Subrata Ghoshroy / AlterNet – 2008-10-05 23:32:52
(October 4, 2008) —
(Read Part One here.)
Noam Chomsky: The New York Times had an article by its economic correspondent in its magazine section a couple weeks ago about Obama’s economic programs. He talked about Reagan as the model of passionate commitment to free markets and reduction of the role of the state, and so on … Where are these people? Reagan was the most protectionist president in post-war American history. In fact, more protectionist than all others combined. He virtually doubled protective barriers. He brought in the Pentagon to develop the “factory of the future” to teach backward American management how to catch up on the Japanese lead in production. SEMATECH (“Semiconductor Manufacturing Technology”) was formed. If it weren’t for Reagan’s protectionism and calling in of state power, we would not have a steel industry, or an automobile industry, or a semi-conductor industry or whatever they protected. They reindustrialized America by protectionism and state intervention. All of this is washed away by propaganda as though it never happened.
It is very interesting to look at a place like MIT, which was right at the center of these developments. My department — you’re teaching a course in the Military Industrial Complex — my department is an example of it. I came here in the mid-50’s. I don’t know the difference between a radio and a tape recorder, but I was in the electronics lab. I was perhaps the one person who refused to get clearance on principle. Not that it made any difference; everything was open anyway.
The electronics lab, along with the closely connected Lincoln labs, was just developing the basis of the modern high- tech economy. In those days, the computer was the size of this set of offices.
By the time they finally got computers down to the size of a marketable main frame, some of the directors of the project pulled out and formed DEC (Digital Equipment Corporation), the first main frame producer. IBM was in there, at the government’s expense, learning how to move from punch cards to electronic computers. By the early l960’s IBM was capable of producing its own computers, but no one could buy them. They were too expensive. So they were bought by the National Security Agency. Bell Labs did develop transistors. That is about the only example you can think of a significant part of the high-tech system which came out of private enterprise. But that is a joke too! They worked on technology. Their transistor producer was Western Electric, who could not sell them on the market; they were too expensive. So the government bought about 100 percent of advanced transistors. Finally, of course, all of this gets to the point where you can market them privately. It was not until the 1980’s after 30 years of development essentially in the state sector that these things became marketable commodities and Bill Gates could get rich.
The Internet was the same thing. I was here when they were starting to work on the Internet. It was not until 1995 that it was privatized, after 30 years. If you look at the funding at MIT, in the 1950s and 1960’s it was almost entirely Pentagon. For a very simple reason, the cutting edge of the economy was electronics based. A good cover for developing an electronics-based economy was the Pentagon. You sort of frighten people into thinking the Russians are coming, so they pay their taxes and their children and grandchildren have computers.
Through the 70’s and 80’s funding has been shifting to NIH (National Institutes of Health). Why? Because the cutting edge of the economy is becoming biology-based. So, therefore, the state sector is shifting its priorities to developing biology-based industries. All of this is going on with accolades to the Free Market. You don’t know whether to laugh or cry.
The point is, to get back to the new international economic order: It was a serious proposal that was immediately kicked out the window and UNCTAD (United Nations Conference on Trade and Development) was reduced to a data collecting agency with no policy initiatives. The new information order was destroyed, along with UNESCO. Neo-liberal programs were rammed down the throats of the poor. (Although the rich did not accept them — and to the extent that they do accept them, it is harmful to them too.) This went along with the great shift to the liberalization of finance. It was a disaster in the making all along; serious economists have been pointing out since the early 70’s that the freeing up of financial capital flows is just a disaster in the making, with in fact periodic crises. Also, Reagan the great free marketer carried out one of the biggest bailouts in American history when he bailed out (and virtually nationalized) a major bank.
SG: This was the Latin American crisis? Brazil?
NC: This was before that. This was Continental Illinois. Later they had the savings and loan crisis; Citibank was overexposed in Latin America. The federal government has to continually step in to insure that the financial institutions that it is letting run wild survive.
SG: Do you see any special characteristics to (the current) crisis?
NC: This is apparently considerably worse, for one thing, because no one seems to understand what is really going on. There was clearly a housing bubble and some of the better, more serious economists began writing about it a couple of years ago. So Dean Baker, for example, has been regularly pointing out that housing prices are completely unsustainable.
SG: Greenspan was saying it was a “froth,” not a “bubble.”
NC: Greenspan was saying, “Don’t worry about it”. It is the Greenspan crisis. It has turned into a crisis for the entire credit industry. And a major one.
