Eco-nomics and eco-politics- lecture notes
GATT (General Agreement on Tariffs and Trade)
NAFTA (North American Free Trade Agreement)
The global economy
WTO (World Trade Organization)
boundaryless (stateless) corporation
The Natural Step
If the people only understood the rank injustice of our money and banking system there would be a revolution before morning!
Andrew Jackson, 7th U. S. President
The government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme perogative of government. It is the government’s greatest creative opportunity. By the adoption of these principles, the taxpayer will be saved immense sums of interest. Money will cease to be the master and become the servant of humanity.
President Abraham Lincoln
The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarcy, more insolant than autocracy, and more selfish than bureaucracy.
Whoever controls the value of money in any country is absolute master of all industry and commerce….. and when you realize that the entire system is very easily controlled, one way or another, by a few men at the top, you will not have to be told how periods of inflation and depression originate.
President James Garfield, 3 weeks before he was assassinated
The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government ever since the days of Andrew Jackson.
Franklin D. Roosevelt, 1933
This a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.
Rutherford B. Hayes, 19th President/General
The liberty of democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism- ownership of government by an individual, by a group or by any controlling private power.
Franklin D. Roosevelt, 32nd President
We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.
Louis Brandeis, US Supreme Court Justice
There can be no effective control of corporations while their political activity remains.
History records that the money changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance.
I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments of those in power than by violent and sudden usurpations.
The corporations…. Have successfully leveraged economic power into political power that undercuts the Constitution.
The 20th century has been characterized by three developments of great political importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy.
Climbing here saved my life from the confines of the materialistic illusion that we’re taught as children in school…. The way I see it, there are two world’s: There’s the world where nothing is sacred except money, and the other world where everything is sacred.
Ron Kauk (Yosemite rock climbing legend)
Modern civilization has abused the environment beyond the limit of its tolerance and we are facing a disastrous contradiction in all areas of society, including the political, economic, educational, and scientific. In order to liberate ourselves from this contradiction, we must harmonize the lives of human beings with the natural environment, and discard materialism, the pursuit of profit, and the idea that human beings are the center of all things.
From the Japanese Green Party platform
I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.
President Thomas Jefferson, 1816
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that grow up around them will deprive the people of all their property until their children wake up homeless on the continent their fathers conquered.
I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. The issuing powers should be taken from the banks and restored to the people to whom it properly belongs.
These international bankers and Roosevelt-Standard Oil interests control the majority of newspapers, the columns of papers to club into submission or drive out of public office officials who refuse to do the bidding of the powerful corrupt cliques which compose the invisible government.
Theodore Roosevelt, 1919
Banking is conceived in iniquity and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with the flick of a pen they will create enough money to buy it back again. Take this great power away from the bankers and all great fortunes like mine will disappear and they out to disappear for this would be a better and happier world to live in. But if you want to continue the slaves of bankers and pay the cost of your own slavery, let them continue to create money and control credit.
Sir Josiah Stamp, Director of the Bank of England, 1920s
Anyone who thinks you can have indefinite growth on a finite planet is either a madman or an economist.
Kenneth Boulding, economist and former president of American Association for the Advancement of Science
There is something fundamentally wrong in treating the earth as a business in liquidation.
Herman Daly, World Bank economist
Capitalism boils down to this: Privatization of profits, socialization of losses.
Istvan Meszaros, economist
I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.
Thomas Jefferson, 1816, 3rd President of the United States
I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign until all wealth is aggregated in a few hands, and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of the war.
Abraham Lincoln, 1864
There is no point of contact between macro-economics and the environment.
World Bank economist, Herman Daly
Much of apparent economic growth may in fact be an illusion based on a failure to account for reduction in natural capital
Colin Clark, Univ. of British Columbia
A cynic is one who knows the price of everything and the value of nothing.
The wholesale substitution of machines for workers is going to force every nation to rethink the role of human beings in the social process.
Jeremy Rifkin, The End of Work
The disappearance of labor as a key factor of production (is the) unfinished business of capitalist society.
Peter Drucker, CEO
Machines are the new proletariat. The working class is being given its walking papers.
Jacques Attali, President of European Bank
We don’t have just a failure of one law, but a series of laws. Toxic pollution is such a potent issue, we have been able to enact more than one law. By and large, they’ve all been failures.
Curtis Moore, former Republican counsel on the Senate Environment and Public Works Committee
In a highly competitive industry, companies cannot afford to spend their resources on environmental protection, however well conceived the rules, unless they perceive that those rules are backed up by credible enforcement policy.
We already know that they (the global economic changes) demand that politicians and statesmen accept the unpopular abandonment of sovereignty. I wouldn’t say the nation-state is dead, but the sovereignty has been greatly circumscribed…. even for a country as large as the US.
W. Michael Blumenthal, chairman of Unisys
What we call the “environmental crisis”- the array of critical unsolved problems ranging from local toxic dumps to the disruption of global climate- is a product of the drastic mismatch between the cyclical, conservative, and self-consistent processes of the ecosphere and the linear, innovative, but ecologically disharmonious processes of the technosphere.
Barry Commoner, Making Peace with the Planet
Growth for the sake of growth is the ideology of the cancer cell.
Free enterprise refers in practice to a system of public subsidy and private profit with massive government intervention in the economy to maintain a welfare state for the rich.
Noam Chomsky, What Uncle Sam Really Wants
The world’s present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the past four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin… The monetary system by means of a loose coupling, exercises a general control over the matter-energy system upon which it is superimposed. Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is now almost over. The monetary system has no such constraints, and according to one of its most fundamental rules, it must continue to grow by compound interest.
We are in a crisis in the evolution of human society. It’s unique to both human and geologic history. It has never happened before and it can’t possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered.
M. King Hubbert, 1950s.
Ecology= literally “house study”
Economy= literally “house management”
The critical assignment of our time is to get these two groups of people talking together- like authors Herman and Daly.
According to Barry Commoner, the environmental crisis is generated by the war between the two world’s that human societies occupy- the ecosphere and economics- and economics has harnassed most of the vast resources the technosphere and Western technical intelligence. It is best understood in terms of their interplay. Of course, in a conventional war you can take sides and ignore the interests of one combatant or the other. But this is done at the cost of understanding. If we ignore the ecosphere, it is possible to define the crisis in terms of production, prices and profits. Then we can concoct a scheme of “pollution credits”, as George Bush, Sr. did recently, in which factories are allotted the right to emit pollutants up to some acceptable level and in a parody of the free market, to buy and sell and trade these rights. If we ignore the technosphere, we see the environmental crisis only in ecological terms and humans then become a peculiar species bent on destroying their own habitat. Then it’s easy to become misanthropic and advocate a radical reduction of the number of people. This anti-humanist perspective is represented by an article in the publication Earth First! that favors the spread of AIDS as a means of reducing human population. So we need to see beyond both extreme views and find a way for humans to live sustainably and wisely on our planet.
Oil geologist M. King Hubbert recognized the incompatibality of the money system with the environment over 50 years ago, as per the quotes above. In her 2001 book, The Divine Right of Capital, Marjorie Kelly demystifies the problem somewhat, providing a perspective on the history of “antique”, basically fuedal, ideas which inform our economic system. At the core of our system is the notion of the divine right of capital- or that is, those who have it. All corporations have as their fundamental purpose the maximation of profits for the benefit of shareholders. In general, the aim is to pay stockholders as much as possible, and employees as little as possible. The health of the environment and the health of communities are generally not even considered. ThomHartmann’s Unequal Protection; The Rise of Corporate Dominance and the Theft of Human Rights (your text), gives a fascinating account of how the money power has successfully supplanted people as dominant force in our “democracy.”
