Please make your comment after we make our decision

Taking a page from their United States counterparts, European Union trade negotiators apparently interpret the word “consultation” as a synonym for “ignore.” Fresh evidence for this attitude toward the public was provided thanks to a leak of the final text of the proposed “free trade” agreement between Canada and the EU.

Although the E.U. trade office, the European Commission Directorate General for Trade, promotes a process of public consultation on its web site, it isn’t the public who gets listened to. The final text of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) includes language mirroring corporate wish lists unchanged from previous drafts despite the fact that the E.U. trade office has not had time to analyze comments submitted by the public.

This farce of a “consultation” process mirrors the secretive negotiations in the better known Trans-Pacific and Transatlantic trade agreements. Corporate lobbyists are well represented in these talks, but the public, watchdog groups and even parliamentarians and legislators are barred from seeing the text. The CETA text is also secret, but was leaked by the German television news program Tagesschau, which published the entire 521-page document on its web site. Yep, 521 pages.

The Rideau Canal in Ottawa (photo by John Talbot)

The Rideau Canal in Ottawa (photo by John Talbot)

Critical to understanding the CETA text is Section 33, the portion simply labeled “dispute settlement.” Under that bland heading a reader finds the muscle — what is known as an “investor-state dispute mechanism.” These “mechanisms,” found in many bilateral and multilateral trade deals, are corporate-dominated secret tribunals that hand down one-sided decisions with no oversight, no public notice and no appeals. Governments that agree to these mechanisms legally bind themselves to mandatory arbitration with “investors” in these secret tribunals on which most of the judges are corporate lawyers who represent the “investors” in other legal proceedings.

Kenneth Haar, a spokesman for the watchdog group Corporate Europe Observatory, in an interview with the EurActiv news site, called the dispute mechanism “an outright danger to democracy,” and said:

“The Commission is not really serious about its own consultation. It’s more about image than substance. … I think those who chose to respond to the Commission’s consultation are being ridiculed.”

Decisions will be final and unaccountable

Employing the standard sweeping language, CETA’s Article 14.2 (the articles here are numbered “14” even though they are found in Section 33) states: “[T]his Chapter applies to any dispute concerning the interpretation or application of the provisions of this Agreement” [page 472]. Article 14.10 goes on to declare, “The ruling of the arbitration panel shall be binding on the Parties. … The panel shall interpret the provisions referred to in Article 14.2 in accordance with customary rules of interpretation of public international law” [page 476].

“Customary” international law is whatever one of these secret tribunals says it is. Environmental regulations, “buy local” laws or any other government action that a corporation claims will hurt its profits can be, and frequently are, ruled illegal by these tribunals when adjudicating disputes under existing trade agreements. Such rulings set precedents that become “customary” international law.

In case these “customary” laws are not clear, on page 480 of the CETA text is Article 14.16, which would supersede national law:

“No Party may provide for a right of action under its domestic law against the other Party on the ground that a measure of the other Party is inconsistent with this Agreement.”

Your law was passed in a democratic process? Too bad — it will be overruled if an “investor” doesn’t like it.

CETA’s proposed rules are consistent with what is being secretly negotiated in the Transatlantic Trade and Investment Partnership between the U.S. and E.U., and in the Trans-Pacific Partnership being negotiated among 12 Pacific Rim countries. A majority of the world’s economy would be removed from any possibility of democratic control should these three trade deals come into effect.

The watchdog group Council of Canadians warns:

“The Harper government has thrown Canadian municipalities under the bus, forever banning ‘buy local’ and other sustainable purchasing policies that help create jobs, protect the environment and support local farmers and businesses. The Harper government has also agreed to lengthen patents and give new monopoly protections to already profitable brand name drug companies, which will needlessly add hundreds of millions to the cost of prescription drugs in Canada.”

Not even water would be exempt. If a water system is privatized and a local government chooses to re-municipalize it because rates have risen while service declines (as has routinely occurred on both sides of the Atlantic), the investor would be able to hold out for an extra windfall under the terms of the trade deal.

Only corporate lobbyists need apply

Although the public, and public-interest groups, are not heard, corporate lobbyists are. For example, there are 605 “advisers” with access to the text of the Trans-Pacific Partnership and who shape U.S. negotiating positions. Virtually every one is an executive of a multi-national corporation or a corporate lobbyist working for an industry association.

It is little different in Europe. Corporate Europe Observatory reports that 92 percent of the closed-doors meetings of the E.U. trade office have been with corporate lobbyists, while only four percent have been with public-interest groups. The trade office has gone so far as to actively solicit the involvement of corporate lobbyists. That perspectives other than those of multi-national capital are not considered can be inferred from the very way public input is solicited, the Observatory said:

“How would the average citizen respond to questions such as: ‘If you are concerned by barriers to investment, what are the estimated additional costs for your business (in percentage of the investment) resulting from the barriers?’ So, clearly, the close involvement of business lobbyists in drawing up the EU’s position for the [Transatlantic Trade and Investment Partnership] talks is a result of the privileged access granted to them.”

It’s no different for CETA, and the same dynamic exists across the Atlantic. Former U.S. Trade Representative Ron Kirk once admitted that if people knew what was in the Trans-Pacific Partnership, it would never pass. It is important to remember that these massive “free trade” deals are not simply business as usual — they go well beyond even the draconian rules of the North American Free Trade Agreement.

So although the competitive pressures of each country attempting to give an advantage to its multi-national corporations does mean that maneuvering through differing interests requires lengthy negotiations — not to mention the sometimes conflicting interests of various industries — at bottom there is a unifying class interest in the overall project. It is true that the U.S. adopts the hardest line in the trade negotiations it participates in (before we even get to the military muscle it applies to force open Southern countries), yet the absence of the U.S. from a Canada-European Union trade deal has made no practical difference to its outcome.

That different countries, different administrations, reach similar one-sided “free trade” agreements in which “investors” are allowed to overrule national laws, and labor, safety and environmental regulations are “harmonized” at the lowest level, is a product of capitalist competition. The rigors of that structural competition mandate expansion and growth — as local markets mature, capital has no choice, if it is to survive relentless pressure from competitors, other than opening new markets and relentlessly cutting costs to maintain profit levels. “Free trade” agreements represent one of the most effective ways to accomplish that.

Popular revolts against these agreements must be continued, and strengthened, but there will be no end to them as long as economic and social decisions are allowed to be made by “markets,” which are not disembodied entities sitting dispassionately on an Olympian throne but rather are the aggregate interests of the most powerful industrialists and financiers.

When water is a commodity instead of a human right

The shutoff of water to thousands of Detroit residents, the proposed privatization of the water system and the diversion of the system’s revenue to banks are possible because the most basic human requirement, water, is becoming nothing more than a commodity.

The potential sale of the Detroit Water and Sewerage Department is one more development of the idea that water, as with any commodity, exists to produce private profit rather than to be a public necessity. And if corporate plunder is to be the guiding principal, then those seen as most easy to push around will be expected to shoulder the burden.

Thus, 17,000 Detroit residents have had their water shut off — regardless of ability to pay — while large corporate users have faced no such turnoff. The Detroit Water and Sewerage Department began its shutoff policy in March with a goal of shutting off the water to 3,000 accounts per week. Residents can be shut off for owing as little as $150. That is only two months of an average bill.

