Rollback - Part IV
by Noam Chomsky
Z Magazine, May 1995
Towards a Utopia of the Masters
The economic crisis for the general population is a global
one. In the past 20 years, economic growth has fallen well below
the levels of the 1950s and 1960s (which were, to be sure, historically
unique). World per capita income fell in 1993 for the fourth straight
year, while the unemployment situation, already grim, worsened
in most countries. The International Labor Organization (ILO),
in its World Employment 1995 report, "Predicts Rising Global
Joblessness," the Wall Street Journal reports, noting however
that "many management theorists" regard the analysis
as outdated because "the whole concept of a job -- steady
work at steady pay from the same employer -- must be discarded."
The only major exception to the growing catastrophe of global
capitalism is East and Southeast Asia, with the exception of the
Philippines -- incidentally, the sole part of the fastest growing
economic region of the world that has been under tight U.S. control
for a century and (coincidentally) resembles the Latin American
disaster area.
Japan's former colonies have resumed the rapid economic growth
of the colonial period; though a brutal imperial power, Japan
treated its colonies quite differently from the Western norm.
Within the region dominated by Japan and the overseas Chinese
financial network, states have been powerful enough to organize
capital as well as to control labor. Unlike the rest of the South,
they have not been encumbered by what economic historian Paul
Bairoch calls the most extraordinary myth of "economic science":
"It is difficult to find another case where the facts so
contradict a dominant theory than the one concerning the negative
impact of protectionism," he writes, reviewing much of the
record though considerably understating the significance of state
intervention for the wealthy, because he limits himself to a narrow
category of market interferences. The conclusions, of course,
have been understood by the architects of policy, which is why
they have progressed while those subjected to their whims have
suffered.
The official tale is that the Japan-based region is passionately
dedicated to markets. We even read that "talk of labor standards
enrages many export-oriented countries in Asia"; the term
"countries" here refers, for example, to the brutal
and corrupt rulers in Indonesia's developmental state, but not
to the working people courageously struggling for the right to
organize and demanding labor standards. In internal discussion,
we find greater honesty. Thus a Federal Reserve report attributes
Singapore's economic growth to a domestic "forced savings"
policy and other state action.1
Unemployment remains higher in Europe than in the U.S., but
as the ILO and others observe, that fact has to be placed in the
context of the much harsher conditions of work in the United States
and the reduced social contract generally. While the U.S. work
week is reaching postwar peaks, the battle for a 40-hour week
having been lost long ago, in Europe it has fallen to 38-39 hours,
with much longer holidays and leaves and more benefits. To take
just one case, until 1993 the U.S. was one of the very few countries
in the world that did not provide for statutory maternity leave,
and its provisions still fall far below the European standard
-- in fact below the agreement negotiated by plantation workers
in Uganda, which grants male workers seven days of paternal leave.
The same picture is revealed by ratification of ILO conventions
guaranteeing labor rights. The U.S. has by far the worst record
in the Western hemisphere and Europe, with the exception of El
Salvador and Lithuania. It does not recognize even standard conventions
on child labor and the right to organize.2
The major factors that have led to the global economic crisis
are well understood. One is the globalization of production, which
has offered the masters tantalizing opportunities. The business
press frankly warns the "pampered Western workers" that
they must abandon their "luxurious life styles" and
such "market rigidities" as contracts, pensions, health
and safety in the workplace, and other outdated nonsense, even
the very concept of a job. Economists talk of job flow, pointing
out that it is hard to estimate -- and also largely beside the
point. The threat suffices to force working people to accept employers'
demands. The end of the Cold War, returning most of Eastern Europe
to its traditional Third World service role, places new weapons
in the hands of the rulers, as the business press has reported
with unrestrained glee. GM and VW can shift production to the
restored Third world in the East, where they can find workers
at a fraction of the cost of the "pampered Western workers,"
meanwhile enjoying high tariff protection and the other amenities
that "really existing free markets" provide for the
rich. The U.S. and U.K. are leading the way in grinding down working
people and the poor, but others will follow along, thanks to the
globalization of production. Inequality is back to the depression
days in the U.S., back to Victorian times in England, though Latin
America still wins the prize for worst record in the world, thanks
to our kind tutelage over many years.3
As many studies have shown, relative equality is a significant
factor in economic growth and improvement in health and living
standards. The fact is recognized by the World Bank, but without
influencing the policies that it and its IMF associate impose
on the Third World, which dramatically increase inequality and
undermine other factors that the Bank identifies as essential
for growth, notably education and welfare. There is ample historical
precedent. For over 200 years, "experiments" have been
conducted by the powerful following the highest principles of
economic science, with startlingly uniform results: benefits for
the experimenters and their power base, tragedies for the experimental
animals. Right-thinking people, again, are to draw no conclusions.
