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Central American University - UCA  
  Number 180 | Julio 1996



Democracy and Markets in The New World Order

With masterful irony and indignation, the eminent linguist Noam Chomsky responds to a question that is key for correct understanding and transformation of the world we live in.

Noam Chomsky

The conventional picture of the new era we are entering and the promise it holds was formulated clearly by National Security Adviser Anthony Lake when he presented the Clinton Doctrine in September 1993: "Throughout the Cold War, we contained a global threat to market democracies: now we should seek to enlarge their reach." The "new world" opening before us, he expanded a year later, "presents immense opportunities" to move forward to "consolidate the victory of democracy and open markets."

The issues are much deeper than the Cold War, Lake elaborated. The "enduring truth" is that our defense of freedom and justice against Fascism and Communism was only a phase in a history of dedication to "a tolerant society, in which leaders and governments exist not to use or abuse people but to provide them with freedom and opportunity." That is the "constant face" of what the US has done in the world, and "the idea" that "we are defending" again today. It is the "enduring truth about this new world" in which we can more effectively pursue our historic mission, confronting the remaining "enemies of the tolerant society" to which we have always been dedicated, moving from "containment" to "enlargement." Fortunately for the world, the sole superpower "of course" is unique in history in that "we do not seek to expand the reach of our institutions by force, subversion or repression," keeping to persuasion, compassion and peaceful means.

Commentators were duly impressed by this enlightened "foreign policy vision." The point of view so dominates public and scholarly discourse that it is superfluous to review the record. Its basic theme was perhaps stated most succinctly by Samuel Huntington, Eaton Professor of the Science of Government and Director of the Olin Institute of Strategic Studies at Harvard, in the scholarly journal International Security: the United States must maintain its "international primacy" for the benefit of the world because, alone among nations, its "national identity is defined by a set of universal political and economic values," namely "liberty, democracy, equality, private property and markets"; "the promotion of democracy, human rights and markets are [sic] far more central to American policy than to the policy of any other country."

Since this is a matter of definition, the Science of Government teaches, we may dispense with the boring task of empirical confirmation. A wise move. Inquiry would quickly reveal that the conventional picture Lake presents ranges from dubious to false in every crucial respect, save one: he is right to urge that we look at history to discover the "enduring truths" that hold up some of the institutional structure, and take them seriously in considering the likely future, when that structure remains essentially unchanged and free to operate with little constraint. An honest review suggests that "this new world" may well be marked by a shift from "containment" to "enlargement," but not quite in the sense that Lake and the chorus of approval intend us to understand. Adopting slightly different Cold War rhetoric, what we see unfolding is a shift from "containment" of the threat of functioning democracy and markets to a campaign to "roll back" what has been achieved in a century of often bitter struggle.

Before looking at a few typical cases that illustrate broadly generalized patterns and are instructive with regard to likely prospects, a methodological truism. If we want to learn about the values and goals of the Soviet leaders, we look at what they did within the reach of their power. The same course will be followed by a rational analyst who wants to learn about the values and goals of the American leadership and the world they intend to create. The contours of that world were delineated by UN Ambassador Madeleine Albright just as Lake was lauding our historic commitment to pacifist principles. She informed the Security Council, which was wavering on a US dictated resolution on Iraq, that the US will continue to act "multilaterally when we can and unilaterally as we must." Play your games as you wish, but in the real world "What We Say Goes," as President Bush put the fundamental doctrine more bluntly while bombs and missiles were raining on Iraq. The US is entitled to act unilaterally, Ambassador Albright instructed the errant Council, because "we recognize [the Middle East] as vital to US national interests." No further grant of authority is required.

Actually, Iraq would be a good example to illustrate the "enduring truths" of the real world, but it is more informative to turn to the region in which the US has been most free to act as it chooses, so that the values and goals of the political leadership and the version of the "national interests" it represents are exhibited with the greatest clarity. Let's turn then to "our little region over here which never has bothered anybody," as Secretary of War Henry Stimson described the hemisphere at the end of World War II while explaining that all regional systems must be dismantled apart from our own, which are to be extended a perfectly reasonable stance, since "what was good for us was good for the world" and whatever we do is "part of our obligation for the security of the world," Stimson's liberal colleague Abe Fortas added, dismissing Churchill's irrational suspicions that the US had thoughts of domination.

The US is right to act unilaterally and to control such regions as it selects is unique, as befits the sole power which is "defined" by its dedication to all good things. Japan's attempt to mimic the Monroe Doctrine in its "little region" led to World War II in the Pacific, and the Gulf War was a reaction to Saddam Hussein's proposal that the affairs of another region "vital to US interests" be handled by a regional organization. Within "our little region," the regional organization we are sure to dominate is permitted to function, but within limits. If Latin Americans "attempt irresponsible use of their numerical strength in the OAS," John Dreier explained in his study of the organization, "if they carry to extremes the doctrine of nonintervention, if they leave the United States no alternative but to act unilaterally to protect itself, they will have destroyed not only the basis of hemispheric cooperation for progress but all hope of a secure future for themselves." The US will have to act "unilaterally as it must."

These conditions held even at the outer limits of tolerance, under FDR's Good Neighbor Policy, which carried an "implicit obligation of reciprocity," State Department Latin America official Robert Woodward emphasized: "the admittance into an American government of an alien ideology" would "compel the United States to take defensive measures" unilaterally. Needless to say, no one else has such a right, in particular, no right to defend itself from the US and its "ideology," which are not "alien," indeed nothing more than advocacy of goals that any reasonable person must seek.

