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The New Confessions of an Economic Hit Man

Human activities are driven by this process of altering human perceptions of reality

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By John Perkins

My success as chief economist at a major international consulting firm was not due to the lessons I learned in business school. It was not due to the competence of my staff of brilliant econometricians and financial wizards.

Those things may have helped at times. But there was something else that made it all happen. That something else was the same something else that elevated George Washington, Henry Ford, Mahatma Gandhi, Mother Theresa, Martin Luther King Jr, Steve Jobs, and other successful people to the heights of their success.

That something else is available to everyone of us.

It is the ability to alter objective reality by changing perceived reality, what we might think of as the Perception Bridge.

Screen Shot 2016-08-21 at 12.18.21 PM

As described in my book The New Confessions of an Economic Hit Man, my job was to convince heads of state of countries with resources our corporations covet, like oil, to accept huge loans from the World Bank and its sister organizations. The stipulation was that these loans would be used to hire our engineering and construction companies, such as Bechtel, Halliburton, and Stone and Webster, to build electric power systems, ports, airports, highways and other infrastructure projects that would bring large profits to those companies and also benefit a few wealthy families in the country, the ones that owned the industries and commercial establishments. Everyone else in the country would suffer because funds were diverted from education, healthcare and other social services to pay interest on the debt. In the end, when the country could not buy down the principal, we would go back and, with the help of the International Monetary Fund (IMF), “restructure” the loans. This included demands that the country sell its resources cheap to our corporations with minimal environmental and social regulations and that it privatize its utility companies and other public service businesses and offer them to our companies at cut-rate prices.

It was a strategy of using perceived reality to change objective reality. In these cases, Objective Reality 1 was that the countries had resources. The Perceived Reality was that using those resources as collateral on loans to finance the building of infrastructure projects would create economic growth and prosperity for all the citizens. Objective Reality 2, however, was that economic growth occurred only among the very wealthy. Since economic statistics (GDP) in such countries are skewed in favor of the wealthy, the fact was that only our companies and the wealthy families benefited. The rest of the population suffered. In many cases this has led to political unrest, resentment, and the rise of various forms of radicalism and terrorism.

“Reality is merely an illusion.”

                                                                     -Albert Einstein

We know from quantum physics and chaos theory that consciousness, observation, and changes in perception have impacts on physical reality that can expand exponentially. Modern psychology teaches that perceived reality governs much of human behavior. Religion, culture, legal and economic systems, corporations – in fact, most human activities – are determined by perceived reality. When enough people accept these perceptions or when they are codified into laws, they have immense impact on objective reality.

Human activities – individual, communal, and global – are driven by this process of altering human perceptions of reality in order to change objective realities. A couple of cases from US corporations illustrate this.

Case #1: Ford Motor Company

In 1914 Henry Ford’s Objective Reality was: A) His company sold Model T cars that were produced through the assembly line process by workers who were paid a standard minimum wage; and B) Because the assembly line was monotonous and workers were under a lot of pressure to reduce the amount of time to build a car from 12.5 hours to less than 100 minutes, there was an extremely high turn-over rate in Ford’s work force.

So Ford perceived a new reality. He raised wages from the standard $2.34 for a nine-hour day to $5 for an eight-hour day – at a time when every other car manufacturer was trying to reduce wages. In addition to keeping workers on his assembly line, Ford was motivated by a second perception. He understood that the company, its workers and the buying public all came from the same population and he reasoned that “unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers.” Ford perceived that increasing the buying power of his workers would have a multiplier effect; it would also increase the buying power of many others.

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Objective Reality 2: Ford sold 308,000 Model Ts in 1914—more than all other carmakers combined. In 1915, sales soared to 501,000. In 1920, Ford sold a million cars.[1] In the process, Ford’s actions helped stimulate unprecedented growth in the US middle class. 

Case #2: Nike, Adidas and other Retailers

Objective Reality 1: These companies design high-end footwear and clothing that is manufactured in factories that the companies do not own in China, Vietnam, and other “sweatshop” countries.

Perceived Reality on the part of management at these companies: A) Outsourcing production releases their companies of worker-rights responsibilities and minimizes wages; B) Hiring highly-paid athletes to promote products counterbalances the negative publicity generated by activists who advocate more pay for sweatshop workers; and C) These policies, that are diametrically opposed to those of Henry Ford, will maximize profits.

