Responding to the introduction by John Freehand and Bob Ellis

Well thank you Bob, that was quite wonderful, and we did have a good talk, it was
sober, and the ocean was good, and I haven't won any prizes tonight but I
nevertheless want to thank a few people - the Evatt Foundation, the Social
Change Media organisation and the organisation which really organised me
coming here which was Australia's Environmental Education Agency, peak
agency, the Australian Association for Environmental Education.
I think that it's true that if you're all here tonight not doing something better, it's
not really because of me, it is really - might be because of Bob actually - it is
because something's happening.
I do think that the last 12 months have been key months in the beginning of the
end of something. It doesn't mean we're turning a corner to something good, it
just means we're turning a corner, it's up to us to decide what that corner is going
to be like, and where it's going to lead us.
Globalisation
We could be here for all I know to celebrate the glory of globalisation: it's
possible, maybe another kind of globalisation. I'm sure there are rooms, sadder
rooms these days, but rooms filled with people who are theoretically celebrating
that glory. They're going to be doing it in a small town in Switzerland in a few
days where they all gather together to celebrate the glories of globalisation once
a year.
And we'd be celebrating in that case the end of the nations, that governments
were finished with that terrible interference that governments have in the
freedom of men and women. We'd be talking as if the destruction of the power of
government was in victory for the citizens - a bit of logic which has always
somehow escaped me, since governments are in fact the only structure of power
which citizens actually have.
In those conversations, it's as if all nations, all nationalism when organised was
murderous. As if all governments were somehow either the government of Serbia,
or about to become the government of Serbia. And therefore we should all
celebrate the end of them so that we can all indeed go to the beach and not have
the serious conversation and just go to the beach when we're not making money,
or trying to, or being unemployed.
This whole approach towards the end of a nation as a victory for citizens rests on
an essential misinterpretation of what the individual is, of what individualism is. It
completely puts aside the real understanding of what an individual is, of what
individualism is, which is to say a responsible job for the citizens, responsible
individualism. Individuals working together as citizens inside nations, the
democratic citizen.
In its place there is a very narrow, uninteresting definition of the individual, which

was refined in the 19th century - and it existed before that - which says that the
individual is somebody who exists only because they're ultra self-interested, and
they only act out of self-interest and therefore out of competition with each other,
whether that competition is for money or with guns or whatever.
It's as if we're all, as a poet said, the servants of greed. When the poet wrote that
the phrase he was of course talking about a much smaller group of society. It
goes without saying that in a society that doesn't believe in the democratic
nation, this kind of individualism will be passive, it will be a tributary, a passive
tributary of the economic forces which apparently are leading society, in fact
inevitably leading society. In fact everything important will seem to be inevitable,
and only the unimportant things will be left in our hands.
Globalisation has been presented to us, sold to us for 25 years now, because
that's when it first 25 years ago got a hold of a government. Happened to be the
Chilean government interestingly enough. It has been sold to us as something
which is and will be inevitable.
Now it's curious because those same people are the people who keep saying
democracy has been winning, there's more and more democracy in the world,
thanks to globalisation. But how can you have democracy if everything's
inevitable? What's the point in voting, what's the point in choosing?
I mean if everything's inevitable why would we waste our time in being citizens? I
mean if everything's inevitable let's just get some nice sort of, you know, not too
nasty dictator to look after things! Look after the detail since everything's going
to happen anyway, and all we're doing is negotiating half percentage points of
the directions that we're going to take. It's not worth not going to the beach if
that's all democracy is.
Personally speaking it's a very tiring idea, this idea. If you live in a democracy, it's
very tiring to be always surrounded by great and high abstract generalisations
which are in fact the most banal and nave cliches dug out of second rate
movements of the late 19th century.
And one ends up inevitably in arguments which are, excuse me for using the
world like this - "Manichean", you know, in an old philosophical movement where
there's good and evil and good is defined by the people of power inevitably.
What is good? Good is being free. What is free? Free is not having a government,
it's not having regulations. What is cowardly? What is evil? What is wanting to be
protected? Obviously if you want to be protected you're cowardly, you're afraid of
freedom. You see the logic, the Manichean logic, and what it leads to is what I
would call the hypnotic clarity of false choices.
Democracy
Democracy isn't about abstract false clear choices. Democracy is extremely
complex, it is extremely concrete, it's about constantly choosing, finding,
developing practical options within the common good. Constantly searching for
how to express in a practical way the common good, not in some grand way,
some grand and absolute way, but in a very comfortable way. How can the
common good be put in place?

