So take a look at one of the things you don't say if you're an economist within one of the ideological institutions, although surely every economist has to know it. Take the fact that there is not a single case on record in his*tory of any country that has developed successfully through adherence to "free market" principles: none. Certainly not the United States. I mean, the United States has always had extensive state intervention in the economy, right from the earliest days-we would be exporting fur right now if we were following the principles of comparative advantage.
Look, the reason why the industrial revolution took off in places like Lowell and Lawrence is because of high protectionist tariffs the U.S. gov*ernment set up to keep out British goods. And the same thing runs right up to today: like, we would not have successful high-tech industry in the United States today if it wasn't for a huge public subsidy to advanced in*dustry, mostly through the Pentagon system and N.A.S.A. and so on-that doesn't have the vaguest relation to a "free market."
In fact, if you want a good illustration, just read today's New York Times. There's a story on the business page about how we've got a funny kind of economic recovery going on in the country right now: there's a lot of economic growth, but not many good new jobs-you know, big surprise. And they use one factory as an example, a stove factory that's being set up
in Tulsa by the Whirlpool corporation. Well, the last paragraph of the arti- \ s0 de points out how the "free market" really works: the reason why ~.\, Whirlpool decided to put the factory in Tulsa instead of, say, in Mexico, is
that the taxpayers in Tulsa County are going to pay 25 percent of the cor- L.*poration's capital costS.37 Okay, that's how the free market really works- ~ in fact, that's how it's a/ways worked, from the early days of the industrial revolution right up until this morning, without any known exception.38
As a matter of fact, the United States has been the most economically protectionist country in history. We've traditionally had the highest protec*tionist tariffs in the world, so much so that one leading economic historian in a recent book (published by the University of Chicago Press, no less) de*scribes us as "the mother country and bastion of modern protectionism." 39 So for example, in the late nineteenth century, when Europe was actually toying around with laissez faire for a brief period, American tariffs were five to ten times as high as theirs-and that was the fastest economic growth period in American history.4o
And it goes on right until the present. The United States developed a steel industry a century ago because it radically violated the rules of the "free market," and it was able to recover its steel industry in the last decade or so
256 Understanding Power
by doing things like restricting imports from abroad, destroying labor unions to drive down wages, and slamming huge tariffs on foreign stee1.41 I mean, the Reaganites always talked enthusiastically about "market forces," but they refused to allow them to function-and for a very simple reason: if market forces had been allowed to function, the United States would no longer have an automobile industry, or a microchip industry, or computers, or electronics, because they would have just been wiped out by the Japanese. So therefore the Reaganites closed off American markets and poured in huge amounts of public funds. And actually, they were perfectly frank about it to the business community-though of course, not to the public. So when he was Secretary of the Treasury, James Baker proudly pro*claimed to a business audience in 1987 that Ronald Reagan "has granted more import relief to U.S. industry than any of his predecessors in more than half a century"-which was far too modest, actually; Reagan proba*bly provided more import relief to industry than all his predecessors com*bined in that period.42
Of course, the "free market" ideology is very useful-it's a weapon against the general population here, because it's an argument against social spending, and it's a weapon against poor people abroad, because we can hold it up to them and say "You guys have to follow these rules," then just go ahead and rob them. But nobody really pays any attention to this stuff when it comes to actual planning-and no one ever has.
So there was just a British study of the hundred leading transnational corporations in the "Fortune 500," and it found that of the hundred, every single one of them had benefited from what's called "state industrial pol*icy"-that is, from some form of government intervention in the country in which they're based. And of the hundred, they said at least twenty had been saved from total collapse by state intervention at one point or another. For instance, the Lockheed corporation was going under in the early 1970s, and the Nixon administration just bailed them out with public funds.43 Okay, so they're back in business. And now they stay in business because the public pays for C-130s [ military aircraft], and upgrading F-16s, and the F-22 project, and so on-none of which has anything to do with a "free market" either.
Or take the fact that so many people live in the suburbs and everybody has to drive their own car everywhere. Was that a result of the "free mar*ket"? No, it was because the U.S. government carried out a massive social*engineering project in the 1950s to destroy the public transportation system in favor of expanding a highly inefficient system based on cars and airplanes-because that's what benefits big industry. It started with corpo*rate conspiracies to buy up and eliminate streetcar systems, and then con*tinued with huge public subsidies to build the highway system and encourage an extremely inefficient and environmentally destructive alter*native. That's what led to the suburbanization of the country-so you get huge shopping malls in the suburbs, and devastation in the inner cities.44
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But these policies were a result of planning-they had nothing to do with the "free market."
