Noam Chomsky - The World V. The Banks - Audio only

the first of all can you hear me this is my QWERTY yeah okay the topic that was announced it's quite a mouthful I won't waste time by repeating it it's not a topic for a talk it's a topic at least for a course in fact team-taught course with plenty of the classroom participation which probably be the most important part I'm gonna try to take a stab at some parts of it will be plenty of loose ends I hope they'll come up in discussion time for that the loose ends are in part for lack of time in larger part for a lack of knowledge and understanding I my part and just begin by saying that that lack of understanding and knowledge is ought to be borne in mind it's quite widespread it's very broadly acknowledged by leading figures in the field and others and properly so right after the last Asian crisis big surprise contrary to predictions one of the leading international economists Harvard Jeffrey Sachs wrote an article about it in which he started by pointing out that the world economy is as he put it Emily understood and went on to elaborate on how it's dimly understood the Bank for International Settlements in Switzerland which is sort of you know the central bank of central bankers the most respectable institution around they had a report about it in which they they advised what they call humility nobody knows what's going on and the least we can do is acknowledge and approach the questions with humility just a couple of months ago there was a one of the economics journals had a series of interviews with Nobel Prize winners and economics one of them was Robert Solow from here he's the founder of modern growth theory work back in the 1950s and he was asked of course what's been learned in the last 25 years exciting years of economic research and expansion of the fields on what's been learned about growth central question and his answer was we have not learned a lot in the last quarter century beyond a lot of empirical data that we know he said there are factors that it's reasonable to think are associated with growth like openness to trade capital investment various political and social arrangements but we simply don't know whether they contribute to growth and in fact we don't even know whether the causal relation is in that direction he says probably it's often the other way around that is growth for whatever reason which is not understood leads to capital investment openness to trade and social arrangement and a one leading economic historian Swiss historian pull about the industrial economies the Western Europe in the United States over the last couple of centuries and he concludes that if you look at the data they could give a strong argument that protectionism increases trade how does protectionism lead to increased trade well protectionism apparently leads to increased growth and increased growth leads to increased trade so you can make a case for that there's a sharp split between the historical data and the models and that's pretty widely acknowledged pay attention the historical data is for what it's worth the last couple of centuries is pretty consistent every industrial economy every rich country we're called the developed societies starting from England and up to the newly industrializing countries of East Asia and dramatically including the United States which is a leader in this tendency every single one of them has relied quite heavily on protectionism massive state intervention subsidies targeting industrial development the United States radically so in fact right up until today that's why we're here in fact MIT is part of the funnel by which public funds get transferred into private pocket called research and development mostly subsidized and that goes way back and it's the core of the dynamic part of the economy and it's not just the United States it's the whole of industrial history it's striking to point out that the recent trade agreements last five or six years and the theories that lie behind them what sometimes called the Washington Consensus places significant the have intended and in fact succeed in eliminating the devices that have been used by the rich industrial countries as I mentioned that falls under a category called trade related investment measures trims which if you run through them simply cuts out one by one all the devices that have been used consistently by the rich countries that goes all the way up to the East Asian miracles for the last year's and deprives the what are called the developing societies many of thing backwards and unfortunately the poorer countries are deprived of these in the trade agreements and the agreements themselves are agreements among the rich few rich and powerful countries create primarily the United States which is worse overwhelming influence create the system and it simply rammed down everyone else's throat and a choice then I brought into the deliberations and they complain about it bitter the complaints are not reported much year but there certainly there it's been going on for a long time as the neglect that's been going on it for a long time there was a pretty dramatic case just a couple of months ago in April there was a high-level summit the first summit at the level of heads of state the most important in their history of what used to be the non-aligned countries it's called g77 the 77 countries that met back in the 60s to try to call for a new international economic order that would be concerned with pay attention to the needs of the south countries south so metaphor but the what's called the South and the world outside of Europe its former colonies like the United States they their that their call for a new economic order was the first completely smashed with long-term consequences of an unpredicted variety including incidentally the current drug crisis if there's time I'll come back to that but they just had another meeting they've had many that the highest level whenever was last April it's a level of heads of state these countries account for about 80 percent of the world's population so it's not a trivial part of the world and they among other things they issued a long detailed declaration describing what they thought was wrong with the international order and they thought it would be done about it which was completely ignoring barely even mentioned and