Some Truths and Myths About
Free Market Rhetoric

Letter from Lexington January 7, 1994

Dear LOOT,

Hardly a day passes without acclaim for the exciting new idea of the New World Order: free market capitalism that will liberate the energies of active and creative people, for the benefit of all. Euphoria peaked as Clinton savored his NAFTA triumph at the Asia-Pacific summit in Seattle, where he expounded his "grand vision for Asia," bringing leaders together "to preach the gospel of open markets and to secure America's foothold in the world's fastest growing economic community." This "may be the biggest rethinking of American policy toward Asia" since World War II, David Sanger observed. Clinton outlined the "new vision" before a "cheering throng... inside a giant airplane hangar at the Boeing Company," "a model for companies across America" with its "booming Asian business" -- and its plans for "multimillion-dollar job-creating investments outside the United States on a scale that would terrify NAFTA's opponents."¹

Unmentioned is another fact: Boeing is also the model for radical state intervention to shield private profit from market discipline. It would not be America's leading exporter, nor probably even exist, were it not for a huge public subsidy funneled through the Pentagon and NASA, institutions in large part designed to serve that function for high tech industry generally. Clinton's gospel, then, is that the taxpayer should provide massive welfare payments to investors and their agents, safely protected within their totalitarian institutions from interference by public or workforce, pursuing profit and market share as they choose, by "job-creating investments" abroad if that suits their interests.

"China alone now buys one of every six of [Boeing's] planes," Sanger continued. And lofty rhetoric aside, Clinton's one achievement at the summit was to open the door to more exports to China, expected to be "the magic elixir that can cure many of the ills of the American economy" (Apple). Clinton arranged for sales of supercomputers and nuclear power generators; the manufacturers (Cray, GE) are also leading beneficiaries of the state-subsidized private profit system, and the items sold can be used for nuclear weapons and missiles, Pentagon officials and other experts observed. A problem, perhaps, because of a ban on such exports imposed last August "after American intelligence agencies produced conclusive proof" that China was engaged in missile proliferation, while also continuing "nuclear cooperation" with Iran, probably weapons production. But the problem was only superficial: Secretary of State Warren Christopher informed China that Washington would "interpret an American law governing the export of high technology to China to allow the export of two of the seven sophisticated American-made satellites banned by sanctions imposed on China in August, senior Administration officials said," adding that "there was no linkage" between the supercomputer and nuclear generator sales and the issue of proliferation.²

These decisions illustrate the "very different notion of national security" to which Clinton "is drawn...with the Communist threat having receded," reported by Thomas Friedman in an adjacent column: "promoting free trade and stemming missile proliferation."

There was also "no linkage" to human rights, another slight problem, if only because of Clinton's impassioned campaign rhetoric denouncing his predecessor for ignoring China's horrendous record in order to enhance corporate profits (called "jobs," in PC parlance). Just as Clinton's new export initiative was announced with much fanfare, a fire killed 81 workers in a factory with doors and windows locked "to keep people inside the factory during working hours," a spokesman said.³ Appended to Friedman's lead story "Clinton Preaches Open Markets at Summit" the next day was a brief notice of "deadly accidents involving fire and poisonous gas" that had killed 100 workers "in booming Guandong Province," widely hailed as a free market model.

Though there was "no linkage" to human rights issues or proliferation, it would be unfair to suggest that the New Democrats have no qualms about China's bad behavior. "Clinton administration officials are considering imposing trade sanctions against China," The Wall Street Journal reported a month later. The reason is China's "resolve to withstand U.S. pressure" to cut its textile exports. "Washington is angry over what it claims are more than $2 billion of Chinese-made textiles and apparel shipped illegally to the U.S. each year through third countries."⁴

December 31 was the deadline for Chinese submission to U.S. protectionist demands, and also "for China to meet promises made to the U.S. in 1992 to open up its market." After China failed to live up to these paired obligations, "the Clinton administration is set to slash China's textile quotas by as much as a third while also lifting a ban on the sale of two communication satellites to Beijing," the Journal reports further, describing this as the "good-cop, bad-cop style": the "bad-cop" will punish China for its brazen defiance of U.S. barriers to free trade, and the "good-cop" will sell them satellites (despite the ban) to show that the U.S. is "ready to reward China if it makes demonstrable progress" -- also, incidentally, rewarding GM's Hughes Aircraft unit, which is looking forward to $1 billion in future business⁵

Careful students of free trade gospel will have no difficulty seeing how all this hangs together.

