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Forum Post: chomsky on economic suicide

Posted 11 years ago on Aug. 14, 2012, 8:15 a.m. EST by flip (7101)
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One of the main goals of the Occupy movement is fighting inequality in the US, but also worldwide. What is your assessment of the US and European answer to the financial and the so-called Euro-crisis?

Chomsky: The US reaction has been somewhat better than the European reaction. The European reaction is a suicide, class based suicide. It’s pretty hard to interpret the Troika Policies, mostly German backed, as something else than class warfare. In fact ECB president Mario Draghi pretty much said we are going to get rid of the social contract.

But he also said that the fiscal pact has to be backed by a growth pact.

Chomsky: Finally they are talking about what should have been done in the first place. There is plenty of resources in Europe to carry out stimulation of demand and so on. But the idea of imposing austerity under recession is a recipe for suicide. Even the IMF has come out with studies showing that that’s the case. The effect, and presumably the intention, is to dismantle the welfare state and the social contract.

Why do you think that this is the intention?

Chomsky: Just look at the people who are designing the policies. They never liked the welfare state, they never liked the power of labor. Europe was a relatively civilized place by comparative standards. But that helps the population, that doesn’t help the corporate sectors, the super rich and so on. So sure, if they can dismantle that, fine. It’s hard to think of any other rationale for the policy that’s been pursued. But as you said now it is the cracking off slightly.

The rationale that German chancellor Angela Merkel puts forward is that we have a debt crisis, and in times of debt, you’ve got to cut spending.

Chomsky: In times of debt, what you do is get the economies to grow so that they can overcome the debts. If you impose austerity, it gets worse. It was obvious in the beginning and that’s exactly what happened.

Do you think that countries like Greece should have defaulted?

Chomsky: Greece has some serious internal problems. They just didn’t collect tax, the rich were undisciplined, and there’s too much bureaucracy. But the debt is a dual responsibility. If you believed in capitalism the problem would be a problem of the lenders. I lend you money, I make some profit, you can’t pay, tough for me.

But there always has to be some enforcement or guarantee that the debts are paid back….

Chomsky: Not in capitalism. But in real life it’s your neighbor’s problem. They have to subject themselves to austerity. These are just systems for supporting the wealth and power. So should Greece have defaulted? Well, it should have had a way to extract itself from debts that they weren’t incurred by the population. It’s true that they used the fake money, fake wealth to overconsume. But that’s pretty much the faults of the banks. They were smart enough o figure out that there is gong to be unplayable debt. But the question is, could Greece restructure so that the debt would not be imposed on the population. There are countries that have done it, like Iceland or Argentina.

People in the richer European countries fear that by increasing spending this will lead to higher debts…

Chomsky: Not, if the money is used the way it was used in East Asia. They used it for capital investment and industrial policy programs. So, Taiwan and South Korea, Japan earlier, they moved from quite poor peasant societies to richer and developed societies. In fact the entire history of state capitalist development has been like that. That’s the way the United States developed. In the 1770’s, the newly liberated colonies did get economic advice from respectable figures like Adam Smith. He advised the colonies to do what are called the Principles of Sound Economics; the ones that the IMF and the World Bank were instructing the poor countries to do today. So, concentrate on your comparative advantage, export primary products, import superior manufacturers from Britain. Well, the colonies were free. So they did the exact opposite. They raised tariff barriers, developed industry, tried to monopolize cotton. That’s how the US developed.

Would protectionism make sense in the industrialized countries today? Because if you walk around in a supermarket, you´ll see products that have been produced under conditions that the societies in the industrialized countries wouldn´t tolerate. The T-Shirt from Bangladesh, the TV from China, the toy from Taiwan: all produced without interference from the welfare-state, labor unions or environmental protections. ‘There is nothing more neoliberal than the consumer“, Swiss author Adolf Muschg once noted. But shouldn´t we protect the consumer?

Chomsky: There’s two approaches. One approach is protectionism, but notice that in the case that I’ve mentioned the protectionism was against the richer societies. You are talking about something different; tariffs against poor countries. And there is another approach, namely the approach that the European Union in fact took. Help them raise their levels so they don’t undermine the living standards of northern workers.

But what happens if it´s impossible to raise standards in China?

