Keeping the Rabble in Line Copyright © 1994 by Noam Chomsky and David Barsamian
Previous section | Next section | Contents | Archive | ZNet

The Emerging Global Economic Order

February 1, 1994

DB: In the fall of 1993 the Financial Times trumpeted, "The public sector is in retreat everywhere." This is before the passage of the two major corporate-state initiatives, NAFTA (North American Free Trade Agrrement) and GATT (General Agreement on Trade and Tariffs). How were they able to do it and what are the consequences?

First of all, it's largely true, but major sectors of the public sector are alive and well, in particular those parts that cater to the interests of the wealthy and the powerful. They're declining somewhat, but they're still very lively. They're not going to disappear. How were they able to do it? These are developments that have been going on for about twenty years now. They had to do with major changes in the international economy that we've talked about in earlier discussions. For one thing, the period of U.S. global economic hegemony had pretty much ended by the early 1970s. Europe and Japan had reemerged as major economic and political entities. There was pressure on profits. The costs of the Vietnam War were very significant for the U.S. economy, and extremely beneficial for its rivals. That tended to shift the world balance. In any event, by the early 1970s the U.S. felt that it could no longer sustain its traditional position as essentially international banker, which was codified in the Bretton Woods agreements at the end of the Second World War. Nixon dismantled that system. That led to a period of tremendous growth in unregulated financial capital. It was accelerated by the short-term rise in commodity prices, which led to a huge flow of petrodollars into the now largely unregulated international system.

There were technological changes that took place at the same time which were significant. The telecommunications revolution made it extremely easy to transfer capital or paper equivalents of capital, in fact, electronic equivalents of it, from one place to another. There has been an enormous expansion of unregulated financial capital in the past twenty years. What's more, its constitution changed radically. Whereas in the early 1970s about ninety percent of financial transactions were devoted to long-term investment and trade, basically more or less productive things, by now that's reduced to ten percent. About ninety percent is being used for speculation. This means that huge amounts of capital, $14 trillion, according to a recent World Bank estimate, are now simply very quickly moveable around the world basically seeking deflationary policies. It is a tremendous attack against government efforts to stimulate the economy. I think it was pointed out in the same Financial Times article to which you referred. That's one factor.

Related to that was a very substantial growth in the internationalization of production, so it became a lot easier than it had been in the past to shift production elsewhere to places where you get much cheaper labor, generally high-repression, low-wage areas. So it becomes much easier for, say, a corporation executive who lives in Greenwich, Connecticut to have corporate and bank headquarters in New York but the factory is in some Third World country. That now includes Eastern Europe. These developments placed powerful weapons in the hands of corporate and financial power. With the pressure on corporate profits that began in the early 1970s came a big attack on the whole social contract that had developed through a century of struggle and had been kind of codified around the end of the Second World War with the New Deal and the European social welfare states and so on. There was a big attack on that, led first by the U.S. and England, and by now going to the continent. It's had major effects. One effect has been a serious decline in unionization, which carries with it a decline in wages and other forms of protection of rights. That's led to polarization of the society, primarily in the U.S. and Britain, but it's extending.

Just this morning driving in I was listening to the BBC. They reported a new study of children in Britain which concluded that children living in work houses a century ago had better nutritional standards than millions of children in Britain today living in poverty. That's one of the grand achievements of the Thatcher revolution, in which she succeeded in devastating British society and destroying large parts of British manufacturing capacity and driving England into, as the Financial Times puts it, the poorhouse of Europe. England is now one of the poorest countries in Europe, still above Spain and Portugal, but not much. It's well below Italy. That's the British achievement.

The American achievement was rather similar. We're a much richer, more powerful country, so it isn't possible to achieve quite what Britain achieved. But the Reaganites succeeded in driving U.S. wages down so we're now the second lowest of the industrial countries. Britain is the lowest. Wages in Italy are about twenty percent higher than in the U.S., Germany maybe sixty percent higher. Along with that goes a deterioration of the general social contract. The breakdown in public spending or the kind of public spending that goes to the less privileged. That's rather crucial. That's just a concomitant. We should bear in mind, and it's important to say, that the kind of public spending that goes to the wealthy and the privileged, which is enormous, remains fairly stable. That's a major component of state policy.

DB: What was the extent and quality of domestic opposition and resistance to NAFTA and GATT?

That was quite interesting. The original expectation was that NAFTA would just sail through. Nobody would ever even know what it is. So it was signed in secret. It was put on a fast track in Congress, meaning essentially no discussion. There was virtually no media coverage. Who was going to know about a complex trade agreement? So the idea was, We just ram it through. That didn't work. And it's interesting that it didn't work. There are a number of reasons. For one thing, the labor movement got organized for once and made an issue of it. Another was the maverick third party candidate Ross Perot, who managed to make it a public issue. And it turned out that as soon as the public heard about it and knew anything about it they were pretty much opposed. The media coverage on this was extremely interesting. Usually the media try to keep their class loyalties more or less in the background. But on this issue the bars were down. They just went berserk, especially toward the end when it looked like there was going to be a problem. There was a very quick transition after it passed, incidentally. I've written about this in Z Magazine. But nevertheless, despite this enormous media barrage and the government attack and huge corporate lobbying, which totally dwarfed anything else, of course, despite that the level of opposition remained pretty stable. If you look at polls right through the period, roughly sixty percent or so of those who had an opinion remained opposed. It varied a little bit here and there, but that's quite substantial. In fact, the end result is very intriguing. There was a poll published a couple of days ago in which people had to evaluate labor's actions with regard to NAFTA. The public was overwhelmingly opposed to the actions of the labor movement against NAFTA, about seventy percent opposition to it. On the other hand, the public also took exactly the same position that labor was taking. So why were they opposed to it?