I don’t think that the banks and the hedge funds even understand the instruments that they are using, but they are very delicate and they could crash. I presume that the financial institutions are strong enough to be able to weather it somehow, but no one really knows. Just like no one knows whether China, Japan and Dubai and Singapore will continue to keep what, from their point of view, are poor investments in the US economy — treasury securities, or whether they will diversify. If they diversify, what happens to the US economy? The US has become a low production/high consumption economy. What happens if the Chinese, the Japanese and Dubai stop funding the American consumers? A lot of things could happen, but unlike poor countries, US does not really have to pay its debts. There are a lot of ways to avoid doing so, but these are real hammer blows to the international economy, the kind that are not understood. The bailouts of Fannie Mae and Freddie Mac, was described pretty well by Martin Wolf, the economic correspondent for the Financial Times. He says it is outrageous, a case of the public taking the risks and being forced to pay for the foolishness and incompetence of the private management of the market institutions. The public takes the risks and pays for the costs.
SG: So, the public debt goes up dramatically.
NC: Yes, enormously; liabilities from these takeovers are, I forget the number, but it is a substantial proportion of the national debt … I think, it is something like one-third of the deficit, the public debt. It is huge. That is the public debt, that’s my grandchildren, you know. It is permitting financial institutions to run wild without regulation. So, if you allow unregulated capital, of course you will have corruption and disaster.
Read Adam Smith. He points out if you see two business men talking in the corner, they are probably arranging a conspiracy against the public. That’s their job. It is not that they are bad people. That is just what they are supposed to do. Just like a corporation is not evil to try to maximize profit. If managers are not trying to maximize profit, they are breaking the law. They are not supposed to be ethical institutions; they are supposed to be operating in the interests of their shareholders.
SG: Because of the integrated nature of the global economy, are there others who would want to keep the American economy vibrant?
NC: Sure. That’s why China buys US treasury securities. They want to keep America spending.
SG: So, in a way that may be stabilizing.
NC: It is stabilizing, but it is a very uncertain kind of stability. They might decide to devote their resources to increase purchasing power inside China, for example, instead of inside the US It is conceivable, which would mean a big shift in the international economy.
SG: If China makes a precipitous decision to do something — for example, there is one fund, a sovereign fund; it is $200 billion dollars — if they pull money out, will there be military threats from the US?
NC: But what do the military threats mean from the US? Of course, the US outspends the rest of the world in military spending and is more technologically advanced. But what are they going to do? Are they going to bomb Beijing? I mean, they can’t even control Afghanistan. Sure, they have a huge military, but I doubt that the US will use it as a weapon. US capacity to undermine governments by military threats has been declining in recent years.
Take Latin America, a region where the US has regularly overthrown governments through military coups and so on. In the last ten years it has been very hard. The US sponsored a military coup in Venezuela, but could not pull it off, had to back down, partly because the coup was immediately overthrown by popular uprising, and partly because of the uproar in Latin America, which said it would not tolerate this any longer. If you look at the history, this is quite a change. The US and France did effectively carry out a military coup in Haiti and threw out the government, but Haiti is a desperate country. It was the richest colony in the world and the source of much of France’s wealth, but it has been tortured by France and then the US for 200 years. Now it barely survives. Overthrowing the government of Haiti was not that difficult a task.
SG: So, do you see a decline in the military ability of the US?
NC: There is a very serious decline in the ability of the US to undermine and overthrow governments. South America, for the first time since the European conquest 500 years ago, is moving, uneasily, but noticeably, in the direction of independence and gaining sovereignty. The US is unable to do much about it. One of the main military bases for the United States until recently was Paraguay. The US just lost Paraguay, with the recent election of a liberation theology priest. That was one of the few remaining US military bases in South America.
In Central America, which was devastated by Reaganite terrorist wars, nevertheless, there are beginnings of a recovery. In Honduras, which was the center of the whole US terrorist apparatus, President Zelaya has been moving towards alliances with Venezuela. There is not much that the US can do about it. It’s trying — the training of Latin American officers has risen very sharply.
… In fact, if you look at US aid to Latin America, the percentage of military aid, as compared to economic aid, is far higher now than at the peak of the Cold War. I think that the US is trying to rebuild some kind of military capacity to deal with its loss of control over Latin America. It used to be able to overthrow governments easily or destroy a country back in the l980’s, but now it is harder.
SG: Daniel] Ortega was the second government leader to recognize Abkhazia and South Ossetia. I don’t know if it was a good thing to do. [
NC: Ortega is not one of my favorite characters. But it is a symbolic indication of the degree of independence. What is happening in Honduras is more significant. Honduras was a classic banana republic run by the US during Reagan’s terrorist wars in Central America. Honduras was the main base, not only for the Contra war, for support for the terrorist wars in El Salvador and Guatemala and so on. It was a regional war, remember.
SG: Isn’t that where Negroponte was?
NC: That is where Negroponte was; he was the chief terrorist commander of the l980’s. Literally, he was running the Contra war from Honduran bases, but also lying steadily about atrocities inside Honduras to make sure that congressional money flowed to Honduras for various wars in the region. John Negroponte, one of leading terrorist commanders of the modern period, was soon appointed the counterterrorism czar, with nobody raising an eyebrow.
