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The Jus Semper Global Alliance Living North and South

The Neo-Capitalist Assault Essay One of Part III (The Neo-Capitalist Assault) August 2001 GLOBAL – A TLWNSI ISSUE ESSAY SERIES

Neoliberalism and Its Summary Dogma: The Implications of  Towards a New Global Economic its Philosophical Postulates Architecture  A New Global Strategy for By Alvaro J. de Regil a Maximum Profits

 Towards an Economic Dogma for the From time to time TJSGA will issue essays on topics relevant to The Living Wages North and  Neoliberal : “liberalize to South Initiative (TLWNSI). This paper is the eight globalize” in the series “The Neo-Capitalist Assault” –a collection in development about .  Neoliberalism and its Dogmatic Postulates - The Theoretical This first essay of Part III is also the first to formally Framework analyze The Neo-Capitalist Assault in theory and practice and its consequences. The author  The fallacies of Friedman’s eulogy: describes the new business mentality that is based “” on maximum profitability and deprived of any social responsibility and discusses the theoretical  The Wolf in Sheep’s Clothing framework. The author opens by discussing the exhaustion of the Fordist Method and the move to the new flexible ethos with management concepts such as just-in-time- inventory, total quality, zero defects, global tive cost could be achieved. Providing a greater sourcing and global access to labour markets, all variety of products to regional markets, instead of critical elements for achieving maximum specific country markets, entailed the opening of profitability. national to give access to the products sourced from different manufacturing centres. Efficient production volumes required the development of regional economies-of-scale. Thus, achieving the appropriate scales required The exhaustion of the Fordist-Taylorist Method of moving them from local Production and the success of the Japanese markets into one global market. This global Flexible Production System forced the U.S. to market, composed of different regions, provides create the conditions necessary to expand its the volumes required to customize products to and wealth by achieving maximum meet, more competitively, regional efficiency through maximum flexibility in costs of preferences. A clear example of the search for production and in access to markets. competitiveness is provided by Wal-Mart, the Management concepts such as just-in-time largest retailer in the world, which is known for inventory, total-quality and zero- defects became its rock-bottom , its super efficient a fundamental part of the new production ethos. operations and its huge economies-of-scale. But The successful implementation of this system Wal-Mart has not been successful internationally required developing a new strategy where due to a lack of market dominance. This is “volume through variety” and the most competi- because, except for its North American markets, it

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has no leadership position in Europe, South The historical evidence shows a very consistent America or Asia. Thus, without market and stable pattern of joint exploitation up to the dominance, its -chain systems and its Second World War; first relative to the global sourcing will not increase efficiencies. relationship between the European powers of the Wal-Mart’s strategy is based on the idea of global Era and their , and, then, sourcing in order to cut costs dramatically. relative to the neo-colonial structures of However, since most products on supermarket exploitation established and managed between shelves are still sourced locally, Wal-Mart will the industrial powers and the oligarchies of the need to achieve scales locally and then regionally former colonies of the periphery during the in order to globalize its sourcing.1 Thus, access to Nineteenth and Twentieth Centuries. Since the nations with large consumer markets and strong colonial times of the last four centuries, there had is a key element of maximum always been a tacit agreement between the efficiency. In this, First World nations and the centres of power and the elite of the periphery to larger so-called emerging markets are critical for share the benefits. Moreover, it should be of no success. surprise to anyone that, in many instances, the elites of the periphery were citizens of the The other key element in search of maximum empires who moved to the colonies to enjoy the efficiency is access to labour markets around the fruits of their exploitations. world. MNCs not only need flexibility in world , in order to achieve large scales, they also Unfortunately, at the threshold of the third need labour flexibility in order to secure the millennium, after several decades of apparent cheapest labour costs, globally, for their Third World economic development, one cannot manufacturing. Thus, countries need to open find any surprising changes. For, in this historical their labour markets to MNCs and eliminate as time of neoliberal , despite the much protection and other hurdles as possible for existence of a democratic framework in the to secure the lowest labour costs. In structure of most capitalist states, there is a tacit this case, Third World nations with weak agreement between the G7 powers and the democracies, or outright dictatorships, and a plutocratic elites, of the so-called emerging decent level of skilled labour are the favourite economies, to continue this relationship of targets of to establish manufacturing exploitation of natural resources, of labour and of centres or to subcontract production at rock consumer markets to their benefit. Sheer greed bottom costs. In these countries, the lack of has become the dominant force, weakening the democracy ensures that unionism will not have democratic structures of governments everywhere the force to wages that diminish the in favour of what I would call “corpocracy” or competitiveness and the margins that MNCs “corpocratic government”. This is because seek to achieve. governments nowadays see themselves as servants of the MNCs and work to provide what Towards a New Global Economic Architecture these need to meet their financial goals. And so, The nature of is one of unrelenting the primary responsibility of governments –to expansion in search of raw materials, cheap procure the common good of all ranks of society– labour and new consumer markets. Thus, it has been betrayed for the sake of personal should be self-evident that the nature of benefit. Indeed, with the arrival of globalization, Capitalism is, in itself, exploitative of labour in the democratic structures have been completely order to achieve maximum profits and corrupted. As a consequence, in clear contrast competitiveness. Indeed, this is a trait that has with the short period of economic and social always been valid since the dawn of modern development, the poor of both rich and emerging Capitalism during the times of mercantilism. economies have become completely irrelevant. If Nevertheless, in the new so-called global was the vehicle to social architecture, this exploitation appears not to development and the eradication of poverty occur strictly in the traditional pattern: from the during the post-war, neoliberal globalization centres-of-power to the periphery; but, rather, changed the purpose of economic growth to across social segments of both centres and the soothe the ambitions of MNCs. Everywhere in periphery. the present capitalist system, the responsibilities

