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The USA is the richest country in the world and it can't carry out even minimal economic planning because of the impact of speculative, unregulated capital. For a Third World country the situation is hopeless. There's no such thing as economic planning. Indeed the new GATT agreements are designed to undercut those possibilities by extending the so-called liberalization, and what they call services meaning that big Western banks the Japanese, British and American banks can displace the banks in smaller countries, eliminating any possibility of domestic national planning.
The accelerating shift from a national to a global economy has the effect of increasing polarization across countries, between rich and poor countries, but also, even more sharply, within the countries. It also has the effect of undermining functioning democracy. We're moving to a situation in which capital is highly mobile, and labour is immobile, and becoming more immobile. It means that it's possible to shift production to low- wage, high repression areas, with low environmental standards. It also makes it very easy to play off one immobile, national labour force against another.
During the NAFTA debate in the United States just about everybody agreed that the effect of NAFTA would be to lower wages in the United States for what are called unskilled workers, which means about 70% or 75% of the workforce. In fact, to lower wages you don't have to move manufacturing, you just have to be able to threaten to do it. The threat alone is enough to lower wages and increase temporary employment.
Consider the matter of democracy. Power is shifting into the hands of huge transnational corporations. That means away from parliamentary institutions. Furthermore, there's a structure of governance that's coalescing around these transnational corporations. This is not unlike the developments of the last couple of hundred years, when national states more or less coalesced around growing national economies. Now you've got a transnational economy, you're getting a transnational state, not surprisingly. The Financial Times described this as a de facto world government, including the World Bank and the IMF, and GATT, now the World Trade Organisation, the G7 Executive, and so on. Transnational bodies remove power from parliamentary institutions. It's important to keep the technocrats insulated -- that's World Bank lingo; you want to make sure you have technocratic insulation. The Economist magazine describes how it's important to keep policy insulated from politics.
Power is drifting not only to corporations but into the structures around them--all of them completely unaccountable. The corporation itself has got a stricter hierarchy than exists in any human institution. That's a sure form of totalitarianism and unaccountability, the economic equivalent of fascism which is exactly why corporations are so strongly opposed by classical liberals.
Thomas Jefferson, for example, who lived just about long enough to see the early development of the corporate system, warned in his last years that what he called banking institutions, money and corporations would simply destroy liberty and would restore absolutism, eliminating the victories of the American Revolution.
Adam Smith was also concerned about their potential power, particularly if they were going to be granted the rights of "immortal persons".
The end of the Cold War accelerates all this. The Financial Times, for example, had an article called "Green shoots in communism's ruins"; one of the good things it saw going on was that the pauperization of the workforce and a high level of unemployment were offering new ways to undercut "pampered Western European workers" with their "luxurious lifestyles".
A British industrialist explained in the Wall Street Journal that when workers see jobs disappearing it has a salutary effect on people's attitudes. This was part of an article praising the Thatcher reforms for bringing about a low-wage, low-skill economy in England with great labour flexibility, and wonderful profits. Take General Motors, already the biggest employer in Mexico it is now moving into Eastern Europe but in a very special way. When General Motors set up a plant in Poland they insisted upon high tariff protection; similarly, when Volkswagen sets up a plant in the Czech Republic it insists on tariff protection and also externalization of costs. They want the Czech people and the Czech Republic to pay the costs; they just want the profit and they get it. That's the tradition: markets for the poor and plenty of state protection for the rich.
The biggest test is Poland. A country where multinational corporations can get people who are well-trained and well- educated and they'll have blue eyes and blond hair unlike in the Third World, and they'll work for 10% of your wages, with no benefits, because of the effectiveness of capitalist reforms in pauperizing the populations and in increasing unemployment.
That in fact tells us something about what the Cold War was about. We learn a lot about what it was about just by asking a simple question: who's cheering and who's despairing? If we take the East. Who's cheering? The old Communist Party hierarchy is; they think it's wonderful. They are now working for international capitalism. What about the population? Well, they lost the Cold War, they're in despair, despite their victory over the Soviet experiment.
What about the West? There's a lot of cheering from corporations and banks and management firms about the experts who were sent to Eastern Europe to clinch a friendly takeover, as the Wall Street Journal put it, but ran away with all the aid, it turns out. Very little of the aid got there; instead it went into the pockets of the Western experts and management firms.
The workers in General Motors and Volkswagen lost the Cold War because now the end of the Cold War just gives another weapon to undermine their "luxurious lifestyles".
These misnamed free-trade agreements, GATT and NAFTA, carry that process forwards. They are not freetrade agreements but investor rights agreements and they are designed to carry forward the attack on democracy. If you look at them closely, you realize they are a complicated mixture of liberalization and protectionism carefully crafted in the interests of the transnational corporations. So, for example, GATT excludes subsidies except for one kind: military expenditures.
Military expenditures are a huge welfare system for the rich and an enormous form of government subsidy that distort markets and trade. Military expenditures are staying very high: under Clinton they're higher in real terms than they were under Nixon and they are expected to go up. That is a system of market interference and benefits for the wealthy.
Another central part of the GATT agreement, and NAFTA, is what are called intellectual property rights which is protectionism: protection for ownership of knowledge and technology. They want to make sure that the technology of the future is monopolized by huge and generally government- subsidized private corporations GATT includes an important extension of patents to include product patents; this means that if someone designs a new technique for producing a drug, they can't do it because they violate the patent. The product patents reduce economic efficiency and cut back technical innovation. France, for example, had product patents about a century ago and that was a reason why it lost a large part of its chemical industry to Switzerland which didn't, and therefore could innovate.
It means that a country like India, where there is a big pharmaceutical industry which has been able to keep drug costs very low simply by designing smarter processes for producing things, cannot do that any longer.
Right after his NAFTA triumph Clinton went off to the Asia Pacific summit in Seattle where he proclaimed his "grand vision" of the free-market future. Corporations to emulate were the Boeing Corporation, for example, and in fact he gave a speech about the grand vision in a hangar of the Boeing Corporation. That was a perfect choice, as Boeing is an almost totally subsidized corporation. In fact, the aeronautical industry the leading export industry in the 1930s couldn't survive, and then the war came along and it made a huge amount of money, but it was understood right after the Second World War that they were not going to survive in the market. If you read Fortune magazine, it would explain how the aeronautical industry can't survive in the market. The public has to come in and subsidize them, and in fact the aircraft industry, which includes avionics and electronics and complicated metallurgy, is simply subsidized through the Pentagon and NASA. This is the model for the free-market future. The profits are privatized and that's what counts it's socialism for the rich: the public pays the costs and the rich get the profits. That's what the free market is in practice.
Noam Chomsky is a professor of linguistics at the University of Cambridge, Massachusetts, USA. He is the author of many books, including Manufacturing Consent, published by Pantheon Books (1988). The above article is edited extracts from Chomsky's speech given in London in May, 1994.
