From: harelb@math.cornell.edu (Harel Barzilai)
Subject: Z MAGAZINE: _The Market Versus Democracy_
Followup-To: alt.activism.d
Originator: daemon@pencil.cs.missouri.edu
Organization: ?
Date: Sat, 12 Dec 1992 05:59:41 GMT

[From Edward S Herman's regular column on DoubleSpeak]

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From: Hank Roth <odin@world.std.com> 
Reply-To: Hank Roth <odin@world.std.com> 
Subject: Market Versus Democracy 
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From: Philip Feeley <pfeeley@unixg.ubc.ca> 
<<< via P_news/p.news >>>> 
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       =======================================================
        T H E   M A R K E T   V E R S U S   D E M O C R A C Y
       =======================================================
        by Edward S. Herman, Z Magazine, Nov. '92, p.29-31 


        There is poetic justice  in  the  fact that  George Bush seems
likely to be  brought down by  a recession, or "contained depression,"
that just   won't  go away.   His failure   is  partly a    result  of
incompetence,  lack of imagination,  and  an  ideological  aversion to
using government as a problem solver.  But it is also a product of the
immobilization of traditional macro-policy by prior Reagan actions and
by the development of the market itself.  The huge Reagan  tax cuts of
1981 had the dual purpose of redistributing  income upward and forcing
down government outlays for ordinary citizens.  But the huge tax cuts,
in   conjunction with the    automatic growth   of  non- discretionary
spending, also produced a so-called "structural"  deficit, which tends
to grow  over time in  the absence of further  expenditure reductions.
It was part of the Reagan plan that the rising deficits would  make it
difficult for the  "liberals" to raise outlays  for social programs in
the future, as these would increase deficits even further.  One of the
costs  of this strategy, however, has  been the inability   to use tax
cuts or expenditure  increases to  help  get  the economy  out   of  a
recession.  Bush is   hoist    by  the  Reaganite   plan, which     is
inadvertently striking down a Republican voodoo economics loyalist.

        He is also hoist by the workings of the  more efficient, free,
global  capital   market.    The  wealthy   financial    institutions,
transnational corporations, and  individuals  who dominate  the global
market fear  the U.S.   deficit, and policies   enlarging the  deficit
would therefore cause  a fall in the value  of the  dollar and capital
flight, along with a rise in interest rates.  Carter in the late 1970s
and  Mitterand  in   1981-82 were quickly brought  to  heel by capital
outflows and market pressures on exchange and interest  rates.  Reagan
was  treated more kindly,  but this was almost  surely  an exceptional
case  and cannot be expected to  apply where large budget deficits are
not associated with   a prior very   low debt  to income ratio   *and*
policies   that  transfer  wealth directly  into   corporate and elite
pockets.

        The power of the global capital market has grown steadily, and
is now  of commanding importance.    This was displayed  in the recent
inability of  Great  Britain,  with the support  of  powerful European
allies, to protect the  value of  the pound  where market  opinion was
that the pound  was over-  valued and must fall.  In  the wake of that
market victory, which cost the European central banks  an estimated $6
billion, spokespersons for the  financial community stated frankly and
complacently that "governments have lost the power to control capital,
and  they probably have  lost  it  forever" (Daniel   Roche of  Morgan
Stanley).  Salomon Broghers strategist David Shulman pointed  out that
the very  success of   western financial leaders  in opening   up  the
world's  economies  "has limited    their control  over  events....The
day-to-day flows can swamp their ability to control things."

        Keynesian  macro-economists   have  been slow  to   absorb the
significance  of  the new  market  hegemony over policy.   Thus,   the
economist  Robert  Eisner explains that   the U.S. deficit  is not too
large and  can  be  increased without damage, but  he ignores the fact
that if  the market  has  a different  opinion  the deficit  cannot be
increased without devastating effects.  An early 1992 statement by 100
liberal economists  urging a   $50  billion  increase   in  government
investment spending as  a  necessary  counter- recession measure   was
hedged by recognition that there must be assurances to the market that
the deficit  will be  temporary and will  be reduced poste- haste; but
there is  an element  of unrealistic  optimism that   the market  will
accept these assurances.

