|| A Short Introduction ||
As I mentioned in the last
issue, Adam Smith is hardly the father of
modern capitalism. Although I merely touched on the subject, the
example of "overspecialization" is a vital contradiction to the
deepest principles of Smith's economic theory. I think it
reveals a lot about the deceptive policies that puts the worker
at a huge disadvantage.
To give another quick example, before moving forward, modern
capitalists often believe that Smith proposed self-interest as
the only sentiment that drives a man forward. What is
conveniently ignored is that although Smith admitted that he
believes it is the most persistent, in his first book The Theory
of Moral Sentiments he also emphasized the "sentiment of
sympathy." This sentiment interests a man "in the fortune of
others, and renders their happiness necessary to him, though he
derives nothing from it, except the pleasure of seeing it."
Therefore, I think he spoke of self-interest in a much broader
sense than the mere accumulation of material wealth. Thus, we
must now ask the question of "how" the ideas of Smith have been
twisted. I think it is pretty obvious "why" but I find "how" to
be a much more interesting inquiry.
|| How Adam Smith's Theory of Capitalism Has Been Twisted ||
Richard Dawkins, an evolutionary theorist, proposes that bits of
information are much like genes in that they are
self-replicating. These ideas often mutate when they are passed
from one brain to another (known as the "Meme Theory").
In the case of Smith's theory of capitalism, it seems that the
generation that preceded us, and the one before that and so
forth, did not do an adequate job passing on their knowledge. As
each generation becomes largely dependent on what the preceding
generation passes on the knowledge becomes poorer and poorer.
Consequently, full understanding becomes fragmented into pieces
of information, open to various interpretations. Although
Dawkin's ideas, as Thomas Homer-Dixon (Director of the Peace and
Conflict Studies Program and Associate Professor of Political
Science at University of Toronto) points out, "downplays the
role of human creativity" in dealing with fragmented
information, he did admit that his theory does show that our
society sometimes tend to allow ideas (diluted or not) to
"develop and persist ... without much conscious creativity and
direction." In other words, we accept the diluted version of
capitalism without exercising critical thinking or closer
observation. Therefore, such things a "Free Trade" (a misleading
concept which I will explore later) or, more accurately,
"Corporate Globalization" are, in many ways, interpreted in
fragments -- the anti-market elements within this system are not
observed. As a result, the information we would then pass along
to our children would be even more fragmented. This is then
compounded by other factors such as: info-glut, the ever
increasing pace of our daily lives, the increasing complexity of
our natural systems (ie. global warming), the narrowing of
knowledge (overspecialization) and so forth. These all lead to
what Homer-Dixon calls the "Ingenuity Gap" which he defined as
"a shortfall between" our "rapidly rising need for ingenuity
and" our "adequate supply" of it.
The concept of an ingenuity gap seems rather obvious but
considering our lack of comprehension of complex systems, or of
our most troubling problems (economic, social, political or
environmental), it is rather hard to be optimistic of a future
in which an adequate amount of ingenuity can be supplied. Of
course, this does not mean we should stop producing new ideas to
solve our most troubling problems. We can still solve them but
the hour is late. As Dixon points out, the population often
relies on "technical experts" to supply ideas but even they fail
to comprehend the increasing complexity of our world to which we
ourselves are largely responsible for. Observed in this context,
the idea of an ingenuity gap is rather enticing and definitely
deserves a more extensive discussion. Therefore, I would like to
return to the subject of corporate globalization in which there
are four effective platforms to assail it from -- the gap we
must fill with our ingenuity.
|| Assailing 'Corporate Globalization' On Four Platforms ||
1.) Worker Insecurity:
Overspecialization is just one example of promoting worker
insecurity, mainly because the worker becomes less flexible and
unable to adjust to changing situations as effectively.
Christopher D. Merrett, author of Free Trade: Neither Free Nor
About Trade, explained that the "whipsaw process", which is the
threat of job stransfer, is another tool in undermining worker
security -- this threat does not have to be reality, the threat
is enough.
