Sie sind auf Seite 1von 18

ABSTRACT.

The article considers six standard


arguments in favour of an unfettered free market: (1)
the freedom to consume; (2) the freedom of the seller;
(3) the freedom of the producer; (4) freedom from
government interference; (5) lower costs; (6) promo-
tion of democracy. It demonstrates that each of these
arguments turns out to be incoherent on closer
examination. The ground of this incoherence it is
shown, is the market doctrines systematic omission
of non-business costs and benefits from its analysis,
a methodological blindness which can only be
overcome by a wider-lensed comprehension of
economic value.
Parties in the market should be free to buy and
sell at any price at which they can find a partner
to the transaction free to produce, buy and sell
anything that can be produced or sold at all.
Friedrich A. Hayek

TheRoad to Serfdom

The essential argument for the free
market: Freedom
As Hayeks formula emphasizes, the principal
argument for the free market is the freedom it
grants producers, buyers and sellers: that is,
freedom from any external control in the pro-
duction and exchange of goods between buyers
and sellers who agree to the transaction. Because
this freedom applies to the basic spheres of
peoples lives what they eat, drink, live in,
travel by, read, are entertained by and so on, it
is the most important and fundamental realm of
freedom there can be.
Or so it seems. But let us examine these argu-
ments more carefully. As we do so, let us keep a
question before us throughout: are any of the fol-
lowing problems of the free market ever raised in
the mass media, or even in economics courses?
If not, why not?
Part A: Counterarguments to the
argument of freedom
1. Freedomto consume
If the consumer does not have the money
required to pay for the good s/ he needs or desires
(e.g., food or shelter), then the consumer cannot
buy it, and thus cannot have it or consume it.
In the free market, therefore, those who do not
have enough money to pay for what they require
to live have no right to food or shelter or any
other required means of life which is produced
and sold. To call this freedom for such people
an increasing number of our society and the
world is self-contradictory. That is, freedom
cannot exist for those with no means to act freely.
We may put this matter another way. Under
the rules of the free market, need without
effective demand (i.e., the purchasing power of
money) is not recognized. It counts for nothing.
Need with no money to back it has no reality
or value for the market. That is why many soci-
eties have introduced government interventions
in the free market to provide government assis-
BUSI ART NO. 1399 PIPS. NO. 82934
The Contradictions of
Free Market Doctrine:
Is There a Solution? John McMurtry
Journal of Business Ethics 16: 645662, 1997.
1997 Kluwer AcademicPublishers. Printed in theNetherlands.
John McMurtry is a Professor of Philosophy at the
University of Guelph. His work in social and political
philosophy, political scienceand sociology has been inter-
nationally published in journals, textbooks and public
forums.
tance to those who are without the money they
need to survive. But such interventions have
come under increasing attack as government
interferences in the free market. In many places,
structural readjustments to reduce or to elim-
inate food subsidies and social programs are
demanded by lending agencies such as the
International Monetary Fund and the World
Bank as a condition for loans to governments.
Cutting off assistance to those in need is justi-
fied as necessary for survival in the tough new
international marketplace.
The freedom of the consumer in the free
market, in other words, is really only the freedom
of those who have enough money to demand
what they need or want. For all those who do
not possess this money, there is no freedom of
the consumer, even to eat. It follows that people
without the money to purchase the goods they
need, about 20% of the worlds population and
increasing, do not have under the rules of the
free market the right to live.
2. Freedomof theseller
People who must work most of their active hours
to earn enough money to live must normally sell
their work or service to a corporation or other
employer in exchange for wages and salaries. The
sale of their work is all or almost all of the value
they have to sell. The employer, in turn, having
paid for their work or service, has the right to
give orders to them regarding everything they do,
and how they do it on the job. It is company
time. But to be told what to do and how to do
it during most of your active waking hours
cannot be meaningfully called freedom. It is
for this reason that Marx called such a situation
wage slavery. He meant that ones active life
is owned by another.
The lot of sellers of their work or service who
can find no buyer the unemployed is more
externally constrained still. They are left by the
free market with no value. It is because one must
normally sell oneself to a buyer in the market-
place that Henry Thoreau referred to the mar-
ketplace as a site of humiliation. One is
required to present oneself as an object for sale,
and may still find no-one with money who is
willing to buy ones work or service.
In other words the freedom of the seller in
the market applies only to those who are not
required to sell themselves or their work to stay
alive, a small minority of society.
3. Freedomof theproducer
Because those who must sell their work or
service to live must normally obey the orders of
their employer most of their active hours, they
do not have freedom as producers. Who, then,
isgenuinely free as a producer in the free market?
Artists of all kinds have a special freedom of
independence in their work, but they too must
create what buyers with enough money will
purchase and, therefore, must shape their
products so as to attract and not offend wealthy
buyers of what they sell. Their freedom as pro-
ducers is limited by what those with money to
buy artistic goods are willing to pay for.
The small minority who have enough capital
to employ others rather than work as employees
have more freedom than their employees, but in
the free market even they are compelled by its
laws to invest only in production that will net
them money profit at the end of the production
and exchange cycle. This means, for example,
that they must relate to other people only as a
means to make profit for themselves and/ or their
shareholders. If they treat them otherwise, they
are being unjust according to free market rules.
They are not maximizing profits for investors.
Those who produce value for others without
having to sell what they make or do are inde-
pendent as producers. Professionals of various
kinds public servants and professors, for
example are in this way free or self-governing
in their work lives, but only because what they
do for others is not for sale on the free market at
a profit for private shareholders. We are thus
constrained to face the opposite conclusion of
what free market advocates claim. People are only
free or autonomous in their work when they are
not bound by the rules of the free market.
646 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
4. Freedomfromgovernment interference
Perhaps the strongest conviction of true believers
in the free market is that its open competition
ensures freedom from government interfer-
ence.
But let us again examine this argument more
carefully. Free market proponents fail to acknowl-
edge that the free market continuously requires
very expensive government interventions to
provide round-the-clock protection and services
for its operations and for its owners of private
capital. These very costly government assistances
to protect and serve private-profit seekers begin
with police forces guarding their assets and
exchanges, armed-forces to protect their private
investments abroad and government diplomatic
offices and personnel to promote private business
interests in foreign states. The free market further
requires continuous government intervention in
the free market to provide serviced roads and
highways to transport private business goods to
production and exchange sites, as well as school
training and natural resource agencies to supply
private business with the human and resource
capital to produce the commodities it sells. All
of these protections, services and goods are
provided by governments. The idea of the free
market being free of government intervention
is an extravagant myth.
Free market proponents really mean freedom
from government intervention that is not neces-
sary or profitableto privatebusiness. That is why
market advocates never talk about reducing
government interventions that benefit corpora-
tions (e.g., police, armies, roads, free employee
training and public resource giveaways), but only
about government interventions that do not
directly benefit business (e.g., universal social
security and environmental regulations). At the
same time as publicly paid-for government
services to business are never challenged so long
as they benefit the business sector, government
tax loop-holes, deferments and subsidies to
business and the wealthy are increasingly
demanded and received though they rapidly
escalate the very government deficits business
attacks. So it is not government interventions
or costly government programs that free
market proponents are in truth arguing against,
but only those government interventions and
programs that do not directly subsidize private
business.
Governments have also over the last century
come to serve the interests of society as a whole.
