The crucial role in industrial development of the “visible hand”âplanning and coordination of production, marketing and R&Dâis well-known from the studies of business enterprise by Alfred Chandler over the past 30 years. Summarizing and extending work by Chandler, David Landes, and other historians of development, William Lazonick argues that industrial capitalism has passed through three major phases: the “proprietary capitalism” of 19th century England, with family-owned firms and a substantial degree of market coordination; the “managerial capitalism” of the United States, with “administrative coordination” for planning and organization; and the “collective capitalism” of the Japanese model, which allows still more efficient long-term planning and coordination. In each case, private enterprise has relied extensively on the state power that it largely controls, though in different ways. The TNCs extend these internally coordinated, state-supported systems worldwide.
7
“Import substitution [through state intervention] is about the only way anybody's ever figured out to industrialize,” development economist Lance Taylor observes: “In the long run, there are no laissez-faire transitions to modern economic growth. The state has always intervened to create a capitalist class, and then it has to regulate the capitalist class, and then the state has to worry about being taken over by the capitalist class, but the state has always been there.” Furthermore, state power has regularly been invoked by investors and entrepreneurs to protect them from destructive market forces, to secure resources, markets, and opportunities for investment, and in general to safeguard and extend their profits and power.
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With the conventional pretext gone, Washington sought new ways to maintain the subsidy to advanced industry. One method is foreign arms sales, which also help alleviate the balance-of-payments crisis. As the Cold War came to a definitive end, the Bush Administration created a Center for Defense Trade to stimulate arms sales while proposing government guarantees of up to $1 billion in loans for purchase of US arms. The Defense Security Assistance Agency was reported to have sent more than 900 officers to some 50 countries to promote US weapons sales. Pentagon officials trace the policy to a July 1990 order that Embassy officials should expand their assistance to US arms exporters; the Gulf war was then prominently featured as a sales promotion device. At a Pentagon-industry conference in May 1991, industry officials asked the government to pick up the costs of US military equipment and personnel sent to contractor tradeshows around the world for sales promotion. The Pentagon agreed, reversing a 25-year policy. The first taxpayer-funded display was at the June 1991 Paris Air Show.
Lawrence Korb of the Brookings Institution, formerly Assistant Secretary of Defense in charge of logistics, observed that the promise of arms sales had kept stocks of military producers high despite the end of the Cold War, with arms sales rising from $12 billion in 1989 to almost $40 billion in 1991. Moderate declines in purchases by the US military were more than offset by other arms sales by US companies. Since “President Bush called last May [1991] for restraint in weapons sales to the Middle East,” AP correspondent Barry Schweid reported in early 1992, “the United States has transferred roughly $6 billion in arms to the region,” part of the $19 billion in US weapons sent to the Middle East since Iraq's invasion of Kuwait. From 1989 through 1991, US arms exports to the Third World increased by 138 percent, making the US far and away the leading arms exporter. The sales since May 1991 are “fully consistent with the president's initiative and the guidelines” in his call for restraint, State Department spokesman Richard Boucher announcedâquite accurately, given the actual intent.
Bush Administration calls for restraint were timed for the triumphal celebration of the Gulf war, as part of the PR campaign on the new era of peace and tranquility that we are entering, thanks to the valor of our grand leader. On February 6, 1991, Secretary of State James Baker told the House Foreign Committee that the time had come for concrete steps to stem the flow of armaments to the Middle East, “an area that is already overmilitarized.” On March 6, in his triumphant address to a cheering joint session of Congress, the President announced that control of arms sales would be one of his major postwar goals: “it would be tragic,” he said, “if the nations of the Middle East and Persian Gulf were now, in the wake of war, to embark on a new arms race.”
In recognition of the scale of the tragedy, the Administration, a few days earlier, had provided the Senate Foreign Relations Committee with a confidential listing of planned sales reaching to record levels, more than half for the Middle East; and informed Congress of a $1.6 billion sale of advanced fighter aircraft to Egypt. A week after the speech, Congress was informed of a $760 million deal for Apache helicopters to the United Arab Emirates. The Pentagon then used the Paris Air Show for an unprecedented sales pitch, displaying with pride (and hope) the goods that had so magnificently destroyed a defenseless Third World country. Secretary of Defense Cheney announced new arms transfers to Israel and plans to stockpile $200 million worth of US weapons there; another $7 billion in weapon sales, mainly to the Middle East, was announced in July. The UK followed the same path. China was the only weapons exporter to call for concrete limits on arms sales to the Middle East, a proposal quickly dismissed by the US and its allies.
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Military Keynesian initiatives have not been limited to the taxpayer subsidy (R&D) and a state-guaranteed market. While the US “lags far behind nations like Japan and Germany in per-capita spending on foreign economic aid,” William Hartung points out, about one-third of its foreign aid budget “is devoted to direct grants or loans to foreign governments for the purchase of US military equipment”; other programs are shaped to the same ends.
Such considerations, however, should not obscure the more fundamental role of the Pentagon system (including NASA and DOE) in maintaining high-tech industry generally, just as state intervention plays a crucial role in supporting biotechnology, pharmaceuticals, agribusiness, and most competitive segments of the economy. The Reagan Administration sharply increased protectionist measures along with steps to support failing banks and industries, and generally to assist US corporate power.
By IMF standards, the United States, after a decade of Reaganite folly, is a prime candidate for severe austerity measures. But it is far too powerful to submit to the rules, intended for the weak.