"Labor Market Flexibility" is another device promoted by the
World Bank. To quote them:
"Increasing labor market flexibility -- despite the bad name
it has acquired as a euphemism for pushing wages down and
workers out is essential in all the regions of the world ... The
most important reforms involve lifting constraints on labor
mobility and wage flexibility, as well as breaking the ties
between social services and labor contracts ..."
To translate from the technical jargon: wage flexibility does
not mean wages up. As well, again, labor mobility does not mean
workers can move anywhere, as required by Smith's theory,
instead it is the right of employers to fire workers at will.
The "breaking [of] the ties between social services and labor
contracts" is surprisingly blunt and requires no further
explanation. Basically, the decision is to reverse everything
that past generations have struggled for and won.
This version of globalization is largely investor-based and it
is not the people who are free to move wherever they please. It
is capital and corporations that must be free to move because
the rights of people are secondary. More accurately, these
rights are merely incidental.
Before Congress, Alan Greenspan, the current Chairman of the
U.S. Federal Reserve Board, cited this "greater worker
insecurity" as an important factor in the "fairy-tale economy"
of the U.S. in the 1990's. The minority of the rich were able to
profit while the majority of the country suffered. Or, in the
words of the business press at the time: has given up their
"luxurious" lifestyles.
Due to increasing worker insecurity workers are afraid of
requesting for higher wages and more benefits. As a result,
working hours have increased sharply and wages either stagnated
or declined for the majority (primarily for nonsupervisory
workers). These things are imposed on much of the world by the
World Bank and International Monetary Fund as "conditions". Of
course, what is only slightly noticed in rich countries, despite
its harmful impact, are devastating for poor countries.
2.) Protectionism:
Due to protectionist elements written into World Trade
Organization rules, millions of people are dying from treatable
diseases -- mostly from poor countries. One of these elements is
called "Trade Related Intellectual Properties (TRIP's)".
TRIP's grant private megacorporations the rights to monopolize
pricing. For example, if a poor country can produce livesaving
drugs at a much lower price in comparison to the monopolistic
pricings they would be threatened with trade sanctions. The U.S.
in 1998 even threatened to withdraw funding from the World Trade
Organization if they monitored the connection between trade
sanctions and health.
Such elements have nothing to do with trade, it has everything
to do with monopolistic pricing. Such a thing, as Thomas
Homer-Dixon points out, is anti-market in that it reduces
development. Although intellectual rights are important in
protecting the innovations of entrepreneurs these rights should
only allow a temporary monopoly. A temporary monopoly would
provide enough incentives for the entrepreneur (ie. brand name,
get ahead of competition, etc.).
The creative destruction of modern capitalism is that this
temporary monopoly is maintained. As a result, no one can
innovate or make the idea better. As well, what is supposed to
be a constant race -- where there is no ultimate winner, where
those at the top would be rewarded -- becomes locked into
stagnation. Furthermore, growth is heavily slowed down and it
does nothing to promote market competition or development. In
addition, a lot of the cross-border transactions going on now
are between companies and their subsidiaries which could hardly
be considered as trading.
Again, it is about investor rights, not trade which has no value
in itself. It has value insofar as it relates to the increase in
human welfare.
3.) Third World Debt:
When the U.S. invaded ("liberated" in U.S. textbooks) Cuba in
1898 to prevent it from liberating itself from Spain, the U.S.
cancelled Cuba's debt to Spain. The reason was perfectly
reasonable: that it was an "odious debt". In other words, it was
imposed under coercive conditions and was not given consent by
the population. Therefore, it does not have to be paid. This
concept is well understood by the United States as they
recognized it in this case.
If the same principles applied to poor countries today the third
world debt would disappear completely and more. Although, as
Noam Chomsky (an MIT Linguistic Professor and cutting political
analyst) points out, it is "a very powerful weapon of control"
for the United States and cannot be abandoned. It allows
Washington to impose favorable conditions (for the U.S.) on the
indebted country. Basically, it is a powerful "ideological
tool".