Commitment to the "enduring truths" spans the spectrum. At the dissident extreme, President Carter's Latin America adviser, historian Robert Pastor, writes that the United States wants other nations "to act independently, except when doing so would affect US interests adversely"; the US has never wanted "to control them," as long as they do not "get out of control." No one, then, can accuse the US leadership of any concern but "the good of the world," including full freedom to act as we dictate. If our wards use the freedom we grant them unwisely, we have every right to respond unilaterally in self defense, though opinions vary as to the proper tactical choices, leading to splits between doves and hawks.

It is the Central America Caribbean region that of course reflects "the idea" to which US power is dedicated most clearly, just as the Eastern European satellites revealed the goals and values of the Kremlin. This region, rich in resources and potential and the source of no small part of Europe's wealth, is one of the world's major horror chambers. It was the scene of terrible atrocities one again in the 1980s as the US and its clients left the countries devastated perhaps beyond recovery, strewn with hundreds of thousands of tortured and mutilated corpses.

The terrorist wars sponsored and organized by Washington were directed in large measure against the Church, which had dared to adopt "the preferential option for the poor" and therefore had to be taught the familiar lessons for criminal disobedience. It is hardly surprising that the grisly decade should open with the assassination of an Archbishop and end with the murder of six leading Jesuit intellectuals, in both cases by forces armed and trained by Washington.

In the years between, these forces rampaged throughout the region, compiling a horrifying record, including aggression and terror condemned by the World Court, a decision dismissed with a shrug of irritation and contempt by Washington and intellectual opinion generally. The same fate was accorded the Security Council and General Assembly of the United Nations, whose calls for adherence to international law were rarely even reported. A reasonable judgment, after all. Why should one attend to those who put forth the ridiculous idea that international law or human rights might enter into the calculations of a power that has always rejected "force, subversion or repression," adhering by definition to the principle that "governments exist not to use or abuse people but to provide them with freedom and opportunity"? The "enduring truth" was put well by a distinguished statesman two centuries ago: "Great souls care little for small morals."

A look at this region teaches us a good deal about ourselves. But these are the wrong lessons, hence excluded from respectable discourse. Another lesson that is wrong, hence necessarily consigned to the same fate, is that the Cold War had little to do with any of this, apart from providing pretexts. Policies were the same before the Bolshevik Revolution, and have continued without change since 1989. Without a "Soviet threat," Woodrow Wilson had invaded Haiti (and the Dominican Republic), dismantling the parliamentary system because it refused to adopt a "progressive" Constitution that allowed North Americans to take over Haiti's lands, murdering thousands of peasants, restoring virtual slavery, and leaving the country in the hands of a terrorist army as a US plantation, later an export platform for assembly plants under miserable conditions.

After its unfortunate and quickly terminated experiment with democracy, the traditional framework was being restored with US assistance just as Lake announced the Clinton Doctrine, offering Haiti as the prime example of our moral purity. Elsewhere, too, policies continued without essential change after the fall of the Berlin Wall, followed within weeks by Bush's invasion of Panama to restore to power a clique of European bankers and narcotraffickers, with predictable consequences in a country that remained under military occupation even according to the puppet government placed in power by US force.

Brazil: A Revealing Case

Brazil illustrates the marginal relevance of the Cold War to the traditional US attitude towards democracy and human rights. Described early in the century as "the colossus of the South," Brazil, with its enormous wealth and advantages, should be one of the richest countries. "No territory in the world is better worth exploitation than Brazil's," the Wall Street Journal observed 70 years ago. By then the US was proceeding to displace its major enemies, France and Britain, though they lingered on until World War II, when the US was able to dismiss them from the region and take over Brazil as a "testing area for modern scientific methods of industrial development," in the words of a highly regarded scholarly monograph on US Brazilian relations by diplomatic historian Gerald Haines, also senior historian of the CIA. This was one component of a global project, said Haines, that the US "assumed out of self interest, responsibility for the welfare of the capitalist system." From 1945, the "testing area" has been favored with close US guidance and tutelage. And we can be proud of what we have achieved, he wrote in 1989. The outcome is "a real American success story"; "America's Brazilian policies were enormously successful," bringing about "impressive economic growth based solidly on capitalism," a testimony to our goals and values.

The success is real. US investments and profits boomed and the tiny elite were doing wonderfully; an economic miracle," in the technical sense of that term. Until 1989, Brazil's growth far surpassed that of much lauded Chile, now the star pupil, Brazil having suffered collapse and thus automatically shifting from a triumph of market democracy to an illustration of the failures of statism if not Marxism a transition that takes place effortlessly and routinely within the doctrinal system, as circumstances require.

Meanwhile, at the peak of Brazil's economic miracle, the overwhelming majority of the population ranked among the most miserable in the world, and would have regarded Eastern Europe as a paradise a fact that also teaches the wrong lessons, and is therefore suppressed with impressive discipline, along with others like it.

Communists Have Unfair Advantages?

The success story for foreign investors and a fraction of the population reflects the guiding values of the tutors and designers. Their goal, as Haines describes it, was "to eliminate all foreign competition" from Latin America so as "to maintain the area as an important market for US surplus industrial production and private investments, to exploit its vast reserves of raw materials, and to keep international communism out." The latter phrase is mere ritual; as Haines notes, US intelligence could find no indication that "international Communism" was trying to "get in," even had this been a possibility.

