|| 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 put 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 become 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
tends 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 as "Free Trade" (a misleading concept which I will
explore later) or, more accurately, "Corporate Globalization"
is, 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
was 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 reparation
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, 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 shoveled 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.
