Market Democracy in a Neoliberal Order: Doctrines
by Noam Chomsky
Davie Lecture, University of Cape Town, May 1997
I have been asked to speak on some aspect of academic or human
freedom, an invitation that offers many choices. I will keep to
some simple ones.
Freedom without opportunity is a devil's gift, and the refusal
to provide such opportunities is criminal. The fate of the more
vulnerable offers a sharp measure of the distance from here to
something that might be called "civilization." While
I am speaking, 1000 children will die from easily preventable
disease, and almost twice that many women will die or suffer serious
disability in pregnancy or childbirth for lack of simple remedies
and care. UNICEF estimates that to overcome such tragedies, and
to ensure universal access to basic social services, would require
a quarter of the annual military expenditures of the "developing
countries," about 10% of U.S. military spending. It is against
the background of such realities as these that any serious discussion
of human freedom should proceed.
It is widely held that the cure for such profound social maladies
is within reach. The hopes have foundation. The past few years
have seen the fall of brutal tyrannies, the growth of scientific
understanding that offers great promise, and many other reasons
to look forward to a brighter future. The discourse of the privileged
is marked by confidence and triumphalism: the way forward is known,
and there is no other. The basic theme, articulated with force
and clarity, is that "America's victory in the Cold War was
a victory for a set of political and economic principles: democracy
and the free market." These principles are "the wave
of the future -- a future for which America is both the gatekeeper
and the model." I am quoting the chief political commentator
of the New York Times, but the picture is conventional, widely
repeated throughout much of the world, and accepted as generally
accurate even by critics. It was also enunciated as the "Clinton
Doctrine," which declared that our new mission is to "consolidate
the victory of democracy and open markets" that had just
been won. There remains a range of disagreement: at one extreme
"Wilsonian idealists" urge continued dedication to the
traditional mission of benevolence; at the other, "realists"
counter that we may lack the means to conduct these crusades of
"global meliorism," and should not neglect our own interests
in the service of others. Within this range lies the path to a
Reality seems to me rather different. The current spectrum
of public policy debate has as little relevance to actual policy
as its numerous antecedents: neither the United States nor any
other power has been guided by "global meliorism." Democracy
is under attack worldwide, including the leading industrial countries;
at least, democracy in a meaningful sense of the term, involving
opportunities for people to manage their own collective and individual
affairs. Something similar is true of markets. The assaults on
democracy and markets are furthermore related. Their roots lie
in the power of corporate entities that are totalitarian in internal
structure, increasingly interlinked and reliant on powerful states,
and largely unaccountable to the public. Their immense power is
growing as a result of social policy that is globalizing the structural
model of the third world, with sectors of enormous wealth and
privilege alongside an increase in "the proportion of those
who will labor under all the hardships of life, and secretly sigh
for a more equal distribution of its blessings," as the leading
framer of American democracy, James Madison, predicted 200 years
ago. These policy choices are most evident in the Anglo-American
societies, but extend worldwide. They cannot be attributed to
what "the free market has decided, in its infinite but mysterious
wisdom," "the implacable sweep of `the market revolution',"
"Reaganesque rugged individualism," or a "new orthodoxy"
that "gives the market full sway." The quotes are liberal-to-left,
in some cases quite critical. The analysis is similar across the
rest of the spectrum, but generally euphoric. The reality, on
the contrary, is that state intervention plays a decisive role,
as in the past, and the basic outlines of policy are hardly novel.
Current versions reflect "capital's clear subjugation of
labor" for more than 15 years, in the words of the business
press, which often frankly articulates the perceptions of a highly
class-conscious business community, dedicated to class war.
If these perceptions are valid, then the path to a world that
is more just and more free lies well outside the range set forth
by privilege and power. I cannot hope to establish such conclusions
here, but only to suggest that they are credible enough to consider
with care. And to suggest further that prevailing doctrines could
hardly survive were it not for their contribution to "regimenting
the public mind every bit as much as an army regiments the bodies
of its soldiers," to borrow the dictum of the respected Roosevelt-Kennedy
liberal Edward Bernays in his classic manual for the Public Relations
industry, of which he was one of the founders and leading figures.
Bernays was drawing from his experience in Woodrow Wilson's
State propaganda agency, the Committee on Public Information.
"It was, of course, the astounding success of propaganda
during the war that opened the eyes of the intelligent few in
all departments of life to the possibilities of regimenting the
public mind," he wrote. His goal was to adapt these experiences
to the needs of the "intelligent minorities," primarily
business leaders, whose task is "The conscious and intelligent
manipulation of the organized habits and opinions of the masses."
Such "engineering of consent" is the very "essence
of the democratic process," Bernays wrote shortly before
he was honored for his contributions by the American Psychological
Association in 1949. The importance of "controlling the public
mind" has been recognized with increasing clarity as popular
struggles succeeded in extending the modalities of democracy,
thus giving rise to what liberal elites call "the crisis
of democracy" as when normally passive and apathetic populations
become organized and seek to enter the political arena to pursue
their interests and demands, threatening stability and order.
As Bernays explained the problem, with "universal suffrage
and universal schooling,...at last even the bourgeoisie stood
in fear of the common people. For the masses promised to become
king," a tendency fortunately reversed -- so it has been
hoped -- as new methods "to mold the mind of the masses"
were devised and implemented.
Quite strikingly, in both of the world's leading democracies
there was a growing awareness of the need to "apply the lessons"
of the highly successful propaganda systems of World War I "to
the organization of political warfare," as the chairman of
the British Conservative Party put the matter 70 years ago. Wilsonian
liberals in the U.S. drew the same conclusions in the same years,
including public intellectuals and prominent figures in the developing
profession of Political Science. In another corner of Western
civilization, Adolf Hitler vowed that next time Germany would
not be defeated in the propaganda war, and also devised his own
ways to apply the lessons of Anglo-American propaganda for political
warfare at home.
Meanwhile the business world warned of "the hazard facing
industrialists" in "the newly realized political power
of the masses," and the need to wage and win "the everlasting
battle for the minds of men" and "indoctrinate citizens
with the capitalist story" until "they are able to play
back the story with remarkable fidelity"; and so on, in an
impressive flow, accompanied by even more impressive efforts,
and surely one of the central themes of modern history.
To discover the true meaning of the "political and economic
principles" that are declared to be "the wave of the
future," it is of course necessary to go beyond rhetorical
flourishes and public pronouncements and to investigate actual
practice and the internal documentary record. Close examination
of particular cases is the most rewarding path, but these must
be chosen carefully to give a fair picture. There are some natural
guidelines. One reasonable approach is to take the examples chosen
by the proponents of the doctrines themselves, as their "strongest
case." Another is to investigate the record where influence
is greatest and interference least, so that we see the operative
principles in their purest form. If we want to determine what
the Kremlin meant by "democracy" and "human rights,"
we will pay little heed to Pravda's solemn denunciations of racism
in the United States or state terror in its client regimes, even
less to protestation of noble motives. Far more instructive is
the state of affairs in the "people's democracies" of
Eastern Europe. The point is elementary, and applies to the self-designated
"gatekeeper and model" as well. Latin America is the
obvious testing ground, particularly the Central America-Caribbean
region. Here Washington has faced few external challenges for
almost a century, so the guiding principles of policy, and of
today's neoliberal "Washington consensus," are revealed
most clearly when we examine the state of the region, and how
that came about.
It is of some interest that the exercise is rarely undertaken,
and if proposed, castigated as extremist or worse. I leave it
as an "exercise for the reader," merely noting that
the record teaches useful lessons about the political and economic
principles that are to be "the wave of the future."
