Democracy and Markets
in the New World Order
‘Enduring Truths’
There is a conventional picture of the new era we are entering
and the promise it holds. It was formulated clearly by National
Security Adviser Anthony Lake when he announced 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 ‘presents
immense opportunities’ to move forward to ‘consolidate the
victory of democracy and open markets’, he expanded a year later.
The issues are much deeper than the Cold War, Lake elaborated.
Our defence 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 everything 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’.
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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.1
Commentators were duly impressed by this enlightened vision
and lucid restatement of conventional truths. A year earlier,
Thomas Friedman, the chief diplomatic correspondent of the
New York Times, had written that ‘America’s victory in the Cold
War was a victory for a set of political and economic principles:
democracy and the free market’. At last others too are coming
to understand that ‘the free market is the wave of the future—a
future for which America is both the gatekeeper and the model’.
The world is lucky to have such a noble gatekeeper, we are constantly
informed. Too noble, many fear, among them Henry
Kissinger, who has often warned that the altruism of US policy
goes too far for its own good. Sometimes the truths rise from
mere empirical fact to pure logic. Thus the Eaton Professor of
the Science of Government at Harvard, Samuel Huntington,
writes that 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’; accordingly, ‘the promotion of democracy,
human rights, and markets are [sic] far more central to
American policy than to the policy of any other country’.2
Since this is a matter of definition, the Science of Government
teaches, we may dispense with the tedious work of empirical
confirmation. A wise decision. Otherwise someone looking
just at the recent past might ask, for example, how our principled
rejection of ‘force, subversion or repression’ is illustrated by the
terrorist wars of the Reagan years in Central America, which left
three countries in ruins, strewn with tens of thousands of tortured
and mutilated corpses. Or how the Kennedy Administra-
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tion, at the other extreme of the political spectrum, was demonstrating
the same commitment with its international terrorist
campaign against Cuba and its escalation of the attack against
South Vietnam, moving from support for the standard Latin
American-style terror state that Eisenhower had instituted to
outright aggression, including bombing of civilian targets by the
US Air Force, the use of napalm, crop destruction to starve out
the indigenous resistance, and other such means.
Or some deluded person might ask how the same Administration,
at the peak period of American liberalism, was ‘containing
a global threat to market democracies’ when it prepared the
overthrow of the parliamentary government of Brazil, paving the
way to a regime of killers and torturers, with a domino effect that
left neo-Nazi regimes in control of much of the hemisphere, always
with firm US support if not initiative. The resulting plague
of repression was something new even in the bloody history of
‘our little region over here which has never bothered anybody’,
as Secretary of War Henry Stimson described the hemisphere in
May 1945 while explaining that regional systems must be disbanded
apart from our own, which were to be extended—‘as part
of our obligation to the security of the world’, the influential liberal
Democrat Abe Fortas added, explaining that ‘what was good
for us was good for the world’.
If facts are indeed irrelevant, we may overlook the conclusion
of the leading academic specialist on the US and human rights
in Latin America, Lars Schoultz, in his standard scholarly work
on the topic: the goal of the National Security States was ‘to destroy
permanently a perceived threat to the existing structure of
socioeconomic privilege by eliminating the political participation
of the numerical majority . . .’. Their establishment, their goals,
and their accomplishments are traceable in large measure to a
historic 1962 decision of the Kennedy Administration: to shift
the mission of the Latin American military from ‘hemispheric
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defence’ to ‘internal security’, while providing enhanced military
aid and training to ensure that the task would be properly performed.
‘Hemispheric defence’ was a relic from World War II,
but ‘internal security’—a euphemism for war against the domestic
population—is a serious matter. The change of mission
ordered by the liberals of Camelot changed the US stance from
toleration ‘of the rapacity and cruelty of the Latin American military’
to ‘direct complicity’ in ‘the methods of Heinrich Himmler’s
extermination squads’, in the words of Charles Maechling,
who led counterinsurgency and internal defence planning from
1961 to 1966.3
All of this—only a pea on a mountain—has no bearing on
the ‘enduring truths’ about the ‘political and economic principles’
to which the ‘tolerant society’ is dedicated, so we are instructed.
Or perhaps the record even reveals its dedication to the idea that
‘leaders and governments exist not to use or abuse people but to
provide them with freedom and opportunity’.
The actions are indeed seen much that way as they proceed,
with startling uniformity; the occasional shafts of light should not
mislead. At the dissident extreme, Asia scholar John King Fairbank
criticised the Vietnam War in his presidential address to the
American Historical Association in December 1968, explaining
that the US became involved ‘mainly through an excess of
righteousness and disinterested benevolence’. Years later, when
the record was known in even more shameful detail, Anthony
Lewis of the New York Times, at the outer reaches of media dissidence,
criticised our ‘bungling efforts to do good’ which, by 1969,
had become ‘a disaster’. At the other end of the spectrum, critics
of the war were accused of turning what all regard as a ‘noble
cause’ into a costly failure.
As for the military coup in Brazil, it was ‘a great victory for
free world’, Kennedy’s Ambassador Lincoln Gordon reported,
undertaken ‘to preserve and not destroy Brazil’s democracy’. It
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was ‘the single most decisive victory of freedom in the mid-twentieth
century’, which should ‘create a greatly improved climate
for private investments’—so in that sense, at least, it did contain
a threat to market democracy.
Given that the enduring truths are the very ‘definition of our
national identity’, we also do not have to evaluate other cases, in
fact the whole historical record, which reveals that the US has
acted to destroy democracy and undermine human rights with
some consistency, the pretexts shifting to satisfy contingent doctrinal
requirements. For many years, the reflexive justification
for any horror was the Cold War, a tale that regularly collapses,
case by case, on inspection. One general indication of its significance
is the continuity of policies before and after. The Czar was
firmly on his throne when Woodrow Wilson, keeping to a long
tradition, launched his murderous invasions of Haiti and the Dominican
Republic. This exercise of ‘Wilsonian idealism’ killed
thousands, restored virtually slavery in Haiti, and dismantled its
parliamentary system because legislators refused to accept a
‘progressive’ Constitution written in Washington that allowed US
investors to turn the country into their private plantation; and,
perhaps most important, left both countries in the hands of terrorist
armies dedicated to ‘internal security’, and trained and
armed for the task. With no Bolsheviks in sight, the US was defending
itself against the Huns.
In earlier years, conquest and terror were acts of self-defence
against (among others) Spain, England, and the ‘merciless Indian
savages’ whose crimes are denounced in the Declaration of Independence
in a remarkable inversion of the facts that is scarcely
noticed after 200 years. Innocent Americans were even under attack
by ‘hordes of lawless Indians’ and ‘runaway negroes’ waging
‘savage, servile, exterminating war against the United States’ in
1818; Secretary of State John Quincy Adams’s official justification
for the conquest of Florida in 1818 in which General An-
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drew Jackson was exterminating indigenous people and runaway
slaves in the conquered territory, an important and much admired
state paper that established the doctrine of executive war
without the congressional approval required by the Constitution.
So the ugly story continues.
Sometimes the enemy is the entire world. President Lyndon
Johnson warned in November 1966 that the people out there
outnumber us 15 to 1, and ‘If might did make right they would
sweep over the United States and take what we have’. The grave
dangers were underscored by the corruption of the United Nations,
then falling under ‘the tyranny of the majority’ as decolonisation
and recovery from the war weakened the ability of the US
to impose discipline. By the 1960s, diplomatic correspondent
Barbara Crossette of the New York Times writes in retrospect,
‘Moscow and many newly independent nations were isolating
and vilifying the United States’. It is hardly surprising, then, that
the US was forced, in self-defence, to take a commanding lead
in vetoing Security Council resolutions, blocking the General Assembly,
and refusing to provide legally obligated funding. Sober
commentators probed the causes of the world’s moral decline.
Times cultural commentator Richard Bernstein, famous more recently
for his condemnation of ‘political correctness’, attributed
it to ‘the very structure and political culture’ of the UN and the
lack of diplomatic skills among naive Americans. The title was
‘The U.N. vs. the U.S.’, not ‘The U.S. vs. the U.N.’; it is the world
that is out of step when the US stands alone. Though the UN’s
reputation for integrity revived as it followed US orders once
again during the Gulf War, and for once Washington did not have
to veto resolutions condemning aggression and atrocities, this
‘wondrous sea change’, as the Times editors called it, did not last
long. Throughout these grim years, ‘There were times when only
the United States and Israel voted together, and people questioned
whether we had any friends there’, the Chairman of the
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House Committee on International Relations, moderate New
York Republican Benjamin Gilman, commented recently. Many
times, in fact, though the US has sometimes been able to mobilise
El Salvador, Romania, and a few others to the cause of justice
and freedom; and in the Security Council, Britain is fairly
reliable, taking second place in vetoes (France a distant third)
since the 1960s, when Moscow’s dominance became intolerable
to true democrats.4
As Kennedy’s ‘monolithic and ruthless conspiracy’ engaged
in world conquest faded from the scene in the 1980s, the search
was on for new aggressors threatening our borders and our lives.
