Chomsky latest from U.of Calgary



A speech delivered by Noam Chomsky, Sept. 22, 1998, at the University of
Calgary

Renowned scholar and political activist Noam Chomsky spoke Sept. 22 to a
crowd of about 3,400 at the Jack Simpson Gymnasium on the University of
Calgary campus. The following was transcribed from a cassette recording of
the event, by Greg Harris of the U of C's Communications Office. Chomsky,
a master of the subordinate clause, often manages to keep several ideas
aloft in the same sentence; although highly interesting, his parenthetic
speaking style can occasionally challenge the transcriber's skill in
deploying punctuation. False starts, ums, wells, and you knows have
usually been edited out. As always, use at your own risk. The transcriber
did his best but makes no claims to 100-per-cent accuracy. If you find
this useful (or, alternatively, if you see any egregious errors), email
[log in to unmask]

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"WHOSE WORLD ORDER: CONFLICTING VISIONS"

Chomsky: I want to at least mention quite a number of different topics.
The mentions are ineveitably going to be far too brief; every one of them
deserves intensive thought and discussion and they're not at all
comprehensive. But what I want to kind of suggest, if I can do it, is that
these are some of the threads that out to be woven together to give some
kind of coherent picture of where we stand today, what kinds of problems
we have to face and where we might find at least a standpoint to begin to
think about them in a constructive way.

I want to go back a half a century - I think we live very much within an
era that was more or less created then. There are occassional moments in
human affairs where power relations make it possible to establish social
and economic arrangements that actually merit the term world order. Merit
might not be the right word. It's not necessarily a phrase that should be
invested with positive connotations, as history amply reveals. One of the
most dramatic and in fact most easily timed of those moments was about 50
years ago in the aftermath of the most devasting single catastophe in
human history which took place right in the heartland of western
civilization. At the end of the war, the United States, of course, had an
overwhelming share of global wealth and power and, perfectly naturally,
dominant forces within the state corporate nexus in the United States
planned to use that power to organize the world as much as they could in
accord with their own conceptions of their interests and those they
represented.

Of course, there were conflicting visions both at home and abroad and they
had to be contained, or better, rolled back, to borrow some cold war
rhetoric. That was done with varying degrees of success, but in fact the
basic conflicts persist and for elementary reasons - they persist because
they are about fundamental values; they are about freedom and justice and
human dignity and human rights in a world of inequality - great inequalty
and great concentration of power (the real world, that is); these values
quite commonly constitute an arena of conflict between centres of power
and most of the rest. A good deal of history revolves around these
conflicts in the last half century; this is no exception and I'm sure the
next will not be either.

Well at the onset of the current era, about a half century ago, the
framers of the world order of that day, the new world order of that day,
they faced these challenges everywhere. At home, what had to be contained,
maybe rolled back, were the very strong commitments of a large majority of
the population to social democratic ideals that the business world rightly
perceived as a grave threat to their traditional dominance. They were the
hazard-facing industrialists in the rising political power of the masses,
as the National Association of Manufacturers put it in their internal
literature. It was the crisis of democracy that was posed by a population
that sought to enter the political arena, as frightened liberal
internaltionalist elites phrased essentially the same problem after the
ferment of the 1960s, expressing particular concern about what they called
the institutions responsible for indoctrination of the young, which were
failing to carry out their disciplining role properly.

Similar problems were faced throughout the industrial world. They were
enhanced by the prestige and appeal of the anti-fascist resistance, which
was a complex affair, but often had radical democratic thrusts. They were
enhanced further by the discrediting of the traditional conservative
order, which had been linked closely to the fascist system. Reinstating
that traditional order in its essentials was a primary task of the early
post-war years and it was achieved to a large extent often in not very
pretty ways. As in the United States, this project continues. It's taken
new forms in the last 25 years, as here and as throughout the world, under
the guise of neo-liberalism or economic rationalism or free market
doctrine, which is permeated with a good deal of deceit, hypocrisy and
maybe outright fraud. All of these issues are strongly very, very much
alive right now - here, Europe and elsewhere.

In the Third World, the south - the developing world as its
euphemistically called - similar problems were compounded by strong
pressures, uncontrollable pressures, to overturn the imperial systems, and
the legacy of dependancy and subordination that they had left. The basic
issues were very much the same in most of the world but they were revealed
with particular clarity, with starkest clarity, in Latin America for the
simple reason that the United States faced no challenge there, no outside
challenge, so you see the principles operating in their purest form. There
was a real challenge, but it was from the domestic population - no outside
challenge.

As In Europe, these conflicts in Latin America came to a head even before
the war was over, in the case of Latin America very dramatically in
February 1945 at a hemispheric conference (Canada was not part of the
Western hemisphere in those days, remember, so Western hemisphere means
United States to the south. I don't think Canada attended the conference,
but maybe I'm mistaken.) The hemispheric conference was supposed to
organize affairs for the hemisphere. We know from U.S. internal records
now that the Uinited States was deeply concerned with what the State
Department called the "philosophy of the new nationalism" that was
spreading all over Latin America and indeed all over the world, quoting
State Department documents. The philosphy of the new nationalism, which
embraced policies designed to bring about a broader distribution of wealth
and to raise the standard of living of the masses on the principle that
the first beneficiaries of the country's resources are the people of that
country. That heresy is called radical nationalism or economic nationalism
and of course it has to be stamped out - the first beneficiaries of a
country's resources are U.S. investors, their counterparts elsewhere, and
local elites who are associated with them.

At the hemispheric conference the United States - given the power
relations of course the U.S. prevailed - and it imposed what was called an
economic charter for the Americas which called for an end to economic
nationalism in all its forms. In the cruel and bloody history of the
half-century that followed, these remained central themes and they will
continue to. They are very much alive today; now they are often framed
differently in the context of the investor rights agreements that are
mislabeled free trade agreements: NAFTA, the forthcoming, maybe,
Multilateral Agreement on Investments, MAI, and what's called
globalization, which is a specific form of international integration (not
by any means the only necessary form); it's the specific form that's
crafted primarily to serve the interests of its designers, again not
terribly surprisingly, transnational corporations, financial institutions
and the bureaucracies that they control and of course the major states
that are part of the system.

The most critical part of the Third World was then and I think remains
today the Middle East, for the very simple reason that it's the locus of
the world's major energy supplies for as far ahead as anybody can see.
Hence, it was considered to be, and is still considered to be, of
particular importance that the first beneficiaries of that wealth are not
the people of the region; rather the resources must be under effective
U.S. control, they must be accessible to the industrial world on terms
that the United States leadership can see is appropriate and, crucially,
the huge profits that are generated must flow primarily to the United
States, secondarily to its British junior partner, to borrow the term used
by the British Foreign Office rather ruefully to describe its new role in
the post Second World War era. This is done in various ways. In part it's
recycled by local managers who have to be dependent on the global rulers,
a long story which continues.

