.. in the world. Also, it’s dependent, unlike the United States — which has plenty of internal resources and enough military power to control other sources of raw materials — on trade for resources and raw materials as well. Also, the Japanese, when you look at the numbers, look very rich. But if you look at the way people live, they don’t look very rich.
People are crammed into tiny apartments. They live a highly coerced and submissive existence. If you develop any reasonable quality of life standards, Japan would not rank very high by many measures, although it ranks quite high in others, like health, for example. So it’s a mixed story. It think there are serious weaknesses in that economy.
I’m not all that surprised by the current recession and financial crisis in Japan. They have such resources and capital. They’ll doubtless pull out of this one. DB: Along with the Arab oil producing states and some portions of Europe, Japan seems to be the only other area where there is excess capital formation for investment. There is a lot of excess capital, but it’s not clear what it’s going to look like after this crisis has passed.
A lot of it was based on very chancy investments and a huge bubble in real estate which was highly inflated. But it’s still true. They have plenty of excess capital. In my opinion, German-based Europe is a more likely prospect for a world economic leader in the long term. DB: You just said crisis, which reminds me of something I’ve been hearing as long as I can remember, and I am certain you have as well, the current crisis in capitalism.
It seems to be an ongoing story. Is this particular crisis any different? There has been a global stagnation for about twenty years now. The growth rates and the rise in productivity of the 1950s and 1960s are things of the past. It leveled off around the early 1970s. Things like the breakdown of the Bretton Woods system were symptomatic. Since then there has been a kind of stagnation. It’s not level across the globe.
For example, for Africa it’s been a catastrophe. For Latin America it’s been a catastrophe. In fact, for most of the domains of the capitalist world it has been absolutely catastrophic, including internally. Large parts of American and British society have suffered severely, too. On the other hand, other sectors have done quite well. The so-called newly industrializing countries of East Asia, the ones in the Japanese orbit, like South Korea and Taiwan, didn’t succumb in the 1980s to the international crisis of capitalism as Latin America did.
Up until then their growth rates had been pretty comparable. But they separated sharply in the 1980s, with the East Asian ones doing much better. Again, nobody really knows the reasons for this, but one factor appears to have been that, unlike Latin America, the East Asian countries don’t make any pretense of following free-market rules. Capital flight was a huge problem in Latin America. The wealthy just sent their capital elsewhere, or else it was just payment on debt. East Asian countries didn’t do that.
South Korea has no capital flight problem because the state is powerful enough not only to control labor, which is the norm, but also to control capital. You can get the death penalty for capital flight. Other forms of state-corporate managed industrial and financial development did protect them from this global crisis of capitalism. Within the rich countries there were various reactions. The United States and Britain are probably the ones that suffered most from it, thanks to Reaganite and Thatcherite measures.
Whether you call this a crisis or not, it’s not a well enough defined term so you can answer the question. For a very large part, probably a considerable majority, of the American work force, real wages have either stagnated or maybe even declined for about a twenty-year period. DB: The decline of major U.S. industries, such as auto, textiles, electronics, etc., is well documented. It’s not even a matter of discussion. The fastest area of growth in jobs in the U.S.
is in such areas as janitors, waiters, truck drivers. Actually, the fastest growing white collar profession is security guard. DB: What does that tell you? It means that there is a large superfluous population that has to be controlled and a large number of rich people who have to be protected from them. DB: Is there any economic strategy or planning to create real jobs with decent wages? For U.S. workers? Why should there be? DB: It would seem that elites would want to protect their position.
But their position does not rely primarily on U.S. labor. They do want to have a domestic work force for services, but production is a different matter. DB: But if there’s major economic dislocation in this country, unrest would surely result and their position of power and strength would be threatened. That depends on whether you can keep the public under control.
For example, the Washington Post reported on a study about black males in Washington, D.C. DB: Forty-six percent of all black males between 18 and 35 are incarcerated in the District of Columbia. I think they say at any particular moment about seventy percent of them are somehow within the control of the justice system, on probation, etc. That’s a way of keeping people from bothering us: keep them in jail. If they’re not useful for wealth production they have to be controlled somehow.