But although "international Communism" was not a problem, "Communism" definitely was, if we understand the term in the technical sense of the elite culture. This sense was explained incisively by John Foster Dulles in a private conversation with President Eisenhower, who had observed ruefully that throughout the world, indigenous Communists had unfair advantages. They were able to "appeal directly to the masses," Eisenhower complained. It is an appeal "we have no capacity to duplicate," Dulles added, giving the reasons: "The poor people are the ones they appeal to and they have always wanted to plunder the rich." We find it hard to "appeal directly to the masses" on the basis of our principle that the rich must plunder the poor, a public relations problem that remains unsolved.

The problem goes back long before the term "Communist" became available to label the miscreants. In the debates in 1787 on the Federal Constitution, James Madison observed that "in England, at this day, if elections were open to all classes of people, the property of landed proprietors would be insecure. An agrarian law would soon take place." To ward off such injustice, "our government ought to secure the permanent interests of the country against innovation," establishing checks and balances so "as to protect the minority of the opulent against the majority," It requires some talent to fail to see the "enduring truth" that this has been "the national interest" ever since, and that "the tolerant society" recognizes the right to uphold this principle "unilaterally as we must," with extreme violence if necessary.

Dulles' lament is persistent in internal documents. Thus in July 1945, as Washington "assumed, out of self interest, responsibility for the welfare of the world capitalist system," a major study of the State and War Departments warned of "a rising tide all over the world wherein the common man aspires to higher and wider horizons." The Cold War was not irrelevant to this ominous prospect. The study warns although Russia had given no indication of the crime, we cannot be sure that it "has not flirted with the thought" of lending support to the aspirations of the common man. We must therefore act forthrightly to contain the threat to market democracies, as we understand this notion.

To be sure, the USSR was guilty of other crimes. Washington and its allies were deeply concerned that their traditional dependencies were impressed with Soviet (and Chinese) development, particularly in comparison to such "success stories" as Brazil; disciplined Western intellectuals may not be able to see the point, but Third World peasants can. Economic assistance from the Soviet bloc was also considered a serious threat, in the light of Western practice.

Take India. Under British rule, it sank into decline and misery, but some development began after the British left. Not, however, in the pharmaceutical industry, where (mostly British) multinationals made tremendous profits in India by overpricing, relying on their monopoly of the market. With help from the World Health Organization and UNICEF, India began to escape from these controls, but public sector drug production was finally established with Soviet technology. This led to a radical reduction in drug prices; for some antibiotics, prices fell as much as 70%, compelling transnationals to slash their prices. Once again, Soviet malice had undercut market democracy, allowing millions of people in India to survive disease. Fortunately, with the criminal gone and capitalism triumphant, the TNCs are regaining control, thanks most recently to the strongly protectionist features of the latest GATT treaty, so we can perhaps look forward to sharp increase in deaths along with mounting profits for the "opulent minority" in whose "permanent interests" democratic governments must labor.

Whose Atrocities Are Horrendous?

The Party Line is that the West was appalled by Stalinism because of its horrendous atrocities. This pretense cannot be taken seriously for a moment, any more than corresponding claims about fascist horrors. Western moralists have found little difficulty in consorting with mass murderers and torturers, from Mussolini and Hitler to Suharto and Saddam Hussein. Stalin's awesome crimes were of little concern. President Truman liked and admired the brutal tyrant, regarding him as 'honest" and "smart as hell." His death would be a "real catastrophe," Truman felt. He could "deal with" Stalin, as long as the US got its way 85% of the time, Truman observed: what happened inside the USSR was not his concern.

Other leading figures agreed. In Big Three meetings, Winston Churchill praised Stalin as a "great man, whose fame has gone out not only over all Russia but the world," and spoke warmly of his relationship of "friendship and intimacy" with this estimable creature: "My hope," Churchill said, "is in the illustrious President of the United States and in Marshall Stalin, in whom we shall find the champions of peace, who after smiting the foe will lead us to carry on the task against poverty, confusion, chaos, and oppression." "Premier Stalin was a person of great power, in whom he had every confidence," Churchill told his cabinet in private in February 1945, after Yalta; and it was important that he should remain in charge. Churchill was particulary impressed with Stalin's support for Britain's murderous suppression of the Communist led anti fascist resistance in Greece, one of the more brutal episodes in the worldwide campaign of the liberators to restore the basic structures and power relations of the fascist enemies while scattering or destroying the resistance, with its radical democratic taint and inability to comprehend the rights and needs of the "opulent minority."

Returning to Brazil, in the early 1960s the US run experiment was facing a familiar problem: parliamentary democracy. To remove the impediment, the Kennedy Administration prepared the ground for a military coup, which instituted the rule of torturers and murderers who understood the "enduring truths." Brazil is a major country, and the coup had a significant domino effect. The plague of repression spread from the Colossus of the South throughout much of the continent, with consistent US support and involvement. The goal was accurately described by the leading American academic specialist on human rights and US foreign policy in Latin America, Lars Schoultz: "To destroy permanently a perceived threat to the existing structure of socioeconomic privilege by eliminating the political participation of the numerical majority...." Again, the Cold War had virtually nothing to do with this. And as usual, the USSR was more than happy to collaborate with the most depraved killers, though for completely cynical reasons it did sometimes offer assistance to people trying to defend themselves from the hemispheric Enforcer, and served as a deterrent to full exercise of US violence one of the few authentic cases of deterrence, but one that somehow lacks prominence in the many sober studies of deterrence theory.