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intrinsic to democratic governments have been movement of car/truck and auto-part abandoned, or, in the best case, have been left to manufacturers from Argentina to Brazil. The providential outcomes, such as the illusory idea manufacturers were attracted by the subsidies of the trickle-down economy, and not to their first offered by several Brazilian states and by the and foremost responsibility. The masses of poor, desire to enjoy the cheaper labour costs available of the disenfranchised, and even of those on the in Brazil since the devaluation. This created a edge of falling into those categories, have been significant loss of to the Argentine deemed irrelevant because corporations can economy and a substantial level of mistrust thrive by focusing on serving those segments of between both partners, which threatened to derail society that have been lucky enough to command the Mercosur agreement, the union a purchasing power meaningful to the new formed by those countries along with Uruguay economy of the mega-mergers and of the rule of and Paraguay. This problem is important because the . It is the same as if we affirm that the automotive industry represents 20% of all the governments are only preoccupied by the well trade inside Mercosur.3 Such is the culture and being of those social segments that MNCs regard morale of the new economy of neoliberal as their primary markets. And so, as it is globalization. This way, exploitation in the new increasingly argued, Civil Society does not rule; economy is no longer a traditional centre- only the market and their owners, the periphery. It is an exploitation that cuts across shareholders, through corporations, rule. social boundaries. The elites and the middle- classes are, respectively, the rulers and A New Global Business Strategy for Maximum of the new economy. The poor and the totally Profits disenfranchised –the growing majority of the Through globalization, the population of the Third World and a growing necessary to meet the need of the multinationals, segment of those in the First World– no longer for reaching maximum efficiency, are achieved exist for the corpocratic governments of the new without the need to distribute wealth in order to neo-capitalist economy, except as of generate and reduce poverty. labour, if anything at all. With the now openly accepted practice of mergers and acquisitions, the oligopolisation of Hoogvelt coincides with this view and asserts that industries, combined with the globalization of Neoliberalism cuts across national boundaries consumer, labour and markets, has through a policy of exclusion, both in developed modified the rules of the game. The new rules and developing countries, in favour of the global restrict participation to only a handful of run by MNCs across nation-states corporations in each industrial sector for the in which domestic economies are transformed to benefit of their shareholders and the adapt themselves to the needs of the MNCs’ governmental elites that impose the conditions global economic strategy.4 To accomplish this, demanded by the MNCs. In the new economy, the oligopolisation of industrial sectors was not even many of the workers of the MNCs, necessary, in order to put them in the hands of a especially in the periphery, belong to the new few MNCs. And the oligopolisation of industries, economy, because their are so meagre in turn, required the of industries that they are barely capable of surviving. These that Reagan and Thatcher began in the 1980s and workers are regarded by MNCs as mere subsequently forced, through various methods of commodities, totally dispensable. Thus, when coercion, on the Third World and, more these commodities try to oppose their dire gradually, on Western Europe and Japan. This exploitation, MNCs simply leave and move to goes directly against the Keynesian paradigm and buy labour commodities in environments that are the Post-Keynesian Theory of that more docile. A typical case is the recent required the intervention of governments in order migration of several car manufacturers from to regulate their own particular capitalist system Argentina to Brazil after the devaluation of the so as to maintain a reasonable level of stability. “Real” in 1998.2 Since then, a new agreement was established in March of 2000. This The capitalist system, as previously explained, is agreement seeks to solve a very delicate conflict inherently unstable since it is affected by the between both countries, which derived from the perceptions and the reflexivity of these