I think it's easy to explain that. The media went berserk. From Bill Clinton down to Anthony Lewis, as you pointed out to me in an earlier interview (December 6, 1993), there was just hysteria about labor's musclebound tactics and these backward labor leaders trying to drive us into the past, jingoist fanatics and so on. In fact, the content of the labor critique has virtually not appeared in the press. But there was plenty of hysteria about it all over the spectrum. Naturally people see what's in the press and figure labor must be doing really bad things. The fact of the matter is that labor, one of the few more or less democratic institutions in the country, was representing the position of the majority of those who had an opinion on NAFTA. Evidently from polls the same people who approved of the positions that labor was actually advocating, though they may not have known it, were opposed, or thought they were opposed to the labor tactics.

I suspect that if someone had a close look at the Gore-Perot television debate, they might well find the same thing. There were some interesting facts about this debate which ought to be looked at more closely. I didn't watch it, but friends who did watch it thought that Perot did quite well. But the press, of course, instantly had a totally different reaction. The news analysis right after was that Gore won a massive victory. Same thing with next morning's headlines: tremendous victory for the White House. If you look at the polls the next day, people were asked what they thought about the debate. The percentage who thought that Perot had been smashed was far higher than the percentage of people who had seen it, which means that most of the people were getting their impression of what happened in the debate from the front pages the next day or the television news. As the story, whatever it may have been, was filtered through the media system, it was turned into what was needed for propaganda purposes, whatever may have happened. That's a topic for research. But on the reaction of the public to labor's tactics, it's quite striking.

DB: One of the mass circulation journals that I get is Third World Resurgence, out of Penang, Malaysia. In that I learned that in Bangalore, India, half a million farmers demonstrated against GATT. I wonder if your local paper, the Boston Globe, featured that.

I also read it in Third World Resurgence and in Indian journals. I don't recall having seen it here. Maybe there was something. I wouldn't want to say it wasn't reported without checking. But there is plenty of public opposition in India to GATT. The same in Mexico on NAFTA. Incidentally, you asked about GATT. What they had planned for NAFTA worked for GATT. So there was virtually no public opposition to GATT, or even awareness of it. I doubt a tiny fraction of the country even knows what it's about. So that may be rammed through in secret, as intended. Strikingly, they couldn't quite do that in the case of NAFTA. It took a major effort to get it through, one which was very revealing about class loyalty and class lines. In Mexico there was substantial public opposition. That was barely reported here. What happened in Chiapas doesn't come as very much of a surprise. There has been an attempt to portray the Chiapas rebellion as something about the underdeveloped south as distinct from the developed modern north. At first the government thought they'd just destroy it by violence, but they backed off and they'll do it by more subtle violence, when nobody's looking. Part of the reason they backed off is surely they were afraid that there was just too much sympathy all over the country and that if they were too up front about suppression they'd cause themselves a lot of problems all the way up to the Mexican border. The Mayan Indians in Chiapas are in many ways the most oppressed people in Mexico. Nevertheless, the problems they are talking about are the problems of a large majority of the Mexican population. Mexico too has been polarized by this decade of neo-liberal reforms which have led to very little economic progress but have sharply polarized the society. Labor's share in income has declined radically. The number of billionaires is shooting up.

DB: But I found the mainstream media coverage of Mexico during the NAFTA debate somewhat uneven. You mentioned the New York Times. They have allowed in a number of articles that official corruption was and is widespread in Mexico. In fact, in one editorial they virtually conceded that Salinas stole the 1988 presidential election. Why did that information come out?

I think that that's impossible to repress. Furthermore, there were scattered reports in the Times of popular protest against NAFTA. Tim Golden, their reporter in Mexico, had a story a couple of weeks before the vote, probably early November, in which he said that lots of Mexican workers are concerned that their wages would decline after NAFTA. Then came the punch line. He said that undercuts the position of people like Ross Perot and others who think that NAFTA is going to harm American workers for the benefit of Mexican workers. In other words, they're all going to get screwed. It was presented in that framework as a critique of the people who were opposing NAFTA here. But there was very little discussion here of the large-scale popular opposition in Mexico, which included, for example, the largest non-governmental trade union. The main trade union is about as independent as the Soviet trade unions were. There were large public protests not reported here. The environmental movements were opposed. Most of the popular movements were opposed. The Mexican Bishops' Conference came out with quite a strong statement criticizing NAFTA and endorsing the position of the Latin American bishops at Santo Domingo in December 1992. There was a conference of Latin American bishops, the first one since Puebla and Medellin back in the 1960s and 1970s, which was quite important. It was not reported here, to my knowledge. The Vatican tried to control it this time to make sure that they wouldn't come out with these perverse ideas about liberation theology and the preferential option for the poor. But despite a very firm Vatican hand the bishops came out quite strongly against neo-liberalism and structural adjustment and these free-market-for-the-poor policies. The Mexican bishops reiterated that in their critique of NAFTA. If there was anything about that here, I didn't see it.

DB: What about the psychological and political position people like us find ourselves in of being "against," of being anti, re-active rather than pro-active?