Libya, disliked and defenceless, served as a particularly useful
punching bag for courageous Reaganites. Other candidates include
crazed Arabs generally, international terrorists, or whoever
else can be conjured up. When George Bush celebrated the fall
of the Berlin Wall by invading Panama, it was not in defence
against Communism; rather, the demon Noriega, captured,
tried, and condemned for his crimes, almost all committed while
he was on the CIA payroll. At this moment, half of US military
aid goes to Colombia, the hemisphere’s leading human rights violator,
with a shocking record of atrocities. The pattern is typical,
but the pretext is not; this time, it is defence against narcotraffickers.
US military aid and training go almost entirely to military
forces that are not involved in the ‘drug war’, except in one respect:
as reported by the international human rights monitors
and all other competent observers, the recipients of US aid and
training and their paramilitary associates are at the heart of the
racket, a global enterprise that has been abetted by US policy in
most remarkable ways, for half a century.
Various devices are at hand to demonstrate the irrelevance
of a morbid fascination with fact. Realist scholars explain that
appeal to the historical record ‘confound[s] the abuse of reality
with reality itself’. Reality is the unachieved ‘national purpose’
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revealed by ‘the evidence of history as our minds reflect it’; the
actual historical record is a mere artefact, which tells us nothing
about ‘the Purpose of America’. To think otherwise is to fall into
‘the error of atheism, which denies the validity of religion on similar
grounds’.5
Also ready on the shelf is the doctrine of ‘change of course’.
True, we made errors in the past, a result of our innocence and
excessive good will. But that is behind us, and we can therefore
keep to the grand vistas that lie ahead, ignoring all of history and
what it might suggest about the functioning and behaviour of institutional
structures that remain unchanged. The doctrine is invoked
with impressive regularity, always with sober nods of
approval for the profundity of the insight.
Suppose then that we adopt the doctrine and keep just to
‘our little region over here’ right now, in 1995, before the next
change of course takes effect—somehow always leaving us on
the same track.
In May 1995, the Bishop and priests of the Diocese of
Apartado in the northwest region of Colombia issued a ‘Communique
to Public Opinion’ about ‘the moment of terror’ in
which the people are living, ‘caused by homicides and disappearances’.
‘The paramilitary groups have mercilessly decimated entire
towns’, they charge, while the authorities, ‘facing the tragedy
of the people, . . . remain indifferent without opposing the advance
of this macabre plan of death and destruction’. Their
charges are backed by the Mayor of Apartado, who alleges that
the paramilitary groups are ‘virtually running wild with an escalation
of murders and horrible mutilations’ while the tens of
thousands of military and police watch in silence.
As does the world, in particular, the country that is providing
the arms and training. The Communique may reach a few people
in the solidarity groups, but will not find its way through the
usual filters, for the usual reasons. It is the wrong story: the re-
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sponsibility lies in the wrong hands, and the atrocities could readily
be stopped if the public were alerted. So far, all efforts to expose
the use of half of US military aid have been successfully
deflected, but if that proves impossible, they can be dismissed
with yawns and sneers about ‘old stories’ and ‘routine Americabashing’,
or by appeal to the doctrine of ‘change of course’; this
was a few weeks ago, after all.
The current upsurge of military–paramilitary atrocities in
Colombia seems to be part of land-grab efforts related to a multibillion
dollar development project in the region. The paramilitaries
are closely linked to the landowners, ranchers, and
narcotraffickers, one of the most important of whom recently became
supreme commander of the paramilitary units of the Magdalena
Medio region, long known for the close cooperation of
the military, drug lords, landowners, and paramilitary forces.
The agents of this ‘macabre plan of death and destruction’ are
the usual ones, as are the targets: grassroots civic and popular
organisations and their leaders, peasants, indigenous people and
the Black population, in fact anyone who gets in the way of the
alliance of the government, drug rackets, and ‘legitimate’ economic
powers. All of this continues a regular pattern, including
the silence.
Markets in the Real World
Since the enduring truths lie beyond the reach of trivial fact, we
may cheerfully put aside other qualms. Take the dedication to markets.
If that is part of the ‘national identity’ by definition, it would
be plain silly to bring up the fact that, from its origins, the US has
been ‘the mother country and bastion of modern protectionism’. I
am quoting the eminent economic historian Paul Bairoch, who
proceeds to document his more general conclusion that ‘it is difficult
to find another case where the facts so contradict a dominant
theory’ as the doctrine that free markets were the engine of
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growth;6
or, for that matter, that great powers adhered to them except
for temporary advantage. That ‘late developers’ have departed
from these principles has been familiar since the work of Alexander
Gerschenkron, at least. The same is true of their predecessors. The
United States, in particular, has always been extreme in rejecting
market discipline. That is how it developed from the beginning, including
textiles, steel, energy, chemicals, computers and electronics,
pharmaceuticals and biotechnology, agribusiness, and so on,
gaining enormous wealth and power instead of pursuing its comparative
advantage in exporting furs, in accord with the stern principles
of economic rationality.
Nor did the American developmental state break new
ground. Britain had 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 fairly safe bet, even
then relying on the fact that 40 per cent of its exports could go to
the Third World (1800–1938). It is not easy to find an exception,
from the origins of Europe’s industrial revolution, when Daniel
Defoe, expressing the common perception in 1728, warned that
England faced an uphill struggle in attempting to compete with
‘China, India and other Eastern countries’. The problem was that
they have ‘the most extended Manufacture, and the greatest variety
in the World; and their Manufactures push themselves upon
the World, by the meer Stress of their Cheapness’. They also may
have had the highest real wages in the world at the time and the
best conditions for working class organisation, so the most detailed
recent scholarship indicates, contrary to long-standing beliefs.
‘Britain itself would have been deindustrialized by the
cheapness of Indian calicoes if protectionist policies had not been
adopted’, the same work concludes.7
Contemporaries saw matters much in that light. A century
after Defoe, liberal historian Horace Wilson observed ruefully
that without protection, ‘the mills of Paisley and Manchester
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would have been stopped in their outset, and could scarcely have
been again set in motion, even by the power of steam. They were
created by the sacrifice of Indian manufacturers’. It was India,
not Britain, that was deindustrialised, including steel, ship-building,
and other manufactures.
Britain showed the same ‘constant face’ when Egypt tried to
undertake an industrial revolution under Mohammed Ali; with
rich agricultural resources and domestic cotton, Egyptian development
might have succeeded, as France and Britain feared, had
it not been for British financial and military power, which intervened
to bar unwanted competition and interference with British
imperial strategy. Unlike the US at the same time, Egypt was unable
to attempt a course of independent development in radical
violation of the principles of economic science.8
Serious comparative studies are few, but what they suggest
has much contemporary relevance. It can hardly escape notice
that one part of the South resisted colonisation: Japan, the one
part that developed, with its colonies in tow; a brutal colonial
power, Japan nevertheless industrialised and developed its
colonies, unlike the West. Or that the earliest colony happens
to be the one part of northern Europe to retain Third World
characteristics: Ireland. One of the leading historians of Africa,
Basil Davidson, observes that modernising reforms in West
Africa’s Fanti Confederation and Asante kingdom were similar
to those implemented by Japan at the same time, and indeed
were seen in that light by African commentators and historians,
one of whom wrote bitterly a few years later that ‘The same
laudable object was before them both, [but] the African’s attempt
was ruthlessly crushed and his plans frustrated’ by British
force. Davidson’s own view is that the potential ‘was in substance
no different from the potential realised by the Japanese
after 1867’. But West Africa joins Egypt and India, not Japan
and the United States, which were able to pursue an independ-
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ent path, free from colonial rule and the strictures of economic
rationality.9
By the 1920s, England could not compete with more efficient
Japanese industry. It therefore called the game off, returning
to the practices that allowed it to develop in the first place.
The empire was effectively closed to Japanese trade; Dutch and
Americans followed suit. These were among the steps on the
road to the Pacific phase of World War II, and among those ignored
in the 50th anniversary commemorations.
The Reaganites followed much the same course in the face
of Japanese competition half a century later. Had they permitted
the market forces they worshipped in public to function, there
would be no steel or automobile manufacturing in the United
States today; nor semiconductors, massively parallel computing,
and much else. The Reagan Administration simply closed the
market to Japanese competition while pouring in public funds,
measures expanded under Clinton. No such measures were
needed to safeguard the leading civilian export industry, aircraft,
or the huge and profitable tourism industry, based on aircraft
and government-funded infrastructure. These are hardly more
than an off-shoot of the major component of the welfare state:
the Pentagon system (even the ‘defense highway system’ that was
part of the state–corporate social engineering project that
changed the face of America).
It was entirely natural for Clinton to select the Boeing corporation
as the model for the ‘grand vision of a free market future’
that he proclaimed at the Seattle meeting of the Asia–Pacific Economic
Conference (APEC) in 1993, to much acclaim. One could
hardly find a finer prototype of the publicly subsidised privateprofit
economy that is proudly called ‘free enterprise’. The triumph
of the free market was further underscored by Clinton’s
announcement of his one APEC achievement: contracts with
China for aircraft, nuclear power generators, supercomputers,
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and satellites, produced by Boeing, GE, Cray and Hughes Aircraft,
all paragons of free enterprise (the sales were illegal because
of China’s alleged involvement in nuclear and missile proliferation,
but the State Department explained that Washington would
‘interpret’ the laws as inapplicable).