in the north the United States press for example few disparaging words but part of it was a sharp condemnation of the form that the international economic order has taken under the so-called agreements which are essentially rammed down their throat and have among other aspects what I just mentioned eliminating systematically the kinds of devices that in fact have been used whatever the theoretical models say they're the ones that in fact have been used from for every rich society beginning with England the first industrial society including the United States Germany and France in Italy later Japan up to the East Asian countries well the if we the turning to other illustration acknowledgments of lack of understanding because they're important to bear in mind the inter-american Development Bank sort of like analogue to the World Bank concerned with the Western Hemisphere they just published a long detailed study trying to figure out why the economic record in Latin America is so rotten should be good lots of resources heavily under the influence of the US Treasury US government everything should be going right but the record is awful has the worst inequality in the world has the highest crime rates in the world low growth rates they've had pending on the country 15 or 20 years of work called reforms and nothing has happened and they asked why and their conclusion is that it's not they reject the conclusion of the Washington Consensus explicitly that's the point of view that dominates the international financial institutions the World Bank in the IMF the US Treasury leading figures it's cool sometimes neoliberalism contrary to the Washington Consensus they say you can't attribute this to interventionist policies to what's called import substitution in fact during the period of import substitution and growth rates were considerably higher and including Social Development so you can't attribute to that and they argue that more than half the difference between Latin America and the rich countries is a reflection of the fact that they have weak state they call it institutional lacks what it amounts to is weak states they can't control the rich that's what it amounts to and they don't they don't the government's don't provide public services research integration of the economy and so on and so forth they also point out that they've suffered from a general problem of the south namely agricultural development and health have suffered very seriously from our cold market policies market the way markets work is that those who have concentrated power dominate them these markets don't produce what people need they produce what rich people then by overwhelming and market control has a big effect on that you can see that for example in what's called the agricultural crisis in North America the United States and Canada there isn't our agricultural crisis but if and if you look where it is it's striking the food chain begins with big energy corporations produce fertilisers and so on and then chain in the middle our farmers at the end are the big retailers and distributors and so on turn turns out that the agricultural crisis in both the United States and Canada is located in the middle in the farmers you know the farmers who are producing the food that's where the crisis is at every other point there's a terrific profits and that relates very closely to market control at the outer edges of the chain it's highly concentrated power they determine how the markets are going to work in the middle it's people who are more or less thrown on the market and they're suffering badly even with huge subsidies and the same relation holds in the international economy and with regard to agriculture and healthy international the IDB the inter-american Development Bank practice if eclis points out that agricultural research and development are geared to the rich countries that's been true in the United States for a long time one of the reasons why the US has very productive agriculture is national federal investment since the 19th century which have ultimately after the Second World War began impact it still goes on but there's very little research and development than the kinds of Agriculture that are used in the poor countries south and I'll say tropical agriculture and that's just a direct reflection of who has power and who controls market to do the extension to function the same is true in health they point out in fact there's a well-known principle in the public health field called the 90/10 principle which is that ninety percent of the research goes for ten percent of the health problems mainly the ten percent that the rich suffer from and again that's a big surprise that's the way you'd expect institutions to work including markets to the limited extent that they function well when you turn to fan and notice that all of this as they point out is quite contrary to the Washington Consensus the the theory that is out of the way exactly contrary when you turn to financial the financial domain the financial architecture and so on which is of enormous significance today dominates the international economy in the last couple of decades here is total chaos I mean everyone concedes that there just is no Theory at all there are no models there's a interesting book by Robert blacker an economist at American University surveys semi-technical book which surveys but readable which he surveys the models that have been constructed in the last 10 or 15 years of huge financial flows to try to figure out what's going on every couple of years they're all thrown out and start with new ones with the past ones it's completely wrongly and this is again widely acknowledged Harvard economist Dani Rodrik recently wrote that it's a sad commentary on our understanding of what drives capital flows that every crisis spawns a new generation of economic models and that's very rapid especially in the last 10 or 15 years when markets have been extremely volatile that's a reflection of the liberalisation of capital markets in the early seventies and again it's exactly contrary to predictions by the major economies if you take a look at the IMF World Bank predictions international financial institutions they've made lots of predictions over the years and the record is not very uplifting to say the least working hard on at all of time and they make