These functions for societys membership as a
whole arewhat private business representatives
attack as interferences in the free market.
Elected governments in Canada and elsewhere
have introduced legislation to limit the hours of
the working day and week; to establish safety
standards and environmental regulations for
factories and businesses; to permit employees to
organize in workers unions; to provide unem-
ployment insurance and income security for
those without jobs; to institute programmes of
health care available to all independent of ability
to pay; to provide public education for everyone
and university education to the qualified at a
fraction of cost; and to construct publicly acces-
sible transit systems, parks and cultural centres
free of cost or at below-cost prices. Go over this
list again to check whether even one of these
basic social goods can be provided by the market
free from government interference.
All of these government interferences in the
free market have been achieved through public
democratic process rather than through private
business; none are run for money profit; and all
require government enforcement and taxation.
All of them have been at one time or another
opposed by business, sometimes violently (e.g.,
killing worker and community organizers).
Freedom from government interference in the
free market, then, entails loss of all of these public
goods.
In this light, we need to ask who benefits from
the current intense campaign to reduce gov-
ernment regulations, privatize public-sector
goods and cut social programs. Free market
proponents argue that we can no longer afford
these high standards and social goods. But if the
free market is really so efficient and productive,
why must society be increasingly worse off the
freer it becomes?
Contradictions of FreeMarket 647
BUSI ART NO. 1399 PIPS. NO. 82934
5. Lower costs
Another argument for the free market is that it
reduces the costs of production and distribution.
The argument here is that in the free market,
producers and sellers must compete to produce
and sell their goods at the lowest price. In this
way the market ensures lower costs, and there-
fore lower prices, for consumers.
The main problem with this argument is that
it looks only to lower costs for consumers, not
to the way these lower costs are achieved. For
example, private business can lower its costs of
production by eliminating or evading pollution
controls, minimum wages, workers benefits,
health and safety standards, and government taxes
to pay for the care and support of the sick and
unemployed. That is why under new interna-
tional free trade agreements private corporations
and businesses relocate to places where they do
not have to pay these costs of protecting human
life and the environment for example, to the
Maquiladora Zone on the border between
Mexico and the United States where wages are
a small fraction of what they are in Canada and
the U.S., effective pollution controls are non-
existent and taxes for public health and educa-
tion have been reduced or abolished. With the
right under free trade to sell the low-cost
products produced there to consumers in
Canadian and U.S. markets, private businesses
and corporations are better able to maximize
their profits by avoiding the costs of protecting
people and the environment.
Unemployment in the home country is a
further benefit to these businesses and corpora-
tions because it lowers the price of labour, and,
therefore, the amount private business is required
to pay workers. With automated and electronic
processes increasingly replacing workers of all
kinds, and with the new free-trade right of
private investment capital to move production
to the lowest-wage areas, the price of labour has
no floor. With enough unemployment free trade
can, and has, reduced salaries and wages to ever
lower levels. What is a disaster for most people,
ever more reduction of their real incomes and
loss of their jobs, is good for international
business under free trade. There is not even a
need to worry about workers rebellions or upris-
ings as unemployment grows and wages and
salaries drop. All that is required is to relocate
investment to another region of the world where
desperate people will work for under one dollar
a day and in disease-causing working conditions.
The international free market ensures this liberty
of private investment capital. That is why we hear
much about how we must adapt to the harsh
new reality of the world market, and how
shock treatments are necessary for societies
who do not accept the new global regime.
Low-cost free trade zones across the world,
which have no independent unions or human
rights protections to raise the cost of labour,
provide further comparative advantages to busi-
nesses seeking to minimize costs and maximize
profits. It is rational under free market princi-
ples for business to relocate their operations to
such areas, whatever their cost in jobs to the
home country. A home country does not exist
within the rules of the international free market.
Nor does a home. A worker is expected to leave
his or her home to wherever he is allowed to go
to seek employment. The freedom of private
capital to move across boundaries to the most
favourable circumstances, however, is denied to
the worker who, with the exception of the
European Economic Community, is required to
seek a better exchange for his work within
confined borders.
Therefore it is only by government or other
intervention in the free market for example, by
international minimum standards of rights and
environmental protection in trade agreements
that societies can prevent their standards of life
from falling to the lowest common denominator,
which itself can keep falling to ever lower levels
of social poverty and pollution. But such stan-
dards are not protected in current free trade
agreements. On the contrary, they are specifically
ruled out from review or dispute under the terms
of the North American Free Trade Agreement.
There are thousands of pages of rules to protect
corporate and business rights, over 20000 pages
of them in the most recent General Agreement
on Tariffs and Trade (GATT), but no rules
protect human rights or the quality of the envi-
ronment.
648 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
A further major way of reducing costs in the
free market is by economies of scale where the
greater the investment and purchasing power, the
capital infrastructure of labour-saving machinery,
the division of labour and specialization, the
volume of goods produced, and the international
linkages of production and distribution, the
cheaper the per-unit costs of the commodities
produced and sold normally are. Since multina-
tional corporations have the greatest economies
of scale, they are best able to reduce their costs
of production in these ways. Consequently, small
producers and small businesses without these
economies of scale may be unable to compete
in the price of their goods. It was for this reason,
for example, that the small Chiapas producers of
corn in southern Mexico began a rebellion
against the death sentence of NAFTA on the
day of its inception on January 1, 1994.
At the same time, economies of large scale
make for more and more uniformity of methods
and goods from monocultural farming and
seeds to mass homogeneity of media products and
books. Diversity raises prices. Vandana Shiva has
called the outcome of this market imperialism
process a monoculture of the mind. With ever
fewer multinational media conglomerates in the
global free market monopolizing control of the
production and distribution of television
programs, films, magazines, newspapers and even
textbooks and learned journals, this monocul-
ture of the mind extends into the control of
peoples brain circuits themselves.
But are the lower costs which proceed from
these competitive advantages and economies of
scale really lower costs for societies as a whole?
What about increased poverty, pollution, unem-
ployment, illiteracy, ill-health, environmental
degradation and destruction of natural resources
by large-scale exploitation which follow from
such cost reduction methods? What of the loss
of cultural diversity and autonomy of thought
which the central control of media conglomer-
ates increasingly imposes on human societies and
peoples? What of the increasingly inescapable
pervasion of the globe by ever more motor noise,
traffic, commercial interruptions and junk?
These negative consequences of the free
market are conceived in free-market ideology as
externalities. That is, they are not factored into
the costs of doing business, and so are not
recognized as business costs. But it is difficult to
think of more important and drastic costs to
the great majority of societys membership.
Consumer goods for sale in the market may carry
a lower price for those who can afford to buy
them, but even they must suffer the social costs
of increasingly polluted air and water, social
squalor, insecurity of income and employment,
depredated environments and mass media
violence, to name a few externalities. So the
argument for lower costs of the free market
applies very narrowly. While consumer goods
may become less expensive, though this is by no
means assured by the current oligopoly condi-
tions of competition, the shared goods of life
such as our air and water, social conditions,
mutual security and cultural diversity deteriorate,
with no limit in free market doctrine to their
decline.
