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Furthermore, what's called trade isn't trade in any serious sense of the term. Much of what's called trade is just internal transactions, inside a big corporation. More than half of US exports to Mexico don't even enter the Mexican market. They're just transferred by one branch of General Motors to another branch, because you can get much cheaper labour if you happen to cross a border, and you don't have to worry about pollution. But that's not trade in any sensible sense of the term, any more than if you move a can of beans from one shelf to another of a grocery store. It just happens to cross an international border, but it's not trade. In fact, by now it's estimated that about 40% of what's called world trade is internal to corporations. That means centrally-managed transactions run by a very visible hand with major market distortions of all kinds, some- times called a system of corporate mercantilism, which is fairly accurate.
GATT and NAFTA just increase these tendencies, hence harming markets in incalculable ways. And if we proceed, we find that the alleged efficiencies of trade are to a large extent an ideological construction. They don't have any substantive meaning. With automation, for instance, there's no doubt that it puts people out of work. But the fact of the matter is that automation is so inefficient that it had to be developed in the state sector for decades meaning the US military system. And the kind of automation that was developed in the state sector at huge public cost and enormous market distortion was a very special kind. It was designed in order to de-skill workers and to enhance managerial power. This has nothing to do with economic efficiency; it's to do with power relations.
There have been a number of academic and management-affirmed studies which have shown over and over that automation is introduced by managers, even when it increases costs when it's inefficient just for power reasons.
Take containerization. It was developed by the US Navy that is, by the state sector in the economy masking market distortions. In general, invocation of market forces, as if they were laws of nature, has a large element of fraud associated with it. It's a kind of ideological warfare. In the post Second World War period, this includes just about everything; electronics, computers, biotechnology and pharmaceuticals, for instance, were all initiated and maintained by enormous state subsidies and intervention otherwise they would not exist. Computers, for example in the 1950s, before they were marketable were virtually 100% supported by the taxpayer. About 85% of all electronics was state-supported in the 1980s. The idea is that the public is supposed to pay the cost. If anything comes out of it, you hand it over to the corporations. It's called free enterprise!
All of thisquite sharply increased under the Reagan administration. The state share of GNP rose to new heights in the first couple of years of the Reagan administration. And they were proud of it. To the public they had all kinds of free-market talk, but when they were talking to the business community, they talked differently. So James Baker, when he was Secretary of the Treasury, announced with great pride to a business convention, that the Reagan administration had offered more protection to US manufacturers than any of the preceding post-war administrations, which was true, but he was being too modest; it actually offered more protection than all of them combined.
One of the reasons why Clinton had unusual corporate support for a Democrat is that he planned to go even beyond that level of market distortion and market interference, for the benefit of domestic-based capital. His Secretary of Treasury, Lloyd Bentsen, was quoted in the Wall Street Journal as saying, "I'm tired of this level playing field business. We want to tilt the playing field in favour of US industry." Meanwhile, there's a lot of very passionate rhetoric about free markets but, of course, that's free markets for the poor, at home and abroad.
The fact is that people's lives are being destroyed on an enormous scale through unemployment alone. Meanwhile, everywhere you turn you find work that these people would be delighted to do if they had a chance. Work that would be highly beneficial both for them and their communities. But here you have to be a little careful. It would be beneficial to people, but it would be harmful to the economy, in the technical sense. And that's a very important distinction to learn. All of this is a brief way of saying that the economic system is a catastrophic failure. There's a huge amount of needed work. There's an enormous number of idle hands of suffering people, but the economic system is simply incapable of bringing them together. Now of course this catastrophic failure is hailed as a grand success. And indeed it is for a narrow sector of privileged; profits are sky- rocketing. The economy is working just fine for some people, and they happen to be the ones who write the articles, and give the speeches, so it all sounds great in the intellectual culture.
Looking at these major tendencies, especially in the past twenty years, one crucial event was Richard Nixon's demolition of the Bretton Woods system in the early 1970s. That was the post-war system for regulating international currencies, with the US serving as a kind of international banker. He dismantled that with a lot of consequences.
One effect of the de-regulation of currencies was a huge increase of capital and financial markets. The World Bank estimated it at about 14 trillion dollars, which totally swamps government. And the amount of capital that's being transferred daily is increasing. It's probably now about a trillion dollars a day again swamping government.
In addition to a huge increase in the amount of unregulated capital, there's also a very radical change in its composition. John Eatwell, an economist at Cambridge, and a specialist on finance, pointed out recently that in 1970--before Nixon dismantled the system--about 90% of the capital used in financial transactions, internationally, was for long-term investment trade and about 10% for speculation. Now figures have reversed. It's 90% for speculation, and about 10% for investment and trade. Eatwell suggested that that may be a big factor in the considerable decline in growth rates since this happened in 1970.