Water is a human right, the people of Detroit say. (Photo by Moratorium NOW! Coalition to Stop Foreclosures, Evictions, amd Utility Shutoffs)

Water is a human right, the people of Detroit say. (Photo by Moratorium NOW! Coalition to Stop Foreclosures, Evictions, and Utility Shutoffs)

Detroit water rates have more than doubled during the past decade, according to Left Labor Reporter, and in June another 8.7 percent raise was implemented. Yet only in July, months after residential water shutoffs began, did the water department announce it would send warning notices to delinquent businesses. There is no report, however, that any business has had its water turned off.

About half of the city’s overdue water payments are owed by commercial and industrial customers. Forty offenders, according to the department, have past-due accounts ranging from around $35,000 to more than $430,000. One golf course operator is said to owe hundreds of thousands of dollars.

The same week that the residential water shutoffs began, Detroit Emergency Manager Kevyn Orr put the water department up for sale. The department takes in about $1 billion in revenue per year, The Wall Street Journal reports, and collects more revenue than it spends. The system would potentially be a valuable asset for one of the multi-national corporations that have taken over privatized water systems around the world, mostly to the regret of the local governments and ratepayers.

Reversing the privatization of water

If Emergency Manager Orr succeeds in selling off Detroit’s water system, he will be bucking a trend. Dozens of cities in France and Germany have reversed earlier privatizations and are taking back their water systems after finding that higher prices and reduced services had been the norm post-privatization. French private water prices are on average 31 percent higher than in public water services. Five Pennsylvania towns that privatized their water saw their rates more than triple on average.

That rate differential shouldn’t come as a surprise — a government doesn’t need to generate a profit like a corporation. A water company, like any other capitalist enterprise, is expected to generate large profits for its investors and giant payouts to its executives, and thus must extract more money out of its property.

If the water system is privatized, Detroit’s city budget will receive a one-time boost, but forgo future revenues and lose control of a public good built with public money. Nor is there any guarantee that it would be sold at market value. A utility undervalued would produce quicker profits for any water company that got its hands on it, and every incentive is for it to be bought at as low a price as possible.

Banks, however, have already extracted huge profits from Detroit’s infrastructure. The water department is believed to have paid banks penalties of $537 million to escape its disastrous interest-rate default swaps. Instead of simply selling plain-vanilla bonds — paying bond holders a set amount on a set schedule — Detroit (like many municipal governments) became entangled in various complicated financial derivatives layered on top of its bonds.

Investment banks sold local governments interest-rate swaps as a form of insurance as a hedge against rising interest rates. But if interest rates went down — which they did — then the governments would be on the hook for large sums of money. (That rates would fall was predictable; central banks cut interest rates as a matter of routine during recessions.) Thanks to financial engineering falsely sold as “insurance,” the Financial Times reports it will cost Detroit $2.7 billion to pay back $1.4 billion in borrowing — this total includes $502 million in interest payments and $770 million as the cost of the derivatives.

The $537 million the Detroit water department handed to banks to escape continued extra payments to cover the swaps is more than four times the entire past-due water bill, residential and commercial, at the start of the water shutoffs in March.

Not so quick to challenge the banks

Yet there appears to be no effort to recoup any of that penalty money or to investigate if there was any illegality in the deals. Curt Guyette, writing for a Detroit alternative publication, Metro Times, said:

“Given the fact that former Mayor Kwame Kilpatrick, who is now is serving a decades-long sentence in federal prison for running the city as if it were a criminal enterprise when these deals went down, [was then in office] it doesn’t seem unreasonable to at least suspect that something shady might have been going on.

Nonetheless, Orr and the legal team from [corporate law firm] Jones Day — where Orr was a former partner, and which has as clients both Bank of America and a division of UBS — have, as the complaint [filed in federal court by community activists] points out, ‘failed to investigate the misconduct or take measures to recoup any portion of the $537 million in suspect termination fees paid to the banks.’ ”

Both Bank of America and UBS profited enormously from the interest-rate swaps. Emergency Manager Orr does not seem terribly bothered by democratic processes, however. He is going ahead with a separate plan to privatize Detroit’s parking department despite the fact that the City Council voted, 6-2, against it. The Detroit Free Press reports that the parking system generates $23 million in revenue with only $11 million in expenses. This would be another revenue stream leaving public hands, and the same needs of a private owner to generate profits would be expected to lead to the same results that privatizations of water systems and other public services have led.

The people of Detroit are fighting back, through demonstrations, lawsuits, appeals to the United Nations and in physically blocking crews assigned to turn off the water. Water is also being turned back on without asking for permission from authorities. Activists demand the immediate resumption of water service for everyone and to make water affordable. Detroit Debt Moratorium, for example, is calling for water bills to be capped at two percent of household income.

These efforts have borne some fruit as Emergency Manager Orr issued an order handing Mayor Mike Duggan managerial control over the water department in late July. The department subsequently declared a moratorium on water shutoffs until August 25.

A commodity is privately owned for the purpose of profit, regardless of human need; that the commodity is something as necessary as water does not alter that a commodity goes to those who can pay the most. The market determines who gets what, or if you get it at all — and the market is simply the aggregate interests of the most powerful industrialists and financiers. The agony of Detroit is the logical conclusion of reducing social and economic decisions to market forces. Detroit just happens to the be the locality that got there first.

We cannot shop our way out of environmental crisis, ‘green’ or not

Eight weeks ago, I wrote about the delusions of “green capitalism,” that there is no alternative to a dramatic change in the organization of the global economy. That led to a vigorous discussion, and I thank all of you who contributed to it.

This week, I’d like to return to this theme, in the form of discussing an interesting paper that I could then only quote briefly. The paper, “Green capitalism: the god that failed,” by Richard Smith of the Institute for Policy Research & Development in London, packs a powerful argument into its 33 pages. The paper was published in issue No. 56 (March 2011) of Real-World Economics Review. (That a publication for non-orthodox practitioners needs to take such a name speaks volumes of the field as a whole.) The author’s basic theses are:

  • “Green capitalism” is “doomed from the start” because maximizing profit and environmentalism are broadly in conflict; the occasional time when they might be in harmony are rare exceptions and temporary. This is because the managers of corporations are answerable to private owners and shareholders, not to society. Profit maximization trumps all else under capitalism and thereby sets the limits to ecological reform.
  • No capitalist government can impose “green taxes” that would force out of business the coal industry or any other because the result would be recession and mass unemployment. Without carbon or other “green” taxes, the “entire green capitalist project collapses.”
  • Green-capitalism proponents vastly underestimate the speed with which environmental collapse is coming. No amount of tinkering can alter the course of environmental destruction under the present system. Humanity, therefore, must replace capitalism with a post-capitalist ecologically sustainable economy.
  • Resource extraction is inherently polluting but can’t be shut without chaos. It is not possible to “dematerialize” much of the economy as green-capitalism proponents believe possible. The only way to reduce greenhouse-gas emissions is to “enforce a drastic contraction of production in the industrialized countries.” Such a thing is not possible in capitalism because the affected industries would be committing suicide to agree to this and nobody would promise jobs to those displaced; this could only be carried out through a socialization of industry and a redeployment of labor to sectors that need to be developed for social good.
  • Consumerism and over-consumption are not “cultural” or the result of personal characteristics — they are a natural consequence of capitalism and built into the system. Problems like global warming and other aspects of the world environmental crisis can only be solved on a global level through democratic control of the economy, not by individual consumer choices or by national governments.

