Armed Madhouse

by Greg Palast

  Poland, following free-market Pied Pipers after the implosion of the Soviet Union, had, by 2005, successfully unemployed 18% of its workforce. That’s the official number, which would have been higher, except that herds of Poland’s skilled workers have been sent to rove Western Europe. The desperate droves of Polish workers were used as a tool for bending Germany’s workforce into submission. From 1995 to 2003, the average German’s pay was cut 4.7%.

  China, Mr. Friedman’s heartthrob, is, he tells us, our future. How looks it out there in The Future? In a single year, 2005, China’s richest forty businessmen saw their net worth rise by 44% to $26 billion. That’s in U.S. dollars—obtained from U.S. pockets. And they aren’t sharing. Employees in their new entrepreneurial private companies earn an average 8,033 yuan ($994) a year. Those workers stuck in the “past”—the old state enterprises—earn nearly twice as much: 14,577 yuan ($1,803) a year. The pay cut has slid into the pockets of “entrepreneurs,” the new factory owners, who take home twenty-five times their average worker’s pay.

  Why Not Slip Into Something Less Comfortable?

  The new Mr. Beale describes the latest fashion craze:

  The golden straight jacket is the defining political economic garment of globalization… tailored by Margaret Thatcher. Ronald Reagan sewed on the buttons.

  And what does one have to do to shimmy into this attractive madhouse couture? Deregulate industry, drop trade barriers, free currencies, cut government spending, de-unionize, cut pensions, welfare and subsidies, and make government whimper at the feet of the entrepreneurial gods and obey them.

  But there’s resistance. Not all the inmates want to be buckled into the latest design, and Friedman/Beale just can’t stand it:

  This is a bad time for France and friends to lose their appetite for hard work.

  The Danes in particular have made sloth a policy. Blithely unaware that Indians are working 35 hours a day, the Danes average 22 hours a week. Partly that’s the result of the “laziness” written into law: employers must provide a minimum of five weeks paid vacation. The official week is 37 hours, but non-vacation weeks average 28. Worse, there’s paid maternity leave! The Danish minimum wage is $10 and health care is free. By Beale/Friedman economics, Danes should be falling off the edge of the flat world. But look at this: Danes earned an average $26 an hour in 2001, a solid 61% more than Americans. By 2006, the difference became even more embarrassing. And with a workforce 80% unionized, the nation is regulated to a fare-thee-well. Yet they do fare quite well.

  Norwegians do even better than their Danish brothers. The workforce is wealthier, the wealthiest in the world. You could say that’s because Norway has oil. But so does Russia, so does Nigeria, and so, for that matter, does the USA. But whose oil is it? In Norway, it’s the Norwegians’—that is, the oil company is state-owned and its profits shared.

  One has to ask why the Thomas Friedmans and Milton Friedmans want us to follow the goose-stepping example of Pinochet’s Chile or the Darwinian horror show of China as economic guiding lights. Why imitate India and Poland, where more and more is produced by those making less and less, when far more successful examples shine under the midnight sun?

  How did the Scandinavians get so rich? Norway and Denmark are, with Sweden, the least economically polarized nations on the planet: Almost no one’s very rich and almost no one poor. The official international standard of economic inequality is called a “GINI” index. The Scandinavians are all at a low (i.e., very equal) 25. India is 33 and China a feudal 45. The USA lies uncomfortably close to China at 41.

  The Organisation for Economic Co-operation and Development, OECD, which gathers these statistics, explains that Scandinavia’s low hours and lots of rules produce big paychecks. In these nations, employers are forced to make their profits by investing more per worker to hike productivity. This is the opposite of the Chinese/Indian/Reaganized American model of making profits by cutting wages.

  No wonder Scandinavians are in no mood to slip on Ronald Reagan’s straightjacket. Other Western Europeans, from France to Holland, not so far behind Scandinavia, are also resisting.

  Here’s the problem for the owning class of this planet. The lackadaisical Danes and Swedes have the highest pay, best health care, longest vacations, and safest pensions anywhere on earth, and the French, Luxemburgians and other Europeans were, for decades, not far behind. How do you persuade the well-cared-for Europeans to give it all up?

  Answer: Grab them by their currencies.

  Multi-dollars, Euro-nations and Mundell’s Toilet

  One vast and immense, interwoven, interacting, multivariate, multinational dominion of dollars! Petro-dollars. Electro-dollars. Multi-dollars, Mr. Beale.

  “Multi-dollars”?

  In 1999, Europe first adopted the “euro”—the multinational currency designed, as the movie Network predicted, to replace national coins: German deutsch marks, French francs, Spanish pesetas, Danish krone and the rest.

  But the euro wasn’t invented in Europe—it was created in the good old USA, in New York, by Robert Mundell. Mundell, called the Godfather of the Euro, won a Nobel Prize for it.

  Who is this Mundell? The “golden straightjacket” is Thomas Friedman’s madhouse fashion metaphor for “Reaganomics,” the free-market, free-trade, government-free, dog-eat-dog economic free-for-all that also goes under the alias “supply-side economics.” The inventor of Reaganomics, Thatcher-nomics and “supply-side” economics? Robert Mundell.