The punishment was duly administered, Thomas Friedman reported in the lead story the next day. U.S. trade representative Mickey Kantor announced harsher quotas that should cost China over $1 billion, "to insure that China abides by its commitments to follow fair, nondiscriminatory trade practices" and to show the Administration's determination "to stand up for U.S. jobs" as demanded by the textile manufacturers' lobby, noted for its single-minded dedication to "jobs."⁶

Protectionist measures had been greatly enhanced under Reagan, who, in his impassioned pursuit of free trade, had "granted more import relief to U.S. industry than any of his predecessors in more than half a century," Secretary of Treasury James Baker proudly informed the business community. Not enough for the New Democrats, however. As Clintonites announced their National Export Strategy, which is to surpass the "less coordinated efforts" of Reagan and Bush to undermine free trade, including new GATT-violating measures, Secretary of Treasury Lloyd Bentsen explained: "I'm tired of a level playing field. We should tilt the playing field for U.S. businesses."⁷

The contours of the inspiring new gospel come into still sharper focus.

Though market discipline is not for us, the lesser breeds are to adhere rigorously to its strictures. The promise and problems are illustrated by three December 22 stories.

In the Christian Science Monitor, Sheila Tefft reported from Beijing under the heading "Growing Labor Unrest Roils Foreign Businesses in China." "Industrial tragedies and labor disputes are stirring tensions between Chinese workers and their foreign bosses," she reports, giving two examples: the November fire that killed 81 women trapped "behind barred windows and blocked doorways," and another a few weeks later that killed 60 workers in a Taiwanese-owned textile mill. More than 11,000 Chinese workers were killed in industrial accidents in the first eight months of 1993, double the 1992 rate, the Labor Ministry reported. "Chinese officials and analysts say the accidents stem from abysmal working conditions, which, combined with long hours, inadequate pay, and even physical beatings, are stirring unprecedented labor unrest among China's booming foreign joint ventures." "The tensions reveal the great gap between competitive foreign capitalists lured by cheap Chinese labor and workers weaned on socialist job security and the safety net of cradle-to-grave benefits." Their minds poisoned by socialist indoctrination, workers fail to comprehend that after their rescue by the Free World, they are to be "beaten for producing poor quality goods, fired for dozing on the job during long work hours" and other such misdeeds, and locked into their factories to be burned to death.

In a New York Times report from Shanghai, Patrick Tyler ruminates on the problem from a different perspective. The city "is racing to recapture the glory of capitalism that flourished here 60 years ago" when it "reached the zenith of power and allure," before it "crumbled under the scorn and persecution of Communism." In those glory days, "expatriate merchants imported European architecture and society, living in mansions behind high walls in the concession areas they were granted" by China's rulers -- the "grants" assisted now and then by foreign guns. "The masses of Chinese outside these walls suffered the instability of warlord rule, gang rivalry and political struggle between the underground Communist movement and the corrupt Nationalist Government" -- though they remained untouched, it seems, by "Western imperialism" (cited in horror quotes, if at all). "Old Shanghai had opium dens, cabarets imitating Europe's best, pink gin, cigars," and for "the masses of Chinese," indescribable misery and torment. The city then sank into its "long decline" with Japan's conquest and the Communist takeover, which "drained the city of its foreign population and investment" and "deflated what capitalist spirit remained." While the spirit is now reviving, it is not certain that the grandeur of yore can be regained: "Whether Shanghai can rival its position of old is a much contested question," Tyler observes.

Progress in that direction is reported by Joseph Kahn in the Wall Street Journal. He describes government projects to "usher out hundreds of thousands" of people from Shanghai to "satellite cities created by diktat to make way for office buildings, hotels and luxury apartments," so that Shanghai will "become a city for the rich and the powerful people," an expelled shopkeeper complains. The representative for a foreign developer disagrees: "The people are very happy to move out," he says, much like those who enjoy "urban renewal" in advanced capitalist countries. Shanghai may never quite recapture the "glory of capitalism," but perhaps it can at least come to look more like New York and Chicago.