Washington's "crusade for democracy," as it is called,
was waged with particular fervor during the Reagan years, with
Latin America the chosen terrain. The results are commonly offered
as a prime illustration of how the U.S. became "the inspiration
for the triumph of democracy in our time," to quote the editors
of the leading intellectual journal of American liberalism. The
author, Sanford Lakoff, singles out the "historic North American
Free Trade Agreement (NAFTA)" as a potential instrument of
democratization. In the region of traditional U.S. influence,
he writes, the countries are moving towards democracy, having
"survived military intervention" and "vicious civil
Let us begin by looking more closely at these recent cases,
the natural ones given overwhelming U.S. influence, and the ones
regularly selected to illustrate the achievements and promise
of "America's mission."
The primary "barriers to implementation" of democracy,
Lakoff suggests, are the "vested interests" that seek
to protect "domestic markets" -- that is, to prevent
foreign (mainly U.S.) corporations from gaining even greater control
over the society. We are to understand, then, that democracy is
enhanced as significant decision-making shifts even more into
the hands of unaccountable private tyrannies, mostly foreign-based.
Meanwhile the public arena is to shrink still further as the state
is "minimized" in accordance with the neoliberal "political
and economic principles" that have emerged triumphant. A
study of the World Bank points out that the new orthodoxy represents
"a dramatic shift away from a pluralist, participatory ideal
of politics and towards an authoritarian and technocratic ideal...,"
one that is very much in accord with leading elements of twentieth
century liberal and progressive thought, and in another variant,
the Leninist model; the two are more similar than often recognized.
Thinking through the tacit reasoning, we gain some useful insight
into the concepts of democracy and markets, in the operative sense.
Lakoff does not look into the "revival of democracy"
in Latin America, but he does cite a scholarly source that includes
a contribution on Washington's crusade in the 1980s. The author
is Thomas Carothers, who combines scholarship with an "insider's
perspective," having worked on "democracy enhancement"
programs in Reagan's State Department. Carothers regards Washington's
"impulse to promote democracy" as "sincere,"
but largely a failure. Furthermore, the failure was systematic:
where Washington's influence was least, in South America, there
was real progress towards democracy, which the Reagan Administration
generally opposed, later taking credit for it when the process
proved irresistible. Where Washington's influence was greatest,
progress was least, and where it occurred, the U.S. role was marginal
or negative. His general conclusion is that the U.S. sought to
maintain "the basic order of...quite undemocratic societies"
and to avoid "populist-based change," "inevitably
[seeking] only limited, top-down forms of democratic change that
did not risk upsetting the traditional structures of power with
which the United States has long been allied."
The last phrase requires a gloss. The term "United States"
is conventionally used to refer to structures of power within
the United States; the "national interest" is the interest
of these groups, which correlates only weakly with interests of
the general population. So the conclusion is that Washington sought
top-down forms of democracy that did not upset traditional structures
of power with which the structures of power in the United States
have long been allied. Not a very surprising fact, or much of
a historical novelty.
To appreciate the significance of the fact, it is necessary
to examine more closely the nature of parliamentary democracies.
The United States is the most important case, not only because
of its power, but because of its stable and long-standing democratic
institutions. Furthermore, the United States was about as close
to a model as one can find. America can be "As happy as she
pleases," Thomas Paine remarked in 1776: "she has a
blank sheet to write upon. The indigenous societies were largely
eliminated. There is little residue of earlier European structures,
one reason for the relative weakness of the social contract and
of support systems, which often had their roots in pre-capitalist
institutions. And to an unusual extent, the socio-political order
was consciously designed. In studying history, one cannot construct
experiments, but the U.S. is as close to the "ideal case"
of state capitalist democracy as can be found.
Furthermore, the leading Framer of the constitutional system
was an astute and lucid political thinker, James Madison, whose
views largely prevailed. In the debates on the Constitution, Madison
pointed out that in England, if elections "were open to all
classes of people, the property of landed proprietors would be
insecure. An agrarian law would soon take place," giving
land to the landless. The system that he and his associates were
designing must prevent such injustice, he urged, and "secure
the permanent interests of the country," which are property
rights. It is the responsibility of government, Madison declared,
"to protect the minority of the opulent against the majority."
To achieve this goal, political power must rest in the hands of
"the wealth of the nation," men who would "sympathize
sufficiently" with property rights and "be safe depositories
of power over them," while the rest are marginalized and
fragmented, offered only limited public participation in the political
arena. Among Madisonian scholars, there is a consensus that "The
Constitution was intrinsically an aristocratic document designed
to check the democratic tendencies of the period," delivering
power to a "better sort" of people and excluding "those
who were not rich, well born, or prominent from exercising political
power." These conclusions are often qualified by the observation
that Madison, and the constitutional system generally, sought
to balance the rights of persons against the rights of property.
But the formulation is misleading. Property has no rights. In
both principle and practice, the phrase "rights of property"
means the right to property, typically material property, a personal
right which must be privileged above all others, and is crucially
different from others in that one person's possession of such
rights deprives another of them. When the facts are stated clearly,
we can appreciate the force of the doctrine that "the people
who own the country ought to govern it," "one of [the]
favorite maxims" of Madison's influential colleague John
Jay, his biographer observes.
One may argue, as some historians do, that these principles
lost their force as the national territory was conquered and settled,
the native population driven out or exterminated. Whatever one's
assessment of those years, by the late 19th century the founding
doctrines took on a new and much more oppressive form. When Madison
spoke of "rights of persons," he meant humans. But the
growth of the industrial economy, and the rise of corporate forms
of economic enterprise, led to a completely new meaning of the
term. In a current official document, "`Person' is broadly
defined to include any individual, branch, partnership, associated
group, association, estate, trust, corporation or other organization
(whether or not organized under the laws of any State), or any
government entity," a concept that doubtless would have shocked
Madison and others with intellectual roots in the Enlightenment
and classical liberalism -- pre-capitalist, and anti-capitalist
These radical changes in the conception of human rights and
democracy were not introduced primarily by legislation, but by
judicial decisions and intellectual commentary. Corporations,
which previously had been considered artificial entities with
no rights, were accorded all the rights of persons, and far more,
since they are "immortal persons," and "persons"
of extraordinary wealth and power. Furthermore, they were no longer
bound to the specific purposes designated by State charter, but
could act as they chose, with few constraints. The intellectual
backgrounds for granting such extraordinary rights to "collectivist
legal entities" lie in neo-Hegelian doctrines that also underlie
Bolshevism and fascism: the idea that organic entities have rights
over and above those of persons. Conservative legal scholars bitterly
opposed these innovations, recognizing that they undermine the
traditional idea that rights inhere in individuals, and undermine
market principles as as well. But the new forms of authoritarian
rule were institutionalized, and along with them, the legitimation
of wage labor, which was considered hardly better than slavery
in mainstream American thought through much of the 19th century,
not only by the rising labor movement but also by such figures
as Abraham Lincoln, the Republican Party, and the establishment
These are topics with enormous implications for understanding
the nature of market democracy. Again, I can only mention them
here. The material and ideological outcome helps explain the understanding
that "democracy" abroad must reflect the model sought
at home: "top-down" forms of control, with the public
kept to a "spectator" role, not participating in the
arena of decision-making, which must exclude these "ignorant
and meddlesome outsiders," according to the mainstream of
modern democratic theory. I happen to be quoting the essays on
democracy by Walter Lippmann, one of the most respected American
public intellectuals and journalists of the centruy. But the general
ideas are standard and have solid roots in the constitutional
tradition, radically modified, however, in the new era of collectivist
Returning to the "victory of democracy" under U.S.
guidance, neither Lakoff nor Carothers asks how Washington maintained
the traditional power structure of highly undemocratic societies.