  “Ronald Reagan would not have been elected President without Mundell’s influence,” wrote The Wall Street Journal’s Jude Wanniski. Mundell was the guy whose brain stayed awake flattening the world while Reagan napped.

  In the eighties, excepting Margaret Thatcher’s Britain, Western Europeans saw no reason to make a mad dash to deregulate their economies. And this drove Mundell just crazy. It started with his toilet, Mundell told me. In a long chat we had in 2000, he told me about the travails of owning a castle in Tuscany. (Like many “flat world” supply-side economists, Mundell created prosperity—for himself.)

  “They won’t even let me have a toilet!” he said, which seemed like a mighty uncomfortable and unfair rule. His problem was that, to preserve the ancient structure, local officials wouldn’t let him simply rip out a couple of walls to put in a tub and water closet. He concluded, “Europe is over-regulated.” And he was going to do something about it.

  He had other complaints. “It’s very hard to fire workers in Europe,” he said.

  To solve the problems of putting toilets where you want them and firing workers when you don’t want them, and in sum, to rip down the entire structure of employee protections enjoyed on the continent (minimum wage, lazy workweeks and all), he invented the euro. The euro is designed to be the battering ram to break down the entire edifice of worker protection rules and taxes on businesses that support the welfare state. The euro and free-market economics are as inseparable as flies and feces.

  The Godfather of the Euro explained how it will work: “Monetary discipline forces fiscal discipline on the politicians as well.” What he means is that every Euro nation must adhere to strict limits on borrowing (no more than 60% of GDP) and on deficits (no more than 3% of the government budgets). Furthermore, nations will no longer have their own central banks printing money. That’s all quite extraordinary, really. No congress of a European nation may call on the key tools used to pull a nation out of a recession (increased government spending to create jobs, lowering interest rates to boost investment, printing more money to create demand through more liquidity).

  National parliaments are castrated—their powers to affect their nation’s economic destinies cut off. Isn’t that a bit, uh, un-democratic? Forget it: There is no democracy, Mr. Beale.

  If a nation can’t control its own interest rates, borrowing, or money supply, how can it keep up employment? Answer: by stealing the jobs from their Euro neighbors, luring industry away by cutting out rules and slashing business taxes. Mundel
l foresees a Europe unburdened of unemployment compensation, minimum wages, chemical safety regulations and government medical insurance. Out they will go, as well as rules barring the landlord class from Euronating wherever the hell they like.

  The Little Red Book of Chairman Rob

  Denmark resisted the trend. It voted down the euro and held fast to its krone coins and its chill workweek. But for how long? The new Mr. Beale of the Flat World is warning them:

  I believe history will record that it was Chinese capitalism that ended European socialism.

  Now we’re getting to the real point of the New Order. The shorter workweeks, unemployment insurance, all that stuff that the French call “Le New Deal”—it’s all got to go, Pierre.

  Friedman’s language is a bit odd, no? He defines “socialist” states as those with workweek limits, unemployment compensation and union work rules. The “capitalist” state, China, is the one where the state owns and controls what Marx, Lenin and Mao called, “the means of production.” I’m sorry, you can call China a chicken but that won’t fly. If China is now a capitalist free-market state, then I’m Paris Hilton.

  The truth is that China’s economy soared because it stubbornly refused the Friedman free-market mumbo-jumbo that government should stop owning, regulating and controlling industry. Its new inequality is not the engine of its success but the measure of the power of a thin elite that is sopping up the productivity gains.

  China isn’t buying Free Markets Uber Alles. Its markets are no freer than its press. The truth is that regulation and state control are its economic locomotives. For example, China’s announcement that it would “revalue” the yuan covered over a more important notice that China would henceforth bar foreign ownership of its steel sector. China has built a powerhouse steel industry larger than America’s or Europe’s by directing the funding, output, location and ownership of all factories. And rather than freeing industry through opening its borders to foreign competition, the Chinese, for steel and every other product, have shut out in-bound trade except as it suits China’s own needs.

  China won’t join NAFTA or CAFTA or any of those free-trade clubs, and joined the WTO only on the sotto voce condition it could ignore all of the rules. In China, Chinese industry comes first. And it’s still the People’s republic, where the state and army own an unknown number of Wal-Mart’s 4,800 suppliers. In an interview just before he won the Nobel Prize in economics, Joseph Stiglitz explained to me that China’s huge financial surge of 9.5% per year began with the government’s funding and nurturing rural cooperatives while protecting fledgling industry behind high, high trade barriers.

  It is true that China’s growth also got a boost from ending the blood-soaked self-flagellating madness of Mao’s Cultural Revolution. And China, when it chooses, makes use of markets and market pricing to distribute resources efficiently. However, Chinese markets are as free as my kids: They can do whatever they want unless I say they can’t.