6. Thefreemarket as democracy
Another standard argument for the free market
is that the economic competition of the free
market rules out monopoly of social decision-
making by an all-powerful state. This argument
is valid, but is typically confused with a much
stronger, further claim that the democratic rights
of a society increase as the rule of the free market
increases. This claim is a non-sequitur. It ignores
the fact that the exercise of individual democ-
ratic rights in a free market the right to a free
press, for example requires that he or she who
exercises this right has the means to do so. If I
do not own a press, how can I exercise my right
to freedom of it? How can any of us? If we lack
the means to exercise our freedom, this freedom
exists as a slogan for free market ideology, but
not as a fact.
An individual may of course submit what s/ he
writes to a corporately owned press, but then it
is not really s/ he who is free to publish, but the
corporations employee-editors who operate
under the owners policy and control. If what is
written exposes or criticizes the owner of the
press, or the corporate structure for which the
Contradictions of FreeMarket 649
BUSI ART NO. 1399 PIPS. NO. 82934
press is a vehicle of advertising messages (to
quote the former publisher of the Globe and
Mail), then the article will not be published. If
by exception it is, its exposure will not be
reproduced. Are there any counter-examples to
this rule of press censorship? If there are not, then
the free press is in truth not free. It does not
permit criticism of the powers that own and
control it. Thus, the right to freedom of the press
in the free market comes to be a paradoxical
claim asserting as a fact a democratic freedom
which does not in fact exist.
We can formulate the law-like principle of this
unfreedom of the press in a general way: Nothing
which contradicts thevalueor thenecessity of thefree
market systemor its aimof money profit for private
corporations will bere-produced in themass media.
Test this hypothesis against fact. Follow the mass
media in all their pervasive circuits of dissemi-
nation to see if this principle of their censorship
is anywhere disproved.
Other claimed democratic rights in a free
market society can be similarly illusory and con-
tradictory to fact. The democratic right of the
eligible adult population to elect a government
of their choice to govern them is clearly not
democratic when very few members of that
population are in the position to pay very costly
election expenses (often in the millions of dollars
for one office), to own or influence the mass
media whose favorable exposure is necessary to
win mass elections, or to pay full-time lobbyists
to continuously pressure politicians to their
viewpoint. As with other freedoms asserted by
advocates of the free market, these democratic
freedoms in the free market can turn out to be
very undemocratic.
In the worlds most populated free market
societies in East Asia, democratic rights do not
include freedom of personal speech or the right
to oppose the party in power. These are very
important freedoms which have developed in
some Western free market societies, but do not
follow from the existence of a free market. A free
market is, in fact, compatible with a murderous
political dictatorship in Chile, Indonesia and
China, for example. The free market may also be
imposed by force on societies. Where people
oppose the reduction of social life to exchanges
for private owners money profit, systematic
violence may be the only way to impose it, as
we have seen occur to indigenous peoples across
the world over five centuries.
In light of these facts, ever more deregula-
tion, privatization and public sector
cutbacks to develop the free market cannot
be truthfully called a move towards more
democracy. The more that public goods and
regulations are accountable to electorates and
open to public criticism and transferred to the
private sector, the more democratic account-
ability is abolished, and the more control is
transferred to those with responsibility to no goal
but the money profits of private investors.
According to United States Congressional statis-
tics, the top 1% of the population controls more
private wealth than the bottom 90% in the U.S.
So this transfer of responsibility to the private
sector is essentially a transfer of power to a very
small minority with the most power already, the
wealthiest 1% of the population. The free market,
therefore, reduces democratic process and control
the more it takes over resources and regulation
from an electorally responsible and accountable
public sector and transfers them to the rule of
the private sector.
But what of the more cost-effective and
diverse choices for consumers which can be
spurred by privatization of inefficient govern-
ment sectors? This may be an overdone argument
given that, for example, health care in the U.S.
private health-care system is $1000 per capita
more expensive than the Canadian government-
funded system, and fails to provide any health
care to 38 million Americans. Suppose, however,
it is granted that the free market provides con-
sumers with superior goods in areas involving the
manufacture and delivery of material commodi-
ties for personal consumption. Even then, it
remains true that the social system will be less
democratic the more that universal access to
public goods like health-care, education, clean air
and water, environmental resources, cultural sites
and transportation is reduced by the privatization
of these goods and their sale to only those who
can afford to pay for them.
650 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
Part B: Freedoms have limits:
Internalizing externalities
1. Traditional limits on thefreemarket
All freedoms have limits. Freedom of speech does
not include the right to bear false witness against
or slander ones neighbour, to shout Fire! in a
crowded theatre, or to pre-empt everyone elses
right to speech by monopolizing the opportuni-
ties to speak. In the same way, the free market
needs to have limits on its operations. As shown
above, the free markets operations left to them-
selves tend to weaken or destroy the resources
of life and freedom for the majority, to benefit
most the small minority of society whose wealth
provides them with far more to buy and to sell
for their private money profit than they need;
and to leave most people with little but their own
work to live by and increasing tens of millions
without even that. The more unequal the pos-
session of wealth is in a free market, the more
people there are without the money to buy what
they need for a decent life, the less freedom that
free market assures for the society in question.
How, then, are we to set the moral limits and
responsibilities for the free market which are not
entailed by freedom to produce, buy and sell
anything at any price one can get?
Most of this centurys history in Scandinavia,
Western Europe, Canada, Australia and New
Zealand has given us one answer a democrat-
ically controlled and openly criticizable public
sector. Until recently it has more or less ensured
universal access to clean water and air, education,
income security in unemployment, old age
pensions, health care, public broadcasting,
libraries and culture centres, parks and some
environmental preservation, and civil rights to
free speech, association, assembly and protection
of law from violence to person or property. None
of these more or less universally accessible public
goods is ensured by a society in which the
freedom to produce, buy and sell anything at any
price is left to function without any public or
government intervention. But this sort of society
is the one towards which we are being increas-
ingly driven. The historically developed mixed
society in which the free market is comple-
mented by a public sector guaranteeing what
the free market cannot, is now being rapidly
dismantled in Canada and across the world by
proponents of a true free market.
2. Thenew freetradeas theageof disposable
humanity
In recent years, globe-girding information tech-
nologies and international free trade agreements
have increasingly allowed corporations and
investment capital to serve their connection with
any given community or nation or culture.
Industrial and service workers of all kinds can
now be displaced not only by workers elsewhere
willing to work more cheaply, but the other
blade of the pincers by new labour-replacing,
computer-driven systems of production and
communication. With no democratic input or
accountability required for any step of this
process of mass worker displacement and disem-
ployment corporations and investment capital can
cancel or move their operations across the world
with the speed of an electronic signal. The vast
majority of the planets people have in this way
been radically disempowered as a political and
economic force: increasingly transformed into an
international pool of part-time employees who
can be hired and dismissed at will, with ever
more people in the labour market competing for
ever more replaceable jobs. Globalized free trade
has brought us, we might say, to the age of dis-
posable humanity.
It is perhaps for this reason that ethnocentric
conflicts and upheavals are on the rise across the
world desperate reactions to an increasingly
rootless infrastructure of global economic power.
The free market cannot in principle solve such
problems because its logic of profit for private
investors as the ruling absolute of global life
excludes all other considerations of existence as
secondary or external. In this situation of
rising social strife, the free market in fact flour-
ishes by the dynamic new outlets for investment
which social crises provide: producing and selling
arms to the combatants (the largest single item
of international trade); selling ever more narcotic
stimulants and violence-entertainment to all;
Contradictions of FreeMarket 651
BUSI ART NO. 1399 PIPS. NO. 82934
producing and selling costly new pharmaceuti-
cals to the environmentally diseased who can
afford them; mass-marketing security devices and
substitutes in countless different forms; and
generally making the rich richer, the poor poorer
and the environment more uniform and more
degraded. Which of these patterns, we need to
ask, is not furthered and deepened by the
unfettered operations of the free market?
