Amanda Kovattana

Middle-aged musings in interesting times

Monday, October 29, 2007

It's the Stupid Economy, Stupid: Big Box Thinking

In a restaurant in Gdansk, Poland, I had a conversation with a Polish man that would stay with me long after I had forgotten his name. It was the summer of 1978 and I was on holiday with two of my aunts. At the time my Aunty Lily was the managing director of the Bangkok branch of the Polish ocean lines. When I heard that she was going to make a business trip to Poland, I begged her to take me along, as I was hugely curious about what a communist country would be like. Did they wear uniforms and practice goose-stepping? Were they brainwashed? And if not, did they secretly plot to escape?

We were hosted by four different Polish families who had lived overseas in Thailand while working for the ocean line. They would invite us for a cup of tea in their tiny apartments (where the living room converted to a master bedroom). In Gdansk, the Rudovsky family took us to a restaurant famous for its wild game. All the meat on the menu was brought in by hunters. It added diversity to what the state could offer, Mr. Rudovsky told me. The restaurant was decorated with the heads of the deer meat brought in. It made me feel at home in a medieval European sort of way. I asked Mr. Rudovsky if he would like to visit the United States. His answer both informed me and warned me.

"I don't want to visit the US for the same reason I don't want to visit the Soviet Union," he said. I was thrown for a loop just to have the two countries mentioned in the same category.

"You see, in a country that large, people have far less opportunity to be exposed to another culture," he explained. "In Poland for instance, there are not enough Polish books to read so we must read books from other countries." I immediately understood what he was saying about this monolithic way of thinking for I had experienced it as a foreigner living in the US, but the message that stayed with me was that the real danger of living in a large country was how easily a person could become isolated from outside perspectives.

Why, I would ask myself following this trip, was communism so dreaded in the United States? Couldn't we just let it be? Though McCarthyism and the red scare had been put down to an extremism of the rigid '50s, the United States of the post hippie '70s had taught me that communism was the anvil upon which our artistic souls would be crushed. The whole cold war was based on the assumption that Russia was the evil empire plotting to blow us up. Then there was the domino theory of communism taking root in South East Asia as if this icky gooey, mind controlling substance would ooze all over the peninsula into Thailand and Burma.

All of our Polish hosts were in agreement that the benefits of what the state could provide outweighed the day-to-day sacrifices they made in putting up with their tiny living space and the constant lines at government stores for necessities. (Mr. R. did have a larger house in the country that he built himself and Mrs. S. had figured out how to jump the queue by throwing down her money, taking the needed item and telling the cashier to keep the change).

There were other restrictions too. The number of students who could study art was limited by the state (because there wouldn't be enough jobs for all those that wanted to study art). But homelessness had been eradicated, people had jobs, education was free and the cost of living was kept down. Plus the streets were immaculate in stark contrast to the streets and canals of Bangkok, which were chronically trash filled and populated with maimed beggars and the poor living in shacks.

I was also surprised to see that private businesses were not forbidden. There were lots of private shops and enterprises because, as Mr. R. explained, the state couldn't be bothered to make every button, so they contracted with private factories and people were also free to sell whatever they made themselves.

In Warsaw, I came to understand the Poles feelings for the Soviets. Our hotel looked out on a dramatic building of distinctive style that towered upward to a spire and sprawled across the open plaza with shoebox shaped wings. It took up the entire block, but none of the guidebooks available to us mentioned it even though it was so obviously a historical landmark. I asked our host what it was.

"Oh," said Mrs. S dismissively, "that was a present from Stalin." It was the Palace of Culture she told me. I could see it was thriving with activity and I knew from my acting studies that Poland was world renown for its experimental theatre. Catholicism also thrived in defiance of the communist regime. As a people, the Poles thought of themselves as Europeans, not Eastern block satellites of Moscow.