  Yes, China is adopting select elements of “capitalism.” That’s the ugly part. Chinese capitalism appears to be limited to real estate speculation in Shanghai, making millionaires of Communist party boss’ relatives and to bank shenanigans worthy of a Neil Bush. But it is not the Shanghai skyscraper bubble that is allowing China to sell us $200 billion more goods a year than we sell them. By rejecting free-market fundamentalism, China’s government can easily conquer American markets where protection is now deemed passé.

  Am I praising China? Forget it. China is Stalinist in governance, capitalist in sales pitches and feudalist in the division of wealth and power. This is one rank dictatorship that brutalizes, terrorizes and tortures. All must kowtow to the wishes of Chairman Rob—Wal-Mart chief Robson Walton.

  * * *

  Recipe for a Better World Order

  Kerala Meen Kootaan (Fish Curry)

  You won’t find this on the menu at The Palm or the Four Seasons or other feedlots for rulers of the New World Order.

  Chances are, you’ve never heard of Kerala, and the economic carnivores want to keep it that way. While the free-market Mouseketeers peddle the blood-soaked fake “miracle” of Chile as their model, Kerala has thrived, notes Nobelist Amartya Sen, on the economic cooperative model, with expansive social services and universal education.

  This tiny Indian state on the Arabian Sea has a population more literate than any American state’s—its main export is PhD’s for energy and computer industries. In 1995, I visited a fishermen’s cooperative.

  This is what they fed me:

  KERALA MEEN KOOTAAN (FISH CURRY)

  Ingredients

  1½ lb. firm white fish (cod, halibut, sword) or tuna cut into 1-inch cubes

  1 medium onion, chopped

  1-inch cube ginger, shredded

  7 cloves garlic, chopped 2 tsp. mild Kashmiri Red Chili Powder (or ½ tsp. hot red chili powder plus 1 tsp. paprika)

  1½ tsp. coriander powder

  1 pinch turmeric powder

  4 pinches fenugreek powder

  2 tbsp. canola oil or other light-flavored oil

  ½ tsp. mustard seeds

  10–12 curry leaves (Note: Curry leaf is NOT the whole form of that English mixture called “curry powder.”)

  2 tsp. tamarind paste

  1 cup water

  salt

  2 tsp. coconut oil (optional, for garnishing)

  Method

  Cut and clean the fish.

  In a blender or small food processor, make a paste of the following ingredients with a little water: onion, ginger, garlic, chili powder, coriander powder, turmeric, and fenugreek powder.

  Heat oil in a frying pan and fry mustard seed and curry leaf.

  Add the paste and fry all this well (until the oil separates).

  Now add the softened tamarind, and pour in the rest of the water.

  Then add salt. After it boils, add the fish.

  Let it simmer until the gravy thickens and the fish is tender.

  Lastly, sprinkle the coconut oil, and leave it on the heat for a minute.

  Serve it with white basmati rice or with boiled tapioca.

  Thanks to Santhosh Shyamsundar in Cochin, Kerala, for recovering the recipe, Linda Levy in New York for converting it to the Western kitchen and Oliver Shykles of Brighton, UK, for testing it.

  * * *

  Can this planet imitate Chinese success without Chinese autocracy? Yes, there is another way. I found it in an India not visible from Bangalore’s golf courses.

  In 1995, I dropped in on a fishing village in Kerala, a jarring but stunning day-long railway journey from Bangalore. Most of the village’s fishermen worked from motorless dug-out log boats. Their language is Malayalam, but a large banner slung between two coconut trees announced in English, “WordPerfect applications class today.” After they brought in the catch, the locals practiced programming on cardboard replicas of keyboards.

  What made all this possible was not capitalist competitive drive (there was no corporate “entrepreneur” in sight), but the state’s investment in universal education and the village’s commitment to developing opportunities, not for a lucky few, but for the entire community. The village was 100% literate, 100% unionized, and 100% committed to sharing resources through a sophisticated credit union finance system.

  This was the community welfare state at its best. Microsoft did not build the schools for programmers—the corporation only harvested what the socialist communities sowed.

  The economist Amartya Sen won the Nobel Prize in 1998 for predicting that Southern India, with its strong social welfare state, would lead the economic advance of South Asia—and do so without the Thatcherite sleight of hand of pretending that riches for the few equates to progress for the many.

  The Electro-Dollar Riots in Ecuador

  In April 2005, I was in the Andes Mountains, standing on the equator, when a condor flew over and dropped a document into my hands marked, “FOR OFFICIAL USE ONLY.” There were other warnings. The document’s contents
“may not be disclosed” without authorization of the World Bank. In light of the Bank’s concern, please do not look at this document on the facing page.

  Nowhere is the world flatter or more tilted than that part of the world that hangs down perilously from Texas: Latin America. Mother Nature has stocked these nations with a wealth of resources from gold to oil to cropland to hydropower, creating an El Dorado richer than any in the most extravagant dreams of the conquistadors. Yet 132 million South Americans live on less than $2 a day; and just a couple of years ago you could find schoolteachers in Buenos Aires hunting through garbage cans for dinner. Why? Because one resource was mined from their land until it was exhausted: capital.