[PEN-L:5158] Review of Goldsmith's The Trap

[D Shniad <shniad@xxxxxx>]

IN THESE TIMES -- APRIL 3,1995

MONEY ISN'T EVERYTHING

-- By Art Hilgart

How is it," Sir James Goldsmith asks, "that nearly
two hundred years after the birth of the Industrial
Revolution, which produced humanity's greatest
period of economic expansion, the absolute number
of those living in misery, both material and
social, has grown exponentially?" This is a rather
interesting question, especially considering its
source.  Goldsmith, a man who epitomizes the modem
paper capitalist, accumulated a very large fortune
before tuming 50, mostly through corporate
takeovers, stock speculation and generous rewards
for not taking over companies.  He consolidated his
holdings and gave up business for politics in 1987,
forming l'Autre Europe, a European Parliament
coalition of assorted leftists and conservatives
from several countries opposed to the growing power
of Brussels.
  If it seems a little out of the ordinary for an
ex-Master of the Universe to rhetorically question
the justice of capitalism in its golden age, that
is because Goldsmith is himself a bit of an odd
fish, a character of seemingly contradictory
inclinations.  A vigorous proponent of national
distinctiveness, Goldsmith is himself cosmopolitan.
French-bom, Goldsmith observes with delight that
the English think he is French and the French think
he is English.  While he describes his religious
views as a blend of the Far East and Native
American, he notes that Catholics think he is a Jew
and Jews think he is a Catholic.  A financial
speculator, he was the darling of socialist prime
minister Harold Wilson, who was ultimately
responsible for Goldsmith's knighthood.
  In The Trap, which reprises a series of
interviews with Yves Messarovitch, the economics
editor of Le Figaro, Goldsmith decries the brand of
globalism now purveyed by transnational
corporations and First World governments.  It is a
globalism that, in his view, subordinates human
interests to the unlimited pursuit of profit by
transnational corporations and that, through the
indiscriminate use of technology, transforms people
into disposable commodities.
  Goldsmith questions a fundamental premise of
ortholox economics, the idea that the primary
objective of society is growth in gross national
product (GNP).  One pitfall of endowing growth
figures with too much evaluative significance, he
notes, is that they can give a misleadingly
incomplete picture.  Any money transaction will
boost GNP, regardless of whether it truly
represents an augmentation of social well-being.
Growth in prison building and nuclear waste
disposal boosts GNP, as does transferring child
care from families to paid workers.  More
importantly, GNP growth is indifferent to the
distribution of wealth.  Not only in the Third
World but in England, France and the United States,
poverty has grown along with GNP.  Goldsmith blames
this growing maldistribution of income in large
part on free trade among nations and the
industrialization of agriculture.
  Traditionally, free trade theory has rested on
Ricardo's principle that aggregate production and
consumption are maximized when each country
produces goods for which it is best suited.
Nations with abundant coal resources, for example,
should export steel because they can produce it
more cheaply than countries without coal.  A
country's prosperity rests on its ability to
identify and exploit such "comparative advantages."
Goldsmith observes that this principle is becoming
less relevant in modern economies because the
important factors in modern comparative advantage -
- money and technology -- are now universally
transferable.  Intemational competition has thus
been reduced to a search for cheap labor.  The
clothing trade illustrates his point: many
"American" clothing manufacturers now move
equipment back and forth between countries like
China and Guatemala in their quest for the lowest
costs.  This competition for work creates downward
pressure on wages globally -- including those of
workers in the First World -- and brings in its
wake the grinding poverty and urban slums so common
throughout the world.
  Part of the solution to this problem, says
Goldsmith, is to allow the free movement of capital
and technology, but not goods.  If Ford wants to
sell cars in Mexico, then it should be required to
build plants in Mexico and make the cars there,
with access to patents, know-how and funding from
anywhere; the U.S. market, in the meantime, should
be served with cars made in the United States by
American workers. This may be in the strictest
sense less efficient, but it serves the human needs
of both countries. Mexican industry would have a
chance to develop, and American labor would
preserve its living standards and working
conditions.
  In modern economies, lower production costs do
not necessarily lead to lower prices.  Patents,
copyrights and trademarks confer monopoly pricing
power on sellers, and the latest GATT agreements
extend this control over prices globally. In an
aside about pharmaceutical prices, Goldsmith
recognizes this power of transnational corporations
to set prices unilaterally, and he proposes instead
the compulsory licensing of technology rights to