        The economists,  Bush, and Clinton are  all  flummoxed because
the only way to prevent a capital market policy veto  is to opt out of
the world market.   At a  minimum capital and exchange  rate controls,
and possibly price and wage controls as well, would be needed to allow
governments  to  pursue independent  macro-economic  policies.   These
controls would  be very difficult  to enforce, with capital markets so
interlinked and transnational  corporations spread  across the  globe.
Such a  policy transformation is  also unlikely in the   absence of an
economic    breakdown and  radical  political  change, given  that the
requisite controls would  run counter to the  whole  thrust of western
policy and ideology  over the  past several decades.  The IMF  imposes
open markets, balanced budgets, and anti-inflation  policies on all of
its    clients, including the  lucky Poles   and   Russians.  It  even
admonishes the United States and Germany to get their budgets in order
and stop  setting such bad  examples to their  inferiors.  In a sense,
then, the policy makers of  the national economies  are hoist by their
ideological  commitments  and  institutional frankenstein progeny--the
global capital market.  The liberal economists  don't like to confront
the  fact that the free  market  institutional arrangements which they
encouraged    so enthusiastically have   now  undermined discretionary
policy itself.

=======================================================================
T H E   N E W   A N T I - D E M O C R A T I C   I N S T I T U T I O N S
=======================================================================

        It has always been difficult for national governments to carry
out expansionary or  redistributive  policies that  the  large  monied
interests opposed; the market has always been able to exact penalties.
But the dominant interests have still felt the need  for institutional
supplements to  the market to  keep  recalcitrants in line.   This has
been the function of the IMF and World Bank,  which have been in place
almost a half century.  These institutions  have always constituted an
undemocratic form of supra-government through which the leading powers
and major  contributors could define  proper policy  and impose  it on
needy national borrowers.  The Third  World debt crisis   of the  last
decade  or  so   has  increased  the  power  of    these  undemocratic
institutions.  Given the collapse of the Soviet  bloc, and the general
agreement of the great capitalist powers and the major participants in
the new global market on  proper Third  World  policy,  the IMF's  and
World  Bank's conditional   loan offerings to  Third World governments
must be accepted--there is No Other Option in the Free World.

        Market  and   IMF-World Bank discipline   still   not offering
sufficient  control, the dominant  powers have established or proposed
additional institutional structures like the European Commission (EC),
the Maastricht  regime,  the  General Agreement  on Trade  and Tariffs
(GATT), and   the   North American Free  Trade  Agreement (NAFTA),  to
further the power of capital to  override  the challenge of democratic
government  and pressures from the general  population.   All are sold
under the symbols of free trade and improved competitiveness, and they
do reduce trade barriers  to a degree, even  if selectively.  But they
also contain protectionist, imperialist, and antidemocratic components
of great importance.

        The   design  of these  new  institutional arrangements  is to
remove decision-making powers from local  and national legislatures in
favor of impersonal market  forces  and/or supranational bureaucracies
remote from popular control.  Put otherwise, they  are all systems for
regional or global deregulation.   NAFTA  would indirectly  deregulate
wages, working conditions, and environmental  controls in the affected
areas   by allowing  capital    to  move easily   into the deregulated
environment  of  Mexico.  Maastricht imposes national debt, inflation,
and exchange rate limits on all members, which reflect the "stability"
conditions preferred by the Bundesbank and global financial interests.
Limits on unemployment,   hunger,   and  poverty are  not included  in
Maastricht's fundamental agreements.  GATT rules, including both those
in place  and now on   the table,   hold forth the   possibility  that
regulations to  protect basic  food supplies,  reduce smoking, provide
cheap  medicines,  limit  pesticide  use,  and  maintain environmental
standards, can be overruled as unfair trade practices.