A second factor in the general crisis is the huge explosion
of unregulated financial capital since the Bretton Woods system
was dismantled by Richard Nixon and the radical change in its
constitution. Daily turnover on foreign exchange markets may be
approaching $1 trillion, some estimate. In the early 1970s, about
90% of capital in international exchanges was for investment and
trade, 10% for speculation. By 1990, those figures had reversed,
and a 1993 estimate is that only 5% is related to "real economic
transactions" (Wilfried Guth of the Deutsche Bank, who argues
further that these processes are undermining free trade, as do
others). The consequences were understood early on. In his 1978
presidential address to the American Economics Association, Nobel
laureate James Tobin suggested that taxes be imposed to slow down
speculative flows, which, if unimpeded, would drive the world
towards a low-growth, low-wage economy, with booming profits as
well. By now, the point is widely recognized; a commission headed
by Paul Volcker, former chairman of the Federal Reserve, attributes
about half of the 50% decline in growth rates since the early
1970s to the huge growth of currency speculation.4
The world is being moved by state-corporate policy towards
a kind of Third world model, with sectors of great wealth, a huge
mass of misery, and a large superfluous population, lacking any
rights because they contribute nothing to profit-making for the
rich.
These developments are commonly attributed to inexorable market
forces. Analysts then divide over the contribution of various
factors, primarily trade and automation. But the discussion cannot
sensibly proceed without recognition of major interferences with
markets. Huge state subsidy and intervention have always been
required to make trade appear efficient, not to speak of ecological
costs imposed on future generations who do not "vote"
in the market, and other "externalities" consigned to
footnotes. To mention merely one slight market distortion, a good
part of the Pentagon budget has been devoted to "secure flow
of oil at reasonable prices" from the Middle East, "overwhelmingly
the preserve of the United States" (Phebe Marr of the National
Defense University) -- a contribution to the "efficiency
of trade" that rarely receives attention, apart from other
contributions to "the health of the economy." There
are plenty of others.
As for automation, it surely contributes to profit at some
point, but that point was reached by decades of protection within
the state sector, as David Noble has shown. Furthermore, the specific
form of automation designed within the state system was often
driven by considerations of power more than profit or efficiency;
it was designed to deskill workers and subordinate them to management,
not because of market principles or the nature of the technology,
but for reasons of domination and control.5
Such contributions to private power give further insight into
the attractiveness of the military system for modern state capitalism,
particularly its appeal to "conservatives," who are
commonly in the lead in demanding that markets be undermined for
class interests. Reaganite America and Thatcher's England are
the primary recent examples -- both paragons of "conservatism,"
both leaders in expansion of state-subsidized industry. The U.S.
