Year 501 Copyright © 1993 by Noam Chomsky. Published by South End Press.
Chapter 2: The Contours of World Order Segment 12/14
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In theory, free trade arrangements should lower wages in high-wage countries and raise them in the poorer areas to which capital shifts, increasing global equity. But under prevailing conditions, a different outcome is likely. The senior economist at the Environment Department of the World Bank, Herman Daly, points out that the vast and growing supply of underemployed people in the Third World will "keep the supply of labor very large, and will make it impossible for wages worldwide to be bid up very much." Repression and terror lend their assistance. The outcome will be huge profits and chipping away at high wages and social gains, including laws against child labor, limits on working hours, and protection of the environment. "Anything that raises costs [is] going to tend to be competed down to the lowest common denominator in free international trade," Daly predicts -- precisely as intended.42

Under current conditions of power and control, selective free trade will tend to drive the level of existence to the lowest grade for people who are spectators, not participants in the decisions that affect their lives. The basic thrust is well-described by Andrew Reding: "Unable to impose its agenda on a `gridlocked' Congress that, however imperfectly, still responds to civil society (`special interest groups'), the Bush administration is linking up with like-minded elites abroad in an effort to legislate from without, ...constructing what amounts to international government, though a peculiar form thereof in which only business and trade representatives have any voice"; "Under cover of free trade, foreign governments and businesses are gaining an effective veto over national, state, and provincial legislation that elevates human welfare." There is, however, nothing in the least "peculiar" about this pursuit of the vile maxim of the masters, adapted to the current age.43

The maxim requires a slight amendment: "all for themselves now." The longer term is as irrelevant as other people. Thus in a lead news story, the Wall Street Journal hails George Bush's "extraordinary coup" in compelling the entire world to abandon plans for a meaningful agreement on greenhouse gases at the June 1992 Rio conference. Someone more clever than I could pen a wonderful story or cartoon on the final edition of the Journal, going to press with a passionate editorial demonstrating that global warming is a left-wing fraud just as the rising sea level engulfs the corporate headquarters.44

Overall, the 1980s accelerated a global rift between a small sector enjoying great privilege, and a growing mass of people suffering deprivation and misery. Though superfluous for wealth production or consumption, the only human functions recognized in the dominant institutions and their ideology, these people must be dealt with somehow. Current social policy in the US is to coop them up in urban centers where they can prey upon one another; or to lock them in jail, a useful concomitant of the drug war (see chapter 4.3).

The internationalization of capital that has accelerated since 1971 gives a somewhat new character to competition among national states. To cite one indication, while the US share in world exports of manufactures declined 3.5 percent from 1966 to 1984, the share of US-based TNCs slightly increased. And international trade patterns yield a very different picture if imports from overseas subsidiaries are counted as domestic production. Foreign affiliates increased their share of total exports of manufactures by US-based firms from under 18 percent in 1957 to 41 percent in 1984. "If such foreign production could be brought back to the United States," Richard Du Boff observes, "the nation's exports would double, according to some Commerce Department projections." A 1992 World Bank study reports that "intra-firm trade within the largest 350 [TNCs] contributed about 40% of total trade. More than a third of U.S. trade is between foreign affiliates and their U.S.-based parents." Over half of Malaysia's exports to the US were from US affiliates, Taiwan's five leading electronics exporters are US firms, 47 percent of Singapore's exports in 1982 were by US-owned firms. "Similarly, exports of electrical goods by Japanese producers in Korea had much to do with the rise of Korea in world electronics." "So all the textbook trade theory about comparative advantage and the virtues of frictionless open trading systems is nonsense," Doug Henwood observes, noting that the current estimates are probably higher than these figures, from the early 1980s: "Several hundred economically and politically powerful corporations with global networks dominate trade largely on their own terms, and then serve as their governments' advisors on trade strategy."

Commercial products reflect these tendencies; to take one example, almost a third of the market price of a GM Pontiac LeMans goes to producers in South Korea, over a sixth to Japan, about the same to a combination of Germany, Singapore, Britain, Barbados, and others. As a social entity, the country and most of its population may decline; the corporate empires are playing a different game, based on the theological doctrine that the masters have the right to make investment decisions, unencumbered by concerns of their servants in workplace and community. With somewhere between one-quarter and one-half of world trade already conducted within North-based TNCs, these are factors of growing importance as we look towards Year 501.45


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42 "Interview," Multinational Monitor, May 1992.

43 Reding, op. cit.

44 Rose Gutfeld, WSJ, May 27, 1992.

45 Arthur MacEwan, Socialist Review, July-Dec. 1991; Du Boff, Accumulation; World Bank, Global Economic Prospects and the Developing Countries 1992, cited by Doug Henwood, Left Business Observer, No. 54, Aug. 4, 1992; Watkins, Fixing, 5, 24.