Well quite naturally these arrangements breed continual conflict. Internal
U.S. documents describe them in the conventional way. The conflicts are
conflicts with radical nationalism, radical Arab nationalism that
threatens U.S. dominance. For the public it's put a little differently,
varying over time. These days it's international terrorism, or the clash
of civilization; tomorrow it will be something new, but it's basically the
same ones all the time. The question is, who's going to be the first
beneficiaries of the region's resources.

These conflicts are likely to become more virulent and ominous in the
coming years, at least if the analysis and projection of quite a number of
geologists are anywhere near accurate. A reasonably broad consensus
(there's plenty of room for disagreement and uncertainty) but a reasonably
broad consensus was captured in the headline of a major review article on
the topic, in the journal Science - the journal of the American
Association of the Advancement of Science a couple of weeks ago. The
headline was, "The next oil crisis looms large and perhaps close." It may
be a little hard to believe in a period when gasoline prices are at an
historic low, but there are many who regard that as an aberration, a
short-term aberration. The crisis that many people fear is that the rate
of discovery has been declining for some time after having risen steadily
since the earliest discovery of oil, and the Gulf region, the Arabian
peninsula and the Persian Gulf region, that has by now virtually regained
the share of energy production that it had in the early 1970s, (You'll
recall that that was sufficient to bring the era of super-cheap energy to
a sudden end; it happened to be a temporary end but a foretaste of what
lies ahead.) basically back to that share, meaning that degree of power,
and that share is expected to increase, in part because world consumption
is increasing very rapidly and most of the known energy reserves by a big
measure are in that region. And it's also speculated, not apparently
implausibly, that something like the 50-per-cent mark of exploitable
capacity may not be too far away, maybe within the next few decades. All
of this combines to suggest to policy makers and others that the need to
control that region is going to become increasingly important and that's
going to mean very likely increasing confrontations with radical
nationalism.

As a kind of a sidelight to this, I think that, very likely, the latest
terrorist exchange in the last few weeks might well be seen in this
context. I'm referring to the terrorist bombings of the U.S. embassies in
Africa, allegedly by groups who are opposed to U.S. domination of the
major oil producers, and the U.S. missile attacks on Sudan and
Afghanistan. One might ask, why those targets? Well, like the bombings of
the embassies in Africa, the U.S. selected targets that were vulnerable,
not the ones to which the messages were aimed, in either case. The message
for the missile attacks may well have been directed elsewhere, in this
case very likely to Riyadh and Teheran. There have been recent steps
towards rapprochement between Saudi Arabia and Iran, historic enemies, and
that's not an appealing prospect for U.S. global managers. It raises
fears, which have been lingering for a long time, of regional groupings
that will get out of control in the strategically most important part of
the world, which holds the greatest material prize in world history -
that's quoting U.S. assessments from the late '40s, which still prevail.

The U.S. missile attacks have been criticized (you've read plenty of
criticisms of them) as being counterproductive (elite opinion has held
that) because of their effects on the Sudan and Afghanistan. Well, it's a
pragmatic judgment, apparently. The same opinion seems to be largely
unconcerned by the fact that, effective or not, there were war crimes -
that's now partially conceded in the case of Sudan. However, just keeping
to the pragmatic judgment, it might be evaluated in the light of a secret
1995 study of the U.S. Strategic Command, called Essentials of Post-Cold
War Deterrence, which was released recently under the Freedom of
Information Act. It's an interesting document. It resurrects Nixon's
madman theory, as it was called. It says that the United States should
portray itself as irrational and vindictive with leadership elements out
of control and it should exploit the nuclear arsenal for that purpose.
This madman posture can be beneficial to creating and reinforcing fears
and doubts among adversaries, real or potential. In this case perhaps the
big players in the region, Saudi Arabia and Iran, whose potential
rapprochement, which has been going on now for almost a year, is doubtless
a very frightening prospect in Washington. Well, we don't have documentary
evidence, so that's speculation. But I think it's not unreasonable.

Well there's a lot to say about all these topics (and these are things I'm
just mentioning) and related aspects of the post-war global system that I
haven't even mentioned. But let me just leave it as something to think
about and turn to something related: namely, the institutional structures,
the institutional framework that was designed for world order 50 years
ago, and how it's fared, and what it looks like today.

The institutional structure had three basic components. One was an
international political order - that's articulated in the United Nations
Charter. A second part was concerned with human rights and the norms for
the behavior of governments towards their citizens - that's the Universal
Declaration of Human Rights. (Its 50th anniversary will be celebrated, or
maybe mourned, in December 1998.) The third component was an international
economic order. That's the Bretton Woods system, as it's called, designed
by the United States and Great Britain, the global manager and the junior
partner. I want to talk mostly about the third, but a few words about the
first two.

The first, the international political order, (essentially the UN Charter)
that's based on a very simple, straightforward principle, and elaborated
in various ways. The principle is that the threat or use of force in
international affairs is disallowed, unacceptable, has to be barred
totally, with two exceptions. One exception is when the threat or use of
force is specifically authorized by the Security Council after the
Security Council determines that peaceful means have failed. The second is
the famous Article 51, which says that nothing in this Charter abrogates
the right of self-defence against armed attack until the Security Council
acts. That's a rather narrow and specific notion. It means, for example,
that if Cuban armies invade the United States, the United States is
supposed to notify the Security Council and then, until the Security
Council has a chance to do something about this terrible threat, it's
allowed to defend itself in anyway that's necessary. Whether that example
is hypothetical or not depends on what you want to believe. The Cuban
threat to the United States was recently downgraded by the Pentagon, so we
don't have to tremble in total fear anymore. That elicited a good deal of
anger in Congress and the conclusion was rejected by the White House,
which invoked Cuba's threat to the national security and existence of the
United States, just a few months ago, in the course of rejecting World
Trade Organization jurisdiction when the European Union protested before
the WTO gross U.S. violations of trade agreements and international law
that had already been condemned by just about every international agency,
including even the normally quite compliant Organization of American
States. So, depending on where you sit, that example was real or
hypothetical, but whatever it is, that's the exception permitted by the UN
Charter by the framework of political order and received international
law. And those are the only exceptions to the threat or use of force.

Now of course there is no enforcement mechanism - this has to be by
acceptance. There is in fact an enforcement mechanism, namely the great
powers, and to be realistic exactly one of them, namely the United States,
so that's the enforcement mechanism. But that suffices to show that the
whole system is null and void because the United States rejects the
principles out of hand. It rejects them both in practice and in fact in
doctrine. There's no need to waste time on the practice in the past half
century; the bombing of a pharmaceutical plant in the Sudan a couple of
weeks ago is a recent illustration but one that's completely trivial in
historical context, though I suppose that terrorist destruction of half of
the medical supplies and fertilizers in the United States might be taken a
shade more seriously.

