveilling partners between 1900 and 1956 was, essentially, no one".

Cold War: Agents & Informers

Volume 1 ends at 1956 as we move into the modern era. To end on a serious point but a humorous memory: "The practices of the secret world both fed on the Cold War atmosphere and stoked it... This ideological tone characterised many political detectives' assessments in which words and deeds were inherently treated as suspicious... The use of informants and agents represented a particular challenge for analysis".

"The veracity of their reports was always open to question, with sources potentially liable to exaggerate, or even fabricate, details. Reasons for doing so included a desire to please handlers - and possibly thereby get more money or ongoing work from the Police - or out of a zealous or scornful wish to punish targets". But in relation to surveilling student groups, George Fraser (a Special Branch - and later Security Service - agent employed to infiltrate left organisations and movements) recalled "with a bellyful of booze and the camaraderie of the occasion, who was to remember?"

That risk of ideology corrupting State surveillance is particularly relevant to the stories coming out of the United States today, where penetration by the extreme Right went far enough to allow a near-coup. Other, darker forms of political interference are also spreading across the globe. Eccentric super-rich tech titans fund high profiles for ideas and policies which suit unregulated capitalism, while shadowy private corporations hack phones and computers, manipulate online and public debates, and kill opponents in autocracies with impunity. Lately we've been moving towards a more complex and ugly world, and New Zealand will be better off if can stay clear of American and Israeli models of surveillance. Meantime, we can look forward to Volume 2 to open up more of our national secrets.

HOW CIVIL WARS START
And How to Stop Them
by Barbara F Walter, Viking/Penguin, London, 2022

This is an important book for Watchdog readers. It explains how civil wars start overseas, but it also explains a lot about the rise of the hard Right here in Aotearoa. I found it by accident in the library, thinking it was about the sort of open conflicts common in corrupt autocracies. Reading on, I found Walter began the book to highlight increasing signs of unrest in the United States, based on statistical measures which had predicted previous civil wars around the globe. She started writing in 2018 and had a nearly complete manuscript by the time Trump's followers stormed the Capitol on January 6th 2021. The book includes a hypothetical chapter on what a future civil war might look like in the United States.

Barbara Walter has made a lifelong study of conflict, taking her family to many nations that are definitely not on your bucket list to visit. She points out there are more civil wars today than at any time in recorded history - over 250 since 1946, and still trending upwards. Her book reviews recent civil wars - Yugoslavia, Philippines, Ireland, Syria, Myanmar and Yemen - to introduce various predictive measures which were developed so conflicts could be stopped earlier, before they escalated into cycles of ongoing violence.

Walter is a Professor of International Relations at the University of California, but the book is plain-language and full of examples, not academic. It is also very grounded in practical statistics, meaning collecting the right data and applying easy-to-understand measures. Statistics might sound boring, but not with a critical topic like civil war.

The first chapter introduces the study of civil conflicts, recounting the surprise of early researchers when they found inequality is not a useful predictor. Democratisation, on the other hand, is! Specifically, rapid democratisation in an already divided society is a recipe for civil war - think Iraq, Libya, Syria and Yemen.

Democratisation creates new winners - and new losers, who may see no option but fighting to retain privileges. At the same time, democratisation destabilises Government, making it more vulnerable and further increasing social polarisation. The faster the democratisation, the greater the risk. Iraq is the classic example, where the US military administration threw tens of thousands of Baath bureaucrats out of their jobs and left 350,000 officers and soldiers without an income.

So rather than talking about the usual "transition to democracy", Walter and other conflict specialists use a 21-point "polity scale" ranging from -10 (autocracies) to +10 (democracies). Countries in the middle (-5 to +5) are found to be most at-risk. These are referred to as "anocracies"; countries with elements of democracy (maybe elections) but leaders with lots of authoritarian powers.

Dangers Of Partial Democracy

Countries with partial democracy are three times as likely to experience civil war as a full democracy, and more likely again after a recent decline on the scale. So, the United States, recently taken by Trump to the border of anocracy (+5), could easily be pushed towards conflict by a combination of bad governance and undemocratic interventions which weaken its institutions.