Objective Reality 2: A) Low “non-living” wages and poor working conditions in overseas factories result in high worker turnover, illnesses, and adverse publicity; B) By negatively impacting consumer economic growth, such policies destroy opportunities for new markets that would result if workers were paid enough to buy the products they make and at the same time stimulate the multiplier effect; and C) Neither corporate profits nor overall economic growth in the countries where the factories are located are in fact maximized.

I had the opportunity to highlight the difference between the two cases above when a Portland Oregon (home of Nike) radio station interviewed me. The host inquired “If you could ask Nike founder Phil Knight one question, what would it be?”

I didn’t have to give it much thought. “Hey Phil, why don’t you follow Henry Ford’s advice?” I went on to say, “Imagine if as part of an international advertising campaign those athletes were to say something like, ‘Instead of $X millions, I and a bunch of my friends – other Nike celebrities – have agreed to have Nike cut our fees by Y%. Nike’s top managers have agreed to similar cuts. That extra money will go toward paying workers who make Nike products around the world higher wages. We believe that by Just Doing It we will help make the world a better, more peaceful place.’” I paused.

“That’s an awesome idea,” the host said.

I couldn’t help adding, “What do you think that might do to Nike sales? How would it impact the rest of the industry?”

“It’s all in the mind.” 
-George Harrison

The above are two examples of how the Perception Bridge works. There are countless others. These range from the individuals to corporations and all the way to governments. Human activity is determined by the ways perceptions impact physical reality – both consciously and unconsciously. Here’s an example of the global impacts that a perceived reality in the 1950s has had on every subsequent generation throughout most of the world .

Case #3: US Government Policies in Iran

Objective Reality 1: A) Mohammad Mosaddegh was democratically elected Prime Minister of Iran in 1951; B) He introduced progressive reforms including social security, rent control, and land reform; C) He insisted that foreign oil companies pay a fair share of their income from Iranian oil to the Iranian people and when one – now known as BP – resisted, he set about nationalizing it.

Perceived Reality: The US government labeled Mosaddegh a Communist, Soviet puppet, and threat to democracy.

Objective Reality 2: A) The CIA overthrew Mosaddegh in 1953 and replaced him with the Shah, a brutal pro-Western dictator who “auctioned” Iran to foreign oil and other companies; B) Growing discontent led to the Iranian Revolution of 1979; C) The Shah was overthrown, Ayatollah  Khomeini took control, 52 US diplomats and citizens were held hostage for 444 days, US and European countries broke relations with and initiated sanctions against Iran; D) Islamist militarism expanded rapidly during the next decades throughout the Middle East; and E) The entire region has been torn by wars and political instability; this has impacted relationships between countries far from the Middle East, including the US, China, Russia, much of Africa and Europe.

We can only imagine how different the situation might be in Iran, the Middle East, the US, and so much of the world if the perceived reality had been different – something like:

Perceived Reality: The US government supports Mossadegh’s policies and announces that it will only purchase oil from companies that pay a fair share of their income to the people of the countries where they extract oil.

The US overthrow of Mossadegh resulted in a series of tragic events that might be considered as “unintended consequences.” In my experience, such consequences occur because the people making the decisions do not fully understand the power of the Perception Bridge.

I’ve found in my role as advisor to corporations, governments, executives and as a lecturer at MBA and other programs that taking a good, hard look at the impact of perceived reality on objective reality is one of the most efficient processes individuals, businesses, and other institutions can employ in order to achieve their true objectives. I’m struck by how much the perceived realities in business have been altered since I was in school during the late 1960s.

I was taught that a good CEO earns a decent return for his investors and also makes sure that his company is a good citizen, that it serves a public interest. We were instructed to take care of our employees, giving them health insurance and retirement pensions, to treat our suppliers and customers with deep respect, and to honor the idea that good business is a win-win for all stakeholders. In many cases, CEOs made sure that their companies not only paid their fair share of taxes but also contributed money to local schools, recreational facilities and other such services.

All that changed in 1976 when Milton Friedman won the Nobel Prize in Economics and stated, among other things, that the only responsibility of business is to maximize profits, regardless of the social and environmental costs. This was a perceived reality that became the defining goal for businesses. It convinced corporate executives that they had the right – some would say the mandate – to do whatever they thought it would take to maximize profits, including buying public officials through campaign financing, destroying the environment, and devastating the very resources upon which their businesses ultimately depend.

That perceived reality has resulted in a failed global economic system, one that is on the path to consuming itself into extinction – what some economists refer to as Predatory Capitalism.

It is time that we turn this around. How about:

Objective Realty 1: The glaciers are melting, the oceans rising, less than 5% of the world’s population lives in the US and we consume about 30% of the resources while half the world’s population lives in poverty, and the resource base that feeds the economy is in rapid decline.