predictions the predictions are given with great confidence and they turn into policy prescriptions very quickly so for example in 1997 the directors of both institutions published major studies there were going to be a period of widely publicized and advertised in which this is more or less quote they strongly praised the remarkable economic performance and sound macroeconomic policies and the depth and liquidity of market of Thailand Indonesia Malaysia and South Korea the Philippines is right behind just as these major books appeared they all collapsed the books were quickly withdrawn the IMF had also predicted with confidence of sure people that private firms are certain to be careful about what they do so on the borrowing well turned out that private borrowing was the source of the crisis the earlier record is no more exciting so through the 1970s both institutions urged banks to lend massively to the poor countries and urged the poor countries to borrow as much as possible and models which proved that this was going to be a wonderful thing to do and that continued right in fact the latest publication on the subject was in 1982 again urging this policy it appeared just a couple of weeks before Mexico defaulted on its debt setting off the international crisis which converted policy in a totally different direction towards what came to be called structural adjustment programs which imposed very harsh austerity on the people of the south to pay off the debt which was accumulated during the period when they were told that's exactly they're not de but they're mostly thick to tear the leaders were told what to do incidentally the people who pay the debt are not the people who borrowed the money the debt is to a large extent an ideological construction not an economic fact so they take a look say at Latin America export of capital meaning rich people sending their money to banks in New York and London was more or less than the order of the debt the the rich and the generals they borrowed the money not the peasants but the austerity programs are imposed on the peasants rich so it's not the people who borrowed the money you've paid the debt it's the poor who pay the debt and in part that that is socialized people like us to the rich one of the roles of the IMF is to provide what amounts to free risk insurance it if debts aren't repaid it's not the problem of the lender they got to be protected after all there are banks rich folk and stuff like that so the data socialized the IMF takes it over which means it's distributed to northern taxpayers so you end up with a system of the IMF is is being criticized right now on the streets of Prague as a you know major defender of capitalism from another point of view it's kind of the opposite there's an there's a capitalist principle that says that people who lend money take a risk it doesn't work their problem and people who borrow money have to pay it back like if you lend me money and I Mercedes with it and then you come back I'm not supposed to be able to say look I don't feel like paying it ask my neighbors and if you don't want to take the risk you say okay my that's not the capitalist principle if that principle were applied it would wipe out most of the debt right away but at the cost of harming rich people and that's not the way things work so a different principle works and it's the one I described and those wrecked that record of predictions and costs continues the another recently more recent example is we're called the transition economies the countries of Eastern countries of Eastern Europe after the Soviet tyrannic collapsed around 1990 they moved to market systems and again there were very competent predictions the World Bank stated very confidently countries that liberalize rapidly and extensively turn around more quickly the man who was later became the chief economist for the World Bank Joseph Stiglitz in a recent article quoted this and pointed out that it was a reasonable prediction because he said economic theory was extremely clear in giving that prediction the only trouble is it turned into a huge catastrophe I mean it was predicted that if this these policy then they were spelled out you know these policy prescriptions were followed that output was going to get sore everybody would become rich like folks in fact what happened is that output decline plummeted not in fact the economy probably collapsed by 50% or something right now about 75% of Russians are below the poverty line so radical decline from before a majority of children is estimated somewhere between 50 and 80 percent have physical and mental defect workers rights which did exist are probably go on a capital flight from the newly liberalizing economy is greater than loans and investments which doesn't harm the American promised here it's the worst depression in modern history if not in all of history outside of maybe a war of plague or something like that and it's a demographic catastrophe millions of people have died in a different way have been killed by the so called economic reforms which again were offered with great confidence on the basis of Stiglitz put it the best economic theory which lay behind in some respect so if you move away from economics and look at the socio-political perspective this doesn't look to me like much of a surprise it has to do with the nature of the Cold War that's a topic in itself but in many respects ever since 1917 on the Cold War began it's had many of the properties of what's going with South conflict conflict and the end result of these typically is that a country that tried to break out of the system get smashed because it's weaker than the ones with the power and when it gets smashed your ribbon right back into the system may be poor was before so for example nicaragua's now one of the second poorest after maybe third after Haiti and Guatemala and the hemisphere collapsed since the u.s. took it back over in 1990 and that's sir actually the same is true of Guatemala on Haiti no they are the countries that have the rather striking fact which takes a little discipline to ignore that the poorest countries in the Western Hemisphere the real super basket cases are the ones that have had the most exposure to US intervention invasions control the economy and so on and so forth maybe it's an accident maybe there's a connection if you look