According to conventional doctrine, by overthrowing the parliamentary regime in our private "testing area" and installing a National Security State ruled by neo Nazi generals, the Kennedy and Johnson administrations, at the peak of American liberalism, were "containing the global threat to market democracies." That is the thesis we are to intone with proper solemnity. And so the matter was presented at the time, arousing few detectable qualms. The military coup was "a great victory for the free world," Kennedy's Ambassador Lincoln Gordon explained before moving on to become President of a great university not far from here. It was undertaken "to preserve and not destroy Brazil's democracy." Indeed it was "the single most decisive victory of freedom in the mid twentieth century," which should "create a greatly improved climate for private investments" so it did contain a threat to market democracy, in a certain sense of the term.

This conception of democracy is broadly held. At home, the population are "ignorant and meddlesome outsiders" who may be "spectators" but not "participants in action," Walter Lippmann held in his progressive essays on democracy. At the other end of the spectrum, statist reactionaries of the Reaganite variety deny them even the spectator role: hence their dedication to unprecedented censorship, and clandestine operations that are a secret only from the domestic enemy. The "great beast," as Alexander Hamilton termed the feared and hated public enemy, must be tamed or caged, if government is to secure "the permanent interests of the country." The same "enduring truths" apply to our foreign wards, with much greater vigor in fact, since constraints are far less. So consistent practice demonstrates with brutal clarity.

Crusade for Democracy?

The traditional US opposition to democracy is understandable, and sometimes recognized with fair explicitness. Take the decade of the 80s, when the US was engaged in a "crusade for democracy," according to standard doctrine, particularly in Latin America. Some of the best studies of this project a book, and several articles are by Thomas Carothers, who combines the view of a historian with that of an insider. He was in the Reagan State Department, involved in the programs to "assist democracy" in Latin America. These were "sincere," he writes, but largely a failure an oddly systematic failure. Where US influence was least, progress was greatest: in the southern cone of Latin America, where there was real progress, opposed by the Reaganites though they took credit for it when the tide could not be stemmed. Where US influence was greatest in Central America progress was least. Here Washington "inevitably sought only limited, top down forms of democratic change that did not risk upsetting the traditional structures of power with which the United States has long been allied," Carothers writes. The US sought to maintain "the basic order of...quite undemocratic societies" and to avoid "populist based change" that might upset "established economic and political orders" and open "a leftist direction."

That is exactly what we are seeing right now in Lake's prime model, if we choose to open our eyes. In Haiti, the elected President was allowed to return after the popular organizations had been subjected to a sufficient dose of terror, but only after he accepted a US dictated economic program stipulating that "the renovated state must focus on an economic strategy centered on the energy and initiative of Civil Society, especially the private sector, both national and foreign." US investors are the core of Haitian Civil Society, along with the super rich coup backers, but not the Haitian peasants and slum dwellers who scandalized Washington by creating a civil society so lively and vibrant that they were able to elect a President and enter the public arena. That deviance from acceptable norms was overcome in the usual way, with ample US complicity; for example, by the decision of the Bush and Clinton administrations to allow Texaco to ship oil to the coup leaders in violation of the sanctions, a crucial fact revealed by Associated Press the day before US troops landed, though yet to pass through the portals of the national media.

The same "enduring truths" hold for the hemisphere's worst human rights violator, which, to the surprise of no one familiar with history, receives half of all US military aid for the hemisphere: Colombia. It is hailed here as an outstanding democracy, and described by the Jesuit based human rights group that tries to function despite the terror as "a democra tatorship," Eduardo Galeano's term for the amalgam of democratic forms and totalitarian terror favored by the "really existing tolerant society," when democracy threatens to "get out of control."

Free Markets or Protectionism?

In the real world, democracy, markets, and human rights are under serious attack in much of the world, including the leading industrial democracies. Furthermore, the most powerful of them the United States is leading the attack. And in the real world, the US has never supported free markets, from its earliest history until the Reagan years, which set new standards for protectionism and state intervention in the economy, contrary to many illusions.

Economic historian Paul Bairoch points out that "the modern protectionist school of thought...was actually born in the United States," which was the "mother country and bastion of modern protectionism." Nor was the United States alone. Britain before us followed a similar course, only turning to free trade after 150 years of protectionism had given it such enormous advantages that a "level playing field" seemed a safe bet, then abandoning the stance when the expectation was no longer satisfied. It is not easy to find an exception. Today's First and Third Worlds were far more similar in the 18th century. One reason for the enormous difference since is that the rulers would not accept the market discipline rammed down the throats of their dependencies. The most extraordinary "myth" of economic science, Bairoch concludes from a review of the historical record, is that the free market provides the path to development. "It is difficult to find another case where the facts so contradict a dominant theory," he writes.

To mention only one aspect of state intervention commonly omitted from economic history narrowly construed, recall that the early industrial revolution was founded on cheap cotton, just as the post 1945 "golden age" depended on cheap oil. Cotton wasn't kept cheap by market mechanisms, but by elimination of the native population and slavery a rather serious interference with the market, though not considered the topic of economics; rather another discipline. If the natural sciences had one department devoted to protons, another to electrons, a third to light, etc., each keeping to its designated domain, there would be little fear of understanding nature.

The record is impressively consistent. Britain used force to prevent industrial development in India and Egypt, quite consciously acting to undercut potential competition. After the American revolution, its former colonies took off on their own industrial revolution, first in textiles and machinery, later steel and manufacturing, and on until today: computers and electronics generally, metallurgy, the aeronautical industry, agribusiness, pharmaceuticals, in fact virtually every functioning part of the economy. Since the second World War, the Pentagon system including NASA and the Department of Energy has been used as a prime mechanism for funneling public subsidies to advanced sectors of industry, one reason why it persists with little change after the disappearance of the alleged pretext. The current Pentagon budget is higher in real dollars than under Nixon and not far below the Cold War average, and is likely to increase under the policies of the statist reactionaries mislabeled "conservatives." As always, much of it functions as a form of industrial policy, a taxpayer subsidy to private power and profit.

