They Don't Even Know That They Don't Know 1 страница
December 16, 1992
DB: Tis the season of fantasies and fairy tales, and in that holiday spirit, today's New York Times editorial offers the following history lesson: "America became rich by tapping its natural resources and building large manufacturing plants that imposed rigid work rules." What an inspiring story!
Actually, it's a good year to mention that. This year is sort of historic in this respect. For one thing, it's the centenary of the destruction of the largest union in the United States, the American Steelworkers Union, by Andrew Carnegie, who had just in 1892 established the Carnegie Steel Works, which became the first billion dollar U.S. corporation. His most advanced plant was in Homestead, Pennsylvania, a working-class city with a working-class mayor and a lively cultural scene and a commitment to workers' rights and a union base. He locked the workers out. They took over control of the plant and the town. He sent Pinkerton guards, who were driven away. He then got the National Guard sent in, which took over. It was exactly as the New York Times described. In fact, they described it at the time. He was able not only to destroy the union, but to institute twelve-hour work days, and miserable labor standards. The company history published not too long after described this as the basis for the enormous profits that they made. Although he was a pacifist, he succeeded in overcoming his pacifist principles to take on a huge contract for steel for naval vessels. The U.S. was then building up a big navy for purposes of international intervention. He also succeeded crucially, and this is important, in destroying utterly the democratic structure of the town and the region. Scholars who went in to investigate Homestead afterwards found that people were afraid to talk to them. They wouldn't even talk in their homes because they were too terrified of blacklisting and other retaliation. When Mother Jones, the eighty-nine-year-old labor organizer, came to Homestead in 1919 to try to help organize the union again, she was carted off by the cops when she tried to make a public statement. As late as the 1930s, when Roosevelt's Secretary of Labor, Frances Perkins, came to Homestead, she had to be under police protection. It wasn't until the mid-1930s, in the course of union organizing and great public activism, that the elements of democracy were restored to Homestead, and they didn't last very long. The attack on the union started right away. Nineteen-ninety-two is a historic year in that respect, too. This is the first time in sixty years that a major corporation has dared to use the ultimate weapon against a major union. Caterpillar broke a UAW strike by hiring scabs, just as Carnegie and Frick had done a century earlier. So the Times has a point to make. If you impose harsh enough working standards, you can create profits. As the Times well knows, it turns out to be much easier than before to move production to high-repression, low-wage areas like Mexico or increasingly, Eastern Europe or Indonesia. There you can really impose iron work rules and extract a lot of profit and meanwhile leave the United States with the inner cities that we see. So all that's accurate. I'm glad to see the Times saying something true. They could have added a little background but you can't ask for everything.
DB: "America became rich by tapping its inner resources." The brave and enterprising European settlers came to these shores and found this vast, empty, fertile land with abundant flora and fauna and developed it, like some natural process.
That's partly true. They first had to exterminate the native population and drive them off the lands. "Exterminate" is the word they used, and it's what they did. After exterminating the population and bringing in huge numbers of slaves to work for them, they developed the resources.
DB: At the Little Rock economic conference and elsewhere there is much talk of economic recovery and restoring competitiveness. Gar Alperovitz takes a dim view that federal policy can reverse basic problems. He writes in today's New York Times that what is being proposed is "not likely to make a dent in our deeper economic problems. We may simply be in for a long, painful era of unresolved economic decay." Would you agree?
I didn't see that piece but I did read this morning's Financial Times from London, and they talk with some pleasure of the fiscal conservatism shown by Clinton and his advisors. There are some real issues here. First of all, as regards Gar Alperovitz's comment, it's accurate, but we have to be careful in the use of terms. When he says America is in for a long period of decline, we have to decide what we mean by "America." If by the United States we mean the geographical area, he is, I'm sure, right. There has been decline, and there will be further decline, and the country is picking up many of the aspects of a Third World society. That's an automatic consequence of sending productive labor elsewhere. GM, as the press constantly reports, is closing some twenty-four factories in North America. But what you only read about in the small print is that it's opening new factories, including for example a $700 million high-tech factory in former East Germany, an area of huge unemployment where they can pay forty percent of the wages of Western Europe and none of the benefits. Or, as the Financial Times, the leading world business journal, puts it, they don't have to worry about the "pampered West European workers" any longer, they can just get highly exploited Third World workers now that Eastern Europe is being pushed back to its traditional Third World status. It's the same in Mexico, Thailand, etc.