Whatever the practice may be, and you can know that perfectly well, or
should, what's interesting about the recent years is that official
doctrine expresses with great clarity and precision the utter contempt for
the principles of world order that are of course grandly proclaimed when
they serve some power interest. This has been going on since the Reagan
years and it is a change, a doctrinal change; you might say it's a change
toward greater honesty. Anyhow, it's a change. Since the Reagan years the
United States has officially reinterpreted the Article 51, the crucial
article, to justify its repeated reliance on force. It has held that
Article 51, I'm quoting actually, authorizes self-defence against future
attack. Article 51 permits the United States to defend its interests. This
became even more ludicrous in the Clinton years. It was all formulated
rather straightforwardly by Ambassador Albright, now Secretary of State,
when she informed the UN Security Council, which was then refusing to go
along with some U.S. demands about Iraqshe informed the Security Council
that the United States will act "multilaterally when we can, unilaterally
when we must in an area important for our interests." That means
unconstrained by the world court which had already been dismissed as
irrelevant 10 years earlier by the most solemn treaty obligations, the
foundations of world order, and so on. I stress that the only innovation
in all of this in the past 15 years is that contempt for these high
principles is now openly proclaimed, with the acquiescence and the
applause of the educated classes - that's a change. But it serves to
indicate where the foundations of world order stand after 50 years. In
brief, the United Nations and its Charter are fine when they serve as an
instrument of power, otherwise the decisions and the condemnations are not
even worth reporting, and they are not reported, let alone obeying.

Incidentally, you've been following I'm sure the recent debate about
founding an international criminal court on war crimes and as you know the
United States, essentially alone refused to go along with that. U.S.
opposition is effectively a veto when the General Assembly votes 151 to 1
on something (or 2 if the U.S. picks up a client state). That amounts to a
veto, just for straight power reasons - nothing obscure about it. And this
effectively vetoes the criminal court on war crimes. The official argument
that was given by the Clinton administration and Congress was that an
international tribunal might carry out frivolous prosecution of U.S.
soldiers engaged in peacekeeping operations. That's not very credible,
especially if you look at the U.S. role; the U.S. is mostly disqualified
from peacekeeping operations - that's literally true. The reason is
because it has a very unusual, maybe unique, military doctrine and that is
that no military forces are permitted to come under any threat; so if
there is any threat at all, they are supposed to react with overwhelming
force and that means that in any situation that involves civilians, you
know, anything short of total war, the U.S. military simply can't be
deployed and in fact isn't if you look at the peacekeeping operations. So
that's not a plausible argument, but there are other ones that are
plausible and are barely beneath the surface, and that is the very likely
concern that an independent judicial inquiry, if it existed, might, as it
should, move up the chain of command and that's going to lead it very soon
to pretty high places, including the White House. That would be true
whether the issue is Indochina or Central America and Panama or Somalia or
other exploits.

Well, again, a lot to say about that, but let's turn to the second element
of world order: the Universal Declaration of Human rights. Doubtless we
will all hear much rhetoric in the coming months about the universality of
the high principles that are proclaimed and about the challenge of
relativity that's posed by various bad guys around the world. Those
charges will be accurate enough, unfortunately, and probably understated,
but you are unlikely to hear about a different topic: namely, U.S.
adherence to the universal declaration both in action and in doctrine.
Well again, I'll put aside action and just keep to the doctrine. If you
look at the doctrine you find out quickly that the United States is a
leader of the relativist camp. One is unlikely to see headlines about
that, but it's pretty clear - the United States dismisses one fundamental
component of the universal declaration completely as having no status:
that's the component that's concerned with the socio-economic provisions,
which have the same status as any others in the universal declaration, but
the U.S. doesn't agree. They are a letter to Santa Claus, as Ambassador
Jean Kirkpatrick put it. They are preposterous and a dangerous incitement,
as they were described by U.S. Ambassador Morris Abrams. He was in fact
testifying at part of the discussion by the UN Commission on Human Rights,
which was considering a Declaration on the Right of Development which very
closely paraphrased the socio-economic conditions of the universal
declaration and which, incidentally, the U.S. proceeded to veto.

Well again there's more to say, but let's proceed to the third point: the
international economic order - the Bretton Woods system, as it's called,
and its institutions. That's all over the front pages now with the fears
of a global meltdown that might affect privileged folk like us, as well as
just the usual victims, so therefore it's news. Well, the Bretton Woods
system had two basic principles: set up institutions like the World Bank
and the IMF, which are called the Bretton Wood institutions - but it had
two basic principles which one has to keep in mind, they're important. One
principle was to liberalize trade; a goal was to liberalize trade, more
free trade. The second principle had to do with capital flow and it was
the opposite. The goal was to regulate capital flow and control it, keep
fixed exchange rates, keep capital controls and so on. That was agreed by
both the U.S. and the British negotiators - the U.S. main negotiator was
Harry Dexter White, the British, John Maynard Keynes - and it expressed a
very common conception at the time, which has a lot of plausibility. It's
built into the rules of the IMF. There is now an effort, the U.S. is
leading an effort, to try to change those rules, but up until now they
have been breached many times. The rules of the IMF still authorize
countries to regulate capital flow and they prohibit the IMF from giving
credits to cover capital flight. Many of you who follow these affairs all
know how well that one's been observed, but anyhow it is a rule.

There was thinking behind this, there were reasons. The reasons were in
part theory, what some international economists call an incompatibility
thesis, which in fact remains the guiding principle of UNCTAD, the main UN
Conference on Trade and Development. The theory is that capital flight, so
short-term speculative flows which lead to exchange rate fluctuations and
so on, that they are going to undermine trade and investment, so they are
inconsistent with one another. You can't liberalize both; and recent
experience is, I think, consistent with that assumption. The second reason
was not a theory, it was a truism. The truism is that free flow of capital
definitely undermines democracy in the welfare state, which was at that
time far too popular to ignore (it's the mid-20th century). The basic
point (I'm essentially paraphrasing White and Keynes here) is that capital
controls allow governments to carry out monetary and tax policies to
sustain unemployment incomes, social programs, maintain public goods,
without fear of capital flight, which will punish this irrational behavior
(irrational in that it's only for the benefit of people, not for the
benefit of investors and speculators, and it will be punished by capital
flight for obvious reasons). That's the essential point - free flow of
capital quickly creates what some international economists call a virtual
senate of financial capital which will impose its own social policies by
the threat of capital flight, which leads to higher interest rates,
economic slowdown, budget cuts for health and education, recession, maybe
collapse. It's a powerful weapon.

