|
Please, help me to keep
up this website active by sending us a small donation
Anti-democratic
nature of US capitalism is being exposed – Noam Chomsky
Versão
em Português aqui
THE SIMULTANEOUS unfolding of the US
presidential campaign and unraveling of the financial markets presents one
of those occasions where the political and economic systems starkly reveal
their nature.
Passion about the campaign may not be
universally shared but almost everybody can feel the anxiety from the
foreclosure of a million homes, and concerns about jobs, savings and
healthcare at risk.
The initial Bush proposals to deal
with the crisis so reeked of totalitarianism that they were quickly
modified. Under intense lobbyist pressure, they were reshaped as "a clear
win for the largest institutions in the system . . . a way of dumping assets
without having to fail or close", as described by James Rickards, who
negotiated the federal bailout for the hedge fund Long Term Capital
Management in 1998, reminding us that we are treading familiar turf.
The immediate origins of the current
meltdown lie in the collapse of the housing bubble supervised by Federal
Reserve chairman Alan Greenspan, which sustained the struggling economy
through the Bush years by debt-based consumer spending along with borrowing
from abroad. But the roots are deeper. In part they lie in the triumph of
financial liberalisation in the past 30 years - that is, freeing the markets
as much as possible from government regulation.
These steps predictably increased the
frequency and depth of severe reversals, which now threaten to bring about
the worst crisis since the Great Depression.
Also predictably, the narrow sectors
that reaped enormous profits from liberalisation are calling for massive
state intervention to rescue collapsing financial institutions.
Such interventionism is a regular
feature of state capitalism, though the scale today is unusual. A study by
international economists Winfried Ruigrok and Rob van Tulder 15 years ago
found that at least 20 companies in the Fortune 100 would not have survived
if they had not been saved by their respective governments, and that many of
the rest gained substantially by demanding that governments "socialise their
losses," as in today's taxpayer-financed bailout. Such government
intervention "has been the rule rather than the exception over the past two
centuries", they conclude.
In a functioning democratic society, a
political campaign would address such fundamental issues, looking into root
causes and cures, and proposing the means by which people suffering the
consequences can take effective control.
The financial market "underprices
risk" and is "systematically inefficient", as economists John Eatwell and
Lance Taylor wrote a decade ago, warning of the extreme dangers of financial
liberalisation and reviewing the substantial costs already incurred - and
proposing solutions, which have been ignored. One factor is failure to
calculate the costs to those who do not participate in transactions. These
"externalities" can be huge. Ignoring systemic risk leads to more
risk-taking than would take place in an efficient economy, even by the
narrowest measures.
The task of financial institutions is
to take risks and, if well-managed, to ensure that potential losses to
themselves will be covered. The emphasis is on "to themselves". Under state
capitalist rules, it is not their business to consider the cost to others -
the "externalities" of decent survival - if their practices lead to
financial crisis, as they regularly do.
Financial liberalization has effects
well beyond the economy. It has long been understood that it is a powerful
weapon against democracy. Free capital movement creates what some have
called a "virtual parliament" of investors and lenders, who closely monitor
government programs and "vote" against them if they are considered
irrational: for the benefit of people, rather than concentrated private
power.
Investors and lenders can "vote" by
capital flight, attacks on currencies and other devices offered by financial
liberalization. That is one reason why the Bretton Woods system established
by the United States and Britain after the second World War instituted
capital controls and regulated currencies.*
The Great Depression and the war had
aroused powerful radical democratic currents, ranging from the anti-fascist
resistance to working class organization. These pressures made it necessary
to permit social democratic policies. The Bretton Woods system was designed
in part to create a space for government action responding to public will -
for some measure of democracy.
John Maynard Keynes, the British
negotiator, considered the most important achievement of Bretton Woods to be
the establishment of the right of governments to restrict capital movement.
In dramatic contrast, in the
neoliberal phase after the breakdown of the Bretton Woods system in the
1970s, the US treasury now regards free capital mobility as a "fundamental
right", unlike such alleged "rights" as those guaranteed by the Universal
Declaration of Human Rights: health, education, decent employment, security
and other rights that the Reagan and Bush administrations have dismissed as
"letters to Santa Claus", "preposterous", mere "myths".
In earlier years, the public had not
been much of a problem. The reasons are reviewed by Barry Eichengreen in his
standard scholarly history of the international monetary system. He explains
that in the 19th century, governments had not yet been "politicized by
universal male suffrage and the rise of trade unionism and parliamentary
labor parties". Therefore, the severe costs imposed by the virtual
parliament could be transferred to the general population.
But with the radicalization of the
general public during the Great Depression and the anti-fascist war, that
luxury was no longer available to private power and wealth. Hence in the
Bretton Woods system, "limits on capital mobility substituted for limits on
democracy as a source of insulation from market pressures".
The obvious corollary is that after
the dismantling of the postwar system, democracy is restricted. It has
therefore become necessary to control and marginalize the public in some
fashion, processes particularly evident in the more business-run societies
like the United States. The management of electoral extravaganzas by the
public relations industry is one illustration.
"Politics is the shadow cast on society by big business,"
concluded America's leading 20th century social philosopher John Dewey, and
will remain so as long as power resides in "business for private profit
through private control of banking, land, industry, reinforced by command of
the press, press agents and other means of publicity and propaganda".
The United States effectively has a
one-party system, the business party, with two factions, Republicans and
Democrats. There are differences between them. In his study Unequal
Democracy: The Political Economy of the New Gilded Age, Larry Bartels shows
that during the past six decades "real incomes of middle-class families have
grown twice as fast under Democrats as they have under Republicans, while
the real incomes of working-poor families have grown six times as fast under
Democrats as they have under Republicans".
Differences can be detected in the
current election as well. Voters should consider them, but without illusions
about the political parties, and with the recognition that consistently over
the centuries, progressive legislation and social welfare have been won by
popular struggles, not gifts from above.
Those struggles follow a cycle of
success and setback. They must be waged every day, not just once every four
years, always with the goal of creating a genuinely responsive democratic
society, from the voting booth to the workplace.
*
The Bretton Woods system of global financial management was created by 730
delegates from all 44 Allied Second World War nations who attended a
UN-hosted Monetary and Financial Conference at the Mount Washington Hotel in
Bretton Woods in New Hampshire in 1944.
Bretton Woods, which collapsed in
1971, was the system of rules, institutions, and procedures that regulated
the international monetary system, under which were set up the International
Bank for Reconstruction and Development (IBRD) (now one of five institutions
in the World Bank Group) and the International Monetary Fund (IMF), which
came into effect in 1945.
The chief feature of Bretton Woods was
an obligation for each country to adopt a monetary policy that maintained
the exchange rate of its currency within a fixed value.
The system collapsed when the US
suspended convertibility from dollars to gold. This created the unique
situation whereby the US dollar became the "reserve currency" for the other
countries within Bretton Woods.
This article appeared first in The Irish Times.
This
work is licensed under a
Creative Commons Attribution-Noncommercial-Share Alike 3.0 License
| 
