The United States has a long history of manipulating global markets to the benefit of extremely wealthy, but where did it all begin? And how can we learn from that past and the current moment to save the planet and its population? T.J. Coles, author of Privatized Planet: Free Trade as a Weapon Against Democracy, Healthcare and the Environment, answers these questions and describes the economically brutal ways in which the U.S. has always been a grand manipulator.
Samantha Borek: How did the U.S. get into the position it is today, where it sort of dictates the economic climate of the world in its favor?
T.J. Coles: There’s a long and brutal history that divides, roughly, into two eras: the “discovery” of America by the Europeans in 1492 and World War II. The “discovery” led to the conquest and extermination of an estimated 56 million Indigenous peoples, who populated both South and North America. Today in the U.S., Indigenous peoples continue to suffer discrimination, unemployment and incarceration.
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The founding of the modern United States as a “nascent Empire,” in the words of George Washington, profited from slavery. Around 12.5 million slaves were kidnapped and transported from Africa to the U.S. between 1525 and 1866; 2 million of whom died in transit. African Americans also experience systemic discrimination, disproportionate poverty and a prison system that basically substitutes for slavery. Consider the strategic advantage the white, male ruling classes of the U.S. had over the rest of the world: a resource-rich nation, almost emptied of its Indigenous peoples, whose most profitable industries benefited from slave labor. By 1890, despite the Civil War, the U.S. was the world’s biggest economy.
By the start of the World War II, the U.S. not only enjoyed unparalleled economic advantages, its ruling classes benefited from military insularity. The only major attack on U.S. soil by a foreign power was the British burning Washington in 1814. Only small conflicts and skirmishes followed. Pearl Harbor (1941) was, of course, an attack on a U.S. military lagoon base, not on the mainland. With the U.S. protected geographically by the two major oceans, it aided in the destruction of Asia and Germany with minimal reprisals. By the end of the war, 78 million people had died, 39 million of whom were Europeans; over 10 million as part of the Nazi genocides against Jews, Roma and others. Half of Europe’s casualties were civilian. By contrast, the U.S. lost around 400,000 people, most of whom were military personnel.
Post-war State Department planners, like George Kennan, boasted about the U.S. being the “object of envy and resentment,” having half the world’s wealth and just 6 percent of its population. Even before the end of the war, U.S. economic planners formulated a global model at the Bretton Woods Conference (1944). The U.S. dollar became the global reserve currency. International loans were made by a U.S.-led World Bank and debts managed by a U.S.-led International Monetary Fund (IMF). Trade and investment was facilitated via the General Agreement on Tariffs and Trade (GATT). Nations that didn’t conform to this model had their governments overthrown, often under the pretext that they were Soviet proxies.
The late, great William Blum documented 57 U.S.-led or supported “interventions” around the world between 1949 and 2014. Many of the victims of U.S. “intervention” were soon absorbed into the U.S.-led, debt-based, globalized economy. This is a massive, global empire; “full spectrum dominance,” as the Pentagon calls it. The U.S. ruling classes consider it outrageous that nations like Russia or China retain state-controls over their economies and resist absorption into the system.
What kind of role does austerity play in economies across the world?
Austerity is a multi-pronged weapon against working people. Firstly, we should ask: Austerity for whom? Following the global financial crisis, which began in late 2007, governments around the world cut back on social spending, supposedly to reduce national debts and deficits. Bankers enjoyed record bonuses. For a while, banks posted record profits, thanks to the taxes of working people. Consistent with a 30-plus year trend, the wealth of the top 10 percent continued to grow while the household incomes of the bottom 90 percent stagnated or declined.
Austerity follows the “loser pays” principle. Secondly, austerity is a political choice, not an economic necessity. Economists at the IMF and other institutions question austerity. But the directors ignore that advice for ideological reasons, the main one being the notion that GDPs should remain high to attract investment.
Austerity is part of the wider neoliberal agenda: huge GDP but relatively low growth, unequal share of GDP per capita, widespread privatization, insurance policies for failed businesses, and reductions in or eliminations of public services. This model was tested on the so-called third world in the 1970s and ‘80s — the Washington Consensus, as it was called. It often followed military coups and the imposition of juntas and dictators, as in the case of Chile in 1973, when the U.S. helped to install General Augusto Pinochet.
The so-called Chicago Boys (in reference to the Chicago School of Economics) helped impose economic austerity, especially in the early years. It was only from the late 1990s until recently that Latin American countries reversed some of these policies via the socialistic “pink tide” of left-leaning governments, like Lula Inácio Lula da Silva in Brazil and Hugo Chávez in Venezuela. Today, the region has lurched to the right and austerity is taking hold again. Predictably, we see a rise in migration as desperate people flee the negative and complicated effects of neoliberalism.
In Europe, the modern European Union (EU) came into being via the neoliberal Maastricht Treaty of 1992. Member states agreed to reduce social spending, a single currency — the euro (Britain opted out), meet inflationary and deficit-reduction targets and commit to privatization. The socioeconomic effects have been significant. Long before the crash of 2007-08, working Europeans saw wages stagnate, job quality decline, union protections undermined and pensions become less secure. Muslims and foreigners became easy targets for abuse and blame.