There are additional signs of progress on that front. "Murder, robbery and other violent crimes are sharply on the rise in China," the official press reported, up 17.5% in 1993.⁸

Russia has moved more rapidly towards the "glory of capitalism." Under Western-prescribed "shock therapy," the population starves with "poverty now visible in Russia in ways that it never was before," while more Mercedes 600 SEL's are sold at $130,000 each than in New York, Celestine Bohlen reports. Purchasers are the new rich (many of them the old Nomenklatura), who are working for foreign companies or selling off Russia's resources. Others belong to the criminal syndicates springing up as "crime and business have become interwoven in Russia to an alarming degree." "Crime has risen dramatically...as the controls of the totalitarian state have fallen away and before the certainties of a law-abiding society have emerged to take their place," though "Moscow is still lagging behind American levels of murder and violence," with only about half the murder rate of New York, where capitalist democracy implanted "the certainties of a law-abiding society" long ago. "Russian society has begun to break down into social layers, with people at the top who are extraordinarily rich and people at the bottom who are poor," Bohlen adds; oddly, just the pattern that prevails where Western guidance has proceeded without interruption, and increasingly, in the rich industrial societies themselves.⁹

Could there be some lessons here?

The great hope in the East is Poland, where the free fall of the economy since 1989 finally bottomed out. It resembles other Third World success stories, not only in the divide between great wealth and mass misery and in providing supercheap labor to allow Western investors to drive down wages and social services at home, but down to fine detail. Poland's foreign expert was Harvard's Jeffrey Sachs, now plying his wares in Russia. He earned his fame by helping to orchestrate an economic miracle in Bolivia, a macroeconomic success and human disaster; Bolivians suffer the social reality, the West applauds the statistics and the opportunities for enrichment, unconcerned that the statistical successes are based in large measure on sharply increased production of illegal drugs, which may have become the major export earner. Sachs then moved on to Poland, which now provides Western Europe with its highest-quality illegal drugs, including 20% of the amphetamines confiscated in 1991, up from 6% in the late 1980s. Poland may also be the biggest transshipment point for narcotics from Central America, Afghanistan, and the Southeast Asian golden triangle, though "drug trafficking has also increased sharply throughout the region," Raymond Bonner reports. Costa Rica's Ambassador to Poland was arrested at the Warsaw airport with almost $1 million worth of pure heroin, and "a staggering 1.2 tons of cocaine was seized in St. Petersburg," from Colombia, where cartels are hiring Polish couriers to smuggle cocaine to the West. The former Soviet regions of Central Asia are expected to become major drug producers down the road.¹⁰

This standard pattern under Western tutelage, perhaps the most persuasive example of maximization of utility and efficient use of resources under free market conditions, should gain more respect than it does.

Meanwhile market discipline retains its traditional dual aspect: rigid for the victims, quite different for the victors. GM purchased an auto plant near Warsaw, but "on the under-the-table condition that the Polish government provide it with 30 percent tariff protection," Alice Amsden observes. Similarly, "VW is capitalizing on low labor costs" to build cars in the Czech Republic for export to the West, but "the tortuous journey towards free markets" includes "a very attractive deal" in which VW was able to reap the profits and "to leave the Government with the debts and with enduring problems like how to clean up pollution," while "stiff tariffs" guarantee the profits of the foreign investors. Daimler-Benz recently worked out a similar "attractive deal" with Alabama, on the Third World model, The Wall Street Journal noted.¹¹

The former Soviet domains still fall short of Western standards for Third World dependencies, however. Some of the distance yet to be travelled was revealed in a Canadian Broadcasting Company investigation, The Body Parts Business, "a gruesome litany of depredation," reporting murder of children and the poor to extract organs, "eyeballs being removed from living skulls by medical pirates armed only with coffee spoons," and other such entrepreneurial achievements.¹² Such practices, long reported in Latin America and perhaps now spreading to Russia, have recently been acknowledged by one of the most prized U.S. creations, the government of El Salvador, where the procurator for the defense of children reported that the "big trade in children in El Salvador" involves not only kidnapping for export, but also their use "for pornographic videos, for organ transplants, for adoption and for prostitution."¹³

The dead hand of socialist values is impeding progress beyond countries like China that are now reforming. At the Pan-American games in Puerto Rico, extraordinary efforts were made to lure Cuban athletes, but though "ardently courted," almost all "spurned the pleas to jump ship" despite "the desperate Cuban economy and the potential for million-dollar major-league contracts."¹⁴ Under the heading "Defects in the System?," referring to the fact that some Cubans did succumb to the courting, Steve Fainaru reports in more detail on the ardent efforts and their general failure. Boxer Felix Savon was offered a $20 million contract, but refused, saying that "money is not the essential thing for a human being." "Savon is crazy," one of the defectors said: "He's been reading too much Communist propaganda." The most painful tragedy was the failure of any baseball players to defect, though scouts from every major league team were dangling huge contracts in front of their eyes. "There's so much wasted talent over there," a scout for the Dodgers complained: "It really makes me mad when I think about how these guys could be making millions" instead of returning to the country that they say they love: "But there's nothing we can do. [Castro] is the one who has the last word," his mystic presence forcing the athletes to return to the "economic despair" at home.¹⁵