Under these circumstances and in proportion
to the movement in this direction, the free
market ceases to be morally defensible. Themore
a social formation increases/ decreases its members
access to thegoods they need, thebetter/ worseit is as
a social formation. Under this criterion, theglobal free
market has becomean increasingly immoral system.
3. Internalizingexternalities: Towards a solution
One solution to the increasing immorality and
destruction of a socially lawless international
economy is a world-wide workers revolution
against it, and the restructuring of societys
economic and political power so that it is
democratically owned and controlled. That was
Karl Marxs solution. A more modest solution has
been proposed by an increasing number of
concerned experts, now even including GATT
Director Peter Sutherland. This is to institute a
rule-based international economy where the
rules do not, as now, merely protect business
interests and trade, but include minimum
standards to protect workers wages, health and
safety, to safeguard the environment against
pollution and degradation, and to provide a
social safety net for the old, the unemployed,
the young, the infirm and others left out of the
current wage-and-capital international economy.
Most of the serious problems of the anarchic
free-trade economy identified in the analysis
above would be significantly reduced by such a
global rule-base, assuming that the worlds most
dominant businesses and corporations would
allow such a balancing to include other rights
than their own. Unfortunately, the historical
record of public health-care, unemployment
insurance, old-age pensions and social security
support-systems has been one in which business
lobbies and representatives have adamantly
attacked such reforms over a century as too
costly, unworkable, against private initia-
tive, communist, and so on. But these reforms
nevertheless came to pass in many jurisdictions
through the mass support of social populations.
The difference now is that corporations are
now tied to no community of people, and can
leave any society in which effective laws to
protect human rights or the environment increase
business costs above competing regions of
investment elsewhere in which no such laws exist
or are enforced. Under current free-trade regimes
where business has secured the right to invest or
to disinvest at will across national boundaries
with no social obligations, rules protecting
human and environmental life have to be inter-
national to be obeyed. If they are not, business
investment will move to the lowest-cost, lowest-
standard areas to maximize profits. Effective
international rules protecting humans and the
environment must then be included in transna-
tional trade agreements to bind corporations to
wider interest than their own profits. Once
international trade agreements include such life-
protective standards, not as now by side-agree-
ments without legal force, but by specific and
enforceable regulations, corporations and busi-
nesses would be obliged to comply with these
minimum standards to continue having free
access to the national markets covered by these
agreements. Very elaborate and precise mecha-
nisms of enforcement are now spelled out over
thousands of pages by the NAFTA and GATT
Agreements to protect corporate ownership,
market and profit rights across national bound-
aries. There is no reason why regulative mecha-
nisms cannot be incorporated to protect human
life and environments across national boundaries.
If such a moral and social balancing of inter-
national trade agreements were to be instituted,
these agreements would not merely be bills of
rights to private corporations to override all
other life interests but their own competitive
maximization of ownership and capital wealth.
They would provide for a genuine level playing
field or common framework of environmental
and human-rights rules within which all private
corporations would be required to play to
652 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
continue having free access to others markets.
The current comparative advantage of avoiding,
violating or rejecting all standards which protect
the lives of people and the environment would
no longer be available. Instead of contriving the
rules as now to maximize the social and moral
irresponsibility of international business seeking
to reduce its costs to the lowest possible level at
the expense of human and environmental survival
and well-being, there would be limits set on this
life-destructive process by trade-agreement
standards reducing free access to markets to
corporations not abiding by these common
standards.
Two benefits would flow from such a regula-
tory balancing. First of all the current corporate
agenda of reducing or eliminating the achieved
social standards of civilization to compete in the
tough new international marketplace would be
diminished in its capacity to extort social sacri-
fices for lower business costs. Secondly, the
standard appeal to national sovereignty by
various dictatorships and oligarchies abroad to
resist international pressure for the development
of human rights and environmental standards
governing business within their borders would
cease to be a viable defence. Equal market access
of such nations and their corporate producers to
the wealth and infrastructures of other societies
would be conditional on their compliance with
international social and environmental standards.
The level playing field proclaimed by free-
trade advocates would in such a situation become
more than an Orwellian slogan.
A rule-based international economy could in
this way achieve a minimum, progressive
common framework of protection of human and
environmental life in places where there has so
far been no effective protection by trade agree-
ments of either. A rule-based international
economy, that is, could introduce an historically
unprecedented lever of actual global development
by rules of civilized behaviour which private
corporations have so far been permitted to roll
back or avoid. Access to other countries markets
would no longer be granted as an absolute right
to international corporations to exploit in only
their own interests, playing societies against one
another to cut back their social fabrics for the
benefit of lower costs to business. It would not
be a question here, as the currently fashionable
propaganda would have it, of government inter-
ference in the marketplace, but an issue of
making a socially lawless situation lawful. The
normal human obligation to comply with laws
protecting life against destruction by unlimitedly
self-seeking behaviour would simply be applied
to private business interests as well as to
individual citizens. The dogma of free trade,
however, has yet to rise to this level of concep-
tion we know as civilization.
4. Is a rule-based international economy enough?
Unfortunately, it is not easy to be serene about
the chances of educating adherents to the free-
trade dogma to the most elementary require-
ments of social existence. Private corporations
and governments have so far imposed against
majority will a series of undebated, secretly
negotiated business-only trade agreements which
have disemployed millions, ruined communities
and cut back social legislation across the devel-
oped world without a noticeable dissenting voice
from a single party to the process. A world coup
dtat, one might say, has already occurred. Self-
maximizing owners of international capital have
been accorded well-defined transnational rights
to rule the worlds production and distribution,
uncontrolled by a single effective human right or
environmental limit to their private profit-
seeking for themselves.
In such circumstances, pessimism might incline
us to acquiesce in a growing sense that this
regime will destroy the world by its socially
lawless behaviour. Indeed, a critic of a rule-based
international economy might argue, even if
international standards of human and environ-
mental life protection were to be instituted into
these trade agreements now, the long-term effects
of anarchic world capitalism have advanced too
far to correct. Such a critic could point to:
(1) an exploding world consumer population
loading the already over-stressed resources
and eco-fabric of the globe;
(2) an ever growing gap between job-seekers
and jobs;
Contradictions of FreeMarket 653
BUSI ART NO. 1399 PIPS. NO. 82934
(3) the irreversible destruction of alternative
ways of life, first peoples and environ-
ments by the unlimited demands of
industrial and commercial development;
(4) the escalating reduction of the worlds
diversity of life to ever more homogenous
monocultures of human and non-human
functions in a globe-girding system of
capital-circuits; and
(5) an increasing majority of people who have
no meaningfully productive life and who
are ever more pervasively conditioned by
commercial propaganda, toxic effluents,
motor noise and trash. There is much to
our current world economic condition,
such a critic could argue, that goes beyond
the capacity of even a rule-based interna-
tional economy to improve.