More extreme partisans of state power and intervention have expanded these mechanisms of welfare for the rich. Largely through military expenditures, the Reagan administration increased the state share of GNP to over 35% by 1983, an increase of well over a third from a decade earlier. Star Wars was sold to the public as "defense" and to the business community as a public subsidy for advanced technology. If market forces had been allowed to function, there would be no US steel or automobile industry today. The Reaganites simply closed the market to Japanese competition. Then Secretary of Treasury James Baker proudly proclaimed to a business audience that Reagan had "granted more import relief to US industry than any of his predecessors in more than half a century." He was being too modest: it was actually more than all of his predecessors combined, as import restrictions doubled to 23%.

The director of the Institute for International Economics in Washington, international economist Fred Bergsten (who really does advocate free trade), adds that the Reagan Administration specialized in the kind of "managed trade" that most "restricts trade and closes markets," voluntary export restraint agreements (VERs). This is "the most insidious form of protectionism," he pointed out, which "raises prices, reduces competition and reinforces cartel behavior." The 1994 Economic Report to Congress estimates that Reaganite protectionist measures reduced US manufacturing imports by about one fifth.

While most industrial societies became more protectionist in recent decades, the Reaganites often led the pack. The effects on the South have been devastating. Protectionist measures of the rich have been a major factor in doubling the already huge gap between the poorest and richest countries from 1960. The 1992 UN Development Report estimates that such measures have deprived the South of $1/2 trillion a year, about 12 times total "aid" most of it in fact export promotion, under various guises. This behavior is "virtually criminal," the distinguished Irish diplomat and author Erskine Childers observed recently. One might, for example, take a moment to look at the "silent genocide" condemned by the World Health Organization 11 million children who die each year because the rich countries deny them pennies of aid, the US the most miserly of them all, even if we include the largest component of "aid," which goes to one of the rich countries, Washington's Israeli client. It's a tribute to the US propaganda system that Americans wildly overestimate foreign aid expenditures, as they do welfare, which is also miserly by international standards if we put aside welfare to the rich, not what they have in mind.

Reaganites also rebuilt the US chip industry by protectionist measures and a government industry consortium, to bar a Japanese takeover. Reagan's Pentagon also supported high performance computing, becoming "a pivotal market force," Science magazine reported, "boosting massively parallel computing from the laboratory into a nascent industry," helping to create many "young supercomputer companies." The story goes on and on, in just about every functioning aspect of the economy.

The global social and economic crisis is commonly attributed to inexorable market forces. Analysts then divide over the contribution of various factors, primarily international trade and automation. There is a considerable element of deception in all of this. Huge state subsidy and intervention have always been required, and still are, to make trade appear efficient, not to speak of ecological costs imposed on future generations who do not "vote" in the market, and other "externalities" consigned to footnotes.

Facilitating Class War

Take the second factor, automation. It surely contributes to profit at some point, but that point was reached by decades of protection within the state sector military industry as David Noble has shown in an important work. Furthermore, he also shows, the specific form of automation selected was often driven by power more than profit or efficiency; it was designed to deskill workers and subordinate them to management, not because of market principles or the nature of the technology, but for reasons of domination and control.

The same holds more generally. Executives inform the business press that a major reason for shipping manufacturing jobs even to countries with much higher labor costs is to facilitate class warfare. "We are concerned about having only one place where a product is made," a Gillette Corporation executive explained, primarily because of "labor problems." If Boston workers strike, he points out, Gillette could supply both the European and US markets from its Berlin plant, thereby breaking the strike. It is only reasonable, then, that Gillette should employ over three times as many workers abroad as in the United States, irrespective of costs, and not for economic efficiency.

Similarly, the Caterpillar corporation, now attempting to destroy the last vestige of industrial unionism, is pursuing "a business strategy that has nudged American workers away from defiance toward compliance," business correspondent James Tyson reports. The strategy includes "manufacturing at cheaper facilities abroad" and "relying on imports from factories in Brazil, Japan, and Europe." It is facilitated by profits that are shooting through the roof as social policy is crafted to enrich the wealthy; the hiring of "temps" and "permanent replacement workers" in violation of international labor standards; and the complicity of the criminal state that refuses to enforce labor laws, a stand raised to principle by the Reaganites, as Business Week documented in an important review.

The real meaning of "free market conservatism" is illustrated by a closer look at the most passionate enthusiasts for "getting the government off our backs" and letting the market reign undisturbed. Speaker of the House Newt Gingrich is perhaps the most striking example. He represents Cobb County Georgia, which the New York Times selected in a front page story to illustrate the rising tide of "conservatism" and contempt for the "nanny state."

There's a small footnote, however. Cobb County receives more federal subsidies than any suburban county in the country, with two interesting exceptions: Arlington Virginia, which is effectively part of the Federal government, and the Florida home of the Kennedy Space Center, another component of the system of public subsidy, private profit.

Public Subsidy for the Rich; Market Discipline for the Poor

Gingrich's "Contract with America" neatly exemplifies the ideology of the double edged "free market": state protection and public subsidy for the rich, market discipline for the poor. It calls for "cuts in social spending" and health payments for the poor and elderly, denying aid to children and cutting welfare programs for the poor. It also calls for increasing welfare for the rich, in the classic ways: regressive fiscal measures, and outright subsidy. In the former category are increased tax exemptions for business and the wealthy, capital gains cuts, and so on. In the latter are taxpayer subsidies for investment in plants and equipment, more favorable rules for depreciation, dismantling the regulatory apparatus that merely protects people and future generations.