Actually, the most dramatic example of these "market distortions" that I can think of-which I suspect is never even taught in economics courses*concerns the reason why the United States had an industrial revolution in the first place. Remember, the industrial revolution was fueled by textiles, meaning one commodity: cotton. And cotton was cheap, that was crucially important. Well, why was cotton cheap? Was it because of market forces? No. Cotton was cheap because they exterminated the native population here and brought in slaves-that's why cotton was cheap. Genocide and slavery: try to imagine a more severe market distortion than that.
Other countries who had their own cotton resources also tried to start on industrial revolutions-but they didn't get very far, because England had more guns, and stopped them by force. Egypt, for example, had its own cot*ton resources, and started on an industrial revolution at about the same time as the United States did, around 1820-but the British weren't going to tolerate an economic competitor in the Eastern Mediterranean, so they just stopped it by force. Okay, no industrial revolution in Egypt.45
The same thing also happened in Britain's earliest "experiment" with these ideas, in what was called Bengal, in India. In fact, Bengal was one of the first places colonized in the eighteenth century, and when Robert Clive [British conqueror] first landed there, he described it as a paradise: Dacca, he said, is just like London, and they in fact referred to it as "the Manches*ter of India." It was rich and populous, there was high-quality cotton, agri*culture, advanced industry, a lot of resources, jute, all sorts of things-it was in fact comparable to England in its manufacturing level, and really looked like it was going to take off. Well, look at it today: Dacca, "the Manchester of India," is the capital of Bangladesh-the absolute symbol of disaster.46 And that's because the British just despoiled the country and de*stroyed it, by the equivalent of what we would today call "structural ad*justment" [i.e. economic policies from the World Bank and International Monetary Fund which expose Third World economies to foreign penetra*tion and control].
In fact, India generally was a real competitor with England: as late as the 1820s, the British were learning advanced techniques of steel-making there, India was building ships for the British navy at the time of the Napoleonic Wars [1803-1815], they had a developed textiles industry, they were producing more iron than all of Europe combined-so the British just proceeded to de-industrialize the country by force and turn it into an im*poverished rural society.47 Was that competition in the "free market"?
And it goes on and on: the United States annexed Texas [in 1845], and one of the main reasons for that was to ensure that the U.S. achieved a mo*nopoly on cotton-which was the oil of the nineteenth century, it was what really fueled the industrial economies. So the American leadership figured that if they could take Texas, which was a major cotton-producing area,
258 Understanding Power
then they would be able to strangle England economically. See, England was the main enemy at that time, they hated England: it was much more powerful militarily than the United States, it kept us from conquering Canada and seizing Cuba the way elites here wanted to-and in fact, the only reason the American colonists had been able to defeat England in the American Revolution in the first place was that the French military had massively intervened in the colonial uprising here to help overthrow British power.48 So England was the real enemy. And if you read the Jacksonian Democrats, Presidents Polk and Tyler and so on, they were saying: if we can get Texas, we can bring England to our feet and gain mastery of the trade of the world. In fact, the worst charges, paranoid charges, that were leveled against Saddam Hussein before the Gulf War apply precisely to the Jack*sonian Democrats: they wanted to monopolize the main resource of the world so they could bring everybody else to their feet.49
And exactly the same lessons apply today. Today it's oil that's at the cen*ter of the industrial economies. And why is oil cheap? Well, that's what you pay your taxes for: a large part of the Pentagon system exists to make sure that oil prices stay within a certain range-not too low, because Western economies and energy corporations depend on the profits from it, but not too high, because that might interfere with what's called the "efficiency" of international trade [i.e. because transport and other costs of trade rise with the oil price]. Well, trade is only "efficient" because a lot of force and inter*national violence keeps oil prices from going too high, so if you really wanted to measure the "efficiency of trade," you'd have to figure in all of the other costs which make it that way, like the costs of the Pentagon for one. And if anyone ever did that, you couldn't possibly say that trade is "ef*ficient." If anybody ever bothered to calculate these things, the efficiency of trade would drop very, very low, and it would in fact prove to be extremely inefficient.
I mean, these market distortions are not footnotes-they are absolutely huge phenomena. Nobody ever tries to estimate them, because economics is not a serious field-but people in the business world know about them perfectly well, which is why they've always called upon a powerful state to protect them from market discipline: they don't want market discipline any more than they want democratic control, and they've always blocked it. And the same is true of just about every aspect of any developed economy there is.