Does this mean that only a revolutionary trans-
formation of our world economic structure can
possibly solve the deepening problems of what
is called globalization? Is Marx right after all,
for more reasons than he imagined, that we are
faced with a choice between world capitalism and
world survival? On the basis of what evidence
or structural tendency can his prognosis now be
falsified? But both Marx and others since have
fallen short in designing or implementing a viable
historical alternative, even if one takes into
account that capitalist states have waged more or
less total military and ideological war on any
social alternative that has emerged, typically in
violation of international law (e.g., by armed
invasions). A rule-based international economy
seems in these circumstances to be the only
option available to us.
Considered in the light of its possibilities, the
rule-based option is not so narrow or fore-
closing as it may appear in the context of these
deepening problems. Conscious rules or agree-
ments can, in principle, be constructed and
implemented to protect all values, even those
values which seem irreversibly forfeited by the
out-of-control operations of the current inter-
national economy. It is true that job seekers
increasingly out-number jobs available, due to
both labour-replacing technologies and world
population growth. And it seems true that the
current international economy both engenders
and promotes this problem. But rule-governed
agreements can lead to population restraints (e.g.,
by voluntary birth-control), job-sharing (e.g., by
work contracts) and laws limiting corporate
rights to ruin lives by mass disemployment. The
value of each individual having work which
provides her or him with an independent
livelihood and occasion to realize some human
capacities for the benefit of others need not
necessarily be abandoned in an international
capitalist economy.
Similarly, the reduction of ever more of the
world to corporate waste products seems
inevitable under the current global economy. For
no effective environmental controls on produc-
tion processes or sales are specified in such
international trade agreements as NAFTA. Yet
conscious regulation of environmentally
damaging practices has at the same time become
a more viable international possibility by the
increasing requirement of corporate producers to
sell their products in international markets.
Selling a product in other nations markets is not,
as producing it is, a job-creating enterprise or a
valuable investment in those markets. On the
contrary, its production elsewhere deprives those
markets of those jobs and that investment which
are located in a foreign country. So it is not costly
in either jobs or investment for a home country
to impose tariffs on environmentally destructive
products produced elsewhere which do not
comply with specified environmental standards.
No blackmailing of societies with threats of loss
of jobs or loss of investment would be plau-
sible in such a situation because the environ-
mental standards would be applied at the market
end where jobs and investment are not at
risk.
At the same time, market-end tariffs on
environmentally damaging products would put
those corporations and businesses producing and
selling these products at a competitive disadvan-
tage instead of at a competitive advantage. Under
present free-trade regimes, environmental irre-
sponsibility pays because the costs saved on not
having to reduce pollution or to limit resource
destruction allows the producers and the vendors
of such products to sell at a lower price.
654 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
Environmental accountability by tariffs on
environmentally damaging products reverses this
destructive pattern. Rather than polluters being
rewarded by a competitive advantage of lower
costs, environmental tariffs would put their
non-polluting competitors at a cost-competitive
advantage, thereby encouraging pollution-free
production by market means.
Requiring corporate producers to confront the
external costs of their production by increased
prices for their goods in international markets is
a generalizable strategy. It is not only applicable
to destruction of the environment which is
currently cost-free and a competitive advantage
under current trade agreements, but it can be
made applicable to other socially destructive
practices by private corporations. The dollar
costs, for example, of supporting workers who
have lost long-term jobs by corporate plant-
closures to invest in low-standard economies
elsewhere are immense in developed societies
not only in social assistance payments, but in
increased health-care and other social expendi-
tures, not to mention personal damages. But
these vast costs are now loaded wholly on other
economic agents than the private businesses
which have caused them. Tariffs on the incoming
products of such job-eliminating exporters by the
society suffering unfair losses from their
dislocations could be defined and assessed in
international trade agreements just as unfair
trade practices protecting private profits are
defined and assessed by these trade agreements
now. Again it is a question of these agreements
protecting interests beyond those of private cor-
porations. In the present international economy,
however, corporations are permitted to degrade
environments, to pollute and to damage others
with no limit, while victimized local populations
are required to pay the price for these damages
inflicted upon them by this unaccountable
regime.
5. Theincoherent assumptions of thecurrent free
tradedogma
There are three logically incoherent assumptions
upon which the destructive absolutism of the
current corporate agenda is based which need
to be clearly recognized.
(i) The first is that the right of access to
markets across regional and national boundaries
is assumed to belong to private corporations cost-
free with no obligation to pay any of the direct
or indirect costs of this market entry into other
societies. All that is required is that corporate
agents agree among themselves through mecha-
nisms of government co-ordination to a system
of self-protective rules not infringing each others
rights to this access.
Yet market access to what is owned and
exchanged in another society has in fact
enormous costs for that society which are borne
by its citizens past, present and future taxes and
government deficits. The benefits of these tax-
supported goods are under present trade agree-
ments now received cost-free by foreign
corporations who buy and sell in other societies
markets without having to contribute to the
many costs of their ownership and trade in
these societies. Their goods are produced else-
where, and provide no jobs in the markets to
which they sell. The home society provides
armed-force and police protection across its ter-
ritory, developed laws to protect its agents and
goods, publicly paid-for roads, subsidized utili-
ties, sewage systems, water supplies, and many
other domestically financed and highly expensive
protections and infrastructures. To these expenses
have been added still further major public costs
of protecting foreign-owned corporations
patents (e.g., in medicines) and enforcing intel-
lectual property rights (e.g., over farmers seeds
and authors texts, even against their own
growers and writers).
Foreign corporations or domestic corporations
paying no taxes for the protection and utiliza-
tion of these publicly financed supports and
services are, thus, free-riders on public expendi-
tures which increasingly disemployed populations
are required to pay for. Current trade agreements
grant this free-rider status to all non-domestic
corporations within the international territories
covered by them, and increasingly to domestic
corporations as well by reductions, exemptions
and subsidies to keep them from investing else-
where. (Corporate taxes in Canada, for example,
Contradictions of FreeMarket 655
BUSI ART NO. 1399 PIPS. NO. 82934
have shrunk from nearly 50% of federal revenues
in 1950 to under 10% today.)
All private corporations are nicely served by
this free-rider status in other societies, and by
competitively falling tax-rates in their own. This
is why there has been the extraordinary una-
nimity of private corporations supporting these
trade agreements. As free-riders on public purses
and deficits, it is in their self-interest to institute
free trade regimes which grant them this ever
more extended right to free-riding. Under this
system societies must compete against one
another in granting private corporations ever
lower domestic tax-rates and favorable treatment
to keep them from taking capital produced in
home societies and investing it elsewhere. To pay
for this competitive subsidization of corporations,
societies must reduce more and more of their
social spending for public needs. In this way a
spiral of bankrupting public sectors to subsidize
private corporations has been set in motion with
no apparent limit to its special-interest demands
and to government concessions.
Since private corporations are the first to insist
that there is no free lunch for others, their
assumption of the right to ever more public
subsidization of their own operations including
the public funding of negotiation and imple-
mentation of these trade agreements themselves
is self-contradictory. But this self-contradictory
assumption of a right to cost-free access to very
costly market infrastructures and services in other
societies markets, and increasingly domestic
markets as well, is a basic premise of international
free trade agreements which has so far been
repressed from public view.
(ii) The second logically incoherent premise
of current international trade agreements is that
damages and losses by corporations and corpo-
rate trade sectors are to be recognized and
regulated by international trade agreements, but
damages and losses to workers, governments,
publicly owned resources, environments, com-
munities and any other economic sectors are not
to be recognized or effectively regulated at all.
