NetNews Usenet Archive 1992 #30

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Newsgroups: misc.activism.progressive Path: sparky!uunet!spool.mu.edu!tulane!ukma!mont!pencil.cs.missouri.edu!daemon From: harelb@math.cornell.edu (Harel Barzilai) Subject: Z MAGAZINE: _The Market Versus Democracy_ Message-ID: <1992Dec12.055941.4046@mont.cs.missouri.edu> Followup-To: alt.activism.d Originator: daemon@pencil.cs.missouri.edu Sender: news@mont.cs.missouri.edu Nntp-Posting-Host: pencil.cs.missouri.edu Organization: ? Date: Sat, 12 Dec 1992 05:59:41 GMT Approved: map@pencil.cs.missouri.edu Lines: 367 [From Edward S Herman's regular column on DoubleSpeak] - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - From: Hank Roth <odin@world.std.com> Reply-To: Hank Roth <odin@world.std.com> Subject: Market Versus Democracy - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - From: Philip Feeley <pfeeley@unixg.ubc.ca> <<< via P_news/p.news >>>> - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - {P_news on fidonets and p.news on Peacenet are parallel conferences for progressive news, views and articles.} - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ======================================================= T H E M A R K E T V E R S U S D E M O C R A C Y ======================================================= by Edward S. Herman, Z Magazine, Nov. '92, p.29-31 There is poetic justice in the fact that George Bush seems likely to be brought down by a recession, or "contained depression," that just won't go away. His failure is partly a result of incompetence, lack of imagination, and an ideological aversion to using government as a problem solver. But it is also a product of the immobilization of traditional macro-policy by prior Reagan actions and by the development of the market itself. The huge Reagan tax cuts of 1981 had the dual purpose of redistributing income upward and forcing down government outlays for ordinary citizens. But the huge tax cuts, in conjunction with the automatic growth of non- discretionary spending, also produced a so-called "structural" deficit, which tends to grow over time in the absence of further expenditure reductions. It was part of the Reagan plan that the rising deficits would make it difficult for the "liberals" to raise outlays for social programs in the future, as these would increase deficits even further. One of the costs of this strategy, however, has been the inability to use tax cuts or expenditure increases to help get the economy out of a recession. Bush is hoist by the Reaganite plan, which is inadvertently striking down a Republican voodoo economics loyalist. He is also hoist by the workings of the more efficient, free, global capital market. The wealthy financial institutions, transnational corporations, and individuals who dominate the global market fear the U.S. deficit, and policies enlarging the deficit would therefore cause a fall in the value of the dollar and capital flight, along with a rise in interest rates. Carter in the late 1970s and Mitterand in 1981-82 were quickly brought to heel by capital outflows and market pressures on exchange and interest rates. Reagan was treated more kindly, but this was almost surely an exceptional case and cannot be expected to apply where large budget deficits are not associated with a prior very low debt to income ratio *and* policies that transfer wealth directly into corporate and elite pockets. The power of the global capital market has grown steadily, and is now of commanding importance. This was displayed in the recent inability of Great Britain, with the support of powerful European allies, to protect the value of the pound where market opinion was that the pound was over- valued and must fall. In the wake of that market victory, which cost the European central banks an estimated $6 billion, spokespersons for the financial community stated frankly and complacently that "governments have lost the power to control capital, and they probably have lost it forever" (Daniel Roche of Morgan Stanley). Salomon Broghers strategist David Shulman pointed out that the very success of western financial leaders in opening up the world's economies "has limited their control over events....The day-to-day flows can swamp their ability to control things." Keynesian macro-economists have been slow to absorb the significance of the new market hegemony over policy. Thus, the economist Robert Eisner explains that the U.S. deficit is not too large and can be increased without damage, but he ignores the fact that if the market has a different opinion the deficit cannot be increased without devastating effects. An early 1992 statement by 100 liberal economists urging a $50 billion increase in government investment spending as a necessary counter- recession measure was hedged by recognition that there must be assurances to the market that the deficit will be temporary and will be reduced poste- haste; but there is an element of unrealistic optimism that the market will accept these assurances. The economists, Bush, and Clinton are all flummoxed because the only way to prevent a capital market policy veto is to opt out of the world market. At a minimum capital and exchange rate controls, and possibly price and wage controls as well, would be needed to allow governments to pursue independent macro-economic policies. These controls would be very difficult to enforce, with capital markets so interlinked and transnational corporations