NAFTA's a good case, because in fact the NAFTA critiques were pro-active. Very few of the NAFTA critics were saying, No agreement. Not even Perot. He had constructive proposals. The labor movement, the Congressional Office of Technology Assessment, which issued another major report that was also ignored, and other critics, in fact, virtually every critic I saw, were saying there would be nothing wrong with a North American Free Trade Agreement. But not this one. It should be different. The respects in which it should be different were outlined in some detail. It's just that it was all suppressed. What's left is the picture that, say, Anthony Lewis portrays, jingoist fanatics screaming about NAFTA. Incidentally, what's called the left played the same game. James Galbraith is a left-liberal economist at the University of Texas. He wrote an article in which he also denounced the jingoist left. He picked me out as the main person, quoting an article in which I said the opposite of what he attributed to me, of course, but that's normal. It was in a sort of left-liberal journal, World Policy Review. He said there's this jingoist left, nationalist fanatics, who don't want Mexican workers to improve their lives. Then he went on with how the Mexicans are in favor of NAFTA. By the Mexicans he meant Mexican industrialists and executives and corporate lawyers. He didn't mean Mexican workers and peasants. He doesn't have a word about them. All the way over from people like James Galbraith and Anthony Lewis, to way over to the right, you had this very useful fabrication, that critics of NAFTA were just reactive and negative and that they were jingoist and were against progress and wanted to go back to old-time protectionism. When you have essentially total control of the information system, it's rather easy to convey that image. It leads to the conclusion that you describe, that the critics are re-active and not pro-active. It isn't true. You read the reports and studies and analyses and you see that they had very constructive proposals.

DB: In early January you were asked by an editor of the Washington Post to submit an article on the New Year's Day uprising in Chiapas. Was this the first time they had asked you to write something for them?

That was the first time ever. It was for the Sunday Outlook section. I was kind of surprised. I'm never asked to write for a major newspaper. I wrote it. It didn't appear.

DB: Was there an explanation?

No. It went to press, as far as I know. The editor who had asked me called me saying it looked OK and then later told me that it had simply been cancelled at some higher level. I don't know any more about it than that. Although I can guess. That article was about Chiapas, but it was also about NAFTA, and I think the Washington Post has been even more extreme than the Times in keeping discussion of this topic within narrow bounds.

DB: In that article you write that the protest of Indian peasants in Chiapas gives "only a bare glimpse of time bombs waiting to explode, not only in Mexico." What did you have in mind?

Take South Central Los Angeles, for example. In many respects, different societies and so on, but there are points of similarity to the Chiapas rebellion. South Central Los Angeles is a place where people once had jobs and lives. Those jobs and lives have been destroyed. They have been destroyed in large part by the socio-economic processes that we have been talking about. For example, say, furniture factories went to Mexico where they can pollute more cheaply. Military industry, the big public input into the high-tech system, has somewhat declined, especially in the L.A. area. People used to have jobs in the steel industry. They don't any more. They rebelled. The Chiapas rebellion was quite different. It was much more organized, much more constructive, and it's the difference between an utterly demoralized society, like South Central Los Angeles, the kind we have, and a society that still retains some sort of integrity and community life and so on, though objectively poorer. When you look at consumption levels, doubtless Mexican peasants are poorer than people in South Central Los Angeles. There are fewer television sets per capita. By other, more significant criteria, mainly social cohesion, integrity of the community, they're considerably more advanced. We have succeeded in the U.S. not only in polarizing but also in destroying community structures. That's why you have such rampant violence. That's one case.

Take another which is even more dramatic. A couple of days after the NAFTA vote, the Senate overwhelmingly passed the most extraordinary crime bill in history. It was hailed with great enthusiasm by the far right as the greatest anti-crime bill ever. I think that it greatly increased, by a factor of five or six, federal spending for "fighting crime". There's nothing constructive in it. There are more prisons, more police, heavier sentences, more death sentences, new crimes...

DB: Three strikes and you're out.

Three strikes and you're out. Membership in a gang is a crime. Clinton has quickly moved to pick this up as his major social initiative. That makes a lot of sense, and it makes a lot of sense that it should appear right after NAFTA. NAFTA will continue, maybe accelerate the polarization of society. No one has any plans for these people who are being marginalized and suppressed. There will be more South Central Los Angeles-type situations. It's unclear how much pressure and social decline and deterioration people will accept. One tactic is just drive them into urban slums, concentration camps, in effect, and let them prey on one another. But that has a way of breaking out and affecting the interests of wealthy and privileged people. So we'd better build up the jail system, which incidentally is also a shot to the economy. That's public spending, which gives a kind of economic stimulus as well. It's natural that Clinton should pick exactly that as his topic. Not only for a kind of ugly political reason. It's easy to whip up hysteria about that. But also because it reflects the general point of view of the so-called New Democrats, the business-oriented segments of the Democratic Party.

DB: One last point on Mexico: You talked about the wages being depressed. There has also been significant union busting and smashing. Describe what happened at a couple of auto plants in Mexico, one involving Ford and one involving Volkswagen.

Ford and VW are two big examples. Within the last few years, I think for VW it was 1992 and Ford a few years earlier, Ford just fired its entire work force and would rehire at a much lower wage level only those who agreed to be non-unionized. They're backed by the always ruling party when they do this. In VW's case it was pretty much the same. They fired workers who supported an independent union. They were willing to allow the fraudulent government union. But those who sought to get an independent union were kicked out and only those who agreed not to support it were rehired at lower wages.

A few weeks after the NAFTA vote in the U.S., workers at a GE and Honeywell plant in Mexico were fired for union activities. I don't know what the outcome is, but that was again symbolic. That's exactly what things like NAFTA are about. Whether NAFTA in the long term will lower the wages of Mexican workers is kind of hard to predict. There are a lot of complicated factors. I think it may very well. That it will lower the wages of American workers is hardly in doubt. The strongest NAFTA advocates point that out in the small print. My colleague at MIT, Paul Krugman, is a specialist in international trade and interestingly one of the economists who had done some of the theoretical work showing flaws in free trade. He nevertheless was an enthusiastic advocate of NAFTA, which is, I should stress, not a free trade agreement. But he did point out, if you look, that the only people who will lose will be unskilled workers. A footnote: Seventy percent of the work force is classified as "unskilled." They're the only ones who will lose.

