from the noam chomsky archive at <http://www.zmag.org/chomsky>.
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The Passion for Free Markets
Exporting American values through the new World Trade Organization
By Noam Chomsky



For more than half a century, the United Nations has been the main forum
for the United States to try to create a world in its image, maneuvering
with its allies to forge global accords about human rights, nuclear tests
or the environment that Washington insisted would mirror its own values."

So runs postwar history, we learn from the opening paragraph of a
front-page story by New York Times political analyst David Sanger. But
times are changing. Today, the headline reads: "U.S. Is Exporting Its
Free-Market Values Through Global Commercial Agreements." Going beyond the
traditional reliance on the UN, the Clinton administration is turning to
the new World Trade Organization (WTO) to carry out the task of "exporting
American values." Down the road, Sanger continues (quoting the U.S. trade
representative), it is the WTO that may be the most effective instrument
for bringing "America¹s passion for deregulation" and for the free market
generally, and "the American values of free competition, fair rules, and
effective enforcement," to a world still fumbling in darkness. These
"American values" are illustrated most dramatically by the wave of the
future: telecommunications, the Internet, advanced computer technology, and
the other wonders created by the exuberant American entrepreneurial spirit
unleashed by the market, at last freed from government interference by the
Reagan revolution.

Today "governments are everywhere embracing the free-market gospel preached
in the 1980s by President Reagan and Prime Minister Margaret Thatcher of
Britain," Youssef Ibrahim reports in another Times front-page story,
reiterating a common theme. Like it or hate it, enthusiasts and critics
over a broad range of opinion agree‹just to keep to the liberal-to-left
part of the spectrum‹about "the implacable sweep of what its exponents call
Œthe market revolution¹": "Reaganesque rugged individualism" has changed
the rules of the game worldwide, while here at home "Republicans and
Democrats alike are ready to give the market full sway" in their dedication
to "the new orthodoxy."

There are a number of problems with the picture. One is the account of the
last half-century. Even the most dedicated believers in "America¹s mission"
must be aware that U.S./UN relations have been virtually the opposite of
what the opening passage depicts ever since the UN fell out of control with
the progress of decolonization, leaving the U.S. regularly isolated in
opposition to global accords on a wide range of issues and committed to
undermining central components of the UN, particularly those with a third
world orientation. Many questions about the world are debatable, but surely
not this one.

As for "Reaganesque rugged individualism" and its worship of the market,
perhaps it is enough to quote the review of the Reagan years in Foreign
Affairs by a Senior Fellow for International Finance at the Council on
Foreign Relations, noting the "irony" that Ronald Reagan, "the postwar
chief executive with the most passionate love of laissez faire, presided
over the greatest swing toward protectionism since the 1930s"‹no "irony,"
but the normal workings of "passionate love of laissez faire": for you,
market discipline, but not for me, unless the "playing field" happens to be
tilted in my favor, typically as a result of large-scale state
intervention. It¹s hard to find another theme so dominant in the economic
history of the past three centuries. The current enthusiasms about the
communications revolution that Sanger is reporting are a textbook case.

Reaganites were following a well-trodden course‹recently turned into a
comedy act by Gingrich "conservatives"‹when they extolled the glories of
the market and issued stern lectures about the debilitating culture of
dependency of the poor at home and abroad while boasting proudly to the
business world that Reagan had "granted more import relief to U.S. industry
than any of his predecessors in more than half a century"; in fact, more
than all predecessors combined, as they led "the sustained assault on [free
trade] principle" by the rich and powerful from the early 1970s, deplored
in a scholarly review by GATT secretariat economist Patrick Low, who
estimates the restrictive effects of Reaganite measures at about three
times those of other leading industrial countries.

The radical "swing toward protectionism" was only a part of the "sustained
assault" on free trade principles that was accelerated under "Reaganite
rugged individualism." Another chapter of the story includes the huge
transfer of public funds to private power, often under the traditional
guise of "security." Without such extreme measures of market interference,
it is doubtful that the U.S. automotive, steel, machine tool, semiconductor
industries, and others, would have survived Japanese competition or been
able to forge ahead in emerging technologies, with broad effects through
the economy.