There are three main levels of incoherence at
work here.
The first is that private corporate economic
interests are to be protected in fine detail by
government agreements, but no other economic
interest is to be so protected.
The second is less obvious. It is that the public
interest which governments are supposed to
represent is abandoned as too costly, while the
private interests governments are intended to
regulate are one-sidedly protected. This contra-
diction is further deepened by the fact that the
private economic interests being protected by
these inter-government trade agreements are very
narrow in base (the interests of transnational
corporations and wealthy investors in private
profits for themselves), and are also already
institutionally more powerful than the wider
social interests which public governments are
assisting them to override.
(iii) The third and perhaps most pernicious
level of incoherence here is that the damages and
losses inflicted by private corporate interests on
other economic interests by free trade agreements
are never to be borne or paid for by the corpo-
rations who inflict them, but only by their
victims or by taxpayers who had no responsibility
for the losses and damages. Trade agreements and
their very restricted class of significant benefi-
ciaries not only assume that they have a right
across boundaries and nations to be free-riders
on costly public infrastructures and services paid
for by the citizens of these societies, but they
further assume that whatever costs and damages
they then cause to others by their publicly
supported and protected operations across inter-
national boundaries are not to be paid for by
them at all. They assume, that is, legal immunity
from and non-liability for the harms they do to
others by the operations of these agreements, and
thereby assume in corollary that only those who
are not responsible for these costs and damages
are to bear and to pay for them.
In a normal context, we would call such
assumptions psychopathic. Nonetheless their self-
serving incoherence and vicious consequences
are now assumed as givens by international trade
agreements, by their corporate beneficiaries, by
major international investors, and by the
economic theory that is their propagandist.
Environmental resources tens-of-millions of years
old may be polluted, degraded and exhausted by
private corporate exploitation across the globe
656 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
with no requirement at all to pay for the damages
or their prevention by the trade agreements
permitting this destruction. Working people and
whole communities across the globe may be
deprived of their livelihoods, security and ances-
tral homes by rootless corporations who take over
their lives and abandon them at will, but no cost
of this destructive process is either recognized or
deterred by current trade agreement, least of all
paid for by the corporations who inflict these
damages by their actions. This second main
assumption of current international trade agree-
ments that private corporations have no
responsibility or liability for any and all of the
costs and damages they inflict on human and
environmental life by their actions under these
agreements is certainly incoherent in its
content, but outside the span of consideration
of these agreements. Such an assumption is
beyond that of the free-rider. It is alike in its
structure to the reasoning of the criminally
insane. Reflect carefully on this claim. In what
respect is it over-arched?
The absolute refusal of responsibility for
paying for what one receives, or for causing
damages to others without limit is most explic-
itly prescribed by legislation for the worlds
multiplying Free Trade Zones (e.g., the
Maquiladora zones on the border of Mexico and
the U.S.). Characteristically, such zones grant the
private foreign corporations who produce in
them the freedom not to pay taxes, not to re-
invest capital, not to allow workers unions, not
to be subject to national pollution laws, not to
pay minimum wages, not to have maximum
work days or weeks, not to obey established
health and occupational safety laws and not, in
general, to be bound by any rule to pay for what
they receive in public infrastructure and services
or to be held responsible for the environmental,
health and social damages their regime imposes
on the human and other life ruled by them.
NAFTA, for example, not only provides for the
indefinite perpetuation of this free trade zone
structure in Mexico, but business lobbies have
further called for its extension into such places
as Halifax and Vancouver.
Having assumed that private corporate inter-
ests, and only private capital interests, have a right
to be free-riders on public infrastructures and
services, across national boundaries, and increas-
ingly free-riders on domestic public infrastruc-
tures and services too, and having further
assumed that any cost or damages inflicted on
other economic interests in the operation of
free-trade agreements do not exist for these
agreements protection or regulation, and cannot
be charged in any form to those responsible for
the damages, a final assumption follows easily in
train. It is that there is no way to prevent the
harsh consequences of these harms because
free trade agreements in this one-sided form are
inevitable, and their costs to publics, workers
and environments are necessary adjustments
to the tough new reality of the global work-
place.
6. Freetradeas an absolutist religion
The inevitability doctrine of the current market
ideology is typical of fundamentalist religious
sects. There is an invisible hand that governs
human events with an omniscient logic which
cannot be interfered with. Followers of the true
faith will be rewarded in some certain but never
defined realm of future prosperity, while those
who deviate from its strict necessity will be
consigned to the hell-fires of shock treatment
and painful cuts. No amount of human suf-
fering or natural destruction exacted by the
doctrines implementation can alter its prescrip-
tions or prove it false because its truths are eternal
and not subject to falsifying evidence. Salvation
can only be won by obedience to its iron laws,
though life in fact grows only more desperate for
the majority under its rule.
No fundamentalist theology has ever been so
dominant in the world, or so widely diffused by
propaganda organs. Its unifying assumption of
inevitability to the absolutist program it
imposes on the globes peoples is, however, in
striking contradiction to its pretenses of repre-
senting democracy and freedom in the
world. Because it has been everywhere contrived
by secret negotiations without or against the
expressed majority will of social populations, and
because it rules out any social alternative or
Contradictions of FreeMarket 657
BUSI ART NO. 1399 PIPS. NO. 82934
public participation in its implementation, it is
democratic only in that non-factual realm
whichfundamentalist religious ideologyoccupies.
Conclusion
In the context of the many-levelled incoherence
of the free trade dogma, a rule-based interna-
tional economy which accords rights and pro-
tections to broader human and environmental
interests than those of private international capital
is compelled by elementary logic as well as
requirements of global survival. Resolution of the
problems of the absolutist doctrine expressed in
current trade agreements admits of ascending
levels of understanding and life-responsibility.
The more widely human and environmental life-
interests are taken into account and safeguarded
by rule-based international agreements, the less
incoherent and destructive in reasoning and effect
these agreements become. There are many
degrees of realization possible here, especially
since the base-line from which they are required
to begin in current trade agreements now accords
no effective protection to any other life-interest
but self-serving rights in investment capital and
profit. But the extent to which broader interests
than these are taken into account and effectively
protected by the rules of international trade
agreements marks the extent to which these
agreements become rationally coherent and life-
responsible.
Appendix
1.2 billion of the planets people remain in
absolute poverty. In the last 30 years, the richest
fifth of the world has doubled its share of income
in comparison with the poorest fifth. Annual
Review OxfamCanada, Toronto, 1993.
NAFTA (North American Free Trade
Agreement) has no minimum labour standards
no health and safety regulations no worker
rights [for] collective bargaining [or against] child
labour and forced labour.
NAFTA has no environmental standards, no
conservationist standards allows no subsidies for
environmental cleansing, conservation or renew-
able energy.
NAFTA rules punish people in definite ways
who deny expected trade profits to corporations,
but there are no rules punishing corporations for
violating worker rights. The only recognized
unfair trade practices are those that destroy
expected or real profits, not those that destroy
peoples lives, the quality of peoples lives or even
whole communities. Alex Michalos, Ph.D.,
FRSC, unpublished paper, 1994.
For Latin America as for other areas of the
South, the past two decades have brought
declines in living standards, per capita incomes,
urban wages, state expenditures on health, mor-
bidity rates and food consumption. Frans J.