spread across the globe. Such a policy transformation is also unlikely in the absence of an economic breakdown and radical political change, given that the requisite controls would run counter to the whole thrust of western policy and ideology over the past several decades. The IMF imposes open markets, balanced budgets, and anti-inflation policies on all of its clients, including the lucky Poles and Russians. It even admonishes the United States and Germany to get their budgets in order and stop setting such bad examples to their inferiors. In a sense, then, the policy makers of the national economies are hoist by their ideological commitments and institutional frankenstein progeny--the global capital market. The liberal economists don't like to confront the fact that the free market institutional arrangements which they encouraged so enthusiastically have now undermined discretionary policy itself. ======================================================================= T H E N E W A N T I - D E M O C R A T I C I N S T I T U T I O N S ======================================================================= It has always been difficult for national governments to carry out expansionary or redistributive policies that the large monied interests opposed; the market has always been able to exact penalties. But the dominant interests have still felt the need for institutional supplements to the market to keep recalcitrants in line. This has been the function of the IMF and World Bank, which have been in place almost a half century. These institutions have always constituted an undemocratic form of supra-government through which the leading powers and major contributors could define proper policy and impose it on needy national borrowers. The Third World debt crisis of the last decade or so has increased the power of these undemocratic institutions. Given the collapse of the Soviet bloc, and the general agreement of the great capitalist powers and the major participants in the new global market on proper Third World policy, the IMF's and World Bank's conditional loan offerings to Third World governments must be accepted--there is No Other Option in the Free World. Market and IMF-World Bank discipline still not offering sufficient control, the dominant powers have established or proposed additional institutional structures like the European Commission (EC), the Maastricht regime, the General Agreement on Trade and Tariffs (GATT), and the North American Free Trade Agreement (NAFTA), to further the power of capital to override the challenge of democratic government and pressures from the general population. All are sold under the symbols of free trade and improved competitiveness, and they do reduce trade barriers to a degree, even if selectively. But they also contain protectionist, imperialist, and antidemocratic components of great importance. The design of these new institutional arrangements is to remove decision-making powers from local and national legislatures in favor of impersonal market forces and/or supranational bureaucracies remote from popular control. Put otherwise, they are all systems for regional or global deregulation. NAFTA would indirectly deregulate wages, working conditions, and environmental controls in the affected areas by allowing capital to move easily into the deregulated environment of Mexico. Maastricht imposes national debt, inflation, and exchange rate limits on all members, which reflect the "stability" conditions preferred by the Bundesbank and global financial interests. Limits on unemployment, hunger, and poverty are not included in Maastricht's fundamental agreements. GATT rules, including both those in place and now on the table, hold forth the possibility that regulations to protect basic food supplies, reduce smoking, provide cheap medicines, limit pesticide use, and maintain environmental standards, can be overruled as unfair trade practices. These international agreements were all negotiated in secret talks among executive branch leaders, in close consultation with business representatives. Legislatures have been onlookers, and the general citizenry of the affected countries have been mere targets of propaganda, although sometimes allowed to ratify complex and vague agreements under intense pressure and propaganda form above. The new institutions then have considerable freedom to make decisions that may override national and local democratic demands. Subject to executive department and powerful business interest lobbying, they are a perfect vehicle for overriding the parochial interests of democratic majorities in favor of the Global Interest (which carries us beyond the mere National Interest). ================================================= T H E I M P E R I A L I S T C O M P O N E N T ================================================= The imperialist component of the new international agreements and institutional arrangements is closely related to their sponsorship and purpose. They were instituted and are or will be controlled by the dominant nations and were designed to serve them and the interests of the global capital market. Free trade favors the stronger, and the EC, Maastricht, and NAFTA will make it easier for the more powerful countries to dominate the lesser members. Mexico, for example, is effectively surrendering its sovereignty, and Canada, Spain, and Portugal have lost a great deal of theirs. Their leaders have succumbed to the interests of the greater