From: "Linda Muller" <linda@buchanan.org>
To: brigade@zeus.wwol.com
Date: Tue, 28 Mar 2000 12:23:11 -0500
Subject: [BRIGADE] The Betrayal of Adam Smith
Dear Brigade,
"What would an Asian trade policy rooted in Smith's ideas and the national
interest entail? .... First, overturn MFN. Second, place upon China the same
tariffs Beijing imposes on us. Third, shift that $63 billion in U.S. purchases
last year from Communist China to Free China and Free Asia. Help our
friends out of their crisis with trade, not IMF aid. Fourth, negotiate with the
Pacific Rim, so that its trade surpluses are used to buy U.S. farm products
and weapons to keep the U.S. defense industry humming, and to enable
Free Asia to depend less on us, and more on itself, for its future security --
against a predatory China ... Call it an America First, friends second and
adversaries last trade policy...." - PJB 1998
Brigade - See 2 items below:
1. How Adam Smith Would Handle China - by PJB July, 1998
2. The Betrayal of Adam Smith by David C. Korten, [When Corporations Rule
the World] 1995
GO PAT GO!!!!!!!!!
Linda
--------------------------
How Adam Smith Would Handle China
by Patrick J. Buchanan
July 24, 1998
House Republicans who enjoy sporting Adam Smith ties should read a little
more Adam Smith. In at least four cases, the father of free trade wrote, it
must be "advantageous to lay some burden upon foreign (imports)," i.e.,
impose tariffs...
As America was annexing the Philippines in 1898, preparing to send a U.S.
army to crush Filipino resistance to the new American empire, William
Graham Sumner gave a speech titled, "The Conquest of the United States by
Spain."
"(W)e are submitting to be conquered by her on the field of ideas and
politics," said Sumner. "If we believe in liberty, as an American principle, why
do we not stand by it? Why are we going to throw it away and enter upon a
Spanish policy of domination?"
Today, someone should write a speech titled, "The Conquest of the United
States by China." For consider how we are corrupting ourselves, chasing the
receding rainbow of "the China trade."
Scientists at U.S. satellite companies have gone up to the line, maybe over
it, in helping China perfect rockets that can carry nuclear warheads. U.S.
corporations like Boeing have become lobbyists and apologists for Beijing.
Republicans, who once prided themselves on standing with the Reagan
Doctrine of containment-and-rollback of the Evil Empire, now prattle about
how trade will transform China.
Through trade, they say, we will build a Chinese middle class that will
demand change; political reform will follow economic reform. The core
doctrine of this free-trade cult: "Commerce shall make you free!"
So, retailers lobby Congress to ensure their access to cheap toys "Made in
China," unaware those toys are produced in factories run by the Peoples
Liberation Army. Do they not know what the PLA does with its dollars? It buy
weapons to deal with a Seventh Fleet that will one day have as its sailors the
very boys getting all those toys. Irony of ironies, many of the gifts American
Christians give one another on the birthday of their Savior are made in
factories using the forced labor of Chinese Christians, imprisoned for their
faith.
We are not changing China; China is changing us.
By year's end, China will have run up $200 billion in total trade surpluses with
America in the Clinton era. At whose expense has this windfall come?
Communist China's gigantic trade surpluses with the United States -- now
running at $1 billion a week! -- have come at the expense of Free China
(Taiwan) and Free Asia, which have been crowded out of U.S. markets by
the Mainland's conscript labor.
Between 1992 and 1997, China's sales of footwear to the United States
soared by $4 billion a year; South Korea's fell $1.3 billion. China's sales of
toys and sporting goods soared $6 billion. Taiwan's fell by $700 million.
China's sale of telecommunications parts and equipment rose $157 million.
Japan's fell by that sum. China's sale of parts for radio broadcast receivers
rose $1.1 billion a year from '92 to '97, Japan's, South Korea's and Taiwan's
fell as much.
The United States has shifted purchases away from friends and allies to
people who behave like enemies. Why is a Republican Party that presided
over America's victory in the Cold War endorsing a trade policy that favors
Asian Communists over Asia's democrats?