case is well-known. As for Thatcher, her blind pursuit of Friedmanite
dogmas that were refuted at every turn succeeded in creating the
worst crisis for manufacturing industry since the industrial revolution,
destroying almost 1/3 of the manufacturing plant within a few
years, a fact extensively detailed (and deplored) by actual conservatives,
notably Ian Gilmour. Nevertheless, the disaster was somewhat alleviated
by the growth of state-subsidized industry. At least in military
industry and sale of torture equipment to countries with awful
human rights records, England remains a world leader. London is
not far behind Washington in its aggressive pursuit of arms sales
including such meritorious customers as Saddam Hussein and Suharto,
pursuing the shared doctrine expressed by Thatcher's Defense Procurement
Minister Alan Clark: "I don't really fill my mind much with
what one set of foreigners is doing to another."6
Corporate decisions for power rather than simple profit are
often reasonable enough as a tactic in relentless class war. Particular
choices of technology provide one example. The recent health care
debacle is another case in point. Much of U.S. industry would
probably gain from a rational public insurance program, which
is why it was advocated editorially by Business Week. But it is
unwise to allow the general public to realize that government
can carry out useful acts. Despite the heavy shadow cast by business,
government remains the one system of power and authority that
is to some degree under public influence, unlike private tyrannies,
which are almost entirely unaccountable. Enhancing their power
is worth some sacrifice in profit.
There are other reasons for sacrificing short-run gain. Executives
point out to the business press that it is worthwhile to ship
manufacturing jobs even to Germany, with its much higher labor
costs, so as to facilitate class warfare. A Gillette Corporation
executive explains that the company is "concerned about having
only one place where a product is made," primarily because
of "labor problems." Thus if Boston workers strike,
Gillette could supply both the European and U.S. markets from
its Berlin plant, thereby breaking the strike; and vice versa.
It is only reasonable, then, that Gillette should employ over
three times as many workers abroad as in the U.S., irrespective
of costs. Strikes of critical importance are now underway in Illinois,
where Caterpillar and other corporations are attempting to destroy
the last vestige of unions. "Like many US companies, Caterpillar
has pursued a business strategy that has nudged American workers
away from defiance toward compliance," business correspondent
James Tyson reports. The strategy includes "manufacturing
at cheaper facilities abroad" and "relying on imports
from factories in Brazil, Japan, and Europe" -- and, of course,
hiring scabs and temps and relying on the criminal state to refuse
to enforce labor laws, a stand raised to principle by the Reaganites,
Such considerations help explain why U.S. corporations are
"creating jobs overseas" despite the fact that "a
dollar and falling labor costs have made American products increasingly
competitive," as the Times reports. Overseas investment is
rising at twice the rates of exports, and profits corporations
earn from production abroad are almost double those from exports.
These are natural ways to use the "dazzling profits"
they reap from "conservative" social policies, and the
further gains anticipated from the Gingrich Contract.7
Courts too have sometimes been frank about their contributions
to the rollback campaign. Denying an appeal by workers who had
lost jobs when Ohio plants were moved to states with cheaper labor,
the Sixth Circuit Court of Appeals stated accurately that "States
and counties in the United States compete with each other for
companies contemplating relocation," and labor laws neither
"discourage such relocations" nor bar closing of unionized
plants in favor of "a nonunion plant in another part of the
country or in a foreign country," as "contemplated"
by NAFTA. The Court then explained the background. Congress and
the courts "have made the social judgment, rightly or wrongly,
that our capitalistic system, Darwinian though it may be, will
not discourage companies from locating on the basis of their own
calculations of factors relating to efficiency and competitiveness.
The rules of the marketplace govern. By so reflecting commercial
interests, the institutions of government serve -- according to
current legal and economic theory -- the long-term best interests
of society as a whole. That is the basic social policy the country
has opted to follow."
The candor is unusual, though the deception is typical. "The
country" has "opted" for no such course, and it
is radically false that "the rules of the market place govern"
or that the system is "Darwinian" (in the intended sense
of "social Darwinism," which has little to do with biology)
-- except, of course, for the poor and the weak, who are indeed
subjected to these rules by those who cast their usual shadow
by means of Congress and the courts.
As for the dedication of "legal and economic theory"
to "the long-term best interests of society as a whole,"
perhaps that was best described by Swiss economist Simonde de
Sismondi 175 years ago, commenting on the doctrines of the founder
of modern economic theory, David Ricardo, who patiently explained
that employment was of no consequence to an economy as long as
rent and profits, which funded new investment, were in good shape.