Already, polling shows 45% of Republicans supported the attack on the Capitol. But here's a telling quote from Walter: "America was lucky its first modern autocratic president was neither smart nor politically experienced. Other ambitious, more effective Republicans have taken note and will seek to do better. How far will the leaders go? How far will we let them?"

Chapter two looks at the rise of factions in Government, the armed forces and intelligence services. Once a country enters the anocracy zone, the rise of factions is the strongest predictor of civil war, and war is even more likely if at least one faction becomes a "superfaction", where ethnic or racial identity is reinforced by religion, class and locational concentration. Political parties become predatory, enacting policies that benefit them and cut out their rivals.

For society to fracture along identity lines, you also need a mouthpiece - described here as an "ethnic entrepreneur", someone who fosters and exploits divisions for personal advantage. Yugoslavia is cited as a classic case, while Modi's promotion of Hindu interests in the previously secular Indian state is a worrying recent example.

Groups which turn violent tend to be left out of political processes, with limited voting rights and/or access to Government positions and political power. And specifically, the trajectory of a group's political status was the most powerful determinant of violence. "People were especially likely to fight if they had once held power and saw it slipping away".

Immigration is also often a flashpoint for conflict as migrants compete with locals, and the world is entering a period of unprecedented human migration which will be fuelled again by climate change. Protests too can be a tipping point if they fail to get results; the loss of hope incentivises violence - and there have been more protests in the last ten years than at any time since data collection began in 1900. Similarly, corrupt elections raise the risk of violence, as do overly harsh military responses to unrest.

And Then Came Facebook

Chapter five is quite different because it documents an external contributor to civil wars - Facebook. In 2012 a group of Buddhist ultranationalists targeted Muslim communities throughout Myanmar, blaming them for local violence, describing them as invaders, and including comments like "just feed them to the pigs."" At the same time Facebook was becoming the country's most popular social media platform and the primary source of digital news.

Myanmar's military leaders followed this lead, posting hate speeches and false news stories - and Government leaders supported these stories to avoid antagonising the military, while officials created thousands of fake accounts to spread the disinformation. The Times' Paul Mozer reported in 2018 that as many as 700 people had worked shifts in a secretive operation started by Myanmar's military. Military personnel developed large followings for fake pages and accounts with no visible connection to the military, which they then flooded with hate propaganda and disinformation.

To encourage people to turn to the military for protection, the pages often aimed at stoking ethnic tensions and generating feelings of vulnerability. This campaign continues a long practice of Myanmar's military engaging in psychological warfare, employing techniques learned by officers sent to Russia for training. By June 2012, 80,000 Muslims were reported "displaced" and over the next year reports of ethnic cleansing campaigns against the Rohingya emerged. This violence was stoked by Facebook but it refused to respond to evidence presented by journalists, citizens, human rights organisations and foreign governments even as the violence escalated.

By 2016 the military had intensified its campaign of murders, rapes, arrests and burning homes. In 2017 this turned to clear genocide as the military and Buddhist mobs began mass killings, deportations and rapes. By 2018 an estimated 24,000 Rohingya people had been killed; 18,000 women and children raped or sexually assaulted; 116,000 beaten; 36,000 thrown into fires; and approximately 700,000 of the nearly one million estimated Rohingya forced to flee. This was the largest human exodus in Asia since the Vietnam War.

Looking back, the world has seen many more countries become less democratic since 2010, but sub-Saharan Africa was an exception for much of this decade. Africa was also unusual for its very low levels of Internet access. Usage increased after 2014 and social media rapidly became a primary means of communication. And as social media use increased, the level of conflict also rose... By the middle of the decade false information had skyrocketed, stoking ethnic factions and resentment of immigrants, supporting the election of bullying populists, and violence increased. "Open, unregulated social media platforms turned out to be the perfect accelerant for the conditions that lead to civil war".

