Economic Democracy (Book Review)

Introduction
The general consensus in respectable opinion is that the current system of global capitalism may have defects, but there is no better alternative. Respectable opinion frequently couples capitalism with freedom and democracy; declares it to be the apogee of economic evolution; defends it as imperfectly perfect as any human economic system can be. Mainstream liberals exalt the newer, improved “flat” world with “flexible” labor markets and a McDonald’s on every block. “There is no time to waste” to prepare for the inevitable wonders of globalization and “35 hour workdays.” They chastise countries with strong labor unions, urging them to lower their standards of life in order to better compete with poor Indians, Chinese, or Eastern European labor markets. (The quoted words are the words of senior op-ed writer Tom Friedman at the conventionally liberal New York Times.) Beyond the respectable margins of opinion expressed in national media exist reasonable criticisms and proposed alternatives to current economic systems, but they are rarely heard.

One reasonable framework to use in measuring the moral functioning of an economic system is the Universal Declaration of Human Rights, of which the US has been a signatory for over fifty years. The entire declaration is worth reviewing for the purpose of this paper, and should be considered a background to discussion. Among its guarantees are “equal pay for equal work… without any discrimination”, “human dignity … supplemented… by social protection,” “the right to work… to just and favorable conditions of work and to protection against unemployment”, “the right to form and join trade unions”, and “a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.” It seems that a reasonable yardstick with which to measure an economic system is how well it comes to serving the ideals spelled out in this important human rights document.

Critics maintain that capitalism is antagonistic to these ideals. Respectable opinion dismisses the criticisms as whining and maintain that the problems under the current system are growing pains, and while sometimes tragic should be considered subordinate to the greater good of progress. Other supporters maintain that no human system is perfect, and as history has proven capitalism is the best system possible in the real world. In my view that second line of defense is short sighted, self-serving, and should largely be ignored. The first is perhaps a matter of perspective. The onus does appear to be on the critics to provide a viable alternative to capitalism. One critic, David Schweickart introduces a theory called Economic Democracy and the following is in part a discussion of the ideas he proposes in his books Against Capitalism and After Capitalism. But before we explore Schweickart's ideas we need to more precisely define the problems, questions, and existing conditions that beg discussion. A bit of context is needed to understand how the theory of capitalism differs from the current system in place. So many misconceptions exist that before any meaningful discussion can take place, they must be dealt with. First we need to briefly untangle misconceptions about both socialist and capitalist theory. Then we need to establish existing problems and their relationship to capitalism. Finally we will discuss Schweickart’s ideas.

On Socialism and Contemporary Opinion
Richard W. Rahn of the Cato institute writes that “socialism and its numerous variations” is an ideology that “has contempt for the individual and has caused untold economic misery and the deaths of hundreds of millions at the hands of their governments.” He defines socialism as “simply an economic system where the government (or collective) owns and controls the means of production.” Socialism has failed because state directed markets have no “objective way to determine prices” and “thus no way to allocate resources efficiently.”[i] His criticisms are perfectly accurate in a doctrinal sense. His criticism centers on two properties of the old Sino-Soviet systems; the state directed economic sector and brutal political system. The following discussion is not a defense of state dominated economies, Stalinism, nor is it a rose colored view of socialism. Communism has rightfully been deposited in the garbage of human ideas; heavy-handed authoritarian structures – even if viable in some technical economical aspects – are destructive. But the failure of state socialism should not limit all future discussion of economics. To avoid confusion, let me restate my interest in sorting the following matters out. It is not to suggest that we should have a communist society, or a totalitarian-lite form of government control. My interest is in sorting out misconceptions from reality in order to have a reasonable discussion on economics unhindered by popular dogma and distortion.

Rahn repeats the common misperception that socialism requires a repressive and controlling state. The failure of the Soviet system was not only economical; it was political. Economically Russia transformed itself from a war-ravaged country; approximately 30 million killed after the two world wars and 1917 Bolshevik revolution, into one of the worlds economic superpowers. Ultimately economic inefficiencies created by state directed development contributed to its collapse, but for decades it developed rapidly. (Although there is an immediate question; did they develop because of or in spite of their economic system?) The most obviously offensive feature of the old Soviet society and its orbits was the level of repression and lack of human rights. The problem was not that the state dominated soviet system did not work economically; it was that it was so inhumane no one wanted to live in it. It is arguable that the Soviet system of development worked in a technical sense but was a failure by any rational human measure and should rightly be discarded. But we should remain honest when discussing its failures.

The political failures of the Soviet system are commonly conflated with its economic failures. The Soviet economy did have problems; the state dominated and controlled supply, demand, and allocation of resources, which created economic inefficiencies. Socialist principles of worker solidarity and ownership of the means of production were largely ignored by the failed Soviet experiment. The workers did not own the means of production any more than workers in a capitalist society own the means of production; worker participation was undermined right after the Bolshevik revolution. In the end, the Soviet system was a means for a few to consolidate their wealth and power and cloak their hypocrisy behind a rigid ideology. One interesting observation is that using the same flawed standards capitalism should also be discarded as a failure because many “capitalist” economies around the globe have failed when coupled with harsh, repressive governments.

Rahn claims that all socialist economies have “only failed and will continue to fail because its theory is as flawed as its practice.” Besides his mistaken assumption that socialism requires a dynamic state directed economy, this claim ignores other crucial influences on developing nations. To stay within examples alluded to thus far but still outside of the Soviet sphere; look at Nicaragua or other Latin American countries that sought to develop outside of the Washington Consensus in the 1980s. Many of these countries languished for decades under dictatorships supported by the US because they allowed Western corporations such as United Fruit to dominate and exploit their economies.[ii] In the late 1970s and early 1980s many of these dictatorships began to fall and for a few years the Latin American countries developed under “socialist” reforms. The reformers nationalized industry and instituted programs of land reform for peasants, offering compensation to the corporations they took the land from. During these few years multiple independent human rights organizations such as Oxfam, the UN, the IRC, Amnesty, etc. documented the rapidly increasing literacy, education, housing and health standards within these developing countries.

The ultimate result of their development will never be known because the United States undermined the reforms. Perhaps their failures were due to “flawed theory,” but foreign aggression from the hemisphere’s resident super power played a role as well. The US spent millions of dollars running illegal proxy wars, condemned in part by the World Court as an illegal “use of force” that rolled back previous gains and diverted precious resources to defense. The CIA printed operational manuals for the various groups it supported, such as the Contras in Nicaragua, to terrorize the new governments. One typical passage from a manual reads

The results can be seen in the countryside, where some contra forces have been implementing this approach with varying success. Overall, there is a conscious effort to reduce the presence of the civilian government, to remove successful social programs and the ideological influence which comes with them. The strategy aims to create the impression of government weakness and contra strength. In practice, this means the targeted torture and assassination of teachers, health workers, agricultural technicians and their collaborators in the community. This is not, as many critics charge, “indiscriminate violence against civilians.” Nor are the killings random acts of terror by incorrigibly brutal ex-National Guardsmen. Rather the violence is part of a logical and systematic policy...[iii]

Former State Department worker and political writer William Blum comments,

The boys of Capital, they also chortle in their martinis about the death of socialism. The word has been banned from polite conversation. And they hope that no one will notice that every socialist experiment of any significance in the twentieth century – without exception – has either been crushed, overthrown, or invaded, or corrupted, perverted, subverted, or destabilized, or otherwise had life made impossible for it, by the United States… It’s as if the Wright brothers’ first experiments with flying machines all failed because the automobile interests sabotaged each test flight. And then the good and god-fearing folk of the world looked upon this, took notice of the consequences, nodded in their collective heads wisely, and intoned solemnly: Man shall never fly.