"Wealth is everything, men are absolutely nothing?,"
Sismondi replied: "In truth then, there is nothing more to
wish for than that the king, remaining alone in the island, by
constantly turning a crank, might produce, through automata, all
the output of England." Others have no further right to be
in England, and should go elsewhere, the laws of the new science
proclaimed.
The founders of the science were surpassed by none in their
devotion to the "happiness of the people," and even
advocated some extension of the franchise to this end: "not
indeed, universally to all people, but to that part of them which
cannot be supposed to have any interest in overturning the right
of property," David Ricardo explained, adding that still
heavier restrictions would be appropriate if it were shown that
"limiting the elective franchise to the very narrowest bounds"
would guarantee more "security for a good choice of representatives."
There's an ample record of similar thoughts, and actions, to the
present day.8
The internationalization of production puts quite a different
cast on contemporary debate about "American decline."
As a geographical entity, the country is declining in many respects.
But the principal architects of policy have quite different interests,
as the "merchants and manufacturers" did in 18th century
England, and make sure that they are "most peculiarly attended
to," whatever the effect on others, including their own populations.
Nothing fundamental has changed in that regard since Adam Smith's
observations, apart from the dedicated zeal of the efforts to
suppress the obvious. With these truisms in mind, we should not
be surprised to find that while the U.S. role in manufacturing
production is declining if we consider the geographical entity,
it is holding its own quite nicely if we consider the share in
global production of U.S.-based corporations. The same is true
of the "trade deficit." If we consider international
borders, the U.S. has a huge deficit. But when the Commerce Department
recalculated, counting profits of U.S. companies abroad as U.S.
exports, the deficit turned into a huge surplus: the recalculation
was reasonable, the Wall Street Journal explained, because the
profits gained abroad "benefit companies domestically through
greater investment and R&D." The recalculation interprets
the words "United States" in the terms that matter for
the "principal architects of policy: not the geographical
area or its people, but the people who count.9
These remarks barely skim the surface. It's easy to understand
the mood of desperation, anxiety, hopelessness and fear that is
so prevalent in the world, outside of wealthy and privileged sectors
who see the opportunity to achieve at last the kind of power that
was out of reach when the democratic distemper infected nation-states
and popular forces could mobilize to win human rights and defend
them.
"Intractable Contradictions"
Recall the concerns of New York Times reporter David Rosenbaum
that "however worthy the goals and however sensible the principles"
of the Gingrich reformers, their dedication to the poor faces
"seemingly intractable contradictions." The most important
one, scrupulously ignored, is the need to protect the wealthy
and powerful from market discipline in traditional ways, now being
extended. But there are other problems.
Educated and privileged sectors, reasoning along Ricardo's
lines, see little problem in the fact that policies are executed
in "technocratic insulation," unimpeded by public interests
and concerns. But the population has to be controlled somehow.
For obvious reasons, one cannot appeal to them on grounds of the
intended effects of the policies that are being implemented. So
other methods are required. There are standard devices. Many can
simply be locked up or confined to urban slums. Others can be
entrapped by artificial "creation of wants" or other
forms of diversion. They can be left in confusion and despair
by corporate and other propaganda, a huge industry in the United
States for many years. Or they can be mobilized in fear and hatred
-- of foreigners, of one another -- or by religious fundamentalist
appeals.
The masters of mankind understand very well that people must
not be given opportunities to organize in a functioning civil
society, which might enable them to pool limited resources and
to take their affairs into their own hands. But when the limited
admissible means are used to mobilize people to do such needed
work as rolling back the social contract, "intractable contradictions"
arise. The problems are classic: they were recognized by German
industrialists who had supported Hitler's forces as a way to destroy
the labor movement, and found -- not to their pleasure -- that
he and his followers had some ideas of their own. The Iranian
merchants who relied on fundamentalist religious leaders to mobilize
the public against the Shah faced the same dilemma shortly after.
Some similar "intractable contradictions" are arising
right now as the rollback campaign gains force.