Cap-and-trade equals profits by polluting

European attempts to implement “cap and trade” schemes to limit greenhouse-gas emissions were countered from the start by industry lobbyists asking for exceptions because, they argued, they would lose competitiveness, and some threatened to move elsewhere, taking jobs with them. Governments gave in. Polluters and traders took in windfall profits, with no real effect on emissions. Dr. Smith wrote:

“German electricity companies were supposed to receive 3 percent fewer permits than they needed to cover their total emissions between 2005 and 2007, which would have obliged them to cut emissions by that amount, instead the companies got 3 percent more than they needed — a windfall worth about $374 billion at that time.” [page 119]

A proposal to directly tax carbon in France, proposed by the administration of Nicolas Sarkozy, was ruled unconstitutional because most of France’s major polluters would have been let off the hook entirely while households would have assumed the burden. Dr. Smith put the farce of this failed proposal in perspective:

“The court said that more than 1,000 of France’s biggest polluters could have been exempted from the charges, and that 93 percent of industrial emissions would not have been taxed at all. But even if Sarkozy had successfully imposed his carbon tax, this tax would have raised the price of gasoline by just 25 US cents per gallon. Given that the French already pay nearly $9 per gallon for gasoline, it’s hard to see how an additional 25 cents would seriously discourage consumption let alone ‘save the human race.’ ” [page 120]

A part of Moofushi's bleached coral reef (Alifu Dhaalu Atoll, Maldives), damaged by warming sea temperatures.  (Photo by Bruno de Giusti)

A part of Moofushi’s bleached coral reef (Alifu Dhaalu Atoll, Maldives), damaged by warming sea temperatures.
(Photo by Bruno de Giusti)

Some advocates of cap-and-trade or carbon taxes in the United States try to get around industry pushback by advocating they be made “revenue-neutral.” But if “carbon tax offsets are revenue neutral, then they are also ‘impact neutral,’ ” Dr. Smith writes. That brings us back to the reality that imposing drastic cuts would be the only way to effect the significant reductions in greenhouse-gas emissions necessary to prevent catastrophic global warming in coming decades. That, in turn, can’t be done without massive dislocation.

Yet reductions are not only necessary, but will be required by physical limits — the world’s population is using the resources at the rate of 1.5 Earths and the United Nations predicts we’ll be using two Earths by 2030. Moreover, if all the world’s peoples used resources at the rate that the United States does, “we would need 5.3 planets to support all this.” Needless to say, we have only one Earth available.

More efficiency leads to move consumption

One of the pillars on which green capitalists rest their advocacy is increased efficiency of energy usage, achieved through technological innovation. But energy usage has been increasing, not decreasing, despite greater efficiencies wrung out of a range of products. Gains in efficiency can, and frequently are, used to expand production; given that capitalist incentives reward expansion, that is what is done. Moreover, “green” industries are not necessarily green. The “god that failed” paper points out:

“Even when it’s theoretically possible to shift to greener production, given capitalism, as often as not, ‘green’ industries just replace old problems with new problems: So burning down tracts of the Amazon rainforest in order to plant sugarcane to produce organic sugar for Whole Foods or ethanol to feed cars instead of people, is not so green after all. Neither is burning down Indonesian and Malaysian rainforests to plant palm-oil plantations so Britons can tool around London in their obese Landrovers.” [page 128]

Making motor vehicles more fuel-efficient, although a goal that should be pursued, nonetheless falls far short of a solution. Fuel usage from the increasing number of vehicles and longer distances traveled are greater than all the savings from fuel efficiency. And focusing on only when the vehicle is being driven leaves untouched most of the pollution caused by them, Dr. Smith writes:

“Most of the pollution any car will ever cause is generated in the production process before the car even arrives at the showroom — in the production off all the steel, aluminum, copper and other metals, glass, rubber, plastic, paint and other raw materials and inputs that go into every automobile, and in the manufacturing process itself. Cars produce 56 percent of all the pollution they will ever produce before they ever hit the road. … [S]o long as [automakers] are free to produce automobiles without limit more cars will just mean more pollution, even if the cars are hybrids or plug-in electric cars.” [page 131]

Those electric vehicles are only as “clean” as the source of electricity used to power them. Many plug-in electric vehicles are coal-powered vehicles because coal is a common source of electricity. Looking at it holistically, such an electric vehicle would be more polluting than a gasoline-fueled vehicle; and the majority of the pollution from the manufacturing (for the vehicle itself) would be there just the same. Then there is the pollution and greenhouse-gas emissions of the electric-car battery. Nickel is a primary input; the Russian city that is the site of the world’s largest source of nickel, Norilsk, is one of the world’s most polluted places.

“I would not be surprised if the most ecological cars on the planet today are not those Toyota Priuses or even the Chevy Volts with their estimated [seven- to 10-year] lifespan, but those ancient Fords, Chevrolets, and Oldsmobiles cruising round the streets of Havana. For even if their gas mileage is lower than auto-producer fleet averages today, they were still produced only once, whereas American ‘consumers’ have gone through an average of seven generations of cars since 1960 (when the U.S. embargo ended car imports to Cuba), with all the manufacturing and disposal pollution that entailed.” [page 133]

Consumerism props up capitalist economies

Planned obsolescence is part of the problem, across the spectrum of manufactured products. Capitalist manufacturers don’t want products that last a long time; repeatedly selling new products is far more profitable. But it would be overly simplistic to lay full blame for this on greed, however much greed is rewarded by a capitalist economy. Household consumption — all the things that people buy for personal use from toothbrushes to automobiles — accounts for 60 to 70 percent of gross domestic product in almost all advanced capitalist countries. If people aren’t buying things, the economy struggles.

Proponents of green capitalism fail to grasp the structural causes of over-consumption. However much better for the environment, and the world’s future, drastic reductions in consumerism would be, moral exhortations can’t be effective. Trapped in an idealist mirage that capitalism can be “tamed” or “repurposed,” green capitalists, through seeking individual solutions to structural and systemic problems, not only miss the forest for the trees but leave the economic structure responsible untouched. People in the global North should consume less, but to place the blame on individual behavior lets the manufacturers of useless products off the hook and is blind to the economic realities should the system be left in place intact.

