ISBN 978-1-888363-82-1. “Profit Over People – Neoliberalism and Global Order” by Noam Chomsky was originally published by Seven Stories Press in 1998. The cover photo is of the 2010 G20 protests in Toronto so this is a later imprint with some new notes on the inside cover. Although it is not made clear in the Introduction by Robert W. McChesney this is a compilation (again) of works published elsewhere by Chomsky through 1996 to 1998. It precedes the 1999 infamous ‘Battle of Seattle’ which sank the first incarnation of the MAI (Multilateral Agreement on Investment). Fast forward to 2014 & we are in Groundhog Day as now the TTIP (Transatlantic Trade and Investment Partnership) takes its place.
If you have read our reviews of numerous Chomsky books through the years then you can cut and paste most of the contents into this review. I will focus here (again) on a few specific point the Chomsky draws out. The rest is samey – you have seen it before in a dozen other Chomsky books. Of course there is always something new. If you are unfamiliar with Chomsky and wish for a short read about the perils of Globalisation (as seen back in 1996) then this may well be the work for you. If not then he has released later books that are more worthy of your attention. What “Profit Over People” does show is just how little has changed in the 16 to 18 years since this was written. The cover photo of the 2010 G20 protest demonstrates this. State capitalism nearly collapsed in 2008 and the state rode to the rescue with ‘more-of-the-same’. We learnt our lesson & learnt nothing: the philosophy may be bankrupt, broken & erroneous but to fix it will must apply more bankruptcy, more erroneous ideology and more propaganda to convince us all that everything is just dandy. It isn’t.
At the time this was written I myself was still very much under the spell of the Globalisation genie. I had just read “The Lexus and the Olive Tree” and it offered a powerful mantra: free trade between peoples and nations is the best solution to poverty. I know now that Thomas Friedman was not necessarily wrong, but it was what he didn’t say that is the problem. The theory of Globalisation is fine, but the practice stinks. The problem is that the “freeing of markets” is done my powerful lobbies who distort the result towards their own advantage. In essence it is not “free” at all. It is the result of vast distortions that create overwhelming inequality & poverty. We are on a road to a new feudalism of gated communities of the 1% – the ultra-rich who own everything. Outside will be the 99% living in desperate poverty – the very vision shown in the dystopian sci-fi movie “Soylent Green” (1973) – a hot, overcrowded world of dispossessed people facing draconian law enforcement – whilst the untouchable-elite live in concrete fortresses.
Globalisation can be made to work but only where free markets are directed and lead by strong government. The central issues that Chomsky re-iterates here is that what is being peddled to us as “globalisation” is no such thing. It is based upon rules written by, and for, transnational corporations to the disadvantage of the majority of people. In essence this is a crisis for democracy: the people we elect no longer have sovereignty over policy. We no longer direct our futures, we are not in the loop, our rights have been minimised whilst the power of the unaccountable corporation has been maximised. Under perfect free market conditions of perfect knowledge with lots of equal (and small) competitors this could maximise utility across the community. However, whilst some economic growth results the trickle-down theory does not work. The wealth trickles up leading to further monopolies of power and less, and less, democracy. The free market is not being used to maximise the wellbeing of most of the people most of the time. It is being twisted to produce only monetary wealth in the short term for a vanishingly small minority. The ideology states that this is good for everyone. The facts speak for themselves: the result is the impoverishment of everyone, even the rich. Finally we will all suffer.
Thankfully we do live in a time of some small measures that recognise that all is not well. At the time of writing the US looks to be limiting carbon emissions. In France a leading academic has published a book that has caused a sensation by seriously showing that modern capitalism leads only to vast inequality. Books are published regularly about the damage inequality does to populations. Evidence is taken seriously that the State creates wealth in markets by leading on innovation. Countries now attempt alternative measures of human progress that go beyond GDP. Now there are conferences to discuss inclusivity in capitalism. These may just be sticking plasters, not quite yet a tsunami that over-turns the dogma, but it’s a start. We have not yet witnessed to death throes of neoliberal ideology at the hands of the evidence. It has a momentum all of its own.
Economies across the world are locked into a one-way-street. They are trapped by the dogma long after they realised it could not fulfil its promises. What we need now is an escape route, a roadmap back to social democracy, back to sustainability. Our economy has become financialised with our manufacturing sector sold off to China.
“In 1971, 90 percent of international financial transactions were related to the real ecnomy – trade or long term investment – and 10 percent were speculative. By 1990 the percentages were reversed, and by 1995 about 95 percent of the vastly greater sums were speculative, with daily flows regularly exceeding the combined foreign exchange reserves of the seven biggest industrial powers, over $1 trillion a day, and very short-term: about 80 percent with round trips of a week or less.”