We constructed democracy over a period of 250 years, the modern version of it,
we constructed it inside the nation station. There's all sorts of horrible things that
happened inside all of our nation states. Fortunately most of the developed
countries have managed to put a lot of those behind us now, those ugly things.
But the positive thing that we were doing was developing the idea of the citizen,
developing the idea of a common good, developing the mechanisms of
democracy. And so if you remove power from the nation and put it in the global
arena without compensating for that power taken away from the nation, will the
equivalent power for the citizen also be transferred to the international level. If
you transfer the power without the power of the citizen, then you're not
weakening the nation, that's really a secondary thing. You're weakening
democracy.
Superficially it's true there's never been so much democracy in the world, there's
never been so many governments calling themselves democratic. The reality is
year by year over the last couple of decades we have actually been weakening
the reality of the democracy.
There have been some good stories, some happy stories, there's been movement
in the environmental area for example, but one looks at the basic mechanisms of
power in fact democracy, on the big questions, has been weakened over the last
25 years. Battle after battle won over the last 200 years has been reversed in the
last 20 years, or is in the process of being reversed.
The very fact that anybody could believe that a democratic society could be led
by economics, by self-interest, by definition demotes the citizen and their
civilisation to little more than decoration. What that means in practical terms is
that since 1945 we put in place around the world we put in place in the
international arena, dozens and dozens of international treaties, hundreds of
international treaties - but the only ones which are really binding are the
economic treaties.
So what we've done is taken the economic power out of the nations and put it at
the international level. And we've left all the other powers, the binding powers,
inside the nations, which means we've put all the other, non-economic powers at
a severe disadvantage.
And that's why we're finding today that democracy feels as if it's been turned on
its head, as if it has no teeth, as if it has no power, as if it only can react, because
we've engaged in (since we elected a number of governments, all of us), we've
engaged in a form of almost unconscious suicide by allowing these enormously
important powers to escape from our hands to the international arena without
before, let alone at the same time, getting equivalent binding powers for the
common good at the international level.
The result is disequilibrium, the disequilibrium which we're living at the moment.
The result is an artificial creation of instability, the instability which we're living.
Competition and Deregulation
Now of course we're told that, yes, we're going through a difficult time, we've
been going through it since 1973 actually. But there are great advantages once
we get through this difficult period, and the great advantage is that we will have

created competition, a new kind of competition and that competition will produce
prosperity.
But actually when we look back at the record of this argument, the practical
record, we find that it has failed not according to some socialist critique, or even
to some small 'l' liberal critique, it's failed according to its own critique, its own
claim of what it was going to do.
The merger mania which goes on and on and on is the sign of the disappearance
of competition. As we deregulate, the mergers increase which means there's less
and less competition. At the national level, at the regional level but also at the
international level.
I mean these are numbers which I'm sure a lot of you know, that today five firms
control 50 per cent of the global markets, in aerospace, in electronic components,
automobiles, airlines, electronics and steel. Five control 70 per cent in consumer
durables, five control 40 per cent in oil, personal computers and media. Fifty-one
per cent of the largest economies in the world today are corporations not
countries. Now, Canada is number eight.
I believe, I didn't have it with me, I believe Australia is between 10 and 15, but I
have to warn you, since it's a very competitive country, that Walmart is number
12. So I don't know where you stand vis-a-vis Walmart.
The point is that none of this, none of this loss of competition which is a form of
loss of freedom, to say nothing of a failure of capitalism by its own terms, none of
this is inevitable. It's the conscious creation of us somehow as citizens allowing
the treatment of economics as the leader of our society, of our societies. We
haven't found the way not to treat economics as the leader of our society.
It's been disastrous for competition, disastrous for capitalism, it's led us into
those terrible roads - monopoly and oligopoly, which I can't even spell, which is all
around us. It's bad for prosperity, the prosperity which is needed for their model,
their model which is dependent on consumption. It's disastrous for their model of
consumption.
Why? Because the sales of 200 companies represent 28.3 per cent of the world's
GDP. I always wonder who does these numbers you know, I just take them out. I
have a theory if you can take a number a statistics and you can either halve it or
double it and it's still shocking then you can use it. So 200 companies sales
represent 28.3 per cent of the world's GDP, and those companies employ point-75
per cent of the workforce, less than one-per cent of the workforce.
So you don't have to be left-wing to be horrified by that, you know, any decent
conservative capitalist would be horrified to realise that so much production was
in the hands of people who provide so few jobs, because it's that production
which provides wages to people which allows them to consume. So it's their
model that's failing, not the socialist model, not the social democratic model, not
even the small 'l' liberal model, it's the economic rationalist model which fails by
its own definition.
And what's more, these large corporations, which we call transnationals, usually
are extremely bad for their market place. Why? Because these organisations and
all of their work on this area, on economics tells us this. I'm not using anybody