Their topic is not the terrorist wars that left tens of thousands
of tortured and mutilated corpses, millions of refugees, and devastation
perhaps beyond recovery -- in large measure wars against the Church,
which became an enemy when it adopted "the preferential option
for the poor," trying to help suffering people to attain
some measure of justice and democratic rights. It is more than
symbolic that the terrible decade of the 1980s opened with the
murder of an Archbishop who had become "a voice for the voiceless,"
and closed with the assassination of six leading Jesuit intellectuals
who had chosen the same path, in each case by terrorist forces
armed and trained by the victors of the "crusade for democracy."
One should take careful note of the fact that the leading Central
American dissident intellectuals were doubly assassinated: both
murdered, and silenced. Their words, indeed their very existence,
are scarcely known in the United States, unlike dissidents in
enemy states, who are greatly honored and admired; another cultural
universal, I presume.
Such matters do not enter history as recounted by the victors.
In Lakoff's study, which is not untypical in this regard, what
survives are references to "military intervention" and
"civil wars," with no external factor identified. These
matters will not so quickly be put aside, however, by those who
seek a better grasp of the principles that are to shape the future,
if the structures of power have their way.
Particularly revealing is Lakoff's description of Nicaragua,
again standard: "a civil war was ended following a democratic
election, and a difficult effort is underway to create a more
prosperous and self-governing society." In the real world,
the superpower attacking Nicaragua escalated its assault on the
country's first democratic election: the election of 1984, closely
monitored and recognized as legitimate by the professional association
of Latin American scholars (LASA), Irish and British Parliamentary
delegations, and others, including a hostile Dutch government
delegation that was remarkably supportive of Reaganite atrocities,
as well as the leading figure of Central American democracy, Jos
Figueres of Costa Rica, also critical observer, though regarding
the elections as legitimate in this "invaded country,"
and calling on Washington to allow the Sandinistas "to finish
what they started in peace; they deserve it." The U.S. strongly
opposed the holding of the elections and sought to undermine them,
concerned that democratic elections might interfere with its terrorist
war. But that concern was put to rest by the good behavior of
the doctrinal system, which barred the reports with remarkable
efficiency, reflexively adopting the state propaganda line that
the elections were meaningless fraud.
Overlooked as well is the fact that as the next election approached
on schedule, Washington left no doubt that unless the results
came out the right way, Nicaraguans would continue to endure the
illegal economic warfare and "unlawful use of force"
that the World Court had condemned and ordered terminated, of
course in vain. This time the outcome was acceptable, and hailed
in the U.S. with an outburst of exuberance that is highly informative.
At the outer limits of critical independence, columnist Anthony
Lewis of the New York Times was overcome with admiration for Washington's
"experiment in peace and democracy," which showed that
"we live in a romantic age." The experimental methods
were no secret. Thus Time magazine, joining in the celebration
as "democracy burst forth" in Nicaragua, outlined them
frankly: to "wreck the economy and prosecute a long and deadly
proxy war until the exhausted natives overthrow the unwanted government
themselves," with a cost to us that is "minimal,"
leaving the victim "with wrecked bridges, sabotaged power
stations, and ruined farms," and providing Washington's candidate
with "a winning issue," ending the "impoverishment
of the people of Nicaragua," not to speak of the continuing
terror, better left unmentiond. To be sure, the cost to them was
hardly "minimal": Carothers notes that the toll "in
per capita terms was significantly higher than the number of U.S.
persons killed in the U.S. Civil War and all the wars of the twentieth
century combined." The outcome was a "Victory for U.S.
Fair Play," a headline in the Times exulted, leaving Americans
"United in Joy," in the style of Albania and North Korea.
The methods of this "romantic age," and the reaction
to them in enlightened circles, tell us more about the democratic
principles that have emerged victorious. They also shed some light
on why it is such a "difficult effort" to "create
a more prosperous and self-governing society" in Nicaragua.
It is true that the effort is now underway, and is meeting with
some success for a privileged minority, while most of the population
faces social and economic disaster, all in the familiar pattern
of Western dependencies. Note that it is precisely this example
that led the editors to laud themselves as "the inspiration
for the triumph of democracy in our time," joining the enthusiastic
We learn more about the victorious principles by recalling
that these same representative figures of liberal intellectual
life had urged that Washington's wars must be waged mercilessly,
with military support for "Latin-style fascists,...regardless
of how many are murdered," because "there are higher
American priorities than Salvadoran human rights." Elaborating,
editor Michael Kinsley, who represented "the left" in
mainstream commentary and television debate, cautioned against
unthinking criticism of Washington's official policy of attacking
undefended civilian targets. Such international terrorist operations
cause "vast civilian suffering," he acknowledged, but
they may be "perfectly legitimate" if "cost-benefit
analysis" shows that "the amount of blood and misery
that will be poured in" yields "democracy," as
the world rulers define it. Enlightened opinion insists that terror
is not a value in itself, but must meet the pragmatic criterion.
Kinsley later observed that the desired ends had been achieved:
"impoverishing the people of Nicaragua was precisely the
point of the contra war and the parallel policy of economic embargo
and veto of international development loans," which "wreck[ed]
the economy" and "creat[ed] the economic disaster [that]
was probably the victorious opposition's best election issue."
He then joined in welcoming the "triumph of democracy"
in the "free election" of 1990.
Client states enjoy similar privileges. Thus, commenting on
yet another of Israel's attacks on Lebanon, foreign editor H.D.S.
Greenway of the Boston Globe, who had graphically reported the
first major invasion 15 years earlier, commented that "If
shelling Lebanese villages, even at the cost of lives, and driving
civilian refugees north would secure Israel's border, weaken Hezbollah,
and promote peace, I would say go to it, as would many Arabs and
Israelis. But history has not been kind to Israeli adventures
in Lebanon. They have solved very little and have almost always
caused more problems." By the pragmatic criterion, then,
the murder of many civilians, expulsion of hundreds of thousand
of refugees, and devastation of southern Lebanon is a dubious
It would not be too hard, I presume, to find comparable examples
here in the recent past.
Bear in mind that I am keeping to the dissident sector of
tolerable opinion, what is called "the left," a fact
that tells us more about the victorious principles and the intellectual
culture within which they find their place.
Also revealing was the reaction to periodic Reagan Administration
allegations about Nicaraguan plans to obtain jet interceptors
from the Soviet Union (the U.S. having coerced its allies into
refusing to sell them). Hawks demanded that Nicaragua be bombed
at once. Doves countered that the charges must first be verified,
but if they were, the U.S. would have to bomb Nicaragua. Sane
observers understood why Nicaragua might want jet interceptors:
to protect its territory from CIA overflights that were supplying
the U.S. proxy forces and providing them with up-to-the-minute
information so that they could follow the directive to attack
undefended "soft targets." The tacit assumption is that
no country has a right to defend civilians from U.S. attack. The
doctrine, which reigned challenged, is an interesting one. It
might be illuminating to seek counterparts elsewhere.
The pretext for Washington's terrorist wars was self-defense,
the standard official justification for just about any monstrous
act, even the Nazi Holocaust. Indeed Ronald Reagan, finding "that
the policies and actions of the Government of Nicaragua constitute
an unusual and extraordinary threat to the national security and
foreign policy of the United States," declared "a national
emergency to deal with that threat," arousing no ridicule,
May 2, 1985.} Others react differently. In response to John F.
Kennedy's efforts to organize collective action against Cuba in
1961, a Mexican diplomat explained that Mexico could not go along,
because "If we publicly declare that Cuba is a threat to
our security, forty million Mexicans will die laughing. Enlightened
opinion in the West takes a more sober view of the extraordinary
threat to national security. By similar logic, the USSR had every
right to attack Denmark, a far greater threat to its security,
and surely Poland and Hungary when they took steps towards independence.