The Contract is remarkably brazen. The proposals for business incentives, capital gains cuts, and other such welfare for the rich appear under the heading "The Job Creation and Wage Enhancement Act." The section does indeed include a provision for measures "to create jobs and raise worker wages" with the added word: "unfunded." But no matter. In contemporary Newspeak, the word "jobs" is understood to mean "profits," so it is indeed a "job creation" proposal, which will continue to "enhance" wages downwards. This rhetorical pattern is close to exceptionless.

Military Expenditures: Security or Subsidy?

Another category is "strengthening our national defense" so that we can better "maintain our credibility around the world" so that anyone who gets funny ideas, like priests and peasant organizers in Latin America, will understand that "What We Say Goes." The phrase "national defense" is hardly even a sick joke. The US faces no threats, but spends almost as much on "defense" as the rest of the world combined. Military expenditures are no joke, however.

As we meet in November 1994, Clinton is preparing to go to the Asia Pacific economic summit in Jakarta, where he will have little to say about the conquest of East Timor that reached its near genocidal peak with lavish US military aid, or the fact that wages in Indonesia are half those of China while workers seeking to form unions are killed or jailed. But he doubtless will talk about the themes he emphasized at the last APEC summit in Seattle, where he presented his "grand vision of free market future," to much awe and acclaim. He chose to do so in a hangar of the Boeing Aircraft Corporation, offering this triumph of entrepreneurial values as the prime example for the grand free market vision. The choice makes sense: Boeing is the country's leading exporter, civilian aircraft leads the way in US manufacturing exports, and the tourism industry, aircraft based, accounts for about a third of the US trade surplus in services.

Only a few facts were omitted from the enthusiastic chorus. Before World War II, Boeing made virtually no profits. It was enriched during the war, with a huge increase in investment, over 90% from the Federal government. Profits also boomed as Boeing increased its net worth over five fold, doing its patriotic duty. Its "phenomenal financial history" in the years that followed was also based on taxpayer largess, Frank Kofsky points out in a study of the early postwar Pentagon system, "enabling the owners of the aircraft companies to reap fantastic profits with minimal investment on their part."

After the war, the business world recognized that "the aircraft industry today cannot satisfactorily exist in a pure, competitive, unsubsidized, `free enterprise' economy" and that "the government is their only possible savior," according to Fortune and Business Week. The Pentagon system was revitalized as the "savior," sustaining and expanding the industry along with most of the rest of the industrial economy. The Cold War provided the pretext. The first Secretary of the Air Force, Stuart Symington, put the matter plainly in January 1948: "The word to talk was not `subsidy'; the word to talk was `security'." As industry representative in Washington, Symington regularly demanded enough procurement funds in the military budget to "meet the requirements of the aircraft industry," as he put it, Boeing winning the major share.

So the story continues. In the early 1980s, Boeing relied on military business for "most of its profits," and after a decline from 1989 to 1991, its defense and space division had "a tremendous turnaround," the Wall Street Journal reported. One reason is the surge in military sales abroad as the US became the world's largest arms seller, picking up almost three fourths of the Third World market, relying on ample government intervention and public subsidy to smooth the way. As for profits from the civilian market, a proper estimate of their scale would factor out the contribution made by dual use technology and other contributions of the public sector, hard to quantify precisely but doubtless substantial.

Military Spending v. Public Spending

The understanding that industry cannot survive in a "`free enterprise' economy" extended well beyond aircraft. The operative question after the war was what form public subsidy should take. Business leaders understood that social spending could stimulate the economy, but preferred the military alternative, for reasons having to do with privilege and power, not "economic rationality." In 1948, the business press regarded Truman's "cold war spending" as a "magic formula for almost endless good times," as Steel put it. Such public subsidies could "maintain a generally upward tone," Business Week commented, if only the Russians cooperated with a sufficiently threatening look. In 1949, the editors noted with relief that "so far, Stalin's `peace feelers' have been brushed aside" by Washington, but they remained concerned that his 'peace offensive" might nevertheless interfere with "the prospect of ever rising military spending." The Magazine of Wall Street saw military spending as a way to "inject new strength into the entire economy."

The Pentagon system has numerous advantages over alternative forms of state intervention in the economy. It imposes on the public a large burden of the costs while assuring a guaranteed market for excess production. No less significant, it does not have the undesirable side effects of social spending directed to human needs. Apart from its unwelcome redistributive effects, such spending tends to interfere with managerial prerogatives. Social spending may also arouse public interest and participation, thus enhancing the threat of democracy. For such reasons, Business Week explained in 1949 that "there's a tremendous social and economic difference between welfare pump priming and military pump priming," the latter being far preferable. And so it remains in Cobb County and other strongholds of libertarian doctrine and entrepreneurial values.

Free markets are fine for the Third World and its growing counterpart at home. Mothers with dependent children can be sternly lectured on the need for self reliance, but not dependent executives and investors, please. For them, the welfare state must flourish. "Tough love" is just the right slogan for state policy, as long as we give it the right meaning: love for the rich, tough for everyone else.