The Problem Is Social Media's Business Model

Social media's business model generates more advertising money the longer you watch. Unfortunately, people are more likely to "like" posts that are incendiary - "fear over calm, falsehood over truth, outrage over empathy". This incentivises the creation of outrageous, inflammatory content, and then the algorithms of Facebook and YouTube will take you there so they make more money. Studies have described YouTube as a "radicalisation pipeline", leading viewers from "mild" Rightwing content to more radical alt-Right content.

"By promoting a sense of perpetual crisis, the algorithms give rise to a growing sense of despair. Disinformation spread by extremists discredits peaceful protesters, convinces citizens that counterattacks by opposition groups are likely, and creates a sense that moderates within their own movement are not doing enough".

The Facebook whistleblower Frances Haugen confirmed in 2021 the platform is still fanning ethnic violence in countries including Ethiopia and is not doing enough to stop it. Leaked internal documents show 87% of the spending on combating misinformation at Facebook is spent on content from inside the United States, while only 9% of worldwide users are English speakers.

Haugen argues that human nature means this system is doomed to amplify the worst in us. "One of the things that has been well documented in psychology research is that the more times a human is exposed to something, the more they like it, and the more they believe it's true", she says. "One of the most dangerous things about engagement-based ranking is that it is much easier to inspire someone to hate than it is to compassion or empathy. Given that you have a system that hyper-amplifies the most extreme content, you're going to see people who get exposed over and over again to the idea that it's OK to be violent to Muslims. And that destabilises societies".

Perhaps you're still sceptical about the suggestion of civil war in wealthy countries like the United States. Here's another example from the book. Sweden is not known for far-Right politics; it has a progressive political culture and generous welfare system. Yet in 2014 a former neo-Nazi party became Sweden's third largest Parliamentary party.

Calling themselves the Sweden Democrats, they were founded by a chemist who joined the Waffen SS in World War II. In 2005 they started rebranding from neo-Nazi to populists but mainstream media refused to run their ads - so they became early adopters of social media, creating multiple Facebook pages and two news Websites which published a stream of far-Right stories related to daily events. Example: "Foreign burglars were arrested following tips from an attentive neighbour", accompanied by a clearly staged photo.

More than a million Swedes viewed these sites daily, about the same number who read the two main newspapers. The party emphasised the need to return Sweden to "a simpler and happier time". The goal is to restore "the national home." Happy times, led by neo-Nazis? I don't think so - but social media isn't about thinking. It's about reinforcing prejudices which lead you to support authoritarians.

How To Reduce The Risk Of Civil War

The most successful response is to reform a degraded Government: bolster the rule of law and access to justice, give all citizens equal access to voting, insulate voting from political interference, and improve the quality of Government services. The last is particularly important when poverty and corruption are endemic. If insurgents provide better services than the State, they can grow their support base to dominate whole regions.

After January 6 people kept asking the author how the United States should respond. Her first answer was always "take away the social media bullhorn and you turn down the volume on bullies, conspiracy theorists, bots, trolls, disinformation machines, hate-mongers, and enemies of democracy. America's collective anger would drop almost immediately - as it did when Donald Trump could no longer reach every American 20 times a day, every day. As Voltaire once said, 'Those who can make you believe absurdities can make you commit atrocities'".

A December 2020 poll found that 17% of all Americans agree with the statement: "A group of Satan-worshiping elites who run a child sex ring are trying to control our politics". 63% of conservatives still believed the 2020 election was "stolen" in 2023, though this is now trending down from a high of 75% in 2021. As Walter points out, it doesn't have to be this crazy. The five major tech companies which control global social media are based in the United States, and can be regulated. Even America's ultra-rich have more to lose than to gain if gun-toting militias proliferate and alt-Right penetration of their security forces grows.

Unfortunately, countering misinformation campaigns in those partial democracies where autocrats have consolidated their power through social media will be tough. And even in the United States, Sweden and Aotearoa, regulation alone will not slow the growing wealth which shapes our public debates through funding think tanks, sympathetic economists, political and social media campaigns.