Once again, we can not shop our way out of economic and environmental problems. Even not shopping would bring its own set of problems, Dr. Smith writes:

“[H]ow can we ‘reject consumerism’ when we live in a capitalist economy where, in the case of the United States, more than two-thirds of market sales, and therefore most jobs, depend on direct sales to consumers while most of the rest of the economy, including the infrastructure and not least, the military, is dedicated to propping up this super consumerist ‘American way of life?’ Indeed, most jobs in industrialized countries critically depend not just on consumerism but on ever-increasing overconsumption. We ‘need’ this ever-increasing consumption and waste production because, without growth, capitalist economies collapse and unemployment soars. …

[I]t’s not the culture that drives the economy so much as, overwhelmingly, the economy that drives the culture: It’s the insatiable demands of shareholders that drive corporate producers to maximize sales, therefore to constantly seek out new sales and sources in every corner of the planet, to endlessly invent [new needs]. … ‘[C]onsumerism’ is not just a ‘cultural pattern,’ it’s not just ‘commercial brainwashing’ or an ‘infantile regression.’ … Insatiable consumerism is an everyday requirement of capitalist reproduction, and this drives capitalist invention and imperial expansion. No overconsumption, no growth, no jobs. And no voluntarist ‘cultural transformation’ is going to overcome this fundamental imperative so long as the economic system depends on overconsumption for its day-to-day survival.” [pages 141-142]

There is no way out other than replacing capitalism with a steady-state economy based on meeting human needs, and that could only be attained through bottom-up, democratic control. No one promises new jobs to those who would be displaced under capitalism; logically, then, those who jobs and ability to earn a living is dependent on polluting or wasteful industries resist environmental initiatives. The wholesale changes that are necessary to prevent a global environmental catastrophe can’t be accomplished under the present economic system; it would require a different system with the flexibility to re-deploy labor in large numbers when industries are reduced or eliminated, and one that would have no need to grow. Inequality would have to be eliminated for any kind of global democratic economy to be able to function.

Richard Smith pronounces this “a tall order to be sure.” That it is. But with many world cities, and entire countries, at risk of becoming inhabitable due to rising sea levels, more erratic weather and an accelerated timetable to deplete the world’s resources, what choice do we have? Green capitalism is not only not green, it is worse than illusion because of the false hope it dangles in front of our eyes.

Economists say solution to problems is more of the same

Neoliberalism is dead! Long live neoliberalism! Such is the contradictory message given by the OECD in its report on the global economy’s next 50 years.

Seemingly intent on providing yet more evidence that orthodox economics is a service for the one percent rather than a science, the report’s prescriptions are a mix of advocacy of more of the same policies that have brought the world to its present crisis with mild reforms that would be in direct opposition to the logical outcomes of those same policies and contradict the interests of the corporate beneficiaries of those policies.

The paper, “Policy Challenges for the Next 50 Years,” published by the OECD (the Organisation for Economic Co-operation and Development, a club of the the world’s most developed countries along with a few large developing countries), carries the caveat that it does not necessarily reflect the view of OECD member countries, but as it is presented as a “synthesis” of several earlier OECD studies, it is fair to consider the paper an authoritative representation of elite thinking.

(Mural by Ben Shahn)

(Mural by Ben Shahn)

Those elites, evidently, see difficulties ahead but believe the adoption of the right policies will allow everything to be just fine as we march into the second half of the 21st century with the world capitalist system intact and robust.

Perhaps the biggest contradiction, or perhaps an unwillingness to think through the implications, is the paper’s prediction of a steady decline in world economic growth, from an overall 3.6 percent (but only 1.2 percent for OECD countries) in the 2010-2020 decade to 2.4 percent (0.5 percent for OECD countries) in the 2050-2060 decade. Although the “Policy Challenges” paper never uses the word, or so much as hints at it, that is a forecast of another half-century of stagnation.

The implications of that stagnation are a sputtering economy, more unemployment and more inequality because capitalism is a system that requires growth. A system based on endless growth can’t function without it — slow growth (all the more so no growth) means misery for working people as the recent years of “recovery” from the 2008 economic collapse has demonstrated. That is so even without the austerity policies advocated by the “Policy Challenges” paper, which would only accelerate dislocation.

A lot of austerity and a little wishful thinking

Among the prescriptions the paper calls for are:

  • More and bigger “free trade” agreements, supported by “policies that favour … worker mobility (e.g. pension portability).”
  • “Enact social insurance reforms to maintain labour supply in the face of rising longevity and an ageing workforce.”
  • Push more of the costs of a university education onto students.
  • International coordination of intellectual property rights, greenhouse-gas emissions and taxation.
  • Adoption of policies to encourage renewable energy.
  • Phasing in higher capital requirements for banks and continued “accommodative” monetary policies.
  • “Flexible” labor markets that are “pursued in a way that cushions their potentially negative impact on equality.”

At first glance, the above list appears to be a somewhat eclectic mix of austerity and, shall we say, Keynesian lite (albeit with the emphasis on austerity). But the austerity measures fit snugly into current economic policy while the ameliorative measures are directly in opposition to not only current policy but the advocated austerity measures.

It is disingenuous to advocate more corporate globalization through more and bigger “free trade” agreements while at the same arguing for harmonization of taxation and environmental rules so as to avoid a race to the bottom. The very point of corporate globalization and, especially, “free trade” agreements is to take advantage of lower wages and lesser environmental and labor standards among different countries. We already are in a race to the bottom, fueled by existing “free trade” agreements, which “harmonize” downward.

The accompanying call for “pension portability” is code for privatizing public-retirement systems. It also presupposes that working people have pensions connected to their jobs, but in the United States that is a relic of the past for the vast majority of employees. At best, a worker might have a “defined contribution” plan such as a 401(k) that mostly relies on the employee’s own contributions and shifts the risks from employer to employee. A public retirement system has no need for “portability”; only a privatized system free of employer responsibility and job security does.

Bullet point number two above, in parallel with “pension portability,” is a polite way of advocating people work more years before being eligible for retirement and receive less money on which to retire. Bizarrely, the OECD paper rests its labor prescriptions on “labor shortages in the OECD” countries! Huh? The unemployment rate for the European Union, which includes most of the OECD countries, is 10.3 percent. The official U.S. unemployment rate is 6.1 percent, but the real rate is 12.1 percent. (The “U-6” figure including part-time workers needing full-time work and discouraged workers.)

The paper forecasts “income convergence between OECD countries and developing countries” in the coming decades (although it does not address if that will be an upward or a downward convergence) that “may dampen work-related migration flows, exacerbating labour shortages in the OECD” [page 26]. Completely missing are future flows of migrants escaping environmental damage from global warming. The paper sees global warming as no big deal, despite predicting that greenhouse-gas emissions will double from 2010 to 2060.

Although the paper does state that “rising greenhouse gas concentrations pose the most comprehensively global risk to economic output,” [page 30] it projects that the cut to global gross domestic product will be only 0.7 to 2.5 percent.

Oh, that’s right, it’s the “magic of the market”

The rosy future of a benign world of international convergence in which income inequality is entirely the product of differentiated skill levels depicted by the OECD paper rests on the neoliberal belief in “free trade” agreements. The paper asserts:

“Openness to trade is associated with higher incomes and growth. These benefits are transmitted through several channels: shifting production from low to high productive locations; relocation of factors of production towards sectors and firms with high productivity; and rising incomes due to an increase in market size that supports more specialisation, faster technology diffusion and stronger incentives to invest in ‘non-rival’ assets.” [page 34, citation omitted]

Reality is far different from these neoliberal fairly tales. Production has been shifted to “high-productive locations” only if we define those as locations in which the maximum possible amount of profit is extracted through the lowest wages and harshest working conditions. That is “productive” — for the industrialists and financiers who extract and pocket these profits.