There is a consequence to that. We become a Third World country in some respects. So if by the United States we mean the geographical area, he's right. If by the United States we mean U.S.-based corporations, then he's not right. In fact, the indications are to the contrary. Profits are doing fine, and a small sector is enriching itself. Even production by U.S.-based corporations is doing well, if we view the matter globally, as they do. I think Gar is right in saying that the policies now being discussed will have only a cosmetic effect on the United States as a geographical area. But I think they will probably be beneficial to the United States as a system of U.S.-based finance and industry, which is why the business community tended to give Clinton a good deal of support.
These last couple of days, the conference, and the elections, too, did deal with a significant issue. As usual, the issue had to do with a tactical disagreement within business circles. They are facing an objective problem, there's no doubt about it. The core of it has to do with what's called "industrial policy." We have to put aside a lot of nonsense before we can talk about this. The United States has always had an active state industrial policy, just like every other industrial country. Outside of ideologues, the academy, and the press, no one thinks that capitalism is a viable system, and nobody has thought that for sixty or seventy years, if ever. It has been understood certainly since the Great Depression and the Second World War, if not long before, that the only way a system of private enterprise can survive is if there is extensive government intervention to regulate disorderly markets and protect private capital from the destructive effects of the market system, to organize a public subsidy for targeting advanced sectors of industry, etc. So every advanced country, whether it's Germany or Japan or by now South Korea or certainly the United States, France, etc., has always had an active industrial policy. You can trace this back to the first industrializing country, England, and it's always been true of U.S. history, increasingly consciously so, since the Depression and the Second World War. Nobody called it industrial policy. It was always masked within the Pentagon system, which was, internationally, an intervention force, though domestically the Pentagon always was, and was understood to be from the late 1940s, a method by which the government can coordinate the private economy, can provide welfare to it, can subsidize it, can arrange the flow of taxpayer money to research and development, provide a state-guaranteed market for excess production, and target advanced industries for development, etc. Just about every successful and flourishing aspect of the U.S. economy has always relied on this kind of government involvement. Much of it has been masked by the Pentagon system.
Why are people now talking about industrial policy? The reason is that the mask is dropping. That's an objective problem. It is very difficult now to get people to be willing to lower their consumption, their aspirations in order to divert investment funds to high-technology industry on the pretext that the Russians are coming. There are various efforts to continue this. In fact, the current public relations stunt in Somalia, in my opinion, is an effort which I don't think is going to work to try to reinvigorate this system. But the system is in trouble. Economists and bankers have been pointing out openly for some time that one of the main reasons why the current recovery is so sluggish is that the government has not been able to resort to the traditional pump priming mechanism, the traditional mechanism of economic stimulation, namely increased military spending with all of its multiplier effects. That's just not as readily available.
There's another fact that goes right along side it, which is independent of this. The cutting edge of technology and industry has for some time visibly been shifting in another direction, away from the electronics-based advanced industry of the postwar period and towards biology-based industry and commerce. Biotechnology, genetic engineering, design of seeds and drugs, even animal species, etc. is expected to be a huge growth industry with enormous profits. It's vastly more important than electronics. In comparison, electronics is a sort of frill. This has to do with the means of life and existence, which the government and U.S. corporations hope that U.S. commercial enterprises will dominate and if possible even monopolize. But it's very hard to disguise government involvement in that behind the Pentagon cover. Even if the Russians were still there you couldn't do that. So there are some real problems. That's why you have open discussion now of industrial policy. It was pretty openly proposed and discussed in the Little Rock meetings, and in fact throughout the campaign. There are differences between the two political parties on this. The Clinton people are more up front about these needs. The Reagan-Bush types, who are more fanatically ideological, still to some extent have their heads in the sand about it, although the Reagan administration was highly protectionist and did set up a government corporation to try to get the computer-chip industry back into operation. That succeeded. They were a bit more dogmatic on this issue. I think that's one of the main reasons why Clinton had substantial business support.