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perceptions, described by Soros, of the different supporting views such as those of the so-called actors who participate with opposing . School of Regulation Theory. The capitalists seek to maximize profits through maximum efficiency, while labour seeks to The key point to stress is that the current maximize the level of endowment of its work. economic environment in the core of the What Keynes and, subsequently, the regulation capitalist system and its periphery is, as can be theorists thought, is that, since Capitalism is a expected, the result of a political will and a system with participants with opposing interests, political process resulting from the struggle of the it needs a set of in order to maintain a various actors at play. That is, the current reasonable level of stability between the regime economic environment is the result of continuous of accumulation and the regime of . social interaction. The mere fact that a huge A coherent system of accumulation, according to debate about neoliberal and the Regulation Theory, is one which has an theory has arisen in the last few years is clear efficient set of rules, and of checks and balances, proof that economics is very much a matter of so as to ensure long-lasting success.5 To ensure policy, making as it is of mathematical models as this, it needs to establish a balance between both it is of democracy. Thus, the economic theories . In essence, it seeks to developed to manage the various elements establish equilibrium between supply-side affecting supply and demand and the of and demand-side Keynesian society at large permeate into every realm of economics. It implies stable conditions between human activity, and they expand the realm of supply and the accumulation of and economics towards what was demand through the reproduction of wages. originally striving for, which was that economic However, what actually emerged, concurrently inquiry was part of both social and political with a lack of fiscal discipline to engage in inquiry. excessive military spending, was a change of paradigm to support supply-side economics In essence, self- fuelling political will is at through the currently dominant neoliberal the heart of the debate about neoliberal monetarist economic school. globalization. This fact is of critical importance. The theoretical postulates and the practical Towards an Economic Dogma for the Wealthy consequences of Neoliberalism and of the During the Twentieth Century, economics opposing views, constitute the debate between gradually moved in scope from being regarded as two forces with diametrical opposing interests: a social to being regarded, in some regulators and free-marketeers. schools in the U.S. and abroad, as a branch of applied mathematics. However, it has been In my opinion, regulators seek to establish an impossible to ignore the fact that economic ethos allowing the to benefit behaviour is not applied by selfless policy the common good whilst the free marketers seek makers. Policy makers are actually self-interested to benefit the corporate few at the expense of individuals maximizing returns for their political Civil Society at large. However, I deem it interests in terms of power, position, votes, wealth important to stress that those who seek to benefit and so on. But, again, Soros has clearly the corporate few pretend to be on top of demonstrated that economic theory is directly democracy and, for that matter, of the rule of law. influenced by the element of reflexivity from In the whole of the First World, beginning with human interaction. Thus, economic theory is not the U.S., and in many developing nations, an exact science, as some intend to assert, but, democracy is the formal and legal foundation of rather, a social science where the observer also their state. In these nations, the democratic social participates as the subject matter and invariably contract, which the procurement of the has a vested self-interest. It is important to common good of all ranks of society, is supposed emphasize these facts. Because the current to be observed, and views such as that of the neo- debate over , evolves capitalist paradigm are supposed not to override around the arguments of free-market economic the Civil Society’s mandate. However, claiming theory, which assumes a stable and self-regulating to be on the side of democracy, the centres of economy, and the arguments of post-Keynesians, capitalistic power represented by the national

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governments are now overwhelmingly dominated order to forcefully globalize the periphery for a by the interests of the multinational corporations. core-periphery method of production, a new This is because democratic praxis has been Neo- must be imposed. As in dramatically corrupted through all sorts of legal previous times in history, today’s Neo-colonialism and illegal political schemes. A frequent case is is simply the imposition of the economic interests the donation of for political campaigns of the centres of on the civil intended to uphold the interest of the MNCs societies of the periphery. This is performed once instead of the interest of Civil Society at large. again in association with the local oligarchies, under the disguise of a mock democracy. In consequence, Neoliberalism, as applied so far, Furthermore, this kind of Neo-colonialism centres has moved against the overwhelming interest of on MNCs and, thus, MNCs financially support Civil Society; for it has not been subject to real those political groups that compete inside the scrutiny and democratic choice by all members of parties, and who are willing to advance the civil society, to ensure that it guarantees society’s farthest the MNCs’ economic interest in their most basic need: the right to earn a decent political agenda. This way, the MNCs and the standard of living in exchange for its work. The political groups work in partnership just like the end result, therefore, has been the imposition of absolutist kings and did in the past to an economic ethos that demands the freedom to achieve their mutually beneficial objectives. As a act and move at will across national and social consequence, the MNCs, under the protection of boundaries, with no regulation, in favour of a few their governments, take the same role and enjoy powerful interests: those of the MNCs. Even the same privileges as the merchant companies of worse, the pundits of this Neo-capitalism have the Absolutist Era. We can then conclude, with a tried to uphold their views as scientific dogma, great degree of confidence, that the neoliberal which, judging from the developments of the last ethos of the MNCs is a clear recreation of the two years, have failed; especially from the Enlightenment’s Mercantilism. Furthermore, the moment that Blair and Clinton tried to politically increasing mockery of democracy and the manage the wave of criticisms by introducing the dogmatic attitude of its pundits bring memories of idea of the , a political rather than a European absolutism. For growing dissent in the scientific scheme. periphery is constantly crushed with repression and outright human rights violations and growing Neoliberal Mercantilism: “liberalize to dissent in the core countries, as recently globalize” happened in Seattle, Prague, and others, is So undemocratic is Neoliberalism, that I find far simply dealt with overt repression and deaf ears. more resemblance with Mercantilism than with classical liberal economic theory. In essay II part I, I described the many similarities that share Neoliberalism and its Dogmatic Postulates - The today’s neoliberal Capitalism and the Theoretical Framework Mercantilism of the absolutist era. At this stage, I Let us now discuss the development and deem necessary to explain briefly how this Neo- foundation of neoliberal theory. The theoretical capitalism developed and ultimately came to foundation of Neoliberalism is , resemble many of the features of Mercantilism. which came about as the result of successive When the Fordist method of production was works around the quantity theory. The Quantity gradually abandoned during the 1970s and Theory of Money, as it is formally known, 1980s, flexibility in labour markets and consumer establishes the relationship between the quantity markets was required in order to consolidate the of money in the economy and the effect on the flexible method of production and achieve levels. This theory traces its roots all the maximum efficiency. This is the essence of way back to the times of Mercantilism with John today’s globalization of the markets and of the Locke (1632-1704) who wrote specifically on the ’s deceiving . So, in order to and quantity of money against the merchant achieve the flexibility in labour costs and elite in his Theory of Quantity of .6 In economies of scale, market economies have been his modern version, Chicago Milton forced to liberalize to in turn be globalised for a Friedman has been the best exponent of this “global method of production.” However, in theory on the demand of money in his series of