The fact that such pleas can regularly be put forth is again an
interesting comment on the intellectual culture of the victors,
and another indication of what lies ahead.
The substance of the Cold War pretexts is greatly illuminated
by the case of Cuba, as are the real operative principles. These
have emerged with much clarity once again in the past few weeks,
with Washington's refusal to accept World Trade Organization adjudication
of a European Union challenge to its embargo, which is unique
in its severity, and had already been condemned as a violation
of international law by the Organization of American States and
repeatedly by the United Nations, with near unanimity, more recently
extended to severe penalties for third parties that disobey Washington's
edicts, yet another violation of international law and trade agreements.
The official response of the Clinton Administration, as reported
by the Newspaper of Record, is that "Europe is challenging
`three decades of American Cuba policy that goes back to the Kennedy
Administration,' and is aimed entirely at forcing a change of
government in Havana." The Administration also declared that
the W.T.O. "has no competence to proceed" on an issue
of American national security, and cannot "force the U.S.
to change its laws."
At the very same moment, Washington and the media were lauding
the W.T.O. Telecommunications agreement as a "new tool of
foreign policy" that compels other countries to change their
laws and practices in accord with Washington's demands, incidentally
handing over their communications systems to mainly U.S. megacorporations
in yet another serious blow against democracy. But the W.T.O.
has no authority to compel the U.S. to change its laws, just as
the World Court has no authority to compel the U.S. to terminate
its international terrorism and illegal economic warfare. Free
trade and international law are like democracy: fine ideas, but
to be judged by outcome, not process.
The reasoning with regard to the W.T.O. is reminiscent of
the official U.S. grounds for dismissing World Court adjudication
of Nicaragua's charges. In both cases, the U.S. rejected jurisdiction
on the plausible assumption that rulings would be against the
U.S.; by simple logic, then, neither is a proper forum. The State
Department Legal Adviser explained that when the U.S. accepted
World Court jurisdiction in the 1940s, most members of the U.N.
"were aligned with the United States and shared its views
regarding world order." But now "A great many of these
cannot be counted on to share our view of the original constitutional
conception of the U.N. Charter," and "This same majority
often opposes the United States on important international questions."
Lacking a guarantee that it will get its way, the U.S. must now
"reserve to ourselves the power to determine whether the
Court has jurisdiction over us in a particular case," on
the principle that "the United States does not accept compulsory
jurisdiction over any dispute involving matters essentially within
the domestic jurisdiction of the United States, as determined
by the United States." The "domestic matters" in
question were the U.S. attack against Nicaragua.
The media, along with intellectual opinion generally, agreed
that the Court discredited itself by ruling against the United
States. The crucial parts of its decision were not reported, including
its determination that all U.S. aid to the contras is military
and not humanitarian; it remained "humanitarian aid"
across the spectrum of respectable opinion until Washington's
terror, economic warfare, and subversion of diplomacy brought
about the "Victory for U.S. Fair Play."
Returning to the W.T.O. case, we need not tarry on the allegation
that the existence of the United States is at stake in the strangulation
of the Cuban economy. More interesting is the thesis that the
U.S. has every right to overthrow another government, in this
case, by aggression, large-scale terror over many years, and economic
strangulation. Accordingly, international law and trade agreements
are irrelevant. The fundamental principles of world order that
have emerged victorious again resound, loud and clear.
The Clinton Administration declarations passed without challenge,
though they were criticized on narrower grounds by historian Arthur
Schlesinger. Writing "as one involved in the Kennedy Administration's
Cuban policy," Schlesinger maintained that the Clinton Administration
had misunderstood Kennedy's policies. The concern had been Cuba's
"troublemaking in the hemisphere" and "the Soviet
connection," Schlesinger explained. But these are now behind
us, so the Clinton policies are an anachronism, though otherwise
unobjectionable, so we are to conclude.
Schlesinger did not explain the meaning of the phrases "troublemaking
in the hemisphere" and "the Soviet connection,"
but he has elsewhere, in secret. Reporting to incoming President
Kennedy on the conclusions of a Latin American Mission in early
1961, Schlesinger spelled out the problem of Castro's "troublemaking"
-- what the Clinton Administration calls Cuba's effort "to
destabilize large parts of Latin America: it is "the spread
of the Castro idea of taking matters into one's own hands,"
a serious problem, Schlesinger added, when "The distribution
of land and other forms of national wealth greatly favors the
propertied classes...[and] The poor and underprivileged, stimulated
by the example of the Cuban revolution, are now demanding opportunities
for a decent living." Schlesinger also explained the threat
of the "Soviet connection": "Meanwhile, the Soviet
Union hovers in the wings, flourishing large development loans
and presenting itself as the model for achieving modernization
in a single generation." The "Soviet connection"
was perceived in a similar light far more broadly in Washington
and London, from the origins of the Cold War 80 years ago.
With these (secret) explanations of Castro's "destabilization"
and "troublemaking in the hemisphere," and of the "Soviet
connection," we come closer to an understanding of the reality
of the Cold War, another important topic I will have to put aside.
It should come as no surprise that basic policies persist with
the Cold War a fading memory, just as they were carried out before
the Bolshevik revolution: the brutal and destructive invasion
of Haiti and the Dominican Republic, to mention just one illustration
of "global meliorism" under the banner of "Wilsonian
It should be added that the policy of overthrowing the government
of Cuba antedates the Kennedy Administration. Castro took power
in January 1959. By June, the Eisenhower Administration had determined
that his government must be overthrown. Terrorist attacks from
U.S. bases began shortly after. The formal decision to overthrow
Castro in favor of a regime "more devoted to the true interests
of the Cuban people and more acceptable to the U.S." was
taken in secret in March 1960, with the addendum that the operation
must be carried out "in such a manner as to avoid any appearance
of U.S. intervention," because of the expected reaction in
Latin America and the need to ease the burden on doctrinal managers
at home. At the time, the "Soviet connection" and "troublemaking
in the hemisphere" were nil, apart from the Schlesingerian
version. The CIA estimated that the Castro government enjoyed
popular support (the Clinton Administration has similar evidence
today). The Kennedy Administration also recognized that its efforts
violated international law and the Charters of the UN and OAS,
but such issues were dismissed without discussion, the declassified
Let us move on to NAFTA, the "historic" agreement
that may help to advance U.S.-style democracy in Mexico, Lakoff
suggests. A closer look is again informative. The NAFTA agreement
was rammed through Congress over strenuous popular opposition
but with overwhelming support from the business world and the
media, which were full of joyous promises of benefits for all
concerned, also confidently predicted by the U.S. International
Trade Commission and leading economists equipped with the most
up-to-date models (which had just failed miserably to predict
the deleterious consequences of the U.S.-Canada Free Trade Agreement,
but were somehow going to work in this case). Completely suppressed
was the careful analysis by the Office of Technology Assessment
(the research bureau of Congress), which concluded that the planned
version of NAFTA would harm most of the population of North America,
proposing modifications that could render the agreement beneficial
beyond small circles of investment and finance. Still more instructive
was the suppression of the official position of the U.S. labor
movement, presented in a similar analysis. Meanwhile labor was
bitterly condemned for its "backward, unenlightened"
perspective and "crude threatening tactics," motivated
by "fear of change and fear of foreigners"; I am again
sampling only from the far left of the spectrum, in this case,
Anthony Lewis. The charges were demonstrably false, but they were
the only word that reached the public in this inspiring exercise
of democracy. Further details are most illuminating, and reviewed
in the dissident literature at the time and since, but kept from
the public eye, and unlikely to enter approved history.
By now, the tales about the wonders of NAFTA have quietly
been been shelved, as the facts have been coming in. One hears
no more about the hundreds of thousands of new jobs and other
great benefits in store for the people of the three countries.