else's, I'm using conservative statistics here, right-wing statistics rather. Every
time you do statistics on corporations you find out that the transnationals take
the fewest risks, do the least long-term investment, do the least r and d
compared to small real capitalist companies, are the most top heavy in
management, much more bureaucratic than government departments, and much
more expensive bureaucracy than government bureaucracies.
They reward mediocrity, that's the purpose of business schools. It doesn't matter
how badly they're doing, they just keep hiring more people who come from the
same training as themselves and that's called, used to be called nobility, it's not
called business schools and mediocrity. It's certainly not meritocracy.
Technocracy and Capitalism
And these technocracies, these transnationals, do not meet any of the academic
definitions of capitalism. They are not capitalistic.The people who have been
lecturing us for 25 years, a quarter of a century, on the need to be capitalistic and
to take risk, these people themselves work for corporations which are not
capitalistic. After all, the transnationals are run by technocrats, business school
technocrats, bureaucrats, managers, employees. These people don't have any
shares, they don't risk anything. The only shares they've got they got either free
from the company, or by borrowing money from the company which your national
law may or may not allow them to do without paying interest.
I mean that's not exactly what Carnegie or Rockefeller meant by capitalism, it's
called really lazy bureaucracy and big and expensive, and they're not owned in a
capitalistic manner. The ownership of the means of production, the right and the
left agree on these definitions.
They're owned basically by two groups - they're owned through the stockmarket
by people who buy and sell shares, you know probably a lot of you in the room
speculate, there's nothing wrong with a certain amount of speculation. You buy
shares, you sell them, you hope to make a profit to pay for I don't know what,
going to the beach, it's a theme.
But you're not actually buying these shares because you want to control some
major corporation and being there on a regular basis, you know you're not going
to be, you're just hoping to make a few bucks, it's called speculation. You're
nothing to do with those corporations in a capitalistic manner.
And the other large group are the funds, the pension funds etcetera which are
great, but they're bureaucratic organisations and they're not buying and owning
in a capitalistic manner. So they aren't capitalistic organisations, they're sort of
like large icebergs floating around the oceans of the world bumping up against
countries and doing damage to them, with no particular direction, no particular
agenda, just the agenda of getting bigger and bigger, and providing retirement
for this very large bureaucracy which sits on top of the iceberg causing it to melt
a bit.
How do they live? Since they don't take risks and they don't do R and D and they
don't have much imagination, and they don't have any capitalistic characteristics.
Well they're rather like draculas - they buy a lot of real capitalistic companies that

are real owned by people who have shares and take risks, and are doing R and D
and taking risks, and they buy them before they get too big so they're not too
expensive and then it's like an injection of fresh blood, and the transnationals
suck the blood out of them. They buy two or three and after a couple of years
they've sucked all the blood out and they're feeling rather sloth so they buy some
more.
And in the process they stop our economies from developing, mixed economies
from developing because they're buying all these companies much too soon,
these could be the big companies of the future, the medium big companies of the
future, they're buying them too soon, and thereby aborting in a way the
development of our economy. It's one of the main causes of economic crisis that
we're in, that these transnationals are buying up the real intelligence and force in
our economy.
They keep themselves going by pretending that they're being capitalists.
Mergers, acquisitions, total inflationary activity which has nothing whatsoever to
do with capitalism, with investment, with creation, with risk. In the United States
alone in 1998, two-and-a-half trillion Australian dollars was spent on mergers and
acquisitions - total inflationary activity which, on top of being inflationary, actually
is done usually by indebting totally the company bought, and that debt actually
holds those companies back when they're merged from doing anything
interesting because they have much larger debt ratios than any government.
They spend all their time attacking the debt of government, but it's the debt of
the private sector which is out of control.
The live by encouraging privatisation, which allows these extremely lazy and not
very imaginative people to get a hold of fully developed utilities which don't
require any risk or imagination and they're able to sit there and basically clip their
coupons as you flush your toilets.
So we're through privatisation, there are many ways of moving if you think
governments are too big, moving things like water out of government into a sort
of independent area of the public sector where there be a rotating board of
directors of a non-profit organisation and the board would be citizens - that can
be done if you're worried about how heavy government is. But by moving it into
the private sector you're bleeding real investment capital on the private sector,
you're rewarding laziness and you're rewarding these managers who go about in
capitalistic drag.
Directionless corporations whose only purpose is to avoid collapse through
constant expansion are a classic method, a situation which inevitably prevents
sensible self-examination. A purpose that they have - avoid competition - and
indeed the rhetoric which they paid for, the free-market rhetoric which they paid
for is in fact the reality of the lives that they live.
Free Trade and Protectionism
Look at the whole question of trade, free trade as it's called. What is being called
for is not free trade as opposed to protectionism. We haven't had protectionism of
any consequence for 40 years. I mean the level of tariffs has been nothing for 3040 years and it's been less and less every year because of various international
agreements. It's free trade versus regulation.

But what we've known for 2,500 years in the West is that if you want to have
prosperity you have to have extremely strict straightforward regulations which
will bring the kind of stability, long-term stability, long-term competition which
will bring prosperity. We know that if you don't have that kind of regulation you
get boom and bust cycles which end up in terrible depressions. We've learnt that
already once in this century in the '30s and it's as if we've forgotten it.
A very famous lobbyist courtier said last year that history shows us quite clearly
that trade and direct investment are powerful catalysts for economic
liberalisation, democratisation and the improvement of domestic social
conditions. And I hope you listened to that really important statement.
If you actually look at history in a calm sort of way look at history, that isn't what
history tells you. It just isn't what history tells you. Trade does not necessarily
lead to all those sorts of improvements. In fact, the principle which underlies this
theory is that all trade is good, all investment is good, we must do as much of it
as possible because it will be good, it will produce democracy, it will produce
liberalisation, it will produce better social conditions. But when you actually look
at history what you find is the exact opposite.
For example this person has also said as do, you'll hear it on a regular basis
probably once a week or once a day if you spend your time listening to the radio
and television, you'll hear as part of this argument that "people who trade with
each other don't fight each other", and you've all heard this, it's a central
argument of the last 25 years.
And yet you look at the history of the British empire and you discover that the
whole core idea of the British empire was you move in and start trading and then
when you're not getting what you want in trade you go in and beat the hell out of
them. It's trade, which led to the construction of the British and the French and
the German, and the Italian empires.
The war that led to the independence of the United States - the UK-American war
was a war about trade. The Falklands War was all really a war between two
hundred and fifty year old close trading partners. Argentina's most loved trading
partner was Britain. The US-Iraq war a few years ago was all about trade and oil.
The United Kingdom went to war twice in this century, world wars with Germany Germany, their closest industrial trading partner. Italy, Yugoslavia, the SinoJapanese war at the beginning of this century.
Hannibal, you know, Hannibal tried to take Rome. Why did he do it? It was about
the wheat trade of course.
So if you were going to make a kind of banal simplistic generalistic ideological
argument that we've been forced to listen to for the last 25 years, then you would
have to argue that the principle or leading cause of war is trade. I'm not going to
make that argument, even though it seems to be related in some way.
What in fact I am saying by giving you that bit of history is that economic
dissatisfaction or greed, or dissatisfaction arising out of trade leads to war. Not an
argument against trade, but an argument which says that interest based
societies, societies which perceive themselves as being interest-based, end up in
violence. This is a natural outcome of the natural imbalance of markets.