As noted, the World Bank now estimates that protectionist measures of the industrial countriesâkeeping pace with free market bombastâreduce the national income of the South by twice the amount of the official “development assistance.” The latter may help or harm the recipients, but that is incidental. Typically, it is a form of export promotion. One notable example is the Food for Peace program, designed to subsidize US agribusiness and induce others to “become dependent on us for food” (Senator Hubert Humphrey), and to promote the global security network that keeps order in the Third World by requiring that local governments use counterpart funds for armaments (thus also subsidizing US military producers).
A more significant case is the Marshall Plan. Its goal was “to avert âeconomic, social and political' chaos in Europe, contain Communism (meaning not Soviet intervention but the success of the indigenous Communist parties), prevent the collapse of America's export trade, and achieve the goal of multilateralism,” and provide a crucial economic stimulus for “individual initiative and private enterprise both on the Continent and in the United States,” undercutting the fear of “experiments with socialist enterprise and government controls,” which would “jeopardize private enterprise” in the United States as well (Michael Hogan, in the major scholarly study). The Marshall Plan also “set the stage for large amounts of private U.S. direct investment in Europe,” Reagan's Commerce Department observed in 1984, establishing the basis for the modern TNCs, which “prospered and expanded on overseas orders, ...fueled initially by the dollars of the Marshall Plan” and protected from “negative developments” by “the umbrella of American power,”
Business Week
observed in 1975, lamenting that this golden age of state intervention might be fading away. Aid to Israel, Egypt, and Turkey; the leading recipients in recent years, is motivated by their role in maintaining US dominance of the Middle East, with its enormous oil energy reserves.
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So it goes case by case.
The utility of free trade as a weapon against the poor is illustrated by a World Bank study on global warming, designed to “forge a consensus among economists” (of the rich men's club) in advance of the June 1992 Rio conference on global warming,
New York Times
business correspondent Silvia Nasar reported under the headline “Can Capitalism Save the Ozone?” (the implication being: “Yes”). Harvard economist Lawrence Summers, chief economist of the World Bank, explained that the world's environmental problems are largely “the consequence of policies that are misguided on narrow economic grounds,” particularly the policies of the poor countries that “have been practically giving away oil, coal and natural gas to domestic buyers in hopes of fostering industry and keeping living costs low for urban workers” (Nasar). If the poor countries would only have the courage to resist the “extreme pressure to improve the performance of their economies” and to protect their population from starvation, then environmental problems would abate. “Creating free markets in Russia and other poor countries may do more to slow global warming than any measures that rich countries are likely to adopt in the 1990's,” the World Bank concludesâcorrectly, since the rich are hardly likely to pursue policies detrimental to their interests. In the small print, the consensus economists also recognize that “more effective government regulation” reduces pollution, but grinding down the poor has obvious advantages.
The same page of the
Times
business section carries an item on a confidential memo of the World Bank leaked to the
Economist
. Its author is the same Lawrence Summers. He writes: “Just between you and me, shouldn't the World Bank be encouraging
more
migration of the dirty industries to the [Third World]?” This makes good sense, Summers explains: for example, a cancer-producing agent will have larger effects “in a country where people survive to get prostate cancer than in a country where under-5 mortality is 200 per thousand.” Poor countries are “
under
-polluted,” and it is only reasonable to encourage “dirty industries” to move to them. “The economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.” To be sure, there are “arguments against all of these proposals” for exporting pollution to the Third World: “intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.” But these arguments have a fatal flaw: they “could be turned around and used more or less effectively against every Bank proposal for liberalisation.”
“Mr Summers is asking questions that the World Bank would rather ignore,” the
Economist
observes, but “on the economics, his points are hard to answer.” Quite true. We have the choice of taking them to be a
reductio ad absurdum
argument and thus abandoning the ideology, or accepting the conclusions: on grounds of economic rationality, the rich countries should export pollution to the Third World, which should cut back on its “misguided” efforts to promote economic development and protect the population from disaster. That way, capitalism can overcome the environmental crisis. Free market capitalism is, indeed, a wondrous instrument. Surely there should be two Nobel prizes awarded annually, not just one.
Confronted with the memo, Summers said that it was only “intended to provoke debate”âelsewhere, that it was a “sarcastic response” to another World Bank draft. Perhaps the same is true of the World Bank “consensus” study. In fact, it is often hard to determine when the intellectual productions of the experts are intended seriously, or are a perverse form of sarcasm. The huge numbers of people subjected to these doctrines do not have the luxury to ponder this intriguing question.
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Though not intended for us, “free trade does, however, have its uses,” Arthur MacEwan observes in a review of the uniform record of industrial and agricultural development through protectionism and other measures of state intervention: “Highly developed nations can use free trade to extend their power and their control of the world's wealth, and businesses can use it as a weapon against labor. Most important, free trade can limit efforts to redistribute income more equally, undermine progressive social programs, and keep people from democratically controlling their economic lives.” It is hardly surprising that the “New Evangelists” of neoliberal theology have won an overwhelming victory within the doctrinal system. The evidence about successful development and the actual consequences of neoliberal doctrine is dismissed with the contempt that irrelevant nuisance so richly deserves. “The carrying out of [God's] plan...is the History of the world,” Hegel explained: “That which does not accord with it, is negative, worthless existence.”
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3.The Good News
In the post-affluence period, the ideological institutions have dedicated themselves with renewed vigor to convincing the intended victims of the great benefits of the Higher Truths designed for subject peoples. The wonderful news about the marvels of free market economies is broadcast to the people of the South who have been devastated by these doctrines for years, and East Europeans are invited to share in the good fortune as well. Elites in the targeted countries are quite supportive, anticipating that they will benefit, whatever happens to the lesser orders.