That “free trade” agreements fill the pockets of capitalists while immiserating working people certainly accounts for much of the reason for the persistent promotion of them as job-building exercises, but not all of it. Ideology also plays a part. The economic models are based on the “magic of the market” that assume, inter alia, that capital and labor instantaneously react to changing conditions but never cross national borders; that market mechanisms will ensure full use of all resources; and that flexible exchange rates will prevent lowered tariffs from causing changes in trade balances.

In his recent book, Capitalist Globalization: Consequences, Resistance, and Alternatives, non-orthodox economics professor Martin Hart-Landsberg dismantled these arguments. He wrote:

“[T]his kind of modeling assumes a world in which liberalization cannot, by assumption, cause or worsen unemployment, capital flight or trade imbalances. Thanks to these assumptions, if a country drops its trade restrictions, market forces will quickly and effortlessly lead capital and labor to shift into new, more productive uses. And since trade always remains in balance, this restructuring will generate a dollar’s worth of new exports for every dollar of new imports. Given these assumptions, it is no wonder that mainstream economic studies always produce results supporting ratification of free trade agreements.”

That is still the case as seen in the unrealistic, propagandized boosterism for deals like the Trans-Pacific Partnership and more subtle but similar assumptions imbedded in the OECD “Policy Challenges for the Next 50 Years” paper. The paper, despite its embrace of more reliance on market forces as the “solution” to human development, is seemingly oblivious to the consequences of markets.

Market forces will call the tune, not wishful thinking

Calls for international coordination of taxation and governmental regulations, and for higher capital requirements for banks, fly directly in the face of what has and and will occur as a result of market forces — a race to the bottom. Capitalist markets are nothing more than the aggregate interests of the most powerful industrialists and financiers. “Free trade” agreements continually push rules more draconian, and facilitate monopolies on an international scale, because doing so benefits those interests. That is why these agreements are negotiated in secret, with full participation by corporate lobbyists while labor and environmental advocates are shut out.

To argue, as the final bullet point above does, that “flexible” labor markets should be “pursued in a way that cushions their potentially negative impact on equality” is oxymoronic. Just how are the falling wages and substitution of part-time work for full-time generated by labor “flexibility” not going to create a “negative impact” on equality?

(OECD projections of world economic growth. Graphic from "Policy Challenges for the Next 50 Years" paper, page 15, OECD)

(OECD projections of world economic growth. Graphic from “Policy Challenges for the Next 50 Years” paper, page 15, OECD)

The slowing growth forecast — in particular for the world’s mature capitalist countries, forecast to decline to 0.5 percent annually by mid-century and not average much above one percent per year during any other decade — contains serious implications. Again, that is a forecast of permanent stagnation. Under capitalism, gross domestic products must increase faster than the working population because of new machinery, computerization, work speedups and layoffs continually introduced by capitalists subject to relentless competitive pressures.

Economic growth of 2.5 percent is necessary simply to maintain the unemployment rate where it is and “substantially stronger growth than that” is necessary for a rapid decrease, according to a former White House Council of Economic Advisers chair, Christina Romer.

Capitalism already fails to produce jobs. Using International Labour Organisation figures as a starting point, professors John Bellamy Foster and Robert W. McChesney calculate that the “global reserve army” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) totals 2.4 billion. In contrast, the world’s wage workers total only 1.4 billion!

The stimulus to the global economy from the Internet has likely already run its course; thus it would take a future unforeseen technological breakthrough to provide growth on the scale of what was seen during much of the 20th century. The economist Robert J. Gordon, in a 2012 paper forecasting dwindling future growth, argued that this most recent period of innovation from computers focused on entertainment and communication devices, while earlier periods of innovation brought a rapid series of inventions that took upwards of a century to be fully realized, fueling long periods of growths.

A major effect of the mass introduction of computers was simply to shift commerce to online merchants from traditional ones. By contrast, the taming of electricity and the inventions of steam engines and automobiles powered development for long periods of time.

An economic system designed to meet human needs, rather than private profit, would have no need to grow. But as capitalism is designed for private profit, and requires continual growth to maintain itself, harsher austerity (and the force that will be necessary to implement it) is what is on offer by the world’s elites.

Corporate tax dodging another capitalist innovation

Competition takes many forms in capitalism. Financial engineering by corporations to avoid paying taxes is one aspect of this competition — under the rigors of market competition, evading responsibility is an innovation to be emulated.

The magnitude of tax evasion on the part of multi-national corporations through one channel — the shifting of profits to countries and territories with low or nonexistent taxes — was quantified earlier this month by the U.S. Public Interest Research Group Education Fund and Citizens for Tax Justice. Their study, “Offshore Shell Games 2014,” reports that the 500 largest U.S.-based multi-national corporations have squirreled away almost US$2 trillion in profits that lie untouched.

An estimated $90 billion a year in federal income taxes are not paid through the creative use of subsidiaries set up in offshore tax havens.

The Cayman Islands and Bermuda are favored locations, although other tax havens such as Hong Kong, Ireland and Switzerland are frequently used. The report illustrated the preposterous number of corporations with sham “offices” in the Cayman Islands:

“Ugland House is a modest five-story office building in the Cayman Islands, yet it is the registered address for 18,857 companies. … Simply by registering subsidiaries in the Cayman Islands, U.S. companies can use legal accounting gimmicks to make much of their U.S.-earned profits appear to be earned in the Caymans and pay no taxes on them. The vast majority of subsidiaries registered at Ugland House have no physical presence in the Caymans other than a post office box. About half of these companies have their billing address in the U.S., even while they are officially registered in the Caymans.” [page 4]

Ugland House in the Cayman Islands. Almost 19,000 companies are located in this building.

Ugland House in the Cayman Islands. Almost 19,000 companies are located in this building.

The Cayman Islands has a corporate tax rate of zero. Not a cent. The government there raises revenue through taxes on imports (thus a consumption tax for the people who live there as virtually everything must be imported), but, as an added bonus should any corporate executive stop by to visit the company post office box, luxury goods such as diamonds are exempted. Bermuda also has no corporate tax.

U.S. tax laws allow profits earned abroad to remain untouched until the money is brought into the country. Profits booked in other countries are instead subject to the local tax rate, even if zero. Accounting, rather than geography, often controls what constitutes “offshore” profits, however. The “Offshore Shell Games 2014” study reports that:

“Many of the profits kept ‘offshore’ are actually housed in U.S. banks or invested in American assets, but registered in the name of foreign subsidiaries. A Senate investigation of 27 large multinationals with substantial amounts of cash supposedly ‘trapped’ offshore found that more than half of the offshore funds were invested in U.S. banks, bonds, and other assets.” [page 5]

Corporate money is “off shore” if the corporation says it is

A 2013 report in The Wall Street Journal revealed that many corporations, including Microsoft Corp. and Google Inc., “keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities.” Under federal tax law, those funds are “offshore” and thus exempt from taxation.

Microsoft, in its fiscal year 2013 filing with the U.S. Securities and Exchange Commission, said its funds held by its foreign subsidiaries are “deemed to be permanently reinvested in foreign jurisdictions.” It said, “We currently do not intend nor foresee a need to repatriate these funds.” It pays to be a monopoly in more ways than one.