Many of the decisions that directly affect how we live and what impacts we have on the environment are economic decisions, driven not by concern for the environment or even for most people, but rather by the concerns and demands of a relatively few individuals, businesses and governments in the economic marketplace. Corporate state capitalism may be the most powerful tool ever used by civilization. As a system for allocating resources, labor, finance, taxes, and for determining production, distribution and consumption of wealth, the laws of the “free market” reign supreme. However, we need to recall Noam Chomsky’s (What Uncle Sam Really Wants) insight that “free enterprise” “refers, in practice, to a system of public subsidy and private profit, with massive government intervention in the economy to maintain a welfare state for the rich.”
The U.S.- and now virtually the entire world – has a “free-market”, corporate-state, capitalist economy. The study of economics is the study of how people use the limited resources of the earth to try to satisfy their unlimited wants. Economists study the prices of goods and services and how those prices influence the amount of a given good or service that is produced and consumed. Seen through the economist’s eyes, the world is one large marketplace where resources are allocated. And all the world’s “natural resources” (trees, minerals, fish, etc.) are infinite and free.
One of the “free market laws” is the certainly of the “invisible hand” (of the marketplace) of Adam Smith, which perhaps is just another way of saying that “private greed will lead to public good.” But the real problem is that our economic system is partly blind. It carefully measures the value of things like food, clothing, manufactured goods, work, and money, but does not see the value of things like clean air, clean water, the beauty of mountain scenery, the diversity of life in a forest, etc. This partial blindness is probably the single most powerful force behind the decisions that contribute to environmental damage.
Many popular economics textbooks do not talk about subjects like pollution or the depletion of natural resources. In fact, to most economists, the earth is an inexhaustible treasure house of free raw materials- to be exploited for production. Consider GNP (Gross National Product)- a leading indicator of the health of an economy. GNP is the sum total of goods and services produced in a year. In calculating GNP, natural resources are not depreciated as they are used up. (Trucks and buildings are amortized and depreciated in the economic calculus, but not topsoil, or clean air, or oil reserves). For example, an LDC in South America may cut down a million acres of tropical forest in a year. GNP goes way up as the quality of environment actually goes way down. In fact, for all practical purposes, GNP treats the destruction of the environment as a good thing. For example, GNP went up after the Exxon Valdez oil spill- because of all the extra expenditures and work it created. So therefore, the more pollution we create the greater the GNP! Thus, if we base decisions on purely economic criteria, it is clear that we will get ecological tragedy.
Our gross national product now is over 800 billion dollars a year. But that gross national product, if we judge the United States of America by that, counts air pollution, and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic squall. It counts napalm, and it counts nuclear warheads, and armored cars for police to fight the riots in our cities. It counts Whitman’s rifles and Speck’s knives and the television programs which glorify violence in order to sell toys to our children.
Yet, the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything in short, except that which makes life worthwhile.
Presidential candidate, Robert Kennedy, 1968
Unfortunately, the assumptions that underlie our economic and political systems stem from the system of national income accounts established near the end of the colonial era by economist John Maynard Keynes- a period when the supply of natural resources seemed infinite.
Every production system we have ever invented creates two kinds of things: the product itself or goods, and waste. But waste is never accounted for. Improvements in productivity are considered the single most significant measure of “economic progress”. Then when the product is consumed, waste is produced for the second time, now in the form of CFCs, CO2, SOx and NOx in the atmosphere, or PCBs, phosphates and nitrates in the water supply, etc. So the hidden costs in terms of health and environmental problems are not accounted for properly. It is as if the ultra-rational man who does the economic spreadsheets using classical economic theory believes in magic. He has ignored all the wastes produced by converting natural resources into products and then the additional wastes produced when the product is consumed and discarded.
At present in the U.S., a framework of laws such as the Clean Air Act and the Clean Water Act, etc. governs the degree to which industry is permitted to adversely affect the environment. The laws and their enforcement are extremely imperfect, as we shall see, but they have had a generally positive effect in the direction of protecting the environment. But there is a real problem in getting these laws enforced.
The modern corporation
Today, the world’s top 200 companies have over twice the assets of eighty percent of the world’s people (Paul Hawking, “Skeleton Woman in Seattle”). However, the modern gigantic corporations were not around or even conceived of when our country and its institutions were founded. The very first corporations were guilds or local governments like townships. The towns were “incorporated” in order to accomplish common objectives. Later the British Crown adapted the corporate form to their efforts to colonize the new world- a venture which required huge amounts of risk capital. To amass the capital, they needed to insulate the investors from responsibility for the undertaking- and so the “joint stock company” was born. Thus, individual responsibility, one of the bedrock principles of common law, was diluted. But it was for the “greater sake of the public good.”
This legal tradition carried over to the new colonies in America. And so states bestowed corporate charters to monopolies like railroad companies, etc. By the middle of the 19th century, however, corporate charters were being given to enterprises that did not necessarily serve the public. Now anyone could form a corporation to do anything they wished. Market ideology was that individual’s seeking gain would, under dispensation of Adam Smith’s “invisible hand”, serve the public good. Thus, U.S. Steel and Standard Oil were born. And the Supreme Court completed the coup by ruling that the 14th Amendment applied equally to corporations as to individuals, making them legal persons with all the Constitutional rights and privileges thereof. Now corporations no longer had to serve the public and could do anything they wanted. Meanwhile, they enjoyed the kind of legal exemption from individual responsibility that they had historically obtained only because they would serve the public. Thus, our legal system has essentially conspired to make all humans second class citizens. It is the corporations that have rights, no responsibilities, and can live forever. Furthermore, today publicly-held corporations are subject to shareholder suits if they do not put profits first. Hence, over-exploitation of the environment is virtually guaranteed.
Jerry Mander (In the Absence of the Sacred ) makes an excellent case that corporations should be considered a part of technology. They are a social machine with interchangeable parts and processes. They are designed for one main objective: to maximize profits for shareholders. Thus, the accumulation of wealth is an end in itself, often overturning centuries of Enlightenment societal values, religious beliefs, etc. Certainly social responsibility is not the main function of corporations, PR efforts notwithstanding. InThe Greening of Commerce, Paul Hawken makes the point that while a well-run business is one of the most efficient forms of human endeavor, a poorly run corporation is one of the most dangerous forms of human activity ever devised. In Corporate Crime and Violence, Russell Mokhiber, notes that corporations kill 28,000 and seriously injure another 130,000 each year by selling dangerous and defective products. Another 100,000 die on the job each year due to exposure to toxins in the workplace and other hazards. The Senate Judiciary Committee estimates that the cost of faulty products and monopolistic practices is $174 – 231 billion/year.
Among the 100 largest “economies” in the world today, over half are corporations, not countries.
Just 200 corporations conduct almost a third of the entire plane’s economic activity and employ less than one quarter of one percent of the world’s workforce.
According to economic reporter William Greider (Who Will Tell the People; The Betrayal of American Democracy), Washington now resembles a grand bazaar- a steamy marketplace of tents, stalls and noisy peddlers (mostly lobbiest and lawyers representing corporate interests). And the making and enforcing of environmental (“regulatory”) laws has become an exercise in deal-making. Between 1970 and 1980, 130 major regulatory laws were enacted. That brought the Fortune 500 to Washington, along with tens of thousands of lawyers. What consumes the energies of lawyers these days? 1) The public interest lawyers sue the government to try to get them to enforce their own regulatory laws, 2) the corporate lawyers appeal and/or sue the government to try to get them to not enforce the laws. This legal stalemate has lead to a system of “universal ticket fixing”.