powers and transnational capital because of economic weakness, intense pressure, and the absence of practicable alternatives. By agreeing to accept foreign hegemony, the leaders of the economically weaker powers are honored and aided by their foreign masters, get accolades from the imperial media, and receive generous credits from western banks, the IMF and World Bank. These cover over the loss of sovereignty and the ongoing or imminent Puerto-Rico-ization of their countries. Not only are the terms of the new agreements and their institutional management in the hands of the dominant powers, these agreements are mainly enforceable against weak countries; the great powers can flaunt them with ease. The United States, for example, blithely ignored GATT rules of fair trade with boycotts and trade restrictions against Cuba, Vietnam, Nicaragua, Angola, Iran, etc., in the name of national security or antiterrorism. The United States also launched an export expansion program in 1985, to force open foreign markets by threats of retaliation, again in blatant violation of GATT rules (see below). But as with the boycotts, nobody can do anything about actions of the Godfather, who is the self- appointed global "referee" (Gephardt). =================================================== T H E P R O T E C T O N I S T C O M P O N E N T =================================================== NAFTA will reduce tariff barriers between the United States, Mexico and Canada, but it will increase the barriers to Asian and European producers. These will have to pa higher tariffs than U.S. producers to sell in Mexico or Canada, and even their producing plants in North America will have to meet an increasingly severe "local content" rule, carefully negotiated by U.S. trade representatives in the interest of a protection-minded U.S. auto industry as well as other businesses. In short, there is a dualism in "free trade" NAFTA (as well as in EC and other regional trading bloc arrangements), with freer trade within the bloc, but a very purposeful protection against outsiders. Although always claiming devotion to free trade, the United States has been remarkably opportunistic in its actual trade policies. This country was instrumental in protecting agriculture from GATT liberalization in the 1950s, and it played an important role in the exclusion of textiles from free trade rules, initiating the emergence of the highly protectionist Multi-Fiber Agreement (MFA), still in place. James Bovard points out in his The Fair Trade Fraud that the U.S. textile regulations "shackle imports of cotton socks from Peru while permitting unlimited import of designer dresses from Paris." The United States recently imposed a 42 percent import duty on Bangladesh for allegedly "dumping" shop towels. Bovard also notes that the MFA mainly affects (and raises) the prices of clothing bought by the less affluent. He proposes that the MFA be renamed "An International Agreement for the Perpetuation of Poverty." The United States has also carried the use of quotas and "Voluntary Restraint Agreements" (VRAs) and "Voluntary Import Expansions" (VIEs) to new heights in recent years. Bovard says that as tariffs have fallen, quotas have taken their place and constitute the "covert action of international trade." The United States has imposed quotas on ice cream, beef, veal, machine tools, hair nets, leg warmers, cloth eye glass cases, handspun tapestry, balls of cotton, etc. The VRAs and VIEs are "voluntary" only in an Orwellian sense. In the Nixon years, after months of bullying and threats that caused Japan to capitulate to U.S. demands, White House Press Secretary Ziegler announced: "President Nixon wants to express his personal appreciation for the cooperation and understanding of our negotiating partners and his belief that these voluntary agreements lay the groundwork for even more positive contributions toward friendly cooperation in the future." Reagan, who used "voluntary" agreements liberally, always referred to them as part of the fight for the "liberalization" of trade. George Bush extended steel import quotas in 1989 as part of what he called a "Steel Trade Liberalization Program," one of whose ultimate goals was "to end government interference in global trade in steel." The doublespeak in this field is virtually without limit, based on the blend of policy opportunism and a self-righteous inability to recognize any departure from high principle. AS another sample from the large stock, Rep. John Dingell declared in 1987: "We are not dealing with protectionism in this legislation. We are dealing with salvation." ======================================= G U N B O A T T R A D E P O L I C Y ======================================= Because the Godfather is powerful and arrogant, he can use the rules when they serve and ignore them at pleasure, always with an aura of self-righteousness. When the cards dealt are not to his taste, he simply asserts that the deck has been stacked and declares himself a victim of "unfair trade." This is a tradition of beleaguered elites. Jagdish Bhagwati points out that competitive and business cycle pressures on Britain in the 1870s and 1880s led to the organization of a "National Fair Trade League" and a "Reciprocity Fair Trade Association" to fight against "unfair trade." With the growth of the huge U.S. trade deficits of the 1980s, congress and the executive moved to a more aggressive stance in trade policy. James Bovard speaks of Gunboat