Take another example from above, Chile. In 1971 Chilean voters elected left of center candidate Salvador Allende president. Washington spent millions in Chile to influence the election (try to imagine the reverse happening in the US). Washington strongly opposed his presidency and devised a set of policies to “make the economy scream” (Henry Kissinger). The US lobbied and pressured the international community to cut loans and aid, undermined the global copper market, which was Chile’s most important export, and cut all aid from the US except to the military. When the economic strangulation did not prevent Allende’s presidency the US strengthened ties to the military to overthrow Allende. They engineered the assassination of a pro Allende general and an eventual coup attempt. The results were disastrous and led to the eventual murder of Allende whose last hours were spent on a radio in the capital building while bombs were falling overhead. The coup led to the eighteen-year reign of terror under General Pinochet, who tortured and murdered political dissidents in the Chilean capital. His intelligence force DINA operated an international terrorist campaign. They eventually went a bit too far when they set off a car bomb in the streets of Washington D.C. and killed an American aide and Chilean exile. The facts have been delineated sufficiently elsewhere and this is but one example of many; it is remarkable that Rahn argues that all socialist experiments have failed because of “flawed theory.” [iv]

Socialist systems have failed for several reasons; corrupt political situations, foreign aggression, and “flawed theory.” Generally the political corruption is conflated with the “flawed theory” and foreign aggression is completely ignored for obvious reasons. Left unspoken is that every society has many socialist programs, including the US A socialist program is a community owned program that benefits all; in the modern sense this is generally understood to mean government run programs, although this does not necessarily have to be the case. In the United States several successful socialist programs include Social Security, Welfare, public Education, municipalities, etc. Many European have even larger socialist safety nets than the US and retain free societies with market economies. The millions of dead killed by the State in “Socialist” countries such as the Soviet Union were not the result of flawed economics, but flawed political states. The US economy has many elements of socialism that were introduced following the Great Depression when Keynesian economists and policy planners acknowledged that pure capitalism does not work.

Capitalist Theory And Misconceptions
A good first approximation of the current economic capitalist system is that it resembles something like Capitalism. Classical laissez faire Capitalist theory is a purely market driven system free from the visible hand of government. The system is analogous to a clock; it runs on its own. To help understand the theoretical dynamics of how this works we can start with one of Adam Smith's most oft quoted passages.

As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

The invisible hand of competition guides individuals towards choices that benefit all and any interruption of the market forces creates inefficiencies.

Most people who compete in consumer and labor markets are not capitalists. Consumer markets determine which firms survive. Labor markets sell their labor to firms. The elite who have the resources to create new firms reap the greatest benefits and are also supposed to be prone to the greatest risks; if their venture fails they will lose their investment. Corporations, collectives of private capital and power, were considered a potential danger in classical theory. Adam Smith was wary and distrustful of corporations; he harshly condemned them and argued that corporations would corrupt the laws of the market by co-opting the power of the state to game the system in their favor.[v] Without going any further it should be clear that classical capitalism is a nice theory, but it does not work in practice.

People recognized after the great depression that the economy needed a dynamic state sector to mitigate the disastrous effects of recessions and depressions; and consequently Keynesian policies aimed to keep a powerful state involved in the direction of the economy. The sector they decided upon was the military sector; giving rise to what Eisenhower famously termed the “military-industrial complex.” One problem they overcame was how to coerce the American people to underwrite costly military programs instead of social programs without a war. They quickly realized that if they could keep people afraid then they would go along with the policies. Then secretary of the Air force and later Senator Democrat Stuart Symington noted, “the word to talk was not ‘subsidy’; the word to talk was ‘security’.” As Lawrence Bell, one grateful recipient of massive public subsidies wrote, “as soon as there is a war scare there is a lot public money available.” [vi] Today's generation of technological consumer products exist because of the extensive public subsidizing of the R&D costs for aeronautical, technological and electronic industries. Sometimes the inventions and breakthroughs trickle down to the social sector where the public can use them. By the time they get to the public sector, the patents and profits are handed over to private corporations. Without the publicly funded support today's semi conductors, medicines, computers, electronics, high tech industrial products, and airplanes would not exist. Put another way; left to the market forces we would not have computers, airplanes or electronics.[vii]

And so it has come to pass that the American public heavily subsidizes the rich. Mark Zepezauer counts the following as examples of the poor subsidizing the wealthy; tax breaks for homeowners, runaway pensions, tax avoidance by transnationals, lower taxes on capital gains, accelerated depreciation, insurance loopholes, business meals and entertainments, tax-free municipal bonds, export subsidies, military waste and fraud, the S&L bailout, agribusiness subsidies, media handouts, nuclear subsidies, aviation subsidies, mining subsidies, oil and gas tax breaks, timber subsidies, synfuel tax credits, and ozone tax exemptions.[viii] All told the subsidies amount to billions of dollars. The public is largely unaware of wealthfare, but made keenly aware of welfare. Their attention is diverted to poor welfare; the free market ideal of “no free lunches” invoked for any social spending. The wealthy have spent much effort on indoctrinating the public so they are not aware that they subsidize the rich.

For example ...

When Newt Gingrich touted his Contract with America and railed against the nanny state, his district in Georgia was one of the largest recipients of public money in the form of subsidies to Lockheed; the irony was hardly noted.

Recently, Attorney General John Ashcroft intervened on behalf of corporate rights in a lawsuit brought on by Burmese villagers who charged “the oil company [Unocoal] with assisting and encouraging the torture, murder and rape of Burmese villagers by government soldiers so Unocoal could build a gas pipeline.” Ashcroft argued to the court that every case brought against transnationals from the last twenty years had been wrong. (The court ruled against Unocoal citing overwhelming evidence of their complicity in the criminal activity and rejected Ashcroft’s arguments.)[ix]

The Wall Street Journal opines against the “progressive” trends of the last few decades noting that “the highest-earning 0.1% of the population paid 5.06% of the federal tax burden in 1979, and was paying 9.52% as of a couple of years ago... There's a word for this kind of tax system. It's called progressive, not to mention confiscatory.” Jonathan Chait points out the truth behind this bit of crude propaganda;

“It is certainly true that the richest 0.1% are paying a higher share of the national tax burden. Is that because they're getting socked by the tax code? No, it's because the very rich are earning a far bigger proportion of the national income. In 1979, the highest-earning 0.1% took home about 3% of the national income, and paid about 5% of the taxes. In 1999, they earned about 10% of the national income and paid about 11% of the taxes.