Perceived Reality: A) When Milton Friedman espoused profit maximization in 1976, financial capital was seen as scarce while nature was considered abundant; the planet’s ability to absorb pollution and provide natural resources was considered practically unlimited; that has since changed; B) We can build an economy that rewards businesses that clean up pollution, regenerate devastated environments, and develop new technologies for energy, transportation, communications, trade, and just about everything else – that recycle instead of ravaging the planet; and C) The responsibility of business is to serve a public interest while earning decent rates of returns for investors who develop an economy as defined in B) above.

Objective Reality 2: An economic system that is headed for disaster is converted into one that is itself a renewable resource.

The success stories of humans – as individuals and as communities – revolve around the relationships of perceived reality to objective reality. At this critical time in history, it is essential that we commit to consciously building Perception Bridges that will take us into a world that future generations will want to inherit. By understanding that simple changes in perception bring about monumental changes in objective reality, we also realize that creating a better world is not just possible; it can be inspiring and fun.

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[1] Jeff Nilsson, “Why Did Henry Ford Double His Minimum Wage?” January 3, 2014, The Saturday Evening Post, http://www.saturdayeveningpost.com/2014/01/03/history/post-perspective/ford-doubles-minimum-wage.html

2016 August 21


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  • Duncan Cairncross

    Excellent article

    I would add another “perceived reality” – It is always cheaper to outsource manufacturing to low wage countries

    In actual practice while some executives do gain (A LOT) by outsourcing most companies make little or no gains by outsourcing
    And some companies lose a LOT

  • Louis Shalako

    Speaking of Objective Reality # 2, it will be interesting to see the results of the Ontario experiment in a basic minimum income, first of all in what exactly happens, how it is presented, what conclusions are drawn, and how the information is extended in certain social programs such as the Ontario Disability Support Program.

  • Eli Levine

    While I agree that there is a difference between perceived and objective reality, I must say that it is a) not impossible to match perceived reality up with the (highly complex and nuanced) objective reality that evidence reveals, and b) that we should be working as a species and in all disciplines towards improving the accuracy of the match between perceived reality and objective reality. We work at odds with ourselves when we refuse or neglect to produce accurate maps of how the world actually is and how it actually works, and living in the confusion that “there is no objective reality” is kind of silly when we’ve already seen great advancements in our knowledge and awareness of objective reality in engineering, chemistry, medicine, and other fields. I will conclude by saying that reality may ultimately be fuzzy, and open to many different interpretations at the end of the day. But I do not think that this means that we cannot and should not keep learning about it, even when present evidence is inconclusive or the problems are beyond our present grasp.

  • kostask

    The Female of the Species
    1911
    When the Himalayan peasant meets the he-bear in his pride,
    He shouts to scare the monster, who will often turn aside.
    But the she-bear thus accosted rends the peasant tooth and nail.
    For the female of the species is more deadly than the male.

    When Nag the basking cobra hears the careless foot of man,
    He will sometimes wriggle sideways and avoid it if he can.
    But his mate makes no such motion where she camps beside the trail.
    For the female of the species is more deadly than the male.

    When the early Jesuit fathers preached to Hurons and Choctaws,
    They prayed to be delivered from the vengeance of the squaws.
    ‘Twas the women, not the warriors, turned those stark enthusiasts pale.
    For the female of the species is more deadly than the male.

    Man’s timid heart is bursting with the things he must not say,
    For the Woman that God gave him isn’t his to give away;
    But when hunter meets with husband, each confirms the other’s tale —
    The female of the species is more deadly than the male.

    Man, a bear in most relations-worm and savage otherwise, —
    Man propounds negotiations, Man accepts the compromise.
    Very rarely will he squarely push the logic of a fact
    To its ultimate conclusion in unmitigated act.

    Fear, or foolishness, impels him, ere he lay the wicked low,
    To concede some form of trial even to his fiercest foe.
    Mirth obscene diverts his anger — Doubt and Pity oft perplex
    Him in dealing with an issue — to the scandal of The Sex!

    But the Woman that God gave him, every fibre of her frame
    Proves her launched for one sole issue, armed and engined for the same;
    And to serve that single issue, lest the generations fail,
    The female of the species must be deadlier than the male.

    She who faces Death by torture for each life beneath her breast
    May not deal in doubt or pity — must not swerve for fact or jest.
    These be purely male diversions — not in these her honour dwells.
    She the Other Law we live by, is that Law and nothing else.