But Walter's evidence does suggest the Right's early gains are now tapering off. These relied on hidden funding and campaigns to con populations who were naïve about the scale of social media misinformation. Journalists are more aware of those crude techniques now, and more likely to identify and expose them.

The general public has not yet caught up, but again I have some optimism that monetising online search and social media - the intrusive ads and replacement of searches with sponsored content - will lead users to be more aware of direct manipulation campaigns. But the long battle to counter the power and influence of wealth in public debate has barely begun.

If you'd like to read more from Walter, visit the blog Political Violence At A Glance politicalviolenceataglance.org for articles like "US Public Opposition For Armed Political Demonstrations". This Time backgrounder on Facebook whistleblower Frances Haugen is also well worth reading "Inside Frances Haugen's Decision To Take On Facebook"

THE MYTH OF CAPITALISM
Monopolies And The Death Of Competition
Jonathan Tepper with Denise Hearn, Wiley, New Jersey, 2023

This book is important because it highlights the dominance of monopoly, monopsony and oligopoly in modern capitalism, links them clearly to low wages and political corruption, and shows why a return to breaking up market-dominating corporations is essential for both capitalist efficiency and democracy. And it's written by two full-time market analysts, so they know what they're talking about!

Like me, you may need a refresher on the difference between oligopoly, monopsony and monopoly. Monopoly, taken literally, means a single seller of a product or service. Monopsony is a single buyer in the market. Oligopolies are the most common, where a small number of companies dominate a market and reduce competition. And of course, in everyday use we happily describe our banks and supermarkets as monopolies, though they are really oligopolies.

The book starts with the story of a doctor dragged off a plane by police officers because the airline found itself overbooked after he'd been seated. He refused to give up his seat, citing his need to treat patients the next day. Video of him bleeding from the mouth while being dragged down the aisle went viral, but after a brief blip stock prices went up. Why, you might ask?

Research analysts dismissed concerns the handling would impact shares, saying "consumers might not have much choice but to fly United Airlines (UAL) due to airline consolidation, which has reduced competition over most routes". Online news sites helpfully explained with headlines like "Airlines Can Treat You Like Garbage Because They Are an Oligopoly". Once investors focused on UAL's dominant market position, demand actually pushed prices up. This is modern capitalism. The book may be all about America, but free-market follower that we are, Aotearoa is heading down this same path.

"Our Customers Are Our Enemies"

You will have read about Warren Buffett, a legend of American investing. The usual soft public line is Buffet does well because he invests for the long run. Instead, the authors quote his private comments when speaking to clients. For decades he has recommended buying businesses with strong "moats" and little competition, avoiding companies which require capital expenditure. Being a monopolist makes you a price maker; you can set the price of your goods near the highest amount that consumers would be willing to pay. One corporate president summed it up neatly as: "Our competitors are our friends. Our customers are our enemies".

Oligopolies too can act like monopolies. Collusion and cartels are illegal but tacit collusion is normal and easy in today's digital world. The Economist found in a study from 1997 to 2012 that two-thirds of American industries were concentrated in the hands of a few firms. The peaks of mergers and acquisitions in 2000 and again in 2020 have surpassed records set way back in 1900, which set up the last global surge in inequality.

Now, studies are confirming the most concentrated industries have the highest profit margins and the highest stock returns. They also confirm what we knew all along; mergers lead to increased prices, not efficiencies. Mergers also serve to squeeze supply chains, transferring income from producers to middlemen in the corporations.

Oligopoly Like Medieval Toll Roads

The authors compare modern oligopoly to the toll roads of medieval times - every time you buy something, you're sending an extra slice of your pay cheque to them. There's a lot more detail to how modern oligopolies work too. You may have four big insurers nationally, but they tend to split the market regionally so each safely dominates its home market. This allows them to set sales prices locally, and also reduces wage pressure because it is harder for employees to shop around.

his type of labour market segmentation works in other ways too. Jobs are shifted to low wage states, to rural areas with little alternative employment; this feeds into the political disaffection you see in poor regions. And there are many more bureaucratic barriers like licensing which make it harder to move or change employer, even in ordinary jobs like hairdressing and bartending. On top of this, America has many more regulatory barriers to restrain workers from moving to competitors for higher wages. Zero-hours contracting is growing, not just in America but around the world. In 2011, the New Economics Foundation reported two out of every five UK workers was precariously employed.