Economics in his book; Bhagwati's and Hugh Patrick's book on this development is entitled Aggressive Unilateralism. One important feature of the recent period has been the unwillingness of the U.S. political leadership to recognize that the main causes of the surge in size of the trade deficits were the Reaganite fiscal policies and budget deficits, which increased U.S. interest rates as well as the value of the dollar, bought in foreign money to finance the deficit, increased imports, and badly damaged the export industries. Reagan was proud of the new "strength" of the "superdollar," which was rendering U.S. exports noncompetitive. The trade deficit couldn't be our fault; it must be the fault of foreigners; they must be engaging in dumping and other forms of unfair trade. So instead of addressing real causes, the opportunistic U.S. congress and leadership chose to attack the Japanese and other alleged unfair traders. In 1988, Section 301 of the Trade and Tariff Act of 1974 was revised to make it mandatory that the U.S. Trade Representative put up periodic lists of unfair trading nations, who would have to shape up or be subject to obligatory retaliation. They could be deemed unfair for not affording "fair and equitable...market opportunities" to U.S. firms, for other "unreasonable" practices, or for the unfair practice of inadequately protecting workers wages and rights. These vague words were undefined, some were only tenuously related to trade, and their meanings were left to the discretion of U.S. officials. The hypocrisy involved in listing the maltreatment of workers as a possible basis of trade unfairness is breathtaking. The U.S. government actively and enthusiastically promoted the rule of numerous leaders like Marcos, Pinochet, and Brazil's Castillo Branco, who crushed labor and peasant organizations, and whose U.S. aid increased in direct relation to their curtailment of labor rights (see Chomsky and Herman, The Washington Connection and Third World Fascism, Table 2, p. 45). Within the past month a CBS "60 Minutes" feature on U.S. AID programs demonstrated that this U.S. government agency is still helping to curb trade unions in U.S. Third World client states. We might also ask whether the Reaganite policies of strike-breaking (Patco) and deliberately weakening trade unions by a wide range of policies shouldn't provide the basis for an EC complaint of unfair trade practices. This new law infuriated other countries, as it makes the United States the law maker, prosecutor, judge and jury, in cases of unilaterally declared "trade crimes," and it circumvents or violates GATT rules and procedures. In contrast with GATT negotiated settlements, which involve reciprocity, the 301 process extracts unilateral concessions by threat. It is also entirely one-sided in the sense that the criteria used against foreigners are not symmetrically applicable to U.S. actions. Bovard has many pages juxtaposing actions of other countries condemned under 301 with similar U.S. acts. Believe it or not, Reagan stated in 1988 that Americans "don't pass any trade law that we wouldn't want another country to pass in just the same form"! Beat that one for chutzpah, or self-deception, or both! The United States also has used 301 selectively and to pursue a hidden agenda. It retaliated early against Brazil and India, who happened to be opposing U.S. positions in GATT; and it has not often used 301 against the EC, which defends itself aggressively. Japan, and weak countries, who defend themselves less forcefully, are pursued with vigor. Unilateral aggressiveness under 301 represents a shift from traditional protectionism to a policy of trying to pry open foreign markets by threatening retaliation--which has been called "export protectionism." It often involves retaliation for trade policies that are in accord with GATT rules, such as the Brazilian policy applied for many decades of not recognizing pharmaceutical patent claims. This makes the retaliatory actions GATT violations. The rewriting of trade rules is sometimes defended by U.S. officials and apologists on the grounds of the ineffectiveness of GATT and U.S. impatience with the difficulty in getting rules changed. But ignoring GATT rules on such an excuse is plain vigilantism. Sometimes it is argued that the new U.S. aggressive unilateralism should be tolerated, because otherwise the congress will lose patience with multilateralism and the GATT system and abandon it entirely. Thus, the bully or "madman" must be placated to prevent his doing something more violent and illegal. In one of the most remarkable manifestations of the arrogance of power, U.S. officials applying the vague language of Sec. 301 have suggested that foreign countries' failures to change their retailing structures, cultural preferences for home goods and for saving rather than consumption, and allegedly inadequate government allocations of resources to infrastructure, which make it hard for U.S. firms to sell goods there, are forms of "unfair trade" that should be rectified. The so-called Structural Impediments Initiative is designed to help straighten out these foreigners, getting them to promise to mend their cultural ways in order not to be unfair traders. The Japanese have allowed themselves to be bullied into discussing some of these issues, and even promising to change their distributive machinery and to try harder to spend more on infrastructure and get their people to buy more U.S. goods.