1) The Clean Air Act of 1970 set a 1977 deadline for achieving a 90% reduction in urban carbon monoxide, HC and ozone levels. The penalty was to be the loss of federal funding for development projects. When in 1977, compliance was nowhere in sight, deadlines were moved to 1982, then to 1987. And today, the three most polluted cities- LA, NY and Houston- have another 20 more years to reach target. This act originally empowered EPA to curb toxic air pollution from industrial sources in order to guarantee “an ample margin of safety” for local citizens. Yet by 1990, none of the toxic pollutants listed on the EPA printout were being regulated. The steel industry was found to be operating 36 coke plants that pose a cancer risk of 1 in 10,000- and six mills where the risk was greater than 1 in 100! Nationwide, 2.7 billion pounds of poisonous chemicals are added to environment every year by American industry. EPA estimates that 1500 to 3000 people contract cancer each year as a result, but probably the true dimension of the problem is unknowable.
The Clean Air Act of 1990 permits oil, chemical and steel Co.’s dispensing toxic chemicals to kill as many as 1 people in 10,000 in neighborhoods surrounding their plants (and gives them 20 more years to achieve this standard). The new law overrides the concern for public health in the 1970 bill. And the steel industry is given another 30 years to improve their record at coke factories. The new law puts aside the issue of health risks and instead focuses on engineering standards for tighter plumbing.
Many, many economic calculations are based on “cost/benefit” analyses. The purpose is to create scientific benchmarks to justify what are really policy decisions. The results, however, can be anything but scientific. To make cost/benefit analyses, for instance, economists have to decide how much a human life is worth. Different federal agencies put the value of a human life at between $500,000 and 3.5 million. So, in effect and in practice, property rights and profits are given a higher value than human life.
In his landmark book, Small is Beautiful, economist E.F. Schumacher states:
To press non-economic values into the framework of the economic calculus, economists use the method of cost/benefit analysis. This is generally thought to be an enlightened and progressive development, as it is at least an attempt to take account of costs and benefits which might otherwise be disregarded altogether. In fact, however, it is a procedure by which the higher is reduced to the level of the lower and the priceless is given a price. It can therefore never serve to clarify the situation and lead to enlightened decisions. All it can do is lead to self-deception or the deception of others; for to undertake to measure the immeasurable is absurd and constitutes but an elaborate method of moving from preconceived notions to foregone conclusions; all one has to do to obtain the desired results is to impute suitable values to the immeasurable costs and benefits. The logical absurdity, however, is not the greatest fault of the undertaking: what is worse, and destructive of civilization, is the pretense that everything has a price, or in other words, that money is the highest of all values.
2) At the EPA, the inspector general found that 80% of the case files on hazardous-waste violations showed no evidence that the violators had ever complied with the enforcement order. Instead, EPA enforces the law by “negotiating” with the offenders- bargaining with corporate lawyers about how much they will do to clean up pollution and when.
A Senator asked the EPA inspector- “Is it your testimony that EPA’s enforcement policies are so weak that it frequently pays polluters to keep polluting and pay EPA’s small fines rather than clean up their act?” “Absolutely, we have found that over and over again”.
William Greider, Who will Tell the People
3) At the Nuclear Regulatory Commission (NRC), regulators issued only 350 fines during the 1980’s, although public utilities had reported approximately 34,000 mechanical malfunctions, worker errors, and security infractions at nuclear power plants.
4) At the Dept. of Labor, OSHA (Occupational Safety and Health Admin.) referred only 42 cases of industrial negligence for criminal prosecution in 20 years. Of these, 14 were actually prosecuted, with 10 convictions. No one was ever sent to jail, even for a day, for violating federal law.
In fact, the U.S. government has been the most serious polluter in the country. An EPA study in 1988 found that half of all federal facilities cause environmental damage. The U.S. military, for instance, has created more toxic waste sites than the top five chemical companies in the US. (The estimated cost of cleaning up 17 major nuclear weapons facilities is $155 billion). In fact, the government’s own General Accounting Office estimated that federal departments violate the clean water law at twice the rate of private industry. Of course, the federal government enjoys a distinct advantage in its ability to evade laws. It owns the prosecutor.
5) In Washington today we have “Democracy for hire”. An example is Jack Bonner’s Bonner and Associates on K Street in Washington, which packages democratic expression and sells it to corporate clients.
When the Senate was debating new clean-air legislation in 1990, certain wavering Senators received pleas from grassroots organizations in their states on the question of controlling auto pollution. For instance, John Glenn of Ohio heard from the Big Brothers and Sisters of Mahoning Valley. Sam Nunn of Georgia heard from The Georgia Baptist Convention with 1.2 million members. Easter Seal Society of S. Dakota lobbied Senator Thomas Dashcle. Delaware Paralyzed Veterans Assoc. contacted Senator William V. Roth, Jr.
All these groups and others declared themselves opposed to the proposed new legislation that would have mandated significantly increased fuel efficiency for autos (The Bryan Bill called for minimum fuel efficiency of 42 miles per gallon as an average of an automaker’s entire fleet of different vehicles. If this standard were to be achieved we would no longer need to depend on oil from the Middle East). All the groups were persuaded to take this stand by Bonner and Assoc., which informed them that, consistent with the auto industry’s propaganda, tougher fuel standards would make it impossible to manufacture any vehicles larger than a Ford Escort or a Honda Civic. There were told that vans, station wagons, small trucks and high speed police cruisers would cease to exist. The National Sheriff’s Assoc. and the Nebraska Farm Bureau joined in to condemn new legislation.
For 20 years, whenever government has attempted to improve auto safety or environmental protection through new regulation, the auto industry has always made similar complaints- claiming that satisfying tougher standards would be impossible without dire social and economic consequences. The same story occurred with the debate over air-bags. Industry warnings have always proved false.
Bonner and Associates collected between $500,000 and $1 million from the auto industry for their work of scouring 6 states for potential grass roots voices, coaching them on “the facts”, and then delivering their coached input to the wavering Senators. So now we see innocent (and ignorant) people being manipulated by powerful interests. It starts with a list of undecided Senators whose votes the auto industry needs. Then Bonner and Assoc. looks for willing grassroots targets within those states. And all the expenses were tax deductible for GM, Chrysler and Ford. Whereas an auto company can deduct the cost of flying its executives and lobbyists to Washington to lobby senators on the clean-air bill, an ordinary citizen has to pay his own way. Also, during the clean air debate the National Assoc. of Manufacturers distributed a “jobs at risk” map purporting to show the job losses in every legislator’s home state if Congress enacted the bill. The data was dubious but had the desired, wilting effect on legislators.
6) The very first Secretary of Transportation tried to order airbags as life saving devices in automobiles. Henry Ford and Lee Iococca, then Ford’s top CEO, called on Nixon and lobbied to stifle the measure. This marked the beginning of a 20 year successful stalling campaign by auto companies. Political pleas were followed by postponed regulations, more studies, court challenges, watered-down proposals, more litigation, etc. Finally, as of 1990, air-bags are made available to people. Their effectiveness was demonstrated immediately- and Lee Iococca went on TV for Chrysler boasting that his auto company was the leader in making American cars safer.
7) The Savings and Loan crisis was brewing for over 12 years and was well known by both Democrats and Republicans. The S and Ls were a basically democratic institution designed to help poor people afford homes. The scandal was shielded from the press and the people for over 10 years. When Bush finally did put forth a plan for the bailout of the failed S&Ls it remarkably resembled the blueprint plan drafted by the American Banking Association (the real winners- for now their competition was wiped out) the summer before. The total cost to taxpayers (the real losers- along with poor people needing homes): an estimated $500 billion. This is just another example of corporation’s ability to “privatize profits and socialize losses”.
Citizen GE (from Greider’s Who Will Tell the People)
GE is a mirror of the world economy, you have an opportunity to see everything.