Rolling Forward Inequality

The major factors that have led to the current global economic crisis are reasonably well understood. One is the globalization of production, which has offered business the tantalizing prospect of rolling back the victories for human rights won by working people. The business press frankly warns the "pampered Westerns workers" that they must abandon their "luxurious life styles" and such "market rigidities" as job security, pensions, health and safety in the workplace, and other outdated nonsense. Economists point out that job flow is hard to estimate, but that's a small part of the story. The threat suffices to force working people to accept lower wages, longer hours, reduced benefits and security, and other such "inflexibility." The end of the Cold War, returning most of Eastern Europe to its traditional service role, places new weapons in the hands of the masters, as the business press reports with unrestrained glee. GM and VW can shift production to the restored Third World in the East, where they can find workers at a fraction of the cost of the "pampered Westerns workers," meanwhile benefiting from high tariff protection and the other amenities that "really existing free markets" provide for the rich. The US and Britain are leading the way in grinding down the poor and working people, but others will be dragged along, thanks to global integration.

And while median family income is continuing its decline even under the sluggish recovery, Fortune magazine is gloating over the "dazzling" profits of the Fortune 500, despite "stagnating" sales growth. The reality of the "lean and mean era" is that the country is awash in capital but in the right hands. Inequality is back to pre World War II levels, though Latin America has the worst record in the world, thanks to our kind tutelage. As the World Bank among others recognizes, relative equality and expenditures for health and education are significant factors in economic growth (not to speak of quality of life). But it too continues to act to increase inequality and undermine social spending, in the service of "permanent interests."

A second factor in the current catastrophe of state capitalism, which has left about 1/3 of the world's population virtually without means of subsistence, is the huge explosion of unregulated financial capital since the Bretton Woods system was dismantled 20 years ago, with perhaps $1 trillion moving every day. Its constitution has also radically changed. Before the system was dismantled by Richard Nixon, about 90% of the capital in international exchanges was for investment and trade, 10% for speculation. By 1990, those figures had reversed, and a 1994 UNCTAD report estimates that 95% is now used for speculation. In 1978, when the effects were already clear, Nobel prize winning economist James Tobin suggested in his presidential address to the American Economics Association that taxes be imposed to slow down speculative flows, which would drive the world towards a low growth, low wage, high profit economy. By now, the point is widely recognized; a study directed by Paul Volcker, formerly head of the Federal Reserve, attributes about half of the substantial slow down in growth since the early 1970s to the increase in speculation.

In general, the world is being moved by deliberate state corporate policy towards a kind of Third World model, with sectors of great wealth, a huge mass of misery, and a large superfluous population, lacking any rights because they contribute nothing to profit making, the only human value.

Controlling the Superfluous

The surplus population has to be kept in ignorance, but also controlled. This problem is faced directly in the Third World domains that have long been subject to Western control, and therefore reflect the guiding values most clearly: favored devices include large scale terror, death squads, "social cleansing," and other methods of proven effectiveness. At home, the favored method has been to coop superfluous people in urban slums that increasingly resemble concentration camps. Or if that fails, in prisons, which are the counterpart in a richer society to the death squads we train and support in our domains. Under Reaganite enthusiasts for state power, the number of prisoners in the US almost tripled, leaving our main competitors, South Africa and Russia, well behind though Russia has just caught up, having begun to grasp the values of its American tutors.

The largely fraudulent "drug war" has served as a leading device to imprison the unwanted population. New crime bills should facilitate the process, with their much harsher sentencing procedures. The vast new expenditures for prisons are also welcomed as another Keynesian stimulus to the economy. "Businesses Cash In," the Wall Street Journal reports, recognizing a new way to milk the public in this "conservative" era. Among the beneficiaries are the construction industry, law firms, the booming and profitable private prison complex, "the loftiest names in finance" such as Goldman Sachs, Prudential, and others, "competing to underwrite prison construction with private, tax exempt bonds"; and not least, the "defense establishment" (Westinghouse, etc.), "scenting a new line of business" in high tech surveillance and control systems of the sort that Big Brother would have admired.

It's not surprising that Gingrich's Contract calls for expanding this war against the poor. The war targets primarily Blacks; the close race class correlation makes the procedure only the more natural. Black males are regarded as a criminal population, criminologist William Chambliss concludes from many studies, including direct observation by students and faculty in a project with the Washington police. That's not exactly right; criminals are supposed to have constitutional rights, but as his and other studies show, that is not true of the targeted communities, which are treated as a population under military occupation.

Blacks are a particulary welcome target because they are defenseless. And engendering fear and hatred is, of course, a standard method of population control, whether it is Blacks, Jews, homosexuals, welfare queens, or some other designated devil. These are the basic reasons, it seems, for the growth of what Chambliss calls "the crime control industry." Not that crime isn't a real threat to safety and survival it is, and has been for a long time. But the causes are not being addressed; rather, it is being exploited as a method of population control, in various ways.

Children Pay the Price

In general, it is the more vulnerable sectors that are under attack. Children are another natural target. The matter has been addressed in several important studies, one a 1993 UNICEF study by a well known US economist, Sylvia Ann Hewlett, called Child Neglect in Rich Societies. Studying the past 15 years, Hewlett finds a sharp split between Anglo American societies and Continental Europe Japan. The Anglo American model, Hewlett writes, is a "disaster" for children and families; the European Japanese model, in contrast, has improved their situation considerably. Like others, Hewlett attributes the Anglo American "disaster" to the ideological preference for "free markets." But that is only half true, as I've mentioned. Whatever one wants to call the reigning ideology, it is unfair to tarnish the good name of "conservatism" by applying it to this form of violent, lawless, reactionary statism, with its contempt for democracy and human rights, and markets as well.

