On Capitalism, Europe, and the World Bank
On Capitalism, Europe, and the World Bank
Dennis Ott: In a recent interview you quoted Thorstein Veblen, who contrasted â€œsubstantial peopleâ€ and â€œunderlying population.â€ At a shareholderâ€™s meeting of Allianz AG, major shareholder Hans-Martin Buhlmannn expressed the view that there is only one limit to the increase of the dividend: â€œThe inferiors must not be bled so much that they can no longer consume. They must survive as consumers.â€ Is this the guiding principle of our economic system? And if so, is there any substance to the notion of a â€œsocial market economyâ€?
Noam Chomsky: Those are traditional questions in economics. Itâ€™s part of Marxâ€™s reasoning about why thereâ€™s going to be a continuing crisis of capitalism: that owners are going to try to squeeze the work force as much as possible, but they canâ€™t go too far, itâ€™ll be nobody to purchase what they buy. And itâ€™s been dealt with over and over again in one or another way during the history of capitalism; thereâ€™s an inherent problem.
So for example, Henry Ford famously tried to pay his workers a higher wage than the going wage, because partly on this reasoning â€“ he was not a theoretical economist, but partly on the grounds that if he doesnâ€™t pay his workers enough and other people wonâ€™t pay their workers enough, thereâ€™s going to be nobody around to buy his model-T Fords. Actually that issue came to court in the
The courts decided that the management of the corporation has the legal responsibility to maximize the yield of the profit to its stockholders, thatâ€™s its job. The corporations had already been granted the right of persons, and this basically says they have to be a certain type of pathological person, a person that does nothing except try to maximize his own gain â€“ thatâ€™s the legal requirement on a corporation, and thatâ€™s a core principle of Anglo-American corporate law. So when, say, Milton Friedman points out that corporations just have to have one interest in life, maximizing profit and market share, he is legally correct, that is what the law says. The reason the Dodge brothers wanted it was because they wanted to start their own car company, and that ended up being Dodge, Chrysler, Daimler-Chrysler and so on. And that remains a core principle of corporate law.
Now, there were modifying traditional decisions, which said that a corporation is permitted legally â€“ that means, the management is permitted legally â€“ to carry out benevolent activities, like to join the Millennium Fund or something, but only if it improves their humanitarian image and therefore increases their profit. So a drug company can give away cheap drugs to the poor, but as long as the television cameras are on; then itâ€™s still legal. And in fact, thereâ€™s an important decision by an American court, which is quite intriguing. It urges corporations to carry out benevolent activities; it says â€“ and Iâ€™m quoting it now â€“ or else â€œan aroused publicâ€ may figure out what corporations are up to, and take away their privileges â€“ because after all, theyâ€™re just granted by the government, thereâ€™s nothing in the constitution, thereâ€™s no legal basis for them, itâ€™s a radical violation of classical liberal principles and free market principles. Theyâ€™re just granted by powerful institutions, and â€œan aroused publicâ€ might see through it and take it away. So you should have things like the Gleneagles conference once in a while, which is mostly fake, but looks good, and this is basically the court decision.
How does the social market system differ? Thereâ€™s no principle of economics or anything else that says â€“ first of all that even says that corporations should exist, but granting that they exist â€“ that they should be concerned only with the maximization of gain for their stockholders instead of whatâ€™s sometimes called â€œstakeholdersâ€: the community, the work force, everything else. As far as economics is concerned, itâ€™s just another way of running things. And the European system to an extent has stakeholder interest. So, say,
Like during the New Deal period in the
And in fact a lot of whatâ€™s called â€“ ridiculously â€“ â€œconservatismâ€ is just pathological fanaticism, based on maximization of power and wealth in accord with principles that do have a legal basis.
But to get back to your original question, these are just choices. I mean, there are choices as to whether corporations should even exist, or why theyâ€™re even legitimate. Theyâ€™re just tyrannies. Why should tyrannies exist? They are not supposed to exist in the political realm, thereâ€™s no reason why they should exist in the economic realm. But if they do, they could be imagined in all sorts of different ways, and thereâ€™s constant class struggle and pressures that lead to one or another outcome.
I mean the European system developed out of its complex historical background. Iâ€™m sure you know the original welfare states were basically
In a capitalist system, you donâ€™t have any rights. And in fact when modern capitalism developed in the early 19th century â€“ this is post-Adam Smith or anything like that, but Ricardo and Malthus and so on â€“ their principle was pretty simple: you donâ€™t have any rights. The only rights a person has are what they can gain in the labor market. And beyond that, youâ€™ve no right to live, youâ€™ve no right to survive. If you canâ€™t make out on the labor market, go somewhere else. And in fact they could go somewhere else, they could come here and exterminate the population and settle here. But in Europe, you couldnâ€™t do that, so some remnants of the whole feudal system and conservative structures and so on did lead to â€“ after all,
After World War II, it was a very complex situation; the Second World War had a highly radicalizing effect, and the anti-fascist resistance had plenty of prestige. It was pretty radical; it was calling for quite radical democracy â€“ itâ€™s sometimes called communism, but it often had nothing to do with that. Itâ€™s just very radical democracy, workerâ€™s control and so on and so forth, and it was so wide-spread, some kind of settlement had to be made with it.