My curiosity satisfied, I was in agreement with my Polish friends that having the poor taken care of was a good thing and so was free education and healthcare, but I was not won over by the drab austerity of their lives. There was something cheerless about the way they endured the oppression of Soviet rule. They did not have a say in what went down in their own country. Other European countries, particularly the Scandinavian countries and my own birth country of England had a better system—democratic socialism. But democratic socialism was not a phrase that tripped off the tongue of Americans. We were entering the era of Reaganomics and socialism had become a dirty word. Wasn't that what the Soviets had? Americans couldn't seem to tell the difference between socialism and communism.

With the fall of the Berlin wall, pundits threw out the whole discussion and claimed that clearly capitalism was the chosen economic system of the free world. Indeed, they implied, capitalism was democracy.

Capitalism may well fail us yet, I thought, but suddenly the word wasn't even used anymore. I began to hear another term bandied about, especially by colleagues armed with an MBA. The "free market" would solve our problems, they told me, because where there was a need there would be a buck to be made and solutions would be innovated to cash in on that buck. Some would make fortunes, but this was good for everyone because the money would be spent on other businesses. I was at a loss for words. What did I know? I only had an art degree, but the whole idea of trusting that people's self-interest would drive a market system that would solve all our problems, using the carrot of profit, seemed to me to be paving the way to hell faster than good intentions.

But if some boats were going to be lifted on the tides of fortunes being made, I might as well be on one. Like so many others, I invested my money in the stock market, only I put my whole obsessive focus behind it, waking up before the opening bell every weekday morning to watch the market, reading only books about making money and religiously studying my subscription to Investors Business Daily. Every story out of my mouth was about an up and coming business that showed promise for exceeding amounts of profit. I developed the emotional profile of a heroin addict waiting for the next hit, the next rush of cash. In my search for a better high, I violated nearly all my guidelines to buy only companies that matched my ethics.

I finally called it quits because, I was so bad at this counter intuitive game, my portfolio was a bloody mess of red ink. I had paid a high price to understand the beast, but I would have no illusions about it. Investors, i.e.: speculators, moved so quickly to bag their fortune that they were completely oblivious to the impact of their actions. No one would be anywhere long enough to take responsibility even on a psychic level. But money had been made and this gave people the illusion that everyone everywhere was prospering.

In 1999, a now famous, protest that took place in Seattle at a meeting of the World Trade Organization. Not a single journalist seemed to have a clue what was going on. Gradually the story came out, mostly in the alternative press, that large numbers of the world's population were being left behind by the new rules of globalization. As trade barriers were overcome, corporations were out competing local businesses with cheap imports. They exploited the resulting unemployed by not paying a living wage, while currency debasement drove prices of staples and fuel up higher. Not to mention that the environment was being trashed and the world's resources were being rapidly consumed to make disposable products for new markets. This was what protestors were on about in Seattle, from the Sierra Club to steel workers' unions, from college students to indigenous people worldwide. The media didn't show the banners of these groups, just the few people acting out and police in riot gear. The TV was doing our big box thinking for us.

What I didn't realize at the time was that communism had served as a tempering force on the way capitalism had been allowed to express itself until the fall of the Soviet Union. Like my Polish friends, many populations wanted their government to provide them with health care, education, housing, clean water, clean air, public transit and jobs that offered a living wage. As long as communism and socialism offered this social contract, capitalism had to make do with a mixed economy of government regulations, services and public works to keep the poor from fomenting a revolution based on these examples. Thus was the philosophy behind FDR's New Deal.

The agenda of Reaganomics was to convince the American public that communism and in turn socialism was a very dangerous idea, while at the same time spinning a tale, of prosperity for all, by persuading us that there were great opportunities to be had by every American smart enough to take advantage of this wonderful ride called the free market—we would be a nation of entrepreneurs and owning class citizens, a true meritocracy. Did you buy it?

Meanwhile government services would be shrunk and regulations undone, so that corporations could provide all services on their own terms and not be held accountable to any nation. Blackwater anyone?

Many books on globalization and the American corporate empire have since come out and I've read plenty, but none filled me in quite like Naomi Klein's new book "The Shock Doctrine: The Rise of Disaster Capitalism". Of any single revelation that she takes pains to trace, what offered me the most emotional relief was that the free market doctrine was the extremist idea of one man—Milton Friedman. Like Darwin's "survival of the fittest" mantra, industry found it convenient to embrace this ideology. (Darwin, at least, had the integrity to retract his phrase when he saw how it was being used, while Milton Friedman's last act before his death, was to advise politicians to take advantage of the confusion of the Katrina aftermath to replace the New Orleans public school system with a voucher system.)