Equally appropriate was Clinton’s selection at the Jakarta
APEC session a year later: Exxon, another prime example of independent
entrepreneurial values unhampered by the nanny
state. Once again, Clinton was praised not only for the grand vision,
but also for the successes of ‘the Administration’s campaign
of commercial diplomacy’, which ‘will mean jobs for Americans’,
Times political correspondent Elaine Sciolino reported. She was
referring to Clinton’s announcement of a new US$35 billion contract
for Exxon to cooperate with Indonesia’s Pertamina oil company
to develop a natural gas field for the benefit of other US
corporations and Indonesia’s state-owned electrical company.
That should provide lots of ‘jobs for Americans’—at least lawyers,
bankers, executives and managers, maybe a handful of skilled
workers for a short period. The good news for American workers
led to a rapid increase in Exxon’s stock.10
It is perhaps worth mentioning that the word ‘profits’ has
largely disappeared from respectable discourse. In contemporary
Newspeak, the word is to be pronounced ‘jobs’. Understanding
the conventions, we appreciate the accuracy of the praise for
Clinton’s success in gaining ‘jobs for Americans’. The same conventions
allow recognition of the fact that the Pentagon is not
only for defence against foreign hordes; it also provides ‘jobs’.
‘Politicians of both parties see the defense budget as a jobs program’,
Lawrence Korb of the Brookings Institution writes in a
criticism of the inflated military budget. Profits for investors and
higher salaries for top executives? Perish the thought.
The business press, however, has laxer standards. As the US
pressured Japan to accept more car parts from US manufacturers
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in mid-1995, the respectable media featured the official theme:
‘This is just being hard-nosed and understanding the interests of
the American people’, unfairly deprived of jobs (US trade representative
Mickey Kantor). But the Wall Street Journal could lift
the veil. US parts-makers were indeed hoping that state power
would pry open the Japanese market, which they intended to
supply from their plants in China, Southeast Asia, and Japan itself.
There would be few jobs for Americans in the literal sense
of the word, but plenty of ‘jobs’ for US-based transnationals in
the Orwellian sense.11
No resort to this device is too ludicrous to elicit even a raised
eyebrow, so conventional has it become.
Defiance of market principles and state violence have been
significant factors in economic development, including postwar
Europe, Japan, and the NICs in its periphery, all of which received
a crucial economic stimulus from US military adventures.
Today’s First and Third Worlds were far more similar in the eighteenth
century. One reason for the enormous difference since is
that the rulers were able to avoid the market discipline rammed
down the throats of their dependencies. ‘There is no doubt’,
Bairoch concludes in his detailed refutation of the leading ‘myth
of economic science’, ‘that the Third World’s compulsory economic
liberalism in the nineteenth century is a major element in
explaining the delay in its industrialisation’, in fact, its ‘de-industrialisation’,
a story that continues to the present under various
guises. Bairoch in fact considerably understates the role of state
intervention for the wealthy, because he limits himself in conventional
manner to a narrow category of market interferences: protection.
But that is only a small part of the story. To mention only
one omission, the early industrial revolution in England and the
US was fuelled by cotton, which was cheap and accessible
thanks to the expulsion or extermination of the native population
of the southeast United States and the import of slaves, de-
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partures from market orthodoxy that do not enter the odes to its
wonders. So the story continues to the present.
Keeping to protectionist measures, Bairoch concludes that
after World War II, the US at last moved towards liberal internationalism
after a long history of violating these principles, including
its most rapid period of growth, when tariffs were far
higher than competitors. But that belief can be sustained only
by ignoring the huge state component of the economy, which
undergirded all of high-technology industry during the ‘golden
age of free market capitalism’. In the 1950s, virtually all funds
for research and development of computers came from the taxpayer,
along with 85 per cent of R&D for electronics generally.
I’ll return to the matter; ignoring it, we can understand little
about the contemporary economy or ‘really existing free markets’.
Similarly, the huge social engineering project that led to
the ‘suburbanization of America’, with enormous consequences,
relied on extensive state intervention, from the local to national
level, along with major corporate crime that received a tap on
the wrist in the courts; consumer choices were a slight factor.12
There are fluctuations, to be sure. The statist reactionaries
of the Reagan years broke new records in protectionism and public
subsidy, boasting about it quite openly to their business audience.
Secretary of the Treasury James Baker ‘proudly proclaimed
that Mr Ronald Reagan had “granted more import relief to US
industry than any of his predecessors in more than half a century”’,
international economist Fred Bergsten writes, adding that
the Reaganites specialised in ‘the most insidious form of protectionism’:
‘managed trade’ that most ‘restricts trade and closes
markets’, and ‘raises prices, reduces competition and reinforces
cartel behaviour’. Baker was much too modest. The free trade
enthusiasts and fiscal conservatives imposed more protectionist
measures than all postwar administrations combined, virtually
doubling import restrictions to 23 per cent, while rapidly
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increasing deficits as well, burdening the taxpayer with huge interest
payments.13
Though the Reaganites generally led the pack, almost all industrial
societies have become more protectionist in recent years.
The effects on the South have been severe. Protectionist measures
of the rich have been a significant factor in doubling the already
huge gap between the poorest and richest countries in the
past generation. The 1992 UN Development Report estimates
that protectionist and financial measures of the rich countries
deprived the South of US$1/2 trillion a year, about 12 times total
‘aid’—most of it publicly subsidised export promotion. This behaviour
is ‘virtually criminal’, the distinguished Irish diplomat
and author Erskine Childers observed recently. He also notes
that the West, under US lead, blocked a 1991 resolution tabled
at the General Assembly by the South against ‘economic measures
as a means of political and economic coercion against developing
countries’, the favoured technique, apart from terror,
by which Washington has sought to destroy such independent
upstarts as Cuba and Nicaragua—while never ceasing to chant
odes to the free market. The facts are ‘very little known’, Childers
writes, ‘because of course such things do not get reported by the
dominant Northern media’. He hopes that some day this ‘wholesale
moral abdication by Northern countries’ will lead to ‘their
utter shame before their own citizens’.14
No one familiar with the ‘enduring truths’ is holding their
breath.
Childers couldn’t be more right about the ‘utter shame’. Two
years ago, WHO director-general Hiroshi Nakajima reported
that 11 million children die every year from easily treatable diseases
because the developed world lacks the will to provide the
meagre resources needed to overcome this ‘preventable
tragedy’—a ‘silent genocide’ that should shame all of us. In June
1995, UNICEF released its annual report, estimating at 13 mil-
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lion the number of children who die because the rich countries
deny them pennies of aid. That too evaded the ‘dominant Northern
media’, at least in the United States, though the national
press did report on the same day that Congress planned to reduce
by a third the princely sum of US$425 million that had
been proposed for UNICEF for the coming year, also slashing
foreign aid by US$3 billion over two years (while leaving intact
the US$3 billion that goes to a rich country that serves US interests,
Israel, along with US$2.1 billion to Egypt, for similar reasons;
that amounts to almost half the total). The US already had
the most miserly aid record of OECD countries, but not miserly
enough, Congress has determined.
Shortly after, Washington informed the UN Industrial Development
Organisation (UNIDO) that it would provide only
half of its US$26 million pledge (legally binding under UN
treaties), forcing a large curtailment of UNIDO’s operations. The
Group of 77 was ‘deeply shocked and dismayed’ at this further illegal
action by the leading debtor, already US$8 million in arrears.
Only the most diligent could discover the facts, once again.
The actions that would ‘utterly shame’ any decent person
have little to do with public opinion. On the contrary, recent
studies again show that ‘a strong majority’ of the public favour
maintaining or even increasing aid, and directing it to the poor
rather than to strategic allies and military purposes. A ‘strong
majority’ would also be willing to pay more taxes if aid went to
people who need it, and an ‘overwhelming majority rejects the
idea that the United States should only give when it promotes
the U.S. national interest’. All exactly the opposite of the policies
executed by the political leadership, who never cease to proclaim
their service to the public will.15
The regularity of the pattern is instructive. Thus President
Clinton agrees that the US must lower its contributions to UN
peacekeeping operations while his right-wing adversaries want
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to go much further, shackling or even ending them. In contrast,
they are favoured by over 80 per cent of the public. Half consistently
support US participation, 88 per cent if there are fair
prospects of success. Only 5–10 per cent consistently oppose
such operations, the remainder varying with circumstances. The
effect of fatalities in Somalia was slight, contrary to much pretence.
Two-thirds favour contributing US troops to a UN operation
to protect ‘safe havens’ or to stop atrocities in Bosnia; 80
per cent take the same position with regard to Rwanda, if the
UN were to conclude that genocide is underway.
Nevertheless, 60 per cent of the population think the US has
‘done enough to stop the war in Bosnia’—namely, nothing. But
not because of cruelty or indifference, as other studies reveal.
There is also opposition to foreign aid, particularly on the part
of the 25 per cent of the population who believe it to be the
biggest item on the federal budget. In fact, about half of discretionary
spending goes to the Pentagon, a fact known to under
one-third of the population, while foreign aid is undetectable
(putting aside its purposes).16
Such apparently contradictory results are not hard to explain.
