Forwarded from John Enyang

Louis Proyect lnp3 at
Sat Jan 27 12:08:58 MST 2001

Al-Ahram Weekly On-line
25 - 31 January 2001
Issue No.518

Progressing towards the abyss

Address to the first World Social Forum in Porto Alegre, Brazil

By Noam Chomsky

After World War II, integration of the international economy
("globalisation") has been increasing. By the late 20th century, it had
reversed the decline of the inter-war period, reaching the level prior to
World War I by gross measures - for example, volume of trade relative to
the size of the global economy. But the picture is considerably more

Post-war integration passed through two phases: (1) the Bretton Woods
period until the early 1970s; (2) the period since, after the dismantling
of the Bretton Woods system of regulated exchange rates and controls on
movement of capital. It is phase two that is usually called
"globalisation." Phase two is associated with so-called "neoliberal
policies": structural adjustment and "reform" along the lines of the
"Washington consensus" for much of the Third World, and since 1990, others
such as India and the "transition economies" of Eastern Europe; and a
version of the same policies in the more advanced industrial societies
themselves, most notably the US and UK.

The two phases have been strikingly different. For good reasons, many
economists refer to phase one as the "golden age" of industrial state
capitalism, and phase two -- the "globalisation period" -- as the "leaden
age," with significant deterioration of standard macroeconomic measures
worldwide (rate of growth, productivity, capital investment, and so on),
and increasing inequality. In the world's richest country, where most of
the workforce wages have stagnated or declined, working hours have
dramatically increased, and benefits and support systems have been
reduced. Through the "golden age," social indicators closely tracked GDP;
since the mid-1970s, they have steadily declined to the same level as 40
years ago, according to the most recent detailed academic study.

Contemporary globalisation is described as expansion of "free trade," but
that is misleading. A large part of "trade" is in fact centrally-managed,
through intra-firm transfers, outsourcing and other means. Furthermore,
there is a strong tendency towards oligopoly and strategic alliances among
firms throughout the economy, along with extensive reliance on the state
sector to socialise risk and cost, a key feature of the US economy
throughout this period. The international "free trade" agreements involve
an intricate combination of liberalisation and protectionism, in many
crucial cases (particularly pharmaceuticals) allowing megacorporations to
gain huge profits by monopolistic pricing of drugs that were developed
with substantial contribution of the public sector.

The enormous explosion of short-term speculative capital transfers in
phase two sharply restricts planning options for governments, and so
restricts popular sovereignty insofar as the political system is
democratic. The constitution of "trade" is far different from the
pre-World War I period. A large part now consists of manufacturing flows
to the rich countries, much of it intra-firm.

These options, along with the mere threat to transfer production, are
another powerful weapon against working people and functioning democracy.
The emerging system is one of "corporate mercantilism," with decisions
over social, economic and political life increasingly in the hands of
unaccountable private concentrations of power, which are "the tools and
tyrants of government," in James Madison's memorable phrase, warning of
the threats to democracy he perceived two centuries ago.

Not surprisingly, the phase two effects have led to substantial protests
and public opposition, which have taken many forms throughout the world.
The World Social Forum offers opportunities of unparalleled importance to
bring together popular forces from many varied constituencies, from the
richer and poor countries alike, to develop constructive alternatives that
will defend the overwhelming majority of the world's population from the
attack on their fundamental human rights, and to move on to break down
illegitimate power concentrations and extend the domains of justice and

Related stories:
A manifesto for resistance 18 - 24 January 2001

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Louis Proyect
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