The Clinton Administration has various, I don't know if they believe it or not, fantasies about retraining. They aren't doing anything about that, but even if they did, it would probably have very little impact. What's true of industrial workers is also true of skilled white-collar workers. You can get software programmers in India who are very well trained at a fraction of the cost of American programmers. Somebody involved in this business recently told me that Indian programmers are actually being brought to the U.S. and kept at Indian salaries, a fraction of American salaries, in software development. So that can be farmed out just as easily.

The chances of retraining having much of an effect are slim. The problems are quite different. The problems are that in the search for profit, you will try to repress people's lives as much as possible. You wouldn't be doing your job otherwise.

DB: An interesting thing happened in Alabama involving Daimler-Benz, the big German auto manufacturer.

This deterioration of the policies that destroy unions and undermine wages have a whipsaw effect. It's not only Mexico and the U.S. It's also across the industrial world. So now that the U.S. has managed, under Reagan, to drive wages down way below the level of its competitors, except for Britain, that's had its international effects. So one of the effects of the so-called free trade agreement with Canada was to stimulate a big flow of jobs from Canada to the southeast U.S. because these are essentially non-union areas. Wages are lower. You don't have to worry about benefits. Workers can barely organize. So that's an attack against Canadian workers. What you're describing now simply shows the internationalization of these effects. Daimler-Benz, which is Germany's biggest conglomerate, was seeking essentially Third World conditions. They managed to get the southeastern states to compete against one another to see who could force the public to pay the most to bring them there. Alabama gave the biggest package. They offered them hundreds of millions of dollars in tax benefits. They practically gave them the land for free. They agreed to build all sorts of infrastructure for them. The cost to the citizens of Alabama is substantial. But there will be people who benefit. The small number of people who are employed there, some spillover to hamburger stands and so on, but primarily bankers, corporate lawyers, people involved in investment and finance and financial services and so on, they'll do very well.

It was interesting that even the Wall Street Journal, which is rarely critical of business, pointed out that this is very much like what happens when rich corporations go to Third World countries and questioned whether there were going to be overall benefits for the state of Alabama. Probably not, although for sectors of Alabama, especially the corporate, financial and skilled professional sectors, there will be benefits. The general public will pay the costs.

Meanwhile Daimler-Benz can use that to drive down the living standards of German workers. That's in fact the way the game is played. Southeastern U.S. is one case. But of course Mexico, Indonesia, and now east Europe are much better cases. For example, VW will throw out their work force in Mexico and rehire it. But they'll also set up factories in the Czech Republic, as they are now doing, where they can get workers for about ten percent of the cost of German workers. It's right across the border. It's a westernized society. High educational levels. Nice white people with blue eyes. You don't have to worry about that. Of course, they insist on plenty of benefits. They don't believe in the free market any more than any other rich people do, so they leave the Czech Republic to pay the social costs of pollution, debts, etc. They'll just pick up the profits. It's exactly the same when GM moves to Poland. GM is building plants in Poland, but of course insisting on thirty percent tariff protection. The free market is for the poor. We have a dual system. Free markets for the poor and state socialism for the rich.

DB: After your return from a recent trip to Nicaragua you told me it's becoming more difficult to tell the difference between economists and Nazi doctors. What did you mean by that?

A report from UNESCO just appeared, which I haven't seen reported here. It was reported in the Financial Times of London, which estimated the human cost of what are called reforms, a nice-sounding word, in Eastern Europe since 1989. "Reforms" is a propaganda term. It implies that the changes are good things. If a populist government took over private industries, that wouldn't be called "reform." By referring to the policies as "reforms," the press is able to avoid any discussion of whether they are good or bad policies. They are good, by stipulation. But the so-called reforms, meaning returning Eastern Europe to its Third World status, have had social costs. The UNESCO study tries to estimate them. For example, in Russia they estimate about a half-a-million deaths a year as a direct result of the reforms, meaning the effect of the collapse of health services, the increase in disease, the increase in malnutrition, and so on. Killing half-a-million people a year, that's a fairly substantial achievement for reformist economists. You can find similar numbers, though not quite that bad, in the rest of Eastern Europe, if you look at death rates from malnutrition, polarization, suffering. It's a great achievement.

If you go to the Third World, the numbers are fantastic. So for example, another UNESCO report estimated that in Africa about half-a-million children die every year simply from debt service. Not from the whole array of "reforms," just debt service. About eleven million children are estimated to die every year from easily treatable diseases. Most of them could be overcome by a couple of cents' worth of materials. But the economists tell us that to do this would be interference with the market system. It's not new. It's very reminiscent of British economists during the Irish famine in the mid-nineteenth century, when economic theory dictated that famine-struck Ireland must export food to Britain, which it did, right through the Irish famine, and should not be given food aid because that would violate the sacred principles of political economy. These principles typically have this curious property of benefiting the wealthy and harming the poor.

DB: You'll recall the uproar in the 1980s about Sandinista abuses of the Miskito Indian population on the Atlantic coast. President Reagan, in his inimitable style of understatement, said it was "a campaign of virtual genocide." UN Ambassador Jeane Kirkpatrick was a bit more restrained. She called it the "most massive human rights violation in Central America." What's happening now with the Miskito Indians in Nicaragua?

They were talking about an incident in which, according to Americas Watch, several dozen Miskitos were killed and lots of people were forcefully moved in a very ugly way in the course of the contra war. The U.S. terrorist forces were moving into the area and this was the reaction. It was certainly an atrocity, but you couldn't even see it in comparison to the atrocities that Jeane Kirkpatrick was celebrating in the neighboring countries at the time, or for that matter in Nicaragua, where the overwhelming mass of the atrocities were committed by the so-called freedom fighters.