House Republicans who enjoy sporting Adam Smith ties should read a little
more Adam Smith. In at least four cases, the father of free trade wrote, it
must be "advantageous to lay some burden upon foreign (imports)," i.e.,
impose tariffs. Among Smith's reasons were "the defense of the country,"
"for the encouragement of domestic industry," for "revenge" and "retaliation"
on nations that impose tariffs on one's own exports -- and to break open
foreign markets.
Today, tariffs and taxes on U.S. exports entering China average around 30
percent. If the GOP were true to Smith, it would strip China of MFN and
impose on Beijing the same tariff levels Beijing imposes on us -- both as
retaliation, and to crack open the Chinese market to U.S. farmers and
manufacturers. In 1997, we sold China a pathetic $13 billion worth of goods --
less than we sold to Singapore -- while we bought some 7 percent of China's
entire GDP.
What would an Asian trade policy rooted in Smith's ideas and the national
interest entail?
First, overturn MFN. Second, place upon China the same tariffs Beijing
imposes on us. Third, shift that $63 billion in U.S. purchases last year from
Communist China to Free China and Free Asia. Help our friends out of their
crisis with trade, not IMF aid. Fourth, negotiate with the Pacific Rim, so that
its trade surpluses are used to buy U.S. farm products and weapons to keep
the U.S. defense industry humming, and to enable Free Asia to depend less
on us, and more on itself, for its future security -- against a predatory China.
Call it an America First, friends second and adversaries last trade policy.
---------------------
From: Rcs7710361@aol.com
Date sent: Sun, 26 Mar 2000 23:25:04 EST
Subject: The Betrayal of Adam Smith:
When Corporations Rule the World!
To: linda@buchanan.org
The following is excerpted from
David C. Korten, When Corporations Rule the World
(Kumarian Press and Berrett-Koehler Publishers, 1995)
Proponents of corporate libertarianism regularly pay homage to Adam Smith
as their intellectual patron saint. His writing remains to this day the
intellectual foundation of policies advanced in the name of market freedom
that are allowing a few hundred corporations to consolidate their control over
markets all over the world. See An Economic System Dangerously Out of
Control
Ironically, Smith's epic work The Wealth of Nations, which was first
published in 1776, presents a radical condemnation of business monopolies
sustained and protected by the state. Adam Smith's ideal was a market
comprised solely of small buyers and sellers. He showed how the workings
of such a market would tend toward a price that provides a fair return to land,
labor, and capital, produce a satisfactory outcome for both buyers and
sellers, and result in an optimal outcome for society in terms of the
allocation of its resources. He made clear, however, that this outcome can
result only when no buyer or seller is sufficiently large to influence the
market price-a point many who invoke his name prefer not to mention. Such
a market implicitly assumes a significant degree of equality in the
distribution of economic power-another widely neglected point.
Indeed, Smith was almost fanatical in his opposition to any kind of monopoly
power, which he defined as the power of a seller to maintain a price for an
indefinite time above its natural price. Indeed, he asserted that trade
secrets confer a monopoly advantage and are contrary to the principles of a
free market. He would surely have strongly opposed current efforts by market
libertarians to strengthen corporate monopoly control of intellectual
property rights through the General Agreement on Tariffs and Trade (GATT).
The idea that a major corporation might have exclusive control over a
lifesaving drug or device and thereby be able to charge whatever the market
will bear would have been anathema to him.
Furthermore, Smith did not advocate a market system based on unrestrained
greed. He was talking about small farmers and artisans trying to get the best
price for their products to provide for themselves and their families. That is
self-interest-but it is not greed. Greed is a high paid corporate executive firing
10,000 employees and then rewarding himself with a multimillion dollar
bonus for having saved the company so much money. Greed is what the
economic system being constructed by the corporate libertarians
encourages and rewards.
Smith had a strong dislike for both governments and corporations. He viewed
government primarily as instruments for extracting taxes to subsidize elites
and for intervening in the market to protect monopoly. In his words, "Civil
government, so far as it is instituted for the security of property, is in reality
instituted for the defence of the rich against the poor, or of those who have
some property against those who have none at all." Smith made no mention
of government intervention to set and enforce minimum social, health, worker
safety, and environmental standards in the common interest-to protect the
poor against the rich. We can imagine that given the experience of his day
the possibility never occurred to him.