All of that was articulated quite explicitly in essentially in the words
I've repeated at the time by the U.S.-U.K. negotiators, and it's not
particularly controversial. (In fact not controversial at all, then or
now. If you think it through it's kind of obvious, as it was to them.) And
all of that is quite important to keep in mind in looking at the current
period because there's a challenge to that in the last 25 years and we see
the consequences. (And it's now being re-evaluated because the
consequences are even hitting the rich people and that's where we are
now.) Well, the Bretton Woods system as formulated, that is efforts to
liberalize trade and regulate capital, that was in place to a substantial
degree through the first half of this period, the first quarter century
after it was established. That's what's sometimes called the golden age of
post-war state capitalism - high rates of growth of the economy, of
productivity, expansion of the social contract right through the '50s and
'60s. The system was dismantled from the early 1970s. Richard Nixon
unilaterally abrogated its basic principles; other major financial centres
joined in. By the 1980s capital controls were mostly gone in the rich
countries and the smaller economies like South Korea were simply compelled
to drop them. That, incidentally, is widely regarded now as a major factor
in its recent collapse, alongside of quite extreme market failures in the
private sector throughout East and Southeast Asia and of also the west,
which was involved in crazed lending.

I should add at this point that, in the light of the recent economic
crisis in East Asia, the more serious analysts recognize and insist that
the East Asian economic miracle was quite real. (I'm distinguishing East
Asia from Southeast Asia here - they're quite different.) So one of the
most important and influential, and I think intelligent, Joseph Stieglitz,
who is now the chief economist of the World Bank (he was formerly head of
council of economic advisors here, and it plays a very important role) he
emphasizes in recent World Bank publications and elsewhere that this is
post-crisis - that the East Asian economic miracle was not only real but
it was in his words an amazing achievement historically without precedent
and, furthermore, he points out, based on very significant departures from
the official doctrines of the so-called Washington consensus and that it
should last, it should thrive, in fact, unless it is destroyed by
irrational markets as it could be. Stieglitz points out - remember this is
the chief economist of the World Bank I'm talking about in a World Bank
publication - that in East Asia the basis for the amazing achievements and
the miracle, which has no precedent, is that governments took major
responsibility for the promotion of economic growth, abandoning the
religion that markets know best, and intervening to enhance technology
transfer, relative equality, education, health, along with (he doesn't
stress this but he should have) industrial planning and coordination, and
in fact strict capital controls until they were forced to relinquish them
in the last few years. Stieglitz also mentions, though he doesn't go into
it, that the rich countries, every one of them - from England on through
the United States up to the present, every single one of them had followed
a somewhat similar path, actually far more so than the World Bank has yet
acknowledged. Another big topic I can't go into, but an interesting one
and again worth keeping in mind.

Well what has happened since the Bretton Woods system essentially
collapsed in the early 1970s? It did end the golden age of post-war state
capitalism. Just focusing on the rich countries, primarily the United
states and Britain, although it happens to others in various degrees in an
integrated economy, over the rich countries as a whole, the growth of the
economy and the growth of productivity have slowed very markedly.
Actually, contrary to what you read, trade also slowed, if you look
closely, in the United States specifically and England. Incomes stagnated
or declined throughout this period for the great majority of the
population; working conditions deteriorated, social services have been
significantly cut, infrastructure is in serious danger with very little
required public spending, the welfare state has significantly eroded. (End
of side one)

There has also been a closely correlated, dramatic increase in
incarceration. It's closely correlated because a large part of the society
is just becoming superfluous for wealth formation. In an uncivilized
society you send out the death squads to kill them; in a civilized society
you throw them in jail. Since 1980, when this system really took shape,
when it was in place, at that time incarceration rates in the United
States were roughly like that of other industrial countries, kind of at
the high end but not off the scale, and so crime rates in the United
States are not unusually high, contrary to what you read. Again they're
sort of toward the high end but not unusual, with one exception: namely,
killing with guns. But that's a separate matter that has to do with laws,
cultural patterns and so on, it doesn't have anything to do with crime.
And that remains the case. In fact, crime rates have declined since 1980,
but the incarceration has gone way up . I think it's a direct reflection
of the inequality and the need for social control. It tripled in the 1980s
and it's been rising very fast through the 1990s; it's now five to 10
times as high as other industrial societies. In fact the U.S. is world
champion in imprisoning its population, at least among countries where
there is any minimally reliable statistics. If you take the prison
population into account, that adds another two per cent to the
unemployment rate, which places the U.S. squarely in the middle of the
European level. Actually, even without that it's not at the bottom,
believe it or not, it's about 30 per cent. Of course, you have to decide
what you're talking about; if you count in prison labor, which is not
trivial, and very good for folks like Boeing Aircraft and AT & T and
others (a terrific work force), if you count them in, then of course the
unemployment figures change again. Anyhow these two parallel developments
have been going on and I think have integrated.

Throughout the same period profits have soared, particularly in the 1990s.
The current jitters on Wall Street have to do with the concern that there
may be an end to what for the last couple of years the business press has
been calling this stupendous and dazzling and extraordinary growth of
profits. They've run out of adjectives and they may now be worried that
the facts are ending too. There has been an astronomical increase in
capital flows, a huge increase, mostly very short term. About 80 per cent
now is estimated to have a round trip -- it goes out and back, in a period
of a week or less, often hours or even minutes. That means it's virtually
unrelated to the real economy, to trade and investment. In fact, current
estimates are that about five per cent of the roughly trillion and a
half-dollar per day capital flow is related to the real economy. The rest
is speculative. If you go back to 1970, the figures were essentially
reversed. It was about 90 per cent of a much smaller sum was related to
the real economy and maybe 10 per cent was speculative. It's also based
very heavily on extensive borrowing; it's highly leveraged, in the jargon,
and that's a factor that accelerates something which is often also ...
oops whoever owns these microphones is going to have a problem. Ignore
them? OK. Happy to ignore microphones all the time.

This high borrowing, this highly leveraged character of investment, which
is something new, incidentally (a lot of things are old but this is new),
that's accelerating the irrationality of financial markets. They've become
much more volatile and unpredictable; there have been wildly fluctuating
exchange rates related to speculative flows and there have been increasing
financial crises. The IMF recently did a study of the period 1980-1995, a
15-year period, and it found that about 80 per cent of its roughly 180
members had had one or more banking crises, ranging from significant to
quite serious. Again, that wouldn't have surprised Keynes and White or any
of the framers of Bretton Woods, or the economists' thinking behind them.

