President Obama’s first year in office has been plagued with debates on war, health care and a myriad of other issues, but the theme that seems to creep up again and again is the specter of socialism in a capitalist society. A recent comment in The Post-Crescent expressed optimism that “free enterprise” in America will prevail, despite politicians’ attempts to screw it up. What that commentator, Fox Cities resident Bruce Armstrong, failed to recognize was that there never has, never will be and never should be a free enterprise system in this country. This column has already discussed how Obama is no more “socialist” than past presidents; this month I talked with MIT professor emeritus and political activist Noam Chomsky about the false belief that the United States operates on traditional capitalist principles such as supply and demand or free trade.
I began by simply asking him what he thought of capitalism. He quickly dismissed this. “The question reminds me of what Gandhi is alleged to have said when he was asked what he thought about Western Civilization. His answer was: ‘It might be a good idea.’ I doubt that capitalism would be a good idea, but it won’t come to the test. The business world would never allow it, just as in the past. They have always demanded a powerful nanny state — for themselves. I don’t think it would be a good idea, even if it didn’t quickly collapse.” Allow me to cover a range of topics that explain the lack of free markets in America.
American interaction with Mexico is a complex subject, but can be summed up as blaming the victim. One example is a situation where President Clinton pressured Mexico into ending shipments of low-price tomatoes into America, costing Mexico $800 million annually, and boosting the sales of Florida farmers. While not an official tariff, this action made clear that free enterprise is opposed if it benefits the wrong people.
The much more grand destruction of the Mexican economy came from the North American Free Trade Agreement, which had little or nothing to do with free trade. Just prior to NAFTA, Mexican economists predicted that Mexico would lose over an eighth of its manufacturing jobs, and even the New York Times figured that “several million Mexicans” would be unemployed by the end of Clinton’s term. Mexico’s weakened economy lead to extreme poverty and vast malnutrition. In 2000, U.S. government subsidies to the corn sector totaled over $10 billion, a figure ten times greater than Mexico’s total annual agricultural budget. These subsidies have lead to accusations of “dumping” which threatens Mexican farms and that country’s food self-sufficiency.
One would be correct to assume that the launch of Operation Gatekeeper in October 1994 was no coincidence. Gatekeeper was set up near San Diego to protect the American border from a tidal wave of Mexican immigrants and smugglers, known as “coyotes” or “polleros” (“chicken farmers”). Within three years, the budget of the Immigration and Naturalization Service (INS) had doubled to 800 million dollars, the number of border guards expanded exponentially, fencing was widely added, and the number of underground sensors increased threefold.
There is a certain ignorance and irony with regard to the immigration problem; those in our government most opposed to Mexican immigration tend to be the same figures who favor the expansion of business. There seems to be no awareness for them that these two are intertwined, with their own policies forcing Mexicans to flee their homes. For those paying attention, the Obama immigration policy does not seem to be far removed from the Clinton policy. They even have the same “border czar” on staff, San Diego native Alan Bersin. Upon Bersin’s appointment by Obama in April 2009, Homeland Security Secretary Janet Napolitano commented that Bersin “will lead the effort to make our borders safe while working to promote commerce and trade.” Coincidence?
NAFTA has been the model for other “free trade” agreements, which tend to be highly protectionist — the very opposite of free enterprise. They have a tendency to enforce intellectual property rights, which have the unfortunate side effect of destroying the agricultural and pharmaceutical industries of poorer countries. When a seed’s genes or a medicine’s chemistry can be owned by a corporation, any attempt to compete is likely to be met with failure, lawsuits, or the forcing of a unaffordable product on to a community they could have provided themselves.
Tariffs in general are a difficult matter. Obama recently placed a modest 35% tariff on Chinese tires, decreasing their importation and increasing the production of American brands. This not only likely helped the American job sector, but moved the production to facilities with better labor and human rights. Yet, another side effect occurred; the unwavering demand for inexpensive tires opened a gateway for another country, Indonesia, to begin exporting their own brands. Chomsky recognizes these problems tariffs create, but also points out that without them, “the scattered population of the US would now be pursuing their comparative advantage in exporting fur and fish, as Adam Smith urged, following essentially the same principles being demanded of the third world today.” There are two or more sides to every issue.
Subsidies, not market forces, keep businesses going for products that we would never buy in a free market without our taxes covering a hidden expense. Lockheed was saved from collapse by a $250 million government bailout in 1971, strongly opposed by Wisconsin Senator William Proxmire. Boeing and Airbus are supported by large-scale public subsidy. Computers, electronics, biotechnology and communications can all claim similar protection. The Internet and World Wide Web were created by government decree, not through private innovation.
When computers were being developed in the 1950s, they would never have survived in the market. The American people paid, through the Department of Defense, for all of the research, development and production, and these same developments were later sold by private companies such as IBM. In essence, we were paying on the market for a product we had already paid to create. Says Chomsky, “The idea is that the public pays the costs, the corporations make the profits. Public subsidy, private profit; that’s what we call free enterprise.” Business lives or dies in America not because we want or need something, but because the government – heavily influenced by the businesses themselves – has named it worthy of living or not.
According to Chomsky, the “US version of state capitalism happens to be particularly cruel”, as evidenced by the push for wages that cannot keep up with inflation, the use of labor in countries where human rights do not matter, the failure to produce a public health care system, and other glaring flaws.
What are the alternatives? Chomsky favors “economic democracy; that is, control over workplaces and other economic institutions by participants and communities”. One such proposal would be like the syndicalists of 1930s Spain, prior to the fascist takeover of General Franco. I suggested moving towards what I call “Howard Dean capitalism”, wherein the profit motive remains but is blunted by strict rules and regulations. Dean compares capitalism to a hockey game, where on the one hand the goal is to score points but at the same time, the players recognize the need for rules to keep things fair. Chomsky was surprisingly sympathetic. “In the foreseeable future, there’s no alternative to your proposal. Even those dedicated to revolution should recognize that.”
He also feels we should “definitely” push for the large stimulus package proposed by economist Paul Krugman, although it’s hopeless with “the current business-run rightwing onslaught”. And yes, that includes President Obama. Will free enterprise prevail? We will likely never see such a thing in our lifetime.
Gavin Schmitt (email@example.com) would like to wish Professor Chomsky a happy 81st birthday on December 7. For more conversations between Gavin and Chomsky, see framingbusiness.net