What's happening to the Miskitos now? I was in Nicaragua in October. Church sources, the Christian Evangelical Church, primarily, who work in the Atlantic coast, were reporting that 100,000 Miskitos were starving to death, largely as a result of the policies that we are imposing on Nicaragua. Not a word here.

Another problem among the Miskitos is narcotics. One typical consequence of U.S. victories in the Third World, which again includes much of Eastern Europe, is that the countries where we win immediately become big centers for drug flow.

There are good reasons for that. That's part of the market system that we impose on them. Nicaragua has now become a major drug transshipment center. There's a little concern about that here, so that gets into the press. If you look at the small print, you'll discover that a lot of it goes through the Atlantic coast now that the whole governmental system has collapsed. There's also a drug epidemic. This goes along with being a drug transshipment area.

It's a major epidemic among the Miskitos, in particular, among the divers. Miskito Indian divers, both in Nicaragua and Honduras, are compelled by economic circumstances to carry out diving under horrendous conditions. They are forced to do very deep diving without equipment for lobsters and other shellfish. It's a market system. You've got plenty of superfluous people. So you make them work under these conditions. If they die off fast you just bring in others. That's a standard free-market technique. In order to try to maintain their work rate they stuff themselves with cocaine. Somehow it enables them to bear the pain. So that actually sort of got reported. There was a little report about cocaine use among Miskito Indians. Of course, nobody cared much about the work conditions, or why they are there. That's the situation of the Miskito Indians in Nicaragua today. In Honduras it may even be worse.

DB: This speaks volumes about the whole notion of worthy victims whose plight can be attributed to official enemies, and then when the enemies are eliminated, they become unworthy victims.

It's a clear example of that. If you want another example, in many ways an uglier one, have a look at today's Boston Globe. There's an op-ed by Sidney Schanberg blasting Senator Kerry of Massachusetts for being dishonest and two-faced because he is refusing to concede that the Vietnamese have not been entirely forthcoming about American POWs.

Nobody, according to Schanberg, is honest enough to tell the truth about this. He says the government ought to finally have the honesty to say that it left Indochina without accounting for all the Americans. Of course, it wouldn't occur to him to suggest that the government should be honest enough to say that we killed a couple of million people and destroyed three countries and left them in total wreckage and have been strangling them ever since. It is particularly striking that this is Sidney Schanberg. He is regarded as the great conscience of the press because of his intrepid courage in exposing the crimes of official enemies, namely Pol Pot. He also happened to be the main U.S. reporter in Phnom Penh in 1973, which was the peak of the U.S. bombardment of inner Cambodia, when tens of thousands of people were being killed and the society was being wiped out.

Nobody knows very much about the bombing campaign and its effects because people like Sidney Schanberg refused to cover it. It wasn't a big effort for him to report it. He didn't have to go trekking off into the jungle to find the appropriate refugees. He could walk across the street from his fancy hotel in Phnom Penh, where there were hundreds of thousands of refugees driven from the countryside into the city. I went through all of his reporting. It's reviewed in detail in Manufacturing Consent, my book with Edward Herman. He simply refused to interview refugees to find out what was going on in inner Cambodia. Only a few sentences of refugee testimony appear in his dispatches.

To heighten the depravity, to make it very clear just what he is, there happens to be one rather detailed report of an American atrocity. If you look at the movie The Killing Fields, which is based on his story, it opens by describing this atrocity, which he did report for about three days. What's the one report? American planes hit the wrong village, a government village. That's an atrocity. That was reported. How about when they hit the right village? We don't care about that. One of the reasons why we know very little about this monstrous atrocity in inner Cambodia is that people like Sidney Schanberg wouldn't report it.

Now he's orating about the lack of honesty and the two-facedness of people who won't say that we left POWs behind. Incidentally, take a look at the U.S. record with POWs. It was atrocious. Not only in Vietnam, where it was monstrous, but in Korea, where it was even worse. U.S. treatment of POWs in Korea was an absolute scandal. It's been well discussed in the scholarly literature. If you go back to the Pacific war, it's also horrible, including after the war, when we kept prisoners illegally under confinement, as did the British.

DB: Other Losses, a Canadian book, alleges it was official U.S. policy to withhold food from German prisoners. Many of them supposedly starved to death.

That's James Bacque's book. There's been a lot of controversy about the details, and I'm not sure what the facts of the matter are. He did say that. On the other hand, there are things on which there's no controversy. Ed Herman and I wrote about it back in the late 1970s, in our book Political Economy of Human Rights. It was kind of striking. Just at the time that the first uproar was being whipped up about the American POWs, scholarly work was coming out about American and British treatment of German POWs during and after the Second World War. There were some reviews of this material. They were lauding the humanitarian efforts of the Americans and the British.

If you looked at the material, what happened was that the Americans were running "re-education camps" for German prisoners. Since it was in gross violation of international conventions, it was concealed. They finally changed the name. They picked some Orwellian name for it instead of re-education camps. This was hailed as a tremendous example of our humanitarianism, because we were teaching them democratic ways. In other words, we were indoctrinating them into accepting our beliefs. Therefore it's humanitarian in these re-education camps. They kept it secret because they were afraid that the Germans might retaliate and treat American prisoners the same way. Prisoners were being treated very brutally, killed and starved and so on.

Furthermore, it went on after the war. The U.S. kept German POWs until mid-1946, I think. They were used for forced labor, beaten, and killed. It was much worse in England. There they kept them until, I think, mid-1948. All totally illegal -- forced labor, violence, and so on.

Finally there was public reaction in Britain. The person who started it off was Peggy Duff, a marvelous woman who died a couple of years ago. She was later one of the leading figures in the CND and the international peace movement during the 1960s and 1970s. She started off her career with a protest against the treatment of German POWs.

