------------------------------------------------------------------------ Date: Fri, 16 Oct 1998 From: MichaelP <•••@••.•••> To: •••@••.••• Subject: Re: cj#853.1> (series) Chomsky: "Whose World Order: Conflicting Visions" FYI this Calgary talk is also available on audio - I heard it on KBOO one week ago, it's probably available on tape from Barsamian. Cheers MichaelP ------------------------------------------------------------------------ Part 2 of series full version on web: http://www.acs.ucalgary.ca/~gharris/ ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Well, again, a lot to say about that, but let's turn to the second element of world order: the Universal Declaration of Human rights. Doubtless we will all hear much rhetoric in the coming months about the universality of the high principles that are proclaimed and about the challenge of relativity that's posed by various bad guys around the world. Those charges will be accurate enough, unfortunately, and probably understated, but you are unlikely to hear about a different topic: namely, U.S. adherence to the universal declaration both in action and in doctrine. Well again, I'll put aside action and just keep to the doctrine. If you look at the doctrine you find out quickly that the United States is a leader of the relativist camp. One is unlikely to see headlines about that, but it's pretty clear - the United States dismisses one fundamental component of the universal declaration completely as having no status: that's the component that's concerned with the socio-economic provisions, which have the same status as any others in the universal declaration, but the U.S. doesn't agree. They are a letter to Santa Claus, as Ambassador Jean Kirkpatrick put it. They are preposterous and a dangerous incitement, as they were described by U.S. Ambassador Morris Abrams. He was in fact testifying at part of the discussion by the UN Commission on Human Rights, which was considering a Declaration on the Right of Development which very closely paraphrased the socio-economic conditions of the universal declaration and which, incidentally, the U.S. proceeded to veto. Well again there's more to say, but let's proceed to the third point: the international economic order - the Bretton Woods system, as it's called, and its institutions. That's all over the front pages now with the fears of a global meltdown that might affect privileged folk like us, as well as just the usual victims, so therefore it's news. Well, the Bretton Woods system had two basic principles: set up institutions like the World Bank and the IMF, which are called the Bretton Wood institutions - but it had two basic principles which one has to keep in mind, they're important. One principle was to liberalize trade; a goal was to liberalize trade, more free trade. The second principle had to do with capital flow and it was the opposite. The goal was to regulate capital flow and control it, keep fixed exchange rates, keep capital controls and so on. That was agreed by both the U.S. and the British negotiators - the U.S. main negotiator was Harry Dexter White, the British, John Maynard Keynes - and it expressed a very common conception at the time, which has a lot of plausibility. It's built into the rules of the IMF. There is now an effort, the U.S. is leading an effort, to try to change those rules, but up until now they have been breached many times. The rules of the IMF still authorize countries to regulate capital flow and they prohibit the IMF from giving credits to cover capital flight. Many of you who follow these affairs all know how well that one's been observed, but anyhow it is a rule. There was thinking behind this, there were reasons. The reasons were in part theory, what some international economists call an incompatibility thesis, which in fact remains the guiding principle of UNCTAD, the main UN Conference on Trade and Development. The theory is that capital flight, so short-term speculative flows which lead to exchange rate fluctuations and so on, that they are going to undermine trade and investment, so they are inconsistent with one another. You can't liberalize both; and recent experience is, I think, consistent with that assumption. The second reason was not a theory, it was a truism. The truism is that free flow of capital definitely undermines democracy in the welfare state, which was at that time far too popular to ignore (it's the mid-20th century). The basic point (I'm essentially paraphrasing White and Keynes here) is that capital controls allow governments to carry out monetary and tax policies to sustain unemployment incomes, social programs, maintain public goods, without fear of capital flight, which will punish this irrational behavior (irrational in that it's only for the benefit of people, not for the benefit of investors and speculators, and it will be punished by capital flight for obvious reasons). That's the essential point - free flow of capital quickly creates what some international economists call a virtual senate of financial capital which will impose its own social policies by the threat of capital flight, which leads to higher interest rates, economic slowdown, budget cuts for health and education, recession, maybe collapse. It's a powerful weapon. All of that was articulated quite explicitly in essentially in the words I've repeated at the time by the U.S.