The imperial mentality is something wondrous to behold. Here is one of the leading contemporary terrorists being appointed to be in charge of counterterrorism. Try to find a comment about it. If the US carries out terrorism, it did not happen. But the point is, the US’s capacity to carry out these activities has declined. So when Honduras is straying from its subservient role, that is pretty striking.
So I don’t think that US will use military force against China. For one thing, it is so much bigger. It is also a platform for production by US-based corporations. It is commonly said that industrial production in the US has declined. That is very misleading. If you take US manufacturing industry and consider its share in global manufacturing, it probably hasn’t changed. It’s just that it is doing its production overseas. But, from the point of view of the CEO of Dell, what does it matter where they do their manufacturing? McKinsey, the big financial analysis house, did a study a year or two ago which was reported in the Wall Street Journal. They made an interesting calculation. They said, suppose that you analyze the US trade deficit by considering the US, not as a place on a map, but in terms of the people who own the country (the corporate sector). If, say Dell, is bringing computers it makes in China into the US, we call those domestic production, not imports, which it is from the point of view of Dell management. It turns out that most of the trade deficit disappears.
So, if you take a realistic look at the international economy, from the point of view of the people who own this country, they are not in wonderful shape, but it is nowhere near as bad as the statistics look when you look at GDP. Other measures too are misleading. Take, say NAFTA, you hear from economists and government officials that NAFTA has sharply increased trade between the US and Mexico. Well, a lot of that is fiction. Take the old Soviet Union; suppose that parts were produced in Leningrad and sent to Warsaw for assembly and then sent back to Moscow to sell. We did not call that trade because it was it was interactions internal to a command economy. Now take NAFTA. Suppose General Motors produces parts in Indiana, sends them to Northern Mexico for assembly and sells the cars in Los Angeles. Those are interactions internal to a command economy. But we call it trade, in both directions. That’s just fraud.
There are not good statistics on this, because corporations don’t tell you their secrets, but probably half of the so-called trade between US and Mexico is internal transactions of this kind. An honest, realistic look at how the international economy functions would give a very different picture from what you read in the business pages or sometimes the economics journals.
SG: One question on the elections: If Obama wins, will that bring any changes in US foreign policy?
NC: The prior question is whether he will win; my assumption all along is that McCain will probably win. Now that he has picked Sarah Palin as his vice president, I think those probabilities have increased, for reasons that are understood by party managers and have been expressed very well by McCain’s campaign manager. He said the election is not about issues, it is about character and personality, and so on. Meaning, it is not a serious election. That is the way US elections are run. Issues are marginalized. They don’t talk about them and the media coverage is about Rev. Jeremiah Wright’s sermons or Sarah Palin’s pregnant daughter.
McCain is supposed to be a specialist on national security issues. Why? Suppose that some Russian pilot was shot down bombing heavily populated areas in Kabul and tortured by Reagan’s freedom fighters in the l980’s. Well, we might feel sorry for him, but does that make him an expert on National Security? But McCain is an expert on national security because he was shot down bombing heavily populated urban areas in Hanoi and he was tortured by the Vietnamese. Well, we feel sorry for him, but he is no expert on National Security. But you can’t say that. These elections are run by the public relations industry. The intellectual community goes along. Issues are marginalized. The focus is on personalities, on Jeremiah Wright’s sermons, Sarah Palin’s pregnant daughter, or whatever it may be. In that terrain, the Republicans have a big advantage. They also have a formidable slander and vilification machine which has yet to go into full operation. They can appeal to latent racism, as they are already doing. They can construct a class issue. Obama is the elite Harvard liberal; McCain is the down to earth ordinary American, and it so happens that he is one of the richest people in the Senate. Same thing they pulled for Bush. You have to vote for Bush because he is the kind of guy you would like to meet in a bar and have a beer with; he wants to go back to his Ranch in Texas and cut brush. In reality he was a spoiled fraternity boy who went to an elite university and joined a secret society where the future rulers of the world are trained, and was able to succeed in politics because his family had wealthy friends. I am convinced, personally, that Bush was trained to mispronounce words to say things like “mis-underestimate” or “nu-cu-ler”, so liberal intellectuals would make jokes about it; then the Republican propaganda machine could say see these elitist liberals who run the world are making fun of us ordinary guys who did not go to Harvard (but he did go to Yale, but forget it).