But it’s not clear that that’s a threat to the elites in the Washington area. Or take New York City, which is an absolute disaster. But you can walk around wealthy sectors of downtown Manhattan that look very glitzy and cheery. DB: Prison construction in the U.S. is one of the fastest growing industries.
Yes. The U.S. has by far the highest per capita prison population in the world. Even things like the drug epidemic are functional in a way. I’m not claiming that the government starts it for this purpose. Things go on because they have certain functions for elite groups that set policy. One effect of the so-called drug war, which has very little to do with controlling drugs and a lot to do with controlling people, has been to create a huge explosion in the prison population.
Anybody who works with prisons will tell you that a very substantial part of the prison population is people who are in there for possession, not for harming anyone. That’s a technique of control. Whether it’s an economical technique of control you could argue. Look how much it costs to control people by putting them in prison and having them on drugs and therefore not bothering you or having them shooting and robbing each other in inner cities. How that compares with other techniques of social control would be a hard question to answer. However, to go back to your original question. If you were a wealthy professional or corporate executive living in Westchester County, there are certain things you want.
You want a comfortable environment, a golf course, to be able to go to the theater in downtown Manhattan. You want your executive offices to be in good shape. You want fancy restaurants around. You want to be able to leave your limousine somewhere without having it broken into. You want good schools for your children.
You want a powerful army to protect your interests. You want a skilled work force insofar as you need it. But much of what happens in this country is of no interest to you. If most of the country goes down the tube, that’s no big problem. DB: I love your comment ‘Ultimately’ is a notion that does not occur in capitalist planning. Why not? First of all, there are no capitalist systems.
If there were a capitalist system it couldn’t survive for more than a couple of weeks. The only capitalist systems are the ones that are imposed on Third World countries for the purpose of weakening them so that they’ll collapse and be taken over by the rich. But there are systems that are more or less capitalist. The more capitalist they are, that is, the more competitive, and less planned and integrated, the more they will tend towards short-term gains. That’s inherent in the system. To the extent that a system is competitive and unplanned, those participating in it will be devoting their resources, both intellectual and capital, to short-term gain, short-term profit, short-term increase in market share.
The reasons for that are pretty straightforward. Let’s imagine that there are three car companies: Ford, General Motors, and Chrysler. Let’s say they’re really competitive. Then suppose that General Motors decided to put its resources into dealing with problems of global pollution or even trying to produce better cars ten years from now that would be better than those of Ford and Chrysler. At the same time its competitors Ford and Chrysler would be putting their resources into increasing profits and market share tomorrow, next month, next year. During that period, General Motors would be out of luck.
They wouldn’t have the capital and the profits to carry out their plans. That’s exactly why in countries like Japan in the 1950s, the ministry that directed and organized the Japanese economy, together with the big corporate conglomerates, explicitly and openly decided to abandon free-market illusions and to carry out national industrial planning aimed at Japanese development in strategic sectors with high long-term potential. In newly developing industries, the industries of the future, the startup costs can be quite considerable. Profit doesn’t come for some time. In a competitive, more capitalist society, you’re out of luck.
But in a more managed society you can deal with that. There are many well-known free-market inadequacies that typically lead capitalist entrepreneurs to call upon the state to intervene for their benefit. In Japan this led to a conscious decision to carry out substantial, organized, planned interference with the market mechanism so that the economy could prosper. Questions of pollution are perfect examples. If one company tries to devote resources to effects on the environment, they will simply be undercut by other companies which are not doing it.
Therefore they will not be in a position to compete in the market. These are matters which are inherent in our capitalist systems. There were experiments with laissez faire in Britain in the nineteenth century, when people actually took their own rhetoric seriously. But they pretty quickly called it off. It’s too destructive.