So if you give in to the natural imbalance of markets - you'll notice that I'm not
going to get a Nobel Prize for Economics by saying that - if you give in to the idea
of a natural imbalance of markets you will indeed have war because of trade.
What prevents war isn't economics, what prevents war is a shared understanding
of the common good. That's not an idealistic idea, it's a practical idea.
Over the centuries we know that countries that don't go to war with each other
are countries which have worked very very hard to find something, which they
have in common, and to find practical ways of evoking what they have in
common. That's what France and Germany took out finally, rather late in the day,
out of the Second World War. That they simply couldn't go on killing each other
over economic territorial military racial reasons, that they had to in fact think
about what they had in common in spite of all that.
And even the Manichean idea of protectionism versus freedom, free trade is
dubious, a dubious idea. When you talk about the role of competition, Joseph
Stigler, senior vice-president and chief economist of the World Bank - see all my
quotes are very very respectable - just last year I think said regarding competition
and free trade, "the usual argument that protectionism itself stifled innovation
was somewhat confused".
Yeah, they gave them all those Nobel Prizes. Governments could have created
competition among domestic firms, which would have provided incentives to
import new technology. It was the failure to create competition more than
protection from abroad that was the cause of the stagnation. I'm sorry it's really
boring but it's interesting in a funny kind of way. Trade liberalisation that's going
on, trade liberalisation is neither necessary nor sufficient for creating a
competitive and innovative economy. I didn't say that.
Commodity-Trading Nations
Let me go a little bit further and say something that he probably wouldn't have
said, not all trade is good, amazing, the concept that all trade is good isn't
actually very well based in reality. Wrong kinds of trade can create for example
dependency. For the last quarter century every year we've had growth in almost
all of the developed countries, growth in trade. Every year we've broken new
records, and I think Australia is just like all the other countries. And that these
enormous growths in trade are the result of those international economic binding
treaties that I mentioned earlier.
For countries like Australia and Canada, Brazil, Argentina etc there has been a big
growth in non-commodity trades, which a lot of people say well, we're
diversifying. But when you actually look at it, what you discover is that there's
been a big growth in non-commodity exports, but there's been usually an even
bigger growth in non-commodity, non-natural resources, imports. And so in fact
we have deficits, countries like Australia and Canada usually in the cutting edge
non-commodity trade areas. Which means that we are as dependent in reality if
not more dependent on commodities than we were a quarter of a century ago.
You look around, why the crisis today? I mean they must have noticed that things
are happening out there. When a major crisis, who's in trouble? Well if you listen
to a lot of the neoliberal economic rationalists, economists they're saying the
commodity-dependent exporters are in trouble because - you hear the word

dependent, that's a quote - they're saying that somebody could be dependent on

trade and thereby weakened from exporting too much.
Funny, they didn't tell us about that, they told us we just had to keep on
exporting. Apparently if you don't export the right way you can get into deep
trouble and we're in deep trouble. They told us all trade was good, but it turns out
that it actually depends on the circumstances of the trade, the quality of the
trade, the variety of the trade, the geo-political spread that you're involved in.
And the worst thing that you can do is be dependent on the export of
commodities. It's funny you know, that's something we knew in the 1950's and
1960's. We knew that, we knew it was a problem. But we were told that it wasn't
going to be a problem anymore.
Look at the early 20th century, you look at the trade dependent countries,
particularly the commodity trade dependent countries, you'll find the breakdown
of country after country after country leading into the First World War as a result
of their over-dependence on exports. And particular the countries dependent on
the export of commodities.
The Latin American disaster which they were only just beginning to recover from
began at the end of the last century and the beginning of this century. Juan Peron
came to power in Argentina precisely because Argentina was too dependent on
exports, on free trade, on the exports of commodities.
The countries in trouble today are indeed, from the trade point of view, Argentina,
Brazil, Chile, Canada, Australia, South Africa, New Zealand and a few others. The
list of our problems if you look at them are absolutely typical of the historical list
of problems faced by commodity dependent countries.
How do we in Australia, in Canada, how do we avoid Juan Peron. The way we
avoid it, Juan Peron, is by consciously intervening in the economy, in the society
in order to create artificially a middle-class society. We completely deformed the
effects of the market place in order to create the society which you live in today.
We broke all of the rules which are supposedly inevitable rules in order to create
the society we live in today.
Harold Dennis, the great historian and inventor, really, of the 20th century
philosophy of communications, said "civilisations can survive through a concern
with their limitations". They're not grandiose, concerned with your limitations.
And economics: what you need is an economics which derives its laws from the
history of the place rather than deriving the place from a set of all-purpose laws
formulated elsewhere.
Today Australia exports somewhere between 20 and 25 per cent of its GDP.
Canada exports 35.2 per cent, actually it's almost 40 per cent now of our GDP, so
we're in a worse position than you are. What's called a success is actually our
problem.
It's interesting the countries who aren't in trouble. The United States exports 8.8
per cent, Europe exports 10 per cent - they're not export-dependent, they have a
much better balanced economy.
So have we in fact been engaged in a brilliant invasion of the world market place,