        These international agreements  were  all negotiated in secret
talks  among  executive  branch leaders,   in  close consultation with
business representatives.  Legislatures  have been  onlookers, and the
general citizenry of the affected countries have been  mere targets of
propaganda,  although  sometimes  allowed to ratify  complex and vague
agreements under intense pressure and propaganda  form above.  The new
institutions then have considerable freedom to make decisions that may
override national and local democratic  demands.  Subject to executive
department and powerful business interest lobbying, they are a perfect
vehicle  for  overriding    the  parochial  interests  of   democratic
majorities in  favor of the  Global Interest (which carries  us beyond
the mere National Interest).

	  =================================================
	  T H E   I M P E R I A L I S T   C O M P O N E N T
	  =================================================

        The imperialist component of the  new international agreements
and institutional arrangements is closely related to their sponsorship
and purpose.  They  were instituted and  are  or will be controlled by
the dominant nations and were designed to serve them and the interests
of the global capital market.  Free trade favors the stronger, and the
EC, Maastricht, and NAFTA will  make it  easier for the more  powerful
countries  to dominate the  lesser members.   Mexico, for example,  is
effectively surrendering  its   sovereignty, and  Canada,  Spain,  and
Portugal  have  lost a great  deal   of theirs.   Their  leaders  have
succumbed to the  interests  of the greater  powers  and transnational
capital because of   economic  weakness,  intense  pressure,   and the
absence of practicable alternatives.   By agreeing  to accept  foreign
hegemony, the leaders  of the economically  weaker powers  are honored
and aided by  their foreign masters,  get accolades from  the imperial
media, and  receive generous credits from  western banks, the IMF  and
World Bank.  These cover over the  loss of sovereignty and the ongoing
or imminent Puerto-Rico-ization of their countries.   Not only are the
terms of the new agreements and their  institutional management in the
hands of the dominant powers, these  agreements are mainly enforceable
against weak  countries; the  great  powers can flaunt them with ease.
The United  States, for example, blithely ignored  GATT rules of  fair
trade with boycotts   and trade restrictions  against  Cuba,  Vietnam,
Nicaragua, Angola,  Iran, etc., in  the name  of  national security or
antiterrorism.  The  United States also   launched an export expansion
program  in   1985,  to  force open  foreign   markets by  threats  of
retaliation,  again in  blatant violation  of  GATT rules (see below).
But as with the boycotts, nobody can do  anything about actions of the
Godfather, who is the self- appointed global "referee" (Gephardt).

	 ===================================================
	 T H E   P R O T E C T O N I S T   C O M P O N E N T
	 ===================================================


        NAFTA  will reduce tariff  barriers between the United States,
Mexico  and Canada, but it will   increase the barriers  to  Asian and
European  producers.  These will  have to pa  higher tariffs than U.S.
producers to sell in Mexico or Canada, and even their producing plants
in North America  will   have to meet   an increasingly severe  "local
content" rule, carefully negotiated by  U.S. trade representatives  in
the interest  of a  protection-minded U.S.  auto  industry as  well as
other businesses.  In short, there is a dualism  in "free trade" NAFTA
(as well as in EC and  other regional trading bloc arrangements), with
freer trade within the bloc, but  a very purposeful protection against
outsiders.

        Although  always claiming devotion  to  free trade, the United
States has been remarkably opportunistic in its actual trade policies.
This  country was instrumental  in   protecting agriculture from  GATT
liberalization in  the 1950s, and  it played an important role  in the
exclusion of textiles from  free trade rules, initiating the emergence
of the highly   protectionist Multi-Fiber Agreement (MFA),  still   in
place.  James Bovard points out in  his The Fair  Trade Fraud that the
U.S. textile regulations  "shackle  imports of cotton socks  from Peru
while  permitting  unlimited import of  designer  dresses from Paris."
The   United States  recently   imposed a  42  percent  import duty on
Bangladesh  for allegedly "dumping" shop   towels.  Bovard  also notes
that the MFA mainly affects (and raises) the prices of clothing bought
by  the less   affluent.   He proposes  that the  MFA   be renamed "An
International Agreement for the Perpetuation of Poverty."