For example, Nicaragua's large debt -- $6.4 billion in 2000,
clearly unpayable -- is particularly the result of the U.S.
terrorist attacks on the country from early to late 1980's. The
successful improvements that followed the Sandanista revolution
in 1979, which was awarded by the World Health Organization, was
halted by the brutality of direct U.S. attacks and support for
paramilitary (otherwise known as "death squads") groups. One
only needs to read Jesuit journals to learn about the brutality
of these death squads. Chomsky's Turning the Tide: U.S.
Intervention in Central America and the Struggle for Peace
provides an excellent account of the destruction that was
brought upon the Nicaraguan population.
Furthermore, when Nicaragua brought its case before the World
Court the U.S. was condemned for its illegal economic and
terrorist warfare. The U.S. was ordered to pay reparations which
is variously estimated around $17 billion dollars which, if
paid, can eliminate Nicaragua's debt and more. Of course, the
U.N. Security Council had similar rulings in which they also
condemned U.S. terrorism (the U.S., Israel, and El Salvador,
which was a brutal U.S. client state at the time as well, were
the only rejectionists). Thus, everything I am saying here is
far from being controversial.
In sum, Nicaragua's debt is attributable to the Somoza
dictatorship (pre-1979) -- which the United States supported to
the bitter end -- and when the U.S. regained control of the
country after turning it (like the rest of Latin America) into a
literal hell on earth (which has a few parallel in history).
Both periods accumulated what is known as "odious debt" which is
far from being a controversial term.
George Orwell would have been amazed of how this contemporary
history is dealt with in North America where it has been shoved
deep down into the memory hole (See: Issue #3 "(Nicaragua)
Forgetting the Past: Shifting Blame to Official Enemies").
4.) Sovereignty:
Once again, analogous to trade, sovereignty has no value in
itself. Its value is determined by how much it enhances (or
diminishes) freedoms and rights. It may sound stupid to point
out but it is "human beings" that are in mind when speaking of
these freedoms and rights, not abstract political and legal
beings like corporations.
Today, rights have been granted to corporations that goes far
beyond those of persons. For example, they can demand the right
of national treatment under WTO rules. As Chomsky observes, a
U.S. company can come to Mexico and "demand to be treated like a
Mexican firm." To the contrary, a Mexican person may not come to
the U.S. and demand to be treated like an American. They would
just be deported out of the country amidst laughter.
Another example is "Trade Related Investment Measures (TRIM's)"
which is also built into WTO rules as "conditions for
ramification." These allow corporations, investors, lenders and
so forth to bring suits against sovereign states, "undermining
popular sovereignty and diminishing democractic rights" of
"flesh and blood" persons as a result.
Chomsky gave the following example:
"Guatemala, a couple of years ago, sought to reduce infant
mortality by regulating the marketing of infant formula by
multinationals. The measures that Guatemala proposed were in
conformity with World Health Organization guidelines and they
kept to international codes, but the Gerber Corporation claimed
expropriation and the threat of a World Trade Organization
complaint sufficed for Guatemala to withdraw, fearing
retaliatory sanctions by the United States."
Just as a short background, the Gerber Corporation was marketing
the sale of powdered formula to poor Guatemalan mothers over
breast-feeding. They purposely ignored the fact that in order
for the formula to be effective clean water must be used. Well,
the problem was clean drinking water was a rarity in Guatemala
(much like any other poor country in the world). Gerber
Corporation knew that their policy was killing infants but the
profit was too much of an incentive. There were more factors but
this explanation should suffice to provide ample background for
now.
Again, like "Trade Related Intellectual Property (TRIP's)"
rights, this has nothing to do with trade but everything to do
with "monopolistic pricing practices enforced by protectionist
measures that are introduced into what are [misleadingly] called
free trade agreements"
|| A Short Conclusion ||
It is much easier to figure out the flaws of "modern capitalism"
and all of its vague creations -- such as corporate
globalization -- once all the deceptions, delusions, and
arrogance are shovelled out of the way. The alternatives and
solutions are readily available for anyone, we just have to look
past our own little manufactured world to find them. One thing
for sure is the fact that the economic system we have today is
backwards in practicality, morality, and intellectually.
Notes
On Capitalism (Part II)