People would like to do the right thing, but have been drowned
in ‘enduring truths’ about our altruism and awesome benevolence,
and the ingratitude of a hostile world. For similar reasons,
overwhelming majorities support more help for the poor but call
for cutting welfare: why spend our hard-earned money for Black
mothers in Cadillacs who breed like rabbits to get more welfare
cheques? And having been deluged with these and other fairy
tales—sometimes related by figures like Ronald Reagan, who
may even have believed his famous anecdotes—they also much
overestimate the share of the Federal budget that goes to welfare,
and are quite unaware that it has fallen radically over the
past 20 years from a level that was low to begin with by comparative
standards. A similar barrage leads the public to feel crushed
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by an overwhelming tax burden; only Turkey and Australia are
lower, relative to GDP, among the OECD countries (1991).
Also hidden in the shadows is the fact that the tax system
is unusually regressive. A particularly telling measure is the effect
of taxes and transfers (benefits, etc.) on alleviating poverty.
The most careful study of the topic, by economists Lawrence
Mishel and Jared Bernstein, concludes that ‘the U.S. system of
taxes and transfers is much less effective in reducing poverty
than that of any other [industrialised] country’, and is becoming
‘even less effective over time’, particularly in the Reagan years,
while it has grown more effective elsewhere. Children suffer
particularly under the US system. In the average comparable
country, such measures reduced child poverty by over half from
1979 into the 1980s, while in the US they reduced it by less
than a quarter in 1979, down to 8.5 per cent in 1986 as Reaganite
policies took effect.
Currently fashionable ‘flat tax’ proposals call for excluding
financial gains (dividends, capital gains, interest), which constitute
almost half of income for the top 1 per cent of families, a
proportion that declines very rapidly as we move to lower income
levels. ‘It’s hard to find a definition of “fairness” more compelling
than the idea that every citizen is treated equally’, Fortune magazine
declares in an upbeat cover story on ‘the beginning of the
end of the American income tax system’, quoting an economist
for a right-wing research institute.17
What business leaders call their ‘everlasting battle for the
minds of men’ may not have changed attitudes very much, but
it has left the population mired in confusion, which is just as
good for the fundamental purpose: driving the ‘great beast’, as
Alexander Hamilton called the people, out of the public arena,
where it does not belong, sentiments echoed across the spectrum
throughout American history—again, not an innovation
or exception.
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But once again, such matters have no bearing on the state
of American democracy, if indeed the enduring truths are beyond
the reach of evidence.
Democracy: ‘Containing the People’
It would be unfair to imply that everyone considers facts irrelevant.
I’ve already mentioned a few examples to the contrary and
there are others. Take democracy according to the canon, the principle
that guides and inspires the political leadership above any
other. To evaluate the theory we naturally turn to the place where
policy makers had a relatively free hand: ‘our little region over
here’, rich in resources and potential, and one of the world’s worst
horror chambers—another fact from which we are to learn nothing.
But what about the 1980s, when there was yet another
‘change of course’ as the Reagan Administration led a grand crusade
to bring the benefits of democracy to oppressed people? Perhaps
the most serious studies of the topic within the mainstream
are by Thomas Carothers, who combines the view of a historian
with that of an insider, having been involved in the Reagan Administration
programs to ‘assist democracy’ in Latin America.
These programs were ‘sincere’, he writes, but largely a failure—
though an oddly systematic one. Where US influence was least,
progress was greatest: in the southern cone, where there was real
progress, opposed by the Reaganites at every step although 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 ‘populistbased
change’ that might upset ‘established economic and political
orders’ and open ‘a leftist direction’.18
As, indeed, quite generally.
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It is only by looking closely at individual cases that one can
appreciate the depth of the fear and hatred of democracy in elite
circles. One of the most instructive examples is Nicaragua, also
well studied, but in work that is far from the public eye.
Nicaragua had elections in 1984, widely praised by even hostile
international observers and by the professional organisation
of Latin American scholars, which studied them in unusual
depth. But they could not be controlled, so they did not take
place. Period. The first elections, by official fiat and near universal
practice, were in 1990—we need not tarry on the official tale
that the elections always scheduled for 1990 took place only because
of US pressures, standard apologetics for the terrorist war.
As the electoral campaign opened, the White House announced
that US terror and economic warfare would continue unless
Washington’s candidate were elected; that is considered no interference
with the ‘democratic process’ in the United States, or
the West generally. When the elections came out ‘the right way’,
the Latin American press, largely hostile to the Sandinistas, generally
interpreted it as a victory for George Bush. The US reaction
was different. The Newspaper of Record was typical, with
its headlines hailing the ‘Victory for U.S. Fair Play’ as Americans
were ‘United in Joy’ in the style of Albania and North Korea. At
the outer limits, columnist Anthony Lewis could scarcely contain
his admiration for Washington’s ‘experiment in peace and
democracy’, which gave ‘fresh testimony to the power of Jefferson’s
idea: government with the consent of the governed . . . To
say so seems romantic, but then we live in a romantic age’.
Few had any doubts as to how ‘Jefferson’s idea’ was realised.
Thus Time magazine rejoiced as ‘democracy burst forth’ in
Nicaragua, outlining the methods of ‘U.S. Fair Play’: to ‘wreck
the economy and prosecute a long and deadly proxy war until
the exhausted natives overthrow the unwanted government
themselves’, with a cost to us that is ‘minimal’, leaving the victim
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‘with wrecked bridges, sabotaged power stations, and ruined
farms’, and providing Washington’s candidate with ‘a winning
issue’, ending the ‘impoverishment of the people of Nicaragua’.19
But that’s all down the memory hole, along with the rest of
the sordid story. Also best avoided is what happened to the shattered
society after ‘democracy burst forth’. For the overwhelming
majority the outcome has been a disaster, so much so that the
UN Food and Agriculture Organisation (FAO) predicts that
‘Nicaragua’s next generation will be smaller, weaker, and less intelligent
than today’s population’—those who survive, that is.
Deaths from malnutrition of children under four have increased
by 35 per cent since the ‘romantic age’ began. Homeless waifs
beg for pennies on the streets, or sniff glue to ‘take away the
hunger’. Creatures that scarcely resemble humans scour the
Managua dump for scraps of food. There has been massive starvation
on the Atlantic Coast and a huge drug epidemic. The facts
are reported by relief organisations and at the usual margins, but
are of no interest to the perpetrators of the crimes, including
those who shed bitter tears over the sad fate of the coastal people
subjected to ‘genocide’ by the cruel Sandinistas; abuses were real,
though undetectable by comparison to what the same people fervently
supported, as the international human rights monitors
vainly reported.20
Of all of these crimes, the most cruel is the destruction of
hope in a demoralised society, sinking into helplessness, misery,
and despair. The facts filed away out of sight tell us a lot about
the passion for democracy and human rights, in case after
shameful case.
What Carothers describes is exactly what we are seeing right
now in the prize model of the Clinton Doctrine offered by National
Security Adviser Lake: Haiti. Its elected President was allowed
to return after the popular organisations had been
subjected to a sufficient dose of terror, but only after he too had
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been educated—given ‘a crash course in democracy and capitalism’,
as his leading supporter in Washington described the
process of civilising the troublesome priest, in terms far more
sympathetic to the ‘radical extremist’ than the norm. President
Aristide was compelled to accept 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 slumdwellers
who scandalised Washington by creating a civil society
so lively and vibrant that they were able to elect a President and
enter the public arena. That impropriety was overcome in the
usual way with ample US complicity; for example, by the decision
of the Bush and Clinton administrations to allow the Texaco
Oil Company to supply the coup leaders and their wealthy supporters
in violation of the sanctions, a crucial fact revealed by
Associated Press the day before US troops landed in September
1994, though also kept from the public eye. The ‘renovated state’
is now back on track, following the policies of Washington’s candidate
in the 1990 elections, in which he received 14 per cent of
the vote.21
An honest inquiry will reveal that the conventional picture
ranges from dubious to false in every crucial respect, save one:
the importance of enduring truths. It is only necessary that we
agree to look at the historical record to discover what they are,
and why. And surely we should take them quite seriously as we
consider the likely future, with institutional structures essentially
unchanged and operating with little constraint.
Pursuing this course, we find reason to believe that the ‘new
world’ that is portrayed in such bright and hopeful colours may
indeed be marked by a shift away from ‘containment’, but not to
‘enlargement’; rather, to ‘rollback’, to borrow another term from
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the lexicon of international affairs. For over a century those
whom Adam Smith called ‘the principal architects of policy’—in
his day the ‘merchants and manufacturers’ of England, in ours,
their inheritors—have sought to contain democracy and human
rights, disdaining markets except when they confer advantage.
As in Smith’s day they naturally try to mobilise state power to
ensure that their own interests ‘are most peculiarly attended to’,
however ‘grievous’ the impact on others. Since the early 1970s,
important changes in the global economy have opened the
prospect of not just containing but actually rolling back the victories
for human rights, freedom, and democracy that have been
won in a century of bitter popular struggle—an alluring prospect,
as the current scene illustrates vividly. The enduring truths are
likely not only to persist, but to become still more grim for much
of the world’s population; at home as well, as the social contract
is unravelled.
These are large topics, and I can only hope to touch on a few
of them.22
But let me try to flesh out the story as I see it with
some specific detail.