        The  United States  has  also carried  the  use  of quotas and
"Voluntary  Restraint    Agreements"   (VRAs)  and "Voluntary   Import
Expansions" (VIEs)  to new heights  in recent years.  Bovard says that
as tariffs have  fallen, quotas have taken their  place and constitute
the  "covert action of  international trade."  The  United  States has
imposed quotas on ice cream, beef, veal, machine tools, hair nets, leg
warmers, cloth  eye glass cases, handspun tapestry,  balls of  cotton,
etc.  The VRAs and VIEs  are "voluntary" only  in an Orwellian  sense.
In the Nixon years, after  months of  bullying and threats that caused
Japan to capitulate  to U.S.  demands, White  House   Press  Secretary
Ziegler  announced: "President  Nixon  wants  to express  his personal
appreciation for the cooperation and understanding of  our negotiating
partners   and his belief   that these  voluntary  agreements lay  the
groundwork for even    more positive contributions    toward  friendly
cooperation in the future."

        Reagan,  who   used  "voluntary" agreements  liberally, always
referred  to them as  part of  the fight for  the "liberalization"  of
trade.  George Bush extended steel import  quotas in  1989 as  part of
what he  called a "Steel  Trade Liberalization Program," one  of whose
ultimate goals was "to end government interference  in global trade in
steel."  The doublespeak in  this  field  is virtually without  limit,
based  on  the blend    of policy   opportunism and  a  self-righteous
inability to recognize any departure from  high principle.  AS another
sample from the large stock,  Rep. John Dingell  declared in 1987: "We
are   not dealing with  protectionism   in  this  legislation.  We are
dealing with salvation."

	       =======================================
	       G U N B O A T   T R A D E   P O L I C Y
	       =======================================


        Because the Godfather is powerful and arrogant, he can use the
rules when they serve and ignore them at pleasure, always with an aura
of self-righteousness.  When the cards dealt are  not to his taste, he
simply asserts that the deck  has been stacked  and declares himself a
victim of "unfair trade."  This is a  tradition of beleaguered elites.
Jagdish Bhagwati   points out that  competitive   and   business cycle
pressures on Britain in the 1870s and 1880s led to the organization of
a "National   Fair   Trade  League"  and  a "Reciprocity    Fair Trade
Association" to fight against "unfair trade."

        With the growth of the huge U.S. trade  deficits of the 1980s,
congress and the executive moved to a more aggressive stance  in trade
policy.  James Bovard speaks   of  Gunboat  Economics in  his    book;
Bhagwati's  and Hugh Patrick's  book on  this development  is entitled
Aggressive Unilateralism.  One important  feature of the recent period
has  been the  unwillingness  of the   U.S.   political leadership  to
recognize that  the main causes   of  the surge  in  size of the trade
deficits were the Reaganite fiscal policies and budget deficits, which
increased U.S.  interest rates as well as  the value  of   the dollar,
bought in foreign money to finance the deficit, increased imports, and
badly damaged  the export industries.   Reagan  was  proud  of the new
"strength"  of the "superdollar," which  was   rendering U.S.  exports
noncompetitive.  The trade deficit couldn't be our fault;  it  must be
the fault of foreigners; they must  be engaging in  dumping  and other
forms of unfair trade.