"Thatcher¹s Britain" is another good choice to illustrate "free market
gospel." Just to keep to a few revelations of early 1997, "during the
period of maximum pressure to make arms sales to Turkey," the London
Observer reported, Prime Minister Thatcher "personally intervened to ensure
a payment of 22 million pounds was made out of Britain¹s overseas aid
budget, to help build a metro in the Turkish capital of Ankara. The project
was uneconomical, and in 1995 it was admitted" by Foreign Secretary Douglas
Hurd that it was "unlawful." The incident was particularly noteworthy in
the aftermath of the Pergau Dam scandal, which revealed illegal Thatcherite
subsidies "to Œsweeten¹ arms deals with the Malaysian regime," with a High
Court judgment against Hurd. That¹s aside from government credit guarantees
and financing arrangements, and the rest of the panoply of devices to
transfer public funds to "defense industry," yielding a familiar range of
benefits to advanced industry generally.

A few days before, the same journal reported that "up to 2 million British
children are suffering ill-health and stunted growth because of
malnutrition" as a result of "poverty on a scale not seen since the 1930s."
The trend to increasing child health has reversed and childhood diseases
that had been controlled are now on the upswing thanks to the (highly
selective) "free market gospel" that is much admired by the beneficiaries.

A few months earlier, a lead headline reported "One in three British babies
born in poverty," as "child poverty has increased as much as three-fold
since Margaret Thatcher was elected." "Dickensian diseases return to haunt
today¹s Britain," another headline reads, reporting studies concluding that
"social conditions in Britain are returning to those of a century ago."
Particularly grim are the effects of cutting off gas, electricity, water,
and telephones to "a high number of households" as privatization takes its
natural course, with a variety of devices that favor "more affluent
customers" and amount to a "surcharge on the poor," leading to a "growing
gulf in energy between rich and poor," also in water supply and other
services. The "savage cuts" in social programs are placing the nation "in
the grip of panic about imminent social collapse." But industry and finance
are benefiting very nicely from the same policy choices. To top it all off,
public spending after 17 years of Thatcherite gospel was the same 42 1/4
percent of GDP that it was when she took over.

Not exactly unfamiliar here.

Exporting American Values

Let us put aside the intriguing contrast between doctrine and reality, and
see what can be learned by examining the new era that is coming into view.
Quite a lot, I think.

Sanger is celebrating the WTO agreement on telecommunications. One of its
welcome effects is to provide Washington with a "new tool of foreign
policy." The agreement "empowers the WTO to go inside the borders of the 70
countries that have signed it," and it is no secret that international
institutions can function insofar as they keep to the demands of the
powerful, in particular, the United States. In the real world, then, the
"new tool" allows the U.S. to intervene profoundly in the internal affairs
of others, compelling them to change their laws and practices. Crucially,
the WTO will make sure that other countries are "following through on their
commitments to allow foreigners to invest" without restriction in central
areas of their economy. In the specific case at hand, the likely outcome is
clear to all: "The obvious corporate beneficiaries of this new era will be
U.S. carriers, who are best positioned to dominate a level playing field,"
the Far Eastern Economic Review (FEER) points out, along with one UK-U.S.
megacorporation.

Not everyone is delighted by the prospects. The winners recognize that
fact, and offer their interpretation: in Sanger¹s words, others fear that
"American telecommunication giants...could overwhelm the flabby
government-sanctioned monopolies that have long dominated
telecommunications in Europe and Asia"‹as in the United States, long past
the period when it had become by far the world¹s leading economy and most
powerful state. It is also worth noting that major contributions to modern
technology came from the research laboratories of the "flabby
government-sanctioned monopoly" that dominated telecommunications here
until the 1970s, using its freedom from market discipline to provide for
the needs of advanced sectors of industry generally by transfer of public
funds (in indirect ways, unlike the more direct modalities of the Pentagon
system).

Those who cling irrationally to the past see matters a bit differently. The
FEER points out that "jobs will be lost" in Asia and "many Asian consumers
will have to pay more for phone service before they will pay less." When
will they pay less? For that bright future to dawn, it is only necessary
for foreign investors to be "encouraged...to act in socially desired ways,"
not simply with an eye to profit and service to the rich and the business
world. How this miracle will come to pass is unexplained, though doubtless
the suggestion will inspire serious reflection in corporate headquarters.