Incidentally, why only German POWs? What was happening to the Italian POWs? We don't know anything about that. The reason is that Germany is a very efficient country. So they have published volumes of documents on what happened to German POWs. But Italy's sort of laid back, and at least at that time there was no research on the surely much worse treatment of Italian POWs.

I can remember this as a kid. There was a POW camp right next to my high school. There was controversy among the students over the issue of the students taunting the prisoners. There were a group of us who thought this was horrifying and objected to it, but very few. That's not the worst of it, of course.

DB: At the same time this was going on with the prisoners of war after World War II, there was Operation Paper Clip. Chris Simpson describes this in his book Blowback, and you've discussed it as well. It involved the importation, on a large scale, of known Nazi war criminals, rocket scientists, camp guards, etc.

That was part of it. But it was actually much worse than that. There was also an operation involving the Vatican and the U.S. State Department, and American-British intelligence, which took some of the worst Nazi criminals, like Klaus Barbie, and used them. Klaus Barbie was taken over by U.S. intelligence and returned to exactly the operations that the Nazis had him doing. Later, when it became an issue, some of his supervisors pointed out that they didn't see what the fuss was all about.

They said: We needed a guy who would attack the resistance. We had moved in. We had replaced the Germans. We had the same task they did, namely destroy the resistance, and here was a specialist. He had been working for the Nazis to destroy the resistance, the butcher of Lyon, so who would be better placed to continue exactly the same work for us, when we moved in to destroy the resistance?

So Barbie worked for the Americans as he had worked for the Nazis. When they could no longer protect him, they moved over to the Vatican-run ratline operation, with Croatian Nazi priests and others, and managed to spirit him off to Latin America, where his career continued. In fact, he became a big drug lord and narcotrafficker, and was involved in Bolivia in a military coup, all with U.S. support.

Klaus Barbie was basically a small operator. There were much bigger people. We managed to get Walter Rauff, the guy who invented gas chambers, off to Chile. Others went to fascist Spain. This was a big operation involving many top Nazis. That's only the beginning. Reinhard Gehlen was the leading figure. He was the head of German military intelligence on the eastern front. I don't have to tell you what that means. That's where the real war crimes were. Now we're talking about Auschwitz and other death camps.

Gehlen was taken over quickly by American intelligence and returned essentially to the same role. The U.S. was supporting German-established armies in Eastern Europe. The U.S. continued to support them at least into the early 1950s.

It turns out the Russians had penetrated American intelligence, so the air drops didn't work very well. But they were trying to support Hitler's armies in Eastern Europe. Gehlen was returned to the operations that he had carried out under the Nazis. Furthermore, German, as they called them, counterterrorist specialists, meaning people who were fighting the partisans and the resistance, were taken over by the American army. Their records and expertise were used to create counterinsurgency doctrine.

In fact, if you look at the American army counterinsurgency literature, a lot of which is now declassified, it begins by an analysis of textbooks written with the cooperation of Nazi officers recording the German experience in Europe. It describes everything from the point of view of the Nazis, e.g., which techniques for controlling resistance worked, which ones didn't work. That becomes simply transmuted with barely a change into American counterinsurgency literature. This is discussed at some length by Michael McClintock in a book called Instruments of Statecraft, a very good book which I've never seen reviewed. It's quite illuminating on this topic.

DB: This makes an interesting counterpoint to the opening of the Holocaust Museum in Washington, D.C. and the current widespread popularity of Stephen Spielberg's film Schindler's List, that the U.S. was not passively engaged in recruiting German war criminals but was in fact actively engaged. Is it about this that you say that if a real history of the aftermath of the Second World War were ever written this would be the first chapter?

This would be a part of the first chapter. Recruiting Nazi war criminals and saving them is bad enough, but continuing the activities that they carried out is worse. The first chapter of postwar history, in my view, would be the description of the British and U.S. operations, mostly U.S., given power relations, throughout the world to destroy the anti-fascist resistance and restore the traditional essentially fascist order to power.

That took different forms in different parts of the world. In Korea, where we ran it alone, it meant killing about 100,000 people, just in the late 1940s before what we called the Korean War. In Greece it meant supporting the first major counterinsurgency war, which destroyed the peasant- and worker-based anti-Nazi resistance and restored collaborators to power.

Italy is a very interesting case. A lot of information is just coming out now. The British first, and then the Americans, as they moved in, wanted to destroy the very significant resistance movement. It had liberated most of northern Italy. The Americans essentially wanted to restore the fascist order, as did the British. This is the British Labor Party, incidentally. In the south, they simply restored the fascist order, the industrialists. The Americans tried to get leading fascists in, like Dino Grandi, but the Italians wouldn't accept it, so they took an Italian war hero, Badoglio, and essentially restored the old system.

But the big problem was when they got to the north. There the Italians had already been liberated. The Germans had been driven out by the Italian resistance. The place was functioning. Industry was functioning. First Britain and then the U.S. had to dismantle all of that and restore the old order. Their attitude is extremely interesting. It's just coming out now in books. There is one by an Italian scholar, Federico Romero, who describes this very positively. The big critique of the resistance was that they were displacing the old owners in favor of popular workers' and community control. This was called "arbitrary dismissal" of the legitimate owners. They were also hiring what was called "excess workers," meaning they were giving jobs to people beyond what's called economic efficiency, meaning maximal profit-making. In other words, they were trying to take care of the population and they were more democratic. That had to be stopped. The prime commitment, as the documents say, was to eliminate this arbitrary dismissal of legitimate owners and the hiring of excess workers.