In the same period, again in conformity with their thinking, has been an
assault, an attack on free markets, a sustained assault on free markets,
to quote the head of economic research of the World Trade Organization, in
a major technical study. That was led by the Reaganites. They were talking
free markets for the poor but doing something else for the rich. This
analyst, Patrick Low, estimates the effect of Reaganite protectionist
measures at about three times as high as those of the other industrial
countries which were bad enough. Well again, that's what was expected.
During the Reagan years, lots of lofty rhetoric but protection was
virtually doubled. The public subsidy, which is another violation of free
trade principle, was increased, bailouts increased, both for domestic
banks and international banks. In the Untied States - it's happened
throughout the world but mostly in the United States - In the United
states the goal was to somehow overcome very serious management failures
that were leading to a decline of U.S. industry and were a matter of great
concern at the time. Those of you who read the business press remember a
lot of discussion and concern about the need to reindustrialize America.
American industry was collapsing, mostly because of management failures.
The Pentagon was called in to fill its traditional role to do something
about this problem. (That's actually a role that goes back to the early
19th century before there was a pentagon.) The pentagon was called in to
develop a program under Carter which was greatly extended under Reagan, to
design what was called the factory of the future, based on lean production
and automation and other developments in which the American management had
fallen way behind and then to hand it over to industry as a gift. The
purpose was to save central components of the industrial system from
mainly Japanese competition, which was wiping it out, and to place them in
a position to dominate the emerging technologies and markets of the next
era. The Internet and information technology, generally, are rather
dramatic examples of this but not the only one.

All of this continues under Clinton, alongside the free market rhetoric.
Radical interference with free trade is standard when convenient. And it's
across the spectrum. So Mexican tomatoes were effectively barred from the
U.S. market, as was openly stated, because U.S. consumers prefer them and
they were undercutting Florida growers, sort of at the other end of the
trading spectrum. High tariffs were a couple of months ago introduced on
Japanese supercomputers to protect U.S. manufacturers like Cray
Enterprises, which is called private enterprise I guess because the
profits are privatized. (The markets are public and much of the technology
and funding is public as well but the profits are private.)

If you want to see the real meaning of free trade and neo-liberalism in
its cruelest form, just take a look at the relation between the richest
and the poorest country of the hemisphere - the United States and Haiti.
Haiti was forced to liberalize radically as a condition on terminating the
terror and torture of the coup (?) regime, which was pretty awful - I was
there at the time, but you didn't have to be there to know it. The cost of
liberalization is quite severe. One effect is that Haitian rice
production, one of their few potential economic strengths has been
seriously harmed and virtually destroyed because it is now competing with
US agri-business, which is crazy to begin with, and even crazier when you
recognize that 40 per cent of its profits come from government subsidies,
thanks to Reaganite contributions to free trade. Recently, the United
States has started dumping chicken parts in Haiti, undermining another.
The reason is that American consumers don't like dark meat, so the
producers, these big factory farms, have a lot of extra dark meat, so why
not dump it on Haiti? We're to wipe out one of the few hopeful enterprises
that had developed there. They can't dump it on Canada because Canada has
huge tariffs to block that kind of behavior. Haitian tariffs are forced to
be, I think, roughly one-fiftieth of what Canada's are, same with the
Dominican Republic and Jamaica, but Haiti has to liberalize.

Just within the last few days, U.S. steel manufacturers have been
demanding that the U.S. government force Japan and Russia to cut back
steel imports into the United States; they are particularly worried about
Japan because it's high quality steel, which is undercutting them. And
probably they will. The U.S. has instruments to do that. Super 301 it's
called: you threaten to close off the market to a country and if they
don't do it you tell them. And of course Haiti, since it's a free and
equal world, Haiti has the same instrument: they could object to U.S.
dumping of chicken parts by threatening to close off Haitian markets to
U.S. exporters, just as the U.S. can do, so it's all free and equal. Well,
that's free trade.

Without going on with that, for the Third World generally, given the
relations of force, the post-Bretton Woods era, the last 25 years, have
been pretty much a disaster. Some have escaped, mainly by not playing by
the rules the way the rich countries have done. Russia is a dramatic
example since it returned itself to the traditional Third World role about
10 years ago. Well, there's a standard picture about all of this for the
United States. The standard picture is that the United States has a fairy
tale economy, that Americans are smug and prosperous in the happy glow of
the American boom, there's a fat and happy America enjoying one of the
healthiest booms in American history - these are all quotes from front
page headlines in the New York times, fairly typical. They all give an
example, the same example, up until this summer at least; the example was
the stock market, and it indeed is a fairy tale, especially for the top
one per cent of households who own about half the stock and other assets,
and to some extent for the 10 per cent who own most of the rest. Well,
what about the next 10 per cent, you know the 80th to the 90th percentile,
right below the top ten per cent? What about them? Well for them their net
worth has declined in the 1990s for the reason that debt, which is
enormous, has increased faster than the growth of stock and other assets.
And it just gets worse as you go down. Eighty per cent of families work a
lot more hours just to keep from losing even more ground; they have not
yet recovered the levels of 1989, let alone (that's comparable stage of
the last business cycle), let alone 1973 - that's when the new economy
really began to take hold.

All of this is without precedent in American history. It's never happened
before. It's the first time that during an economic recovery that these
were the consequences: you can't even catch up to where you began for a
large majority of the population. As far as economic growth is concerned
during this fairy tale boom, it's roughly at the average for the OECD, the
rich countries; as far as growth of per capita income is concerned, it's
below the OECD average - it's actually roughly like the anemic '70s and
'80s and nowhere near the golden age. But it's a fairy tale for some and
those are the ones who tell us about it. Those are the Americans who are
smug and happy, the rest are some other thing.

The reason for the fairy tale is in fact frankly explained, for example by
Allan Greenspan, fed chair. He attributes it to what he calls significant
wage restraint and greater worker insecurity. The Clinton administration
in its economic report attributes it to salutary changes in labour market
institutions, which is a delicate way of saying the same thing. The
business world agrees. If you look at the business press, they point out
that workers are too intimidated to seek some share in the good times.
Just this week Business Week reported studies showing that 60 per cent of
workers are very concerned about job security for working people and 30
per cent are somewhat concerned. When 90 per cent of the work force are
insecure, that helps keep profits up and inflation low enough to please
the financial institutions, so it's a fairy tale economy. Well, there are
a lot of reasons for this. One reason is simply the threat of job transfer
if people raise their heads; another is the destruction of unions, which
really took off during the Reagan years by straight corporate crime which
was authorized by the Reagan administration -- again the business press
has been clear and frank about this.

These are specific social and economic policies designed to keep things
this way; that includes the investor rights agreements. That's a long
story in itself, as you should know, or if you don't you should quickly
find out. The OECD, the rich countries, are seeking to ram through the
Multilateral Agreement on Investments, the sort of super investor rights
agreement, in October. (You ought to know it because Canada has been
unique in that there has been substantial public opposition to this.)
They're planning to do it in October, in secret if they can; they've been
trying to do it in secret for a long time. They failed last April and that
caused near panic in business circles - it's worth looking at. The
Financial Times in London, sort of the world's premier business daily, had
an agonized article after they failed about what they called the horde of
vigilantes who descended on the OECD countries and the corporate world
were totally helpless in the face of this massive assault by Maude Barlow
and such, and they had to collapse. You really have to read it to get a
picture of the panic. It also quoted trade diplomats who warned that
unless this crisis of democracy is overcome, I'm quoting now, it may
become harder to do deals behind closed doors and submit them for
rubber-stamping by parliaments, as in the good old days. Well, that tells
you very clearly what it's all about. It's again the hazard-facing - the
corporate sector - in the rising political power of the masses, that's
been frightening rich and powerful people ever since the first modern
democratic upsurge in 17th century England.