Chomsky: Sure you can. In fact it’s being done. When there were massive protests against Foxconn (a Taiwanese corporation that produces electronic devices for Apple in China) this year, China reacted by making some changes, allowing some degree of independent unions that have been permitted to slightly reduce the owners’ conditions that sort of forced workers into this slave labor. If we impose tariffs against exports from China we are imposing costs on western corporations. It’s basically an assembly plant for parts and components that come from the more advanced industrial countries and it’s periphery.

So why not tax them for exploiting workers and the environment in those countries?

Chomsky: Yes, make them pay to raise the standards. I mean corporate profits have gone through the roof. Now, there’s study by the University of Massachusetts, that just unused corporate banking and corporation profits, it’s about a trillion and a half dollars that’s just sitting there because they see no advantage for them to spend it. Well, there are all kind of ways to spent that, as the study points to specific measures which would virtually eliminate unemployment, lead to economic growth and so on.

The presidential campaign starts to heat up. What is your assessment of the first term of president Obama?

Chomsky: Frankly, I didn’t expect much from Obama, so I wasn’t actually disillusioned. When he came into office at the height of the financial crisis, the first thing he needed to do, was put together an economic team. Who did he pick? He picked the people who created the crisis. There are Nobel laureates in economics who had different approaches. But he picked what they called the Rubin Boys, people like Tim Geithner, Larry Summers, bankers and so on. The people who essentially created the crisis. There was an article in the business press, Bloomberg News, which reviewed that. They concluded that these people shouldn´t be on the economic team, half of them should be getting subpoenas. So he was paying off the people who put him into office.

Because they majorly contributed to his campaign?

Chomsky: Most of his campaign funding concentrated in the financial institutions, which preferred him to McCain. And there were people who understood it. So shirtly after he was elected, the advertising industry awarded him the prize for the best marketing campaign of the year.

Still, Obama tried to improve things like introducing healthcare reform…

Chomsky: It´s a mixed story. The United States healthcare systems is a total disaster. If the United States had a healthcare system like any other industrial society, there wouldn’t be any deficit. In fact, it would end up being a surplus. And the reason is not obscure. A largely privatized, mostly unregulated healthcare system which is extremely inefficient and very costly. Well, the Obama reforms are slightly better than what existed, but nothing like would should exist. In fact, even the idea of allowing a public option, to make a choice to pick a public healthcare, even that he refused to pursue.

Obama had to compromise with the Republican opposition.

Chomsky: Some of his supporters argue that it was the best that could be done, given the political circumstances. But that’s by no means obvious. The president has a lot of power, for example, he can appeal to the population. The population was very strong in favor, almost two to one. So okay, appeal to the population. That’s the way Roosevelt got the New Deal legislation through.

You once said that applying the Nuremberg principles every US president actually would have been hanged. Does that apply to Obama as well?

Chomsky: Look at the global assassination campaign, it violates principles going back to Magna Charta.

You’re referring to the drones in Pakistan, Somalia and Yemen.

Chomsky: Yes. If the president decides to kill somebody, you kill him and whoever else happens to be standing around. The foundations of Anglo-American law and by now pretty much of the rest of the world, what´s called the presumption of innocence, that you can punish someone if you demonstrate that they are guilty in a court of law, it´s even in the American constitution. In fact the Obama administration has made it very clear that they basically can kill anyone they want, including American citizens.



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[-] 1 points by notaneoliberal (2269) 11 years ago

As one who usually agrees with Noam, I have to take issue with his quasi-support for anti-protectionist free trade. After correctly pointing out that the U S achieved it's high standard of living by employing protectionism, he seems to be confused about what protectionism is. It is not protectionism "against" a poorer or a richer country. As the word implies, it is to protect the domestic economy. To cite the insignificant gains in wages and working conditions in China, and to attribute that to outside pressure is just not the case. Increases in Chinese wages have not been wide spread, and have only affected a few higher skilled workers in areas where worker shortages have occurred. The neoliberal response to this small increase in labor cost has been to seek out even cheaper labor in other parts of the world, i.e., Vietnam, Korea, Columbia, etc.

[-] 1 points by gnomunny (6819) from St Louis, MO 11 years ago

Hence the TPP.


[-] 2 points by notaneoliberal (2269) 11 years ago

That may be his intent, but on the issue of "helping the American consumer", we must realize that the American consumer is no longer the American consumer,so to speak, if he/she no longer has a job or has had to take a much lower rate of pay due to the downward pressure on real wages that has resulted from outsourcing. The constant outflow of capital that results means less real wealth within the US economy.