There was also another problem which they recognized. Of course the most severe problem for Italy at the time was hunger and unemployment. But that's the Italians' problem, the British labor attaché explained. Our problem, the problem of the occupying forces, is to eliminate this hiring of excess workers and arbitrary dismissal of owners. Then they can worry about the other problem, everybody starving. This is, I should say, described very positively, showing how law-abiding we are. It goes right to contemporary neo-liberalism without much change.

The next thing was to try to undermine and destroy the democratic process, which the U.S. was very concerned about in Italy. The left was obviously going to win the elections. It had a lot of prestige from its involvement in the resistance and the traditional conservative order had been discredited. The U.S wouldn't tolerate that. The first memorandum of the first meeting of the newly-formed National Security Council in 1947 is devoted to this. This was a major issue. They decided that they would undermine the election. There were big efforts made to undermine the election, to withhold food and put all sorts of pressure to ensure that the democratic system couldn't function and that our guys would get in.

That's a pattern that's been relived over and over. Nicaragua recently is another case. You strangle them. You starve them. And then you have a free vote and everybody talks about how wonderful democracy is. They were afraid that violence and coercion might not work. The fascist police and strikebreakers were put back. They said: In the event that the communists win a democratic election legitimately, the U.S. will declare a national emergency, put the Sixth Fleet on alert in the Mediterranean and support paramiltiary activities to overthrow the Italian government. That's NSC 1, the first National Security Council Report.

There were other people who were more extreme, like George Kennan, who thought that we just ought to invade the place, not even let them have the election. They managed to hold him back, figuring that subversion and terror and starvation would do it. And it did. Then comes a long follow-up, right into at least the 1970s, when records dry up.

Maybe it's still going on. Probably the major CIA effort in the world was the subversion of Italian democracy, from the 1940s right to the very modern period, including support for ultra-right Masonic Lodges and paramilitary elements and terrorists and so on. A very ugly story.

If you look at France and Germany and Japan, you get pretty much the same thing. That ought to be chapter 1 of postwar history. The person who opened up this topic and many others was Gabriel Kolko, in his classic book Politics of War (1968) which has really been shamefully ignored. It's a terrific piece of work. A lot of the documents weren't around then, but his picture turns out to be quite accurate, and it's been by now supplemented by a lot of specialized monographic materials.

DB: Let's talk about human rights in a contemporary framework with one of our major trading partners, China.

Today's a good day to talk about it. The State Department just came out with its report on human rights in China. I haven't read the whole report, just the newspaper account, but I'm willing to predict. In the Asia Pacific summit in Seattle, the one substantive achievement was sending more high-tech equipment to China, in violation of legislation, which the governemnt would reinterpret to allow it; the legislation was because of China's involvement in nuclear and missile proliferation, so we therefore sent them nuclear generators and sophisticated satellites and Cray supercomputers. Right in the midst of that summit is a little tiny report which you can find tacked on to the articles about the grand vision in Asia, saying that 81 women had been burned to death. They were locked in a factory in what's called booming Guandong province, the economic miracle of China.

A couple of days later sixty workers were killed in a Hong Kong-owned factory. The China Labor Ministry reported that eleven thousand workers had been killed in industrial accidents just in the first eight months of 1993, double the figure of the preceding year.

These atrocities and the women locked into factories never enter the human rights report. On the other hand, it would be unfair to say that labor practices never enter it. They do. There's been a big hullabaloo about the use of prison labor. Front-page stories in the Times. It's terrible. Prison labor we're opposed to. But locking women in factories in foreign-owned enterprises where they burn to death, that's just one of those things that happens.

What's the difference? Very simple. Prison labor does not contribute to private profit. That's state enterprise. Prison labor in fact undermines private profit because it competes with private industry. On the other hand, locking women in factories where they burn to death contributes to private profit. So prison labor is a human rights violation. But there is no right not to be burned to death. In fact, that's just part of the capitalist system. We're in favor of that. People might be burned to death, but we have to maximize profit. From that principle everything follows. Opposition to prison labor to silence about eleven thousand workers being killed in industrial accidents.

DB: Notions of democracy fill the air. Clinton's National Security Advisor, Anthony Lake, is encouraging democracy enlargement overseas. Might Anthony Lake extend that to the U.S.?

I can't tell you what Anthony Lake has in mind, but the concept of democracy that's been advanced is a very special one. It's one that the more honest people on the right describe accurately. For example, there are some interesting writings recently by Thomas Carothers, who was involved in the Reagan administration in what they called the "democracy assistance project" in the 1980s. He has a book and several articles about the achievements of the project. He takes the commitment seriously, which is odd, to say the least, even given his own report and evaluation.

Carothers gives an assessment which is rather accurate. He said that the U.S. sought to create a form of top-down democracy which would leave traditional structures of power with which the U.S. had always been allied still in effective control. That kind of democracy is OK. That's the kind of democracy that's being enhanced, at home as well, a form of democracy which leaves traditional structures of power in control and in fact, in greater control. Traditional structures of power are basically the corporate sector and its affiliates. Any form of democracy that leaves them unchallenged, that's admissible. Any form that undermines their power is as intolerable as ever.

DB: We should have a lexical definition of democracy and then the practical definition.

The practical definition is something like the one that Thomas Carothers describes and criticizes. The lexical definition is that democracy has lots of different dimensions. But roughly speaking, a society is democratic to the extent that people have meaningful opportunity to take part in formation of public policy. Insofar as that's true, the society's democratic, and there are a lot of different ways in which that can be true. Society can have the formal trappings of democracy and not be democratic at all. The Soviet Union, for example, had elections.

DB: You've commented that the U.S. has a formal democracy with primaries, elections, referenda, recalls, and so on. But what is the content of this democracy in terms of popular participation?

