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Friday, April 28, 2006

Pfaff: Europe Should Reject U.S. Crony Captitalism

William Pfaff says French college students were correct to reject U.S. market capitalism. I am going to let this speak for itself:

Why Europe should reject U.S. market capitalism,  William Pfaff, Commentary, IHT: The specter of Anglo-American market capitalism dominated France's student unrest in March and April, and motivated popular rejection in France a year ago of the proposed new European Union constitution. ...

Advocates of the new model capitalism, and the globalization project that goes with it, like to present it as an expression of historical necessity, rooted in classical economics and embodying irrefutable laws. ... Those who do not conform to the rules of modern market capitalism, and do not offer the human sacrifices of lost employment and diminished living standards that the market demands, will fall by the wayside of history. This is simply untrue, although most of those who say it undoubtedly believe it.

The new American and British market capitalist model, which dictated deregulation of industry and privatization of state enterprises in the 1970s, and globalization of international markets in the 1990s, exists as a result of free political decisions and ideological choices that were anything but inevitable. History may one day describe them as having been perverse and socially destructive.

Two of the most important influences on the new capitalism were academic in origin, and the third, improbably, was an instance of romanticized egoism.

The first influence was monetarist economic theory. This in principle excluded social considerations from economic policy decision. Government economic policy was to be made chiefly in response to a single objectively determinable factor, the money supply. The effect of this new theory was to "dehumanize" economic policy, previously held to be closely related to political considerations, as ... with the Keynesian tradition that monetarism challenged.

The second influence was primarily political, a reaction to 20th-century totalitarianism. Working in London in the 1930s, the Austrian political theorist and economist Friedrich von Hayek began as a critic of Keynes, but eventually widened his argument so as to assert as a matter of principle that state intervention in society, even in democratic political systems, amounted to a "Road to Serfdom" (the title of a book he published in 1944). State intervention in economy and society threatened human liberty. The free market produced economic efficiency and human freedom. Hayek had a great influence on Margaret Thatcher.

The third influence was an eccentric one, important in the United States. It was the creation by a Russian-American novelist, Ayn Rand, of a "philosophy" of heroic egoism and pursuit of individual self-interest ... by superior persons. Her ideas responded to the longings of impressionable college students (including Alan Greenspan) and her views became something of a mid-century American cult, if not a sect.

This is what underlay the transformation of American corporate culture, and of the American business corporation from an institution with national identity, constrained to reconcile interests of owners, employees and community, into the modern global corporation, effectively controlled by its managers and mandated to the single objective of producing "value" for stockholders, while handsomely rewarded its executives.

This change transformed labor into an anonymous commodity and put both blue-collar and white-collar staff into competition with an effectively unlimited global labor supply, resulting in employment insecurity, reduced or static wages, diminished or eliminated benefits and pensions, and the destructive social pressures of falling living standards.

In the United States, the new model of corporate business has evolved toward a form of crony capitalism, in which business and government interests are often corruptly intermingled, the system resistant to reform because of the financial dependence of both major political parties on contributed money.

Frequently described by its supporters as a progressive step in the development of a new international economy, the political-economic system that has evolved in the United States has proved regressive in crucial respects, as well as inefficient and abusive of the public interest.

Europe, one would think, should be looking for social and economic evolution on its own terms. It is perfectly capable of doing so, as a modern industrial society that in aggregate terms is larger and wealthier than the United States, as well as less shackled by obsolescent ideology and entrenched special interests - its problems with union corporatism notwithstanding.

In the longer term, for Europeans to embark on this project, instead of conforming to the currently received wisdom concerning the globalized economy, would serve the international interest as well as that of the European Union. It might even prove a service to the United States, whose future is now jeopardized by economic error and excess, as well as unachievable global political and military ambitions.

    Posted by on Friday, April 28, 2006 at 07:39 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (14)


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