at the record of the keeping peas out a connection and what happened in Russia is not very different you know 1917 whatever you think about the government you know the monsters of brutal tyranny and so on whatever else it was it pulled out of the international system and industrialised the country carried out a kind of forced industrialization Russia had been an extremely poor third world country world we call a third world country it was deeply impoverished falling more and more behind the West kind of a colony of the West for the most part it pulled out what it did very fast growth rate so on it lost the war like the weaker it always does and it's returned right back in the south so it looks like a catastrophe in comparison to what it was in 1989 but if you look at it in comparison to say Brazil look like such a catastrophe pretty much like Brazil and it looks pretty much like the other countries of the South that never did well so from some points of view it's a catastrophe but from another point of view this is not a matter of economics no it's not it's simply the normal course of historical events with which we ought to be familiar Europe and Africa America many other cases well that's another prediction one could go on let me stress that I'm not trying to criticize failure of prediction I think that's to be expected because as Sachs put it the international economy is dimly understood what's going on so therefore predictions are likely to be low confidence the problems are hard it's poorly understood the problem is not so much that the predictions fail but the confidence with which they're presented and then the policies that follow them from them are you and enforced with very little understanding of what's going on an omission of multitude of factors that surely enter and reliance on models which may look pretty and have nice theorems and so on but have very questionable relevance to real-world phenomena they don't seem that much to do with the history of development they some few examples when they're applied so I think that should be the thing one should be critical of not you know not the failure prediction beyond simple systems like big molecules problem a prediction good ability to predict goes down pretty fast when you get to human affairs it's kind of like zero but the but rather the confidence in the predictions and the force with which they are imposed which with the principles are imposed often you know very radical experiments which have disastrous effect quite often as you might expect you take a system you don't understand and hit it with a sledgehammer likely to have harmful effect even if you have a theory that says the sledgehammer will be good for it so it's not too surprising that prediction the record of prediction is so poor and there's a lesson here for critics of the policies like a lot of us and people in the streets and Prague and so on the lesson is pretty simple you got to be careful no you should be very confident you should have no little confidence in your criticisms either because the system is very poorly understood you know the lesson from that is not paralysis on the contrary no human being got to act do things but the caution it's worthwhile heading cost' I'm going to omit that qualification and everything I say from now on but keep it in mind I'll sound a lot more confident than I am well qualifications aside what does the general picture look like about say what's called globalization I would say become a kind of a catch word in the last 10 or 15 years just to just let's just use standard controversial not very good standard globalization kind of a neutral sense refers to the international economic integration which can be measured in many different ways however in the last in the period in which the term has become common coin the last 10 or 15 years it's also been associated with something else which doesn't logically follow it's not connected to economic integration it's connected by decision and that is a shift of power shift of power away from government and towards what's called markets but markets means is concentrations of private power concentrations of unaccountable private power so major corporations linked to one another powerful relying on the international financial institutions money managers US Treasury and so on those are basically unaccountable US Treasury sounds like a government but if you look at it it's a representation it's a representative of the US corporate sector and it's there's been a shift a notable shift from government to concentrations of private power unaccountable private power there's a name for that it's you know liberalism or some other term but that's a fad that's property of contemporary localization now to the extent that governments are democratic and they vary in that respect but to the extent that the Democratic this shift means a decline in democracy decline in popular sovereignty the ability of people to make choices that their lives that's kind of necessary and in fact that's intended that's a property of what are called the reforms and today we should bear in mind that the term reform is a term of propaganda not a description so the term reform doesn't refer to a lot of changes that take place in are called reforms so for example the son dentist Ozora Steven Haiti introduced economic and social changes which were in fact highly praised by the World Bank in the IMF the development agencies and so on but those weren't called reforms those were bad things which had to be eaten back they're not reforms and they were beaten back as such things tend to be and the reason is they benefited the wrong people reforms are changes that benefit the right people that's meaning of the word so I'll keep using it so the reforms have the property that I mentioned the essential part of them is a shift from governments to unaccountable private power the globalization and the neutral sentence meaning economic integration that's going through a lot of different several different phases over the centuries it's an old phenomena the convent is a conventional way of describing it and I think it's fair enough it describes it in three phases of a one phase leading up the World War one another one in the interwar period and a third after a World War two in those three phases are quite different the one after World War Two