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essays: Studies in the . contrast, supply-siders concern themselves with His study is a restatement on the theory of the the rates of labour and output demand of money rather than on prices as was growth. The other key difference is the almost previously expressed.7 blind belief, on the part of Monetarists, despite major evidence, in the idea that the market is Friedman poses a conservative view and makes a inherently stable and that it can regulate itself. As direct criticism of Keynes economic strategy a result, Monetarists advocate no regulation from based on fiscal policies (taxation) and public government through either public spending or spending. Friedman argues that the economy can and a gradual and stable rate of be regulated through the by the increase of the , paralleling the simple regulation of the money supply in the expectations in national economic growth. Thus, . Thus, during times of they propose lower taxes, public spending cuts , a lax will provide and a balanced budget. To balance the budget enough money to encourage and they propose to reduce spending, especially in spending through the low cost of money [interest social welfare, as an incentive for people to seek rates]. Similarly, during times of , a tight work and save. And, as part of the reduction in monetary policy with high interest rates would public intervention, they advocate the contain consumption and investment and reduce deregulation of industry including a reduction in inflation. In A Monetary History of the United the quality of business standards.9 States (1963), written with , Friedman criticizes Keynesians for giving little One last element of Monetarist theory is the firm importance to the role of money in determining belief in the lack of effectiveness of government the level of national income and . policies and regulations due to their anticipation The obvious views of Friedman and other by market participants. This is based on the monetarists are conservative and favour the hypothesis of the so-called theory of rational freedom of the market and little intervention from expectations. The theory explains that market the part of the government in regulating the participants react to counter the changes in economy. Thus, according to Monetarism, the economic policy of government regulators and, central bank role should be to manage the thus, neutralize the intended effect. Robert Lucas, economy through monetary policy in a gradual also of the Chicago School, worked on this idea way with no sudden changes in policy to be to develop a model of extreme Monetarism. In implemented. In essence, Monetarism advocates fact, post-Keynesian economist James Tobin an old tradition at the University of Chicago’s regarded it as the new Classical Macro- Economics Department: that automatic rules Economy.10 replace independent monetary policy. To accomplish this, Monetarists advocate a steady The roots of monetarist theory trace back to the monthly supply of money at a rate of 3%-5% classical economics of Smith, Stuart Mill and instead of the regulators’ position for a others. This is why the dominant economic discretionary monetary policy.8 paradigm of today is called Neoliberalism, since it attempts to claim to take many of its principles Notwithstanding the divergence between from the classical economic theory of British Keynesians and Monetarists relative to monetary . Indeed, one can see several theory, two additional characteristics clearly similarities that explain why the Neoliberals see distinguish the former from the latter and clearly Adam Smith as their apostle. As previously depict the focus of their attention. The first explained, Smith believed in little government divergence in scope lies in the angle of view. intervention in the market; hence the demand of Keynesians are demand-siders whilst Monetarists the Monetarists for free and self-regulating are supply-siders. This implies that while markets. Smith also rejected in his Theory of Keynesians focus on demand and the growth of Moral Sentiments the value of the economic aggregate demand, Monetarists focus on the planner since he believed in the rationality of the growth of supply. Demand-siders care about the market participants. However, these similarities consumption and the ability to sustain and do not withstand any test but those of superficial increase the demand for and services. In resemblance. First, we must not forget that Smith

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and the other British classical spending has no restrictions, even if the public envisioned a market with many small deficit explodes, just as it did during the Reagan entrepreneurs and completely rejected the idea of era. In the real world, the assumptions do not or . Then, they believed, hold, but governments side with the corporations as Monetarism also does, in the rationality of the for their mutual benefit. expectations of market participants. Nonetheless, the classic economists were basing their theory Another illustration is the case of the Theory of on the assumption of a market that enjoyed . If the central bank perfect information. Lastly, we must not forget increases the money supply, lowering interest that their ultimate goal was the welfare of all rates in order to increase activity, but labour and ranks of society, and Stuart Mill went beyond, as capital “perfectly” anticipate the intended effect previously mentioned, and emphasized the need of price increases, they will react to neutralize the for wealth redistribution. effect. Labour will demand higher nominal wages; but, since the employer can anticipate the In clear contrast, Neoliberal Monetarism focuses higher prices and revenues in its activity, it can on the participants of the supply-side of the agree to raise nominal wages without increasing market system: labour and capital. However, real wages and, perhaps, even reducing them a labour had no real opportunity to maintain its little.12 This example is given under the position when the Neoliberal pundits demanded assumption of perfect information. However, in and obtained the deregulation of their business the real world, the employer enjoys much more practices, especially of those dealing with job information than labour. Thus, by knowing protection and benefits. With the freedom to precisely its past cost of labour and its future choose labour markets without rules and prices, it knows exactly how much it can allow in obligations from the part of capital, only the higher nominal wages in order to maintain or welfare of the employer benefits from the system. decrease real wages in the immediate future. However, even before we consider this kind of Labour in contrast cannot anticipate what the deregulation –assuming that there is a set of new increase in prices will exactly be. workers’ protectionist measures– it should Furthermore, with the corruption of democratic become evident in the next paragraphs that the structures, labour legislation is weakened whilst hypothesis of rational expectations only benefits corporations enjoy the freedom to act to protect the employer. their own interests and ignore the law.