or have we in fact been giving in to laziness and becoming dependent in a way

that we were smart enough to avoid in the 1920s and 30s when Argentina was
not smart enough to avoid it?
We were told that unstructured trade would bring diversity, but if you listen
carefully what they said was that unstructured trade would allow people to
succeed at their strengths, and of course what are the strengths of countries like
Canada and Australia? Commodities.
So in fact by moving in to an unstructured scenario increasingly, we trapped
ourselves into the commodity trap.
Distribution of Wealth
Remember something very important and that is that societies have shapes. A
middle-class democracy hopes to be shaped like a diamond standing on its point,
you know like that, a little bit of rich at the top, unfortunately some really poor at
the bottom that you're always trying to deal with but you never manage to deal
with at all, and then most of it are there in the middle.
The 19th century pure capitalist model of society was a pyramid, concentrations
of enormous wealth in a small group at the top, a not very big middle-class in the
middle, and an enormous percentage of the population in the bottom part of the
pyramid. And the job of the not too big middle-class was to sort of act as a gobetween, on the one hand carrying money back up to the top and orders down to
the bottom.
In fact by allowing economics to move back into leadership in our societies we
began a process which would take us away from this attempt at the diamond
standing on a point, towards the pyramid. And indeed whenever you see those
numbers that say income disparities growing, middle-class shrinking, all those
numbers they're all about taking a diamond and turning it into a pyramid. That's
what's happening to us.
We're moving away from our social victory, towards the disaster which we
avoided earlier in this century.
Now it may be that in some countries, even for example Chile, by going to the
pyramid - because it was actually almost a diamond before Mr. Pinochet came to
power - that it may indeed be in some developing countries that you raise the
poorest of the poor up higher than they were. But the problem is that you've got
a half or two in the bottom, and when that sort of balloon pyramid, sorry two
images, rises of course we all know in economics it falls, and when it falls it's not
falling with a small percentage of the population at the bottom, it's falling with
most of the population at the bottom. So it's a disastrous form of society, a very
dangerous form.
There is an obligation when you live in a democracy to diversify the types of trade
you'll involved in, diversify your markets, your production, your internal-external
balance, develop your internal markets so you're not dependent on exports. But
in order to do all of that you need an industrial policy.
Funny thing, for 2500 years all great civilisations have had industrial policies,
trade policies, regulations, Athens had one, Rome had one, remember that's what

Hannibal was mad about, it's the industrial policy. No sophisticated civilisation in
the history of the world has existed without an industrial policy. Only in the last 20
years have we discovered this astonishing thing that an invisible hand is going to
reach out of the sky and remove the necessity of an industrial policy.
Education and Democracy
The crisis that we're in is very real. The technocratic corporate community is
responding to this crisis with some very interesting solutions - slip into
commodities, concentrate on speculation, work on mergers and then as in the
1930s. Go back and look at what they said in the 1930s: cut red tape and cut
taxes, those were their two main policies during the Great Depression.
Now in all of that there's nothing positive, there's nothing creative, there's
nothing new, there's no policies, a total lack of imagination, there's mediocrity,
and of course there is an attempt to ignore the fact that when you cut taxes you
do automatically cut public policy.
They say governments can no longer act because everything's inevitable. They
say that it's no longer possible to have governments like the government that you
had here with Don Dunstan - Bob Ellis called it I think "a wistful Athenian
administration". It's not longer possible to have governments that actually have
ideas and do things, a government like Gough Whitlams' which I understand
marked the way the society would move for two decades.
They can't exist anymore because everything is inevitable, you can't come to
power and think about what you're going to do, you have to come to power and
administrate the details. Governments of ideas are finished. What matters is
efficiency.
In other words democracy no longer matters. And what's worse is in saying all of
this they're saying that government equals bureaucracy in the negative sense of
the word. When in reality government can and should equal the expression, the
practical expression of the common good.
There's a very important revelation in all of this, a revelation that which means
that those who are arguing for globalisation actually don't believe in it. And you
can find this in the fact in their suggestions for the reforms of education.
They keep saying that what we have to do is get jobs for the kids, right, and the
way to get jobs for the kids is to do away with all this abstract stuff, airy fairy
stuff, and bring in some solid vocational training. And even at the higher levels
it's all moving more and more towards training.
Now that's very interesting because if you actually believe in globalisation which
is to say the opening up of the market place, that would be good because after all
vocational training means you're teaching people in the middle of a technological
revolution. It means you're teaching people to work things which will be obsolete
within about five years, about the time they're ready to go on the unemployment
list.
This educational reform happening all around the world is in fact made
unconsciously, I think, because they can't be that stupid, made expressly in order
to produce long-term unemployment. They can't be that stupid. If they believed