Benjamin Heineman, Jr., Corporate Lawyer
GE recognizes that as a major economic entity it has the status and responsibility to form opinions.
Philip A. Lacovara, Corporate Lawyer
By their very nature, corporations do not function as democratic institutions. They are fascist, extremely hierarchical, and they have one extremely narrow function: to maximize profits. And yet they have become perhaps the major force in political decisions, replacing citizens, political parties, and other mediating institutions. This new arrangement is one main reason for the breakdown of democracy. Even though corporations exist in order to maximize their own profits, they presume to speak on behalf of the people. They have taken the place of political parties in defining and shaping the issues in Washington. They have the money to fund lobbyists, PR campaigns, think tanks in Washington, etc. What we have now, literally, is democracy for sale or for hire.
Hundreds of these corporations are now buying influence with politicians and portraying themselves as good citizens. They finance parties and politicians. They sponsor public policy development. They mobilize public opinion around political agendas. Meanwhile, they are also the leading outlaws in a lawless government. GE has been convicted of a series of crimes in recent years, including defrauding the federal government. GE has been identified as responsible for contributing to the damage at 47 Superfund sites- including the Hanford nuclear reservation in WA- that GE has operated for 20 years. At Hanford, there have been many cases of cancer and the toxic legacy will cost billions to clean up. GE is being sued but has made no comment on its responsibility. In Alabama, GE settled out of court when the state sued it for dumping toxic PCBs in the Coosa River. There are many other instances of noncompliance, suits and countersuits.
In 1990, GE was convicted of cheating the Army on a $254 million contract for battlefield computers. In fact, 62% of Fortune 500 corps were involved in one or more “significant illegalities” in the decade from 1975 to 1984. They may regularly violate the law without surrendering their political rights. They commit felonious acts that would send individuals to jail. In fact, corporate crime is rarely even called a crime. When GE was fined $69 million for false invoices to the US government for parts not shipped or sold to Israel, taxpayers subsidized the $400/hour lawyers who handled the case. Like the others, Citizen GE energetically promotes its own civic reputation and pursues its many financial agendas, despite its status as an ex-convict.
In fact, there are no longer any distinct boundary lines between law, politics and corporate management. Many regard political appointments as training for higher paying corporate careers, using the so-called “revolving door”. There are hundreds, probably thousands of examples. One example is Stephan Ramsey, previously Assistant Attorney General for Environmental Enforcement in the Reagan administration. At the Justice Dept., Ramsey had developed the liability rules for enforcing the Superfund law (which requires corporations to pay their share for cleaning up the thousands of toxic waste dumps they created.). Then, after leaving government he worked with a legal firm and helped corporations stymie the Superfund law- developing a play book for how corporate lawyers could confound the government’s efforts to collect the billions owed by polluters. Ramsey now works for GE. And they need him. GE has been listed as a “potentially responsible party” at 47 Superfund sites (all have unacceptably high levels of chemical waste), more than any other corporation.
Other revolving door examples: Ronald Reagan’s former Attorney General now sits on GE’s Board of Directors. So does a former chairman of the Joint Chiefs of Staff, a retired Air Force General, etc. The “revolving door” is not so much about personal ambition. It is simply the political reality in Washington.
GE makes things the government buys and also things the government regulates, including light bulbs, locomotives, jet engines, and nuclear bombs (they’ve made 33,000 of them). It also controls TV broadcasting, nuclear-power plants, and financial services. It is the second largest plastics manufacturer and it also manufactures pollution control systems. It makes medical-diagnostic equipment, circuit breakers, industrial turbines, and electric motors. It is also intensely engaged in trade policy and the emerging global economy. It is a stockbroker and a major bank- its financial subsidiary, GE capital, has $91 billion in assets, making it equal in size to America’s 4th largest commercial bank. It is also a media giant. It owns NBC, and NBC’s seven local stations, the Financial News Network, the Consumer News/Business Channel, and has footholds in TV broadcasting in 3 other countries. So GE is a conglomerate (1989 earnings were $3.9 billion) which functions as a political organization as well as a series of businesses. It has 177 plants in the US, 103 in 23 other countries, it employs 243,000 Americans, and there are about 506,000 stockholders.
GE is a deeply Republican institution. In the 50’s, it sponsored Reagan’s TV career and launched him on his career as a crusader against big government. It’s political wing includes an elaborate team of lawyers and lobbyists, continuing financial investments in both charity and politics and programs of education and propaganda. In Washington, GE has a permanent team of 2 dozen lobbyists and a large support staff. Like most corporations, it finances candidates in both parties. GE PACs contributed $595,000 to Congressional campaigns. One year it paid senators $47,000 to listen to them give speeches (the Congressmen were mostly members of the armed services and defense appropriations committees). GE is a social philanthropist. It’s tax exempt foundations gave away $18.8 million in 1989, mostly to college and school systems, including scholarships to poor and minorities. It donates to the United Way. But much of the tax-exempt contributions also serve its own political purposes- some went to The American Council for Capital Formation (a group that campaigns against corporate income tax), the Institute for International Economics (a think tank that promotes the multinational corporation’s line on trade policy), Americans for Generational Equity (an issues front that campaigns for cuts in such entitlement programs as Social Security). It also gives substantial amounts to the major policy think tanks that promote the conservative business perspective such as Brookings, AEI, and the Heritage Foundation. It sponsors the McLaughlin Group, a right wing TV talk show. GE is a regular member of the Business Roundtable, which disseminates the political agenda for the Fortune 500 corporations.
In the 1980’s, GE spent $26.8 million/year on image making- TV commercials. (It wanted to bolster its image because it came under attack as a nuclear bomb maker). But the 1980’s was also the time GE was indicted criminally for cheating the government on defense contracts. One Congressional aide from Massachusetts explained how the legislative process works:
“Basically the GE guy comes around and tells us which aircraft we are voting for because Lynn (a plant in Mass.) will make the engines for them”
(In fact the PR bill for corporate image making was $941 million in 1987). Dow Chemical, one of the most notorious polluters, portrays itself as a friend of nature, AT&T “saves eagles”, IBM teaches ghetto children. Chevron targeted its “People Do” add campaign at “inner-directed” segments of citizens hostile to them and found that it helped their image.)
As it turns out, GE was possibly the single biggest winner in Reagan’s tax cuts. The tax cuts, remember, were inspired by the “trickle down” theory that the wealthy and corporations should get a tax break so they could invest in more businesses and create more jobs for the economy. GE had corporate profits of $6.5 billion during 1981-83 and actually received a tax rebate of $283 million from the government. Its tax burden went from $330 million/year to minus $90 million/yr. The 1981 tax legislation yielded as much as $1.3 billion for General Electric over several years, possibly much more. (Also, the tax burden on the richest 1% of Americans fell by an amazing 36%, compared to what they would have owed under the 1977 code). (George W. Bush’s 2002 budget proposes to give billions in re-bates to corporations over the next five years.)
So today, 86% of the net wealth of Americans is owned by 10% of the people. The inequality index, the Gini index, is at an all time high. BUT GE’s windfall did not create any new jobs for Americans- as was promised- the “trickle down” theory was just a fantasy and ploy to make the rich richer and the poor poorer. Instead, the company was in the process of drastically shrinking its American work force and eliminated 50,000 people from its payroll through layoffs, attrition and selling off subsidiaries. But the tax windfall did help GE buy new companies- like RCA and NBC and expand overseas operations. Other businesses followed suit- they invested their tax windfall money mostly in foreign countries. So unwittingly American citizens were subsidizing the globalization of their own industrial structure. The corporate tax code was so thoroughly gutted in the early 80’s that hundreds of profitable corporations became free riders in the American political system. Tax laws changed again in the late 80’s and by 1989, GE was paying $1.1 billion in federal taxes- 23%, still much lower than the statutory rate of 34%.