Well, there's a ton more to say about this but it's getting late so let me
just end. Question: Is this globalized economy really out of control? Well
it's very hard to believe that. It's a large majority of the exchanges,
the international exchanges, are within what's called the triad - North
America, Europe and Japan. These are all areas that have parliamentary
institutions, they don't have any fear of military coups, which means
what's going on is in principle subject to public policy decisions and can
be made in practice so as well. And well beyond that - that's all within
existing institutions, assuming existing institutions don't change at all
- but that's a pretty strong assumption. No one should have ever made it
in the past, certainly, and there's no particular reason to believe that
some magic moment has come. In general, institutions are not
self-legitimizing - they've got to legitimize themselves. We live in a
world which is largely dominated by unaccountable private tyrannies and
they have to justify themselves. They are not automatically
self-justifying. When they were created in the United States by radical
judicial activism early in this century, conservatives, (who used to
exist, they don't anymore except in name) bitterly condemned this change
which they saw as a major attack on classical liberal ideas and
fundamental theories of human rights. They condemned it actually as a form
of communism and a return to feudalism, which was not totally inaccurate.

Anyhow, the institutions are not self-legitimizing. They are internally
tyrannical, they are unaccountable to the public, they administer markets
through their internal operations and through strategic alliances with
alleged competitors, they are backed by powerful states which provide
subsidies and risk protection and bailouts if needed, and so on. And
there's a question as to whether those institutional arrangements are
necessary and appropriate, a very serious question. It's entirely natural
for the doctrinal institutions to try to direct the public attention
somewhere else (in fact it would be astonishing if that were not true) to
direct attention away from crucial issues and also to try to induce a
general mood of hopelessness and despair - what Linda McQuaig in a recent
book on Canada, a good book on Canada, calls the Cult of Impotence, she's
describing how it works here -- and to drive people towards individual
survival strategies. Makes a lot of sense to try to do all that. It's
understandable and understanding it can be liberating, as always; it can
liberate people to design and follow, if they choose, very different
paths. These may well involve, and in my opinion should involve,
dissolving centres of unaccountable power, extending democratic
arrangements well beyond to central parts of the society from which they
are excluded, and may make it possible to address in a serious way the
injustice and the needless suffering that defaces contemporary life and to
demonstrate that the human species is not a kind of lethal mutation which
is destined to destroy itself and much else in a flick of an eye, from an
evolutionary point of view. That is not a completely unlikely prospect, in
my opinion, under prevailing conditions of social life.

Thanks

A couple of microphones out there, I'm told, so anybody who wants to
exploit their existence is free to do so. I see two, I don't know if there
are any more.

Questioner: I feel sympathy with most of what you said. I wonder what
suggestions you can make for action by individual citizens in the
democratic countries to perhaps roll back some of the actions of which you
talk?

Chomsky: What actions individual citizens should undertake?

Questioner: Yes.

Chomsky: Well, of course that depends on which issue you're concerned
with. There's a wide range of things that can be done, they're maybe
they're inter-related, but on some issues I think it's pretty clear, at
least I think it's pretty clear, on what ought to be done and in fact not
hard even, because it doesn't challenge the structure of institutions. So
take, say, the MAI, which, as I say, if you're not familiar with it you
ought to be, there's plenty of literature about it, especially in Canada.
It's what was described by Business Week as the most explosive trade deal
you've never heard of, and the whole headline, the whole description is
accurate. It is the most explosive trade deal that's ever been crafted, it
gives extraordinary rights to corporations. They were given the rights of
citizens early in this century, of people, you know, immortal people,
super powerful immortal people, which is already an astonishing attack on
traditional classical liberal ideals, and the MAI actually gives them the
rights of states. Canadians ought to know about this since Canada has just
suffered from it. Canada was sued by a corporation, The Ethyl Corporation
(?), for daring to try to ban a harmful gasoline additive which is banned
in most of the world and theoretically not banned in the United States but
not used because it's too dangerous. Canada tried to do the same, the
Ethyl Corporation sued them under provisions of NAFTA, which is unextended
in the MAI - it's really unclear what they mean, corporations are trying
to press these to the limit. It's never been possible before for
corporations to sue states, but these new arrangements intend to give them
the rights of states. They sued Canada for expropriation because it was
taking away their enjoyment of their rights by banning this probably
poisonous additive. Ethyl Corporation has got a nice record - it's a major
corporation set up by DuPont and GM and all those big guys - its major
contribution was leaded gasoline. They knew in the early 1920s that it was
lethal but they kept it secret and they had good lawyers and they kept
things from happening and for about 50 years it was used with horrendous
effects. Finally it was banned, at least in the United States, around
early 70s, but then it just goes off to the Third World where there's no
controls so you can kill anybody you like.

That's the Ethyl Corporation and now they want to import-export MMT into
Canada - I don't think they cared very much, frankly, it's a sort of a
small item but I think they wanted to establish the point and they did.
Canada backed down and paid some indemnity, 13 million dollars or
something. There's another case coming along by a hazardous waste disposal
company in the United States and there will be more. The idea is to give
corporations not only the rights of super powerful immortal persons, which
is questionable enough, but even of states, and to undermine democratic
options that might be open to citizens - across the board; whether it's
things like setasides for minorities or supporting local enterprise or
environmental labour rights, you sort of name it and it's there somewhere.
I mean it's not put in those words, explicitly, but the intent is to
develop a framework which smart lawyers will then fill in with precedents
- that's the way it works. So naturally it's got to be done in secret
because they know people are going to hate it. And it was kept under a
veil of secrecy - I'm borrowing the phrase from the former chief justice
of the Australian high court when it finally got revealed there and he
bitterly condemned it - it was kept under a veil of secrecy for literally
three years of intense negotiations. Secrecy in a funny sense - the
business world certainly knew about it and they were right in the middle
of it and publishing monographs about it and so on. The press certainly
knew about it but they weren't talking, in the United States Congress was
kept in the dark, the public didn't know, it was pretty much the same
throughout the industrial world, Canada was a unique exception.

Well, anyhow, that was beaten back last April partly because of unexpected
public opposition and it's coming up again in October, so in a couple of
weeks. And it'll go through if nobody makes a fuss, you know, with
long-term effects. Well, OK, it's clear what to do about that, I think, at
least - same thing that was done pretty effectively last time around, but
moreso next time. It'll come back in some other forum you know, like it'll
be written into the conditions of the IMF or some secret forum.