These good tidings have been replaced by the "distinctly
benign economic viewpoint" -- the "experts' view"
-- that NAFTA had no significant effects. The Wall Street Journal
reports that "Administration officials feel frustrated by
their inability to convince voters that the threat doesn't hurt
them" and that job loss is "much less than predicted
by Ross Perot," who was allowed into mainstream discussion
(unlike the OTA, the Labor movement, economists who didn't echo
the Party Line, and of course dissident analysts) because his
claims were sometimes extreme and easily ridiculed. "`It's
hard to fight the critics' by telling the truth -- that the trade
pact `hasn't really done anything'," an administration official
observes sadly. Forgotten is what "the truth" wasgoing
to be when the impressive exercise in democracy was roaring full
While the experts have downgraded NAFTA to "no significant
effects," dispatching the earlier "experts' view"
to the memory hole, a less than "distinctly benign economic
viewpoint" comes into focus if the "national interest"
is widened in scope to include the general population. Testifying
before the Senate Banking Committee in February 1997, Federal
Reserve Board Chair Alan Greenspan was highly optimistic about
"sustainable economic expansion" thanks to "atypical
restraint on compensation increases [which] appears to be mainly
the consequence of greater worker insecurity" -- an obvious
desideratum for a just society. The February 1997 Economic Report
of the President, taking pride in the Administration's achievements,
refers more obliquely to "changes in labor market institutions
and practices" as a factor in the "significant wage
restraint" that bolsters the health of the economy.
One reason for these benign changes is spelled out in a study
commissioned by the NAFTA Labor Secretariat "on the effects
of the sudden closing of the plant on the principle of freedom
of association and the right of workers to organize in the three
countries." The study was carried out under NAFTA rules in
response to a complaint by telecommunications workers on illegal
labor practices by Sprint. The complaint was upheld by the U.S.
National Labor Relations Board, which ordered trivial penalties
after years of delay, the standard procedure. The NAFTA study,
by Cornell University Labor economist Kate Bronfenbrenner, has
been authorized for release by Canada and Mexico, but not by the
Clinton Administration. It reveals a significant impact of NAFTA
on strike-breaking. About half of union organizing efforts are
disrupted by employer threats to transfer production abroad; for
example, by placing signs reading "Mexico Transfer Job"
in front of a plant where there is an organizing drive. The threats
are not idle: when such organizing drives nevertheless succeed,
employers close the plant in whole or in part at triple the pre-NAFTA
rate (about 15% of the time). Plant-closing threats are almost
twice as high in more mobile industries (e.g., manufacturing vs.
These and other practices reported in the study are illegal,
but that is a technicality, on a par with violations of international
law and trade agreements when outcomes are unacceptable. The Reagan
Administration had made it clear to the business world that their
illegal anti-union activities would not be hampered by the criminal
state, and successors have kept to this stand. There has been
a substantial effect on destruction of unions -- or in more polite
words, "changes in labor market institutions and practices"
that contribute to "significant wage restraint" within
an economic model offered with great pride to a backward world
that has not yet grasped the victorious principles that are to
lead the way to freedom and justice.
What was reported all along outside the mainstream about the
goals of NAFTA is also now quietly conceded: the real goal was
to "lock Mexico in" to the "reforms" that
had made it an "economic miracle," in the technical
sense of this term: a "miracle" for U.S. investors and
the Mexican rich, while the population sank into misery. The Clinton
Administration "forgot that the underlying purpose of NAFTA
was not to promote trade but to cement Mexico's economic reforms,"
Newsweek correspondent Marc Levinson loftily declares, failing
only to add that the contrary was loudly proclaimed to ensure
the passage of NAFTA while critics who pointed out this "underlying
purpose" were efficiently excluded from the free market of
ideas by its owners. Perhaps some day the reasons will be conceded
too. "Locking Mexico in" to these reforms, it was hoped,
would deflect the danger detected by a Latin America Strategy
Development Workshop in Washington in September 1990. It concluded
that relations with the brutal Mexican dictatorship were fine,
though there was a potential problem: "a `democracy opening'
in Mexico could test the special relationship by bringing into
office a government more interested in challenging the US on economic
and nationalist grounds"-- no longer a serious problem now
that Mexico is "locked into the reforms" by treaty.
The U.S. has the power to disregard treaty obligations at will;
In brief, the threat is democracy, at home and abroad, as
the chosen example again illustrates. Democracy is permissible,
even welcome, but again, as judged by outcome, not process. NAFTA
was considered to be an effective device to diminish the threat
of democracy. It was implemented at home by effective subversion
of the democratic process, and in Mexico by force, again over
vain public protest. The results are now presented as a hopeful
instrument to bring American-style democracy to benighted Mexicans.
A cynical observer aware of the facts might agree.
Once again, the chosen illustrations of the triumph of democracy
are natural ones, and are interesting and revealing as well, though
not quite in the intended manner.
Markets are always a social construction, and in the specific
form being crafted by current social policy they should serve
to restrict functioning democracy, as in the case of NAFTA, the
W.T.O. agreements, and other instruments that may lie ahead. One
case that merits close attention is the Multilateral Agreement
on Investment (MAI) that is now being forged by the OECD, the
rich men's club, and the W.T.O. (where it is the MIA). The apparent
hope is that the agreement will be adopted without public awareness,
as was the initial intention for NAFTA, not quite achieved, though
the "information system" managed to keep the basic story
under wraps. If the plans outlined in draft texts are implemented,
the whole world may be "locked into" treaty arrangements
that provide Transnational Corporations with still more powerful
weapons to restrict the arena of democratic politics, leaving
policy largely in the hands of huge private tyrannies that have
ample means of market interference as well. The efforts may be
blocked at the W.T.O. because of the strong protests of the "developing
countries," notably India and Malaysia, which are not eager
to become wholly-owned subsidiaries of great foreign enterprises.
But the OECD version may fare better, to be presented to the rest
of the world as a fait accompli, with the obvious consequences.
All of this proceeds in impressive secrecy, so far.
The announcement of the Clinton Doctrine was accompanied by
a prize example to illustrate the victorious principles: What
the Administration had achieved in Haiti. Since this is again
offered as the strongest case, it would only be appropriate to
look at it.
True, Haiti's elected President was allowed to return, but
only after the popular organizations had been subjected to three
years of terror by forces that retained close connections to Washington
throughout; the Clinton Administration still refuses to turn over
to Haiti 160,000 pages of documents on state terror seized by
U.S. military forces -- "to avoid embarrassing revelations"
about U.S. government involvement with the coup regime, according
to Human Rights Watch. It was also necessary to put President
Aristide through "a crash course in democracy and capitalism,"
as his leading supporter in Washington described the process of
civilizing the troublesome priest.
The device is not unknown elsewhere, as an unwelcome transition
to formal democracy is contemplated.
As a condition on his return, Aristide was compelled to accept
an economic program that directs the policies of the Haitian government
to the needs of "Civil Society, especially the private sector,
both national and foreign": U.S. investors are designated
to be the core of Haitian Civil Society, along with wealthy Haitians
who backed the military coup, but not the Haitian peasants and
slum-dwellers who organized a civil society so lively and vibrant
that they were even able to elect their own president against
overwhelming odds, eliciting instant U.S. hostility and efforts
to subvert Haiti's first democratic regime.
The unacceptable acts of the "ignorant and meddlesome
outsiders" in Haiti were reversed by violence, with direct
U.S. complicity, not only through contacts with the state terrorists
in charge. The Organization of American States declared an embargo.
The Bush and Clinton Administrations undermined it from the start
by exempting U.S. firms, and also by secretly authorizing the
Texaco Oil Company to supply the coup regime and its wealthy supporters
in violation of the official sanctions, a crucial fact that was
prominently revealed the day before U.S. troops landed to "restore
democracy," but has yet to reach the public, and is an unlikely
candidate for the historical record.