in globalisation, well then, what they would want would be students who are
coming out of schools and universities who spoke two or three or four languages,
had intimate knowledge of the history, philosophy, language etc, religions of
China, Germany and so on so that they could into meeting rooms and negotiate
things and make money without making fools of themselves and losing the
contract.
What would that mean? Well that would mean you can no longer have these kind
of lazy big classes we used to have, you'd have to get the classes down under
about 20 students in the public school system, you'd have to reinforce the public
school system, you'd have to hire a lot more teachers, and you'd have to put
taxes up.
So in other words if you are an economic rationalist and you believe in
globalisation, the only possible policy you can stand for in terms of education is
hiring teachers and raising taxes, which doesn't seem to be their policy.
They argue that people who would disagree with them or simply the left, you'll
notice there's a lot of "it's the left" as a way of now having to confront their own
fears and failures when they're faced by the real global engagement. Is it in
confidence, is it weakness, is it technocratic fasibidy(?), is it conscious ideology
aimed at undoing the democratic victories of a hundred years?
I don't know frankly, I don't know what it is. But one thing is clear to me,
democracy of this sort - I don't know Australia well but I've been here now twice,
thank god for me, maybe there'll be a third time later this year - democracies of
this sort, middle-class democracies, were built on the basis that the citizens
would right away give themselves an egalitarian based public education system
of the highest possible quality. Why? Because it was the only way that they would
be able to educate themselves in order to be able to engage in the difficult job,
the most difficult job in the world of being a citizen.
And so I really believe very strongly that the willful undermining of universal
public education by our governments and the direct or indirect encouragement of
private education is the most flagrant betrayal of the basic principles of middleclass representative democracy in the last 50 years.
The International Money Market
What about that other new trade sector which they were so proud of until about
six months ago, the International Money Market?
We were told that money had become something new, it was now a trade item, it
wasn't an inflationary activity. People who said they were the children, the
descendants of Hume and Smith turned their backs in reality on Hume and Smith.
Hume: "money is not properly speaking one of the subjects of commerce but only
the instrument which men have agreed upon to facilitate the exchange of one
commodity for the other. It is none of the wheels of trade, it is the oil which
renders the motion of the wheels more smooth than easy."
Adam Smith: "money is neither a material to work upon, nor a tool to work with."

The reality is that the more the money market grows, the more the banks grow
and merge, the less service of the type Hume and Smith who described it, the
less service they give. The more they move down this road, this international
road, the more they are in effect centres of inflation, a kind of inflation which our
statistics organisations don't count.
Six trillion dollars American per day moves around in the international money
market. Every serious banker I know tells me off the record that 95 per cent of
that is just paper, it's just inflation, it's just moving stuff around in the South Sea
bubble tradition. And in fact the growth of the international money market is one
of the principal objects blocking our economies, blocking our societies,
impoverishing our societies.
They're much more in the way of the economy in a real investment than any
government could possibly be. And yet those international money markets are
not inevitable, they're just the result of public passivity. Look at the explanation
for the current crisis - Michel Camdessus , head of the IMF: "this is a system in
crisis, a system not yet sufficiently adapted to the opportunities and risks of
globalisation".
It had a quarter of a century, a quarter of a century is a long time in economic
experiment, two and a half times the time Napoleon had, quite a long time. Five
times the length of a World War, very few people get 25 years to do what they
want in this world. And to be in a major crisis at the end of 25 years is sort of a
sign that you've blown it! And you should step aside.
A minor contradiction, we were all told we had to pay off our public debt, get
inflation down, and de-regulate move into capitalism. Now funnily enough those
are all the characteristics of the Southeast Asian countries which have collapsed
over the last 18 months.
They were all in health, completely healthy state according to the economic
rationalist definition. The result is a rather confused sound that comes out of
various ministers of finance in the developed countries. "We're in uncharted
waters". "Turbulent seas", these are quotes.
I don't know what they read, Barbara Cartland or something. The fact is that we
always have been in uncharted waters, didn't they notice? We always have been
in turbulent seas, that's what economies are all about, that's why you have to
regulate them, that's the point. They missed the point. But then you know
ideology is a form of denial, a denial of reality. It is a profound forum of navet.
Economists and the Crisis
Now it's quite interesting, I noticed the other day in the Japan Times the following
about the crisis in Korea - "the state prosecution is studying whether to punish
the nation's former or current top economists for their role in triggering the
economic crisis". It's quite an interesting idea. They are the ones who say they're
social scientists who have the truth, they're the ones who say they're
professionals like doctors, so why shouldn't they be sued for malpractice?
Let me sum up for you what I think the economic rationalist, economic theory is,
in the words of Horace. "The mountains are in labour and a tiny mouse is born."
Horace is wonderful. I think we've come around a corner, I think that the