And there's a million things like this. We can list them from A-Z - that's
what activism is about, trying to deal with those specific cases of
threats to society, and justice, suffering, oppression, whatever it may
be; all extremely important but short of a further step what about going
beyond putting Band-Aids on the cancer? What about the nature of the
institutions? Are they in fact legitimate? Well, that's a serious matter.
You know you can't just issue proclamations. If you say the organization
of society and its domination by unaccountable tyrannies, which is what it
is, is improper and unjust, and I think it is, you have to consider what
the alternatives are and how you move towards the alternatives, if you
want to. And those are not trivial matters; they require organized popular
movements which think things through, which debate, which act, which
experiment, which try alternatives, which develop the seeds of the future
in the present society, as Bakunin put it a long time ago. And that's a
long-term project.

How do you do that? Well, the same way you got rid of kings and slavery
and lots of other bad things through history. There's no magic formula.
What you do depends on what the conditions are, where you are, what can be
done. But I think it's possible to have a long-term vision about this, and
it's in fact one that draws very much from our own tradition, you know,
not any foreign borrowings and all that bad stuff. So if you go back to,
say, eastern Massachusetts in the mid-19th century without the dubious
benefit of radical intellectuals, working class people were running their
own newspapers, I mean artisans in Boston and young women coming off the
farms who were working in the textile mills were called factory girls and
so on, and they're interesting. They weren't claiming as we do, you know
the radicals among us, that corporations have too many rights, they were
claiming they don't have any rights. They were not asking them to be more
benevolent. They were not asking for the dictators to be more benevolent,
they were saying they had no right to be dictators. They were saying that
those who work in the mills should own them - simple, and the communities
should run them, and so on. It's not an unusual position.

Wage labor in the United States wage labor in the mid-19th century was
considered not very different from chattel slavery. That goes way back
into the classical liberal tradition, I should point out, so servants were
not really considered people because they were working for somebody else.
Abraham Lincoln, for example, it was his position. It was northern
workers, that was sort of their banner in the civil war. The Republican
Party, it was its official platform, you can even read about it in New
York Times editorials. It's by no means an exotic doctrine; it makes a lot
of sense. And it has very deep roots in the enlightenment and way back.
The same is true of inequality. I mean you go back to the origins of
western political thought, and I literally mean the origins, Aristotle's
Politics, it's based on the assumption that a democratic system cannot
survive, cannot exist, except under conditions of relative equality. He
gives good reasons for this. Nothing novel or exotic about this. The same
assumption was made by people like Adam Smith. If you read Adam Smith
carefully and he was pre-capitalist, remember, and I believe
anti-capitalist in spirit, but if you look at his argument for markets, it
was a kind of a nuanced argument, he wasn't all that much in favor of
them, contrary to what's claimed. But when you look at the argument for
markets, it was based on a principle: the principle was that under
conditions of perfect liberty, markets ought to lead to perfect equality;
under somewhat impaired liberty, they'll lead to, somewhat, a degree of
inequality. And equality was taken as an obvious desideratum, you know, a
good thing. He wasn't thinking about democracies, he was thinking in other
terms. These are important ideas. They have to be revived, I think,
brought back into our mode of thinking, our cultural tradition, the focus
of our activism and the planning for how to change things. And it's no
simple business. It wasn't easy to get rid of kings, either.

Questioner: Hello. Thank-you for the insights and strength. I myself have,
I'm sure along with a lot of other people, been sleeping through seasons'
change and just now waking up to the urgent cry of and need for justice
and equality and love and camaraderie in the world. With so many genocides
and 38,000 children starving to death every day, I can't help, although I
truly believe in my heart that we are in time and we can bring a heaven to
earth, how do you feel about, well in terms that people can look at the
Holocaust. Everyone can look at Nazis and the Holocaust and go, "Wow
that's really wrong, that's a nightmare, no one should have to go through
that," yet the same kind of genocide and dark forces are at work. How do
you feel about humanity living in a perpetual holocaust?

Chomsky: It's our choice. First of all, this has been a pretty horrible
century, one of the worst centuries of human history in terms of humanly
created disasters and catastrophes, many of which but not all, but some of
the worst of them, come from the peaks of western civilization. But in
many other respects, it's a lot better than it was. I think if you look
realistically over time, you know it's kind of hard to say when you see
the ugliness around you, but if you look realistically over time, things
are improving. Lots of things that were considered perfectly normal and
natural say a century ago would be considered outlandishly outrageous
today; nobody could even conceive of them. In fact that's even true of the
last 20 or 30 years - for many of us our own lifetimes. Things have really
changed a lot. And we know how they've changed - not by sitting around and
talking about it.

So let's take the last 30 years. Compare Ronald Reagan and John F.
Kennedy. Reagan tried, well, Reagan's advisors, he was probably sleeping,
but his advisors basically used Kennedy as their model, more or less, you
could just sort of see it in detail. As soon as the Reagan administration
came in, it tried to organize a major attack in Central America where all
kind of things were going on that they didn't like, like the Catholic
church was - there was no clash civilizations then - the catholic church
was the main enemy. They really wanted to do in Central America what
Kennedy had done in South Vietnam in 1961 and 62 when he basically
attacked South Vietnam, you know, sent the U.S. Air Force to start bombing
civilians, use napalm, drive people into concentration camps and so on. It
was South Vietnam; that was the main target of the U.S. attack. Reagan
tried to duplicate that, same mechanisms, same white papers, everything
else.

It was a total collapse. After a couple of months of trying they had to
back off and the reason is because an enormous, unanticipated popular
objections were coming from the church, from human rights groups, from
everybody. And they had to back off because it was going to threaten other
objectives. They actually called the press off and told them to stop the
campaign. Kennedy didn't have to worry about that. When he sent the U.S.
Air Force to bomb South Vietnam, it was known; you could read it in the
New York Times, but nobody cared. In fact people cared so little that the
whole era has disappeared from history. Try to find a textbook or even a
scholarly book which talks about when the U.S. attacked South Vietnam - I
mean we know when the Russians invaded Afghanistan, but we don't know when
the U.S. attacked South Vietnam. In fact, ask educated people, your
friends and teachers and so on, to see if they can give you the date of
when that took place, and they won't even know what you're talking about.
There was no such event in official history. There was such an event in
real history, but since nobody cared about it, and if the president wants
to go bomb some other country, who cares, it kind of disappeared in to the
mist and what was left was the propaganda. Couldn't do that in the 1980s -
in fact it was totally different. The popular reaction in the United
States to the Central America wars were completely different from in the
'60s and much more powerful, again contrary to what people say.