Like other multinational corps. GE wants maximum freedom to do as it chooses in the global economy, shifting production and jobs wherever seems most efficient. And it wants minimal responsibility for the economic consequences to the American workforce such as the steady loss of high-paying industrial jobs. Instead. we now have a proliferation of low-wage jobs. Not withstanding GE’s well publicized concern for educating children, in fact, GE abandoned 50 American plants and shrank its overall workforce by about 1/4 during the 80’s, laying off 46,000 well-paid American workers.
The new strategy according to GE’s CEO, Jack Welch (called “neutron Jack” because like the neutron bomb, he eliminates people and leaves the buildings standing. 170,000 were laid off during his tenure)- is a “boundaryless company“. Welch wants a company that will recognize no distinction between domestic and foreign operations. For white collar management, Welch also virtually eliminated the old unwritten loyalties and trust that used to prevail in companies like GE. Business Week concluded that at GE the old social contract between employer and employees has been nullified.
Loyalty to company, it’s nonsense. We now want to create an environment where employees are “ready to go and eager to stay.”
Jack Welch, GE CEO
In fact, the deterioration of wages and the structure of the job market is the central economic question facing American families. In 1979, an American worker earning average wages had to work 23 weeks to earn enough to buy an average-priced car. In 1989, he/she had to work 32 hours to buy the same car. As the president of Chrysler put it: “We’re looking at the pooring of America”. In fact, the productivity of American workers increased cumulatively by over 12% in the 1980’s, but hourly wages increased by only 2%. Meanwhile, between 1977 and 1990, a period when average wages were stagnating, compensation for top CEOs increased by 220%. In 1960 average pay for CEO was 12 times higher than average factory worker, by 1990 its was 70 times higher. Today it is 120 times higher. And the top 1% of American families control 40% of American wealth. World wide the top 1% has as much as the income of the bottom 60%.
All in all, the Fortune 500 companies axed 4 million jobs in last 12 years. And old high wages jobs are not being replaced- in CA, over 50% of new jobs created since 1987 earn less than $7,000/year- not enough to pay rent on an average sized home. No wonder homelessness is on the rise.
Examples- AT&T laid off 40,000 of 300,000 workers in 1996. (And that’s after cutting some 75,000 jobs in the last decade. GM set a record by slicing its work force by 70,000 in 1992. IBM wiped out 63,000 jobs in 1993. Meanwhile, the same day AT&T announced the cutbacks, the Dow Jones jumped 60 points. Stock went up on the Dow Jones because the company is getting “leaner and meaner” and will be “better positioned” to meet competition on the “information superhighway” in an “era of deregulation”. So the job cuts equal increased profits for shareholders. People who were performing well lost their jobs in a climate of “downsizing” and “restructuring”. Today, lots of displaced middle managers can’t find work elsewhere, so middle class is getting anxious. In fact, today, productivity is up, profits are record highs, and wages are stagnant. And the gap between poor and rich is growing rapidly. Between 1947 and 1973, Americans generally shared equally in prosperity. Since 1973, only the top 20 % in income has seen real gains. The bottom 40% has lost ground. Average hourly wage in Sept., 1980 was $7.76. In Sept. of 1995, it was $7.40. Chomsky notes: For most non-supervisory workers, which is the majority of the workforce, wages are maybe 10 percent or more below that they were 25 years ago. That’s in absolute terms. In relative terms, they are much farther below.”
The Wall Street Journal reports: “Most of the cuts are facilitated, one way or another, by new software programs, better computer networks, and more powerful hardware.” William Wimpsinger, past president of the International Association of Machinists (a union which lost half of its membership to automation) stated that within 30 years as little as 2 percent of the global work force will be able to produce all the goods needed. Since management has shown little inclination to share the profits with labor- we can expect the difference between rich and poor to grow.
Why should corporations receive tax credits from the U.S. government when they are simultaneously shrinking US employment, breaking laws, and fouling the environment? Why should the government (i.e., taxpayers) pay the bill for cleaning up pollution generated by corporations?
How can we make GE and other corporations obey the laws? Perhaps they should be barred from selling things to the government if they break the laws. This hasn’t occurred.
Meanwhile, American citizens have been marginalized by the political process. And they have been turned into insatiable consumers by marketing techniques. Paul Hawkens (The Greening of Commerce) notes that the average adult American receives 21,000 commercial messages a year- more than 3,000 per day. 75% of these are paid for by the largest 100 American corporations. (Corporations spend more on trying to get us to buy their products than we spend on secondary education). This advertising creates envy and a sense of inadequacy. It deceives people into buying what they don’t need.
The Global Economy
The rise of multinational corporations and the easy mobility of capital investment and jobs from one country to another is creating a global economy which searches out the lowest wages and cheapest costs and maximum profits for corporations. In effect, the global economy searches for the lowest common denominator in national standards for wages, taxes and corporate obligations to health, the environment and stable communities. The economic consequences of globalization have already been felt by millions of U.S. industrial workers who lost their jobs to cheaper labor in foreign countries in the last 30 years.
Noam Chomsky describes “globalization” as:
a fancy way of saying that you export jobs to high repression, low wage areas- which undercuts the opportunities for productive labor at home. It’s a way of increasing corporate profits, of course… There are two important consequences of globalization. First, it extends the Third World model to industrial countries. In the Third World, there’s a two-tiered society- a sector of extreme wealth and privilege, and a sector of huge misery and despair among useless, superfluous people.. The second consequence… has to do with governing structures…
To quote the business press, we’re creating a “new imperial age” with a “de facto world government.” It has its own institutions- like the International Monetary Fund (IMF) and the World Bank, trading structures like NAFTA and GATT, executive meetings like the G-7 (the seven richest industrial countries- the U.S., Canada, Japan, Germany, Britain, France and Italy, the European Community bureaucracy” and the World Trade Organization.
As you’d expect, this whole structure of decision making answers basically to the transnational corporations, international banks, etc. It’s also an effective blow against democracy. All these structures raise decision making to the executive level, leaving what’s called a “democratic deficit” – parliaments and populations with less influence. Not only that, the general population doesn’t know what’s happening, and it doesn’t even know that it doesn’t know.
As an example of where the global economy leads, lets look at the colonias of Ciudad Juarez in Mexico- the “maquiladora zonez”, where people living in squatter villages work for companies like GE (which operates 8 plants, more than others), Ford, GM, GTE Sylvania, RCA, Westinghouse, Honeywell and many others. Here, corporations pay no property taxes on their factories. They evade US laws and taxes. They pay employees as little as 55 cents/hr. No one can live on these wages, even in Mexico. These are the modern equivalent of the “sweat shops” that once scandalized American cities (The Jungle, by Upton Sinclair). Jobs that once paid $10 or 11/hour in Ohio or Illinois now pay one tenth that much or less in Mexico. These assembly workers turn out TV sets, electrical switches and transformers, computer keyboards, etc. (There are over 240 maquila plants in Juarez, which is second only to Tijuana.)
An official rationale for globalizing the economy is that it will benefit the poor, struggling masses. Although workers in Ohio and Illinois will lose, the new auto workers in Juarez will become middle class consumers. Thus, in time, everyone will benefit. In fact, the workers in Mexico tell a different story. Their wages are not rising, in terms of purchasing power. They have been falling steadily for years. They can’t afford to buy American cars or computers. They can barely afford the necessities. The turnover in the jobs is roughly every three months-
“Workers do not age in this industry- they leave. Because of the intensive work it entails, there’s constant burnout. If they’ve been there three or four years, workers lose efficiency. they begin to have problems with eyesight. they begin to have allergies and kidney problems. they are less productive.” We have begun to see more 14 year olds in the plants- children 14 to 16 years old. Quite a lot say they are 16 but I know they are probably 13 or 14 or 15 years old”
Mexican at GE plant
The scandal of major American corporations employing adolescent children to do the industrial work that once belonged to American adults has been documented in many settings, but it gets no political response in Washington or Mexico City. The National Toxics Campaign stated that the U.S. – Mexican border was already so polluted with dangerous chemicals that it may become “a two thousand mile Love Canal.”