[-] 1 points by notaneoliberal (2269) 11 years ago

Long term thinking seems to be a rare commodity.


[-] 1 points by notaneoliberal (2269) 11 years ago

I'm sure are those that get it (within the 1%} . The thing is, the short term gains are their primary concern, apparently.

[-] 1 points by flip (7101) 11 years ago

i believe this is accurate - "Chomsky: Some of his supporters argue that it was the best that could be done, given the political circumstances. But that’s by no means obvious. The president has a lot of power, for example, he can appeal to the population. The population was very strong in favor, almost two to one. So okay, appeal to the population. That’s the way Roosevelt got the New Deal legislation through." as to corporations they certainly benefit from lower wages - i agree that as jim hightower says "we all do better when we all do better" but seems to me that a large part of the ruling class disagrees

[-] 1 points by VQkag2 (16478) 11 years ago

I agree with Chomsky that Pres Obama should have appealed to the population and also that we (the population should have risen up for a public option just as right wing TP rose up against ACA)

I also agree with Chomsky when he said "I didn'tepect much from Obama, so I wasn't disillusioned" I mean Jesus look at what he faced. The worst economic crash in 70 yrs, a country moving right for 30 years, entrench 1% plutocrats, MIC running wild, fear mongering the rule, and an intransigent opposition obstructing every effort for improvement.

I am surprised and pleased that we got done as much as we have.

[-] 1 points by flip (7101) 11 years ago

i am glad you are happy but we are still heading towards a cliff and both parties are taking us there - one is walking briskly and the other wants to run!

[-] 1 points by VQkag2 (16478) 11 years ago

Sounds hopeless. what should we do.

Maybe we should:

take back the govt. from the 1% conservative plutocats.

Agitate for money out of politics.

Elect progressives. Could be any progressive, republican, democratic, independent, as long as they serve the 99%.

No good?

[-] 1 points by flip (7101) 11 years ago

we agree, now to the hard part - you have told me the what now tell me the how!

[-] 1 points by VQkag2 (16478) 11 years ago

So you won't give me your opinion on what we should do?

You said we're goin over the cliff. I ask YOU What should we do.

I offer the solution of taking back the govt. How? Protests, agitate for money out of politics, Electing progressiv pols who will serve the 99%.

Doesn't that answer your question.?

[-] 1 points by flip (7101) 11 years ago

no it does not

[-] 1 points by VQkag2 (16478) 11 years ago

Why not? Which question? Perhaps if you asked again. Maybe I misunderstood.

And while your at it. What do you think we should do?

[-] 1 points by flip (7101) 11 years ago

this was the question - Doesn't that answer your question.?

[-] 1 points by VQkag2 (16478) 11 years ago

Wow. Ok. I get it. You don't want to discuss it. No biggie.

Just stop responding. I'm sure your philosophy is excellent, whatever it is. I suppose it is a secret. No prob. Or perhaps you just don't want me to know. Or you don't like me. That's fine too.

Peace, & Good luck in all your GOOD efforts.


[-] 2 points by flip (7101) 11 years ago

i understand your point but i disagree. it seems to me that if he had appealed to the public and been shot down by congress he would have had a bigger majority in 2010 and won this election handily. fdr had to fight for what he got. i would have liked obama to echo fdr - "Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred." we will never know - what we do know is that he is not the man we hoped for - i felt that way all along but i was hoping to be wrong. i am sorry if you are a big fan - my wife is (to some extent) so i feel your pain. but he had a chance to change the world and walked away from it - i would have liked to see a fight! we are in huge trouble and need to make big changes soon - doesn't look like it will happen. i am going to buy land in a rural community for my grandchildren!


[-] 3 points by flip (7101) 11 years ago

point taken as to a black man standing up to power - it was certainly easier for a man from the ruling class - still muhammed ali is loved so?? you do know that health care stocks went up when the court approved the plan - anyway we are mostly on the same page so lets hope for the best - and prepare for the worst!


[-] 2 points by flip (7101) 11 years ago

thank you - this was a more intelligent conversation than i hoped for!


[-] 1 points by flip (7101) 11 years ago

that was not a comment on you but a reflection of what i deal with here. it is though to get a sensible conversation - very sad