So in the 1960s it never occurred to anybody to go live in a Vietnamese
village because maybe that would cut back state terrorism by US clients.
Many, many people did that in the 80s and people from the heartland,
Midwest rural areas, actually conservative Christians, sometimes
fundamentalist Christians. These are things that are completely unheard of
in the '60s. And the same is true on a host of other issues. Think about
women's rights, or respect for other cultures, or environmental issues and
so on. They barely existed in the '60s. There was a big change in just 30
years and it's a much more civilized society in many ways. That's not to
say that a lot of rotten things haven't been happening - they have. In
fact a lot of the things that I've been describing in the last 25 years,
in my opinion at least, are a pretty conscious reaction to that, an effort
to stem the tide, and it's partly worked but not in attitudes. It hasn't
worked there.

Well, all of that's important and it shows in a very brief moment what you
can achieve, and a lot of it was led by young people, incidentally, so one
should feel no limits on what could be achieved. And if you look over a
longer stretch of history, yeah, that's true. So take what's maybe one of
the most civilized countries in the world today, say Norway. Norway has
very humane, by comparative standards, norms of behaviour like treatment
of prisoners. But take a look at a book by one of the world's leading
criminologists, Neil Christie (sp.?), who I think is Norwegian. He reviews
the history of incarceration in Norway, and he points out it went up
pretty sharply in the early 19th - this is from memory, I might have the
details wrong, but something like this - it went up pretty sharply in the
early 19th century and he points out that the reason it went up is because
the modes of punishment changed. So before that, if somebody robbed a
store, what you did is you'd drive a stake though his hand. OK, so when
you did that you didn't need jailswell, I mean you can't even talk about
it now. You go back not too far before that in England and people were
being drawn and quartered. You don't have to go back very far in history
to find things so outlandish you can't even conceive of them.

In the 19th century, well-known medical researchers in the United States
were carrying out experiments which make you think of Mengele; so a good
deal of gynecological surgery was developed apparently by respected
doctors who were experimenting on slave women and Irish women, who weren't
considered much different. You know, repeated experiments until they
figured out how to do it right and that sort of thing. That's
inconceivable; nowadays that's Mengele, you know, but then it was maybe
not very nice, but not all that crazy. I'm now talking about recent
history, things do look bad but over time they improve and they don't
improve mechanically; they improve by human will. Well, that's the answer.

Questioner: Among other things, when you were referring to initiatives
that were used to promote trade liberalization you were talking about
information technology, and I'm just kind of wondering if something I had
heard was correct and that was with reference to the fact that it was
considered an important part insofar it was used in facilitating and
moving capital in terms of transactions, if that's clear enough, I hope.

Chomsky: I'm not sure I heard every word, but was the question whether the
need for rapid capital transactions was a factor in developing information
technology?

Questioner: I'm just kind of wondering if that was one of the things that
was considered as part of trade liberalization, like MAI or even NAFTA and
so on and so forth.

Chomsky: Where did it come from, the liberalization? I'm not sure I
understand.

Questioner: I'm just kind of considering if you have a thought, that maybe
one of the initiatives, this is what I've heard, that was specifically
that was one of the core reasons that why information technology is
promoted so heavily is because in fact it would move capital the way trade
liberalization wants to.

Chomsky: So was a factor in the development of information technology its
utilization in facilitating rapid capital movements and so on?

Questioner: Yes.

Chomsky: I doubt it very much. There's good technical literature on the
development of information technology and computers and the internet and
so on, and it doesn't look, from my reading at least and some experience
with it, it doesn't look as if that was a major factor, although it was
indeed used very fast for that. So the telecommunications revolution is a
substantial part of what has led to this very radical change in the way
speculative capital zooms around the world instantaneously, undermining
currencies, distorting trade, and so on. Yes, that technology has
certainly been used for that. So you can get the whole content of Wall
Street resources and stick them in the Japanese stock market because
they're 12 hours different, than using it all the time. You couldn't have
round trips for capital movement of an hour or even a week if you didn't
have fancy technology; and you couldn't have all this highly leveraged
lending with sophisticated derivatives and all that crazy business. In
fact a measure of it, if you want to see it at work, at MIT, you know,
sort of a high class science, engineering school, where I teach, every
year at graduation, corporate recruiters come around and pick up the smart
guys who are getting their PhDs. The last couple of years, I forget the
exact number, but I think around 30 per cent, or something like that, of
corporate recruiters are coming from Wall Street and they're going after
math and physics students, students who know nothing about business and
don't care about it but are smart and have mathematical sophistication and
can go off to Wall Street and figure out complex ways to undermine
economies and so on and so forth ... (end of cassette)

...If you're teaching music at MIT, you're getting paid by the system,
basically, the rest is bookkeeping. And that's true since the 1940s and it
was pretty conscious. So you go back to the business press in the 1940s
and they made it very clear that high-tech industry, I'm quoting Fortune,
cannot survive in a competitive free-enterprise economy, and Business Week
added, government has to be the saviour. They were specifically talking
about the aeronautical industry but the lesson was intended for high-tech
generally, because they just need huge public subsidies. That's why the
internet was developed, to take a recent case, within the military system,
since the 1960s, then taken over by the National Science Foundation,
public, and just two or three years ago handed over to private
corporations so that Bill Gates and so on can make money from it. Gates at
least is honest about it. He attributes his success to the ability to
embrace and enhance the ideas of others, usually ideas coming out of the
public sector or funded by the public sector. And the same is true pretty
much across the board. That's the way the economy works. Take a look at
any dynamic part of the economy and you find that it works that way.

Now of course it's applied and it's applied in ways which weren't
anticipated, like when DRPA, the Defence Research Project Agency, which
initiated the internet and had most of the ideas and so on, when they were
developing all this stuff, I presume they did not have in mind that sooner
or later it would get in the hands of big corporations who would try to
use it for a home shopping service to marginalize people and turn them
into passive consumers and so on and so forth. I'm sure they didn't have
that in mind, but yeah, surely that's what they will try to do. They
certainly didn't have it in mind that it would be used to undermine the
MAI by getting around the constraints of the media - it was used for that
too. So things have all kinds of applications and consequences, but I
think they're basically developed just because you need it for the
technology. Same reason why, when during that period of management
failures, the defence department and military in the United States was
called on to create the factory of the future. And that goes way back.
What's called the American system of manufacturing, which sort of amazed
the world in the mid-19th century, based on replaceable parts and mass
production, all this kind of stuff. A lot of that came straight out of the
Springfield armoury. It was developed for military technology then adapted
to production. It's hard to find anything in the modern economy that
didn't more or less work like that. It's not always the military. That's
what Stieglitz is talking about, chief economist of the World Bank, when
he talks about the fact that the path that the East Asian miracle is
following is not all that foreign to us, actually much more so then he
recognizes, I think. I don't know if I got your question exactly.

End