In fact, the tax rate borne by the very rich has plummeted. In 1979, the top 0.1% paid, on average, 32% of their income in taxes. Today, they pay less than 23%. So what's happening is that the top 0.1% are paying a higher share of the tax burden because their share of the national income is rising faster than their tax rates are falling.“[x]

It is free market ideology for the poor and state protection for the rich. The effort to keep the truth hidden is crude, blatant, and effective. It is also intentional. Prominent Republican strategist Frank Luntz wrote a memo for GOP lawmakers in 2004 that leaked to the public. Luntz advised, “Individual programs have friends and constituencies. Bureaucracies and bureaucrats don't. Therefore, focus the general rhetorical attack on the 'Washington bureaucracy.'... The greatest anger is directed at bureaucrats and waste rather than at specific programs." Instead of lawmakers telling people that they are cutting subsidies for their bus fares, education, roads and environmental projects they talk about cutting taxes and bureaucracy. Luntz continued, "The fact is, most Americans appreciate their local government that picks up their trash, cleans their streets, and provides police and transportation services..." to cut these programs "remind voters again and again about Washington spending, Washington waste, Washington taxation, Washington bureaucracy, Washington rules and Washington regulations."

The same corruption of market ideology is present internationally. Wealthy countries protect themselves from market forces but poor countries are required to privatize their industries and open their countries up to foreign capital before they can receive aid or development loans. But every industrialized nation has followed the same path. They used protectionist policies to keep foreign firms from dominating their economy, nationalized industries to keep the wealth of the nation from being sent abroad, and provided basic health services for the people. These policies are exactly the opposite of international trade organizations and institutions require. When followed, the free trade recommendations have been disastrous turning countries into “basket cases” as has happened in Russia, Argentina, and the Asian collapse of 1997. When one speaks of free markets, they should keep billion dollar subsidies, protectionist tariffs, and international monetary institutions unaccountable to the public in mind. [xi]

It is important to note several things at this point. Capitalist theory and practice are radically different. In some ways the current system is unrecognizable as classical capitalism. The public subsidizes pharmaceutical, agricultural, automotive, aeronautical, defense, and other industries. The public subsidizes and R&D costs for new technologies, agricultural products, and medicines. Domestic goods are protected from imports with tariffs. Public subsidies and economic treaties protect exports. The US has an active state sector to stimulate the economy and control resource allocation through military investment. Recall these are some of the same inefficiencies attributed to the failure of socialism. All of this is largely left unmentioned by most public figures and media. But remember, a market is not free when prices are distorted by public subsidies, tariffs or price guarantees. The misperception remains that our economy is free market capitalism starkly different from state dominated socialism. The truth is that we have a heavily state directed economy, limited and distorted markets and several successful social programs. We need to keep these contradictions in mind and understand who games the rules when discussing the current system.

Criticisms of Capitalism
David Schweickart outlines six criticisms of capitalism; inequality, unemployment, overwork, poverty, undermining of democracy, and environmental degradation – also called externalities.

First, let’s tackle the inegalitarian criticism. Some reduce this line of criticism to absurdity by suggesting that the solution is a redistribution of wealth so that everyone has the same amount of money and property. That the distribution of talent, work ethic, and ability is not distributed equally amongst everyone is obvious. Capitalism argues that the market determines how much each individual is worth and any inequalities are a natural and just function of the system; greater talent deserves greater reward. The in-egalitarian criticism does not assume everyone has equal ability nor does it advocate everyone to have an equal share in the system. In-egalitarian arguments question why so many have not enough of the basics while a few enjoy more wealth than they can use. Schweickart comments, “If inequality were simply a matter of differing levels of consumption, I don’t think we would have much cause to rail against it. If there were no desperately poor people in our society or in the world at large, and if the basic democratic ideas of our society were not compromised, then we would be hard pressed to find good moral grounds for” objection. Schweickart is uncomfortable with redistributive programs and a large welfare state. He does not want to “allow an able-bodied person to claim a right to the fruits of other people’s labor, without being obliged to contribute anything in return… The only real cure for the material and spiritual ravages of poverty is decent work. We all know that. Liberal and social-democratic welfare measures can never really solve the problem, and they sometimes make it worse.” Schweickart’s take on the idea of redistribution of wealth; “It would be pointed out, correctly, that any such radical redistribution attempt would provoke massive capital flight. We would get, not a more egalitarian prosperity, but a Great Depression.” He also criticizes the inefficiencies of the Soviet model of Socialism and its failure.[xii]

The point is not that everyone does not have the same amount of wealth, but that for millions the system does not address their needs and rights, as outlined in the Universal Declaration of Human Rights reviewed above, and offers no hope for them to ever rise out of poverty. Schweickart illustrates the economic inequality of the United States with the following story using statistics from 1999:

As of 1999, there were slightly more than 100,000,000 households in the United States. The average income of these households was $55,000. Let us imagine a parade involving a representative from each of these households. The parade will last one hour. Representatives will be lined up so that those of the poorest households come first, followed by the ever more wealthy.…Poor people will be very short, rich people much taller. Let us assume the average height of an American to be six feet… this represents a $55,000 annual income.

The parade begins with a lot of very small people, many just inches off the ground. Indeed, nearly five minutes pass before the participants reach the one-foot level – representing an annual income of $9,200… After twelve minutes, the marchers have grown to slightly more than a foot and a half… the official poverty line for a family of four.

The parade, you soon realize, is rather boring. There are lots and lots of small people, and they are not growing very fast. Twenty minutes have passed, a third of the parade has gone by and you are still looking down. The marchers at this point are only three feet tall…

Your attention begins to wane… The parade is now half over, so you expect to see people your own height. But no, the marchers are still small, only three-quarters your height, the tops of their heads still lower than your chest…

Heights begin to increase more rapidly… At forty –eight minutes, the marchers have reached nine feet… At the fifty-four minute mark, we reach the top 10 percent. These people… are twelve feet tall- twice your height…

Suddenly the giants have come into view. Now the parade gets interesting. Now people start getting bigger faster. By the time the top 1 percent begins to pass by – 36 seconds to go – heights have more than doubled [to] thirty feet tall...

In the last seconds, the superrich pass by, among them various CEOs of major corporations. Those in the $10 million range tower above you at 1,100 feet…The last person to come by… is Bill Gates…. Gates is more than sixteen times taller than Mt. Everest.

The dwarves in the parade have to choose between electricity and heat in the winter; their children are hungry; they have no healthcare and cannot afford to get sick. In one of the world’s economic superpowers these problems remain shamefully prevalent. Within the United States there are pockets of third world poverty. The gap between the rich and poor has rapidly expanded over the last half century and it has become an increasingly rigid class structure. While the richest have seen their incomes grow exponentially, real working wages have declined. The mobility of people moving from poor to rich is lower than it was 20 years ago and there is more mobility in European countries. The United States infant mortality rate ranks among the worst among industrialized nations, closer to third world countries. Millions of people cannot afford health care and if they get sick are reduced to poverty. Medical problems are one of the most likely causes of slipping from the middle class into poverty. The private American medical system is much worse than social medical systems elsewhere; Nobel Laureate Economist Paul Krugman comments, “American health care is unique among advanced countries in its heavy reliance on the private sector. It's also uniquely inefficient. We spend far more per person on health care than any other country, yet many Americans lack health insurance and don't receive essential care.” Millions of Americans survive paycheck to paycheck. Millions go hungry every day in the United States.[xiii] These are all problems of inequality and are exacerbated by capitalism.