wonderful theatrical thing which for some reason we the citizens are willing to
engage in from time to time, the willing suspension of disbelief has fallen. We no
longer believe in what they've been telling us for the last 25 years.
If you read your own governor of your own Reserve Bank, Mr. McFarlane you find
him saying "if the international capital markets were a smoothly adjusting
mechanism that constantly kept the exchange rate in line with the involving
fundament, but this is not what the people observe" - you're the people, he's very
good actually McFarlane in all this stuff so I'm not making fun of him - "they see
booms and busts but do not believe the proposition that the market is always
right. Attempts by academic economists to persuade them" - you - "that the free
market always or nearly always gives the correct equilibrium price are
unconvincing. The public scepticism is well placed because the intellectual
underpinning of the free market position in relation to asset price determination,
the effective market hypothesis is very weak. In all the exchange rate tests of
which I'm aware the hypothesis has been contradicted by the facts."
In other words, the ideology has been contradicted by reality.
Mr. McFarlane again talking about the fact that markets tend to panic, not balance
naturally, the invisible hand doesn't, it turns out, help. And he talks about
something called "contagion" which is what I think we used to call panic.
Quote: "More and more people are asking whether the international financial
system as it has operated for most of the 1990s is basically unstable. By now I
think the majority of observers have come to the conclusion that it is, and that
some changes have to be made." Remember this is the head of your Reserve
Bank and our minister of finance is starting to say stuff like that as well.
The Americans won't admit any of it, or the English, it doesn't matter whether
you're the left or the right in power in England, they just can't admit stuff like this
because the City is so powerful. We were told that everything was inevitable,
there was a natural balance, we did all the things that we've been doing. We took
everything apart, we took it apart, because they told us it was inevitable, a
natural balance and technology was leaving, and now it turns out that we have to
regulate the money markets.
Quote: "The most obvious reform here is to do something about the extent to
which current regulations allow excessive leverage in financial markets".
Suddenly the whole idea of free movement is nave.
Mr. McFarlane: " It is simplistic to insist on the totally free movement of capital in
all countries and in all circumstances." Now Mr. McFarlane has to be careful, he
has a job, he has to keep your dollar at a reasonable level and like ours it's had
some hard times recently, so he's being careful.
But he's talking about the free movement of capital. But they said that capital
was a new part of trade, whereas Mr. McFarlane is purposely excluding trade, he's
saying oh no no, it's only capital, there's nothing wrong with trade, it's only the
capital markets. But you can't, sort of for, 25 years have it one way and then
suddenly in the next day say "no, no, no we didn't meant it, you know, it's only
capital it's not trade".
And the fact of the matter is that they're right, that there is a relationship

between money and economic activity. They are related in reality, not in the way
that the globalists have been arguing, but they are related.
And the fact is that the problems which we're having in the international money
markets are the problems that we're having in the trade markets. Go and ask
them in Brazil, go and ask them in Argentina. Look at the level of your dollar, look
at the level of the Canadian dollar, that's not about the money market, that's
about trade itself.
I think that we are at a turning point, I think that we are in a way at a kind of
turning point that Tolstoy described in his theory of history which is all about
waves, very appropriate here, sticking with my beach. Waves and tides going in
and out. Kutuzov retreating as Napoleon advanced, and then when the wave
came to its end Kutuzov advanced and Napoleon retreated.
Or Viko, the great Neapolitan philosopher who should have been listened to and
wasn't, the great humanist who had his inclusive theories of history.
In other words what we're seeing is the kind of turning that you would see in
humanist theories of history, not the nave rational sort which have a linear idea
of progress without any memory of what happened yesterday. But the Tolstoyian
view, the more careful balanced progress in which technology is not used as a
fad, instead these are arguments in which, theories of history in which you look
for an expression of civilisation through policy. And policy is used to take hold of
technology and use it to advance policy.
The Current Moment
The situation now isn't the real force of the wave of globalisation is gone, but the
momentum of the waves continues and we haven't yet invented how to stop it or
how to turn it around. This is a very dangerous moment, this is the moment when
the empty structure which no-one believes in anymore carries on, and when
every day that we are inactive as citizens is a dangerous day because it could
lead to a radical swing towards protectionism, which is as dangerous, big
protectionism, as what they've been selling to us.
It could lead to more and more boom and bust cycles which is what we've been
living for the last few years. It could lead to, and we've seen this in all of our
countries, the rise of what I call negative nationalist parties. We can fight them
down, but you can only fight them down so long if you don't deal with the
essential problems that you're facing.
There are some positive signs, Europe and the United States have agreed to
coordinate against illegal cartels and against the dominant positions of the multinational corporations, who knows what it really means.
The new German anti-cartel director has called for a new European body to
regulate cross-border mergers. France withdrew on a clear No from the MAI
negotiations. Germany is calling for something extremely important which is
minimum taxation levels for transnational corporations. They don't say it quite
that way but that's what they're calling for.
And on the 30th of October, perhaps if you're a student the most important event
I think of your lives took place. It wasn't actually covered in our newspapers, I