Schuurman, Modernity, Post-Modernity and
the New Social Movements in Schuurman
(ed.), Beyond the Impasse: New Directions in
Development Theory. London: 2ed., 1993, Chapter
9.
[The Latin American state] has become the
executor and debt collector of a bankrupt
economy on behalf of transnational creditors. In
fact, its central role has manifestly changed from
that of promoting development and at least in
theory protecting political and economic
sovereignty, to that of facilitating surplus extrac-
tion and international subordination. Jorge Nef
and Remonda Bensabat, Governability and
the Receiver State in Latin America: Analysis and
Prospects in A. R .M. Ritter, M. A. Cameron
and D. H. Pollock, Latin America to the Year
2000: Reactivating Growth, Improving Equity,
SustainingDemocracy. New York: Praeger, 1992,
p. 168.
After 10 years of market reforms and
restructurings in New Zealand the results have
been:
In the two years after cuts were introduced
(199092), the Department of Statistics
reported a 40% increase in poverty.
The youth suicide rate has doubled it is
now the highest in the world.
The child poverty rate has reached 26%.
Almost crime-free a decade ago, New
Zealand has the highest overall crime rate
of twelve industrial countries. Violence
658 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
against women has increased by 50% in the
past year, against children by 39.6% and
infant murders have tripled.
By every standard of measurement except
inflation the reforms have been a com-
plete failure. Deep cuts to social programs
were supposed to lower New Zealands
debt, but it more than doubled from $22
billion to $46 billion and thats after the
government used $16 billion from the sale
of crown corporations to fight the debt.
The unemployment rate, 4% in 1984,
hovered around 10% throughout most of
the decade.
Taxes on corporations and the wealthy were
cut by 50%.
From 198593, whole other developed
countries grew by 25%, the OECD
recorded New Zealands growth rate at
3.9% Murray Dobbin, Canadian Perspectives
Winter: 1995, p. 7.
In the American experience [from 1989 to
1992] the combined total income of the top 1%
of all earners increased sensationally, and the
combined total of the bottom 80% declined
sharply. Edward N. Luttwak, Director of the
Institute for Policy Studies Washington in Why
Fascism is the Wave of the Future, London
Review of Books April 7, 1994, pp. 35.
In the May 1992 issue of the American
EconomicReview, there was A Plea for Pluralistic
and Rigorous Economics signed by 44 leading
economists from North America, the U.K. and
Western Europe in which they signal their
profound concern with the drift toward ideo-
logical conformity in economics as demonstrated
by a near monopoly of one viewpoint in the
academic journals. Bernice Shrank, Blind
reviewing the other way round, Canadian
Association of University Teachers Bulletin, March
1994, p. 11.
Between 1978 and 1991, there was a sixfold
increase in the number of households [in the
U.S.] which declared incomes of $1 million or
more in constant dollars [cash] and an absolute
decline in income for most families. Edward N.
Luttwak, The poor get poorer, Times Literary
Supplement, June 10, 1994, p. 17.
[Canada is] clearly in the transitional business
of reapportioning national income so that a larger
share goes to corporations and less to wage
earners this is a fundamentally necessary
process. Peter Cook, Globeand Mail Report on
Business, August 19/ 94, p. B2.
Popular organizations in Nicaragua are
struggling to find solutions to their worsening
economic and social situation [since the intro-
duction of market-driven policies]. Poverty has
increased dramatically, and now affects over 70%
of the population. Unemployment stands at 60%,
while 80% of children do not finish primary
school, and deaths from malnutrition have
skyrocketed. Hunger, practically unknown
throughout the 1980s, is widespread. Tools for
Peace, Toronto, June 27, 1994.
Total less developed country debt has doubled
from approximately U.S. $819 billion in 1982 to
U.S. $1712 billion in 1993 despite their having
repaid over U.S. $14 trillion in debt service.
Ecumenical Coalition for Economic Justice,
Economic Justice Report Volume 5: Number 2
(1994), p. 7.
In the first three years of the U.S.-Canada
Free Trade Agreement, Canada lost 1.4 million
jobs, including 500000 manufacturing jobs, over
25% of the entire manufacturing sector. In
Mexico, the [current] average hourly wage paid
by U.S. corporations is 63 cents. In the last ten
years, as American and other foreign corpora-
tions moved into Mexico [and into Free Trade
Zones], Mexican wages have been driven down
by 60%. Citizens Concerned About Free Trade,
Saskatoon, Summer 1994.
Throughout history, the 18th century econ-
omist Adam Smith observed, we find the
workings of the vile maxim of the masters of
mankind. All for ourselves and nothing for other
people.
The invisible hand of the market, he wrote,
will destroy the possibility of a decent human
existence unless government takes pains to
prevent this outcome as must be assured in
every improved and civilized society. It will
destroy community, the environment and human
values generally. Noam Chomsky, TheNation
and TheToronto Star, April 13, 1993, p. A15.
Researchers are faced with a new reality.
Contradictions of FreeMarket 659
BUSI ART NO. 1399 PIPS. NO. 82934
They cant expect to receive funds to do their
research just because it is good research. . . . We
have to accept that the new reality is everywhere.
We have to relate research to [the demands] of
the marketplace. Keith Bezanson, President of
the International Development Research Centre
(IDRC), International Researchers Must Face
New Realities, At Guelph, November 30, 1994,
p. 5.
Despite rising productivity, real U.S. wages
for non-supervisory, private-sector employees
peaked in 1972 and have dropped ever since
20 per cent in 20 years. Walker Russell Mead
Essay, Harpers Magazine, September 1992, p.
41.
[We see today] the new totalitarianism of
consumption, commerce and money. Nobel
Prize winner and former President of
Czechoslovakia, Vaclav Havel, The Velvet
Hangover, Harpers Magazine, 1993.
The strategy of economic competition
which subjects itself to this narrow standard
measurement [of per capita income increase] is
the most fundamental madness of our epoch.
Rudolf Bahro, The decline of the world, The
New Left Review, 1978, p. 263.
The Guatemalans had been organizing co-
operatives and protesting their terrible poverty.
When their ancestral lands were turned into huge
coffee and sugar plantations [for international
export and trade], they could no longer grow
enough food to survive. The army responded to
their resistance by killing hundreds of thousands
in the 1980s, and a struggle for land grew into
genocide. Ted Hyland, Jesuit Centre for Social
Faith and Justice, Sept. 30, 1993.
In the World Competitiveness Report
prepared by the Swiss-based World Economic
Forum . . . there were no measures of environ-
mental degradation, resource depletion, occupa-
tional health and safety or human rights
protection. Alex Michalos, Action Canada Dossier
#32, July/ August 1991, p. 15.
NAFTA was negotiated in great secrecy. Its
2000 pages long. In addition theres the imple-
menting legislation: more than 4000 pages,
which shows how many laws will have to change
because of NAFTA. You now have to pay $150
plus GST for this public document. How will
NAFTA affect democracy? Agreements like
NAFTA have begun to create what the Financial
Times of London called a de facto world
government in place of those silly old elected
ones. Their backers say these deals will lock in
countries so theyll never be able to back out or
try other policies. Rick Salutin, Whats it got
to do with democracy? Globeand Mail, April
9, 1993, p. D1.