US policy planners have been well aware of the inequality problem for decades. They have dedicated much thought and effort towards maintaining the status quo to protect their interests. The liberal icon George F. Kennan put these concerns to paper last century in the aftermath of WWII when the victors were planning how to rebuild the global economy. He wrote in the important State Department paper Policy Planning Study 23,

We have about 50% of the world's wealth but only 6.3% of its population... Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity... To do so we will have to dispense with all sentimentality and day-dreaming.... We need not deceive ourselves that we can afford the luxury of altruism and world-benefaction.
...
We should cease talk about vague and unreal objectives such as human rights, the raising of living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.

A National Security Study memorandum from 1974 warned of the growing threat the US national security from the population of poor countries. Richard Robbins summarizes the memo’s conclusions, “The population growth in the periphery is a threat to US national security for four reasons: because larger nations will gain greater political power; because populous nations may deny the United States access to needed strategic materials; because a growing population will include a large number of young people who may be more likely to challenge global power structures; and because the growing population may threaten US investors in those countries.”[xiv] The planners saw these growing populations as threats because they would not represent new markets, but rather, “From the viewpoint of US interests, such reductions in LDC [less development countries] food needs would be clearly advantageous. They would not reduce American commercial markets for food since the reduction in LDC food requirements that would result from slowing population growth would affect only requests for concessional or grant food assistance, not commercial sales.”[xv] In other words, they were so poor that they would be a drain on wealthy nations rather than a market to be mined for profit.

The vice president of development economics and chief economist for the World Bank wrote a memo in 1991 that eventually leaked to the world. He argued that “the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.” He believed “the World Bank should be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]” because poorer populations have “increased morbitity and mortality” so will not live long enough to suffer the health effects of toxic pollution as severely as wealthier nations, were “vastly UNDER-polluted” since they lacked industrial centers and were unlikely to complain since “demand for a clean environment for aesthetic and health reasons is likely to have a very high income elasticity.” The man was Lawrence Summers, considered a liberal, later serving as the Secretary of the Treasury under Bill Clinton and is currently President of Harvard University. One can hear echoes of Kennan’s disregard for “vague and unreal objectives such as human rights” and “the raising of living standards” in Summers’ memo. Some have noted, correctly, that under the current economic system Summers’ memo was insanely logical.[xvi]

The 2004 National Defense Strategy of the United States remarks, “we will promote the security, prosperity, and freedom of action of the United States and its partners by securing access to key regions, lines of communication, and the global commons.” In other words US foreign policy will be aimed at ensuring the US and allies have access to natural resources, “global commons”, that happen to lie in other countries termed “key regions.” US policy has long been based on ensuring that Americans “maintain” their “position of disparity” as it relates to global resources.

The properties defining our “position of disparity” have grown more extreme since Kennan’s time. The global population is rapidly growing and the need for “concessional or grant food assistance” has grown with it; within the next 50 years the population is expected to exceed 10 billion people. The gulf between haves and have-nots has doubled over the last 30 years. Millions die due to the failure of the economic system to provide for their needs. [xvii] Let us be clear what the problems are, even if it is not yet apparent that they exist because of capitalism rather than alongside or in spite of. Every year millions of poor people die from starvation and treatable disease. But would more die if the current globalization was more widespread or would less die? Is there not enough of or too much of capitalism (or is it irrelevant) that causes these problems? Is there a correlation? The problem is not one of supply. Through some of the worst famines in recent times the starving countries continued to export food (see for example Bangladesh or the Irish Potato famine.) Demand is not always met because those who need cannot afford ‘market’ prices. While for some products, such as designer jeans, this is perfectly acceptable. For needs such as food, water and medicine it is not. Hunger is often not a problem of supply or demand; but lack of wealth. The increasingly entrenched inequality of wealth under capitalism exacerbates these problems – not necessarily market forces. Millions are too poor to participate in the market and are left to starve or become sick and die. The wealthy are aware of the problem and engineer global institutions to take advantage of this and to "maintain [their] position of disparity." This is an important distinction because markets can exist without capitalism. Competitive markets do not cause the poverty problem; the problem is the properties of capitalist growth that lead to unlimited expansion and acquisition of wealth that leads to a gross inequality of access to the basic necessities of life.

Two problems that exist side by side under capitalism are unemployment and overwork. Schweickart remarks, “Healthy capitalism requires unemployment… to discipline the workforce. If unemployment is too low, workers make wage demands that cut into profits to the degree that future investment is jeopardized… Capitalism cannot be a full employment economy.” It is ironic that many people cannot work while others work more than they want to. But as unemployment raises so does overwork because workers become more worried about their jobs and are more likely to put in overtime to keep from being laid off. Many large firms are aware of this and can force workers to put in extra time without pay, effectively halving their minimum wages. According to the Labor Department this illegal exploitation is “prevalent” and “is one of the more common violations of the Fair Labor Standards Act.” It is also a crime that primarily affects the poor. [xviii]

Many people unthinkingly associate a positive correlation between democracy and capitalism. In truth, capitalism undermines democratic equality because it requires an unequal distribution of power to function. The corporate subjugation of democracy in America began in 1886 when the Supreme Court ruled that under the 14th amendment corporations were considered to have the same rights as people. The ruling gave them Constitutional rights including free speech and the ability to influence public opinion, the dangers of this potential development had long been shared among leading thinkers and founding fathers.[xix] The people who have the wealth have the power in a capitalist system and make the decisions for society and are often at odds with what the public wants. On many issues the public stand at odds with elite opinion. A survey of public opinion polls on a variety of issues reveals the truth of this statement. Often the differences are stark, and call into question the function of American Democracy.

Internally corporations are authoritarian institutions with rule from the top down and have no democratic form. Politically they closely resemble political dictatorships. Unlike in a democracy where people choose their leaders through elections, workers never choose their managers. Today, the ability of corporations to dominate and influence government is staggering. Public relations and lobbying are billion dollar industries selling everything from cars to American presidents. Schweickart asks the obvious question, if people are trusted to elect their governments then why aren’t they able to elect their bosses? Opaque and unaccountable decision-making, lack of attachment to community and an institutional structure that is only concerned with profits often leads to actions that hurt everyone. A more democratic structure would prevent these problems, or at least curb them. Just to pick an example, examine the following three instances of automotive corporate decision-making that affect everyone’s everyday life. It is likely that at least two of these events would not have occurred in a democratically run economic system.