One Mexican social worker states:
For 10 years they told us they handled no toxic wastes. I was attacked by the plants as an alarmist. Now they are beginning to admit that they do handle toxic wastes but, unless we can find out what they do with the wastes, there’s no way to stop them….
What most concerns me is the health within the plants. We have no money for research, but we hear these complaints from workers. We find high levels of lead in blood samples. We have situations in which we find a tremendous amount of manic depressives,. So I’m thinking this is a central nervous system disorder. It could be solvents. It’s heavily concentrated in the electronics industry. There’s also a tremendous number of Down’s syndrome children. Other deformities you find in high incidence are cleft palates and other deformities.
Meanwhile, the CEO of an American clothing company was asked if his company’s imported goods from China might, in fact have been manufactured with slave labor. He replied: “Everybody is slave labor. The wage is so cheap”.
The problem with this system is that it eventually destroys communities. Neither the corporations nor the poor workers pay taxes. So city infrastructures deteriorate. The system is good for short-term productivity only. In the long term it consumes and destroys people, communities, and resources. In fact, between 1960 and 1980, the gap in real income between the rich and poor countries of the world has increased from a factor of 20 to a factor of 46. The world’s economic system- even the so-called economic aid we give to third world countries- generally increases the gap between the haves and the have nots.
In 1971, British economists E.F. Schumacher (Small is Beautiful) noted:
It is a strange phenomenon indeed that the conventional wisdom of present-day economics can do nothing to help the poor…. The economic calculus, as applied by present-day economics, forces the industrialist to eliminate the human factor because machines do not make mistakes which people do. Hence the enormous effort at automation and the drive for ever-larger units. This means that those who have nothing to sell but their labor remain in the weakest possible bargaining position. The conventional wisdom of what is now taught as economics by-passes the poor, the very people for whom development is really needed. The economics of gigantism and automation is a left-over of 19th century conditions and 19th century thinking and it is totally incapable of solving any of the real problems of today. An entirely new system of thought is needed, a system based on attention to people… It could be summed up in the phrase; production by the masses, rather than mass production.
William Greider concludes that perhaps the only way that Americans can defend themselves and their nation against the forces of globalization is to link their own interests with the interests of people in other nations. Perhaps with a global minimum wage law, perhaps with international unions that protect workers rights. He believes that we have to take democracy to a higher plane because genuine reform will require new levels of cross-boundary politics. Americans are not exactly accustomed to this kind of sophisticated internationalism. As Greider states:
Most Americans, aside from what they are told about the Cold War rivalry and occasional military conflicts, have been educated into ignorance about the world at large.
In fact, the global economy has become a “closet dictator”. We are now, suddenly a nation whose citizens can no longer decide their own destiny. American policy is moving offshore. Our housing policy is determined by central bankers.
GATT, NAFTA, and FTAA
GATT= General Agreement on Tariffs and Trade-
NAFTA= North American Free Trade Agreement- Agreement between U.S., Canada and Mexico which took effect Jan. 1, 1994, which seeks a radical reduction in tariffs and non-tariff barriers and establishes comprehensive rules governing trade and investment. Labor and environmental concerns are pretty much ignored and so there are few enforceable provisions.
FTAA= Free Trade Area of the Americas. 34 rich countries pledged to establish this by 2005. It would extend the rules of NAFTA to all the Western Hemisphere.
These modern trade agreements are generally devised in secrecy by the heads of major corporations. Somehow, they get converted to secret executive orders which are railroaded through Congress during the early 1990s (under Bush I) on “fast track” (a simple yea or nay vote) without ever having to be debated or presented to the general public. In 1990, Bush I announced his “Enterprise for the Americas” in effect a plan for a free trade zone extending from the North Pole to Tierra del Fuego. Asceeding to Wall Street’s wishes, he first laid the ground work for NAFTA, which was to be a completely deregulated free trade zone in which US corporations could move their operations to Mexico in order to take advantabe of an average hourly wage of 98 cents an hour against the US average of $11 dollars an hour. The legal minimum in Mexico was 59 cents an hour, but workers in sweatshops commonly work for less. Some have termed the Mexican sweat shops (“maquiladoras” or assembly plants) an “Auschwitz below the border”.
The Bush-Wall Street imperative for the Uruguay round of GATT was to press forward with similar free trade agreements for the entire world, in which all nations would now be coerced into giving up their sovereign rights to intervene on behalf of their workers and environmental regulations.
Chomsky asserts that these agreements “are basically designed to maintain that (wage) inequality. They undergird what’s called a “flexible labor market”, meaning that people have no security. If they have a fear of job loss, people are not going to ask for better conditions and benefits.”
The proponents of the agreements claim it will be a win-win situation for everyone. Its authors include officials of Coca-cola, General Mills, Phillip Morris, ConAgra, Argill and many other multi-national corporations. Small business, labor, environmentalists and farmers were not consulted. Environmentalists and farm groups argue that GATT (General Agreement on Tariffs and Trade) is actually aimed at fostering greater deregulation of business- without the inconvenience of domestic political debate. GATT means to abolish tariffs, which are simply trade taxes. Its authors call tariffs “trade barriers”. However, these tariffs generate billions of dollars in revenues for this country. OMB estimates we will lose $14 billion in next five years and $40 billion in next 10 years from lost tariff revenues. Therefore, our taxes will need to be increased or government services will have to be cut to make up for the losses. This system offers tax relief to foreign countries and multi-national corps. It is yet another example of big business’ attempt to “privatize profits and socialize losses”.
“The U.S. proposals (for GATT) represent a radical attempt to preempt the authority of its own citizens and the citizenry of other countries to regulate commerce in the pursuit of environmental and social ends. It is an attempt to impose a laissez-faire philosophy on a worldwide basis, to allow the global corporations unfettered ability to transfer capital, goods, services, and raw materials across national boundaries.”
David Morris, Institute for Local Self-Reliance in St. Paul, MN
Also, GATT would effectively vitiate domestic laws on food safety by assigning the question of environmental standards to an obscure UN-sponsored commission in Rome. If for instance, the U.S. has a stricter law on pesticide pollution than this UN commission in Rome, then other nations can declare that the environmental standards are artificial “trade barriers” and subject to penalties. Thus, the goal of Bush’s trade negotiators all along was to “harmonize” environmental laws across political boundaries to encourage freer trade. That objective, inevitably, means lowering U.S. standards. Today, the concept of “boundaryless company”/”stateless corporation” is commonplace among multinational corps. IBM consists of 40% foreigners, Whirlpool is mostly non-American, etc.
NAFTA is the North American Free Trade Agreement and does essentially the same thing (removes trade barriers) for the U.S., Canada and Mexico. Noam Chomsky (The Prosperous Few and the Restless Many) notes:
NAFTA will flood Mexico with industrial agricultural products from the United States. These products are all produced with big public subsidies, and they’ll undercut Mexican agriculture. Mexico will be flooded with American crops, which will contribute to driving and estimated 13 million people off the land to urban areas or into the Maquiladora areas- which will again drive down wages. NAFTA will very likely be quite harmful for American workers too. We may lose hundreds of thousands of jobs, or lower the level of jobs. Latino and Black workers are the ones who are going to be hurt most. But it’ll certainly be a big bonanza for investors in the United States and for their counterparts in the wealthy sectors in Mexico. They’re the ones- along with the professional classes who for them- who are applauding the agreement.