The North American Commission for
Environmental Protection (NACEC) which was
established by the NAFTAs Environmental Side
Agreement [provides a] review process [which is]
complicated, lengthy and secretive permits only
NAFTA Parties (not provincial governments or
citizens or environmental groups) to participate.
It is to be conducted in the absence of proper
legal procedures and without adequate opportu-
nities to collect evidence or call expert witnesses.
The evidentiary requirements which must be met
in order to penalize a government [not private
corporations who inflict the damage] for not
enforcing its environmental laws appear to be
insurmountable. The resource exclusion [in the
Agreement] embraces an untenable definition of
environmental law. The environmental side deal
will not redress NAFTAs erosion of environ-
mental standards and resource conservation. In
many ways, it represents a significant step back-
wards. The Development GAP, Nafta thoughts,
Volume 4, pp. 34.
The majority of the nation is invited to lower
its standard of living so that we can become
more efficient. But who is we, and efficient
at what? True efficiency lies in the protection
of these hard-won community standards
[regarding wages, welfare, population control,
environmental protection and conservation] from
the degenerative competition of individualistic
free trade which comes only to rest at the
lowest common denominator. Population and
Environment: A Journal of Interdisciplinary Studies,
Vol. 11: No. 3 (Spring 1980), pp. 190191.
Today an estimated U.S. $900 billion worth
of currencies are traded every day. Only one of
every seventy dollars that changes hands on world
currency markets actually pays for trade in goods
or services. Ecumenical Coalition for Economic
Justice, Cooling hot money Economic Justice
660 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934
Report Volume 5: Number 2 (1994), p. 2. In
1994, for example, the dollar value trading on
the Chicago Mercantile Exchange will exceed
U.S. $200 trillion . . . six times the aggregate of
all the worlds gross national products. Ted
Fishman, Our Currency in Cyberspace,
Harpers Magazine, December 1994, p. 54.
A 1991 study by Statistics Canada revealed
the following components of the federal debt:
50% due to compounding interest, 44% due to
tax breaks to corporations and wealthy
Canadians, less than 3% due to government
spending on social programs. National Party of
Canada on basis of H. Mimoto and P. Cross,
The Growth of the Federal Debt, Canadian
EconomicObserver, June 1991.
The U.S. Congress estimates that the U.S.
would save $44 billion a year if it moved like
Canada to a single-payer [government] health-
care system. The New Statesman, February 7,
1993, p. 13. As would be expected from
international economic restructuring, Britain,
France and the U.S.A. have undergone similar
changes in employment and income structures.
More jobs became more insecure . . . organized
labour declined in membership . . . unemploy-
ment, income inequality and poverty all rose.
Hilary Silver, National Conceptions of the New
Urban Poverty, Free Trade and Global Trends,
Oxford: Basil Blackwell, 1993, p. 339.
Since the Maquiladora free-trade zones were
introduced along Mexican-U.S. border in 1980,
Mexicans have experienced a net job loss . . . a
50% reduction in wages . . . a rise of unem-
ployment from 8.5 to 17.9 percent of the work
force . . . The American Medical Association has
characterized the health situation there as a
virtual cesspot and breeding ground for infec-
tious diseases. Citizens Concerned About Free
Trade, op. cit. and Globeand Mail, July 16, 1993,
B13.
Establishing holidays, work-day limits and
overtime pay is passing laws making low pro-
ductivity compulsory. Asia Week, April 14,
1993, p. 23.
Since he became CEO in 1981, G. E. has
shed over 200000 employees while its net
income nearly tripled and its market value
increased by $67.6 billion. John F. Welch, A
Master Class in Radical Change, Fortune
Magazine, December 13, 1993, p. 82.
[The European Communitys] constitution
the Treaty of Rome is the only one in the
world that is committed to capitalism. . . . It is
entirely undemocratic. It is run largely by
commissioners who are not elected and cannot
be removed. Its Council of Ministers is the only
legislative body in whats called the free world
that meets in secret. Former British Minister of
Technology and Trade, Tony Benn, Europes
Democratic Deficit. World Policy Journal, Vol.
VIII: No. 4 (Fall 1991), p. 741.
The characteristics of the stateless corpora-
tion [are] . . . very mobile across international
borders . . . no allegiance to country or region
. . . will locate anywhere where profits can be
maximized . . . seeks areas with minimum
environmental legislation and minimum social
legislation . . . overall behaviour is amoral.
Kimon Valaskakis, A prescription for Canada
Inc,, Globeand Mail, October 31, 1992, p. D4.
In 1989, the richest 1 percent of families [in
the U.S.] owned 36.2 percent of Americas
private wealth. . . . The remaining 89.9 percent
of families owned . . . less than the richest 1
percent alone. Geoffrey Hawthorn, Capitalism
without Capital, London Review of Books, 26
May, 1994, p. 12.
In Chile, the much touted success of the
neo-liberal model, approximately 30% of the
population lives (apparently permanently) on the
margin of the miracle. In Perus capital, Lima,
it is estimated that only 18% of the economi-
cally active population has adequate employ-
ment. Jos Burneo, Americas Update, May/ June,
1994, p. 8.
Kerala, which has one of the lower gross
national products of the country (India), has high
literacy rates for both sexes. Despite extreme
poverty, public commitment to education and
health as well as to improving the status of
women has in general made the population of
Kerala literate and long-lived. That fact illustrates
that certain measures of economic success, such
as GNP, can be incomplete. Amartya Sen, The
Economics of Life and Death, ScientificAmerican,
May 1993, p. 40.
The [new NAFTA] Commission for
Contradictions of FreeMarket 661
BUSI ART NO. 1399 PIPS. NO. 82934
Environmental Co-operation will be able to act
on environmental complaints from Canada over
alleged violations of Mexican or U.S. environ-
mental laws only if the laws in question fall under
federal jurisdiction in Canada. [But] most
Canadian industries are regulated provincially.
Giles Gherson, Shame may be Watchdogs
weapon, Globe and Mail, July 23, 1994, p.
A4.
60 percent of international trade is intra-
company, and the great organizers of this global
vertical integration of production are stateless
corporations . . . with no attachment to any one
country. The intensification of international
competition and the high mobility of capital
leads then to what some have called a frenetic
race for the bottom. Those countries that offer
the most lax environmental conditions, the
lowest wages and the least generous social safety-
nets attract international investment. Kimon
Valaskakis, Wanted: a GATT agreement that
covers workers, Globeand Mail, April 22, 1994,
A11.
Every country and every industry will have
to learn that the first question is not Is this
measure desirable? but what will be the impact
on the countrys, or the industrys competitive
position in the world economy? Peter F.
Drucker, The Age of Social Transformation,
AtlanticMonthly, September 1994, p. 77.
Four years ago, when the Berlin Wall came
tumbling down, we were promised a bright new
future [under free-market rule]. But far from
prosperity, we see even more people plunged into
poverty and despair and a quarter of the world
starving. One in nine people live as refugees.
. . . In every region of the world, it seems that
human rights are being rolled back . . . fuelled
by economic policies which make the rich richer
and the poor poorer. Secretary-General of
Amnesty International, Pierre San, Amnestys
report card from hell, Globeand Mail, Dec. 10,
1993, p. A21.
University of Guelph,
Department of Philosophy,
N1G 2W1 Guelph,
Ontario 401, Canada
662 John McMurtry
BUSI ART NO. 1399 PIPS. NO. 82934