Worshipping the Free Market God

The experiment began in the 70s with the idea, propulgated by the likes of Milton Friedman, that free markets could solve all of societies ills. The role of the Nation State, as well as of democracy itself, became second place to the miracles of the market. The traditional functions of regulation, imposed democratically to ensure the interest of public good, would now be relegated to market forces which would ensure the public good through Darwinistic selection. Those who survive and prosper do so because they provide the most service or good. Privatization of utilities such as power and water would usher in a new era of competition and lower prices for consumers. Lifting off burdonsome government regulations would free the markets to naturally select and economies would flourish.

This never happened.

Joseph Stigletz, Nobel Prize winning, former chief economist for the World Bank began to notice a pattern. Everywhere the experiment was implemented, economic disaster occured. Throughout the 80s and the 90s, all across Africa and South America the free marketeers, through the mechanisms of the IMF and the World Bank, got to try out their theories: deregulate, denationalize, privatize.

It didn’t work. Facts:

“In perhaps the most comprehensive such study to date, Scorecard on Globalization 1980-2000, Mark Weisbrot, Dean Baker and other researchers at the Center for Economic and Policy Research documented that economic growth and rates of improvement in life expectancy, child mortality, education levels and literacy all have declined in the era of global corporatization (1980-2000) compared to the years 1960-1980. From 1960-1980 many countries maintained protectionist policies to insulate their economies from the international market to nurture their domestic industries and allow them to become competitive. Those policies are the same ones on which U.S. economic prosperity was built.

The Scorecard findings include:

  • Slower economic growth for countries at all income levels;
  • A negative growth rate for the poorest countries;
  • For moderately wealthy countries, income growth declined from 100% increase per capita between 1960-1980 to a 21% increase in the last two decades;
  • Reduced progress in education as evidenced by declining school enrollment rates and literacy. Slower growth in domestic spending correlates to decreased educational spending;
  • An overall slowdown in reducing infant and child mortality and in improving overall life expectancy (this is not necessarily an indicator of policy failure–it could be a natural flattening of progress curve).

You don’t have to go to Argentina to see the wrath of the Free Market God.

Yet despite these facts, proponents of globalization, like members of a cult, ignore evidence for ideology. And with every indicator of failure, they respond “more”.

Take the California energy crisis of the ’90s. This is one of the first areas where they got to try out their experiments in the U.S. By promising cheaper prices for consumers through deregulation and market selection, they lobbied and passed legislation to free up the energy markets. The result? In one day, electricity prices rose 7000%. No, that’s not a typo. In the end they had to call in the regulators again. But not before Enron and others milked Californians for over $7 Billion.

How did they do it? They profiteered on the fact that electricity, unlike widgets, is not something you can do without. So they colluded and schemed and basically held California’s electricity for ransom.

The free marketization of natural monopolies such as water and power is bad economics, but the free marketization of medicine is immoral. Just like water, healthcare is not optional. And yet the priest of the free market expect the forces of consumer demand to apply to kidney transplants and cancer treatment. But they really don’t expect that. They’re just out to make a buck. So they falsely claim that profit incentives have created the best healthcare system in the known world. Meanwhile, 45,000,000 (45 million) Americans have to crowd into emergency rooms to get substandard treatment and if you need something severe like a new kidney, tough luck.

Democrats: going right along.

Like Californians, all Americans havw been taken for a free market ride. At every turn the neoliberals are trying to perform their ideologically driven, factually challenged experiment here. And the Democrats are going right along. The party of FDR has shed of it’s old skin as the party of the people for a new, gobalization friendly sheen.

But in doing so, they have also shed the post-New Deal, anti-corporate, highly regulatory policies that oversaw the greatest economic prosperity in the history of the world and led, for the first time, to the creation of a thriving middle-class.

By bellying up to the free market alter, Democrats have largely lost their reason for existing. And it shows. For the past few decades, with the exception of civil rights and social issues, Democrats have been hard pressed to define a unifying principle. The Democratic agenda has consisted of issues: education, prescription drugs for seniors, choice or now gay marriage. But a fundamental principle around which to coalesce has been awash in inconsistencies and contradictions. The old principles of economic justice and progressive populism have given way to corporate appeasment and economic abiguity. The principles of FDR’s New Deal and Johnson’s Great Society have been replaced by Clintonian Machiavellianism and the myth of globalization as vehicle for the spread of democratic prosperity.

And while the liberal left and the religious right have been fighting over partial birth abortions, endowment for the arts, and gay marriage, the corporate center have been driving off with the furniture.

This has led to an exodus from the Democratic party of progressives who no longer feel they can support policies that continue to allow the accumulation of wealth and power into corporations while devouring the poor and working class. And the exodus will spread. As free market reforms failed in South America and elsewhere, they will fail here as well. And there is nothing in our history to indicate that we are protected from the fate of those other failed countries: civil unrest, riots, military intervention. If you believe that we are fundamentally different from those in Argentina and elswhere, I suggest you look at the streets of Boston after a Celtics upset.

The inevitable outcome of extreme economic diparity is social instability. And as all of the evidence indicates, the inevitable outcome of globalization is extreme economic disparity.

Globalization vs. Democracy

Of all the outcomes of globalization, none is more dangerous than the subversion of democracy. Just as corporate influence is corrupting the democratic process here at home, it corrupts smaller, less institutionalized countries tenfold. But if bribery of officials and CIA covert operations are the old way of globalizing, then the new way is the WTO and GATS. The WTO is a way to give the undemocratic imposition of the corporate agenda a bit of legitimacy. Kind of like Disney in Vegas. And GATS is the new law that makes it all happen.