DB: So you’re saying that this class of managers is impervious to the bridges literally collapsing on the homeless and tunnels bursting under the city of Chicago? Not because they’re bad people, but because if they stopped being impervious to it they wouldn’t be managers any more. Suppose that the CEO of some big corporation decides he’s going to be a nice guy and devote his resources from that corporation to the homeless people under the bridges that are falling down or to global pollution. DB: He’s out of a job. He’s out of a job. That’s inherent in the system.
These are institutional facts. If you want to watch this at its more extreme limits, you should take a look at the World Bank plans on pollution. These recently surfaced. One of my favorite issues of the New York Times must have been February 7, back in the business section. There was a report called something like Can Capitalism Save the Ozone Layer? Ozone being a metaphor for saving the environment.
The question was whether capitalism could save the environment. That was a story by their financial correspondent Sylvia Nasser. The World Bank had come out with a consensus report for the rich countries on a position to take at the Rio conference in June on the global environment. It was written by Lawrence Summers, the chief liberal economist from Harvard. The idea is that the rich countries should take the position, led by the World Bank, that the problem of pollution is that the poor countries, the Third World, don’t follow rational policies.
Rational means market policies. Many of them are resource and raw material producers, energy producers, and they sometimes try to use their own resources for their own development. That’s irrational. That means that they’re using resources for themselves, often at below market rates, when there are more efficient producers in the West who would use those resources more efficiently. That’s interference with the market.
Also, these Third World countries often introduce some measures to protect their own population from total devastation and starvation, and that’s an interference with the market. It’s an interference with rational market policies. The effect of this Third World irrationality is to increase production in places where it shouldn’t be taking place, to increase development in places where it shouldn’t be going on, and that causes pollution. So if we could only convince those Third World countries to behave rationally, that is, to give all their resources to us and stop protecting their own populations, that would reduce the pollution problem. This document was produced with a straight face. It happened that on the same day on the same page of the New York Times there was a little article, unrelated, about a World Bank memo, an internal memo, that had leaked.
It had been published by the London Economist, a right-wing British Wall Street Journal, but weekly. It was written by the same Lawrence Summers. The Times had a brief, slightly apologetic summary of it, including an interview with Summers in which he claimed it was intended to be sarcastic. The World Bank memo added to what I have just said about Third World irrationality. It said that any kind of production is going to involve pollution. So what you have to do is to do it as rationally as possible, meaning with minimal cost.
So suppose we have a chemical factory producing carcinogenic gases that are going into the environment. If we put that factory in Los Angeles, we can calculate the number of people who will die of cancer in the next forty years. We can even calculate the value of their lives in terms of income or whatever. Suppose we put that factory in Sao Paulo or some even poorer area. Many fewer people will die of cancer because they’ll die anyway of something else, and besides, their lives aren’t worth as much by any rational measure.
So it makes sense to move all the polluting industries to places where poor people die, not where rich people die. That’s on simple economic grounds. Combine that with the other document. What it says is that the Third World should stop producing and protecting its own population because that’s irrational. We should send our polluting industries to them because that is rational. Summers in this memo points out that you might have counterarguments to this based on human rights and the right of people to a certain quality of life.
But he points out that if we allowed those arguments to enter into our calculations, then just about everything the World Bank does would be undermined. That’s quite accurate. That’s supposed to be a reductio ad absurdum. Obviously we can’t undermine everything the World Bank does, so obviously we can’t allow such considerations to enter. We consider only economic rationality, of course geared to the interests of the World Bank.
That’s what you do with pollution. Try to convince the Third World to stop producing and to stop protecting their own population and to accept our pollution. It’s all perfectly explicable on rational economic grounds. Any graduate student in economics can prove it to you. DB: Apropos of this blindness of the planners: you have a fantasy .. It’s not blindness.
I think it’s very reasonable on their part. DB: Within their framework. Yes. DB: You tell of a fantasy that involves the Wall Street Journal and the greenhouse effect. Someone asked me once and I simply said that if I had the talent, which I don’t, I would write a short story about the Wall Street Journal.