[1] In the 1940s several car companies including General Motors, Greyhound, and Chevron conspired to destroy electrical streetcars and forms of mass transit. They bought up mass transit systems, disabled them, and then tore out the tracks. They did this to create a market for buses and cars. They were brought to court in a criminal conspiracy case and each corporation was fined $5000, but nothing was done to rollback their operation.[xx]

[2] Car companies resisted safety features like air bags for decades. Chrysler CEO Lee Iaococca lobbied Nixon personally in the 1970s. But eventually the battle was won for safer vehicles and thousands of lives have been saved. A more democratically run industry whose leaders were accountable to workers and had stronger ties to the community might have given more value to increased safety measures.

[3] SUVs are the most dangerous, environment unfriendly, and wasteful vehicles on the road. The only reason they exist is for companies to increase profits by attracting “people who are insecure, vain, self-centered, and self-absorbed, who are frequently nervous about their marriages, and who lack confidence in their driving skills” according to industry researchers.[xxi] Through slick and exploitive marketing this most irrational and dangerous choice has flooded the market place.

Another criticism of capitalism is environmental degradation and other market externalities. Market externalities are costs that companies offload onto the communities, for example pollution. Corporations are at odds with any form of safety or environmental standards that may cut into short-term profits. Often these have disastrous consequences for the majority. On environmental issues corporate sponsored politicians stand directly at odds with the majority of Americans. For example over eighty percent of Americans favor joining the Kyoto agreement on emissions and many mistakenly believe George Bush favors joining the agreement as well. People agree that the US should reduce greenhouse gases even if it means it could hurt the economy, which is Bush’s last remaining defense after grudgingly admitting the correlation of greenhouse gases and global warming. He admitted this only when denial became too embarrassing in the face of near unanimous scientific consensus throughout the world and several embarrassing revelations of government tampering with scientific reports. Almost unbelievably, one of his advisors on the Kyoto treaty was Exxon Mobile, a huge transnational energy company that opposes regulations for obvious reasons.[xxii]

Thus far we have touched on existing economic problems in the world and largely left alone any direct discussion of causal relationships between the global problems and capitalism. The problems listed above are caused or exaggerated by capitalism and could be curbed, softened, or solved with an alternative approach.

First, inequality is caused by a property of capitalists to always expand their wealth. Capitalism accepts such consolidation with no bound. If markets can be preserved and inequality curbed then this would be a win.

Second, unemployment is a necessary condition of capitalism and by extension so is overwork. Unemployment does not have to be a way of life for people. (Unemployment figures only count people who want work but cannot find it.)

Third, poverty is a function of gross inequality, which all economists concede to be one of capitalisms weaknesses.

Fourth, cooperatives and worker-managed firms are inherently more democratic and efficient than corporations.

Fifth, is environmental degradation a necessary condition of progress? Probably to a degree – but worker managed cooperatives would have a larger interest in preserving the world around them. People concerned with the environment could democratically decide whether or not to sacrifice profits for environmental safety.

The question is, can a system that curbs these problems exist? Having laid the groundwork for discussion it is now possible to turn to Economic Democracy. One final note however; this review will not recreate Schweickart’s arguments; it will discuss his conclusions and lightly touch on some of the arguments. Often his arguments fill several pages and are somewhat mathematical in nature so it is not sensible to reproduce them in full. Unfortunately I am limited to discussing conclusions without arguments; the reader will likely find this lacking as the conclusions will be contradictory to much of what they think they intrinsically know to be true; hopefully the reader will be intrigued enough to investigate the original text and others for himself.

Economic Democracy
Schweickart defines Economic Democracy (hereafter ED for short) as a market driven economy of worker owned and controlled cooperative firms. It is a "socialist" system, defining "socialism" as "any economic system that does not feature (extensive) private ownership of the means of production." (66, Against Capitalism) In a capitalist firm the shareholders and management want to expand their share of the market place to drive revenue. Cooperative firms with a more equitable distribution of profits do not tend to expand for several reasons. Expansion requires more workers who would take their piece of revenue as well, so more market share does not necessarily mean drastically accelerating profits for those at the top. Schweickart argues that you can enjoy the benefits of competition, innovation, creativity, natural flows of resource allocation, but curb unlimited concentration of wealth with worker ownership. Schweickart points to several successful cooperative firms in the US and the Mondragon cooperatives in the Basque region of Spain as examples.

Schweickart believes that social and democratic control of investment is better than capitalist investment. In this case “democratic control” refers to meaningful participation by the people, and not delegation to an authoritarian ruler. Indeed every working economy to date has required a strong socialist element to function; the US economy is no exception as previously noted. ED differs from state directed Communism because the market remains intact; supply and demand determine the allocation of resources and prices and the political system remains faithful to democratic function. ED firms behave differently than capitalist firms because they feature “workplace democracy and social control of investment.” (59 After Capitalism)
We need to define ‘workplace democracy’ and ‘social control of investment’. Once defined, we can address the historical and empirical viability of both.

As the phrase implies ‘workplace democracy’ means that workers elect managers and leaders; similar to the political system. Schweickart raises several possible contentions; “Perhaps managers will be reluctant to impose discipline if they are subject to election, or less inclined to exert themselves fully, since they must share profits with workers. Perhaps the time and effort associated with democratic decision-making will cut too deeply into productive work time. Perhaps the process will lead to worker frustration, increased alienation, and incoherent policies.” We will not answer those questions fully here; Schweickart addresses them in his text. His analysis is based on “empirical findings” and “overwhelming evidence, based on scores of studies of thousands of examples, that both worker participation in management and profit sharing tend to enhance productivity, and that worker-run enterprises are almost never less productive than their capitalist counterparts. They are more so.” (59-60, After Capitalism) Studies have also shown that they tend to be more efficient than corporations and are more durable during economic downturns. In part his conclusions are based on the Pacific Northwest plywood cooperatives in the United States and the Mondragon cooperatives in the Basque region of Spain. It may be surprising that worker self-management firms have existed in the past and continue to exist today in the United States and elsewhere.

Now we turn to defining and defending “social control of investment.” In both modern capitalism and the old socialist states the government plays a heavy hand in directing and controlling the allocation of resources for new technologies and investments. Modern Keynesian capitalists, those who are aware enough that this goes on, consider this a necessary evil to prevent depressions. Schweickart argues that rather than have a small class of moneyed bankers and lenders who invest and stimulate the economy the capital for new investment and production should be drawn from a flat tax that everyone pays as a “leasing fee … for social property.” (50, After Capitalism) The revenues raised are investment funds to be poured back into the economy. Schweickart sketches several possibilities. All share several features; investment decisions are made publicly and democratically; local communities have local banks that have ties to that region, and hence vested interests in its welfare to turn to for funds. The empirical arguments and details are addressed in the original text.

Politically, Schweickart remains committed to a government and an economy that guarantees human rights. "Economic Democracy... means something more than general control of the economy by the citizenry... [it] is a form of socialism featuring worker self management" requiring "a constitutional government that guarantees civil liberties to all;... a representative government, with democratically elected bodies at the community, regional, and national levels."(67, Against Capitalism) Investment capital comes from publicly funded community banks but investment decisions are made democratically. The economic framework he outlines for ED to function precludes any authoritarian form of government. Market forces determine production, private collectives enjoy profits, and the State has no hand in directing production or industrial decisions.