don't know about the ABC, I wasn't here, but it was very little covered, it was a
statement from the Group of Seven in which they basically said we're going to
bail out of the bankrupt developing countries, but the third paragraph said the
following after they got by the money stuff - "we commit to develop and
implement international principles and codes of best practice on fiscal policy,
financial and monetary policy, corporate governance and accounting and to work
to ensure the private sector institutions comply with new standards of disclosure".
That's called international regulation, that's called the end of the globalisation
theory as truth.
Now, I don't know why it wasn't covered, I don't know, maybe they didn't
understand it, maybe they didn't want to understand it, maybe they're
embarrassed, maybe the people who wrote it don't mean it. But the fact is
they've said it, and you want to know that they said it, because you should be
quoting it back to them, you should be using this in your political campaigns.
There are some people who are still happily hand in hand going down to bathe in
the global sea, but there are in reality some good people in power, or some
frightened people in power who are trying to do something to save us from the
global turbulence which we're in fact in at the moment.
Their problem is that they're too frightened to admit how big the crisis is, partly
because they fear it'll get even more out of control because they believe in the
concept of technocratic management, the smooth surface, also because
technocrats have a great fear of admitting error and it is kind of embarrassing,
and they don't lose their jobs.
But the fact is they failed, they've sort of admitted they've failed, and we're at a
turning point. There are signs of the revival of democratic energies, the fact that
you would come out tonight is a sign of that and I've seen that all around the
world.
I was just in Chile and in Argentina and various places in Canada and England,
and I see it everywhere that people are really reaching a point where they're
coming out and they want to say something, or they want to take part, they want
to find another way. There's going to be an international human rights court with
binding powers in one to two years. The very fact that Mr. Pinochet was detained
for some time in England, whatever happens to him, is a symbolic beginning of
the globalisation of ethics with real power.
The Euro is a real step forward, the international agreements on money markets
which are going to come now, they have to come will throw the energies away
from the money markets into the practical fiscal area of the economy as the crisis
continues which it will.
Conclusion
Let me just finish by saying we have to remember I think that there is a direct
relationship between big abstractions and the regression, the shrinking of the
public good.
Big abstractions are bad for democracy, they're bad for the public good.
Democracy is a positive creative evocation of our limitations, of our reality. It's
not natural, democracy, we created it, we put it in place, and I think we've

forgotten the energy which it required our fathers, and it almost sounds like a
clich, but it's not our fathers and our mothers and our grandparents and our
great-grandparents to put in place the basic structures of Australian and
Canadian etc democracy such as the public education system.
They fought very hard for that, it didn't come from the top, it came from
throughout society, and you don't get to keep things in democracies, just because
you got them, you get to keep them because you continue struggling and
fighting, giving enormous amounts of your time, boring yourself to death at
meetings, trying desperately to get along with people you don't really like.
You know this whole business that nations are about love, I mean it's nonsense.
Nations are about the public good and getting along with people who you don't
know or love, you love only maybe your wife if you're lucky and your children if
you're really lucky you know, it takes a lot of effort to love someone.
So there's an enormous effort required from all of us I think this year, next year,
the next decade if we want to turn this thing away from disaster.
Let me just finish with a number of points.
Globalisation as presented and advanced, as presented and advanced doesn't
have to be - it's anti-democratic and is a failed experiment. There is an enormous
danger in denying that failure, and denying the fact that markets are not selfregulating, markets have never been self-regulating, markets will never be selfregulating. We've been at this for 2500 years, we kind of know.
Democracy was built on the nation state and every power removed from the
nation state without a compensating international power for the citizens is an
anti-democratic move, and the primary tool which we require at the international
level, I believe, at this point is an international agreement on minimum taxation
levels for transnational corporations. Because if you look at the slip, if you look at
the slippage, if you analyse the tax base of your country you'll find that the
corporations have moved from paying about 50 years ago somewhere around 45
per cent of the income tax, and they're now probably somewhere around six or
seven per cent. That's why you can't afford the public education, that's why you
can't afford that Medicare, that's why you're slipping into two-tier health care.
And let me say again that is not a left-wing argument. Every decent, decent real
conservative of the last 150 years believed that you had to tax the real sources of
wealth in order to fund the real necessities of the democratic state.
The social contract is not actually rooted in the nation, it's rooted in the
responsible individual citizen, and it's through their activities together that they
produce the social contract. None of this has been through the hypnotic clarity of
false choices, none of this is done through consensus.
Ideology is like consensus, democracy loves dispute, argument, different, the
absence of truth. International treaties based on theories which are not built upon
the idea of the citizen are anti-democratic. Democracy requires putting
economics, self-interest which we need, in a subsidiary position, that's the best
recipe for stable prosperity.
Democracy requires a careful identification of reality and of our limitations, a

careful rebalancing of priorities at the international level, binding agreements, re

the public good at the international level. These are the practical elements which
enabled us to build over 150 years, 200 years, 250 years, to build the democratic
nation states, and it's precisely those same practical elements which will enable
us to build stable fair citizen-based global arrangements.
Thank you very much.

Lecture content 1999 John Ralston Saul

Site 1999 Australian Broadcasting Corporation