Now democracy has been restored. The new government has been
forced to abandon the democratic and reformist programs that scandalized
Washington, and to follow the policies of Washington's candidate
in the 1990 election, in which he received 14% of the vote.
The prize example tells us more about the meaning and implications
of the victory for "democracy and open markets."
Haitians seem to understand the lessons, even if doctrinal
managers in the West prefer a different picture. Parliamentary
elections in April 1997 brought forth "a dismal 5 percent"
of voters, the press reported, thus raising the question "Did
Haiti Fail US Hope?" We have sacrificed so much to bring
them democracy, but they are ungrateful and unworthy. One can
see why "realists" urge that we stay aloof from crusades
of "global meliorism."
Similar attitudes hold throughout the hemisphere. Polls show
that in Central America, politics elicits "boredom,"
"distrust" and "indifference" in proportions
far outdistancing "interest" or "enthusiasm"
among "an apathetic public...which feels itself a spectator
in its democratic system" and has "general pessimism
about the future." The first Latin America survey, sponsored
by the EU, found much the same: "the survey's most alarming
message," the Brazilian coordinator commented, was "the
popular perception that only the elite had benefited from the
transition to democracy." Latin American scholars observe
that the recent wave of democratization coincided with neoliberal
economic reforms, which have been very harmful for most people,
leading to a cynical appraisal of formal democratic procedures.
The introduction of similar programs in the richest country in
the world has had similar effects. By the early 1990s, after 15
years of a domestic version of structural adjustment, over 80%
of the U.S. population had come to regard the democratic system
as a sham, with business far too powerful, and the economy as
"inherently unfair." These are natural consequences
of the specific design of "market democracy" under business
Natural, and not unexpected. Neoliberalism is centuries old,
and its effects should not be unfamiliar. The well-known economic
historian Paul Bairoch points out that "there is no doubt
that the Third World's compulsory economic liberalism in the nineteenth
century is a major element in explaining the delay in its industrialization,"
or even "deindustrialization," while Europe and the
regions that managed to stay free of its control developed by
radical violation of these principles. Referring to the more recent
past, Arthur Schlesinger's secret report on Kennedy's Latin American
mission realistically criticized "the baleful influence of
the International Monetary Fund," then pursuing the 1950's
version of today's "Washington Consensus" ("structural
adjustment," "neoliberalism"). Despite much confident
rhetoric, not much is understood about economic development. But
some lessons of history seem reasonably clear, and not hard to
Let us return to the prevailing doctrine that "America's
victory in the Cold War" was a victory for democracy and
the free market. With regard to democracy, the doctrine is partially
true, though we have to understand what is meant by "democracy":
top-down control "to protect the minority of the opulent
against the majority." What about the free market? Here too,
we find that doctrine is far removed from reality, as several
examples have already illustrated.
Consider again the case of NAFTA, an agreement intended to
lock Mexico into an an economic discipline that protects investors
from the danger of a "democracy opening." Its provisions
tell us more about the economic principles that have emerged victorious.
It is not a "free trade agreement." Rather, it is highly
protectionist, designed to impede East Asian and European competitors.
Furthermore, it shares with the global agreements such anti-market
principles as "intellectual property rights" restrictions
of an extreme sort that rich societies never accepted during their
period of development, but that they now intend to use to protect
home-based corporations: to destroy the pharmaceutical industry
in poorer countries, for example -- and, incidentally, to block
technological innovations, such as improved production processes
for patented products; progress is no more a desideratum than
markets, unless it yields benefits for those who count.
There are also questions about the nature of "trade."
Over half of U.S. trade with Mexico is reported to consist of
intrafirm transactions, up about 15% since NAFTA. For example,
already a decade ago, mostly U.S.-owned plants in Northern Mexico
employing few workers and with virtually no linkages to the Mexican
economy produced more than 1/3 of engine blocks used in U.S. cars
and 3/4 of other essential components. The post-NAFTA collapse
of the Mexican economy in 1994, exempting only the very rich and
U.S. investors (protected by U.S. government bailouts), led to
an increase of U.S.-Mexico trade as the new crisis, driving the
population to still deeper misery, "transformed Mexico into
a cheap [i.e., even cheaper] source of manufactured goods, with
industrial wages one-tenth of those in the US," the business
press reports. Ten years ago According to some specialists, half
of U.S. trade worldwide consists of such centrally-managed transactions
and much the same is true of other industrial powers, though one
must treat with caution conclusions about institutions with limited
public accountability. Some economists have plausibly described
the world system as one of "corporate mercantilism,"
remote from the ideal of free trade. The OECD concludes that "Oligopolistic
competition and strategic interaction among firms and governments
rather than the invisible hand of market forces condition today's
competitive advantage and international division of labor in high-technology
industries," implicitly adopting a similar view.
Even the basic structure of the domestic economy violates
the neoliberal principles that are hailed. The main theme of the
standard work on U.S. business history is that "modern business
enterprise took the place of market mechanisms in coordinating
the activities of the economy and allocating its resources,"
handling many transactions internally, another large departure
from market principles. There are many others. Consider, for example,
the fate of Adam Smith's principle that free movement of people
is an essential component of free trade -- across borders, for
example. When we move on to the world of Transnational Corporations,
with strategic alliances and critical support from powerful states,
the gap between doctrine and reality becomes substantial.
Free market theory comes in two varieties: the official doctrine,
and what we might call "really existing free market doctrine":
Market discipline is good for you, but I need the protection of
the nanny state. The official doctrine is imposed on the defenseless,
but it is "really existing doctrine" that has been adopted
by the powerful since the days when Britain emerged as Europe's
most advanced fiscal-military and developmental state, with sharp
increases in taxation and efficient public administration as the
state became "the largest single actor in the economy"
and its global expansion, establishing a model that has been followed
to the present in the industrial world, surely by the United States,
from its origins.
Britain did finally turn to liberal internationalism -- in
1846, after 150 years of protectionism, violence, and state power
had placed it far ahead of any competitor. But the turn to the
market had significant reservations. 40% of British textiles continued
to go to colonized India, and much the same was true of British
exports generally. British steel was kept from U.S. markets by
very high tariffs that enabled the United States to develop its
own steel industry. But India and other colonies were still available,
and remained so when British steel was priced out of international
markets. India is an instructive case; it produced as much iron
as all of Europe in the late 18th century, and British engineers
were studying more advanced Indian steel manufacturing techniques
in 1820 to try to close "the technological gap." Bombay
was producing locomotives at competitive levels when the railway
boom began. But "really existing free market doctrine"
destroyed these sectors of Indian industry just as it had destroyed
textiles, ship-building, and other industries that were advanced
by the standards of the day. The U.S. and Japan, in contrast,
had escaped European control, and could adopt Britain's model
of market interference.
When Japanese competition proved to be too much to handle,
England simply called off the game: the empire was effectively
closed to Japanese exports, part of the background of World War
II. Indian manufacturers asked for protection at the same time
-- but against England, not Japan. No such luck, under really
existing free market doctrine.
With the abandonment of its restricted version of laissez-faire
in the 1930s, the British government turned to more direct intervention
into the domestic economy as well. Within a few years, machine
tool output increased five times, along with a boom in chemicals,
steel, aerospace, and a host of new industries, "an unsung
new wave of industrial revolution," Will Hutton writes. State-controlled
industry enabled Britain to outproduce Germany during the war,
even to narrow the gap with the U.S., which was then undergoing
its own dramatic economic expansion as corporate managers took
over the state-coordinated wartime economy.