A good place to start is in Washington, right now. The standard
picture is that a ‘historic political realignment’ took place
in the congressional elections of 1994 that swept Newt Gingrich
and his army into power in a ‘landslide victory’, a ‘triumph of conservatism’
that reflects the continuing ‘drift to the right’. With
their ‘overwhelming popular mandate’, the Gingrich army will
fulfil the promises of the Contract with America. They will ‘get
government off our backs’ so that we can return to the happy
days when the free market reigned and restore ‘family values’,
ridding us of ‘the excesses of the welfare state’ and the other
residues of the failed ‘big government’ policies of New Deal liberalism
and the ‘Great Society’. By dismantling the ‘nanny state’,
they will be able to ‘create jobs for Americans’ and win security
and freedom for the ‘middle class’. And they will take over and
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successfully lead the crusade to establish the American Dream
of free market democracy, worldwide.
That’s the basic story. It has a familiar ring.
Ten years before, Ronald Reagan was re-elected in the second
‘conservative landslide’ in four years. In the first, in 1980, Reagan
won a bare majority of the popular vote and 28 per cent of the electorate.
Exit polls showed that the vote was not ‘for Reagan’ but
‘against Carter’—who had in fact initiated the policies that the
Reaganites took up and implemented, with the general support of
congressional Democrats: accelerated military spending (the state
sector of the economy) and cutbacks in programs that serve the
vast majority. Polls in 1980 revealed that 11 per cent of Reagan
voters chose him because ‘he’s a real conservative’—whatever that
term is supposed to mean.
In 1984, there were great efforts to get out the vote, and they
worked: it increased by 1 per cent. The number of voters who
supported Reagan as a ‘real conservative’ dropped to 4 per cent.
A considerable majority of those who voted hoped that Reaganite
legislative programs would not be enacted. Public opinion
studies showed a continuation of the steady drift towards a kind
of New Deal-style welfare state liberalism.
Why the votes? The concerns and desires of the public are
not articulated in the political system—one reason why voting so
sharply skewed towards privileged sectors.
When the interests of the privileged and powerful are the
guiding commitment of both political factions, people who do
not share these interests tend to stay home. William Dean Burnham,
a leading specialist on electoral politics, pointed out that
the class pattern of abstention ‘seems inseparably linked to another
crucial comparative peculiarity of the American political
system: the total absence of a socialist or laborite party as an organized
competitor in the electoral market’. That was fifteen
years ago, and it has only become more pronounced as civil so-
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ciety has been even more effectively dismantled: unions, political
organisations, and so on.
In the United States, ‘the interests of the bottom three-fifths
of society’ are not represented in the political system, political
commentator Thomas Edsall of the Washington Post pointed out
a decade ago, referring to the Reagan elections. There are many
consequences apart from the highly skewed voting pattern. One
is that half the population thinks that both parties should be disbanded.
Over 80 per cent regard the economic system as ‘inherently
unfair’ and the government ‘run for the benefit of the few
and the special interests, not the people’ (up from a steady 50 per
cent for a similarly worded question in the pre-Reagan years)—
though what people might mean by ‘special interests’ is another
question. The same proportion think that workers have too little
influence—though only 20 per cent feel that way about unions
and 40 per cent consider them too influential, another sign of the
effects of the propaganda system in inducing confusion, if not in
changing attitudes.
That brings us to 1994, the next in the series of ‘conservative
landslides’. Of the 38 per cent of the electorate who took part, a
bare majority voted Republican. ‘Republicans claimed about 52
percent of all votes cast for candidates in contested House seats,
slightly better than a two-point improvement from 1992’, when
the Democrats won, the polling director of the Washington Post
reported. One out of six voters described the outcome as ‘an affirmation
of the Republican agenda’. A ‘more conservative Congress’
was considered an issue by a rousing 12 per cent of the
voters. An overwhelming majority had never heard of Gingrich’s
Contract with America, which articulated the Republican agenda
and has since been relentlessly implemented, with much fanfare
about the popular will, and less said about the fact that it is the
first contract in history with only one party signing, and the other
scarcely knowing of its existence.
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When asked about the central components of the Contract,
large majorities opposed almost all, notably the central one: large
cuts in social spending. Over 60 per cent of the population
wanted to see such spending increased at the time of the elections.
Gingrich himself was highly unpopular, even more than
Clinton, whose ratings are very low; and that distaste has only
persisted as the program has been implemented.
There was plenty of opposition to Democrats; the election
was a ‘vote against’. But it was nuanced. Clinton-style ‘New Democrats’—in
effect, moderate Republicans—lost heavily but not
those who kept to the traditional liberal agenda and tried to activate
the old Democratic coalition: the majority of the population
who see themselves, correctly, as effectively disenfranchised.
Voting was even more heavily skewed toward the wealthy and
privileged than before. Democrats were heavily preferred by those
who earn less than US$30 000 a year (about the median) and ran
even with Republicans in the US$30 000–US$50 000 range. The
opinion profiles of non-voters were similar on major issues to those
who voted the Democratic ticket. Voters who sensed a decline in
their standard of living chose Republicans—or, more accurately,
opposed incumbent Democrats—by close to two to one. Most are
white males with very uncertain economic futures, just the people
who would have been part of a left-populist coalition committed
to equitable economic growth and political democracy were such
an option to intrude into the business-run political arena. In its
absence, many are turning to religious fanaticism, cults of every
imaginable kind, paramilitary organisations (‘militias’), and other
forms of irrationality, an ominous development, with precedents
that we remember, and that now concern even the corporate executives
who applaud the actions of the Gingrich army in its dedicated
service to the most rich and privileged.
Nevertheless, despite the propaganda onslaught of the last
half century, the general population has somehow maintained
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social democratic attitudes. Substantial majorities believe the
government should assist people in need, and favour spending
for health, education, help for the poor, and protection of the
environment. As I’ve already mentioned, they also approve of
foreign aid for the needy and peacekeeping operations. But policy
follows a radically different course.
The central doctrine—a balanced budget—is a striking illustration.
Business favours it. ‘American business has spoken: Balance
the federal budget’, Business Week concludes from a poll of
senior business executives. And when business speaks, so does
the political class and the press—at least the headlines. Those
who look no further will have little sense of a complex reality.
In Australia, Graham Richardson reports from New York
that ‘Americans are convinced . . . that budgets should be balanced
irrespective of prevailing conditions’, and support cuts in
social spending to that end. His source is Don Hewitt, ‘the elder
statesman of American current affairs television’, with whom he
had breakfast in the Edwardian Room of the Plaza Hotel, ‘one
of New York’s finest’. Hewitt is ‘a man accustomed to mixing
with presidents, billionaires and stars’, and ‘to have stayed on top
in [TV] current affairs for so long means that Hewitt has a real
feel for the pulse of middle America’—not the owners of the corporate
media and the advertisers to whom they sell their product
(audiences), or the billionaires who dine in the Edwardian Room.
When Hewitt tells us what Americans want, ‘you have to take
notice’, just as you have to be impressed by ‘the huge swing to
the Republicans’ in the elections, just reviewed.
In England, under the headline ‘We’re all for balanced budgets
now’, the commentator on America for the Financial Times,
Michael Prowse, writes that ‘Newt Gingrich and his Republican
revolutionaries once again deserve our applause’ for pursuing a
balanced budget in the face of the ‘cynical strategy’ of those who
oppose big cuts in social programs. And the revolutionaries re-
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flect the will of the people, Prowse writes: ‘polls show 80 percent
approval for the goal of a balanced budget’.23
Richardson no doubt reports what his source believes, or at
least prefers to believe; and Prowse is right about the headlines
and what he may well hear on the major elite news program on
National Public Radio, regularly accused of liberal bias, where a
leading commentator, Robert Siegel, reports that ‘Americans
voted for a balanced budget’, detailing the cuts in education and
welfare pursuant to the public will. But if we move beyond the
Edwardian Room and the headlines, we find a different picture.
It is true that most people would prefer a balanced budget, just
as they would like to see their household budgets balanced, with
all debt magically removed at no cost. But the same polls show
that in response to the obvious next question—Do you want the
budget balanced if that entails spending reductions for education,
health, the environment, and other favoured programs?—
support dwindles to a small minority in the 20–30 per cent range.
So we learn, for example, from the small print in an article headlined
‘Americans Like G.O.P. Agenda But Split on How to
Reach Goals’, reporting data showing that Americans dislike the
GOP agenda, overwhelmingly. Other polls give similar results:
balanced budget, Fine; with cuts in social spending, No. As the
Republicans targeted the Departments of Education and Energy
for elimination, 80 per cent wanted to preserve the former, 63
per cent the latter. ‘A strong 72 per cent oppose any reduction
in education whatsoever’, the Wall Street Journal reported, and
‘solid majorities oppose any substantial cuts in Social Security,
the Medicare health program for the elderly and the Medicaid
health program for the poor’— all targeted for severe reduction
along with many other popular programs, with only Social Security
on hold.24
The facts, however, are unwelcome, apart from one: business
has spoken, and that’s really all we have to know. Furthermore,
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with little in the way of a counterforce within the doctrinal system,
wish will become reality over time, very likely.
The same holds pretty much across the board. Polls show consistently
that the public is opposed to more Pentagon spending.