And union membership is very actively opposed by big American employers. This is simple economics; incomes are strongly correlated with union membership and strike prevalence. After labour, the authors turn their attention to Internet giants Google, Facebook and Amazon. Here, their insider knowledge was pretty shocking. Turns out Google doesn't just steal all the advertising revenue from journalism, promote the ultra-Right and avoid taxes. It also abuses its' near-monopoly of search to crush promising new Internet companies and replace them with its' own versions. Anywhere else in the world this would be illegal.

First, it uses its' access to Internet search history to identify new areas of growth, then it offers a cheap buyout. If turned down, it has literally stolen the content from sites like price-comparison company Foundem, Getty Images, Yelp dating service and Warners' CelebrityNetWorth, set up a clone site, then cut the original out of search results. All folded.

Why no regulatory response? It spends a huge amount on pre-emptive lobbying and donating to political parties. Google was the second-largest donor to Obama's re-election, and Google reps attended White House meetings more than once a week on average during his Presidency. Nearly 250 staff shuttled from Government and Google or back during his Administration.

This is where I started to worry about the authors' optimism that once the evidence was out there on the sham of modern competition, a return to monopsony breakups could fix it. All this mega-money flows to America. American politicians probably like it this way. The European Union has been much more effective, fining Google $US3 billion for competition policy violations. I suspect every country will have to fight the Internet monopolies as best we can within national and international law.

Nazis Loved Monopolies

Then the chapter detailing how the Nazis were the last national Government which loved monopoly this much really got me worrying. They actually passed a law in 1936 to force companies which weren't cartels to create one. Large companies were favoured because it was easier for the State to cut deals with them. Collective bargaining was banned, unions were outlawed.

Oddly, the Nazis set the stage for the US breakup of monopolies after WW2. IG Farben had agreed a secret deal with Standard Oil to carve up world markets, where Standard Oil would stay out of the chemical business including synthetic rubber. During the war, this held back American production and the deal was exposed. Standard Oil, six subsidiaries and many executives were convicted and this launched the pushback against cartels and monopolies after the war. But imagine a world where the monopolists won. Oops, that's the world we're in today.

Another chapter makes an important point I hadn't read before. The growth of modern indexed funds is usually seen as a positive, providing relatively safe and low risk investment for lower fees. This is the form of balanced investing which sits behind your retirement fund. Today it tends to have the same effect as old-style horizontal shareholding, where big shareholders own stakes in all the major companies to dampen competition and increase profits. That's because the big three exchange-traded funds now control 80% of the American market.

With less competition, share buybacks are at all-time highs. This diverts income away from production, investment and workers to shareholders and to executives. Buybacks used to be illegal, but Ronald Reagan fixed that. Companies have spent $US5 trillion on them since the financial crisis delivered them more cheap debt. Quoting the authors: "Stock buybacks are not a disease. They are a symptom of little competition and abnormally high profits. They take the tolls everyone pays in their everyday lives and send them to modern-day robber barons".

The authors take issue with Piketty's conclusion that since returns on capital are higher than economic growth, wealth will always outgrow earned income unless Government intervenes, so taxes need to be a lot more progressive. They argue that the rise of modern oligopolies is the real culprit. Most readers would probably recognise both as true, both as important. But the point that oligopoly is a driving force behind many of the worst features of modern American capitalism is well made here, as is the conclusion that break-ups are essential to recreate fair and competitive markets.

The authors also advocate for share grants to workers, recommend you avoid the Internet giants wherever you can, become politically active, and spend your money away from market-dominant firms. The also recommend a healthy distrust of economists, who they describe as preferring theories to searching for evidence, backing anything for hire, and never facing the consequences of their recommendations.