itself breaks up into two periods the first period is called the Bretton Woods period that after the Second World War the US and Britain which one war constructed an international economic order that was the Bretton Woods conference in 1954 so 44 and you know that constructed by Keynes and Harry Dexter white in the United States primarily properties we'll come back to them that regime more or less held perfectly but it more or less was in place up until the early 1970s at that point it was dismantled again by the US in other countries and then you get a second phase of the post-war globalization lease so we have four phases really the pre-world War one interwar Bretton Woods period and the more recent period it's the more recent one since the 70s that's usually called globalization well these phases are quite different than that's looking to notice how there is a sort of a conventional picture of this you can read it through them say this morning's Boston Globe he gives the conventional picture he says that by conventional I mean the standard the he says look globalization meaning what's going on the last couple of decades has been fantastic you know led to enormous growth fairytale economy is all this wonderful stuff but it hasn't worked everywhere so there are a lot of countries that have been left out and that's what people are testing about some of the poor countries have been left out they haven't adopted the American system now the good systems definition and why haven't they done that and then he brings up some currently fashionable theories maybe it has to do with their culture you know their culture is anti-capitalist and so they can't absorb the message of the American system and so on that's the standard picture the facts it's quite a different picture and it's worth I'm you I'm sure you've heard that somebody in the radio that's approximately what they say and so they sort of understand that he's talking about the protesters yeah we understand the protesters it's true that some people have left out it left out of all these Marvel's like sub-saharan Africa well let's put the people more or less understand how do we measure international economic integration thinking of it neutrally well one way to measure it is in terms of people can people how do people move around the world migration flows in other words by that measure the highest period of globalization was the first phase prior to World War one I mean that's when populations were really flowing fast the reason was Europe was industrializing and that had severe costs and people were fleeing fortunately they couldn't flee fortunately for them the places they were going they were able to flee to countries that were being Clent ethnically cleansed as we put it today their own popular indigenous populations were being wiped out and cleared so that the flow of immigrants from Europe couldn't take over that's why we're here and that was kind of an escape valve for Europe during the period of rapid industrialization and if you take a look at the figures sometimes they say take a look at the United States the look at the rate of growth of population attributed over the immigrants it was highest before a World War one and that's fairly generally so by that measure the highest level of globalization was before World War one notice that this is in a court with free trade theory at least according to Adam Smith for whom the cornerstone of Cretan free trade was what he called free distribution of labour that means the ability of people to move around freely if you don't have that can't seriously talk about free trade well that's declined notably since nobody talks about it anymore so in terms of integration of people probably the highest apparently the highest level of globalization was the first phase pre-world who were one what about well since since the 1970s in this second phase capital flow financial flows have expanded just astronomically by now it's reached the point that total global reserves you know the reserves held by all countries is approximately equal to about one day of the foreign exchange turnover international exchange and that's overwhelmingly speculative short term what about 80 percent of it goes up and back foreign exchange trading by 1995 latest figures is about 70 times as high as goods and service trading real economy you go back to the nineteen seventy they were more or less on a far different maybe our exchange trading was a little bit higher but nothing like this so that's hot money just overwhelming the real economy and that's a huge change radical change they've been nothing like it in history and that's quite different that's a marked property of the second of the post Bretton Woods phase and it's the direct result of the liberalisation of financial capital in first class Nixon and others in the early 70s and the breakdown of relatively fixed exchange rates that's what the Bretton Woods system instituted back in 1944 countries were supposed to be able to control capital flow and exchange rates know how many and you get for a dollar was pretty much fixed it remained remarkably stable over a long period that's the system that was broken down by decision in the seventies that's the breakdown of the two phases and one of the consequences is the effect capital flew well you know these two these two changes in free movement of people and free movement of capital they go not just directions with regard to globalization but that tells you something about the way the international order has been designed particularly in the last few decades period so for the localization has it been designed for capital not for people and particularly for financial capital it's a dramatic feature of the globalization period plus ten or twenty year twenty thirty years and that's revealed and it has a lot of effect shows up in all kinds of ways so you compare profits and wages in somebody's you know a lot of variation if you look from country to country so these are kind of overall descriptions but if you look at the freeze you look at profits and wages profits have gone with wages have been either as rising slowly or actually declining in many places incidentally including the United States inequality has gone way up the usual line is that a rising tide raises all boats but that's not true for one thing the tide is rising more