A sampling of corporate highlights, according to “Offshore Shell Games 2014”:

  • Bank of America reports 264 subsidiaries in offshore tax havens, more than any other company. The bank would otherwise owe $4.3 billion in U.S. taxes on the $17 billion it keeps offshore.
  • Nike officially holds $6.7 billion offshore for tax purposes, on which it would otherwise owe $2.2 billion in U.S. taxes. Nike is believed to pay a 2.2 percent tax rate to foreign governments on those offshore profits.
  • Apple holds more money offshore than any other company — $111.3 billion. It would owe $36.4 billion in U.S. taxes if these profits were they not offshore for tax purposes. Two of Apple’s Irish subsidiaries are structured to be tax residents of neither the U.S. (where they are managed and controlled) nor Ireland (where they are incorporated), ensuring no taxes are paid to any government.
  • Google increased the amount of cash it reported offshore from $7.7 billion in 2009 to $38.9 billion. An analysis found that, as of 2012, the company has 23 tax-haven subsidiaries that it no longer discloses but continues to operate.
  • Microsoft increased the amount of money it held offshore from $6.1 billion to $76.4 billion from 2007 to 2013, on which it would otherwise owe $19.4 billion in U.S. taxes. The company is believed to pay a tax rate of three percent to foreign governments on those profits.

You pay when corporations don’t

These arrangements don’t benefit working people in the tax havens. After Ireland’s then prime minister, Brian Cowen, announced that the government would assume all the debts of Ireland’s three biggest banks, he negotiated for what became an €85 billion bailout. In doing so, he demanded, and received, only one concession: There would be no increase in corporate tax rates, which are less than half the level of Ireland’s sales taxes. Taxes on incomes, cars, homes and fuel, however, did rise to pay for the bailout.

Critics, the authors of the “Offshore Shell Games 2014” study not excepted, propose various reforms and tend to discuss this issue in terms of morality. That massive corporate tax dodging is odious from any reasonable ethical standard is indisputable, but reducing it to immorality completely obscures the larger structural problems.

In the relentless competition fostered by capitalism, any successful innovation must be matched by competitors. Such an innovation could be a new production technique but also includes measures to lower costs. If production is moved to a location with low wages and little or no safety and environmental regulations, the boost to profits for the company that does this has to be matched by competitors that otherwise would become uncompetitive and/or fall into disfavor with financiers.

Financial engineering to avoid paying taxes is another boost to profits, and thus a competitive advantage. Other corporations, under the rigors of competition and the ceaseless necessity of expansion and pressure to increase profits, are compelled to copy these innovations.

However much we might wish to morally condemn such behavior, the personality of corporate executives is irrelevant. Expand or die is the remorseless logic of capitalism, and the executive who doesn’t do everything possible to maximize profits will soon be replaced by someone who will.

Nike, to provide an example, proudly announced that, in the past 10 years, it had “returned over $15 billion to shareholders through dividend payments and share repurchases” and assured it would provide more in the future. Nike’s shareholders’ report made no mention of what the company does to extract that money — through brutally exploitative sweatshop labor, paying workers less than a minimum wage set well below subsistence level in places where complaining leads to beatings or firings and striking lands you in prison. And by not paying taxes.

As a second example, Bank of America reported that it paid $3.2 billion to buy back its stock in 2013, money spent to boost its stock price and give extra profits to speculators. (Stock bought for this purpose is paid for at a price higher than the current stock-market value.) That money was available thanks to the billions of dollars it didn’t pay in taxes.

Reforms are good, but reforms can and are taken back when the pressure for them relents, and ultimately leaves the system that rewards such behavior untouched.

Economics students begin to revolt

Economics students of the world have nothing to lose but their ideological chains. A revolt appears to be brewing — an international coalition of economics students has issued a public call for the teaching of a variety of schools of thought so that the field might actually find solutions to the world’s problems.

This is a radical departure. Orthodox economics, dominated thoroughly by Chicago School ideology, exists to justify extreme inequality and class dominance, which is why its adherents, who occupy critical financial posts around the world, continue to implement ruinous policies. At universities, the teaching of economics is similarly dominated by the Chicago School.

University of Chicago

University of Chicago

Not all students are content with this state of affairs. The international coalition International Student Initiative for Pluralism in Economics has issued a manifesto taking direct aim at the extraordinarily narrow curriculum. What makes this especially noteworthy is that this coalition comprises 42 student associations in 19 countries — and has a web site in seven languages. The manifesto says:

“This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century — from financial stability, to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. … [P]luralism carries the promise to bring economics back into the service of society.”

The very need to drag economics “into the real world” speaks for itself. The ideological narrowness of the field leaves students unprepared, the manifesto says:

“Where other disciplines embrace diversity and teach competing theories even when they are mutually incompatible, economics is often presented as a unified body of knowledge. … This is unheard of in other fields. … An inclusive and comprehensive economics education should promote balanced exposure to a variety of theoretical perspectives, from the commonly taught neoclassically-based approaches to the largely excluded classical, post-Keynesian, Institutional, ecological, feminist, Marxist and Austrian traditions — among others. Most economics students graduate without ever encountering such diverse perspectives in the classroom.”

Nor should economics wall itself off from other disciplines, as if the economy is independent of the rest of human activity:

“[E]conomics education should include interdisciplinary approaches and allow students to engage with other social sciences and the humanities. Economics is a social science; complex economic phenomena can seldom be understood if presented in a vacuum, removed from their sociological, political, and historical contexts. To properly discuss economic policy, students should understand the broader social impacts and moral implications of economic decisions.”

That such things need to be said, once again, speaks for itself.

How can a science call itself “sacred”?

Orthodox economists — or “neoclassical” as they are called in the field — like to present themselves as hard-headed realists who dispassionately crunch numbers. Yet consider that one of the most important Chicago School economists, Frank Knight, wrote in a leading academic economic journal that professors should “inculcate” in their students that these theories are not debatable hypotheses, but rather are “sacred feature[s] of the system.”

Under this “sacred” system, economic activity is treated as a simple exchange of freely acting, mutually benefiting, equal firms and households in a market that automatically, through an “invisible hand,” self-adjusts and self-regulates to equilibrium. Households and firms are considered only as market agents, never as part of a social system, and because the system is assumed to consistently revert to equilibrium, there is no conflict. Production is alleged to be independent of all social factors, the employees who do the work of production are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences.

Underlying these assumptions is a concept known as “perfect competition,” a model that assumes that all prices automatically calibrate to optimum levels, and that there are so many buyers and sellers that none possesses sufficient power to affect the market. The economist Robert Kuttner, in a 1985 Atlantic Monthly article, summarized the unreality of this concept:

“Perfect competition requires ‘perfect information.’ Consumers must know enough to compare products astutely; workers must be aware of alternative jobs; and capitalists of competing investment opportunities. … Moreover, perfect competition requires ‘perfect mobility of factors.’ Workers must be free to get the highest available wage, and capitalists to shift their capital to get the highest available return; otherwise identical factors of production would command different prices, and the result would be deviation from the model.”

The real world bears no resemblance to that artificial ideological construct. Rather than question their dogma, adherents instead insist government regulations get in the way, sullying what would otherwise be a pristine market. This is where “magic” comes in, as in the “magic of the market” that is routinely invoked. Because orthodox economists often treat Adam Smith’s works as sacred books, it is not inappropriate to note that Smith himself wrote that “Providence” guarantees that everyone, including the poor, has enough to eat:

“When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition.”

