Profit Over People: Neo- liberalism and Global Order
By Noam Chomsky
Seven Stories Press, New York $16
Madhyam Books, New Delhi
Pages: 175 Price: 175

Even as America made a break with many institutions of the "Old World", it has in many senses been a continuation of the European idea. Hegel in his "Philosophy of History", (1830), while noting that the still nascent America had not made any significant contribution to philosophy at that time, expected it to add to the European achievements in future. Though its contribution in philosophy has been modest in comparison with its other achievements (France still seems to produce the most influential contemporary philosophers), America certainly is the successor to Europe, the "Old World".

In fact, while Western Europe seems to be reclining into a sober, matured middle age, America is an adolescent bursting with energy and confidence that best characterizes that age in the life of a man.

Some, however, may disagree with such characterization. Noam Chomsky, author of the book under review, is one of them. He would rather characterize America as a juvenile adolescent, if not a juvenile delinquent.

Chomsky has been much acclaimed for his definitive contribution to modern linguistics and for his biting criticism of the US foreign policy and analysis of the corporatization of the media. The title of one of his previous books "Manufacturing Consent" is an eloquent phrase that best describes the nature of the mass media today. In India, he is looked upon as a genuine friend and advocate of the Third World.

In a series of essays in the book under review, Chomsky directs his focus on the contemporary economic policies being advocated by the ruling circles in the West under the rubric of "globalization". Chomsky feels that these policies are not new, these are a continuation of the liberalism of the 19th century that saw the massive expansion of Western imperialism over the rest of the world- primarily in Africa and Asia. The essence of such policies today is not much different from that of the last century. In short, it puts profit over people. The profits go to the select group of capitalists and corporate managers at the cost of the ordinary mass of people.

Chomsky traces the role of the US in fomenting trouble in Latin America, which the US has virtually regarded as its backyard. In the fifties, it disrupted regimes that it perceived as being too radical or nationalistic.

The reemergence of Europe and Japan after the devastation caused by the World War II changed the power equations of the world to a tri- polar system in the capitalist world. The writer shares the view of other economists who see the oil crisis of the seventies as leading to the dismantling of the post- war global economic system and within which the US could not sustain its role as the world's banker. This abdication lead to the huge explosion of unregulated capital flows.

"In 1971, 90 percent of the international financial transactions were related to the real economy- trade or long term investment- and 10 percent was speculative. By 1990, the percentages were reversed and by 1995 about 95 percent of the sums were speculative with daily flows regularly exceeding the combined foreign exchange reserves of the 7 biggest industrial powers, over $ 1 trillion a day and very short term about 80 percent with round trip of a week or less." The author suggests that the principal architects of the "Washington Consensus" ignored the predictions of a low growth, low wage economy and preferred the predictable effects including very high profits in the short term. These profits were augmented by the short- term oil price rise and the telecom revolution, both related to the huge state sector of the US economy.

Neo- liberal policies in those countries outside the global system till the early seventies followed the familiar pattern of the third world countries. The case of the former Soviet Union that most enthusiastically and to the most extent gave itself up to the dictates of the IMF is probably the most gruesome where a UNICEF inquiry in 1993 (barely three years after the reforms) found 0.5 million starvation deaths in Russia alone. While a few millionaires gained enormous wealth, 25 percent of the population fell below subsistence levels.

Among other novelties of neo- liberalism is that it cannot explain the reasons for 2/3rd of rise of the per capita income in the US. Similarly, South East Asian economies have also followed paths that do not conform to the neo- liberal orthodoxy. The author quotes Paul Krugman, acerbic but brilliant economist from Massachusetts Institute of Technology (MIT), saying that "conventional wisdom" (as determined by the IMF and World Bank) is unstable and regularly shifting, sometimes the very opposite of the previous phase even as the two institutions impose the new orthodoxy. Retrospectively, it is said that the "policies did not serve the expressed goal" and were based on "bad ideas". Krugman observes that generally these "bad ideas" turn out to be in the interests of the dominant groups.

Chomsky gives a number of examples from history, including that of the "Permanent Settlement" in India that was later termed as a "bad idea". Many specific instances of such cases in the 1990s, including those of Brazil and Mexico that led to similar results are also highlighted. In brief, the great economic ideas have always been bad for those at the receiving end but not for the designers and the local elite.

On the other hand, success stories have invariably come from those countries that rejected the dictates of the financial institutions and instead charted out their own course. The examples of Japan and South East Asia are striking.

As for "Reganesque rugged individualism" and its worship of the market, Chomsky quotes from a review of the Reagan years in the Foreign Review: "the post war chief executive with the most passionate love of laissez faire, presided over the greatest swing towards protectionism since the 1930s". Another chapter of the Reagan years includes the traditional disguise of "security". Similarly, Thatcher's Britain saw "2 million British children suffering ill health and stunted growth as a result of poverty on a scale not seen in the 1930s".

The US has been gradually isolated in the UN, having cast more than 71 vetoes in the world body since 1967, often taking recourse to violent interference in what it perceives to be a threat to its interests, sometimes making itself the ridicule of the world. As the writer says "Polite people are not supposed to remember the reaction when Kennedy tried to organize collective action against Cuba in 1961". Mexico could not go along, a diplomat explained, 'because if we publicly declare that Cuba is a threat to our security, 40 million Mexicans will die laughing'.

The facts offered by Chomsky in support of his thesis are piquant even though the general contours of his arguments have been long known. Critics may say that it is old wine in a new bottle, while his admirers are bound to say that as it ages, wine only gets better.

After accepting this one cannot but ask "What next"? That the neo- liberal order is not the panacea for the world's problems, where do we go from here? Here Chomsky gives only a negative answer (opposition to globalization). Other contemporary commentators like Immanuel Wallerstein ("After Liberalism"), Samir Amin("Capitalism in the Age of Globalization"), and Andre- Gundre Frank ('ReOrient") provide answers that are too detached from the actual state of affairs and too much rooted in the past. Many of them sound utopian in today's context. Alvin Toffler offers some new, though naïve directions.

One hopes that even as we do take the warnings sounded by Chomsky and other writers seriously one also needs to explore, like Manuel Castells in "The Rise of the Network Society" to come to terms with a world that is already globalized.

Bhupinder
bhupi@bigfoot.com
27 Feb 2000

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