In essence, the similarities that Neoliberalism These are the facts that explain why supply-side pretends to have with Classical Liberal Economic economics, focusing on labour and capital, with Theory are completely irrelevant because the their demands for free labour and consumer assumptions of perfect information, full markets, and for an ethos of self-regulation for employment and perfect , that were every industry, work only to the benefit of capital. key features of Classical Theory, never happened. If we add the corruption of governments and the The real and true similarity is not with Classical mockery of democratic principles, Neoliberalism Theory but with the real economic policies that has nothing in common with the classicists’ the British governments of the Industrial theoretical ideal of achieving the common good Revolution imposed for the benefit of the and the welfare of all ranks of society. However, industrialists. Thus, where there is real it is in this self-regulating idea, anchored on the resemblance between the classical period and rational expectations theory, that Neoliberalism today’s ethos is in the imposition of ideological claims that the market is self-regulating. That is, motives over true rational analysis. Villarreal the assumption of rational expectations is clearly notes that a number of assumptions are supposed to guarantee an automatic, instant and made to fit their real motives. In order for the continuously self-regulating market.13 It does, model to function, reality must adjust to the however, have a lot in common with true laissez assumptions instead of validating the hypothesis faire as practiced by the industrial class. Sixty against real facts.11 For example, the State is years after the collapse of Victorian Capitalism inefficient and most curtail its spending. But, and the emergence of the Keynesian paradigm, while social spending is the first to be cut, arms Neoliberalism wants to take the world back to the

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era of dire exploitation that was the true ethos of economy as a consequence of the Great England’s and of the robber Depression because, from the U.S. government’s barons and their trusts in the U.S. perspective, it became evident that the free- market system had obvious failures. In his view, To the Neoliberal claim of self-regulation, there is the cause of the was the now ample and recent evidence to the contrary. government’s failure to take on its responsibility The Neoliberal paradigm began to influence in monetary matters. He warns that if society economic policy since the late 1970s. However, allows its government to be an active player in the experience of the past two decades has shown the economy, we would be following the path that Monetarism has proven to be effective only towards slavery, and he supports his extreme during years when a national economy has view by making reference to Friederich Hayek’s remained stable and predictable. That is, when book The Road to Serfdom.16 the speed or velocity of the money supply and its relationship with GDP and inflation are stable Friedman’s basic position is that it is realistic to and predictable, the money supply is then a expect a well-working free market system if we useful tool to target its effect on prices, labour and understand its principles. So he calls on people output. But, when it does not, as frequently to understand how Adam Smith shows the way in happens, Monetarism is then largely ineffective. which a complex system, organized and For this reason, Monetarism has been abandoned operating without distortions, can develop and and re-approached by different nations as prosper without a centralized control; and how economic cycles unpredictably change.14 The far all the players of the system can coordinate problem is that every time it is abandoned, their deeds to everyone’s benefit without governments go back to intervene in the coercion, if they want to choose adequately.17 economy, regulating key elements such as public Friedman admits, however, that concrete private spending, budgets and fiscal policy in addition to interests have prevailed over the common good. a close management of the money supply. On But he insists that the government should not every one of these occasions, the governments’ intervene in the market system except to regulate economic policy moves back to a regulating the money supply. ethos keen to Keynesianism instead of Monetarism. Consequently, this periodical It should appear evident to the reader that his change of economic policy contradicts the views are rather simplistic. Friedman goes on and Neoliberal claim of the inherent stability of the on in his support of the that markets and of their ability for self-regulation, benefits everyone if we leave all individuals to showing the falsehood of the claims of the pursue their own personal interests without Neoliberal paradigm. However, because their interference, and he calls repeatedly on Smith’s ulterior motive is political and not rational, they postulates to explain why. He considers the price have continued to insist on their claims until system as the essential element in Smith’s today. “Wealth of Nations” to explain why two individuals will engage in an economic The fallacies of Friedman’s eulogy: “Free to transaction only if both believe that it will benefit Choose” them.18 From the very start of his book, Friedman uses some of the postulates of Adam Smith, Stuart Mill However, in the first chapter of Free to Choose, and Thomas Jefferson to support his first claim: Friedman expresses resentment at those narrow that government intervention in the lives of its interpretations of personal interest that reduce it citizens constitutes a great danger.15 He is right. to an exclusive interest in material gain and he It does constitute a great danger if a government argues that individuals have many other interests abandons its responsibilities to procure the beyond material wealth. People have many other welfare of all ranks of society, as Adam Smith also personal interests, he simplistically argues; the said, and sides with the very private interests of scientist, the missionary, the philanthropist, or the the shareholders of the corporations, as has most musician, all have their own personal interests often happened. Friedman laments that the beyond their economic interests.19 But, while this government took a very interventionist role in the is obvious, it bears no relevance, whatsoever, to