After the crash, the Troika — the unelected European Commission, the European Central Bank and the U.S.-led IMF — imposed austerity across Europe, most notably on Greece. Far-right parties and movements were able to capitalize on the continent-wide anger and win significant seats, as in the U.K.’s Brexit Party at the EU Parliament and Matteo Salvini’s government in Italy. The trouble is that many of these far-right parties support ultra-neoliberal policies, like ripping up the EU’s small regulatory regime on financial services — a point which their voters seem unable or unwilling to face.
Austerity is about de-developing society. When nothing is funded properly, nothing functions. When vital services are in decline, private interests step in. Buying once-public services is a huge opportunity for asset managers, consultants, contractors, hedge funds, insurers, liquidity companies, public relations firms and so on. Privatization allows access to new markets. The system amounts to economic capture by the ruling classes.
But austerity-led privatization has longer-term effects. Consider bus services. If a bus service is cancelled due to austerity, a passenger may buy a used car to get to work. That means more pollution: global warming and air toxicity. For oil companies and driver-insurance firms, it provides more profit-making opportunities. Psychologically, it means that the passenger becomes an isolated traveler sitting in traffic, instead of a citizen interacting with people when using public transport.
How does the U.S.’s history of “changing the rules” on global trade play out now in the Trump administration?
Trump withdrew from the U.S.-initiated Trans-Pacific Partnership (TPP), a “free trade” agreement signed by 12 nations, most of them in the Asia-Pacific region. Working Americans loved Trump’s move. But the “deal” as it stood contained loopholes for currency manipulation and value-added tax avoidance, which giant U.S. corporations like Ford argued against. Democratic presidential candidate Sen. Bernie Sanders also opposed the TPP but for different reasons — namely, the harm that such an arrangement would do to workers. The next thing that Trump did was inform his counterparts around the world, including the leaders of Japan and New Zealand, that the U.S. would now negotiate bilateral “free trade” deals.
Trump pursues bilateralism because, periodically, U.S. policy planners and corporate lawyers try to rewrite the rules of global trade and investment to maximize profits for U.S. corporations. As global trade and investment trends shift, the task of the corporate treaty lawyer is to keep up. In 1994, for instance, the U.S. signed up to the World Trade Organization, the regulatory regime that focused more on intellectual property rights for tech and drug companies than its GATT predecessor. This followed decades of fruitful, publicly funded research and development in those sectors. As international commerce relies increasingly on innovation and monopoly — as seen by the rise of Alphabet (Google), Amazon, Apple and Facebook — free trade deals will change character again to incorporate laws that appease giant tech corporations.
There’s also an ideological battle between so-called conservative nationalists like Trump, who prefer bilateralism, and so-called liberal internationalists like Hillary Clinton, who prefer multilateralism like the Trans-Pacific Partnership. The latter see the formation of big trade blocs as a way of forcing non-members, like China, to compete against an international order where many states are absorbed into the U.S.-led system. Trade specialist Andrew K. Rose calls it “GloboCop.” The Trump model sees problems with this because it allows members of such blocs the safety in numbers to resist ultra-neoliberal policies. In bilateral deals, the U.S. is the dominant player of the two given sides.
Either way, working people both in the U.S. and in the given partner-nation pay the price. Free trade texts have written into them provisions to capture public services, destabilize economies by exporting dangerous financial products, lower labor standards, and so on.
Free trade creates what some call the “globalization paradox.” China’s GDP boomed after it agreed to implement the kind of neoliberal reforms recommended by the U.S. in the 1980s and ‘90s. It retained many state controls, however; its largest companies are state-owned. GDP does not correspond to per capita wealth. By that measure, China has very high levels of poverty unevenly distributed across the society.
The paradox arises when the very free market ideologies championed by the U.S. to advance its own corporations end up creating competitive economies. Free trade is a propaganda term because if one looks at, say, Apple, it is a U.S. firm enjoying what many consider underpaid Chinese labor. But many of Apple’s technologies — the computers, the internet, satellites that enable communications, touch-screen, etc. — were developed from the 1950s onward in the U.S. under tax-funded military budgets. Apple pays little to no corporation tax. The high-value part of the production and retail chain is with the intellectual property owned by Apple, not the Chinese assemblers. This is supposed to be “free trade.”
As we approach the 2020 election, what should we be looking for in economic terms? How can we avoid far-right policies while steering away from the pitfalls of neoliberal ones?
Far-right policies and neoliberal policies are entwined. Trump is far right, yet some of his economic policies are the same as the supposedly “liberal” establishment Democrats. The Bill Clinton administration, for instance, selected some of the most pro-neoliberal, fiercest opponents of financial regulation, like Lawrence Summers, to run the Treasury. They advocated the bonfire of regulations that played a major role in the crash of 2007-08.
Trump is taking it even further. Executive Order 13772 is designed to cut regulations in the financial services sector to make it easier for asset managers and hedge funds, the kind of people who funded Trump’s campaign, to invent and profit from increasingly exotic and thus volatile financial products. Another is Executive Order 13859, which has the potential to automate financial services, as well as put humans out of the loop of design, production, analysis and distribution.