        So instead of addressing  real causes, the  opportunistic U.S.
congress and leadership chose to attack the Japanese and other alleged
unfair traders.  In 1988, Section 301 of  the Trade and  Tariff Act of
1974   was revised   to   make it  mandatory   that   the  U.S.  Trade
Representative put up periodic  lists of unfair  trading  nations, who
would have to shape up or be  subject to obligatory retaliation.  They
could be deemed unfair for not affording "fair  and equitable...market
opportunities" to  U.S.  firms, for other "unreasonable" practices, or
for the unfair  practice of  inadequately protecting workers wages and
rights.   These vague words  were undefined,  some were only tenuously
related to  trade,  and their meanings  were left to the discretion of
U.S. officials.  The hypocrisy involved in listing the maltreatment of
workers as a possible basis of  trade unfairness is breathtaking.  The
U.S.   government actively  and enthusiastically promoted  the rule of
numerous leaders like Marcos, Pinochet, and  Brazil's Castillo Branco,
who  crushed  labor and   peasant organizations,  and whose   U.S. aid
increased in direct relation to their curtailment of labor rights (see
Chomsky and Herman, The Washington Connection and Third World Fascism,
Table 2, p. 45).  Within the past month a CBS  "60 Minutes" feature on
U.S. AID programs  demonstrated that this  U.S.  government agency  is
still helping to curb trade unions in U.S. Third  World client states.
We might also  ask whether the  Reaganite  policies of strike-breaking
(Patco)  and deliberately weakening  trade unions by a  wide  range of
policies shouldn't provide  the basis for an EC   complaint  of unfair
trade practices.

        This new  law infuriated  other  countries, as  it   makes the
United States the law maker, prosecutor, judge and  jury,  in cases of
unilaterally declared "trade crimes,"  and  it circumvents or violates
GATT rules  and  procedures.  In    contrast  with  GATT    negotiated
settlements, which  involve reciprocity,   the   301  process extracts
unilateral concessions by  threat.  It is also  entirely one-sided  in
the   sense   that  the criteria    used  against foreigners  are  not
symmetrically applicable  to  U.S. actions.    Bovard has  many  pages
juxtaposing  actions  of  other   countries condemned under   301 with
similar U.S.   acts.  Believe it or not,  Reagan  stated in  1988 that
Americans "don't pass   any trade law  that  we wouldn't want  another
country to pass in just the  same  form"!  Beat that one for chutzpah,
or self-deception, or both!

        The United States also has used 301  selectively and to pursue
a hidden agenda.  It  retaliated early  against  Brazil and India, who
happened to be opposing U.S. positions  in  GATT; and it has not often
used 301  against the EC,  which  defends itself aggressively.  Japan,
and weak countries, who defend themselves less forcefully, are pursued
with vigor.

        Unilateral aggressiveness under  301  represents  a shift from
traditional protectionism to  a policy  of trying  to pry open foreign
markets by  threatening retaliation--which  has   been called  "export
protectionism."  It often involves retaliation for trade policies that
are in accord with  GATT rules, such  as the Brazilian  policy applied
for many decades  of   not recognizing  pharmaceutical  patent claims.
This makes the retaliatory actions GATT  violations.  The rewriting of
trade rules is sometimes defended by U.S.  officials and apologists on
the grounds of the ineffectiveness  of GATT and U.S.   impatience with
the difficulty in getting  rules changed.  But  ignoring GATT rules on
such an excuse is plain vigilantism.  Sometimes it  is argued that the
new U.S.   aggressive unilateralism    should be  tolerated,   because
otherwise the congress will lose patience with multilateralism and the
GATT system and abandon it entirely.  Thus, the bully or "madman" must
be placated to prevent his doing something more violent and illegal.

        In one of the  most remarkable manifestations of the arrogance
of power, U.S. officials applying the vague  language of Sec. 301 have
suggested that foreign countries' failures  to change  their retailing
structures, cultural preferences for home  goods and for saving rather
than consumption, and allegedly  inadequate  government allocations of
resources to infrastructure, which make it hard for U.S. firms to sell
goods there, are forms of "unfair trade" that should be rectified. The
so-called Structural  Impediments Initiative   is  designed   to  help
straighten out these foreigners, getting them to promise to mend their
cultural ways  in order not  to be unfair  traders.  The Japanese have
allowed themselves to be bullied into discussing some of these issues,
and even promising to change their  distributive  machinery and to try
harder to spend more  on infrastructure and get  their people  to  buy
more U.S. goods.
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