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human behaviour when it deals with material bank. That is, of allowing banks to restrict gain. Simply speaking, people only look out for payments to its customers for a specific period; themselves when it comes to monetary gain. and, as a consequence, he also blames the Fed Moreover, if there is no argument between both for being the culprit of the idea that the market regulators and free marketeers relative to the fact system was inherently unstable and, thus, of the that individuals normally pursue their self- need for governments to intervene as agents of interests, because this is a key feature of human regulation.22 nature, there is also no argument in pointing out that, in a capitalist society, they especially pursue Relative to the Welfare State, he goes on, their own self-interests when it comes to unrelentingly criticizing its weaknesses, such as monetary gain. Individuals do not seek to ensure the possibility that the money allocated to these that a transaction benefits both parties. programs was stolen by the possibly corrupt Individuals only seek to ensure that the bureaucrats who administered them.23 He transaction will benefit them. At best, the sake of considers the majority of the programs the other individual is left to chance; at worst, the paternalistic and less humanistic than letting the other party’s benefit is completely irrelevant. recipients fend for themselves. He asserts that Friedman, having proclaimed that individuals can these programs weakened the family and the fend for themselves without the aid of the state, incentive to work, to save and to innovation and then assigns four tasks to government. Three of they jeopardized the accumulation of capital and, the tasks he takes from Smith: protection from of course, limited our freedom [whose physical violence, a precise administration of freedom?].24 Friedman concludes his book by re- justice and basic public works, and he adds the emphasizing that giving too much power to the protection of individuals that cannot fend for government is a great danger [of course, to him, themselves. Later he adds the responsibility for the Welfare State is one big and dangerous monetary emission.20 transference of power]. Interestingly, Friedman offers, in appendix A, a relation of the Economic Friedman’s two best examples of the “right Platform of the U.S. Socialist Party of 1928, economic ethos”, as could be expected, are the indicating that most of its points have been U.S. and England between 1848 and the Great implemented partially or fully.25 In fact, I am War. This is Friedman’s golden age, which he surprised that he did not call the Welfare State, at proclaims to have reached its climax when every least not publicly, a Communist program. British citizen was in “perfect liberty” to pursue his own interests because there was minimal I deem Friedman’s Free to Choose to be very government intervention. He claims that, during superficial and naive, if not full of cynicism. It is those years, there was tremendous prosperity; so silly to think that all individuals are equal and, impressive that it helped to make more evident thus, compete under the same circumstances. It those circles of poverty that were not reached by is naive to think that an individual, aware of the this development and so well depicted by coercive power that he possesses and that others Dickens and others. As for the U.S., he calls the lack, would not use it as an advantage to pursue so-called era of the robber barons a myth. If his own interests and win the better part, if not there was so much exploitation, he asks, how all, in an economic transaction. Friedman seems come immigrants kept turning up? He rejects the to think, or wants the common man to think, of a accusation of a lack of scruples of the world where individuals trade under an ethos of industrialists by pointing out the proliferation of perfect conditions. private associations to assist the poor.21 His superficiality is appalling. In his celebration of the growing wealth of Victorian England and of the Gilded Age in the In his coverage of the Great Depression, although U.S., he doesn’t stop to question how come there he admits to a great wave of in the were so many poor and whether they were poor , he blames the U.S. because they did not want to work or because for almost all the problems that derived from the they were the victims of a system of exploitation crash of 1929. He blames the Fed for not taking imposed for the benefit of the industrialists. Once the same solution used in 1908 to save a private again, he ignores the fact that there was no