The problems have troubled the business press. A Fortune cover
story is headlined "Today's GOP: The Party's Over for Big
Business." To mobilize popular forces, the corporate world
has been compelled to resort to what are called "cultural
issues." But its troops are now prepared to fight the "culture
war," as Pat Buchanan and others refer to the various forms
of fanaticism they are seeking to engender. That process has opened
a "culture gap," Fortune observes. The CEOs are generally
liberal in cultural attitudes. They don't want their children
to be forced to pray in schools or taught "creation science."
They want their daughters to have opportunities. They not only
tend to be pro-choice, but about 60% of CEOs are "adamantly
pro-choice, agreeing with the statement that `a woman should be
able to get an abortion if she wants one, no matter what the reason'."
They do not want to live in a society and culture dominated by
Christian fundamentalists, people who worship the Enola Gay or
run around with assault rifles, or who debate subtle points about
Beast 666 from the Book of Revelations and listen to Pat Robertson
explaining how Presidents from Wilson to Bush may have been pawns
of "a tightly knit cabal" run by Freemasons and "European
bankers," who seek "a new order for the human race under
the domination of Lucifer." But these are the sectors they
are forced to turn to as a popular base for their assault on democracy
and human rights.
Among CEOs, the overwhelming favorite for President is Dick
Cheney; Bob Dole and Phil Gramm were backed by a mere 17%, and
"right down at the bottom of the pack with a 3% show of support...was
Newt Gingrich." Unfortunately for them, however, "The
religious right now controls the GOP," Fortune comments in
bold face: "Religious conservatives are the single most powerful
force within the GOP," no small group in one of the world's
most extreme religious fundamentalist cultures. They "hold
veto power over the Republican presidential nomination."
"There's a real cultural disconnect between the FORTUNE 500
and social conservatives," a lobbyist "with strong ties
to Christian fundamentalist groups and the new Republicans"
observes.
The Wall Street Journal talks uneasily about "class warfare"
-- a term usually avoided like the plague in respectable circles
-- referring to a war over "values" that pits the "upper-middle
class elites of professionals and managers," their constituency,
against the guy in the street who supports the Republican Party
that is supposed to do the bidding of these upper-middle class
elites. The religious conservatives who hold "veto power"
have no great interest in big business, which they rightly see
as hostile to the values that they uphold. They gain support from
"a few large companies on the fringe of corporate America
-- the tobacco industry, Amway." But within the functioning
economy, they are viewed with no little dismay, apart from their
role in implementing the rollback campaign. They oppose government
support for big corporations, threatening a disaster for "free
enterprise" if they cannot be kept down in the trenches.
They agree that "It's rollback time," as one of their
activists says, but they have in mind something quite different
from the CEOs. They don't like it when a corporation that has
its home in Gingrich's Cobb County denounces an official resolution
condemning "the gay life style." The CEOs rightly fear
that their troops may move beyond the "culture war,"
proceeding to undermine the basic framework of state-subsidized
private power.
Funding for the Gingrich army reveals the contradictions clearly.
Major funders are from marketing schemes like Amway, smaller insurance
companies, hedge-funds, and the like. These sectors control plenty
of money but are at the fringes of the economy. They are "very
much in sync with the `Contract With America'," the Wall
Street Journal reports, which is true only under a special but
perhaps accurate interpretation of the support for the Pentagon
on the part of their forces, who, unlike the CEOs, are not much
interested in the government's role as the "savior"
of advanced industry. Furthermore, they come from sectors of the
population that really are cringing in fear and terror, seeing
enemies coming to get them on all sides, a fact about the extraordinary
cultural scene that one cannot simply ignore.10
The contradictions are showing up in Washington. The Commerce
Department under Clinton has become "a pro-business dynamo,"
the Wall Street Journal observes, serving private power to an
unprecedented degree. But the Gingrich army doesn't understand,
which leads to an "uncanny circumstance: Big business allied
with a Democratic administration against Republic proposals to
trim Commerce's sails." The same is true of the Export-Import
Bank, the National Institutes of Health (which have "given
birth to the biotechnology industry," the New York Times
observes), and the National Institute of Standards and Technology
and the Technology Reinvestment Project, Clinton-inspired adjuncts
to the Pentagon subsidy to advanced industry. These are wasteful
because they are not devoted solely to "military uses,"
GOP critics charge, failing to comprehend the way the real economy
works and perhaps believing the lurid tales about Beast 666, Arab
terrorists, and who knows what other agent of Lucifer or the United
Nations. Even the hated regulatory agencies, such as the FDA,
have support from major corporations, which can see ahead far
enough to judge the effects of another thalidomide scandal.11
In the early part of this century, there was much fascination
with "corporate entities," social "organisms"
that have unique rights beyond those of mere individuals. These
ideas, growing from more or less the same Hegelian intellectual
soil, took several forms, notably Bolshevism, fascism, and the
modern corporation. Corporations were granted extraordinary rights
by Courts and lawyers, often with the support of "progressives."