potential competitors. Opening markets to several
sellers would restore the basis for price
competition.
  The other principal cause of contemporary
disruption, according to Goldsmith, is the rapid
destruction of traditional patterns of agriculture.
The spectacular increase in North American
agricultural productivity in this century did not
lead to less work and higher living standards for
the rural population. Surplus workers were left to
migrate to the cities, a difficult displacement
that was moderated only by explosive growth in
manufacturing industries. In the Third World, where
industrial employment cannot begin to absorb
displaced farmers, consolidation of land ownership
and extension of modern agricultural techniques are
devastating. Vast urban slums proliferate around
the world, and Goldsmith predicts that current
trends in rural depopulation will add another 2
billion people to the metropolitan shantytowns. In
fact, we may witness the process directly in the
next few years if, thanks to NAFTA's removal of
trade barriers, cheap American corn destroys rural
Mexico's economic base.
  The goal of agricultural policy, Goldsmith
concludes, should be the preservation of rural
communities, with change introduced gradually to
accommodate natural grown in urban employment.
While Goldsmith criticizes industrial agriculture
primarily for its baleful social consequences, he
also notes that synthetic fertilizers, pesticides
and chemically treated animals damage the
enviromnent and corrupt the food.
  Related to Goldsmith's advocacy of economic self-
sufficiency is his belief that political stability
depends in large part on a respect for cultural
integrity. Had he been Japanese, he would not have
let Conunodore Perry get off his ship. Goldsmith
likens GATT to the conquistadors who plundered
Latin America and the missionaries who followed
them to destroy language, identity and religion.
But his advocacy of community is not based on
ethnocentrism or nostalgia. He argues that well-
being depends first on the small community and
secondarily on a nation where people share a common
culture and sense of identity. He regards
immigration as beneficial to people and nations,
but opposes mass migrations that inevitably lead to
hostility, intolerance and conflict.
  Communities  have  economic importance  as  well,
and  Goldsmith opposes the transfer of  power  from
the  countries of Europe to the European Union.  He
bristles  at outgoing European Commission President
Jacques Delors' boast that eventually 80 percent of
all  laws governing the social, economic and fiscal
affairs of Europeans will originate in Brussels.  A
single  currency  would  be  particularly  harmful,
since  healthy  growth in some countries  might  be
stifled   by  the  monetary  authority   to   fight
inflation elsewhere.
  There  is  a radical flavor to Goldsmith's  views
on  labor -- one expects him to come right out  and
say  "alienation" -- and secular humanism seems  to
underlie  his  general perspective.   In  the  end,
though,  Goldsmith undercuts this brief  flirtation
with  ideology to re-emphasize the value he  places
on  the intelligent use of technology in support of
human  well-being  in  communities  --  communities
seeking  not  domination over  nature  but  harmony
within it.
  Many of us reluctant to abandon a faith in one
world shared by one people will be troubled by
Goldsmith's belief in the importance of cultural
communities.  The failure of several generations of
imposed unity in Eastem Europe to obliterate ethnic
hatreds, however, is a practical challenge to that
hope.  The examples of Bosnia, Croatia, Serbia and
Chechnya tragically lend support to Goldsmith.
  The real world continues to confirm Goldsmith's
views on trade.  The excellent publication of the
Institute for Policy Studies, NAFTA's First Year,
reports that Mexican concentration on production of
food for export has increased rural unemployment
while forcing up domestic food prices.  Americans
are not getting cheaper tomatoes (retail prices are
controlled by processors and distributors), but
American tomato workers are losing their jobs.
While NAFTA advocates can find several hundred new
American jobs that can be attributed to NAFTA, the
authors identify several thousand that have been
lost -- just in the first year. (The report can be
ordered by calling 202-234-9382.)
  In The Trap, James Goldsmith grabs the purveyors
of conventional globalism and unbridled capitalism
by the lapels, forcing them to confront the
realities of the world they've created.  The book
has its flaws: it's short on implementation and
strategy, and many of its arguments have been
advanced more thoroughly elsewhere.  As a counter
to the dangerous nonsense being peddled by the
Intemational Monetary Fund, though, it is valuable.
Goldsmith's blending of related issues is as
welcome as it is rare, and his background will gain
him credibility among audiences unfriendy to
radical views.  One wishes there were a cheap
paperback edition to send to members of Congress
and the Clinton administration.  It's short enough,
at least, for their attention spans.


Art Hilgart is a writer living in Kalamazoo, Mich.
His work has
appeared in The Nation and other publications.