-U.K. negotiators, and it's not particularly controversial. (In fact not controversial at all, then or now. If you think it through it's kind of obvious, as it was to them.) And all of that is quite important to keep in mind in looking at the current period because there's a challenge to that in the last 25 years and we see the consequences. (And it's now being re-evaluated because the consequences are even hitting the rich people and that's where we are now.) Well, the Bretton Woods system as formulated, that is efforts to liberalize trade and regulate capital, that was in place to a substantial degree through the first half of this period, the first quarter century after it was established. That's what's sometimes called the golden age of post-war state capitalism - high rates of growth of the economy, of productivity, expansion of the social contract right through the '50s and '60s. The system was dismantled from the early 1970s. Richard Nixon unilaterally abrogated its basic principles; other major financial centres joined in. By the 1980s capital controls were mostly gone in the rich countries and the smaller economies like South Korea were simply compelled to drop them. That, incidentally, is widely regarded now as a major factor in its recent collapse, alongside of quite extreme market failures in the private sector throughout East and Southeast Asia and of also the west, which was involved in crazed lending. I should add at this point that, in the light of the recent economic crisis in East Asia, the more serious analysts recognize and insist that the East Asian economic miracle was quite real. (I'm distinguishing East Asia from Southeast Asia here - they're quite different.) So one of the most important and influential, and I think intelligent, Joseph Stieglitz, who is now the chief economist of the World Bank (he was formerly head of council of economic advisors here, and it plays a very important role) he emphasizes in recent World Bank publications and elsewhere that this is post-crisis - that the East Asian economic miracle was not only real but it was in his words an amazing achievement historically without precedent and, furthermore, he points out, based on very significant departures from the official doctrines of the so-called Washington consensus and that it should last, it should thrive, in fact, unless it is destroyed by irrational markets as it could be. Stieglitz points out - remember this is the chief economist of the World Bank I'm talking about in a World Bank publication - that in East Asia the basis for the amazing achievements and the miracle, which has no precedent, is that governments took major responsibility for the promotion of economic growth, abandoning the religion that markets know best, and intervening to enhance technology transfer, relative equality, education, health, along with (he doesn't stress this but he should have) industrial planning and coordination, and in fact strict capital controls until they were forced to relinquish them in the last few years. Stieglitz also mentions, though he doesn't go into it, that the rich countries, every one of them - from England on through the United States up to the present, every single one of them had followed a somewhat similar path, actually far more so than the World Bank has yet acknowledged. Another big topic I can't go into, but an interesting one and again worth keeping in mind. Well what has happened since the Bretton Woods system essentially collapsed in the early 1970s? It did end the golden age of post-war state capitalism. Just focusing on the rich countries, primarily the United states and Britain, although it happens to others in various degrees in an integrated economy, over the rich countries as a whole, the growth of the economy and the growth of productivity have slowed very markedly. Actually, contrary to what you read, trade also slowed, if you look closely, in the United States specifically and England. Incomes stagnated or declined throughout this period for the great majority of the population; working conditions deteriorated, social services have been significantly cut, infrastructure is in serious danger with very little required public spending, the welfare state has significantly eroded. (End of side one of the cassette tape) There has also been a closely correlated, dramatic increase in incarceration. It's closely correlated because a large part of the society is just becoming superfluous for wealth formation. In an uncivilized society you send out the death squads to kill them; in a civilized society you throw them in jail. Since 1980, when this system really took shape, when it was in place, at that time incarceration rates in the United States were roughly like that of other industrial countries, kind of at the high end but not off the scale, and so crime rates in the United States are not unusually high, contrary to what you read. Again they're sort of toward the high end but not unusual, with one exception: namely, killing with guns. But that's a separate matter that has to do with laws, cultural patterns and so on, it doesn't have anything to do with crime. And that remains the case. In fact, crime rates have declined since 1980, but the incarceration has gone way up. I think it's a direct reflection of the inequality and the need for social control. It tripled in the 1980s and it's been rising very fast through the 1990s; it's now five to 10 times as high as other industrial societies. In fact the U.S. is world champion in imprisoning its population, at least among countries where there is any minimally reliable statistics. If you take the prison population into account, that adds another two per cent to the unemployment rate, which places the U.S. squarely in the middle of the European level. Actually, even without that it's not at the bottom, believe it or not, it's about 30 per cent. Of course, you have to decide what you're talking about; if you count in prison labor, which is not trivial, and very good for folks like Boeing Aircraft and AT & T and others (a terrific work force), if you count them in, then of course the unemployment figures change again. Anyhow these two parallel developments have been going on and I think have integrated. [to be continued...] ------------------------------------------------------------------------ a political discussion forum - •••@••.••• To subscribe, send any message to •••@••.••• A public service of Citizens for a Democratic Renaissance (mailto:•••@••.••• http://cyberjournal.org) ---------------------------------------------------------- Non-commercial reposting is hereby approved, but please include the sig up through this paragraph and retain any internal credits and copyright notices. .--------------------------------------------------------- To see the index of the cj archives, send any message to: •••@••.••• To subscribe to our activists list, send any message to: •••@••.••• Help create the Movement for a Democratic Rensaissance ---------------------------------------------- crafted in Ireland by rkm ----------------------------------- A community will evolve only when the people control their means of communication. -- Frantz Fanon
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