I suppose their offices are on the seventeenth floor of some New York skyscraper. They’re sitting there in that office putting out an issue of the Wall Street Journal claiming once again that the greenhouse effect is just a fraud invented by left fanatics. As the issue goes to press the water level would have risen to that point and you could hear them gurgling as they start the printer running. That’s about what it’s like. DB: Let’s talk about organized labor unions in the United States. Only fifteen or sixteen percent of the total U.S.
work force is now unionized, far below, perhaps by half or even more, what it was decades ago. This is the era of givebacks, benefits reductions, skipping, deferring or eliminating raises. Does organized labor really have a positive, progressive role to play? It should, but it’s in a very weakened state. It’s been weak for a long time, but it was smashed during the 1980s. It started with Reagan’s success in breaking the air-traffic controllers’ strike, and it’s continuing until today.
The UAW just lost a serious strike at Caterpillar. Their strategy has been so overcome by class collaboration — We nice guys work together with management — that when the crisis came at Caterpillar they were probably unprepared. They were simply wiped out. At this point Caterpillar probably won’t even live up to the terms of the latest agreement. It seems to be continuing to lock them out.
These are serious blows to the labor movement, and that means to American democracy, but they’re much to the benefit of the small sectors that are enriching themselves. Does labor have a part to play? It depends on whether working people can get their act together and rebuild the labor movement and turn it into a powerful force for both people’s rights and democracy as it once was. It’s going to have to be rebuilt from the bottom up. Labor’s role has declined significantly since the 1940s. They’re not unaware of it.
Doug Fraser, the former head of the UAW, pointed out almost fifteen years ago that there has been a bitter, one-sided class war led by American capitalists fighting against labor, while labor, meaning labor bureaucrats, have been seduced by class-collaboration slogans. They’re not fighting a class war. The effect of a bitter, one-sided class war is very evident. DB: The New York Times, in talking about the economic woes, says There is little mystery about what caused the economic problems. The country is suffering a hangover from the mergers, rampant speculation, overbuilding, heavy borrowing and irresponsible government fiscal policy in the 1980s.
How well did the Times and its brethren in the media during this period of economic dislocation and decline actually cover the events and give the American people information that they could act upon? The Times isn’t in the business of giving the American people information they can act upon. They hailed the Reagan revolution and its achievements. There were sectors of the population that profited marvelously, including the corporate sectors, of which the Times is a part. They couldn’t fail to see that there are social costs. You can’t walk around New York City and not see that there are severe social costs, so they probably saw it too. But this was considered as a glorious period of success.
There were people who were upset about it. Take a look at, say, Mondale’s funding in 1984: a lot of it was from fiscal conservatives who were worried about the long-term effects to their own interests of this kind of mad-dog Keynesianism, wild crazed spending, and government stimulation of the economy through borrowing that was going on through the Reagan years. People could see that that was going to be very problematic for the economy. Take what’s just happened in Chicago. The estimates of the costs of fixing those leaks in the underground tunnels might have been at the level of $10,000.
They didn’t fix them because they wanted to save the $10,000 as part of the cutback in civic services. The net effect will be a loss of maybe over a billion dollars or more. That’s a loss to private capital, too. DB: But compared to the S&L bailout that’s peanuts. Yes, the S&L bailout is much bigger than that. Chicago is just one piece of a growing disaster.
Spending on infrastructure has declined radically in the last ten years, and that’s going to have its costs. What happened in Chicago is going to happen all over the place. DB: It can’t help but affect even the elites. The area that was flooded .. And it’s hurting them in Chicago.
Chicago businesses are suffering. Insurance companies are going to suffer. DB: They’re not going to like that. No, but there’s not a lot that they can do about it except to accept more long-term, integrated state corporate planning. There are other possibilities, like democracy, but nobody’s going to talk about that. DB: Yeah, right. And maybe there will just be more slogans like belt-tightening and austerity and biting the bullet as opposed to genuine economic policy.
There is genuine economic policy, but it’s geared to the short term economic interests of the rich. It’s very genuine. And there’s plenty of state intervention for that purpose. Take the Pentagon budget. That’s massive state intervention in the economy for the benefit of the rich.
That’s what keeps the electronics industry going, for example. Go to the next section. Philosophy.