The theory of market economics, as contrasted to free market ideology,
specifies a number of basic conditions needed for a market to set prices
efficiently in the public interest. The greater the violation of these conditions,
the less efficient the market system. Most basic is the condition that
markets must be competitive. I recall the professor in my elementary
economics course using the example of a market comprised of small wheat
farmers selling to small grain millers to illustrate the idea of perfect market
competition. Today, four companies-Conagra, ADM Milling, Cargill, and
Pillsbury-mill nearly 60 percent of all flour produced in the United States, and
two of them-Conagra and Cargill-control 50 percent of grain exports.
Given this reality, one might expect the economic rationalists to be
outspoken in arguing for the need to restrict mergers and acquisitions and
break up monopolistic firms to restore the conditions of a competitive
market. More often they argue exactly the opposite position-that to
"compete" in today's global markets firms must merge into ever larger
combinations. In other words, they espouse a theory that assumes small
firms and advocate policies that strengthen monopoly.
Another basic condition of efficient market allocation is that the full costs of
production must be born by the producer and be included in the producer's
selling price. Economists call it cost internalization. This condition is so
basic to market theory that it is rarely disputed even by the most doctrinaire
of free market ideologues. If some portion of the cost of producing a product
are borne by third parties who in no way participate in or benefit from the
transaction, then economists say the costs have been externalized and the
price of the product is distorted accordingly. Another way of putting it is that
every externalized cost involves privatizing a gain and socializing its
associated costs onto the community.
Externalized costs don't go away-they are simply ignored by those who
benefit from making the decisions that result in others incurring them. For
example, when a forest products corporation obtains rights to clear-cut
Forest Service land at give away prices and leaves behind a devastated
habitat, the company reaps the immediate profit and the society bears the
long term cost. When logging companies are contracted by the Mitsubishi
Corporation to cut the forests of the Penan tribes people of Sarawak the
corporation bears no cost for devastating native culture and ways of life.
Similarly, Dow Chemical externalizes production costs when it dumps
wastes without adequate treatment, thus passing the resulting costs of air,
water and soil pollution onto the community in the form of additional health
costs, discomfort, lost working days, a need to buy bottled water, and the
cost of cleaning up what has been contaminated. Walmart externalizes
costs when it buys from Chinese contractors who pay their workers too little
to maintain their basic physical and mental health or fail to maintain
adequate worker safety standards and then dismiss without compensation
those workers who are injured.
When the seller retains the benefit of the externalized cost, this represents
an unearned profit-an important source of market inefficiency. Passing the
benefit to the buyer in the form of a lower price creates still another source of
inefficiency by encouraging forms of consumption that use finite resources
inefficiently. For example, the more the environmental and social costs of
producing and driving an automobile are externalized, the more automobiles
people buy and the more they drive them. Urban sprawl increases, more of
our productive lands are paved over, more pollutants are released, petroleum
reserves are depleted more rapidly, and voters favor highway construction
over public transportation, sidewalks, and bicycle paths.
Yet rather than demanding that costs be fully internalized, the corporate
libertarians are active advocates of eliminating government regulation,
pointing to potential cost savings for consumers and ignoring the social and
environmental consequences. Similarly they advise localities in need of
employment that they must become more internationally competitive in
attracting investors by offering them more favorable conditions, i.e., more
opportunities to externalize their costs through various subsidies, low cost
labor, lax environmental regulations, and tax breaks.
Market forces create substantial pressure on business to decrease costs
and increase profits by increasing efficiency. The corporate rationalists fail to
mention that one way firms increase their "efficiency" is to externalize more
of their costs. The more powerful the firm, the greater its ability to take this
course. As ecological economist Neva Goodwin has observed, ". . . power is
largely what externalities are about. What's the point of having power, if you
can't use it to externalize your costs-to make them fall on someone else?"