They are, furthermore, as totalitarian an institution as humans
have managed so far to contrive. Terminology is crafted to avoid
the substance behind the shadow, so such terms as "fascist"
and "totalitarian" are restricted to political entities.
But the similarity in character is unmistakable. Two of these
systems of centralized, autocratic, and unaccountable power have
succumbed. The third not only remains but is increasing its sway
and dominance. There are divisions and conflicts of course, but
also much similarity of general conception worldwide, and overarching
institutions are also taking shape. The internal contradictions
may or may not prove "intractable," but they have ominous
import however they are resolved.
The transition from containment of democracy and human rights
to actual rollback should be seen against this background. We
should also recognize that the new phase of the struggle against
the "great beast" is based upon social policies with
particular goals that are not graven in stone or founded in laws
of nature or society, any more than the human institutions from
which they arise.
Notes
1 Pascal Zachary, WSJ, Feb. 22, 1995. FRBSF Weekly Letter
(Federal Reserve), Oct. 21, 1994; Dick Taylor, p.c.
2 ILO, World Labour Report 1994.
3 See my World Orders, Old and New (Columbia, 1994).
4 Ibid. John Frank and Fraser Mustard, Richard Wilkinson,
Daedalus, Fall 1994. World Bank, see David Felix, "Industrial
Development in East Asia: What are the lessons for Latin America,"
UNCTAD Discussion Papers No. 84, May 1984. See my Year 501 (South
End, 1993). Guth, Tobin, cited by Felix, "The Tobin Tax Proposal,"
Working Paper #191, June 1994, UN Development Programme. WSJ,
May 9, 1994.
5 Marr, Middle East Journal 48.2, Spring 1994. Noble, Forces
of Production (Knopf 1984); Progress without People (Charles Kerr
1993).
6 Gilmour, Dancing with Dogma (Simon & Schuster, 1992);
see World Orders for excerpts. John Pilger, Weekend Guardian,
Nov. 12, 1994; Distant Voices (Vintage, 1994). Paul Lashmar, New
Statesman & Society, Jan 20, 1995.
7 Louis Uchitelle, NYT, July 25, 1994. Tyson, CSM, Jan. 24,
1995.
8 Allen, et al., v Diebold, INC, 33F.3d 674 *677, decided
Sept. 6, 1994. Sismondi cited by Robert Heilbroner, "foreword,"
Jeremy Rifkin, The End of Work (Putnam, 1995). Ricardo, cited
by Rajani Kanth, Political Economy and Laissez-faire" (Rowman
and Littlefield, 1986).
9 WSJ, "World-Trade Statistics Tell Conflict Stories,"
March 28, 1994.
10 Fortune, Feb. 6, 1995. Dennis Farney, WSJ, Dec. 14, 1994.
Jill Abramson and David Rogers, WSJ, Feb. 9, 1995.
11 Helene Cooper, WSJ, Dec. 28, 1994. Jonathan Landay, CSM,
Feb. 21, 1995.
This article was originally published in Z Magazine, an independent
magazine of critical thinking on political, cultural, social,
and economic life in the U.S.
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