In the time span relevant to planning, the WTO agreement will raise phone
service costs for most Asian consumers, the Review predicts. "The fact is,
comparatively few customers in Asia stand to benefit from cheaper overseas
rates" that are anticipated with the takeover by huge foreign corporations,
mostly American. In Indonesia, for example, only about 300,000 of 190
million people make overseas calls at all, specifically the business
sector. "It¹s very likely the cost of local telecoms service, in general,
will rise" in Asia, according to David Barden, regional telecoms analyst at
J.P. Morgan Securities in Hong Kong. But that is all to the good, he
continues: "if there is no profitability in the business, there will be no
business." And now that still more public property is being handed over to
foreign corporations, they had better be guaranteed profitability ‹
telecommunications today, and a far wider range of related services
tomorrow. The business press predicts that "personal communications over
the Internet [including corporate networks and interactions] will overtake
telecommunications in five or six years, and telephone operators have the
biggest interest in getting into the online business." Contemplating the
future of his own company, Intel CEO Andrew Grove sees the Internet as "the
biggest change in our environment" at present. He expects large-scale
growth for "the connection providers, the people involved in generating the
World Wide Web, the people who make the computers" ("people" meaning
corporations), and the advertising industry, already running at almost $350
billion annually and anticipating new opportunities with the privatization
of the Internet, which is expected to convert it to a global oligopoly.

Meanwhile privatization precedes apace elsewhere. To take one important
case, over considerable popular opposition the government of Brazil has
decided to privatize the Vale Company, which controls vast uranium, iron,
and other mineral resources and industrial and transport facilities,
including sophisticated technology. Vale is highly profitable, with a 1996
income of over $5 billion, and excellent prospects for the future; it is 1
of 6 Latin American enterprises ranked among the 500 most profitable in the
world. A study by specialists of the Graduate School of Engineering at the
Federal University in Rio estimated that the government has seriously
undervalued the Company, noting also that it relied on an "independent"
analysis by Merrill Lynch, which happens to be associated with the Anglo
American conglomerate that is seeking to take over this central component
of Brazil¹s economy. The government angrily denies the conclusions. If they
are accurate, as one may plausibly surmise, it will fall into a very
familiar pattern.

Side comment: Communications are not quite the same as uranium. Where there
is even a pretense of democracy, communications are at its heart.
Concentration of communications in any hands (particularly foreign hands)
raises some rather serious questions about meaningful democracy. Similar
questions arise about concentration of finance, which undermines popular
involvement in social and economic planning. Control over food raises even
more serious questions, in this case about survival. A year ago the
secretary-general of the UN Food and Agricultural Organization, discussing
the "food crisis following huge rises in cereals prices this year," warned
that countries "must become more self reliant in food production," the
London Financial Times reported. The FAO is warning "developing countries"
to reverse the policies imposed on them by the "Washington Consensus,"
policies that have had a disastrous impact on much of the world, while
proving a great boon to subsidized agribusiness‹incidentally, also to
narcotrafficking, perhaps the most dramatic success of neoliberal reforms
as judged by the "free market values" that the "U.S. is exporting."

Control over food supplies by foreign corporate giants is well under way,
and with the agreement on telecommunications signed and delivered,
financial services are next in line.

Summarizing, the expected consequences of the victory for "American values"
at the WTO are: (1) a "new tool" for far-reaching U.S. intervention into
the internal affairs of others; (2) the takeover of a crucial sector of
foreign economies by U.S.-based corporations; (3) benefits for business
sectors and the wealthy; (4) shifting of costs to the general population;
(5) new and potentially powerful weapons against the threat of democracy.

A rational person might ask whether these expectations have something to do
with the celebration, or whether they are just incidental to a victory of
principle that is celebrated out of commitment to higher values. Skepticism
is heightened by comparison of the Times¹ picture of the postwar era with
uncontested fact. It is further enhanced by a look at some of history¹s
striking regularities, among them, that those in a position to impose their
projects not only hail them with enthusiasm but also typically benefit from
them, whether the values professed involve free trade or other grand
principles‹which turn out in practice to be finely tuned to the needs of
those running the game and cheering the outcome. Logic alone would suggest
a touch of skepticism when the pattern is repeated. History should raise it
a notch higher.