Applebome reviews the "struggle for daily survival in Cuba" while maintaining a stony silence on the U.S. role, the norm for respectable commentary. Thus, reviewing a book on Castro, Mark Uhlig scornfully derides the "failing regime" of the "the Ego That Devoured Cuba," the villain who "has no one else to blame for its deepening crisis," surely not terror and economic warfare from Washington and Miami, which merit not a word in this typical display of moral cowardice.¹⁶ Fainaru departed from good taste, at least mentioning the embargo.

The "deepening crisis" for which Castro bears sole responsibility is driving many women to prostitution, as in the days before the capitalist spirit was deflated. But whether Havana "can rival its position of old" under the "glory of capitalism" is also "a much contested question," now that women have been "schooled in that socialist certainty that she must bow to no one."¹⁷ As the gospel reaches Cuba, that malady too may pass.

For a deeper understanding of the gospel we should lift our eyes to the higher reaches of thought. Some help is offered in an address to a January 1993 conference of the American Academy of Arts and Sciences by the distinguished philosopher, anthropologist, and historian Ernest Gellner.¹⁸ He explains that "humankind in general is dominated by three types of motivations: honor, interest, and salvation." Honor was displaced by interest after the scientific revolution and economic growth under capitalism; perhaps that explains the "craziness" of backward Cubans, still in the primitive grip of honor. The third option is "salvationism" -- in its modern form, "secular salvationism (read: Marxism)": "the idea of running an industrial society through the establishment of righteousness on earth," the goal to which Stalin dedicated his every waking moment. That option was repudiated in 1989, signalling the end of Marxism, which inevitably leads to totalitarianism, just as "modern industrial totalitarianism must be Marxist." What remains is "a kind of International of Consumerist Unbelievers," who understand that public policies to change the near-perfect social arrangements geared to private profit and accumulation would lead straight to the Gulag.

At last all is clear.

Sincerely,

Noam Chomsky

Footnotes

1 R.W. Apple, Thomas Friedman, Sanger NYT, Nov. 21, 1993.

2 Elaine Sciolino, NYT, Nov. 19.

3 Reuters, NYT, Nov. 19.

4 Lawrence Zuckerman and Asra Nomani, WSJ, Dec. 30, 1993.

5 Zuckerman, WSJ, Jan. 4; Bob Davis and Robert Greenberger, WSJ, Jan. 6, 1994.

6 NYT, Jan. 7.

7 Keith Bradsher, NYT, Sept. 28; Michael Frisby, WSJ, Sept. 29, 30) -- as "we" have been doing for 2 centuries.

8 AP, Boston Globe, Dec. 29.

9 NYT, July 31, Aug. 16, Nov. 13, 1993.

10 Rensselaer Lee and Scott Macdonald, Foreign Policy, Spring 1993; Bonner, NYT, Dec. 30, 1993.

11 Amsden, American Prospect, Spring 1993; Richard Stevenson, "In a Czech Plant, VW Shows How to Succeed in the East," NYT, June 22, 1993; Helene Cooper and Glenn Ruffenbach, WSJ, Sept. 30, 1993.

12 John Haslett Cuff, Globe & Mail (Toronto), Nov. 20, 1993.

13 Hugh O'Shaughnessy, Observer (London), Sept. 26, 1993.

14 Peter Applebome, "Passing Up Big Money and Plea to Leave Cuba," NYT, Dec. 3, 1993.

15 BG, Dec. 5, 1993.

16 Uhlig, NYT Book Review, Sept. 19, 1993.

17 Tom Mashberg, BG, Jan. 25 1993.

18 Laura Reed and Carl Kaysen, eds., Emerging Norms of Justified Intervention, Cambridge 1993.

The preceeding letter was published in Lies of Our Times (LOOT), February 1994, and it's reprinted here with their permission.

According to its publishers, Lies of Our Times is "a magazine of media criticism. "Our Times" are the times we live in but they are also the words of the New York Times, the most cited news medium in the United States, our paper of record. Our "Lies" are more than just literal falsehoods; they encompass subjects that have been ignored, hypocrisies, misleading emphases, and hidden premises - all of the biases which systematically shape reporting."