1. Each productive enterprise is managed democratically by its workers.
2. The day-to-day economy is a market economy: Raw materials and consumer goods are bought and sold at prices determined by the forces of supply and demand.
3. New investment is socially controlled: The investment fund is generated by taxation and is dispensed according to democratic, market-conforming plan. (68, Against Capitalism)

Let us now deal with Schweickart’s treatment of capitalism versus ED.

David Schweickart argues ED would be a superior economic system to capitalism. I will briefly outline some of his arguments, and leave it to those interested to investigate the original text for themselves. Unfortunately I could find no way to adequately explain his arguments concisely. This is perhaps a testament to the depth of the issues involved and Schweickart’s treatment of them, or less charitably my failings as a writer. In my view his arguments add up powerfully and his ideas are worth thinking about, but ultimately this discussion is important not so much to promote ED, but to debunk the belief that there is no better alternative to the current capitalist system. The system of economics has changed radically over the centuries, and there is no compelling reason to believe it has reached its end state.

Schweickart’s arguments against capitalism follow two tracks, comparative and non-comparative. He claims that capitalism is unjustified under either analysis. By comparative he means “an argument in the form of ‘in light of viable alternatives, capitalism is best.’” “Noncomparative arguments assert that capitalism is just, because it satisfies a particular standard of justice.” (3, Against Capitalism) Noncomparative arguments are the easiest to refute but the source of the most confusion, which in turn inhibit discussion of the more sophisticated comparative arguments.

Schweickart outlines several measures with which to discuss noncomparative arguments directly from capitalist theory; capitalist contribution as entrepreneurial activity, interest on investment as time preference, interest as reward for waiting, profit as reward for risk, and capitalism as just because it is just. In a market system, people are paid for the value of the service they provide to a market. If someone is overpaid for their service then it follows as a consequence that others are cheated or underpaid for their services. This is an important observation because if the system is flawed in such a way as to ensure by design rather than anomaly or corruption that certain people are always underpaid, and others are always overpaid, then the system is immoral. Capitalist economists are well aware of this argument and theory has jumped through some hoops to minimize the damage. At the heart of Schweickart’s argument is the contention that in a capitalist system the majority of people are essentially cheated for the benefit of the few, or in other words the majority are paid less than their contribution is worth and the few are paid more than their worth, or paid for doing nothing at all in some cases.

Capitalist contribution as entrepreneurial activity falls to the side via mathematical function (and common sense.) Interest on savings is justifiable under theory, but in the real world makes little sense. Profit as reward for risk is dubious. The case for the justness of capitalism as an atomic value is weak; theorists can only arrive at the conclusion that it is so by assuming much of the real world.

In the more interesting debate, the comparative analysis of ED vs. Capitalism, capitalism fares no better. The comparative analysis turns on several issues; efficiency, growth, liberty, equality, democracy, meaningful work and autonomy - all of which (he argues) would be expanded under ED as compared to capitalism. The metrics used to judge the economical system include the following, “human happiness is good; material well-being is good, scarce resources ought not be wasted; it is generally better to labor less than more, but involuntary unemployment is bad; individuals are the best judges of their own welfare’ if a course of action or structural change will make some people better off and no one worse off, then it should be undertaken.” (179, Against Capitalism) A system like ED would not “usher in utopia,” but a “far better world becomes possible than most of us now imagine.” (128, After Capitalism) This conclusion follows from Schweickart’s arguments that ED is more efficient, more conducive to growth, more free, equal, friendlier to democracy, and fairer to both worker and consumer.

Briefly, how would ED firms behave differently from capitalist firms? An important distinction is that under ED labor is not a cost of production, and therefore democratic firms have no interest in lowering labor costs. Those costs are in fact the income of workers. Another important distinction is that worker-run firms do not possess an inherent tendency to expand market share indefinitely because profits are more equitably shared among workers. A greater expansion requires an expansion of workers who also take a larger piece of profit. This difference, once accepted, leads to several subtle but important conclusions. Democratic firms will not have a tendency to become monopolies and competition will thereby be enhanced. Therefore allocative efficiency is increased. During slow times unemployment, already lower under ED, will not increase as much. Managers will not have an incentive to drive down wages to increase profits because the profits are distributed more equitably among the workers. Cutting workers cuts production; the remaining workers have a smaller pie to divide.

What of the inequality problem outlined earlier? Under ED there will still be inequality. It is a competitive free market economy and therefore it should be expected that some firms would be more successful and profitable than others. Workers will also have different skills and abilities, and the higher skilled and more talented would also be paid for their worth. But the level of economic inequality will be much less severe, Schweickart calculates about a 10 to 1 difference from the top to the bottom. Compared to capitalist inequalities reviewed earlier the system becomes unrecognizable.

Conclusion
There are clear problems with today’s economic system; American politicians have long avoided the Universal Declaration of Human Rights for domestic policies because of its social guarantees such as medical care and housing. It may be hard to imagine a radical shift or change in our global economic systems; they are so large, so ever present, so interdependent and seemingly so complex. For perspective, imagine that an English peasant in the 12th century probably had just as hard of a time imagining a different system than the one in which they labored, just as an artisan working in medieval Europe could imagine no other way of life. But eventually the times changed; the world turned. The increasing disparity between rich and poor, indulgence and poverty, gluttony and starvation cannot – or should not -continue. Alternatives, such as ED, do not argue that we halt technological progress or give up the wonders of the modern age. They argue that we should expand access to these wonders with more equitable and humane systems. Capitalism has carried us far but we should embrace an open discussion about its shortcomings. Whether ED or a system like it is where we are headed is up for debate. But the hypothesis that capitalism is not the ultimate system should not be.

Notes
[i] Rahn, Richard W. “Weapons of Mass Disinformation.” The Washington Times, 21 March 2005. Online edition
[ii] For a full story and history see LaFeber, Walter. Inevitable Revolutions The United States in Central America (1984). New York: W.W. Norton & Company
[iii] Referenced by Williams, Harvey. (1987). Reagan Versus the Sandinistas. Colorado: Westview Press
He also documents the extensive social progress made by the Sandinstas, their popular support, and the subsequent rollback of progress caused by the U.S. proxy war
[iv] A detailed look at the declassified documents can be found in Kornblugh, Peter. (2004). The Pinochet File: A Declassified Dossier on Atrocity and Accountability. New Press
[v] Smith, Adam. (1776). The Wealth of Nations. New York: Bantam Dell.
From the introduction to the Wealth of Nations, Adam Smith “worried incessantly that giant corporations would come to dominate particular industries and, led by self-interest, use their influence with government to unfairly thwart their competitors and suppress the wages of their workers.”
[vi] An illuminating depiction of this planning period is found in Kofsky, Frank. (1993) Harry S. Truman and the War Scare of 1948. New York. St. Martin’s Press
[vii] For example, see Tyson, Laura D’Andrea (1992). “Who’s Bashing Whom? Trade Conflict in High-Technology Industries.” Washington, D.C.: Institute For International Economics
She notes that the OECD found