But the voice of business again says the opposite; business leaders
are well aware that the Pentagon is the core of the welfare state
for the rich. Accordingly, Clinton’s first reaction to the Republican
‘landslide’ was to announce a substantial increase in Pentagon
spending; his right-wing opponents quickly upped the ante. In real
dollars, the Pentagon budget is at about 85 per cent of the Cold
War average, US$30 billion a year higher than under Nixon. The
Cold War enemy is, of course, now an ally even in military production:
thus its advanced research programs enabled the US to regain
the world lead in pulsed power and microwave weaponry, Jane’s Defence
Weekly reported. The figures give some indication of how large
‘the threat to market democracy’ posed by the Great Satan loomed
in the eyes of planners who sought to ‘contain’ it and ‘roll it back’.
In April 1995, the far-right Heritage Foundation submitted
its budget proposal, basically adopted by Congress. It called for
an increase in the Pentagon budget in accord with the wishes of
one out of six taxpayers, while sharply cutting funds for education,
drug addiction programs, the environment, and other social
spending favoured by two-thirds of the public. ‘The issue [is]
philosophical’, a policy analyst at the Heritage Foundation explains:
‘Taxpayers should not be forced to support activities they
may not agree with’; certain taxpayers, that is. ‘The issue’, in this
case, was specifically the Foundation’s call for ‘defunding the
left’, defined as Catholic Charities, the American Association of
Retired Persons, and others who try to help the wrong sorts of
people, sometimes with minuscule Federal grants—a rather flattering
image of ‘the left’, incidentally.25
The increase in Pentagon spending was opposed not only by
the population, but even by the Joint Chiefs of Staff, who warned
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that it would cause problems for the military down the road. But
no matter: business has spoken, and the statist reactionaries
know how to listen.
For ‘the principal architects of policy’ to flout public opinion
is neither surprising nor particularly unusual, though it is an indication
of how democracy is understood by those who sing its
praises. But the pattern has become so consistent and dramatic
as to call forth some commentary, which is unusual. The respected
political commentator of the Christian Science Monitor,
Brad Knickerbocker, mused that ‘It’s almost as if lawmakers
looked at what Americans want . . .—and then marched off in
the opposite direction’. He happened to be referring to energy
and environmental policies, but the conclusions hold dramatically,
well beyond even the norm.26
Those truly concerned about democracy would do well to attend
closely to the founding principles of the first modern
democracy 200 years ago, still in many ways the model. 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’.
The constitutional framework adhered closely to Madison’s
design. The ‘permanent interest’ he identified has remained the
‘Purpose of America’ at home, in the eyes of the powerful, and
‘the tolerant society’ they manage has always insisted on upholding
the same principle abroad—‘multilaterally when we can and
unilaterally as we must’, as Clinton’s UN Ambassador instructed
the UN Security Council in October 1994 just as Anthony Lake
was lauding our historic commitment to pacifist principles.27
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There are two ‘cardinal objects of government’, Madison
held: ‘the rights of persons, and the rights of property’. It is the
latter that must have priority, because the rights of property will
constantly be under threat from ‘the will of the majority’, who
may, by their power in a democracy, ‘trespass on the rights of a
minority’. Madison’s more vague formulations have often been
misread as expressing a general concern that ‘the tyranny of the
majority’ might trample individual rights: say to freedom of
speech and conscience. But that reading mistakes Madison’s
concern, which was much more restricted, as he made quite
clear. The primary threat was to ‘the rights of property’. The
rights of the ‘opulent minority’ that government must protect as
its primary duty are, furthermore, quite unlike ‘the rights of persons’;
the latter are to be granted uniformly under the Constitutional
system, whereas ‘the rights of property’ are narrowly held
in the hands of the ‘opulent minority’. The majority are denied
these rights, and must be prevented from infringing on them.
The Madisonian rhetoric, which has largely dominated subsequent
discussion, is misleading in other ways. It is senseless to
compare rights of persons and rights of property. The pen in my
hand is my property but it has no rights, though perhaps I have
a right to own it. The rights of property are rights of persons—
certain persons, always to be a minority, it was held. The Madisonian
framework, then, concerns only rights of persons, and
assigns to an opulent minority among them extra rights in addition
to the rights theoretically shared by all; indeed it privileges
these additional rights, holding that they must take precedence
over the rights that are shared. The issues are obscured—rather
seriously in fact—by the rhetoric in which they are formulated,
and in much subsequent discussion.
To ensure that the rights of the opulent minority are privileged,
they must hold the reins of government, Madison held.
He added that this is only fair, because property ‘chiefly bears
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the burden of government’, and ‘In a certain sense the Country
may be said to belong to [the owners of the soil]’—a notion that
generalised in the obvious way as the society shifted from an agricultural
to a manufacturing and financial power base. As Jennifer
Nedelsky points out in the most careful analysis of ‘the Madisonian
framework and its legacy’, his primary focus on ‘the protection
of property’ cast ‘“the people”, the future majority, in the
role of a problem to be contained’. This conception was accepted
as a matter of course by almost all of the Framers, she notes, citing
James Wilson as ‘the only one who declared that property
was not the main object of government’ and who ‘gave priority
to what was seen by his colleagues as the major threat to property:
the political liberty of the people’.
Thomas Jefferson took a position like Wilson’s, but he had
no direct role in these deliberations. As for Madison, some years
later he did come to recognise—apparently with some shock—
that the ‘opulent minority’ would abuse its power, not acting in
the enlightened manner he had rather naively anticipated. Madison
deplored ‘the daring depravity of the times’ as the wealthy
came to use their control of government much in the way that
Adam Smith had described, with the ‘stock jobber’ coming to be
‘the pretorian [sic] band of the Government, at once its tool and
its tyrant; bribed by its largesses and overawing it by its clamours
and combinations’.28
A central theme of American history is the implementation
of the original Madisonian framework, basically preserved through
many social changes. Nedelsky observes that this legacy, though
attenuated, helps explain ‘the weaknesses of the democratic tradition’
in the United States, and its failure to deal with ‘the interpenetration
of economic and political power’—or, more accurately,
its success in dealing with the problem in a specific way: by sanctifying
privileging the rights of those who own the country. These
rights have come virtually to define the concept of democracy.
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Thus it was in the service of democracy that radio, later television,
was kept from the public domain and handed over to a few huge
corporations; private tyranny equals freedom. That is second nature.
Few detect a problem when a well-known journalist writes
in the New York Times: ‘As every schoolchild must know, a free
press—which means a press free of government—is essential to a
democratic system’ (David Shipler). In contrast, a press free of
Murdoch or Berlusconi, or huge corporations, is not essential.
As Madison’s praetorian band tightened its grip, politics became
ever more ‘the shadow cast on society by big business’, as
Adam Smith’s truism was formulated by America’s leading twentieth
century philosopher, John Dewey. The system that developed
did not simply protect property, Nedelsky adds, but
‘inequality of property’, in accord with its basic design, subordinating
the rights of the great majority of the population in all
other spheres of life as well. The only serious challenge to these
ideas has been from labour and other popular movements, which
have certainly won victories, though they have been marginalised
to an extent unusual in industrial democracies, and are now losing
the gains that they had won.29
The ‘top-down’ structures of power that Carothers describes
as a ‘failure’ of American efforts to enhance democracy are anything
but that. They are not only another success in the project
of undermining democracy in US domains—which is why the
‘failure’ is so systematic— but also reflect the nature of the domestic
society. The facts are not hard to discover in history and
doctrine, if we lift the veils of rhetoric that conceal them.
‘Free Market Conservatism’
Following the same course, we can come to understand the concept
of ‘free market conservatism’. Its real meaning is revealed
by a closer look at the most passionate enthusiasts for ‘getting
the government off our backs’ and letting the market reign undis-
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turbed. 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’.
The headline reads: ‘Conservatism Flowering Among the Malls’,
in this rich suburb of Atlanta, scrupulously insulated from any
urban infection so that the inhabitants can enjoy the fruits of
their ‘entrepreneurial values’ and market enthusiasms, defended
in Congress by its leading conservative, Newt Gingrich, who describes
his district with pride as a ‘Norman Rockwell world with
fiber optic computers and jet airplanes’.30
There’s a small footnote, however. Cobb County receives more
Federal subsidies than any other 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 Centre, another component of the system of public
subsidy, private profit. When we move out of the Federal system
itself, Cobb County takes the lead in extorting funds from the taxpayer—who
is also responsible for funding the ‘jet planes and fiber
optic computers’ of the Norman Rockwell world. Most jobs in
Cobb County, properly high paying, are gained by feeding at the
public trough. The wealth of the Atlanta region generally can be
traced substantially to the same source. Meanwhile praises to market
miracles reach the heavens where ‘conservatism is flowering’.
There is also an interesting sidelight. During the congressional
campaign, when Gingrich propaganda about the nanny
state and welfare excesses was resounding to the rooftops and the
New Democrats were on the run, no one was willing to issue a
simple rejoinder: Gingrich is the country’s leading advocate of the
welfare state—for the rich. The reasons for the silence are easy
to understand: class interests prevail over narrow electoral ones.
It’s agreed across the board that the rich must be protected from
market discipline by a powerful and interventionist welfare state.