Those are real phenomena. They will have to be dealt with. Or take the question of "infrastructure" or "human capital," a kind of vulgar way of saying keep people alive and allow them to have an education. By now the business community is well aware that they've got problems with that. Take, for example, the Wall Street Journal, which has been the most extreme advocate of Reaganite lunacies for the past ten years. They're now publishing articles in which they're bemoaning the consequences -- without, of course, conceding that those are the consequences. They had a big news article a couple of weeks ago on the state of California and the collapse of the educational system, which they are very upset about. It was about San Diego. Businessmen in the San Diego area have relied on the state system, on a public subsidy, to provide them with skilled workers, junior managers, applied research, etc. The system is in collapse. The reason is obvious: the large cutbacks in social spending in the federal budget and the huge federal deficit, all of which the Wall Street Journal supported, simply transferred the burden of keeping people alive and functioning to the states. The states are unable to support that burden. They are in serious trouble. They tried to hand it down to the municipalities, which are also in serious trouble. One of the consequences is that the very fine educational system in the state of California is in serious difficulty, and now businessmen are complaining about it. They want the government to get back into the business of providing them with what they need: skilled workers and research. That's going to mean a reversal of the fanaticism that the Wall Street Journal and others like it have been applauding for all these years.
DB: At the Little Rock conference I heard Clinton talking about structural problems and rebuilding the infrastructure. One attendee, Ann Markusen, a Rutgers economist and co-author of the book Dismantling the Cold War Economy, talked about the excesses of the Pentagon system and the distortions and damages that it has caused to the U.S. economy. So it seems that there is at least some discussion of these issues that I don't recall ever coming up before.
The reason is that they simply can't fully maintain the Pentagon based system with the propaganda pretexts gone. So you've got to start talking about it.
DB: Talking about it is one thing, but do they really have a clue about what do to? Can they have a clue?
I think they have a clue about what to do. They know perfectly well what they can do. If you listen to smart economists like Bob Solow, who started the thing off, they have some pretty reasonable ideas about what to do. What they want to do is openly done by Japan and Germany and every functioning economy, namely rely on government initiatives to provide the basis for private profit, and do it openly. The U.S. has been doing it indirectly through the Pentagon system, which is in fact kind of inefficient. It won't work anymore anyway, for the most part. So they would like to do it openly. The question is whether that can be done. One problem is that the enormous debt created during the Reagan years, at all levels -- federal, state, corporate, local, even household -- makes it extremely difficult to launch constructive programs. That's why they're faced with this contradiction.
DB: There is no capital available.
Yes. In fact, that was probably part of the purpose of the Reaganite borrow and spend program.
DB: To eliminate capital?
You recall about ten years ago, when David Stockman was kicked out, he had some interviews with William Greider which he pretty much said that the idea was to try to put a cap on social spending simply by debt. There will always be plenty to subsidize the rich, but you won't be able to pay aid to mothers with dependent children, only aid to dependent corporate executives. They may have overdone it. Furthermore, there is another problem, a cultural and ideological problem. They have for years relied on propaganda based on denial of these truths. It's other countries that have government involvement and social services. We're rugged individualists. So IBM doesn't get anything from the government. In fact, they get plenty, but it's through the Pentagon, among many other ways, for example, regressive fiscal measures. Propaganda aside, the population is pretty individualistic and kind of dissident and doesn't take orders very well, by comparative standards, and it's not going to be easy to sell people on subsidizing advanced sectors of the economy. These cultural factors are significant. In Europe there has been a kind of social contract. It's now declining, for exactly the reasons that I mentioned, but it has been largely imposed by the strength of the unions, in my opinion, the organized work force, and the relative weakness of the business community, which is not as dominant in Europe as it has been here for historical reasons. That led to a kind of social contract, if you like, in which the government does see primarily to the needs of private wealth, but it also creates a not insubstantial safety net for the rest of the population. So they have general health care, reasonable services, etc. We haven't had that, in part because we don't have the same organized work force and we have a much more class conscious and dominant business community. In Japan, pretty much the same results were achieved, but the reasons were largely the highly authoritarian culture. People just do what they're told. So you tell them to cut back consumption, they have a very low standard of living, considering their wealth, work hard, etc. and people just do it. That's not going to be so easy to do here. There are going to be many problems.
DB: You mentioned the GM plant moving to Mexico. There's also Smith Corona in Cortland, New York, the last U.S.-based typewriter company. That, too, is moving to Mexico. There's a whole maquiladora corridor along the border, with incredible levels of lead in the water, high levels of pollution and toxic waste, and workers working for five dollars a day.