A century after England turned to a form of liberal internationalism,
the U.S. followed the same course. After 150 years of protectionism
and violence, the U.S. had become by far the richest and most
powerful country in the world, and like England before it, came
to perceive the merits of a "level playing field" on
which it could expect to crush any competitor. But like England,
with crucial reservations.
One was that Washington used its power to bar independent
development elsewhere, as England had done. In Latin America,
Egypt, South Asia, and elsewhere, development was to be "complementary,"
not "competitive." There was also large-scale interference
with trade. For example, Marshall Plan aid was tied to purchase
of U.S. agricultural products, part of the reason why the U.S.
share in world trade in grains increased from less than 10% before
the war to more than half by 1950, while Argentine exports reduced
by two-thirds. U.S. Food for Peace aid was also used both to subsidize
U.S. agribusiness and shipping and to undercut foreign producers,
among other measures to prevent independent development. The virtual
destruction of Colombia's wheat growing by such means is one of
the factors in the growth of the drug industry, which has been
further accelerated throughout the Andean region by the neoliberal
policies of the past few years. Kenya's textile industry collapsed
in 1994 when the Clinton Administration imposed a quota, barring
the path to development that has been followed by every industrial
country, while "African reformers" are warned that they
"must make more progress" in improving the conditions
for business operations and "sealing in free-market reforms"
with "trade and investment policies" that meet the requirements
of Western investors. In December 1996 Washington barred exports
of tomatoes from Mexico in violation of NAFTA and W.T.O. rules
(though not technically, because it was a sheer power play and
did not require an official tariff), at a cost to Mexican producers
of close to $1 billion annually. The official reason for this
gift to Florida growers is that prices were "artificially
suppressed by Mexican competition" and Mexican tomatoes were
preferred by U.S. consumers. In other words, free market principles
were working, but with the wrong outcome.
These are only scattered illustrations.
One revealing is example is Haiti, along with Bengal the world's
richest colonial prize and the source of a good part of France's
wealth, largely under U.S. control since Wilson's Marines invaded
80 years ago, and by now such a catastrophe that it may scarcely
be habitable in the not-too-distant future. In 1981, a USAID-World
Bank development strategy was initiated, based on assembly plants
and agroexport, shifting land from food for local consumption.
USAID forecast "a historic change toward deeper market interdependence
with the United States" in what would become "the Taiwan
of the Caribbean." The World Bank concurred, offering the
usual prescriptions for "expansion of private enterprises"
and minimization of "social objectives," thus increasing
inequality and poverty, and reducing health and educational levels;
it may be noted, for what it is worth, that these standard prescriptions
are offered side-by-side with sermons on the need to reduce inequality
and poverty and improve health and educational levels, while World
Bank technical studies recognize that relative equality and high
health and educational standards are crucial factors in economic
growth. In the Haitian case, the consequences were the usual ones:
profits for U.S. manufacturers and the Haitian superrich, and
a decline of 56% in Haitian wages through the 1980s -- in short,
an "economic miracle." Haiti remained Haiti, not Taiwan,
which had followed a radically different course, as advisers must
It was the effort of Haiti's first democratic government to
alleviate the growing disaster that called forth Washington's
hostility and the military coup and terror that followed. With
"democracy restored," USAID is withholding aid to ensure
that cement and flour mills are privatized for the benefit of
wealthy Haitians and foreign investors (Haitian "Civil Society,"
according to the orders that accompanied the restoration of democracy),
while barring expenditures for health and education. Agribusiness
receives ample funding, but no resources are made available for
peasant agriculture and handicrafts, which provide the income
of the overwhelming majority of the population. Foreign-owned
assembly plants that employ workers (mostly women) at well below
subsistence pay under horrendous working conditions benefit from
cheap electricity, subsidized by the generous supervisor. But
for the Haitian poor -- the general population -- there can be
no subsidies for electricity, fuel, water or food; these are prohibited
by IMF rules on the principled grounds that they constitute "price
control." Before the "reforms" were instituted,
local rice production supplied virtually all domestic needs, with
important linkages to the domestic economy. Thanks to one-sided
"liberalization," it now provides only 50%, with the
predictable effects on the economy. The liberalization is, crucially,
one-sided. Haiti must "reform," eliminating tariffs
in accord with the stern principles of economic science -- which,
by some miracle of logic, exempt U.S. agribusiness; it continues
to receive huge public subsidies, increased by the Reagan Administration
to the point where they provided 40% of growers' gross incomes
by 1987. The natural consequences are understood, and intended:
a 1995 USAID report observes that the "export-driven trade
and investment policy" that Washington mandates will "relentlessly
squeeze the domestic rice farmer," who will be forced to
turn to the more rational pursuit of agroexport for the benefit
of U.S. investors, in accord with the principles of rational expectations
By such methods, the most impoverished country in the hemisphere
has been turned into a leading purchaser of U.S.-produced rice,
enriching publicly-subsidized U.S. enterprises. Those lucky enough
to have received a good Western education can doubtless explain
that the benefits will trickle down to Haitian peasants and slumdwellers
-- ultimately. Africans may choose to follow a similar path, as
currently advised by the leaders of "global meliorism"
and local elites, and perhaps may see no choice under existing
circumstances -- a questionable judgment, I suspect. But if they
do, it should be with eyes open.
The last example illustrates the most important departures
from official free trade doctrine, more significant in the modern
era than protectionism, which was far from the most radical interference
with the doctrine in earlier periods either though it is the one
usually studied under the conventional breakdown of disciplines,
which makes its own useful contribution to disguising social and
political realities. To mention one obvious example, the industrial
revolution depended on cheap cotton, just as the "golden
age" of contemporary capitalism has depended on cheap energy,
but the methods for keeping the crucial commodities cheap and
available, which hardly conform to market principles, do not fall
within the professional discipline of economics.
One fundamental component of free trade theory is that public
subsidies are not allowed. But after World War II, U.S. business
leaders expected that the economy would collapse without the massive
state intervention during the war that had finally overcome the
great depression. They also insisted that advanced industry "cannot
satisfactorily exist in a pure, competitive, unsubsidized, `free
enterprise' economy" and that "the government is their
only possible savior" (Fortune, Business Week, expressing
a general consensus). They recognized that the Pentagon system
would be the best way to transfer costs to the public. Social
spending could play the same stimulative role, but it has defects:
it is not a direct subsidy to the corporate sector, it has democratizing
effects, and it is redistributive. Military spending has none
of these unwelcome features. It is also easy to sell, by deceit.
President Truman's Air Force Secretary put the matter simply:
we should not use the word "subsidy," he said; the word
to use is "security." He made sure the military budget
would "meet the requirements of the aircraft industry,"
as he put it. One consequence is that civilian aircraft is now
the country's leading export, and the huge travel and tourism
industry, aircraft-based, is the source of major profits.
It was quite appropriate for Clinton to choose Boeing as "a
model for companies across America" as he preached his "new
vision" of the free market future, to much acclaim. A fine
example of really existing markets, civilian aircraft production
is now mostly in the hands of two firms, Boeing-McDonald and Airbus,
each of which owes its existence and success to large-scale public
subsidy. The same pattern prevails in computers and electronics
generally, automation, biotechnology, communications, in fact
just about every dynamic sector of the economy.
There was no need to explain this central feature of "really
existing free market capitalism" to the Reagan Administration.
They were masters at the art, extolling the glories of the market
to the poor at home and the service areas abroad while boasting
proudly to the business world that Reagan had "granted more
import relief to U.S. industry than any of his predecessors in
more than half a century" - in reality, more than all predecessors
combined, as they "presided over the greatest swing toward
protectionism since the 1930s," shifting the U.S. from "being
the world's champion of multilateral free trade to one of its
leading challengers," the journal of the Council on Foreign
Relations commented in a review of the decade. The Reaganites
led "the sustained assault on [free trade] principle"
by the rich and powerful from the early 1970's that is deplored
in a scholarly review by GATT secretariat economist Patrick Low,
who estimates the restrictive effects of Reaganite measures at
about three times those of other leading industrial countries.