Hence a bloated City of London calls the shots in the Casino economy. The Government expects this casino to generate the wealth of the nation. Like the Casinos in Indian reservations this distorts the economy and displaces all other economic activity. It is its own version of the “resource curse” and in Britain we have it all: North Sea oil, deindustrialisation and the rise of the Finance service sector. Corporations expect vast profits so the State finds itself having to guarantee that money to get the private sector to act in the real world. Just look at the cost of private initiatives in Health Care, the expense of new British Nuclear or the Government’s enthusiasm for fossil fuels. This is backward looking towards to mythical “good old days” of a centralised electricity generating system and the assured income of fossil fuel addiction. Building hospitals, wind farms and renewable energy infrastructure is simply not as profitable as playing the gaming tables in the Square Mile. These corporations are ill-equipped to handle the innovation & long-term investments required to build a new economy so they strong-arm the Government into looking backward. This is the trap. This is the market failure. We have to learn how to generate wealth and wellbeing side-by-side, sustainably to maximise the utility of all. Chomsky does not offer that roadmap. He never really has. He can advocate only old-fashioned “struggle” as if this is just some kind of class-war. But he has a good grasp of the problem as he can see through the smoke screen of our lives.
First off: fossil fuels are not cheap, they receive massive state subsidy in the first place:
“…Pentagon expenditures amount to a subsidy of 30 percent of the market price of oil, demonstrating that the current view that fossil fuels are inexpensive is a complete fiction..”
Secondly we lie to ourselves about how capitalism has ended poverty in the past. Chomsky picks up a point made so well by Ha-Joon Chang about developmental capitalism:
“The “amazing achievements” are highlighted by the tenfold growth per capita income in South Korea in three decades, an unprecedented success, with “heavy doses of government involvement” in violation of the Washington consensus, but in accord with the economic development in the US and Europe…”
Strong Governments create growing and strong economies that lift the population out of poverty. There has been no other way. Finding this out makes me angry, it should make you angry too. When neoliberals quote numbers of people lifted out of poverty they are only referring to one example: China. China is a communist country yet the ideologues pretend that this is a success for their modern form of market globalisation. It proves the opposite. To use this evidence to prevent poor nations from following the same development path is to “kick away the ladder” as Ha-Joon Chang puts it.
Here again Chomsky can always find evidence in the works of Adam Smith:
“Also not well advertised is Smith’s belief that government “regulation in favour of the workmen is always just and equitable,” through not “when in favour of the masters”.”
Those Masters now being the Washington Consensus, the IMF, the World Bank and the WTO. Sadly none of them are using genuinely classic liberalism. Far from it. They are using a distorted version that suits only the needs of those it benefits today. To make this work OUR democratic processes have to be gutted:
“…the governed have the right to consent, but nothing more than that. In the terminology of modern progressive thought, the population may be “spectators”, but not “participants” apart from occasional choices among leaders representing authentic power.”
Where “authentic power” can be read to be the “masters” in Smith’s words or the “specialized class” as Walter Lippman wrote:
“The intelligent minority are a “specialised class” who are responsible for setting policy and for “the formation of a sound pulic opinion” Lippman elaborated. They must be free from interference by the general public, who are “ignorant and meddlesome outsiders.”
Now this is not as straightforward as it seems. It may seem very undemocratic but this overlooks a sophistication. I wrote in my last blog about “The Lion, the Dragon and the Unicorn” that politics is not evidence-based which accounts for the rise of the far-right in European elections. This is democracy’s downfall as it was in the 1930’s leading to the rise of Hitler. The “meddlesome outsiders” are “outside” because they do not have access to the facts and, if they did, they might not have the ability to analyse them with appropriate sophistication. Hence to assume that the general voting population have the ability to make an objective assessment of the MAI or its offspring the TTIP, is wide of the mark. The fact that such protocols can be drawn up in secrecy and with little discussion is precisely because they are long, complicated and boring. That is why the media don’t even mention them. We are not all technocrats. Hence a “specialised class” is always necessary and that class is never judgment-free. This ends up being the political class and they can spin the result to be anything they wish the public to hear. If the “specialised class” can spin the “truth” so that they personally profit then we create a trap of growing exclusion and inequality. A dystopia. The trick of our “Masters” is to convince us that what THEY are doing is good for us too. For those of us who are unconvinced? Well we become disenfranchised and stop participating. When we stop voting the door is open to motivated extremists who can only make things worse.