than before and many of the boats are working pretty hard to stay afloat and working much harder than before just for that you can see the differences if you take a look at things like say trade treaties versus human rights treaties I was trade relate to human rights well feel the trees they're quite different the trade treaties have enforcement mechanisms the trade treaties are imposed by the rich countries and backed by force yeah legal requirements you got to meet those requirements or else the human rights treaties have no no enforcement mechanisms and rich countries like the United States don't pay much attention to the in fact even just signing conventions the US has an awful record the worst new world they take a look at the major human rights conventions the US has ratified very few of them and those who reservations crucial here are things like labor rights conventions now the UN Development Report for the year 2000 just came out in one of the sections of it reviews ratification of International Labour Organization conventions labor rights conventions the u.s. ranked at the bottom not in very nice company along with the equatorial guinea the only other two countries that have that rotten record of ratification and of course plenty of the country the countries that ratified conventions not live up to them that's another story but ratification is at least some symbol of indication of you know how seriously they're taking the US labor record putting aside conventions is quite poor among the industrial countries it's one of the poorest has a very violent labor history unusual in the industrial world the current situation US law does not conform to international labor conventions on many crucial issues and even where the law is in place it's just not enforced this is this has gotten a lot worse in recent years so you go back to say the 1950s there were a couple hundreds of cases of workers who were illegally fired a year fire for trying to organize it's illegal and there were a few hundred cases looked at by the National Labor Relations Board last year I think that over 20,000 it picked up very fast in the Reagan years the Reaganites basically told the corporation's forget a track on enforce the law and the number of the illegal firings shot with weight approximately tripled and it's stated about their sins and their devices by now to prevent the loss from being enforced there's just a report by Human Rights Watch on this that just came out it's not first there when others including the business press which is reported it fairly accurately well that's these are all aspects of the redesign of the international order for the benefit of capital over only financial capital but not only and against people who are less relevant in this system suppose you another measure that can be used is trade so what's happened to trade during these various phases of globalization well it turns out that pre-world War one it was going up quite fast it kind of leveled off or even declines between the wars and then it's returned in the post-war period it's been growing again but rather strikingly trade was growing faster during the Bretton Woods period and then during the globalization series so if you look at the first post-war phase growth create was actually higher relative to the economy then it's been in the second phase the globalization phase it's not really it's it's a reflection of something deeper namely that the whole international economy has its growth has declined in the second phase relative to the first phase so exactly contrary to the standard picture where they quoted before from this morning explodes everywhere the second phase post-world war they is has been worse by standard measures than the first phase second phase is the globalization phase the in fact many economists to now describe the first phase the woods phase as a golden age growth was high wages were rising benefits were increasing and so on up to early 70s and they describe the second phase globalization as the leaden age everything slowed down and that's true across the board so growth of the economy slowed how much you know it depends exactly what you measure but the there was a highly prestigious Commission Bretton Woods Commission headed by Paul Fokker the federal reserve can't get more respectable than that under Reagan he was the head of it they came this 50th anniversary of Bretton Woods and their conclusion was that for the industrial countries of the rate of growth growth had declined by about half during the second phase globalization phase it's not that the economies declined it's the growth rate that decline the UN they just did a study on the poor countries developing countries and they reach pretty similar conclusions that the growth rate had been cut by about half in the recent period if you look at growth of capital investment of productivity trade and so on roughly the same stories declined during the second period one thing to increase this volatility take a look at the capital reserves that countries hold relative to exports the capital reserves means something something used so capital reserve relative to exports that's increased very high particularly for the poor countries and the reason is they have to protect themselves from capital flight from attacks and their currencies or capital flight and that means they got a huge amount of their reserves in fact but half the global reserves now are in the hands of the poor countries they may count for about a quarter of the exports they have to defend themselves against volatility and currency attacks interest rates have been far higher during the second period for essentially the same reason interest rates have to be kept high to prevent capital flight then speculators and so on that's against loes group well that's fairly general we can go on notice just comment but this is it's not a matter of you know the tide is rising wonderfully and some of the left behind the tide is rising more slowly across the board just about every measure these financial flows are expecting overwhelmingly speculative maybe two or three percent of them have to do with the real economy as compared to say ninety percent thirty years ago so they're unproductive they're probably also harmful Lili as I say they keep interest rates high but pretty widely discussed they undermine democracy