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perfect system, as Smith’s assumptions did. He further ignores the fact that mega-corporations are calls the documented fact that the robber barons the modern version of the quasi-monopolies of acted in numerous instances above the law, the Merchant era, which were despised by Adam exploiting and killing to meet their aims, a myth. Smith. Thus, what power does the individual As to the numerous private charities of the XIX have when it has to deal with today’s MNCs? In century, if there were so many, was not this today’s ethos, the MNCs are the only ones free to perhaps because there were so many poor? Are choose. So, how can free marketeers call their so many poor people a result of exploitation or views scientific dogma when they are full of their are they poor as a result of their own sinful ways, own political diatribe? Friedman’s work seems to as Victorian England believed? Were there so be just one more example of Soros theory of many people uneducated because of the lack of reflexivity, except for the fact that he appears to equal opportunities or because of the lack of consciously influence the outcome in the ambition? Above all, he completely ignores the direction of his political ideology. Thus, fact that there is no ethos of hundreds of inevitably, in this work, Friedman tries to thousands of individual entrepreneurs. He just manipulate economic theory to fit his political does not talk about the corporations who exert ideology, which is staunchly conservative, elitist power on governments and do not act as and extremely one-sided. individuals but as powerful organisations, which moves are against the individuals’ interests. The The Wolf in Sheep’s Clothing total absence of comments about corporations is Why is it, then, that theory seems to follow extremely notorious in this book. Friedman, I political ideology? Is it that political interests should say, suffers from such a lack of objectivity produce a political ideology designed to bring the in his views that it is impossible to think that he is results that fulfil their economic interests? In my being naive. opinion, economic theory cannot be developed by selfless academicians. This is the same In summary, the entire content of Friedman’s Free situation that occurs with economic policy to Choose is nothing but the expression of his makers, who are self-interested individuals political ideology instead of a Noble Prize maximizing returns for their political interest in economist speaking to the common reader and terms of power, position, votes, and personal explaining basic and objective economic wealth. With economic scientists, it is exactly the common sense. Free to Choose, which was same. In fact, no social science can be aimed at the casual reader, is nothing but a work developed by selfless individuals. This is human of propaganda to promote Friedman’s political nature. Even under the assumption that they act ideology in a rather biased manner. Throughout with the utmost objectivity and professional zeal, his book, he vehemently defends the laissez faire it is inevitable that social scientists be influenced ideology as applied by the centres of economic first, by their own moral, political and cultural power for their own self-interest. He does not views of specific aspects of human society and, stop to question for a second why there is so second, by their own personal interests. This is much disparity, what are the causes of poverty, especially the case of economics, the social why wealth keeps further concentrating in the science that studies human activity relative to the upper echelons of society and why there is really production, and consumption of no trickle-down effect. He fails to consider, I wealth. For, in addition to the element of suspect on purpose, that, in the real world, there reflexivity, moral and political views and personal is no perfect economic ethos with a perfect interests also influence the development of system of information and competition, with full economic theory. Thus, it is my opinion, that employment, as Smith and his disciples only thinking from a higher moral ground can we envisioned and hoped. More than anything, as aspire to be humanly objective about the study of most neo-capitalists feel, he chose to ignore that economics. there is no ethos of hundreds of thousands of individuals in but rather, an However, what is to be objective in economic increasingly few mega-corporations that form the terms? From a democratic perspective, it is to oligopolies in every sector of the economy that think of the common good. When Adam Smith control every economic trade in the world. He thought about economics, he did it as a professor

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of Moral Philosophy, and he centred his work on market democracy because the same interests the idea of the common good. He was probably have assaulted both geographic areas. This is thinking of the ethos that best suited every because the roots of the assault on democracy individual interest, and that the sum of individual and the markets lie in the power of global interests equalled the good of all individuals. corporations – which are increasingly interlinked– Philosopher Luis Villorio wrote that the common that rely on the protection of powerful states in good can only be true when it is considered from order to enjoy the freedom to act with no need to an angle detached from our exclusive interests, so provide accountability to Civil Society.28 that our interests coincide with the general Corporations by nature try to impose the social interest.26 But, still, the common good can mean environment that best suits their interests. Their different things to different people. Nonetheless, pursuit of maximum profits needs to take the end result of Neoliberalism on society at large advantage of societies without a commitment to is a widening gap between rich and poor and this establish an equal exchange. Thus, corporations cannot be considered an ethos in support of the cannot support true democracy, for the interests common good. of many sectors of society would prevent them from achieving maximum profits. Societies, in Could neoliberal theory of economic monetarism their relationship with companies, seek, for the and self-regulating markets, which demand the welfare of society at large, a fair distribution of elimination of industrial controls and labour the factor endowments. That is, they seek a fair standards and of the support of wealth remuneration for their work and the payment of redistribution programs to procure the common corporate taxes, commensurate with the amount good, be then impartial? Can they seek to of wealth created by the market activities of the procure the good of all ranks of society or are corporations. They also seek from the they advocating rules [or the lack of rules] that corporations the respect of the environment and only benefit the ? Corporations of the community where corporations physically demanded freedom to choose their sources of interact with society. supply for raw materials, components and labour, and the freedom to choose their markets –all in Obviously, all of these social interests reduce the name of efficiency– meaning greater profits; profits and put the interests of corporations in but they present themselves as advocates of direct conflict with those of Civil Society. To be individual liberty. In seeking to meet their own sure, all of these social interests are genuine objectives, they present themselves as fearless democratic interests. However, the historical sheep that can only bring prosperity to everyone raison d’être of corporations is to have as its sole if all are left free to fend for themselves. purpose the maximizing of profits. Otherwise, Nevertheless, the unrelenting search for higher corporations would not exist. It is only because profits and wealth accumulation is the only force of the pressure of civil societies in democratic that drives their motives. states, that corporations have embraced, however reluctantly, their social responsibilities. Thus, How, then, can corporations, who seek to unless a corporation puts their stockholder maximize their own wealth with predatory demands for maximum profit below their social instincts become the darlings of today’s so-called responsibilities, they will inevitably seek to profit democratic governments and have them proclaim over the interests of people. In reality, that Neoliberalism is the way to go? To go for corporations put up the face of Good Corporate who? Well, obviously to go for them, for Citizens only when civil societies put enough Neoliberalism is the ethos where a relatively pressure on them [social pressure coined the label small group of private interests are allowed to of Good Corporate Citizen]. As previously control as much of society as necessary in order mentioned, since the times of the merchant to maximize their wealth.27 companies of the Enlightened Absolutism, corporations have always been in partnership What has occurred now, is that the interests of the with the holders of political power. It was only MNCs and their partners in government, both in the rise of European Liberalism and of democracy the centre and on the periphery, hold democracy that kept at bay the predatory nature of hostage. We now live in what Chomsky calls a Capitalism. But, with globalization, the demands