Globalization vs. U.S. Constitution

The General Agreement on Trade in Services (GATS) Article VI.4 says that governments have a duty to hold “a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments.” But who determines this balance between democratically enacted regulation and the promotion of trade expapansion? The democratically elected leglislature? The democratically elected president?

No.

A mysterious entity called the GATS Disputes Panel decides where the balance is drawn. Who is the GATS Disputes Panel? If you can find a list of it’s members anywhere we’d sure like to have it. But using a criterion called the “necessity test”, the GATS Disputes Panel has the authority to override U.S. legislation if it finds that leglislation causes an unnecessary burdone to the promotion of free trade.

Keep in mind, none of the trade agreements — NAFTA, GATS, and GATT — are debated or voted on democratically. They are negotiated in closed session and signed in closed session. So we now have an undemocratic body that has regulatory override authority over not just the United States government but over all participating countries.

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  1. I stumbled on to this commentary by Mikhail Gorbachev

    It’s time for a second American revolution in the spirit of perestroika

    In the West, the break-up of the Soviet Union was viewed as a total victory that proved that the West did not need to change. Western leaders were convinced that they were at the helm of the right system and of a well-functioning, almost perfect economic model. Scholars opined that history had ended. The dogma of free markets, deregulation and balanced budgets at any cost was force-fed to the rest of the world.

    But then came the economic crisis of 2008 and 2009, and it became clear that the new Western model was an illusion that benefited chiefly the very rich. Statistics show that the poor and the middle class saw little or no benefit from the economic growth of the past decades.

    The global crisis demonstrates that the leaders of major powers had missed the signals that called for a perestroika. The result is a crisis that is not just financial and economic. It is political, too.

    The model that emerged during the late 20th century has turned out to be unsustainable. It was based on a drive for super-profits and hyper-consumption for a few, on unrestrained exploitation of resources and on social and environmental irresponsibility.

    But if all the proposed solutions and action now come down to a mere rebranding of the old system, we are bound to see another, perhaps even greater upheaval down the road. The current model does not need adjusting; it needs replacing. I have no ready-made prescriptions. But I am convinced that a new model will emerge, one that will emphasise public needs and public good, such as a cleaner environment, well-functioning infrastructure and public transport, sound education and health systems and affordable housing.

    • sharon on June 10, 2009 at 7:20 am

    but i am just too tired to read and comment substantively tonight (east coast time).  i’ll be back in the morning when i can think more clearly, but for the moment just want to say thanks for writing.  i have been hoping to see something from you again.

  2. when Reagan said “trickle-down” aka “piss on you” and “service economy” aka “you’re gonna work at McDonald’s.”  “Free” trade means shipping good-paying jobs overseas.

    Oh, don’t get me started.  I’ve been watching this clusterfuck develop since St. Ronnie got elected; Bush merely brought the whole thing to its obvious conclusion: global financial meltdown.

    Who could have predicted…?  Well, me, for one, and I don’t even have a background in economics…just a slight understanding of history & that includes the history of how & why the U.S. got to be such an economic powerhouse in the mid-20th century.

    Watching the GOP dismantle everything with the help of colluding Dems, and turn us into an oligarchy, makes me furious.

    But, thanks for a great essay, and it’s good to have you here.

    • Edger on June 10, 2009 at 9:13 am

    Your question about who the GATS Disputes Panel is composed of piqued my interest, so I did a bit of digging. It’s midnight and this is by no means a final answer but may help as a starting point.

    The WTO Dispute Settlement Gateway page at wto.org gives this bit of information, admittedly unsatisfactory, but the best I could find in five minutes:

    Dispute settlement

    This page is a gateway to material on:

       * Disputes in general, and how they are handled in the WTO and its Dispute Settlement Body

       * New negotiations on the Dispute Settlement Understanding

       * Individual dispute cases: The disputes

    The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly.

    A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. The authors of these agreements are the member governments themselves – the agreements are the outcome of negotiations among members. Ultimate responsibility for settling disputes also lies with member governments, through the Dispute Settlement Body.

    [SNIP]

    The Dispute Settlement Body

    Made up of all member governments, usually represented by ambassadors or equivalent. The current chairperson is H.E. Mr. John GERO (Canada).

    The Appellate Body

    The permanent seven-member Appellate Body is set up by the Dispute Settlement Body and broadly represents the range of WTO membership. Members of the Appellate Body have four-year terms. They have to be individuals with recognized standing in the field of law and international trade, not affiliated with any government.

    There is much more on that page and the pages it links to, including case studies of individual specific dispute cases. and Minutes of Dispute Settlement Body (DSB) meetings.

    Hope this helps…

    • zett on June 10, 2009 at 2:45 pm

    so I only had a chance to skim, but I will be back later to read carefully.  I just want to say I am glad to see you here. I will touch on one part before I go, however:

    This has led to an exodus from the Democratic party of progressives who no longer feel they can support policies that continue to allow the accumulation of wealth and power into corporations while devouring the poor and working class.

    This is what the eedjits who blame everything on Nader refuse to see. I am not saying that Nader is right about everything or he’s wonderful, but the Party can’t keep pissing on Progs and expect our loyalty – we’ll/they’ll turn to whoever tells the truth about what we already know, and that is the fact most Dem pols are not looking out for the working class any more than the Repubs are.

    • Edger on June 10, 2009 at 6:24 pm

    Iraq and Afghanistan are not “members” of the WTO, but only “observers”, considering the considerable “effort” put into “developing” access to their resources to “make them available” to WTO member countries.

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