Causes aside, there isn't much doubt about the effects of what Hewlett calls the "anti child spirit that is loose in these lands," primarily the US and Britain. The "neglect filled Anglo American model' has largely privatized child rearing while placing it out of reach of most of the population. The result is a disaster for children and families, while in the "much more supportive European model," social policy has strengthened support systems for them.

A Blue Ribbon Commission of the State Boards of Education and the AMA pointed out that "never before has one generation of children been less healthy, less cared for or less prepared for life than their parents were at the same age" though only in the Anglo American societies, where an "anti child, anti family spirit" has reigned for 15 years under the guise of "conservatism" and "family values" a doctrinal triumph that any dictator would admire.

In part, the disaster is a simple result of falling wages. For much of the population, both parents have to work overtime merely to provide necessities. And the elimination of "market rigidities" means that you work extra hours at lower wages OR ELSE. The consequences are predictable. Contact time between parents and children has declined radically. There is sharp increase in reliance on TV for child supervision, "latchkey children," child alcoholism and drug use, criminality, violence by and against children, and other obvious effects on health, education, and ability to participate in a democratic society even survival.

These are, again, not laws of nature, but consciously designed social policies with a particular goal: to enrich the Fortune 500 exactly what happened, while Gingrich and the like preach "family values," and get away with it, with the help of those called "the bought priesthood" by the 19th century working class press.

Some of the consequences of the war against children and families do receive a huge amount of attention, in a most enlightening way. In the past few weeks, major journals have been lavishing attention on new books concerned with falling IQ and scholastic achievement. The New York Times book review devoted an unusually long lead article to the topic by its science writer Malcolm Browne, who opens by warning that government "will do so at their peril." There is no mention of the UNICEF study, nor have I seen a review elsewhere or in fact, of any study that is concerned with the war against children and families in the Anglo American societies.

So what is it that we ignore at our peril? It turns out to be quite narrow: perhaps IQ may be partially inherited, and more ominously, linked to race, with Blacks breeding like rabbits and fouling the gene pool. Perhaps Black mothers don't nurture their children because they evolved in the warm but highly unpredictable environment of Africa, the author of one of the books reviewed suggests. This is hard science, which we ignore at our peril. (I won't insult your intelligence by discussing the scientific merit of these contributions.) But we may, indeed must, ignore the social policies based on free markets for the poor and state protection for the rich the fact, for example, that in the city where such material appears, the richest in the world, 40% of children live below the poverty line, deprived of hope of escape from misery and destitution. Could that have something to do with the state of children and their achievement? Such questions we may readily ignore a natural decision by the rich and powerful, addressing one another and seeking justifications for the class war they are conducting and its human effects.

These are some of the uglier forms of population control. In the more benign variant, the rabble are to be diverted into harmless pursuits by the huge propaganda institutions organized and run by the business community, half American, which devote enormous capital and energy to convert people into atoms of consumption and obedient tools of production (when they are lucky enough to find work) isolated from one another, lacking even a conception of what a decent human life might be. That's important. Normal human sentiments have to be crushed; they are inconsistent with an ideology geared to the needs of privilege and power, which celebrates privates profit as the supreme human value and denies people rights beyond what they can salvage in the labor market apart from the wealthy, who are to receive ample state protection.

The visible Hand of Oligopolies

Along with democracy, markets too are under attack. Even putting aside massive state intervention at home and in the international economy, increasing economic concentration and market control offer endless devices to evade and undermine market discipline. To mention only one aspect, about 40% of "world trade" isn't really trade at all; it consists of operations internal to corporations, centrally managed by a highly visible hand, with all sorts of mechanisms for undermining markets in the interest of profit and power. The quasi mercantilist system of transnational corporate capitalism is rife with the kinds of conspiracies of the masters of which Adam Smith famously warned, not to speak of the traditional reliance on state power and public subsidy. A 1992 OECD study concludes that "oligopolistic competition and strategic interaction among firms and governments rather than the invisible hand of market forces condition today's competitive advantage and international division of labor in high technology industries," as in agriculture, pharmaceuticals, services and major areas of economic activity generally. The vast majority of the world's population, who are subjected to market discipline and regaled with odes to its wonders, are not supposed to hear such words; and rarely do.

It's easy to understand the mood of desperation, anxiety, hopelessness, anger and fear that is so prevalent in the world, outside of wealthy and privileged sectors and the "bought priesthood" who sing praises to our magnificence a notable feature of "contemporary culture."

Thomas Jefferson, much concerned with the fate of the democratic experiment 170 years ago, made a useful distinction between "aristocrats" and "democrats." The "aristocrats" are "those who fear and distrust the people, and wish to draw all powers from them into the hands of the higher classes." The democrats, in contrast, "identify with the people, have confidence in them, cherish and consider them as the honest & safe...depository of the public interest," if not always "the most wise." The aristocrats of his day were the advocates of the rising capitalist state, which Jefferson regarded with much dismay, recognizing the contradiction between democracy and capitalism, which is far more evident today as unaccountable private tyrannies gain extraordinary power over every aspect of life.

As always in the past, one can choose to be a democrat in Jefferson's sense, or an aristocrat. The latter path offers rich rewards, given the locus of wealth, privilege and power, and the ends it naturally seeks. The other path is one of struggle, often defeat, but also rewards that cannot be imagined by those who succumb to what the working class press, 150 years ago, denounced as "the New Spirit of the Age," "Gain Wealth, forgetting all but Self."

Today's world is far from that of Thomas Jefferson or mid 19th century workers. The choices it offers, however, have not changed in any fundamental way.

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