When corporate libertarians promote practices that allow corporations and
wealthy investors to socialize their costs and privatize their gains, they reveal
their fidelity to a political interest rather than to economic principles.
A third condition basic to the market theories of Adam Smith, but rarely
noted by corporate libertarians-is that capital is locally or nationally rooted
and its owners are directly involved in its management. Adam Smith made
quite explicit in The Wealth of Nations his assumption that capital would be
rooted in place in the locality where its owner lived. He made it clear that this
condition is critical to enabling the invisible hand of the market to translate
the pursuit of self-interest into optimal public benefit. Indeed, the following is
the only sentence in the entire text in he made reference to the invisible
hand.
By preferring the support of domestic to that of foreign industry, he intends
only his own security, and by directing that industry in such a manner as its
produce may be of the greatest value, he intends only his own gain, and he
is in this, as in many other cases, led by an invisible hand to promote an end
which was no part of his intention.
The circumstance that Adam Smith believed induced the individual to invest
locally, was the inability to supervise his capital when employed far from his
home. In the current age of instant communications by phone, fax, and
computer, and twenty-four hour air travel to anywhere in the world that
circumstance no longer endures. However, the advantage to the community
and the larger society of productive investment being locally owned remains.
Local investment is more likely to remain in place and is more easily held to
local standards,
Smith was also quite explicit that optimal market efficiency depends on the
owners of capital being directly involved in its management-the owner
managed enterprise. One could also argue that implicitly he favored worker
owned enterprises, as in his ideal small firm owner, manager, and worker
were one and the same person.
Thus Smith's vision of an efficient market was one comprised of small, owner-
managed enterprises located in the communities in which the owners reside,
share in the community's values, and have a personal stake in its future. It is
a market that bears little in common with a globalized economy dominated
by massive corporations without local or national allegiance managed by
transient professionals who are removed from real owners by layers of
investment institutions and holding companies.
Economist Neva Goodwin, who heads the Global Development and
Environment Institute at Tufts University suggests that the neoclassical
school of economics, with which many of most vocal proponents of corporate
libertarianism are identified, may be roughly characterized as the political
economy of Adam Smith minus the political analysis of Karl Marx.
The classical political economy of Adam Smith was a much broader, more
humane subject than the economics that is taught in universities today. . . .
For at least a century it has been virtually taboo to talk about economic
power in the capitalist context; that was a communist (Marxist) idea. The
concept of class was similarly banned from discussion.
Adam Smith was as acutely aware of issues of power and class as he was
of the dynamics of competitive markets. However, the neoclassical
economists and the neomarxist economists bifurcated his holistic
perspective on the political economy, one taking those portions of the
analysis that favored the owners of property and the other those that favored
those who sell their labor. Thus, the neoclassical economists left out Smith's
considerations of the destructive role of power and class. And the
neomarxists left out the beneficial functions of the market. Both advanced
social experiments embodying a partial vision of society on a massive scale
and with disastrous consequence.
IN PRAISE OF COMPETITIVE MARKETS
When the necessary conditions are met the market is a powerful and
efficient mechanisms for allocating resources. What we now have is not a
market economy. It is increasingly a command economy centrally planned
and managed by the world's largest corporations to maximize financial
returns to top managers and the wealthiest shareholders at the expense of
the rest of society. If the corporate libertarians were to bear serious
allegiance to market principles and human rights, they would be calling for
policies aimed at achieving the conditions in which markets function in a
democratic fashion in the public interest. They would be calling for measures
to end subsidies and preferential treatment for large corporations, to break up
corporate monopolies, encourage the distribution of property ownership,
internalize social and environmental costs, root capital in place, secure the
rights of workers to the just fruits of their labor, and limit opportunities to
obtain extravagant individual incomes far greater than their productive
contribution.
Corporate libertarianism is not about creating the market conditions that
market theory argues will result in optimizing the public interest. It is not
about the public interest at all. It is about defending and
institutionalizing the right of the economically powerful to do best serves
their immediate interests without public accountability for the consequences.
It places power in institutions that are blind to issues of equity and
environmental balance.