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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
called for ‘cuts in social spending’ across the board—for the poor
and defenceless, including children and the elderly. And 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 favourable rules for depreciation,
dismantling the regulatory apparatus that merely
protects people and future generations. The formulations are remarkably
brazen. Thus the proposals for business incentives, regressive
tax 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, given prevailing conventions, ‘jobs’
means ‘profits’, so it is indeed a ‘job creation’ proposal, which
will continue to ‘enhance’ wages downwards.
The contract also calls for ‘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 organisers in Latin America, will learn better. The phrase
‘national defense’ is hardly even a sick joke, which should elicit
ridicule among people with any self-respect. 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.
Apart from ensuring a particular form of ‘stability’ in the ‘permanent
interest’ of those who matter, the Pentagon is needed to
provide for the likes of Gingrich and his rich constituents, so that
they can fulminate against the nanny state that is pouring public
funds into their pockets.
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Here again a look at history is instructive. As already mentioned,
illusions about the viability of free market capitalism have
been the domain of ideologists, not actors in the political and
economic system. What illusions might have remained about the
matter dissipated after the Great Depression and the success of
the government-managed World War II economy in overcoming
it, with vast growth of production and profits. The lessons were
taught to the corporate managers who flocked to Washington ‘to
carry out one of the most complex pieces of economic planning
in history’, an experience that ‘lessened the ideological fears over
the government’s role in stabilizing the economy’, the leading
business historian, Alfred Chandler, points out. They and others
anticipated a return to depression unless such measures were retained,
in some way. The business world recognised that advanced
industry ‘cannot satisfactorily exist in a pure, competitive,
unsubsidized, “free enterprise” economy’ and that ‘the government
is their only possible savior’ (Fortune, Business Week). The
remarks refer specifically to the aircraft industry established by
public funds and wartime profiteering, but they were understood
to generalise. For well-known reasons, the Pentagon system was
preferred to alternatives and revitalised as the ‘savior’, sustaining
and expanding the aircraft industry and its by-products, along
with steel and metals generally, electronics, chemicals, machine
tools, automation and robotics, and other central components
of the industrial economy.
As long as the fable could be sustained, the Cold War provided
the pretext, often as conscious fraud. 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 that the military budget ‘meet the requirements
of the aircraft industry’, as he put it. The story continues
without essential change until today in just about every function-
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ing sector of the economy, and surely in Cobb County. There, as
elsewhere, the ‘private sector’ relies extensively on welfare payments,
subsidies often called ‘security’. Dramatically again in the
Reagan years, industry has relied on advanced technology that is
readily transferred from military to commercial use. This crucial
factor in modern industrial development and economic progress
has long been understood in the business world, and had been
discussed on the left as well, though the debate has been confused
by anti-militarist literature that concentrates on the fact
that the military path is harmful to the economy as compared
with civilian alternates. That is correct, but irrelevant to business
leaders, who explained 50 years ago why they preferred the military
alternative: primarily reasons of domestic power, not economic
health. Some of these topics are at last being investigated
even in mainstream academic work, which is useful, though misunderstanding
persists in the belief that what is found is ‘contrary
to the beliefs of analysts from both the right and the left’; it has
long been clear in the business press and among left critics. The
same studies conclude that the ‘defense industrial base’ should
be maintained— appropriately, on the understanding that the
wealthy must be protected from market discipline and the population
tricked into subsidising them.31
These are major reasons why military spending is increased
while anything that might benefit the ‘great beast’ that threatens
‘the opulent minority’ must be sharply cut.
The general principles are clear and explicit: 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.
A closer look at particulars again brings out the real meaning
of what is happening. Not content with Clinton’s increase in the
Pentagon budget in radical opposition to the public will, Speaker
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of the House Gingrich, who represents Lockheed-Martin and
other high tech industries, led the House in approving even
more public funds for his wealthy constituents. Under his leadership,
the House approved a US$3.2 billion ‘emergency’ supplement
for the starving Pentagon, the funds to be drawn from
programs for the vast majority. In a vain and pallid gesture that
highlights what is at issue, House Democrat David Obey proposed
in committee to replace a planned US$5 billion–US$7 billion
of cuts in child nutrition, housing, and job training by a
five-year delay in deployment of Lockheed F-22 advanced fighters,
a (surely underestimated) welfare program of US$72 billion:
delay, not discontinuation of the taxpayer giveaway. The suggestion
was summarily rejected, and scarcely reported.
The word to use remains ‘security’, not ‘subsidy’. And, as
often in the past, current plans for ‘defense’ are designed so as
to foster security threats. A minor one is Russia; though now an
ally it remains a potential threat to US ‘preponderance’, the currently
fashionable term for global rule. But the primary threat is
‘Third World weapons proliferation’, Air Force Director of Science
and Technology General Richard Paul informed Jane’s. We
must maintain military spending and strengthen the ‘defense industrial
base’ because of ‘the growing technological sophistication
of Third World conflicts’, the Bush Administration had
explained to Congress while watching the Berlin Wall collapse,
taking with it the most efficient pretext for ‘subsidy’. No one who
has kept their eyes on the ‘security system’ will be surprised to
learn that both threats are to be enhanced.
Some of the funding for the emergency Pentagon supplement
is to be drawn from programs to help dismantle and safeguard
the nuclear arsenals of the former USSR. To protect
ourselves from the resulting threat, we will have to ‘increase the
Defense Department’s budget’, Florida Democratic Representative
Pete Peterson commented. Furthermore, ‘Third World
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weapons proliferation’ is to be stimulated, with new contributions
to its ‘growing technological sophistication’. The US share
in arms sales to Third World countries has reached almost threequarters.
We must therefore provide them with even more advanced
weaponry so that we can tremble in proper fear. The sale
of F-16 aircraft with taxpayer-subsidised loans allows the Air
Force to pay Lockheed to upgrade the aircraft and to develop
the F-22 to counter the threat they pose. The welfare programs
extend beyond Gingrich country. General Paul emphasised, outlining
the commitment ‘to spin dual-use [Science & Technology]
outside the military’ in ‘the national interest’, ‘enhancing our economic
security’. Particularly ‘enhanced’ is the welfare of corporate
America, which is to ‘transition our work’, General Paul
continued in standard bureaucratese.
Gingrich’s favourite government-funded cash cow understands
the scam perfectly. Lockheed propaganda warns that it is
a ‘dangerous world’ in which ‘sophisticated fighter airplanes and
air defense systems are being sold’—mostly thanks to its ‘savior’.
One of the authors adds: ‘We’ve sold the F-16 all over the world;
what if [a friend or ally] turns against us?’ To fend off that threat,
we have to sell potential adversaries still more advanced weapons,
and to transfer still more public funds to the shrinking sectors of
the population that bear the burden of ‘dazzling’ profits. Quite
simple, really.
Arms sales to undemocratic countries—most of the recipients—are
opposed by a mere 96 per cent of the population, so
these programs reflect the ‘popular mandate’ as well as their
companions.32
The National Security State is a natural favourite of the advocates
of private tyrannies. The device facilitates the transfer of
public funds to advanced industry and to wealthy sectors generally,
with the public cowering in fear of foreign enemies so that planners
can operate in ‘technocratic insulation’, in World Bank lingo.
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Furthermore, the ‘great beast’ has to be dealt with somehow, and
the easiest way is to frighten them. With internal enemies as well.
Engendering fear and hatred is a standard method of population
control, whether the devil is Jews, homosexuals, Arab terrorists,
welfare queens (Black, by implication), or criminals lurking in dark
corners (ditto). While crime rates have been stable for decades,
perception and fear of crime has sharply increased, in large part
artificially stimulated, criminologist William Chambliss concludes
from the timing of inflamed public rhetoric and polls; the same
was true, very dramatically, with regard to drugs.33
It is therefore only reasonable that the new ‘conservatives’
should expand further the domestic security system organised
and conducted by the powerful state they wish to nurture. Along
with the Pentagon, the rapid growth of the prison system is to
be accelerated while constitutional protections are dismantled—
for example, by legislation permitting warrantless searches (considered
a ‘bad idea’ by 69 per cent of those who conferred ‘the
mandate’). The harsh measures of the new crime bills make little
sense for a ‘war against crime’, as experts have regularly pointed
out. But they make good sense for a war against the population,
with two aspects: frightening into submission the large majority
targeted for reduction of quality of life and opportunity; and removal
of the growing mass of people who are superfluous but
must somehow be controlled as the Third World model is
brought home.
Under Reaganite enthusiasts for state power, the number of
prisoners in the US almost tripled, leaving the 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 are
expected to facilitate the process, with their much harsher sentencing
procedures. The vast new expenditures for prisons are
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also welcomed as another Keynesian stimulus to the economy.
‘Businesses Cash In’, the Wall Street Journal reports, recognising
a new way to milk the public. 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. Also standing
in line is the ‘defense establishment, . . . scenting a new line
of business’ in high-tech surveillance and control systems of a
sort that Big Brother would have admired.34
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.
In general, it is the more vulnerable sectors that are under attack.
Children are another natural target. The matter has been addressed
in important work, including a UNICEF study by a
well-known US economist, Sylvia Ann Hewlett.35
Reviewing the
past fifteen 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 AngloAmerican
‘disaster’ to the ideological preference for ‘free markets’.