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of the stockholders for maximum profits have This is the new model of , and it is dominated their culture. being replicated all across the world, not only by the G7 partners but also by developing nations, In consequence, corporations seek to impose especially the so-called emerging markets on the their rules by operating under the protection of periphery. This is the dark reality that is governments. Their powerful economic interests, confronting us at the beginning of the third which are their own private interests, have also millennium: the rise of the corpocratic world become the private interests of those in command order embodied in what I regard as the Neo- of governments. Governments have been capitalists Assault. For this reason, in the next corrupted by the personal greed for wealth and essays, I will review how corporations are taking power of those elected to guard the interests of over the economic and political order of the so- Civil Society. They impose the very private called “democratic nation-states” and are interests of a small number of organizations, the imposing their own idea of a “New World corporations, over the public interests at large Order.” embodied in the Civil Society. Thus, now, more than ever, they have moved to govern for the benefit of corporations. a Alvaro J. de Regil is Executive Director of The Jus Semper Global Alliance In the most advanced democracies, social pressure keeps them from imposing the most 1 “Wal-Mart Chimera,” 1/29/2000: 72. extreme conditions desired by the corporations, but that has not kept them from imposing a real 2 Erick Nepomuceno “Argentina Obstaculiza las corpocratic government. That has not kept them Importaciones de Brasil y Desata una Grave Crisis en el from funding the political campaigns and then Mercosur,” El País Digital 28 Julio 1999, Digital ed., sec. demanding the advancement and protection of Economía y Trabajo. their very private interests. 3 Reuters, “Argentina y Brasil alcanzan nuevo pacto In less developed “democracies,” corporations automotriz,” CNN en Español Marzo 23, 2000, Internet ed., have been able to impose their will to the utmost sec. Economía. extreme by using the support of their own government to pressure the local governments. 4 Ankie Hoogvelt, Globalization and the Postcolonial World And the same process that occurs in the (Baltimore: The John Hopkins University Press, 1997) 67. metropolises occurs on the periphery. The local oligarchies and the MNCs also bribe the 5 Ibid, 107. governments of the periphery by financing the latter’s political ambitions. And Civil Society, 6 , Some Considerations of the Consequences of with weaker democracies to protect them, cannot the Lowering of Interest and the Raising the Value of Money overcome the power of the MNCs and their (Hamilton, Ontario: McMaster University Archive for the governments and of their own local autocracies. History of Economic Thought, 2000) Internet Archive. Therefore, in the last two decades, governments on the periphery have advanced the interests of 7 Robert B. Ekelund and Robert F. Hébert, A History of corporations under the disguise of democratic Economic Theory and Method, Third ed. (New York: McGraw progress. The governments of The United States, Hill, 1990) 545. Great Britain and, to a lesser degree, the other members of the G7 have taken full ownership of 8 Ibid, 551-552. the interests of the corporations and have put them above their mandate to govern for the 9 Ibid, 551. welfare of Civil Society. Naturally, the United States, being the nation with the largest share of 10 Rene Villarreal, La Contrarrevolución Monetarista (The MNCs, has the most interest in imposing a Monetarist Counterrevolution) (México, D.F.: Océano, 1984) corpocratic ethos in all nations. 87.

11 Ibid, 101.

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12 Robert B. Ekelund and Robert F. Hébert, A History of Economic Theory and Method, Third ed. (New York: McGraw Hill, 1990) 552.

13 Rene Villarreal, La Contrarrevolución Monetarista (The Monetarist Counterrevolution) (México, D.F.: Océano, 1984) 95.

14 “Follow the Money. Remember Monetarism?,” The Economist August 8, 1998: Finance and Economics.

15 Milton y , Libertad de Elegir (Barcelona: Grijalbo, 1980) 19.

16 Ibid, 22

17 Ibid, 22.

18 Ibid, 30

19 Ibid, 48

20 Ibid, 50-55.

21 Ibid, 58-60.

22 Ibid, 121-130.

23 Ibid, 168.

24 Ibid, 180.

25 Ibid, 431.

26 Luis Villoro, El Poder y el Valor. Fundamentos de una Etica Política (México, D.F: Fondo de Cultura Económica, 1997) 229-243.

27 Noam Chomsky, Profit Over People, Neoliberalism and Global Order (New York: Seven Stories, 1999) 7.

28 Ibid, 91.

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