It struck me that this whole free market idea was a quest for an unobtainable market purity, much as eugenics was a quest for a pure race. Eugenics furthered the violence of a fascist regime. Klein's book chronicles the violence done by the US on behalf of "American interests" from South America to Post-Soviet Eastern Europe, to Mandela's Africa, to the Asian Tigers and now in Iraq. Whether, with the tools of economic subterfuge or by helping dictators "disappear" leaders of the socialist movement, vigilant populations, practicing their hard won freedom from previously oppressive governments, were terrorized into silence.

While Amnesty International hid the socialist identities of these victims (for fear of offending corporate donors) Americans could believe that we had nothing to do with these failed economies. "Corruption," cried free market advocates, blaming the individual countries. Now I can ask. What could encourage corruption more than allowing corporations to operate above the law?

We now have the economy we deserve. One that, in its own profit-seeking wisdom, has provided us with solutions it deemed necessary. The fastest growing sector of the market in recent years has been in surveillance and reconstruction, not green cars or cleaner industry, not better healthcare or education. But now I can take comfort in the realization that such an economy was not one that a democratic people chose. We were misinformed.



At 7:40 AM, Anonymous Anonymous said...


Ah, Milton Friedman. We have studied him at BGI. The first article we read in "Foundations of Sustainable Business" class was Friedman's classic criticism of corporate social responsibility: That was from 1970.

But it gets more interesting. Friedman also engaged in conversation with John Mackey, CEO of Whole Foods, in 2005. His views were somewhat more nuanced at that point:

You make some great points in this post, very similar to those made by political economists. Thanks!


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At 9:10 AM, Blogger AK said...

Thanks Kim for the articles. They gave me a taste of the essence of the man. I was inspired to walk in his shoes and take some notes.

1) Competition creates efficient markets. Markets create profits which will create prosperity for all which is a social good. (Some will work harder to compete and some will work smarter, but all will work most of the time in order to compete. However, since profit is a social good, work will be more fulfilling than leisure.)

2) Slave wages are okay because those who have been out-competed will need the jobs. These jobs will lead to more jobs like them.

3) Elimination of jobs creates efficiency and will result in more labor resources which will further increase profits.

4) Fewer jobs create innovation since necessity is the mother of invention and those without jobs will create their own jobs and their own opportunities to create wealth.

5) Increased profits will mean all boats will rise for everyone because all will be engaged in profit making enterprises. The resulting wealth will create more markets for more goods which will create even more profit.

6) There is no value in the commons until someone makes a profit off of them.

7) Resources should be available only to those who can buy them. This will insure efficient distribution of resources for further profit making.

8) If there is a market for clean, air, water and land then someone will profit by creating businesses to clean said entities for consumers who can conveniently buy single serving portions. Such business opportunities will increase profits overall.

9) Resources used to create profit for individuals will result in endless resources because said profits will fund technology that will create more resources through efficiency and through synthetics and genetic modification.

10) Problems created by the above will create more market opportunities.

11) Basic laws of society should not include those that protect resources from being depleted or environments from being transformed. This would curtail opportunities which would curtail innovation.

12) Corporate taxes should be eliminated so that companies with excess profits need not hoard excess cash in tax free offshore banks thus preventing the rise of all boats.

13) The lawmaking process is enhanced by those with money to buy political favors because people who make profits are smarter and will create laws that allow more profit making which will benefit the common good.

14) Laws that hold corporations accountable are inefficient because money will have to be spent on bureaucracies to enforce said laws. It would be more efficient to allow corporations to voluntarily comply to that which would aid the common good because they know that profit is made when all can benefit from access to the common good.

15) Free market capitalism equals a free society because everyone will be able to buy what they feel they need to be free. Therefore freedom is a state of mind, therefore everyone can be free if they have a mind to be.


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