So, what to do? Chomsky assumes that the electorate are the sort of bright activists he meets through is work. Sadly few people are like that. Certainly we need those activists to take an interest and get the word out. The internet has proved an incredibly important springboard for such action but it is also an echo-chamber of information both good, bad and darn-right malicious. What is important is that there be a level playing field and open access to information and to the right to lobby. This requires equal access and open minds – out current system grants precious little of either. Thankfully public attitudes are not aligned perfectly with what propaganda teaches. People do not vote for policies. This is the result of research by an organisation called “Vote for Policies” who poll the electorate on specific policies but don’t tell those polled which party that policy belongs to. The results align quite neatly with the position that Chomsky puts forward: if we actually voted for the things we believe in then the Green Party would be in power and UKIP would be a fringe party.
So, why the disconnect? The media has a part to play and you can read Chomsky’s own findings in the Chapter entitled “Consent without Consent” that deals with the results of propaganda in state capitalist democracies like ours. His examples are a bit too dated and US-centric so I will not repeat them here, but they are consistent with the results in the UK that “Vote for Policies” bears witness to.
At this point Chomsky takes an interesting diversion into the history of the “end of history” – proclamations that some perfect understanding of economics has been reached, such as the one proclaimed after the fall of Soviet Communism. Chomsky debunks this and shows that such beliefs have popped up regularly. They are trumpeted by the victors but always fail any scrutiny:
“One classic moment was at the origins of the neoliberal doctrine in the early nineteenth century when David Ricardo, Thomas Malthus and other great figures of classical economics announced that the new science was proven, with the certainty of Newton’s Laws, that we only harm the poor by trying to help them, and that the best gift we can offer the suffering masses is to free them from the delusion that they have a right to live. […] But an unanticipated problem arose. The stupid masses began to draw the conclusion that if we have no right to live, then you have no right to rule… …the right to live had to be preserved under a social contract of sorts.”
Hence Chomsky identifies with the “popular struggle” for such a contract and it is a recurrent theme in his work. One might wonder if such “popular struggle” is an anachronism in our time. It is not but it remains marginal and not “popular” at all. It is not perceived as “normal” and THAT is the challenge of the 21st century. How do people know that they even have to struggle?
Chomsky returns to another favoured topic in Chapter 3 entitled “The Passion for Free Markets” – American exceptionalism. He well details a number of cases where the USA has expected other countries to follows rules that it is not willing to adopt itself. This includes the protocols within the WTO (& NAFTA) as well as the justice of the International Court of Justice. Two cases in point were the US terrorist war against Nicaragua and the blockade of Cuba. The latter example springs to mind as still so pertinent when today’s headlines (June 2014) are dominated by stories of the impending fines imposed by the USA upon Banque National Paribas (BNP) for trading with Cuba. Many assume (rightly) that sanctions against Cuba violate international law and are thus illegal. The WTO protocols would outlaw such a blockade but the USA claims that this is a matter of “national security”.
“Polite people are not supposed to remember the reaction when Kennedy tried to organise collective action against Cuba in 1961: Mexico could not go along, a diplomat explained, because “if we publically declare that Cuba is a threat to our security, forty million Mexicans will die laughing”. “
Indeed the view of Cuba in most places in the world is seen through the eyes of the desperately poor who have been treated for free by a Cuban doctor. The power of example is a dangerous one, that is the security threat. Mexico too has found that NAFTA (a North American “Free” Trade Agreement) does not offer quite the level playing field it should. The USA pressurised the Mexicans to stop shipping cheap tomatoes. This was costing the USA $800million annually and had to be stopped even if stopping it would be in violation of both WTO and NAFTA. Why was this trade stopped? Because the wrong people were the victims. It is OK for the USA to subsidise its agriculture and dumps the proceeds on the third world but NOT the other way around. Just imagine the burning injustice felt by tomato growers in Mexico who cannot send their children to school because the big bully next door won’t abide by trade agreements. What value the trade agreement? This is why trade agreements matter. That is why TTIP matters today. They don’t offer “free trade” they offer only a power-play where the strong victimised the weak and where the victim is always to blame.
“Some economists have plausibly described the world system as one of “corporate mercantilism” remote from the ideal of free trade.”
