Monday, August 23, 2004

The Fraud of Neoliberal Economic Theory

Mark of Benzene 4 quotes from The Sorrows of Empire : Militarism, Secrecy, and the End of the Republic (I bolded key parts):

"Leaving aside the former Soviet Union, the main developed countries -- Britain, the United States, Germany, France, Sweden, Belgium, the Netherlands, Switzerland, Japan, and the East Asian NICs (South Korea, Taiwan, and Singapore) -- all got rich in more or less the same way. Regardless of how they justified their policies, in actual practice they protected their domestic markets using high tariff walls and myriad "nontariff barriers" to trade. Britain, for example, did not accept free trade until the 1840s, long after it had become the world's leading industrialcover power. Between 1790 and 1940, the United States was probably the most highly protected economy on earth. In the 1970s and 1980s, the only country in the world without a single Japanese car in it was South Korea, because it was nurturing its own automobile industry. All these "developing" nations begged, bought, or stole advanced technology from the countries that first pioneered it and then, through reverse engineering and targeted investment, improved on it. They used state power to support and protect efficient capitalists within their own national boundaries who had the potential to become exporters. They poured subsidies into uncompetitive industries in order to substitute domestically produced goods for imports, often at almost any price. Some of them captured overseas markets through imperial conquest and colonialism and then defended these markets from other would-be conquerors, using powerful navies and armies. Even when defeated, like Japan after World War II and the USSR and the ex-Communist countries of Eastern Europe after the Cold War, they used every device and all the artifice in their power to subvert the economic reform programs that American economists applied to try to turn them into textbook capitalist economies. They understood, as the academicians did not, that a premature introduction of American economic norms was much more likely to produce mafia capitalism than development, as it did in Russia.

In short, the few successful economies on earth did exactly the opposite of what the gurus of globalization said they should have done."

Mark concludes, "the empirical evidence shows that protectionism works, at least in the early stages of a nation's economic development. I'd be very interested to know how free-trade enthusiasts -- real or fake -- answer this argument."

Mark, they can't answer it. Basically what is called the "free market" or "globalization" (neoliberal economic doctrine ) is a scam. Chomsky has explained in Profit Over People: Neoliberalism & Global Order that the policy advocates don't live by the same rules they insist on imposing on others. Those that actually impose neoliberal doctrine on other countries think "market discipline is good for you, but not for me, except for temporary advantage." see p34

The point is the US and the other countries that got rich did so by "radically violating approved free market doctrine." It is also clear that countries have been harmed when the neoliberal polices have been imposed upon them. "Neoliberal doctrines, whatever one thinks of them, undermine education and health, increase inequality, and reduce labor's share in income; that much is not seriously in doubt." The successful countries did not play by the same rules that they impose on defenseless countries. Major state intervention, subsidies and protectionism are used to make a countries economically successful. The doctrine is used as a means to open up markets to take advantage of the countries, not as a means to help them. Those that advocate the neoliberal principles don't live by them. The US was successful dramatically because it didn't subject itself to market forces. "Standard economic history recognizes that state intervention has played a central role in economic growth. But its impact is underestimated because of too narrow a focus. To mention one major omission, the industrial revolution relied on cheap cotton, mainly from the United States.cover It was kept cheap and available not by market forces, but by elimination of the indigenous population and slavery. There were of course other cotton producers. Prominent among them was India. Its resources flowed to England, while its own advanced textile industry was destroyed by British protectionism and force. Another case is Egypt, which took steps toward development at the same time as the United States but was blocked by British force, on the quite explicit grounds that Britain would not tolerate independent development in that region. New England, in contrast, was able to follow the path of the mother country, barring cheaper British textiles by very high tariffs as Britain had done to India. Without such measures, half of the emerging textile industry of New England would have been destroyed, economic historians estimate, with large-scale effects on industrial growth generally." p 30 of Profit Over People: Neoliberalism & Global Order

The point is the US along with others, have gotten where they are by using "socialist" policies. But in these cases the State intervention was to be for the powerful special interests. People need to look into this.
Dwayne Andreas has made a fortune with the help of politicians from Hubert Humphrey to Bob Dole. But, he says, their talk of "free markets" is just wind. "People who are not in the Midwest do not understand that this is a socialist country." - Dwayne Andreas of Archer Daniels Midland

Notice that mainstream media doesn't get around to explaining clearly that these polices really don't help countries?
This is one of the grievances of Mohammed Atta. What is called a "free-market capitalist" approach is neoliberal economic practices that take advantage of the people of country and undermine their economic justice.

Liz Jackson: He [Mohammed Atta] was opposed to the adoption of a more free-market capitalist approach that Egypt had taken?

Ralph Bodenstein: Well I mean no, he was opposed to it and he was also pointing to details of it. For instance they were producing….strawberries. They were producing strawberries on the Egyptian fields which were not produced for the Egyptian market and were exported to Europe for instance, while at the same time they would have to import food for their own people, like wheat from the US, which he considered absurd. You know there was the old country being used for producing high class luxury products for foreign markets and then they had to again import nutrition from other countries at a certain price again actually to nutrify their own population. It was completely absurd."
Liz Jackson interviews Ralph Bodenstein who studied urban planning with Mohamed Atta

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