WHEN McKINSEY COMES TO TOWN
by Walt Bogdanovich & Michael Forsythe, Penguin/Random House, New York, 2022

Watchdog readers will be well aware that the big four global consultancies are responsible for reshaping modern capitalism into its worst self (well, worst so far, they haven't finished yet...). Here is the detail and inside dirt on what consultancies get up to. The book sets the scene with an introduction covering McKinsey's role in cost cutting at US Steel. With zero experience in the steel industry, it came up with recommendations like cutting maintenance and downgrading skilled workers into roving labour gangs which worked in unfamiliar parts of the plant.

Shares Up, Profits Up, Deaths Up

Shares and profits went up. People died, US Steel was found guilty and fined $US42,000, reduced to $US14,500 after negotiations with the company. Three McKinsey consultants wrote an article that explained, without a hint of irony, "why maintenance staffing matters". The consultant's fees were tied to the steelmaker's financial performance.

Similar recommendations were made at Disneyland in 1977, which previously had an exemplary safety record. After a year of study (read "collecting fees") McKinsey presented a confidential report titled "Transforming Maintenance: Defining The Disney Standard". It claimed to offer a way of making Disneyland more efficient and increasing profits without sacrificing quality. Asking "intuition or science?", it implied the correct answer was science, but as McKinsey defined science...

McKinsey told managers: "Change of this magnitude is not managed - it is led. Leaders must inspire and develop a bench of true change champions". Back in the real world, maintenance decisions dispensed with the judgement of veteran employees, in favour of technical analysis and a managerial culture of cost avoidance. Most maintenance workers were transferred to the night shift, leaving only a small crew handling maintenance during the day. The next year, on Christmas Day, Disneyland had a fatal accident when an untrained supervisor with zero experience filled in for an absent employee docking a large riverboat.

More deaths followed, including a derailed roller coaster flagged for maintenance but left in service. Eventually, the California State government stepped in, requiring Disney to retrain all outside machinists, roving teams and their managers, and forbidding machinists to sign for work they did not perform! Families took a lawsuit, which Disney settled out of court. Paul Pressler, the Disney executive who solicited and implemented McKinsey's advice, had already moved on to become chief executive of Gap, the clothing store chain. His mandate: cut costs and raise profits.

Subsequent chapters cover:

1. "Wealth Without Guilt: McKinsey's Values". McKinsey offers rich rewards so receives 200,000 applications a year and employs just 1 to 2%. They promise young recruits an opportunity to make a difference, to make the world a better place. The company certainly has influence; it advises virtually every major pharmaceutical firm and their Government regulators. It has also worked for a range of despots, their military, police, defence and justice ministries to "raise the stature of authoritarian and corrupt governments across the globe" (New York Times).

The number one stated value of McKinsey is "put client interests ahead of the firm's" which really translates as "profits first". "Scientific management" is the slogan used to sell its' recommendations, but again this is just "profit above all". Garrison Lovely joined McKinsey to find ways to reduce violence in prisons. He summed his experience up in a 2019 essay: "Instead of being a force for good, I found myself a party to the most damaging forces affecting the world - the resurgence of authoritarianism and the continued creep of markets into all parts of life".

2. "Winners and Losers: The Inequality Machine". In 1950 McKinsey completed a pivotal report for General Motors, comparing executive pay across 37 major corporations and concluding that worker wages were rising faster than executive pay and benefits. Back then, executives made 20 times a productive worker's income. Fast forward through outsourcing to low wage southern states, then overseas, championing part-timers, casualisation and turnover to lower wages. Today, executive ratios range around 350, depending on if their share options are up or down...

3. "Playing Both Sides: Helping Government Help McKinsey". That chapter heading says it all. McKinsey doesn't believe in conflict of interest, because working for both sides means more fees for them, and more gains for their clients. Government regulation as pursued by today's market-driven economists more often benefits the largest corporations, setting up barriers to smaller competitors. No competition translates to market power, higher prices and excess profits.