But that is only half true. 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 AngloAmerican
model’ has largely privatised child-rearing while plac-
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ing 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 American Medical Association 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 fifteen 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.
Hunger is most severe among children, with effects that are
permanent. Hunger among the elderly is also ‘surging’, the Wall
Street Journal reports: ‘several million older Americans are going
hungry—and their numbers are growing steadily’, while some 5
million, about 16 per cent of the population over 60, ‘are either
hungry or malnourished to some degree’—again, phenomena unknown
in other developed societies.36
To comprehend what all this means, one has to bear in mind
the unparalleled advantages of the United States. To give only one
indication, health and life expectancy levels of mid-eighteenth
century Americans were not reached until this century by the
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upper classes in Britain. The social and economic catastrophe of
state capitalism is an extraordinary phenomenon—for the ‘great
beast’, that is—not to speak of what it has wrought elsewhere.
An even more vulnerable target is future generations, who
have no ‘votes’ in the market so that costs can be freely transferred
to them in the wealth-concentration frenzy. That is the
long-term effect of dismantling the regulatory system, which the
Gingrich army hope to achieve across the board by imposing
cost–benefit assessment conditions on all environmental and
health regulations. The huge Federal bureaucracy required to administer
the system can be undercut by refusal to fund it, and
any corporate lawyer should be able to tie up proceedings for
long periods in this domain of guesses and uncertainties. Related
changes in the legal system are designed to protect corporate
crime by imposing onerous conditions on victims who seek redress
and compensation, eliminating protection for consumers
and small time investors, and reducing enforcement powers. That
will be a boon for the ‘unscrupulous people’ who ‘steal tens of
billions of dollars, maybe hundreds of billions’, in financial and
insurance frauds, business law professor Benjamin Stein observes,
the costs falling on the vulnerable, including the taxpayer,
who is expected to pick up the tab when things go sour, as in the
savings and loan fiasco, which added many billions to the Federal
deficits. It is also an important gift to such corporations as Philip
Morris, the biggest corporate donor to the Gingrich army, which
needs government protection for marketing its lethal addictive
drugs, responsible for far more deaths than the illegal variety, including
non- users (unlike hard drugs).37
Towards the End of History:
the Utopia of the Masters
For most of the population, conditions of life and work are declining,
something new in the history of industrial society. The latest
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edition of the annual scholarly study of ‘the state of working America’
concludes that during the recovery from the deep Reagan recession
of 1982, ‘the vast majority of families lost wealth as the
economy grew’; all but the top 20 per cent, the authors estimate.
As the economy stagnated and fell into recession in 1988–91,
‘wealth declined among nearly every income group’, and, through
the Clinton recovery, median wages have continued their steady
decline since 1980. Wages for entry-level jobs—a predictor for the
future—fell 30 per cent for male and 18 per cent for female high
school graduates (3/4 of the work force), and for the college educated,
fell 8 per cent for males and rose 4 per cent for females.
Hourly wages dropped over 10 per cent, more for high school
graduates. For men with high school education, real income fell a
‘stunning’ 21 per cent from 1979 to 1990, the 1994 Economic Report
of the President reported, falling further since. Poverty rates
reached double the level of other industrial countries; child
poverty is particularly high, far beyond any other industrial society,
almost three times the average. Meanwhile salaries for CEOs rose
66 per cent, second only to Britain’s 123 per cent rise, though the
US retains its huge lead in CEO/worker pay ratio. The slow
growth in wealth was concentrated in financial assets, overwhelmingly
held by the wealthy. There was a ‘spectacular redistribution’
of wealth, with inequality now far higher than any other
country of the developed world. The share of marketable net
worth held by the top 1 per cent is now twice that of England and
50 per cent higher than France, the nearest competitor in the
Mishel–Bernstein list. In 1980, differences among these countries
were slight, but Reaganite programs directed 60 per cent of marketable
wealth gain to the top 1 per cent of income recipients,
while the bottom 40 per cent suffered an absolute loss of net
worth in real terms; other measures are still more stark.38
Mishel and Bernstein identify several factors in the wage decline:
primarily a severe drop in the minimum wage and deunion-
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isation, rapid expansion of low-wage service jobs (80 per cent of
new jobs created were in the lowest-paying service sector industries),
and globalisation of the economy. They find little if any
impact of technology on wage and employment structure. A
closer look shows extensive state initiative in each of these developments,
favouring some economic forces, undermining others;
consistently in ways that serve ‘the minority of the opulent’.
One indication is that ‘the emergence of greater wage disparities
has been evident only in the United States and Great Britain,
the two countries that have moved fastest to “deregulate” their
labor markets’, though other factors (technological change, etc.)
do not single out these cases.
The general situation is similar in England, less so in continental
Europe and Japan, though in an increasingly globalised
economy, those who pursue the harshest and most inegalitarian
policies will carry others along. The end of the Cold War offers
new weapons to private power in its battle against the ‘pampered
Western workers’ who are going to have to face reality and give
up their ‘luxurious life-styles’ in the wondrous new world order,
the business press warns. But some are doing fine, as the same
sources exult. After four straight years of double-digit profit
growth, profits—now at a 45-year high—are expected to continue
their ‘stunning’ growth, while real wages and benefits are
expected to continue their steady decline. Earnings per share
have more than doubled since 1991 for the top 500 corporations,
and are expected to double that growth rate in 1996; return on
capital for non-financial corporations has more than doubled
since 1980, even surpassing the growth of poverty, though not
keeping up with the increasing prison population.39
Along with democracy, markets are under attack. Even putting
aside massive state intervention, increasing economic concentration
and market control offers endless devices to evade and
undermine market discipline, a long story that there is no time
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to go into here; to mention only one aspect, some 40 per cent of
‘world trade’ is intrafirm, over 50 per cent for the US and Japan.
This is not ‘trade’ in any meaningful sense; rather, 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.40
In reality, the quasi-mercantilist system of transnational corporate
capitalism is rife with the kinds of ‘conspiracies’ of the
masters against the public 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.
The globalisation of production puts tremendous weapons
into the hands of private tyrannies. Another critical factor is the
huge explosion of unregulated financial capital since Richard
Nixon dismantled the Bretton Woods system in the early 1970s.
The consequences of the deregulation of financial markets were
quickly understood. In 1978, Nobel Prize laureate in economics
James Tobin proposed that foreign exchange transactions be
taxed to slow the haemorrhage of capital from the real economy
(investment and trade) to financial manipulations that now constitute
95 per cent of foreign exchange transactions (as compared
with 10 per cent of a far smaller total in 1970). As Tobin observed
at this early stage, these processes would drive the world towards
a low- growth, low-wage economy. A study directed by Paul Volcker,
formerly head of the Federal Reserve, attributes about half
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of the substantial slow-down in growth since the early 1970s to
this factor.
International economist David Felix makes the interesting
observation that even the productive sectors that would benefit
from the Tobin tax have joined financial capital in resisting it.
The reason, he suggests, is that elites generally are ‘bonded by a
common objective, . . . to shrink, perhaps even to liquidate, the
welfare state’. The instant mobility of huge sums of financial capital
is a potent weapon to force governments to follow ‘fiscally
responsible policies’, which can bring home the sharply twotiered
Third World model to the rich societies. By enhancing the
shadow cast by big business over society and restricting the capacity
of governments to respond to the public will, these
processes also undermine the threat of democracy, another welcome
consequence. The shared elite interest, Felix suggests,
overcomes the narrower self-interest of the owners and managers
of productive sectors of the economy.41
The suggestion is a reasonable one. The history of business
and political economy yields many examples of the subordination
of narrow gain to the broader interest of the opulent minority,
which is unusually class conscious in a business-run society like
the United States. Illustrations include central features of the
modern world: the creation and sustenance of the Pentagon system
of corporate welfare despite its well-known inefficiencies;
the openly proclaimed strategy of diversion of soaring profits to
creation of excess capacity abroad as a weapon against the domestic
working class; the design of automation within the state
system to enhance managerial control and de-skill workers even
at the cost of efficiency and profitability; and many other examples,
including a large part of the foreign policy.
I’m afraid this barely skims the surface. It’s easy to see why
the masters see a real hope of rolling back the hated welfare
state, driving the great beast to its lair, and at last achieving the
168 NOAM CHOMSKY
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‘daring depravity of the times’ that so shocked Madison in its
very early stages, with private tyrannies, now released from even
limited public accountability, assuming their proper role as ‘the
pretorian [sic] band of the Government, at once its tool and its
tyrant; bribed by its largesses and overawing it by its clamours
and combinations’. It is also easy to understand the mood of desperation,
anxiety, hopelessness and fear that is so prevalent in
the world, outside of wealthy and privileged sectors and those
who sing their praises.
To stem and reverse this course and restore a modicum of
respect for the values of the Enlightenment, for freedom and
human rights, will be no simple matter. The first step is to penetrate
the clouds of deceit and distortion and learn the truth about
the world, then to organise and act to change it. That’s never
been impossible, and never been easy. It’s not impossible now,
and not easy either. There has rarely been a time in history when
that choice carried such dramatic human consequences.
169Democracy and Markets in the New World Order
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