[PEN-L:9534] Re: Re: My Ideologies

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

Brad writes: >It was Schumpeter I think (and also Norman Angell) who first
pointed out the severe disjunction between the thoughts of generals and
diplomats (who saw political control over territory and resources as the
source of wealth, prosperity, and power) and traders and industrialists
(who saw productivity, comparative advantage, and open markets--the ability
to trade what is cheap here for what is cheap there--as the sources of
wealth, prosperity, and power). <

US industrialists (like other industrial capitalists around the world) do
not value productivity, comparative advantage, and open markets. Instead,
they value _their own_ business' productivity -- but as part of the
constant struggle for rents, technological or otherwise, wish to undermine
the productivity of other businesses. They don't value open markets,
because each one struggles to attain a new monopoly and/or protect an old
one, by all means necessary (but following the calculus of cost and
benefit). I would guess that industrialists are generally ignorant of the
concept of comparative advantage (treating it as a concept from academic
cloud-cuckoo land) and instead focus on their own _competitive_ advantage,
to use Michael Porter's term.

But what about "free trade"? In the 19th century and a lot of the 20th,
i.e., from the beginning of the Civil War until the Smoot-Hawley tariff,
industrialists opposed free trade, favoring instead what was later called
"import-substituting industrialization." Charles Kindleberger quotes
Schumpeter as saying that tariffs were "the household remedy" of the
Republican party, at that time _the_ party of business and also the main
party ruling the US after 1860 until 1932. It's no surprise that Angus
Maddison dubs the U.S. in the early 20th century a "heavy protectionist"
country. This strategy of import-substitution was of course successful in
insulating US business from British competition, allowing them to overtake
and exceed Britain (partly for reasons beyond the scope of this note).
Then, with the US on top of the world in terms of manufacturing
productivity, military power, and financial clout, and with policy elites
learning from the 1930s problem of tariff-retaliation, US industry turned
to pushing free trade on the rest of the world. Even then, US
industrialists push for the _implementation_ of free trade that benefits
them. Note the US efforts to prevent free trade in anti-AIDS drugs with
South Africa; if free trade were truly valued, the drug companies' monopoly
positions would be abolished. Or if Brad is right about industrialists
favoring free trade, they would voluntarily abolish their own monopoly
positions.

(This is not new. The first free-trade nation, Holland, was also on top of
the heap when it pushed this line. Then England became the "workshop to the
world," holding the productivity advantage, and so pushed free trade on
others, especially when it could mean the bankruptcy of "native" industries
in their colonies.)

Merchants don't really value free trade, except rhetorically. Instead, what
they want is to be able to buy low and sell high. Free trade means that the
special advantages that allow such profits disappear, leaving only what
economists term "normal" profits. They continually strive to do better than
that, lobbying and bribing politicians, launching law-suits, hiring
strike-breakers, employing dishonest advertising, etc., etc. and once and
while improving a product.

If it's Schumpeter who pointed to the disjunction, he was pointing in
error. Instead, he should have pointed to the disjunction between the
thoughts of generals and diplomats and those of economists in
currently-dominant countries, especially the elite ones at the US Treasury
Department and Fed, or the US-sponsored World Bank and IMF. (In poor and
dependent countries, economists look at "free trade" with more of a
jaundiced eye, unless they're under the US/World Bank/IMF thumbs.) He may
have been confused by the spiritual unity which seems to exist between
economists and industrials and merchants, so that he projected the
economists' idealized vision of business onto the latter.

In addition, it ignores the importance of the generals' and diplomats'
concern with political control over territory and resources as the source
of power to _business_. In an earlier era (and currently in many places
around the world), the line between the generals and diplomats on the one
hand, and the industrialists and merchants on the other, was thin or
non-existent. Gaining control over land and resources (stealing it from the
"natives" or from rival mercantilists or imperialists) can allow generals
and diplomats (or their near relatives and close friends) _to become_
landed gentry, slave-owners, mine-owners, monopoly merchants, or
industrialists.

Even in the "modern" era, it's been traditional, for example, for US
business operating overseas, especially in the poor and dependent
countries, to work hand in glove with the US embassy, including its CIA
personnel. This became more than obvious when ITT and the copper companies
worked with the US government to overthrow the democratically-elected
socialist-minded government of Allende. But as books like Phillip Agee's
INSIDE THE COMPANY illustrate, the US-based businesses have never hesitated
to use their political connections with the US embassy (or local death
squads) to promote their own profits. Just as in the US, it _pays_ to have
and use one's political connections, though in poor and dependent countries
an industrialist can profit more from the inequality of power.

They also want to insure that the _system_ that allows them to appropriate
profits persists. They interpreted Allende's government, for example, as a
threat to capitalism. (We should not totally rule out paranoia, since
industrialists said similar things about FDR in the 1930s.) They're smart
in this, since the existence capitalism and its property system rests on
the power of the state, which allows the persistence of exploitation.

Tell the Kennecott and Anaconda Copper companies that their political
control over territory and resources aren't important sources of their
wealth, prosperity, and power! (The latter company has changed its name,
but I don't know what to.)  We should reject the arbitrary and ahistorical
distinction between "politics" and "economics" (usually linked to the
inaccurate equation of capitalism with "markets").

(2nd of 2, the last for the day.)

Jim Devine jdevine@xxxxxxxxxxxxxxx &
http://clawww.lmu.edu/Faculty/JDevine/jdevine.html