Their work with Government is notable for its secrecy, because they use their contacts and revolving transfers between private and public roles to influence contracts. During covid the company amassed more than $US100 million advising Government on how to respond. And McKinsey loves pro bono work, because it's a chance to understand the non-profit world - then consult to privatise it.

4. "McKinsey At ICE (Immigration)". In advising the Trump government on immigration, McKinsey recommended cutting costs (spending less on food, medical care and supervision of detainees); increasing "deliverables" (arrests up, processing time down); one-stop hiring (hiring more crazies who agree with Trump to manage the border); zero tolerance (speedier deportation, separating parents from children).

5. "Befriending China's Government". Remember when China developed a reef in the middle of the ocean into a militarised base? The company behind this was China Communications Construction Company. It's one of 96 State-owned enterprises building bridges, roads and ports around the world as part of China's foreign policy. McKinsey has advised at least 26 of them, while also advising the Pentagon.

McKinsey's China work began in 1997, a long project which developed a small regional insurer into the world's second largest by market value. A staffer described the relationship: "Once a project is over, they just execute, no questions asked". Work expanded, including a "smart cities" project with networked cameras to send information back for central analysis.

Tobacco, Vaping, Opioids

6. "Guarding The Gates Of Hades: Tobacco and Vaping". McKinsey improved cigarette marketing once smoking's health harms became public and dented sales, then supported tobacco companies to diversify into the growth market of vaping. Typically American, and unregulated, Juul offered the highest nicotine yields in the industry, the equivalent to 20 cigarettes but with the taste masked in fruity child-appealing flavours. A teenage nicotine epidemic took off.

7. "Turbocharging Opioid Sales". Probably the worst corporate crime in modern American history because it affected so many people. In 2002 McKinley published an influential paper seeking work from Big Pharma by suggesting "marketing improvements" - using data on prescriptions to help sales staff target physicians more likely to prescribe a given drug. Purdue Pharma liked the idea, paying McKinsey $US84 million for advice on how to stoke public demand for the addictive painkiller OxyContin. 750,000 died. Purdue filed for bankruptcy, paid billions to settle investigations and get legal protection from litigation. Opioid deaths continue.

I'd better stop there as it's not good form to summarise a whole book in a review. We do aim to encourage you to read books you like the sound of. So, to close out, I'll just mention that McKinsey was, no surprise, also involved with the sale of toxic securitised loans before the 2008 meltdown, advising the Saudi government on its social media critics before and after the State's murder of Jamal Khashoggi, and assisted Tory privatisation by stealth of the National Health System.

"Financial Extraction Process"

To conclude, it's worth describing how the company structure works. Bright staff are recruited young and everyone works long hours, but you must align yourself with a sponsor further up the ladder to get the more lucrative contracts, which reinforces corporate culture. Aggressive performance reviews counsel "underperformers" to leave but their time at McKinsey is a big step on the corporate ladder and builds insider contacts for future business. Senior partners are very well rewarded so will work for anyone on anything.

Fees income is typically calculated as a share of corporate savings, perhaps 10%. This is what that number-one corporate value mentioned earlier means in practice - "Put client interests ahead of the firm" is really "maximise short-term profits to maximise short-term fees". The client is the current executive, his replacement, his competitors, and his regulators. Everything works for McKinsey. Staff work extremely hard, client contacts and contracts are maximised, profits are maximised for clients and fees are maximised for the company.

Les Leopold, Director of New York's Labor Institute, summarised their nominal pursuit of efficiency as deindustrialisation, where formerly productive companies were loaded with mountains of debt then broken up for sale to maximise short term profits, concluding: "This is not the invisible hand of the market, this is the financial extraction process".

Arand Giridharadas, a former McKinsey consultant, put it this way: "Even at its best, much of the work is about increasing investors' share of the profits by reducing labour's share". You can also read my related book review about consultancy firms ("Bean Counters. The Triumph Of The Accountants And How They Broke Capitalism") in Watchdog 150 (April 2019).

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- Linda Hill