“Oligopolistic competition and strategic interaction among firms and governments rather than the invisible hand of market forces condition today’s competitive advantage and international division of labor in high-technology industries.”… Trade in high-technology products is not generally ‘free’ in the traditional sense. On the contrary, trade outcomes are influenced or “manipulated” – indeed some would say rigged – by both promotional and protectionist government policies. (2-3)

Over the last decade, the 10 three-digit industries classified as high-technology industries by the US Department of Commerce funded nearly 60 percent of private industrial R&D in the United States. Together the electronics complex (computers and office equipment, communications, electronic components, and audio and video equipment) and the aerospace complex (aircraft and missiles) accounted for about two-thirds of total high-technology R&D. (32)

The modern semiconductor industry’s development in the United States was also supported by demand conditions in the form of a reliable defense market. In its early years, up to 100 percent of the industry’s output was purchased by the military… The government continued to pay for a large share of R&D through the early 1970s. (88-89)

(Discussing airplanes) As a result of this arrangement (of subsidies) government money has, not company money, has borne the significant risks of product launch. Companies have not been bet – public funds have. (173)

See also Flamm, Kenneth (1987). “Targeting the Computer: Government Support and International Competition.” Washington D.C.: Brookings Institute
[viii] Zepezaur, Mark. (2004). Take The Rich Off Welfare. Cambridge: South End.
[ix] Eviatar, Daphne. “A Big Win for Human Rights.” The Nation, 9 May 2005. page 20
[x] Chait, Jonathan. “A Very Special Kind of Math.” Los Angelos Times, 29 April 2005. Online edition
[xi] For discussions of globalization see Stiglitz, Joseph. Globalization and its Discontents. (2003) New York: W.W. Norton and Company; Palast, Greg. The Best Democracy Money Can Buy (2004). Plume Books. Especially the section on Argentina;Robbins, Richard H. Global Problems and the Culture of Capitalism, third Edition. (2005). Boston: Pearson Education, Inc. See the sections on Russia in the 1990s, the Asian economic crisis of 1997, etc.;

The history of the eradication of the Haitian Creole pig population in the 1980's is a classic parable of globalization. Haiti's small, black, Creole pigs were at the heart of the peasant economy. An extremely hearty breed, well adapted to Haiti's climate and conditions, they ate readily available waste products, and could survive for three days without food. Eighty to 85% of rural households raised pigs; they played a key role in maintaining the fertility of the soil and constituted the primary savings bank of the peasant population. Traditionally a pig was sold to pay for emergencies and special occasions (funerals, marriages, baptisms, illnesses and, critically, to pay school fees and buy books for the children when school opened each year in October.)
In 1982 international agencies assured Haiti's peasants their pigs were sick and had to be killed (so that the illness would not spread to countries to the North). Promises were made that better pigs would replace the sick pigs. With an efficiency not since seen among development projects, all of the Creole pigs were killed over a period of thirteen months.

Two years later the new, better pigs came from Iowa. They were so much better that they required clean drinking water (unavailable to 80% of the Haitian population), imported feed (costing $90 a year when the per capita income was about $130), and special roofed pigpens. haitian peasants quickly dubbed them prince a quatre pieds, (four-footed princes). adding insult to injury, the meat did not taste as good. Needless to say, the repopulation program was a complete failure. one observer of the process estimated that in monetary terms Haitian peasants lost $600 million dollars. There was a 30% drop in enrollment in rural schools, there was a dramatic decline in the protein consumption in rural Haiti, a devastating decapitalization of the peasant economy and an incalculable negative impact on Haiti's soil and agricultural productivity. The Haitian peasantry has not recovered to this day.

Most of rural Haiti is still isolated from global markets, so for many peasants the extermination of the Creole pigs was their first experience of globalization. The experience looms large in the collective memory. Today, when the peasants are told that economic reform and privatization will benefit them they are understandably wary. The state-owned enterprises are sick, we are told, and they must be privatized. the peasants shake their heads and remember the Creole pigs.

- --From Eyes of the Heart: Seeking a Path for the Poor in the Age of Globalization, by Jean-Bertrand Aristide,
[xii] Schweickart, David. “After Capitalism.” New York: Rowman & Littlefield Publishers, INC. Specifically pages 76, 101, 110, 166 and elsewhere.
[xiii] On the gap between rich and poor:
Johnston, David Cay. “Richest are Leaving Even the Rich Behind.” New York Times, 5 June 2005. Online Edition
Swann, Christopher. “Real Wages Fall at Fastest Rate in 14 Years.” Financial Times, 10 May 2005. Online Edition
Grier, Peter. “Rich-poor Gap Gaining Attention.” Christian Science Monitor, 14 June 2005. Online Edition

On the decreasing class mobility in the U.S.:
Francis, David. “The American Dream gains a Harder Edge.” Christian Science Monitor, 23 May 2005. Online Edition
Herbert, Bob. “The Mobility Myth.” New York Times, 6 June 2005

On the rising instability of the Middle Class see Gosselin, Peter G. “If America is Richer, Why Are Its Families So Much Less Secure?” Los Angelos Times, 10 October 2003. Online edition; see also Gosselin, Peter G. “How Just a Handful of Setbacks Sent the Ryans Tumbling out of Prosperity.” Los Angelos Times, 30, December 2004. Online Edition
He comments,

“In fact, what happened in the Ryans' case — an economic implosion triggered by a succession of layoffs for John and a medical crisis for Kim — has become increasingly common among the nation's working families during the last 25 years.

Setbacks such as job losses and prolonged illnesses have always taken their toll, of course. But they haven't always packed the economic punch they now do.Since the 1970s, the odds that a family will see its income chopped in half when hit by this kind of shock have nearly doubled to more than 20%, according to statistics generated by The Times in cooperation with researchers at UC Davis.… families, even well-off ones, operate with little margin for economic error. And they can pay a steep price if anything goes wrong. The price grows exponentially if, as in the Ryans' case, several things go wrong at once.

See also Francis, David. “Its Better to be poor in Norway than in the US.” Christian Science Monitor; 14, April 2005; Online Edition

The US has the worst distribution of income of any well-to-do country. In a list of 30 prosperous nations, including smaller economies such as Taiwan and Israel, only Russia and Mexico have a greater maldistribution of income than the US.

"We choose to let the market determine most everything," says Timothy Smeeding, a public policy professor at the Maxwell School of Syracuse University, who compiled these inequality numbers. "We do far less on the social side. We have not as good a safety net. The priorities aren't there. Other countries make other choices."

Under Prime Minister Tony Blair, for example, Britain has made a costly and concerted effort to help its poorest families have a more equal chance for the education and other benefits that money can provide. Now, 5 percent of Britain's poor are better off than America's poor. Before 1995, none were.