If anyone were to write an honest history of post-WWII period, the first chapter would be devoted to how the British and American forces liberating
Not long after the
DO: In a commentary on ZNet, John Feffer praised the EU for being â€œmore democratic, more economically fair-minded, more environmentally conscious, and more diplomatically sensitiveâ€ than the U.S. However, many European dissidents criticize the project as an attack on democracy, and as pushing forward militarization and the dismantling of the welfare state in the member countries; in similar spirit, you described it as â€œa central banker system.â€ What is your view â€“ from the American perspective â€“ on the emerging superpower
NC: Thereâ€™s no particular American perspectiveâ€¦ I mean, there is an American elite perspective, which is not mine. The general idea of European unity is a good idea. I think the world should be federalized in some sense, and the erosion of the nation-state system is a good thing. Nation-state systems basically arose in
And the only reason it stopped in 1945 is because of a common realization that you just canâ€™t do it anymore; the next war is going to destroy everything, we developed means of savagery that are too great to be employed. So therefore we have whatâ€™s called a democratic peace by political scientists. Probably the main factor in it is just that the means of destruction are so enormous that powerful states canâ€™t go to war with each other, the war is the end.
And then you get steps towards integration. Some of it is healthy, some of it is unhealthy; itâ€™s a mixture. So, the role of the Central Bank in
Well, thatâ€™s a negative aspect. A positive aspect is that thereâ€™s some erosion of the extremely dangerous nation-state system. In fact, one of the consequences which â€“ in my view at least â€“ is a healthy one is a degree of regionalization throughout much of
So for example, I happened to visit
But all of these things are happening, and some of them are healthy and should be encouraged, others not. I think, say, the French vote on the European constitution was basically a class vote. I mean, working people and peasants could see perfectly well that the constitution was an instrument of class warfare which is going to harm them by imposing neo-liberal conditions and undermining the social market from which they benefit.
There were also other elements; there were racist elements. The opposition in continental Europe to bring in
So itâ€™s a complex web of concerns. In general, I think that moves towards European integration are a good idea. Extending the
A lot of the things that are going on in the world are similar. Like, take the
In fact, itâ€™s not too well known, but the expansion of NATO to the East by
So lots of things are involved in these decisions.
DO: Last yearâ€™s appointment of Paul Wolfowitz as President of the World Bank caused angry reactions all over the world, even some irritations in the Western countries. Is there any detectable change in the World Bank's policy since Wolfowitz has taken office, and what is the signal the Bush administration has sent to the world by appointing this controversial figure to the institution's head?
NC: Unlike most of my friends, I was in favor of that appointment. The reason is pretty simple: I think he can do much less damage in the World Bank than in the Pentagon. So getting him out of the Pentagon almost anywhere is a good decision. In the World Bank, I suppose heâ€™ll be a bureaucrat, like other bureaucrats.
I mean, the only record he has thatâ€™s relevant is his record in
What was his role in
They claim that his task in the World Bank is supposed to be to root out corruption â€“ thatâ€™s the prime task thatâ€™s been assigned to him. Suharto was the most corrupt dictator of the late 20th century. I mean, there is a monitor of corruption, Transparency International, a British-based institution. About two years ago, they ranked regimes in terms of corruption: Suharto was far in the lead, way beyond Mobutu and others way below. And thatâ€™s Wolfowitzâ€™s favorite. So, based on those credentials â€“ delight with corruption, concentration of wealth, tyranny, human-rights violations, destruction of democracy â€“ heâ€™s the candidate for the World Bank.
Will he do any worse than anyone else? My guess is: probably not; heâ€™ll be a bureaucrat like other bureaucrats. So far, thereâ€™s no indication of any shift in World Bank policy that Iâ€™ve seen, and I wouldnâ€™t particularly expect any.
 â€œFight the Power,â€ Noam Chomsky interviewed by Ian Rappel, Socialist Review (online), July 2005.
 Quoted in Arne Daniels, Stefan Schmitz, and Marcus Vogel, â€œWir alle sind Heuschrecken,â€ stern 20/2005, p. 24 (interviewerâ€™s translation).
 John Feffer, â€œ
 Noam Chomsky and David Barsamian, Propaganda and the Public Mind,
Noam Chomsky is Institute Professor and Professor of Linguistics Emeritus at the Massachusetts Institute of Technology. His recent publications on political matters include Hegemony or Survival,
Dennis Ott is a graduate student of linguistics at