The kind of people who benefit from these actions are those like Robert Mercer, the hedge fund billionaire behind the racist Breitbart News and the xenophobic Brexit campaign. Another possible beneficiary is the tech billionaire Robert Shillman, who funds the Canada-based, Islamophobic Rebel Media, whose luminaries include far-right hate-mongers like “Tommy Robinson” (real name Stephen Yaxley-Lennon) and Katie Hopkins. It’s important to see many of these people as well-funded fronts for bigger players with deregulatory agendas.
Trump repackages neoliberal globalization as protectionist nationalism, closing the border and slapping tariffs on China. Somehow Trump has convinced his supporters that “free and fair trade,” as he calls it, is not just more U.S.-led corporate globalization. But one of the first things he did as president was to replace the neoliberal North American Free Trade Agreement (NAFTA) with an almost-identical version: the U.S.-Mexico-Canada Agreement, which gave more investor and intellectual property rights to U.S. tech and biotech firms.
The Republicans designed NAFTA in the late ’80s and early ‘90s. The establishment Democrats facilitated and championed it. But NAFTA fed far-right narratives about “globalists” and “immigrants,” because subsidized U.S. agriculture, for instance, could now be exported to peasant farmers in Mexico — 3 million of whom lost their livelihoods and many became economic refugees who tried to find work in the U.S. By promising to “build that wall,” Trump takes an inhumane position on migration while pursuing some of the very policies that sell American workers out to offshored corporations.
A challenge is to counter the linguistic propaganda, which makes communication between the left and right very difficult. I mentioned “free trade.” Consider also the word neoliberalism. It’s neither new, because it’s based on 19th century British models, nor liberal (if liberal refers to classical liberalism). For some, “liberal” means corporate globalism, whereas for others, “liberal” means possessing and advocating culturally and economically progressive values.
How does U.S. privatization affect issues like climate change or health care?
The climate is [part of the] commons because it affects us all, from air quality to global temperatures, from water scarcity to food production. There are plenty of state-owned businesses that pollute heavily. In the Soviet Union, for instance, state-owned cotton companies drained entire lakes for irrigation. Modern banks owned by the Chinese state finance massive construction projects, including the building of new cities. So, the heart of the issue is to write enforceable environmental regulations into national legislation via international agreements, regardless of whether the enterprise is state-owned or privately owned.
Private ownership adds another dimension: that of profit at all costs. A state-owned enterprise may intentionally minimize profits if the public good is prioritized: to provide health care, an energy grid, transport, etc. A private enterprise can’t do that.
Consider the case of Exxon in the 1980s. At the time, the environmental movement had little influence, unlike now. So, Exxon could get away politically and economically with funding propaganda to question and counter the findings of its own scientists: that carbon dioxide emissions create a greenhouse effect. In the context of globalization, not only do the emissions of Exxon affect global temperatures, the exportation of oil can be deadly to wildlife, as in the cases of the Exxon-Valdez disaster in Alaska and the BP oil catastrophe in the Gulf of Mexico.
I mentioned profit-maximization. Part of making more money is in reducing expenses. The Obama administration’s inquiry into the disaster said that BP’s cost cutting made catastrophe more likely. A privatized market has subtler effects. For instance, after the BP disaster, the affected coastal communities required extensive health monitoring for humans because of the potential carcinogenic fumes and ingestible toxins. But the U.S. health care system is a market, meaning that the poor can’t afford quality care. At the time, the Department of the Interior noted the flurry of “independent activism” in the absence of efficient local or federal responses.
In relation to free trade, consider the Keystone XL pipeline. Proposed in 2010, the system of pipelines brings Canadian Sedimentary Basin crude oil to refineries in the Gulf Coast — the site of the BP spill. Following enormous amounts of bad press, Obama’s Secretary of State John Kerry announced the termination of the project. TransCanada, the owner of the pipeline, announced its intention to sue the U.S., which it was entitled to do under NAFTA free trade rules. The lawsuit was dropped as soon as President Trump reopened the pipeline in 2017. But suing governments over environmental regulation as a hindrance to corporate profits is a two-way street. Under NAFTA, Canada became the most-sued nation, largely over its environmental policies.
With regards to health care, a big concern for Britain is the possibility of a post-Brexit free trade deal with Trump. Any such deal will likely consider the U.K.’s free-to-use National Health Service an opportunity to raise the price of U.S. drugs, gain access to patient data for marketing purposes, capture public health insurance and turn it into a private market and export expensive but inefficient products to British hospitals.
If the U.S. were to pursue more progressive global policies, would other countries follow suit? Or is there no way to put the genie back in the bottle, as it were?
The genie can be forced to work in the interests of ordinary people. This is happening in one inspiring case after another: Occupy Wall Street, Standing Rock, Black Lives Matter, Our Revolution…. These U.S.-based movements and demonstrations are led by grassroots activists, not politicians and other elites. But the issues they raise are universal: the powerful vs. the powerless, and how the powerless can defend themselves via collective action. These movements feed into one another, interlock with similar ones across the globe and have the potential to reverse our dangerous drive to the cliff’s edge.