A couple of centuries of refutation

Although Smith’s writings tend to be cherry-picked by his epigones — inconveniently, Smith acknowledged that capitalists have advantages over employees and believed that labor should be fairly compensated — he drew conclusions that long ago showed themselves unsustainable. Smith believed that capital accumulation inevitably leads to increases in employment and wages, that commercial exchange leads automatically to moral behavior, and that a free market without restrictions would restrain big merchants and manufacturers while benefiting employees and consumers.

Smith wrote in the 18th century at the dawn of the Industrial Revolution before his ideas could be put to the test; today’s orthodox economists who repeat them in the face of massive evidence to the contrary are motivated by something other than scientific rigor. Keep this mind the next time Karl Marx is dismissed as irrelevant because he wrote in the 19th century. At least Marx based his works on rigorous analysis of the actual workings of capitalism.

One of the “sacred” features of capitalism verboten to question is its alleged high levels of efficiency. Were we to examine this question from, for example, an Institutionalist perspective, we might find that is not so. Institutional economics is a school that believes economic and social behaviors are cultural phenomenon, conditioned by cultural parameters, and incorporates a focus on the deployment and concentration of power, in particular the role of institutions in shaping economic behavior.

This is one of the neglected traditions the International Student Initiative for Pluralism in Economics manifesto said should be added to economics curriculums. A leading Institutionalist economist, Marc Tool, argues that competitive market economies are inefficient because they provide no way for wants and preferences to be appraised, leaving it instead to media advertising to create demand artificially, and that markets fail to address the problems of gross income inequality. As a result, many people have their choices in life constrained

“to the point where intellect, creativity, compassion, and commitment are stunted or destroyed for those denied. We then live in a layered or tiered community suffering from elitism and privation alike. This would appear to be inefficiency of really monumental proportions.”

More idle capacity, more unemployment

Unemployment is high at the same time that plants sit idle. Total U.S. industrial capacity utilization as of January 2014 is only 78 percent, and although that is higher than the figure was in the years following the onset of the global economic downturn, there has been a persistent decline in capacity usage since the 1960s. European industrial capacity is 79 percent. Despite this unused capacity, unemployment remains high in both regions.

Another way of looking at this inefficiency is that shrinking numbers of people, in all parts of the world, who have steady employment that pays a living wage. John Bellamy Foster and Robert W. McChesney in their 2013 book The Endless Crisis calculate that the “global reserve army” — workers who are underemployed, unemployed or “vulnerably employed” (including informal workers) — totals 2.4 billion. In contrast, the world’s wage workers total 1.4 billion.

The mystery surrounding orthodox economists continuing to insist on policies that have brought such ruinous results vanishes when we realize that they are promulgating ideology for the benefit of industrialists and financiers and not science on behalf of humanity. Lately is has become fashionable to advocate for a return to the Keynesian policies of the mid-20th century — even these, safely within capitalist bounds, are marginalized within the economics profession.

Keynesianism is the belief that capitalism is unstable and requires government intervention in the economy when private enterprise is unable or unwilling to spend enough to lift it out of a slump. Alas, we are not living in the mid-20th century. Keynesianism depended on an industrial base and the availability of new markets into which capitalism could expand. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which to expand.

Moreover, capitalists who are saved by Keynesian spending programs amass enough power to later impose their preferred neoliberal policies, as they began to do by the late 1970s. The “Keynesian consensus” was a temporary phenomenon tolerated by capitalists because their profits were rising despite the higher wages they were paying. If the world is undergoing a structural crisis of capitalism, then policies intended to stabilize capitalism can’t provide a long-term solution.

Study of the widest reasonable range of economic ideas is not simply a matter of healthy debate but necessary to finding a path to a better, more humane world.

Bringing alternative economic ideas back into the mainstream, especially those critical of capitalism, is part of a larger social struggle. The one percent’s preferred ideas that dominate did not fall out of the sky. As Karl Marx once wrote: “The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force.”

“Ruling” ideas create priesthoods, which are best left outside of economics departments and central banks.

Finding the roots of addiction in the instability of ‘free markets’

Addiction is big business and obscuring its roots is its ideological handmaiden. Despite the incessant chanting that everything that happens to you is solely your fault, social ills do have social roots.

We need not lay this “personal responsibility” mantra solely at the feet of neoliberal ideologues, for such beliefs pervade capitalist society, even among those who are critical of capitalism’s excesses. New age philosophy, for example, routinely blames the individual for all manner of personal misfortunes and overemphasizes personalities at the expense of collective effort.

An episode of Oprah that featured Nelson Mandela saw Oprah Winfrey repeatedly tell the former president that he had accomplished so much by himself; she was oblivious to his protestations that he could not have brought an end to apartheid except as part of the collective movement of which he was a part. On the personal level, a friend still angrily recounts an incident many years ago when she was mugged, went into a nearby New Age establishment to seek some help and instead was asked, “What did you do to draw in that negative energy?”

Reducing everything to personal activity obliterates that movements animated by organized groups accomplish social change (not the solo efforts of charismatic leaders), and by conveniently laying all fault for social ills at the feet of the marginal such reductions obscure larger social conditions.

AlcoholThe common responses to alcohol and drug addiction very much fall within this pattern. It is true that different personalities have differing susceptibilities to addictive behavior; nonetheless, this can’t be and isn’t anything close to a full picture. Solutions to addiction based on correcting individual behavior are hopeless without analyzing the role of dislocation in capitalist society, argues Bruce K. Alexander in his paper The Roots of Addiction in a Free Market Society. Published by the Canadian Centre for Policy Alternatives, the paper demonstrates that free markets, and the massive dislocation that results from them, are the ultimate causes of addictive behaviors.

Failure to focus on root causes will lead to failure

Writing in the context of a new policy put forth by the city of Vancouver a decade ago that sought to treat addiction through a focus on “four pillars” — treatment, prevention, law enforcement and harm reduction — Dr. Alexander argues that, although an improvement on traditional initiatives that focus on policing, such a focus is woefully short of tackling the root causes. He writes:

“[D]islocation is the necessary precursor of addiction. … [F]ree markets inevitably produce widespread dislocation among the poor and the rich. As free market globalization speeds up, so does the spread of dislocation and addiction.

In order for ‘free markets’ to be ‘free,’ the exchange of labour, land, currency, and consumer goods must not be encumbered by elements of psychosocial integration such as clan loyalties, village responsibilities, guild or union rights, charity, family obligations, social roles, or religious values. Cultural traditions ‘distort’ the free play of the laws of supply and demand, and thus must be suppressed. In free market economies, for example, people are expected to move to where jobs can be found, and to adjust their work lives and cultural tastes to the demands of a global market.” [page 1]

Ignoring these larger forces, argues Dr. Alexander, who has more than four decades of experience researching addiction, is responsible for the ineffectiveness of efforts to contain addiction.

