cj#853.2> Chomsky: “Whose World Order: Conflicting Visions”


Richard Moore

Date: Fri, 16 Oct 1998
From: MichaelP <•••@••.•••>
To: •••@••.•••
Subject: Re: cj#853.1> (series) Chomsky: "Whose World Order: Conflicting

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.


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...]

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