In fact, we need not even search that far.

An Improper Forum

The same day that the front page was reporting the victory for American
values at the World Trade Organization, New York Times editors warned the
European Union not to turn to the WTO to rule on its charge that the U.S.
is violating free trade agreements. Narrowly at issue is the Helms-Burton
Act, which "compels the United States to impose sanctions against foreign
companies that do business in Cuba." The sanctions "would effectively
exclude these firms from exporting to, or doing business in, the United
States, even if their products and activities have nothing to do with Cuba"
(Peter Morici, former director of economics at the U.S. International Trade
Commission). That is no slight penalty, even apart from more direct threats
against individuals and companies who cross a line that Washington will
draw unilaterally. The editors regard the Act as a "misguided attempt by
Congress to impose its foreign policy on others"; Morici opposes it because
it "is creating more costs than benefits" for the U.S. More broadly at
issue is the embargo itself, "the American economic strangulation of Cuba"
that the editors term "a cold war anachronism," best abandoned because it
is becoming harmful to U.S. business interests.

But broader questions of right and wrong do not arise, and the whole affair
is "essentially a political dispute," the Times editors stress, not
touching on Washington¹s "free-trade obligations." Like most others, the
editors apparently assume that if Europe persists, the WTO is likely to
rule against the United States. Accordingly, the WTO is not a proper forum.

The logic is simple, and standard. Ten years ago, on the same grounds, the
International Court of Justice was found to be an inappropriate forum for
judging Nicaragua¹s charges against Washington. The U.S. rejected ICJ
jurisdiction, and when the Court condemned the U.S. for the "unlawful use
of force," ordering Washington to cease its international terrorism,
violation of treaties, and illegal economic warfare, and to pay substantial
reparations, the Democrat-controlled Congress reacted by instantly
escalating the crimes while the Court was roundly denounced on all sides as
a "hostile forum" that had discredited itself by rendering a decision
against the United States. The Court judgment itself was scarcely reported,
including the words just quoted and the explicit ruling that U.S. aid to
the contras is "military" and not "humanitarian." Along with U.S. direction
of the terrorist forces, the aid continued until the U.S. imposed its will,
always called "humanitarian aid." Public history keeps to the same
conventions.

The U.S. then vetoed a Security Council resolution calling on all states to
observe international law (scarcely reported), and voted alone (with El
Salvador and Israel) against a General Assembly Resolution calling for
"full and immediate compliance" with the Court¹s ruling‹unreported in the
mainstream, as was the repetition the following year, this time with only
Israel on board. The whole affair happens to be a typical illustration of
how the U.S. used the UN as a "forum" for imposing "its own values."

Returning to the current WTO case, in November 1996, Washington voted alone
(with Israel and Uzbekistan) against a General Assembly Resolution, backed
by the entire European Union, urging the U.S. to drop the embargo against
Cuba. The Organization of American States had already voted unanimously to
reject the Helms-Burton Act, and had asked its judicial body (the
Inter-American Juridical Committee) to rule on its legality. In August
1996, the IAJC ruled unanimously that the Act violated international law. A
year earlier, the Inter-American Commission on Human Rights of the OAS had
condemned the U.S. restrictions on shipments of food and medicine to Cuba
as a violation of international law. The Clinton administration¹s response
was that shipments of medicine are not literally barred, only prevented by
conditions so onerous and threatening that even the largest corporations
here and abroad are unwilling to face the prospects (huge financial
penalties and imprisonment for what Washington determines to be violations
of "proper distribution," banning of ships and aircraft, mobilization of
media campaigns, etc.). And while food shipments are indeed barred, the
Administration argues that there are "ample suppliers" elsewhere (at far
higher cost), so that the direct violation of international law is not a
violation.

As the issue was brought by the EU to the World Trade Organization, the
U.S. withdrew from the proceedings on the ICJ model, effectively bringing
the matter to a close.

In short, the world that the U.S. has sought "to create in its image"
through international institutions is one based on the principle of the
rule of force. The "American passion for free trade" entails that the U.S.
government may violate trade agreements at will. No problem arises when
communications, finance, and food supplies are taken over by foreign
(mainly U.S.) corporations. Matters are different, however, when trade
agreements and international law interfere with the projects of the
powerful.