    She can bring no more to living than the powers that make her great
    As the Mother of the Infant and the Mistress of the Mate.
    And when Babe and Man are lacking and she strides unclaimed to claim
    Her right as femme (and baron), her equipment is the same.

    She is wedded to convictions — in default of grosser ties;
    Her contentions are her children, Heaven help him who denies! —
    He will meet no suave discussion, but the instant, white-hot, wild,
    Wakened female of the species warring as for spouse and child.

    Unprovoked and awful charges — even so the she-bear fights,
    Speech that drips, corrodes, and poisons — even so the cobra bites,
    Scientific vivisection of one nerve till it is raw
    And the victim writhes in anguish — like the Jesuit with the squaw!

    So it cames that Man, the coward, when he gathers to confer
    With his fellow-braves in council, dare not leave a place for her
    Where, at war with Life and Conscience, he uplifts his erring hands
    To some God of Abstract Justice — which no woman understands.

    And Man knows it! Knows, moreover, that the Woman that God gave him
    Must command but may not govern — shall enthral but not enslave him.
    And She knows, because She warns him, and Her instincts never fail,
    That the Female of Her Species is more deadly than the Male.

    Θα νοσταλγήσουμε τον Κλίντον, τον Ντάμπγια και τον Ομπάμα μέσα σε μήνες, όχι χρόνια.

    Hillary Clinton on Gaddafi: We came, we saw, he died

  • The difference between perceived and objective reality with regard to the role of government in economic development has been dumbfounding to me since the triumph of right-wing ideology over the past fifty years. The essential role played by government should be obvious given the facts with regard to the extent to which the most prosperous countries devote their economic resources to government services and the poor countries do not. This failure of perceived reality to comprehend the obvious truth has proved disastrous. See http://www.rweconomics.com/IVR.htm , http://www.rweconomics.com/About.htm , and http://www.rweconomics.com/LTLGAD.htm .

    • Resist_Tyranny

      Leftist PC bubble. Your comment is utter BS lies

      • George H. Blackford

        What is it about my comment that you think is BS lies? Do you not believe the most economically advanced countries in the world, such as those in North America and Western Europe, devote a larger fraction of their economic resources to government services than poorer countries, such as those in Africa?

        If so, I’m willing to learn the truth. Where do you get the facts that support this belief? How can I find out the truth as to which of us has a misperception of reality? I’ve explained my view of this in

        http://www.rweconomics.com/IVR.htm

        What am I missing here?

  • This (excellent) analysis could benefit from the application of the concept of ‘performativity of language’.

  • Isn’t this topic of ‘objective reality is affected by perceived reality’ part of ‘reflexitivity’ as used by social psychologists, constructivist epistemologists and Mr. Soros? These include though also a feedback ‘back’ from objective reality to perceived reality.

    In the dialectical-materialist words of Marx ‘Das (gesellschaftliche) Sein bestimmt das Bewusstsein’ (Societal being determines consciousness) turning Hegel’s idealistic ‘Das Bewusstsein bestimmt das Sein’ (Consciousness determines being) from his head on his feet, which of course both must be combined.

    This combination of influences from reality to the mental world and back from there to the material world is crucial for understanding how (not) to deal with our situation(s) on small and large scales. If we do not only want to interprete ‘our world’, but also to influence it, we need to consider this!

  • Patrick cardiff

    Why did it take this long for Mr. Perkins to examine himself?
    These are 50-year-old ideas. Another book of Economic wisdom won’t be useful turning around the minds of the financiers, no more so than the 1960 were successful.
    Since perceived reality cannot be measured in detail, it cannot be compared with objective reality.

  • X-7

    K, makes sense.
    Perception is how the mind collapses reality, essentially, how it codes / distills reality.
    I contend that the following perception of reality is closer to reality than the mainstream economic perception of reality. The article considers code, including monetary code, in a physics / evolution / complexity context.
    “The story of human intelligence starts with a universe that is capable of encoding information.” Ray Kurzweil – “How to Create a Mind”
    The Price Is Wrong: http://ow.ly/TAyn303lYvb

  • Resist_Tyranny

    The problem today is “denied” reality

  • Skip

    Everything looks good here except “man made global warming,” is on the “perceived reality,” factor not the “objective reality,” factor. The ostensible reason why is the extremely heavy global taxes that will result from what you call “objective reality.” That is the entire objective, when measuring the ice core samples, historical CO2 levels, and a myriad of other things contrary to the man made global warming battering ram.