The content has generally been rather slight. There are changes, but over long periods the involvement of the public in planning or implementation of public policy has been quite marginal. It's a business-run society. For a long time the parties have reflected business interests.

One version of this view which I think has much power behind it is what political scientist Thomas Ferguson calls the investment theory of politics. He argues that since the early nineteenth century the political arena has been a domain in which there's a conflict for power among groups of investors who coalesce together on some common interest and invest to control the state. The ones who participate are the ones who have the resources and the private power to become part of a meaningful coalition of investors. He argues, plausibly, I think, that long periods of apparent political compromise, when not much is going on of a major character in the political system, are simply periods in which the major groups of investors have seen more or less eye to eye on what public policy should look like. The moments of conflict which come along, like the New Deal, are cases where you do have some differences in perspective and point of view among groups of investors.

So in the New Deal period there were various groupings of private capital which were in conflict over a number of issues. He identifies, among others, a high-tech capital-intensive, internationally oriented, export-oriented sector who tended to be quite pro-New Deal and in favor of the reforms. They wanted an orderly work force. They didn't want to be bothered. They wanted an opening to foreign trade. A more labor-intensive, more domestically oriented group, essentially around the National Association of Manufacturers, were strongly anti-New Deal. They didn't want any of these reform measures.

Of course, those groups were not the only thing involved. There was the labor movement, a lot of public ferment and so on, that led to something happening in the political arena.

DB: You view corporations as being incompatible with democracy. You say if we apply the concepts we use in political analysis they are fascist. "Fascist" is a highly charged term. What do you mean?

I mean fascism pretty much in the traditional sense. So when a rather mainstream person like Robert Skidelsky, the biographer of Keynes, describes the early postwar systems as modeled on fascism, he simply means the system of state coordination of corporate sectors. It integrates labor, capital, and so on, under the control of those who have power, which is the corporate system and with general state coordination. That's what a fascist system traditionally was. It's absolutist. Power goes from top down. Even a fascist system can vary in the way it works, but the ideal state is top down control with the public essentially following orders.

Let's take a look at a corporation. Fascism is a term that applies to the political domain, so it doesn't apply strictly to corporations. But if you look at what they are, power goes strictly top down, from the board of directors to managers to lower managers to ultimately the people on the shop floor, typing messages, and so on. There's no flow of power or planning from the bottom up. People can disrupt and make suggestions, but the same is true of a slave society. The structure of power is linear, from top to bottom, ultimately back to owners and investors. As for those who are not part of that structure, they have nothing to say about it. They can choose to rent themselves to it, and enter into the system at some level, following the orders from above and giving them to those down below. They can choose to purchase the commodities or services that it produces. That's it. That's the totality of their involvement in the workings of the corporation.

That's something of an exaggeration, because corporations are subject to some legal requirements and there is some limited degree of public control. There are taxes and other things. That reflects the parliamentary system to the extent that that's democratic. Corporations are more totalitarian than the things we call totalitarian in the political system. These are vast. We're not talking about small isolated islands in some huge sea. We're talking about islands which are the size of the sea. Their operations, including much of what is called "trade," are centrally managed by highly visible hands which may introduce severe market distortions. So, for example, a corporation that has an outlet in Puerto Rico may decide to take its profits in Puerto Rico because of tax rebates and change the pricing system, what's called transfer pricing, so they don't seem to be making a profit here. There are severe market distortions, as in fact in any form of central internal planning. It's a very substantial and growing part of interactions across borders, which really shouldn't be called trade.

About half of what are called U.S. exports to Mexico are just intrafirm transfers. They don't enter the Mexican market. There's no meaningful sense in which they're exports to Mexico. It means Ford Motor Company has components constructed here and ships them to a plant which happens to be on the other side of the border where they get much lower wages and don't have to worry about pollution, unions, and that sort of nonsense. Then they ship them back here. Mexico has nothing to do with it.

According to the last figures I saw, about seventy percent of Japanese exports to the U.S. were in that category. These are major market distortions, and growing. When people say that GATT and NAFTA are free trade agreements, there are many respects in which that's not true. Some of the respects in which it's not true is that these investor rights agreements, as they ought to be called, extend the power of international corporations and finance. That means extending their ability to carry out market distorting operations internally.

If you tried to get a measure of the effect of the distortion of market principles, which I don't think anybody has ever done, you'd probably find that it's quite significant. Things like shifting pricing around to maximize profit are more or less functionally equivalent to non-tariff barriers to trade and voluntary export restrictions. There are estimates of the scale of non-tariff barriers. But I know of no estimates of internal corporate interference with market processes that way. They may be large in scale and are sure to be extended by the trade agreements. These are huge totalitarian institutions which are in a kind of oligopolistic market with plenty of government interference. There are market factors that affect them, but internally, they have little to do with market principles, and they are totalitarian. So when people like Anthony Lake, to get back to the original point, talk about enlarging market democracy, they are enlarging something, but it's not simply markets and it's not democracy.

DB: You describe free trade as protection for the rich and market discipline for everyone else.

That's what it comes down to. So the poor are indeed subjected to market discipline. The rich are not. The ideology calls for what are called flexible labor markets. Flexible labor markets is a fancy way of saying, when you go to sleep at night you don't know if you'll have a job tomorrow morning. That's a flexible labor market. That increases efficiency. Any economist can prove that it increases efficient use of resources if people have no job security, if you can get thrown out and somebody cheaper can come in the next morning. That's the kind of market discipline that the poor are to be subjected to. But the rich have all sorts of forms of protection. This was dramatically illustrated at Clinton's great triumph at the Asia Pacific summit, when he presented what the press called his grand vision for the free market future. He picked as his model for the free market future the Boeing Corporation, whose wealth and power derive substantially from state intervention. That's protection for the rich.

Go to the next section.