By 1996, over 420,000 jobs vanished in the U.S. as a result of NAFTA- in all, since 1970, 2.6 million U.S. jobs have been lost as a result of international trade deals. $28 billion in business was lost to U.S.-based workers. For men with less than 6 years in the work force and no college education, average wages (in real dollars) fell 28% between 1979 and 1997. In the developing world, the results are more devastating. In Mexico, more than 1 million now work for less than the minimum wage ($3.40 per day) and another 8 million have fallen from the middle class into poverty.
Both NAFTA and GATT enjoyed bipartisan support from both Democrats and Republicans and President Clinton and were passed in the early part of the Clinton administration. As a result of NAFTA, the prices of many commodities may well come down. However, again, U.S. jobs will be lost to Mexico, where environmental standards and wages are significantly lower.
The Free Trade Agreement of the America’s (FTAA) would basically extend the rules of NAFTA and GATT to all of Central and South America- making this the largest trading block in the world, surpassing the EU. Brazilian President Lula has stated that it would “
The World Bank and the IMF (International Monetary Fund)
The International Monetary Fund- was created in 1944 to rectify the currency problems which were expected to occur after World War II. It was created to help other countries pay off their debts so that they could continue to trade with the U.S. In the 80s, the IMF worked with powerful private banks and governments to manage the third world debt crisis. Generally speaking, the IMF imposes “structural adjustment programs” on indebted third world governments. These generally have the effect of crippling the countries economy, thereby insuring that the natural and labor resources of the country can be exploited cheaply by multinational corporations.
The World Bank– was also created in 1944. WB loans were intended to help third world countries develop the infrastructure needed for “development”. Generally speaking WB loans have gone to big projects (hydroelectric dams, fossil fuel production) which have enriched large corporations and local elites at the expense of natural environment and social well-being. In the 80’s and 90’s, WB has also imposed structural adjustment programs on poor countries. Today, there are some cracks in the WB-IMF partnership. The WB is supposed to be concerned about poverty. Some in the WB now caution that social breakdown in poor countries , aggravated by IMF structural adjustment programs, may make these countries ungovernable.
These international banks lend money to “third world” countries for “development”. Noam Chomsky (Propaganda and the Public Mind) gives an example of how the system works:
Take Indonesia. Right now its economy is crushed by the fact that the debt is something like 140 percent of GDP. Trace that debt back. It turns out that the borrowers were something like a hundred to two hundred people around the military dictatorship that we supported and their cronies. The lenders were international banks. A lot of that debt has been by now socialized through the IMF, which means taxpayers in the North who fund the IMF are responsible. What happened to the money? They enriched themselves. There was some capital export and some development. But the people who borrowed the money aren’t held responsible for it. It’s the people of Indonesia who have to pay it off. And that means livingt under crushing austerity programs, severe poverty, and suffering. In fact, it’s a hopeless task to pay off the debt that they didn’t borrow. What about the lenders? The lenders are protected from risk. That’s one of the main functions of the IMF, to provide risk free insurance to people who lend and invest in risky loans. They earn high yields because there’s lots of risk, but they don’t have to take the risk, because it’s socialized.
Structural Adjustment Programs (SAPS)- the Washington consensus and “neo-liberal reforms
International corporations have various methods they use to impose their will on Third World nations- thus insuring cheap resources and labor. The standard package of fiscal reforms which the World Bank and IMF impose are called “structural adjustment programs” or SAPS. Another term for this approach to Third World economies is the “Washington consensus” or “neo-liberal reforms.”
Standard features of the SAPs: The 3rd world country must:
1) devalue its currency
2) create higher interest rates
3) have strict control of the money supply
4) cut government spending for social services
5) remove trade and exchange controls (tariffs, etc).
6) use market forces to set the price of goods, services and labor
7) privatize public sector enterprises (water systems, forests, health care systems, etc.)
8) promote exports.
In practice, the SAPs have been a dramatic success for first world elites and a disaster for 3rd world peoples. They undermine local subsistence economies and strengthen the sector dominated by foreigners. Between 1982 and 1989, net outflow of debt service from 3rd to 1st world equaled $240 billion. And yet no country managed to reduce the ratio of debt to GNP. Former Chancellor Willie Brandt stated that the 3rd world debt is like “a blood transfusion from the sick to the healthy”.
The Ecumenical Coalition for Economic Justice describes the impact of SAPs:
Instead of developing their own resources to meet pressing human needs, many Third World economies are literally being “sapped”- gradually exhausted of their wealth- through conditions imposed by their creditors. The goals of this new colonialism are, in part, the same as the old. Thanks to SAPs, transnational corporations enjoy greater access to cheap raw materials, cheap labor and foreign markets. But… the contemporary recolonization also involves an annual collection of tribute in the form of interest payments on debts that… can never be paid off. Thanks to the “success” of SAPs, debt bondage is becoming permanent.”
The World Trade Organization (WTO)
The World Trade Organization was established in 1994 to set rules concerning international trade and investment under the auspices of GATT. It is located in Geneva, Switzerland, and has a dispute-settlement mechanism to enforce the international trade rules. It is probably the most powerful and most anti-democratic organization in the world; dispute panels are composed of unelected , non-accountable trade attorneys. Massive protests of the WTO meeting in Seattle in 1999 brought workers, farmers, students and environmentalists together in an impressive display of people’s democracy.
According to Pawl Hawkings (“Skeleton Woman in Seattle”):
It’s agenda relentlessly pursued the elimination of any strictures in the free flow of trade, including how a product is made, by whom it is made, of what happens when it is made. By doing so, the WTO is eliminating the ability of countries and regions to set standards, to express values, or determine what they do or don’t support. Child labor, prison labor, forced labor, substandard wages, and working conditions cannot be used as a basis to discriminate against goods. Nor can environmental destruction, habitat loss, toxic waste production, and presence of transgenic materials or synthetic hormones be used as a the basis to screen or stop goods from entering a country… If the as-yet-to be approved draft agenda were ratified, the Europeans could no longer block or demand labeling on genetically modified crops without being slapped with punitive lawsuits and tariffs…. All water in the world would be privatized. It would allow corporations patent protection on all forms of life, even genetic material in culture use for thousands of years.
The WTO’s members are the wealthiest countries, the G-7 states. Here they attempt to set the rules and standards for international commerce. This organization probably represents the globalization of the world economy better than any other.
On November 30, 1999, over 700 organizations (NGOs) and between 40,000 and 60,000 demonstrated against the WTO’s Third Ministerial in Seattle, WA. This event has been dubbed by the press “the battle in Seattle.” New York Times columnist Thomas Friedman called the demonstrators “a Noah’s ark of flat-earth advocates, protectionist trade unions and yuppies looking for the 1960s fix”. But he was wrong. The protesters were an amazing coalition of human rights activists, labor activists, people of various religious faiths, indigenous people, steel workers, farmers, environmentalists, forest activists, social justice workers, students, and teachers. And they were speaking on behalf of a world made poorer by globalization. Worldwide, 86% of goods go to the top 20% of the population and the bottom 20% of the population gets 1% of the goods. The protesters came to demand that the WTO show them how globalization benefits workers and the environment in “developing” countries. The protesters were trained in non-violence by the Direct Action Network and notified the city and the police months in advance of the protest. They were met by an army of armored cars, horses and special forces policemen, which included Tactical Operations Division (like a SWAT team) and special forces from the FBI, the Secret Service, and the CIA. Protesters were unarmed. Police were equipped with U.S. military gas masks, tear gas, semi-automatic, high-velocity Autocockers loaded with solid plastic shot; grenades, grenade launchers, .60 caliber rubber ball impact munitions, full body armor and no visible badges or forms of identification.