In the US, both Republicans and Democrats voted several years ago to reform the welfare system - a change that Professor Smeeding generally approves. As a result, the number of those on welfare, often women with children, declined from 5 million in 1994 to 2.2 million in 2000.
But that reform "transformed the welfare poor into the working poor," he adds. They earn minimum wage, or just a bit better, and receive insufficient support from the government in the way of child care, earned income tax credits, cheap housing, and other assistance to rise out of poverty.

On the state of American Medical care see Krugman, Paul. “Ailing Health Care.” New York Times, 11 April 2005. Online Edition; Krugman, Paul. “A Private Obsession.” New York Times, 29 April 2005. Online Edition

[xiv] Robbins, Richard H. Global Problems and the Culture of Capitalism, third Edition. (2005). Boston: Pearson Education, Inc. Pg 157
[xv] NSS Memo 1974
[xvi] The full memo reads:

"DATE: December 12, 1991 TO: Distribution FROM: Lawrence H. Summers Subject: GEP
'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always though that under-populated countries in Africa are vastly UNDER-polluted... compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization." [End Memo]

After the memo became public in February 1992, Brazil's then-Secretary of the Environment Jose Lutzenburger replied: "Your reasoning is perfectly logical but totally insane... Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional 'economists' concerning the nature of the world we live in... If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said... the best thing that could happen would be for the Bank to disappear."

[xvii] Robbins, Richard H. Global Problems and the Culture of Capitalism, third Edition. (2005). Boston: Pearson Education, Inc.
Robbins remarks, “The United Nations estimates that had severely indebted countries been relieved of their debts from 1997 to 2000, they could have saved the lives of 21 million children.”
[xviii] See Greenhouse, Steven. “Forced to Work Off the Clock, Some Fight Back.” New York Times. 19, November 2004; Online Edition

Soon after Trudy LeBlue began working at the new SmartStyle hair salon outside New Orleans, her salon manager began worrying that business was too slow and profits were too weak.

To keep costs down, Ms. LeBlue said, the manager often ordered her and the two other stylists to engage in a practice, long hidden, that appears to have spread to many companies: working off the clock.Many weeks, Ms. LeBlue spent 40 hours in the salon, but was ordered to clock out for 20 of them while waiting for customers to show up, she said. With the salon's computer tracking her official hours, she was told to clean up and stock merchandise during the unpaid stretches.

"If you weren't doing hair or a perm, they'd tell you to get off the clock, but you still had to stay in the salon," she said.

What angered her most was her paltry paycheck, which she said often came to just $200 for two weeks, even after 80 hours at work. For Ms. LeBlue, that worked out to $2.50 an hour, less than half of the $5.15-an-hour federal minimum wage and her official rate, $5.35 an hour.

Workers at hair salons, supermarkets, restaurants, discount stores, call centers, car washes and other businesses who have murmured only to one another about off-the-clock work are now speaking up and documenting the illegal practice.

In interviews and in affidavits supporting employee lawsuits, Ms. LeBlue and more than 50 workers from a dozen companies said they were required to do such unpaid work despite federal and state laws that prohibit it and despite recent lawsuits against Wal-Mart and other companies that have highlighted the problem.

"It is prevalent," said Alfred Robinson, director of the wage and hour division of the Labor Department. "It is one of the more common violations of the Fair Labor Standards Act."

[xix] As noted elsewhere Adam Smith worried about corporations distorting his free market thinking by gaming the political process. See Note 5
Other people worried about this as well,
From Robbins, Richard H. Global Problems and the Culture of Capitalism,Third Edition. Boston: Pearson Education, Inc. 2005
Lincoln quoted on page 93: Abe Lincoln warned on his deathbed, “Corporations have been enthroned… An era of corruption in high places will follow and the money power will endeavor to prolong its reign by working on the prejudices of the people… until wealth is aggregated in a few hands… and the Republic is destroyed.” Jefferson had similar concerns.

Robbins remarks on corporate public relations starting on page 130:

Protected by the free speech provision of the First Amendment, corporations marshal huge public relations efforts on behalf of their agendas. In the United States the 170,000 public relations employees whose job it is to manipulate news, public opinion, and public policy in the interests of their clients outnumber news reporters by 40,000. A study in 1990 discovered that almost 40% of the news content of a typical US newspaper originates as public relations press releases, story memos, and suggestions.

[xx] Zepezaur, Mark, Take The Rich Off Welfare. Cambridge: South End. 2004 Pages 138-139
See also David J. St. Clair, The Motorization of American Cities, New York: Praeger, 1986
[xxi] Gladwell, Malcolm. “Big and Bad.” The New Yorker, 12 January, 2004.
[xxii] On the scientific consensus see Editorial. “Feeling the Heat.” New York Times, 14 June 2005

Scientists throughout the world are telling him that the rise in atmospheric temperature justifies aggressive action. Arnold Schwarzenegger and other prominent Republicans are telling him to get off the dime. His corporate allies are deserting him. And the Senate is inching closer to endorsing a mandatory cap on greenhouse gas emissions
…
As if on cue, the National Academy of Sciences and 10 of its counterparts around the world declared that the science of global warming is clear enough to warrant prompt reductions in greenhouse gases. Mainstream scientists have long accepted the link between warming and human activity

See also Editorial. “Bush, Out in the Cold.” Los Angelos Times, 19 June 2005
Clive Cookson. “Global Warming Real say New Studies.” Financial Times, 18 February 2005.

“A leading US team of climate researchers on Friday released “the most compelling evidence yet” that human activities are responsible for global warming. They said their analysis should “wipe out” claims by sceptics that recent warming is due to non-human factors such as natural fluctuations in climate or variations in solar or volcanic activity.

Scientists from the Scripps Institution of Oceanography in California have been working for several years with colleagues at Lawrence Livermore National Laboratory to analyse the effects of global warming on the oceans. They combined computer modelling with millions of temperature and salinity readings, taken around the world at different depths over five decades.

The researchers released their conclusions on Friday at the American Association of the Advancement of Science meeting in Washington. They found that the “warming signals” in the oceans could only have been produced by the build-up of man-made carbon dioxide in the atmosphere. Non-human factors would have produced quite different effects.

Tim Barnett, the Scripps project leader, said previous attempts to show that human activities caused global warming had looked for evidence in the atmosphere. “But the atmosphere is the worst place to look for a global warming signal,” he said. “Ninety per cent of the energy from global warming has gone into the oceans and the oceans show its fingerprint much better than the atmosphere.”

Prof Barnett added: “The debate over whether there is a global warming signal is over now at least for rational people.” He urged the US administration to rethink its refusal to join the Kyoto Protocol, which took effect this week.”

On government interference with scientific reports see Revkin, Andrew. “Official Played Down Emissions’ Links to Global Warming.” New York Times, 7 June 2005 and Revkin, Andrew. “Ex-Bush Aide Who Edited Climate Report Hired By ExxonMobil” New York Times, 15 June 2005
Cart, Julie. “U.S. Scientists Say They Are Told to Alter Findings.” Los Angelos Times, 10 February 2005

On Bush admitting correlation see Daniel, Caroline. “Bush Admits Human Role on Climate Change.” Financial Times, 6 July 2005