The great "swing toward protectionism" was only
a part of the "sustained assault" on free trade principles
that was accelerated under "Reaganite rugged individualism."
Another chapter of the story includes the huge transfer of public
funds to private power, often under the traditional guise of "security,"
a "defense buildup [that} actually pushed military R&D
spending (in constant dollars) past the record levels of the mid-1960s,"
Stuart Leslie notes. The public was terrified with foreign threats
(Russians, Libyans, etc.), but the Reaganite message to the business
world was again much more honest. Without such extreme measures
of market interference, it is doubtful that the U.S. automotive,
steel, machine tool, semiconductor industries, and others, would
have survived Japanese competition or been able to forge ahead
in emerging technologies, with broad effects through the economy.
There is also no need to explain the operative doctrines to
the leader of today's "conservative revolution," Newt
Gingrich, who sternly lectures 7-year old children on the evils
of welfare dependency while holding a national prize for directing
public subsidies to his rich constituents. Or to the Heritage
Foundation, which crafts the budget proposals for the congressional
"conservatives," and therefore called for (and obtained)
an increase in Pentagon spending beyond Clinton's increase to
ensure that the "defense industrial base" remains solid,
protected by state power and offering dual-use technology to its
beneficiaries to enable them to dominate commercial markets and
enrich themselves at public expense.
All understand very well that free enterprise means that the
public pays the costs and bears the risks if things go wrong;
for example bank and corporate bailouts that have cost the public
hundreds of billions of dollars in recent years. Profit is to
be privatized, but cost and risk socialized, in really existing
market systems. The centuries-old tale proceeds today without
notable change, not only in the United States, of course.
Public statements have to be interpreted in the light of these
realities, among them, Clinton's current call for trade-not-aid
for Africa, with a series of provisions that just happen to benefit
U.S. investors and uplifting rhetoric that manages to avoid such
matters as the long record of such approaches and the fact that
the U.S. already had the most miserly aid program of any developed
country even before the grand innovation. Or to take the obvious
model, consider Chester Crocker's explanation of Reagan Administration
plans for Africa in 1981. "We support open market opportunities,
access to key resources, and expanding African and American economies,"
he said, and want to bring African countries "into the mainstream
of the free market economy." The statement may seem to surpass
cynicism, coming from the leaders of the "sustained assault"
against "the free market economy." But Crocker's rendition
is fair enough, when it is passed through the prism of really
existing market doctrine. The market opportunities and access
to resources are for foreign investors and their local associates,
and the economies are to expand in a specific way, protecting
"the minority of the opulent against the majority."
The opulent, meanwhile, merit state protection and public subsidy.
How else can they flourish, for the benefit of all?
To illustrate "really existing free market theory"
with a different measure, the most extensive study of TNCs found
that "Virtually all of the world's largest core firms have
experienced a decisive influence from government policies and/or
trade barriers on their strategy and competitive position"
and "at least twenty companies in the 1993 Fortune 100 would
not have survived at all as independent companies, if they had
not been saved by their respective governments," by socializing
losses or simple state takeover when they were in trouble. One
is the leading employer in Gingrich's deeply conservative district,
Lockheed, saved from collapse by $2 billion government loan guarantees.
The same study points out that government intervention, which
has "been the rule rather than the exception over the past
two centuries,...has played a key role in the development and
diffusion of many product and process innovations -- particularly
in aerospace, electronics, modern agriculture, materials technologies,
energy and transportation technology," as well as telecommunications
and information technologies generally (the Internet and World
Wide Web are striking recent examples), and in earlier days, textiles
and steel, and of course energy. Government policies "have
been an overwhelming force in shaping the strategies and competitiveness
of the world's largest firms." Other technical studies confirm
As these examples indicate, the United States is not alone
in its conceptions of "free trade," even if its ideologues
often lead the cynical chorus. The gap between rich and poor countries
from 1960 is substantially attributable to protectionist measures
of the rich, the UN Development Report concluded in 1992. The
1994 report concluded that "the industrial countries, by
violating the principles of free trade, are costing the developing
countries an estimated $50 billion a year -- nearly equal to the
total flow of foreign assistance" -- much of it publicly-subsidized
export promotion. The 1996 Global Report of the UN Industrial
Development Organization estimates that the disparity between
the richest and poorest 20% of the world population increased
by over 50% from 1960 to 1989, and predicts "growing world
inequality resulting from the globalization process." That
growing disparity holds within the rich societies as well, the
U.S. leading the way, Britain not far behind. The business press
exults in "spectacular" and "stunning" profit
growth, applauding the extraordinary concentration of wealth among
the top few percent of the population while for the majority,
conditions continue to stagnate or decline. The corporate media,
the Clinton Administration, and the cheerleaders for the American
Way generally, proudly offer themselves as a model for the rest
of the world; buried in the chorus of self-acclaim are the results
of deliberate social policy during the happy period of "capital's
clear subjugation of labor," for example, the "basic
indicators" just published by UNICEF, revealing that the
U.S. has the worst record among the industrial countries, ranking
alongside of Cuba -- a poor Third World country under unremitting
attack by the hemispheric superpower for almost 40 years -- by
such standards as mortality for children under five, and also
holding records for hunger, child poverty, and other basic social
All of this takes place in the richest country in the world,
with unparalleled advantages and stable democratic institutions,
but also under business rule, to an unusual extent. These are
further auguries for the future, if the "dramatic shift away
from a pluralist, participatory ideal of politics and towards
an authoritarian and technocratic ideal" proceeds on course,
It is worth noting that in secret, intentions are often spelled
out honestly, for example, in the early post-war II period, when
George Kennan, one of the most influential planners and considered
a leading humanist, assigned each sector of the world its "function":
Africa's function was to be "exploited" by Europe for
its reconstruction, he observed, the U.S. having little interest
in it. A year earlier, a high-level planning study had urged "that
cooperative development of the cheap foodstuffs and raw materials
of northern Africa could help forge European unity and create
an economic base for continental recovery," an interesting
concept of "cooperation." There is no record of a suggestion
that Africa might "exploit" the West for its recovery
from the "global meliorism" of the past centuries.
If we take the trouble to distinguish doctrine from reality,
we find that the political and economic principles that have prevailed
are remote from those that are proclaimed. One may also be skeptical
about the prediction that they are "the wave of the future,"
bringing history to a happy end. The same "end of history"
has confidently been proclaimed many times in the past, always
wrongly. And with all the sordid continuities, an optimistic soul
can discern slow progress, realistically I think. In the advanced
industrial countries, and often elsewhere, popular struggles today
can start from a higher plane and with greater expectations than
those of the past. And international solidarity can take new and
more constructive forms as the great majority of the people of
the world come to understand that their interests are pretty much
the same and can be advanced by working together. There is no
more reason now than there has ever been to believe that we are
constrained by mysterious and unknown social laws, not simply
decisions made within institutions that are subject to human will
-- human institutions, which have to face the test of legitimacy,
and if they do not meet it, can be replaced by others that are
more free and more just, as often in the past.
Skeptics who dismiss such thoughts as utopian and naive have
only to cast their eyes on what has happened right here in the
last few years, an inspiring tribute to what the human spirit
can achieve, and its limitless prospects -- lessons that the world
desperately needs to learn, and that should guide the next steps
in the continuing struggle for justice and freedom here too, as
the people of South Africa, fresh from one great victory, turn
to the still more difficult tasks that lie ahead.