Author Paul Hawkins (“Skeleton Woman in Seattle”) was there as a non-violent demonstrator and recalled:
Tear gas is a misnomer. Think about feeling asphyxiated and blinded. Breathing becomes labored. Vision is blurred. The mind is disoriented. The nose and throat burn. It’s not a gas, it’s a drug. Gas-masked police hit, pushed, and speared us with the butt ends of their batons. We all sat down, hunched over, and locked arms more tightly. By then, the tear gas was so strong our eyes couldn’t open. One by one, our heads were jerked back from the rear, and pepper was sprayed directly into each eye. It was very professional. Like hair spray from a stylist. Ssst. Ssst…. Tear gas, rubber bullets, and pepper spray were used so frequently that by late afternoon, supplies ran low…. (But soon they resupplied, and that night), the police turned downtown Seattle into Beirut. Michael Meacher, environmental minister of the United Kingdom, stated afterward, “What we hadn’t reckoned with was the Seattle Police Department who single-handedly managed to turn a peaceful protest into a riot.”
A fundamental cause of economic and environmental devastation is the free-markets habit of generating a permanent condition of over-capacity in production. The world’s existing structure of manufacturing facilities, constantly being expanded on cheap labor and new technologies, can now turn out far more products than the world’s consumers can afford to buy. More cars, computers, aircraft, etc. are made than the marketplace can possibly absorb. Ex. Auto factories have the capacity to produce 45 million cars annually- but the market will buy no more than 35 million. This market place imbalance in supply and demand underlies the fierce competition for advantage among companies and nations that guarantees that some plants will have to close and that wages will stay depressed.
In effect, Greider notes that our global economy resembles a kind of global feudalism. The multinational corporations function like rival dukes and barons, warring for territory across the world and oblivious to local interests. They will play weakening national governments off against each other.
Why should American taxpayers subsidize and provide R and D funds for corporations that intend to export their new production and exploit the weak there? Why should American military forces be deployed to protect companies that do not reciprocate the national loyalty? Greider feels that no U.S. company should be treated as a lawful entity if its production is found to exploit child labor in other countries, or if it violates environmental laws, or ignores tax laws here or elsewhere.
At present, we have a plutocracy (“a government or state in which the wealthy rule”). The global economy is running downhill for everyone else- towards lower wages, a degraded environment and destroyed communities. A global minimum wage law could help refashion the global economy so that it runs uphill for everyone.
And given the “revolving door” of the inter-generational class of plutocrats who alternately rotate between the board rooms of major corporations and the highest offices in government and given the ascendancy of corporate rights over the rights of people, many now refer to our present version of “democracy” as fascism. Fascism is defined as: “a system of government that excercises a dictatorship of the extreme right, typically through the merging of state and business leadership, together with belligerent nationalism .” Italian dictator Benito Mussolini once said,
“Fascism should more properly be called ‘corporatism’, since it is the merger of state and corporate power.”
Here are some ideas to re-habilitate our “democracy” and our political and economic institutions at the individual, family, community, national/international levels:
1. Perhaps the most important single step would be to rescind the rights of personhood (14th Amendment rights) to corporations. Currently, money rules the nation rather than people. To rescind 14th amendment rights to cor
2. An equally important step would be for the government to reclaim the right and duty of issuing currency.
At the individual, family, and local level:
1) learn to distinguish necessities from non-necessities
2) purchase natural products; de-emphasize synthetics
4) conserve energy- in homes and transportation
5) buy durable goods rather than throw-aways- and take care of them
6) use your “consumer power” by supporting and building a local economy. Don’t buy at Wal-Mart as they probably use “sweat-shop” labor more than any other single outlet.
B)- At the national level: Some ideas to enable Americans to reclaim their politics:
1) mandatory voter registration and voting
2) de-militarize budget (i.e., cut-off welfare for corporations) and put money toward education, environmental clean-up, infra-structure, social programs, etc.
3) make it illegal for any individual or corporation to contribute more than $100 to a candidates political campaign.
4) encourage more political parties- which represent interests of the non-business sector
5) re-invigorate the national debate by emphasizing education of all Americans by increased funding to education, etc.
6) either move the nation’s capital to Topeka Kansas and/or have another Congressional Congress?
C. At the national/international Level: Shifting the economic emphasis toward sustainable systems:
1) establish and maintain international standards for air, water and environmental quality
2) establish international trade unions
3) establish national and international minimum wage
4) for starters- double US minimum wage- so people can live on their wages
5) offer tax deductions for community service
6) offer shorter work weeks with double time for overtime to encourage hiring of more people
7) enforce three strikes and your out law for corporate as well as individual citizens
8) make sure all laws, particularly environmental laws, are enforced across the board
9) establish EIS procedure for major corporate decisions which will affect environment.
10) emphasize education about how the world works- environmentally, economically, politically.
The Greening of Business- Principles of sustainable business:
1) Replace nationally and internationally produced items with products created locally and regionally.
2) Take responsibility for the effects they (the products you buy) have on natural world.
3) Do not require exotic sources of capital in order to develop and grow.
4) Engage in production processes that are human, worthy, dignified, and intrinsically satisfying.
5) Create objects of durability and long-term utility whose ultimate use or disposition will not harm future generations.
6) Change consumers to customers and citizens through education.
7) Need to incorporate true costs into products- including costs of cleanup, tax-subsidies, etc.
Also, there are now about 70,000 small businesses which have as their express goal cleaning up the environment.
The Natural Step
The Natural Step has been developed in Sweden as a way to teach and support environmental systems-thinking in corporations, cities, government, unions and academic institutions. This includes the following principles:
1) Nature cannot withstand a systematic buildup of dispersed matter mined from the earth’s crust (e.g., minerals, oil, etc.)
2) Nature cannot withstand a systematic buildup of persistent compounds made by humans (e.g., PCBs)
3) Nature cannot take a systematic deterioration of its capacity for renewal (e.g., harvesting fish faster than they can replenish, deforestation, converting fertile land to desert, etc.).
4) Therefore, if we want life to continue, we must a) be efficient in our use of resources and b) promote justice- because ignoring poverty will lead the poor, for short-term survival, to destroy resources that we all need for long-term survival (e.g., the rainforests).
The British economist, E.F. Schumacher spent most of his career in India, where he learned much from the ideas of people like Ghandhi, who stated:
Live simply, so that others may simply live
Schumacher felt that since our modern economy has as its ideal the maximum rate of consumption of material goods , it is basically self-destructing by going through nature’s larder at unsustainable rate.
Schumacher suggests an alternative approach to economics in Small is Beautiful:
Modern economics considers consumption the sole end and purpose of all economic activity, taking the factors of production- land, labor and capital- as the means. Buddhist economics, on the other hand is the study of how to attain the given ends with the minimum means- or maximum well-being on minimum consumption. So whereas modern economics tries to maximize consumption by the optimal pattern of productive effort, Buddhist economics tries to maximize human satisfaction by optimal pattern of consumption. It is easy to see that the effort needed to sustain a way of life which seeks to attain the optimal pattern of consumption is like to be much smaller than the effort needed to sustain a drive for maximum consumption. We need not be surprised, therefore, that the pressure and strain of living is very much less, say in Burma than it is in the United States. I.e., maximum well-being on the minimum consumption.
And from his prison cell, Vaclav Havel wrote:
“Man must in some way come to his senses. He must extricate himself from this terrible involvement in both the obvious and hidden mechanisms of totality, from consumption to repression, from advertising to manipulation through television. He must rebel against his role as a helpless cog in the gigantic and enormous machinery hurtling God knows where. He must discover again, within himself, a deeper sense of responsibility toward the world, which means responsibility toward something higher than himself.”
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