By Timothy V. Gatto

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.

Meanwhile, the underclasses are seeing their wages frozen, and the essentials such as housing and food are getting more expensive. The new apartments created during China’s housing boom are out of reach of the average factory worker. Wealth in China is going to the upper-class such as factory owners and managers. What America has been experiencing for the last few decades, is now happening to China as well as in Russia.

As the capitalist system continues, wealth goes to the top 20%. In time, the people become angry. They see the 20% in the media, and human nature kicks in. People in the under-classes want what they see advertised on television and other media outlets as well as what they see on the street. The people start demanding higher wages as they desperately want what the top 20% have. They then start looking for a different economic model.

This is when they start to look towards Venezuela and what Chavez has done for the underclass. They start to agitate and demand socialist reform. In China, this isn’t hard to do as they remember the socialism of the PRC. This time they are demanding bottom-up socialism, not the ridged communism of the last 60 years.

In time, the people in Venezuela will not remember the top down neo-liberal system that their fathers and grandfathers suffered under. As the people forget the harsh life before Hugo Chavez, they will start to look around for a different system. The cycle will repeat again.

It seems that in order to maintain a continuous government without social upheaval, the two systems, socialism and capitalism must merge. Chavez allows capitalists to operate freely in his nation. Maybe that’s the route that all nations should take.

The reasoning of the capitalists is that socialism is expensive is somewhat true. Still, it’s the right thing to do. All people should share in the nation’s wealth. In the United States this isn’t feasible. Most of the discretionary spending in the US goes to the military-industrial complex. The answer to that problem is to stop these mini-wars that they are waging in Yemen, Nigeria, Afghanistan, and other nations.

All nations should direct their energies toward the people of their countries. This will stop the cycle of changing economic systems through coups, revolutions and such. The main culprit on this planet is the United States. Since 1978 the wages of the middle-class have been essentially frozen. Meanwhile the top 10% have seen their wealth rise.

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the '80s, '90s, and early 2000s (Wolff, 2007)

Those figures are staggering. It’s no wonder that the United States is building detention centers and passing draconian laws that remove our civil liberties. As people argue over gay marriage, abortion and other false-flag issues, they don’t understand what has happened to the middle-class and the under-class. They find it hard going in today’s economy. Soon, human nature will kick in and they will look towards a new economic model. Unions are powerless in the US and oftentimes they are an instrument of management. Strikes that are not sanctioned by the unions will soon start happening. Movements such as the occupy movement will continue.

As long as we continue to waste our wealth on the military and wars for resources, we will continue to see the middle-class and the under-class crushed by the weight of our economic system. In America we have no representative democracy. We have a plutocracy and a neo-liberal economic system. We have two-political parties that control the media. We are suffering under police state tactics of the government. Very soon, human nature and our basic survival instincts will rise and we will start to resist. This is a given. This is also why our government is preparing for it.

All of this could be avoided. If the government will address the problems of the middle-class and under-class, and the restoration of our civil liberties, as well as campaign finance reform we can go on as a beacon of hope for the world. This will require broad reforms and intestinal fortitude (guts). The fate of this nation is at stake. To me, the future looks grim. I see no knight in shining armor ready to take up the challenge. All I see is corporate-controlled puppets at the top. Congress has given all control to the Executive branch and the Supreme Court is in the pockets of the rich.

I would like to say better days are coming but I would be a liar. The future is going to be hard to live through. Still, change will come. How it comes is up to us. This is the challenge of the twenty-first century.

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Tim Gatto's new book "Contempt to Outrage" will be available soon from Oliver Arts and Open Press.

By Timothy V. Gatto, a retired Army Sergeant and former Chairman of The Liberal Party of America. He can be reached at: timgatto@hotmail.com Read Tim's Book "Complicity to Contempt" and his Novel "Kimchee Days or Stoned Cold Warriors From Oliver Arts and Open Press and available on Amazon and all other online bookstores.