Exactly. Chomsky goes on to write:
“The gap between rich and poor countries from 1960 is substantially attributable to protectionist measures of the rich, a UN development report concluded in 1992. The 1994 report concluded that “the industrial countries, by violating the principles of free trade, are costing the developing countries an estimated $50 billion a year – nearly equal to the total flow of foreign assistance”…”
There is no level playing field if you are poor. Is it any surprise that round after round of WTO talks end in collapse because third world countries no longer wish to play ball? It is also not surprising that rich nations are carving up the world between them in secret talks such as those behind MAI and the newer TTIP? (Those after a historical perspective on the TTIP will be best served by reading Chapters 6 & 7 that deal specifically with the MAI. It shows how little has changed. You could write that entire section from 1998 transposing “TTIP” for “MAI” and you would have the situation in 2014. Remarkable.)
Both MAI & TTIP negotiations were/are conducted under a veil of secrecy and are grossly under-reported in the media. Both offer almost exactly the same terms of corporate control over governments and societal wellbeing. Both are objected to by a groundswell of activism organised over the internet. Nothing has changed in 16 years. Nothing. The same old agreements come around and around and around in the hope that all parties might finally give in. We were warned about this by George Monbiot when he was writing about the MAI in 2000 in “The Captive State” and he and Chomsky share some of the same examples. So what is the big deal? Well to quote a 1997 complaint by 25 representatives of the US Congress:
“The MAI provides expansive takings language that would allow a foreign corporation or investor to directly sue the US government for damages if we take any action that would restrain ‘enjoyment’ of an investment.”
Compare this quote from the 2014 Wikipedia entry for the TTIP:
“Any corporation which is “expropriated” from its existing investments becomes entitled to market value compensation, plus compound interest…”
So what goes around, comes around. Chomsky adds:
“There is no reciprocity: citizens and governments cannot sue investors.”
Where is the level playing field? You are I are the “unpeople”, our views do not count. But so many concerned citizens ARE making their views heard. Chomsky quotes an article in the Financial Times at length that suggested that:
“It might even become impossible “to resist demands for direct participation by lobby groups in WTO decisions, which would violate one of the body’s central principles”: “This is the place where governments collude in private against their domestic pressure groups” says a former WTO official” .. “
“It is superfluous to add that the lobbies and pressure groups that are causing such fear and consternation are not the US Council for International Business, the “lawyers and the businessmen” who are “writing the rules of global order” and the like, but the “public voice” that is “invariably missing”. “
Hence we are to understand that the trans-national corporations that are writing the TTIP for us are not a “pressure group”. It seems an odd distortion of logic that a nation’s citizens are not allowed to write the laws that effect their lives because the electorate are an unnecessary group of lobbyists. However a small elite of organisations for whom those new rules will benefit are deemed to be “one of us”. It is so horribly Orwellian.
We leave it to the Introduction by Robert W. McChesney to find a quote that so closely echoes an observation we made in out last book review of Greg Palast’s “Vultures’ Picnic“:
“In the end, neoliberals cannot and do not offer an empirical defense for the world they are making. To the contrary, they offer – no, demand – a religious faith in the infallibility of the unregulated market, that draws upon nineteenth century theories that have little connection to the actual world.”
Something that I have given voice to numerous times in my blogs over the last seven years. Even here McChesney hasn’t quite hit the nail on the head. Yes, markets have failures, lots of them, but the genius of Chomsky is to show us that these neoliberals don’t believe in the religion themselves. They believe in the outcomes – outcomes that are to the advantage of a narrow economic elite. The “religious faith” is what they sell the rest of us as an excuse as to why WE are excluded from THEIR democracy. Since we do not have money we do not have influence. They stand like high priests at the altar of some orthodox church whose teachings make no sense in the modern world. Like the Catholic Church warning poor Africans to avoid using condoms. It is the poor Africans who suffer from AIDS and lack of resources. Neither are cured by a mindless adherence to that specific religious doctrine. But it creates suffering and in suffering people turn to religion. The Church cannot lose. This is moral peril.
The way out of this dilemma is for the church to suffer the consequences. Moral peril must be removed from the market. Those who takes risks should be rewarded for good decisions and punished for bad. If you make bad decisions for someone else then your power should be removed not enhanced. This is our trap, our golden straight-jacket as Thomas Friedman described it. But it isn’t gold, not anymore, it is something far cheaper. There is no reward in this constraint. We do not live in a world that needs more gold. We need freedom not straightjackets. We need democracy and responsibility. The end result must be wellbeing and sustainability across the majority of the community. If that isn’t the outcome then we must go back and try again until we find something that works. We need pragmatism not dogma. Reality-based economics not theology.
Maybe that time has come, but, as this book demonstrates, it has been a real long time coming. It may no longer be some vision of “working class struggle” but there is a struggle going on. If we do not wish to live in the feudal dystopia of “Soylent Green” then activism must become normal for the 99% for whom the theology no longer produces positive results. We must free ourselves of this trap.