These are games run by the public relations industry, which is a huge industry. It spends enormous resources manipulating attitudes and opinions. They design and control elections so that public in effect is marginalized. They keep away from issues for a very good reason. We know a lot about American public opinion. It is a very heavily polled country, mainly because business wants to keep its finger on the public pulse. So there is a ton of information, valid information. On a host of major issues, domestic and international, both political parties are well to the right of the population. So therefore, you don’t want to talk about issues, not if you want to keep the business parties in power. Further, the population is aware of this, but the press won’t publish it; 80 percent of the population says the country is run by a few big interests, looking out for themselves, not the benefit of the people, By about 3 to one, people object to the fact that issues are not at the center of the campaigns. They want issues to be discussed, not personalities. Party managers know that, but they won’t go along with it; it is too dangerous. They have got to make sure that the two factions of the business party, Republicans and Democrats, stay in power. So you don’t deal with public concerns.
SG: Some on the Left and in the progressive community say that Obama’s campaign is a historic opportunity.
NC: I prefer that Obama be elected without any illusions. He is a centrist Democrat who will very likely back away from the more extreme, crazed elements of the Bush programs, but will go pretty much to the center. After all, what is traditional US policy? So people were outraged by the Bush doctrine of preventive war? What was the Clinton doctrine? It was official. The Clinton doctrine was explicit, it was literally more extreme: The US has the right to use force unilaterally to protect markets and access to raw materials without even the pretexts that Bush insisted on. Clinton said it quietly in a message to Congress. He was not brazen; he was not waving his fist in their face. We could pretend it was not there. Why did they bomb Serbia? It can’t be reported here because it conflicts with the image of America’s nobility and Serb villainy. We know from the highest levels of the Clinton administration, but it can’t be reported.
Strobe Talbott, the highest Clinton administration official in charge of Eastern European affairs, wrote a forward to a book by his associate John Norris, in which he says, if you want to understand the thinking at highest levels of the Clinton Administration during the Kosovo war, this is the book that you have to read. Norris speaks with full acquaintance of the Clinton administration at top level. What does Norris say? He says that the bombing had nothing to do with concern with Kosovar Albanians. It was because Serbia was not carrying out the required social and economic reforms. In other words, it was the last holdout in Europe to the Clintonite neo-liberal policies. That is straight from the top level of the Clinton administration. You won’t find a word about it in the press or in the intellectual journals because it conflicts with the party line.
This is a very free country, but also a much disciplined country. Intellectuals keep to the party line. They don’t depart very far. Even though they are free to and they won’t be punished for it. This is the most important information that has come out about the bombing of Serbia. Try to find it.
The same is true of Iran, the major upcoming foreign policy issue. The mere fact that the US and its collaborators happen to be opposed by most of the world and by the majority of the American population cannot be published. Nobody knows it. Going back to the election, it is the same story, major issues of concern to the population have to be marginalized. It must stay focused on personalities; on character; on qualities. Everything we hear about McCain is that he is a war hero and so on. Even liberal critics, like James Carroll in the Boston Globe, says of this noble character that people who opposed the Vietnam war have to go to McCain to apologize. Why do we have to go to McCain to apologize? In Russia, did people who opposed the invasion of Afghanistan go to some pilot who was shot down to apologize? American and western intellectuals can’t understand this, can’t comprehend this. We can’t do anything wrong; we only make mistakes.
Take Obama. I think that the talk about the surge is mostly false, but let’s suppose it were true. Suppose that the US surge had succeeded in cutting down violence in Iraq. What would that mean? That would mean that Bush was almost as successful as Putin was in Chechnya. The Russians destroyed the place, there were massacres, but It is quiet, it is rebuilding. The New York Times says there is a building boom, there is electricity. Do we praise Putin for that? No! We condemn him for that. The fact that they were able to pacify a country, you don’t praise them for that. On the other hand, if the US were able to achieve anything like that in Iraq, it would lead to accolades and praise. And Obama would be silenced. After all, he had no principled criticism of the war. His only criticism was that it was pointless, silly, or waste of money.
SG: Or, that it was a distraction from the war in Afghanistan, which has become the standard line. It gives the Democrats a chance to be for a war.
NC: It is kind of interesting, As the pretexts for the Iraq war are collapsing, weapons of mass destruction, promoting democracy, all of that, and it becomes harder to stand up to Iraqi opinion and even the Iraqi government which is pressing for withdrawal. As all of that is happening, there is a little honesty beginning to creep in about the real reasons for the war. Washington Post editors had a very interesting comment when Obama made his speech saying that Afghanistan is the top priority. They said, “He is making a terrible mistake; the priority is Iraq because Iraq is the country where the oil resources are, which is at the center of the Middle East’s energy producing region.” So, Iraq must be the top priority. Finally, they are telling the real reasons for the war — after lying about it since 2003. Okay, no weapons of mass destruction, no promoting democracy, no liberation; we want to maintain control over energy resources. That’s why we invaded. Sure.
SG: And Afghanistan?
NC: You can have a low intensity war going on for 30 years where you send predator drones to bomb madrassas in Pakistan and kill dozens of people. Who cares?
Subrata Ghoshroy is a research associate in the Science, Technology and Society program at MIT. He directs a project to promote nuclear stability in South Asia.
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