for a simple reason they create what some economists have called an internet a virtual Senate you know a Senate virtual in the usual sense they don't mean there and that virtual Senate of investment bankers money managers and so on they have a veto power over economic policy that is what like technical terms is called a dual constituency conundrum Parliament's have a dual constituency on one hand as the voters the theoretical constituency on the other hand there's the speculators you know the real constituency in literature they conduct a moment-by-moment referendum on economic and financial policies way they don't like them they attack the currency capital flows out and you stop doing them or else you're in trouble deep trouble and that's a major attack on democracy right now about half the world is technically in receivership meaning their economic qualities are actually made in Washington but and the rest are very heavily subject to the veto power of the virtual Senate that's that's true even in the United States when Clinton came in there was some talk about stimulative policies early nineteen ninety-three that's quickly stopped because the financial markets made it very clear than I got tolerated if that happens they'll be an attack on the currency and everything else interest rates will go up the economy it will go down so they just backed off and if maybe you would have anyway but anyway they did respond give up on the base of that and for poorer countries it's just hopeless now this didn't just happen you know these were state decisions the Bretton Woods system was designed to prevent it the restriction back in the 40s there was tremendous popular commitment all over the world at the end of the anti-fascist war to a kind of radical democracy and social democracy and even more radical ideas including the United States and in response to that the Bretton Woods system was created to permit what was called embedded liberalism meaning free trade to the extent thing and have it but carried out in such a way that allows governments to carry out their own social and economic policies meaning high growth kind of what we call the welfare state and it was understood that in order to have that you have to have restrictions on capital flight because if capital flow moves freely you're going to get just what's happened in the last 20 or 30 years a virtual Senate with veto power that's it was conscious you know like you read Keynes very clear about it as were others and predict pretty predictably they were shown to be correct when the system broke down was dismantled in the early 70s described well what are what about other effects as I mentioned the macro the general macroeconomic effects you know like the big figures no growth rate productivity rates and so on the effects have generally been harmful contrary to the standard story now what about other effects so let's take the United States the fairy tale economy everyone else is supposed to and they can join well the story's a lot more complex than that for the rich which I suppose includes anybody in the top over college professors in the top few percentage of income for them it's a fairy tale but let's take a look at say non-supervisory workers that means people who make a wage of don't give orders no so most workers for them latest figures have just appeared in fact average wages and average incomes are actually below the 1970s that's in absolute terms they've finally gotten back to 1989 last business cycle on the other hand may out median wages for male workers have actually actually down since 1989 if you take middle-income families which really means working families they are working average middle income family is working about six weeks a year more than they did ten years ago just to keep afloat on particularly in a country like ours which has very weak support systems any working mother the breakdown of the welfare system just exacerbates all those problems not just for the welfare and mothers but for everybody at the low end of the income that's these are not small parts more small effect they're quite real household debt has reached unprecedented heights partly driven by advertising driven consumerism you know people from infancy driven in their heads that the only thing in life is consume consume consume but more and more and with incomes you know stagnant or declining for most people and enormous pressure to consume and to be an individualist and forget about everyone else and so forth oh you get huge debt but nobody knows what this means but it's a you know it's consequences will be but it's historically completely unprecedented there is a terrific thing the stock market you know everybody the stock market is chopped away huh you read the newspaper reports they tell you the problem is to get other countries to adopt the American model where working people have stocks and therefore do great that was the front page story in The New York Times the other day story's a little different it's true that the stock market has gone out of sight but it's also true that 1% of the population owns close to 50% of the stocks for eight percent according the latest figures and 80 percent of the population the bottom 80% own 4% scatter or a lot of people and they don't have any control of so great but it's benefiting a very small proportion of the population I mean it happens to be the same part of the population that's writing the articles about the fairy tale economy anyway what about poverty well poverty in the United States is worse than it was in 1979 the US and Britain which are the two countries that you know were more extreme most extreme with the reforms Reagan and Thatcher they're the worst in the industrial world by quite a large margin in Britain UK poverty has approximately doubles into the early 80s the major factor theory child poverty in the United States is far higher than 1979 in the industrial world again the United States and Britain are much are the worst and child poverty in Britain the child poverty has tripled since night just since 1990 and it was going through

Channel: infiniteinfiniteinfi

Views: 7,562

Rating: 4.8350515 out of 5

Keywords: Noam Chomsky, World Bank, Latin America, inequality, economics, IMF, International Monetary Fund

Id: oEpQnx3CVic

Length: 56min 15sec (3375 seconds)

Published: Mon Jan 18 2016