“Attempts to treat or prevent addiction that ignore the connection between free markets, dislocation, and addiction have proven to be little better than band-aids. Addressing the problem of addiction will require fundamental political and economic changes. … [S]ociety, as well as individuals, must change. It requires moves towards good government and away from policies that undermine our ability to care for one another and build sustainable, healthy communities.” [page 2]

Dr. Alexander defines addiction more expansively than is ordinary, arguing that a compulsion for money, power, work, food or material goods are as dangerous and resistant to treatment as is addiction to illegal drugs. These addictions are a “desperate substitute” in the wake of dislocation from intimate ties between people and groups. This pattern is repeated in disparate societies around the world; no corner has been spared penetration by global capitalism during the past two centuries. Continual reinforcement is needed to maintain the consumption that is the engine of free markets.

“[E]stablished ‘free’ market societies require the continuing presence of powerful control systems. Carefully engineered management, advertising, taxation, and mass media techniques keep people buying, selling, working, borrowing, lending, and consuming at optimal rates, deliberately undermining the countervailing influences of new social structures that spontaneously arise in modern families, offices, factories, etc. Thus, opportunities to re-establish new forms of psychosocial integration are suppressed.” [page 9]

A pattern found across societies and times

The high rates of poverty, economic disparity, divorce, children diagnosed with “attention deficit hyperactivity disorder” and many other indicators of dislocation within U.S. society are well known, but Dr. Alexander draws on the disparate examples of the Indigenous peoples of Pacific Canada, Scottish peasants and British subjects who lived in the Canadian North in the employ of the Hudson’s Bay Company to illustrate his thesis.

Photo of Vancouver by Andrew Raun

Photo of Vancouver by Andrew Raun

Force was frequently applied to dislocate Indigenous populations. The founding of Vancouver as a port and railroad terminal required the uprooting of almost 100 First Nations villages and systematic destruction of Indigenous culture. Dr. Alexander writes:

“The natives’ lands, which had for centuries been sites for food gathering, communal houses, huge wood carvings, ancestral burial grounds, and invisible spirits became the basis of a free market in real estate almost overnight. Many of their complex cultural practices were outlawed or mocked out of existence. Their famous ‘potlatches,’ elaborate ceremonies in which rich natives gave enormous amounts of food and goods to others according to complex traditional, clan, and personal obligations were the antitheses of free markets. They were prohibited by law from 1884 until 1951.” [page 6]

Even in cases where there was relatively little direct violence or enslavement, military force and other sources of violence were waiting in the wings.

“Of course British authorities always had the lash, the gallows, and the artillery of the royal navy close at hand, and these were called into service at the slightest indication of organized resistance.” [page 25, note 50]

This was true for resistance on the British Islands as well. England’s establishment of a free market society by the early 19th century was achieved through mass displacement and, in the case of Scotland, destruction of cultural institutions that, although far from ideal, did provide social safety nets for the poorest and helped keep starvation at bay during periods of crop failures. Independent peasants were forced off the land so that elites could convert farming from supplying local consumption to producing products for export. This required

“a massive, forced eviction of the rural poor from their farms, commons, and villages and the absorption of some of them into urban slums and a brutal, export-oriented manufacturing system. Those who resisted these new realities too strenuously were further dislocated from their families and communities, by forced apprenticeship of their children, destruction of their unions and other associations of working people, elimination of local charity to the ‘undeserving poor,’ and by confinement in ‘houses of correction’ where they were encouraged to accept their new responsibilities with whips and branding irons.” [pages 9-10]

Those who refused to pull down their houses and leave had their homes burned down by the local sheriff after clan chiefs, induced to join English society, or English landlords bought their formerly inalienable land in the “free market.”

Racial ‘explanations’ for addiction are nonsense

Although it can not be said that there were no social problems among Canadian First Nations peoples before European contact, Dr. Alexander reports in his paper that he has found no mention by anthropologists of any behavior that could be termed addictive, which he attributes to the high level of “psychosocial integration” in societies that had high levels of communality and shared resources. He writes that the popular explanation for widespread alcoholism among Canadian natives (this would also apply to native peoples in the United States) — a racial “inability” to control themselves — is refuted by the lack of addiction before the European drive to wipe out their cultures and languages.

“It was only during assimilation that alcoholism emerged as a pervasive, crippling problem for native people, along with suicide, domestic violence, sexual abuse, and so forth. … ‘Civilization,’ as it came to [eastern Canadian] natives, was administered by militant Jesuits in a century of fanatical religious zeal. This meant destruction of the robust Huron religion and, hence, Huron culture itself, with dislocation as the consequence. Eventually every tribal culture in Canada was engulfed by the overpowering European culture, and every tribe succumbed to the ravages of dislocation, including epidemic alcoholism. Massive dislocation produced massive addiction.” [page 15]

The same pattern was found among dislocated Europeans. Dr. Alexander cites the example of Hudson’s Bay Company employees from Scotland’s Orkney Islands, valued by the company because they were used to far Northern conditions and life at sea, and known for their sobriety. They nonetheless succumbed to widespread alcoholism in the Canadian north, a problem the company could not stamp out no matter how many prohibitions it issued.

Prohibition has not worked in modern times, either — the crack cocaine epidemic of the 1980s served as fodder to intensify the “war on drugs.” Pervasive propaganda at the time that crack is “instantaneously” addictive is a “fabrication,” Dr. Alexander writes, noting this was falsely claimed for alcohol, heroin and marijuana at various times in the 19th and early 20th centuries. He argues that dislocation, not crack itself, is the cause of crack addiction and that, similar to other substances, most use it without falling into addiction.

Stable communities as the solution to addiction

The solution to reversing addiction, Dr. Alexander writes, is to reverse dislocation and stabilize communities. Doing so, however, requires considerable pushback against pervasive messages that spotlight individuals rather than social causes.

“Changing the terms of this debate is a huge task, since the current manner of speaking of addiction as an individual drug-using disease is maintained by an media army that has been launching this message for decades. People endure this barrage of disinformation partly because it complements a deeply-rooted North American ‘temperance mentality,’ which makes it seem natural to blame social problems on drugs and alcohol and partly because it profits many institutions and professions that treat, police, prevent, and ‘harm reduce’ the putative disease. Those who launch the public information barrage prosper because the ‘War on Drugs,’ which has drawn its justification from it, serves vital commercial and geopolitical purposes for vested interests with very deep pockets.” [pages 19-20]

The “war on drugs” is, for example, a useful tool for the U.S. government to justify continual interference in Latin America, punishing governments that do not fully yield to U.S. dictates, and it also suppresses competition to legal drugs peddled by the highly profitable pharmaceutical industry.

People need to belong to their society, “not just trade in its markets,” Dr. Alexander argues. Imposing fair labor standards and preventing multi-national corporations from pressuring local governments to rescind labor, health, safety and environmental standards would be a better solution than mass migration, as would rebuilding a proper social safety net. He concludes:

“On a global level, substantially reducing the addiction problem requires nothing less than exercising sensible, humane controls over markets, corporations, environments, public institutions, and international agencies to reduce dislocation. This cannot be achieved without conflict, because it will inevitably impede the pursuit of ever-increasing wealth and ever-freer markets. Of course it would be naive to hope for a return to any real or imagined golden age. However, it is at least as naive to suppose that society can continue to hurtle forward, ideologically blinded to the crushing problems that free markets create.” [page 22]

In a rational society designed to meet human need rather than private profit at any cost, this conclusion would be obvious. That it seems a fantastic goal is a morbid manifestation of the cancer that is our economic system.