Actually, the case that I mentioned was GM moving to Eastern Europe, which is in a way more interesting. It tells you what the Cold War was all about. But you're right about Mexico. One of the major issues before the country right now, right through the whole electoral period, is NAFTA, the North American Free Trade Agreement. It's quite interesting to see how that's been handled. You learn a lot about the country and the future from looking closely at that. There is no doubt that NAFTA is going to have a very large scale effect on the life of Americans, and Mexicans, too. You can debate what the effect will be, but nobody doubts that it will be significant. Quite likely the effect will be to accelerate just what you've been describing, the flow of productive labor to Mexico, which is a totalitarian dictatorship, very brutal and repressive. Therefore you can guarantee low wages. During what's been called the "Mexican economic miracle" of the last decade, wages have dropped sixty percent. Union organizers get killed. If the Ford Motor Company wants to toss out its work force and hire slave labor, they just do it. Nobody stops them. Pollution goes on unregulated. It's a great place for investors. One might think that NAFTA, which includes sending productive labor down to Mexico, might improve their real wages, maybe level the two countries. But that's most unlikely. One reason is the repression, which prevents organization that could lead to raising wages. Another consequence of NAFTA will be flooding Mexico with capital-intensive agricultural products from the United States, all based ultimately on big public subsidies, which will undercut Mexican agriculture. So they will be flooded with American crops, which will drive millions of people off the land to urban areas or into the maquiladora areas. This means another major factor driving down wages. It's not at all clear that NAFTA will lead to raising wages. It will almost certainly be a big bonanza for investors in the United States and for the wealthy sectors in Mexico which are their counterparts, the ones applauding the agreement, and the professional classes who work for them. It will very likely be quite harmful for American workers. The overall effect on jobs is uncertain, but it's very likely that wages and work conditions will suffer. Hispanic and black workers are the ones who are going to be hurt most.
DB: While those jobs are being lost, U.S. corporate profits are increasing. Is that what you're saying?
Corporations are doing very well. This is one of the best years for corporate profits.
DB: Will NAFTA and GATT, the General Agreement on Tariffs and Trade, essentially formalize on an institutional level North-South relations?
That's the idea, in fact. It will also almost certainly degrade environmental standards. For example, corporations will be able to argue that EPA standards are violations of free trade agreements. This is already happening in the Canada-U.S. part of the mislabeled free trade agreement. Its general effect will be to drive life down to the lowest level while keeping profits high. One can debate this, but there's no doubt that the consequences are significant, and it's interesting to see how it's been handled. It didn't even arise in the campaign. The public hasn't the foggiest idea what's going on. In fact, they can't know. One reason is that NAFTA is a secret. It's an executive agreement which is not publically available. To give you an indication of the extent to which this is true, in 1974 the Congressional Trade Act was passed. One of its provisions was that on any trade-related issue there has to be an analysis and input by the Labor Advisory Committee based in the unions. Obviously they have to have an analysis and report on NAFTA. NAFTA was signed by the President. It's an executive agreement. That was mid-August of this year. The Labor Advisory Committee was notified. They were informed that their report was due on September 9 of this year. However, they were only given the text about twenty-four hours before the report was due, ensuring that they couldn't even convene and obviously couldn't write a serious report. These are conservative labor leaders, not the kind of guys who criticize the government much. They nevertheless wrote a very acid report. They said, to the extent that we can look at this thing in the few hours given to us, it looks like it's going to be a total disaster for working people, for the environment, for Mexicans, and a great boon for investors. They pointed out that property rights are being protected all over the place but working rights are never mentioned. They also bitterly condemned the utter contempt for democracy that was demonstrated by not even allowing them to look at it. They said parts of it are still being kept secret. GATT is the same. Nobody knows what's going on there unless they're some kind of specialist.
DB: Have you seen details of these treaties?
You can see details in the secondary comment on them, like the Labor Advisory Committee report. Theoretically, by now it's possible to get a text. But the crucial point is that, even if you and I could get a text, what does that mean for American democracy? How many people even know that this is going on? The Labor Advisory Committee report was never reported by the press. People not only don't know what's happening to them, they don't even know that they don't know. GATT is even more far reaching. I just came back from a couple of weeks in Europe, where this is a pretty big issue in the European Community context. One of the big public concerns in the European Community is described as nationalism, but what it really has to do with, I think, is what's called in EC parlance the "democratic deficit," meaning the gap that is developing between executive decisions, which are secret, and democratic, or at least partially democratic institutions, like parliaments, which are less and less able to influence decisions made at the Community level. All of this is a marvelous device for rendering democratic forums meaningless. It means crucial decisions with enormous impact are being raised to a level where the population can't influence them even indirectly through parliaments and furthermore doesn't know about them. And as in this case, doesn't even know that it doesn't know. That leads us towards a goal that has long been sought, namely maintaining democratic forms but ensuring that there's no interference with private power. This is a reflection of the globalization of the economy.
Over history, governmental institutions have, to a considerable extent, tended to reflect the form that's being taken by economic power and its organization. It's not one hundred percent, but there is a strong tendency in that direction. That's what we're now seeing. The economy is being internationalized, meaning that the geographical industrial countries are being deindustrialized but the corporations are doing fine. This internationalized economy, run largely by transnational corporations and supernational banks are creating their own governmental structures, like GATT and NAFTA and the IMF and the World Bank and the G-7 meetings, etc. The international business press is pretty up front about it. They call it a "de facto world government" which is going to reflect these interests.
DB: It seems that the Clinton-Gore administration is going to be in a major conflict over its support for NAFTA and GATT at the same time, at least on a rhetorical level, talking about its commitment to environmental protection and creating jobs for Americans.
I would be very surprised if there's a big conflict over that. I think your word "rhetorical" is accurate. Their commitment is to U.S.-based corporations, which means transnational corporations. They very much like this special form that NAFTA is taking with special protection for property rights but no protection for workers' rights. And with the methods being developed to undercut environmental protection. That's in their interests. I doubt that there will be a conflict in the administration about this unless there is a lot of public pressure.
DB: There's been almost a domino effect, in terms of Canada, the United States, and Mexico. Canadian businesses are moving to states in the deep South and U.S. businesses moving to Mexico.
And remember that Canadian and U.S. businesses are pretty closely interlinked. Again, we have to be very careful when we use words like "Canada" and "United States" or "Mexico." These always were propaganda terms which covered up a lot. You just have to look at some of the figures. About ten years ago, when the latest U.N. figures were made available, about forty percent of world trade was internal, intrafirm transfers, transfers internal to a particular corporation. That is, it was centrally managed trade. It's not really trade, just interchanges between branches of a big transnational corporation. That's forty percent of world trade. Undoubtedly the figure's higher now.
Take a look at neo-classical economics, the kind of stuff you're supposed to bow before. It has a theory about this, i.e., ideally there's a free-market sea and within it are little islands which are little individual firms. Of course, everybody understood that a particular business, say a grocery store down the street, internally doesn't work by free trade. Internally it's centrally managed. So you have centrally managed islands in the free-market sea. The free-market sea was always more of less of a joke. But by now the islands are about the scale of the sea. This is increasingly centrally managed trade by major corporate structures. It's been called "corporate mercantilism" with its own governmental structures developing and the public increasingly marginalized to a pretty remarkable extent.
DB: Talk about the political economy of food, its production and distribution, particularly within the framework of IMF and World Bank policies. These institutions extend loans under very strict conditions to the South. They must promote the market economy, and they need to pay back the loans in hard currency. They have to increase exports, like coffee, so that we can drink cappucino, or beef so that we can eat hamburgers, all at the expense of indigenous agriculture.
Basically the picture's the way you have described. The individual cases are quite interesting. Take the great economic miracle in Latin America, which is now being used as the basis for applying the same medicine in Eastern Europe. In fact, the same people are going. Jeffrey Sachs, a leading Harvard expert, who carried through what's considered the highly successful economic miracle in Bolivia, then went off to Poland and Russia to teach them the same rules. It's interesting to have a close look. Take Bolivia. It was in trouble. It had had brutal dictators, highly repressive, huge debt, the whole business. The West went in, Sachs was the advisor, with the IMF rules: stabilize the currency, increase agro-export, cut down production for domestic needs, subsistence agriculture, etc. It worked. The figures, the macroeconomic statistics looked quite good. The currency has been stabilized. The debt has been reduced. The GNP is increasing. There are a few little flaws in the ointment: poverty has rapidly increased. Malnutrition has increased. The educational system has collapsed. But most interesting is what has in fact stabilized the economy: agricultural exports -- but not coffee. Coca. Some specialists on Latin American economies estimate that it now accounts for probably about two-thirds of Bolivian exports. The reason is obvious. Take a peasant farmer somewhere, flood his area with U.S.-subsidized agriculture, maybe through a Food for Peace program, so he can't produce or compete. Set up a situation in which the only way he can function is as an agricultural exporter. He's not an idiot. He's going to turn to the most profitable crop, which happens to be coca.