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Chomsky on Global Myths and Realities

We live in the era of the global free market. Or do we? And now that the Cold War is over, why are the arms manufacturers still looking so prosperous? Political theorist Noam Chomsky thinks he knows why, as Mike Fuller explains.

Here’s one widely accepted version of how things stand in the world today, expressed as three propositions.

Firstly, the contemporary world operates more and more on a free market, free trade agenda which emphasizes market forces of supply and demand and competition. State planning and state intervention in the economy are minimal and protectionism is frowned upon.

Secondly, as economic models, state planning and Keynesian-style state intervention in the market have been discredited as being variously inefficient, inflationary, low in productivity, unjust or tyrannical. Such ‘rolling back’ of the State’s activity leaves the way open for a purer form of market activity. The free market model is the best way forward. Some dissidents such as the financier George Soros and the political theorist John Gray reject this second proposition, arguing that because the free market is so volatile and dangerous and socially destructive, we badly need more ‘global governance’. However, even they accept that the contemporary world is in fact dominated by less and less regulated market activity.

Thirdly, since Keynesianism has been discredited, it follows that ‘military Keynesianism’ does not exist. ‘Keynesianism’ means state intervention in the economy to stimulate and manage demand by such things as government spending on public projects; ‘military Keynesianism’ simply means that the public projects in question are military. In other words, it means spending on arms and the defence industry for purposes, principally, of stimulating and managing the whole economy through a ‘multiplier’ effect. Crudely, defence contractors buy steel and plastics, which enables steel workers and plastics workers to buy cars and holidays, which enables … and so on. J.K. Galbraith puts it well:

All candid economists concede the role of military expenditures in sustaining the modern economy. Some have held that expenditures for civilian purposes would do as well. The transition would be rather easy … [But] there is the problem of magnitude. For the price of a smallish fleet of manned supersonic bombers, a modern mass transit system could be built in virtually every city large enough to have a serious bus line. What would be built then?

(J.K. Galbraith, The Age of Uncertainty, BBC/Andre Deutsch, 1977, p.255).

The denial of ‘military Keynesianism’ means that governments no longer invest massively in the arms and defence industry for the purposes of Keynesian-style economic stimulation and management. Rather, the booming arms industry is driven firstly by the need for security in a volatile world that some claim is actually more dangerous than during the relative stability of the Cold War ‘balance of power’ era, and secondly by the profit motive. The world has a crying demand for arms; developed nations have the technical edge and know-how in supplying them; therefore it makes economic sense for developed nations to concentrate on exploiting their comparative advantage in such a lucrative export market.

Chomsky’s Version of Things

Noam Chomsky challenges the truth of all three propositions. Firstly, he holds that the story of ‘a world of free markets’ is something of a myth. It isn’t a complete myth; it is just that the reality is more complex: a tangled mixture of free trade, planning and protectionism. For instance, he points out that a vast amount of world trade is internal to corporations. Where planning is concerned, he does not just mean that big corporations have to plan their investment and production and sales campaigns if they are to avoid expensive mistakes. He means that, often, research and development costs are paid for by the government out of the public purse while the benefits eventually accrue to private corporations as part of what Chomsky calls the ‘public funding, private profit’ syndrome. An example of this to which he frequently returns is the development of the Internet: a state-funded military project ironically lauded as an achievement of the superior efficiency of free markets. Where protectionism is concerned, Chomsky again points out with irony that there is some bitter truth in the free market rhetoric: the poor and weak must sink or swim according to market forces; but the rich and powerful must be protected against the cold winds of the market by the State. ‘Welfare for the Rich’ takes various forms: corporate bail-outs, government-funded research schemes, tax cuts for the wealthy, government aid and tax relief for business, and so on.

Secondly, Chomsky argues that no one in the know really believes that the free market and free trade are the best way forward. He seems to believe that both government and business, whatever their official free market rhetoric, tacitly accept the Keynesian truth that the State must intervene in the market to alleviate economic and social problems. In a national economy, there is need for a national government with the power to do this. But in today’s global economy, a global political structure is required for this purpose. It is commonly held that, since the global economy exceeds the control of any national government, it must be out of control. Not so, says Chomsky; unelected international bodies like the WTO and IMF actually represent what he calls “a de facto world government” who all too effectively plan and control the world economy for us. Or, more correctly, not for us, but in the interests of the ‘prosperous few’ at the expense of the ‘restless many’. So whereas commentators like Gray and Soros argue about the need for ‘global governance’, Chomsky claims that we already have it!

Thirdly, he says, ‘military Keynesianism’ is very much alive and well, since the ‘Pentagon System’ – Chomsky’s name for the military-industrial complex – constitutes a crucial internal dynamic to keep the economy sweet. In a world dominated by one superpower, the US, there can be no genuine security or strategic reasons for massive spending on defence and arms. Further, the domestic and global demand for arms is largely a created one, driven by business and economics and taking full advantage of the built-in obsolescence factor to generate continual profits and economic health.

Critical Comparison

Chomsky has been called the most important intellectual in the world today and certainly few would deny the acuteness, informed care and frequent originality of his analyses of world structures and events. As one might expect from someone whose early fame rested on his work in linguistics, the use and abuse of language is a dominant theme. Chomsky tries to expose the ways in which supposedly truthful accounts of things are actually ideological fictions concealing more unsavoury truths, which are sometimes almost the opposite of the ‘official’ version. His notion of ideology is very like that of Karl Marx: to see if what passes for truth is really a mask for vested interests.

We have already seen him at work in this way in the three propositions mentioned: (1) Under the ideological rhetoric of ‘the global free market’ lies a more complicated reality which in some ways negates the free market. (2) Rather than being beyond anyone’s control, the global economy is all too well controlled by a de facto world government. (3) Under the official ideological fiction about the need for upgrading security in a dangerous world lies military Keynesianism, powerful lobbying and ‘jobs for the boys’. Further, the arms trade, rather than supplying an independently existing demand, to a large extent creates the demand which it supplies.

Let’s critically consider Chomsky’s first proposition – that the free market, free trade agenda is something of a myth. There are certain obvious ways in which he is correct. ‘Oligopoly’ means ‘restricted competition’ and, in a world of relatively few vast multinational corporations, competition will be more restricted than in the utopian theoretical market model of many smallish competing firms. Further, the prohibitive cost of entry into some kinds of market restrict the competitive free market model still more. Again, oligopoly, in the sense of restricted price competition, is one of the most rational and riskfree ways for big corporate ‘competitors’ to behave. Also, due to the enormous costs of some research and development, cooperative joint ventures between competitors are quite common. Also quite common is the practice of owning stock in rival companies.

Concerning free trade and protectionism, it seems there are again ways in which Chomsky’s analysis is correct. While tariffs may be frowned upon, so-called ‘non-tariff barriers’ (NTBs) have by no means disappeared. Also, a free trade agenda may itself constitute a kind of protectionism, since it aims to protect the interests of those with a competitive edge or comparative advantage against barriers.

Another of Chomsky’s contentions, associated with protectionism, is his claim that, in spite of the ideological rhetoric disparaging state intervention in the market, such intervention is the norm. Chomsky does not even necessarily disapprove of this, since he feels it is the only practical way to run complex modern economies. What he disapproves of is the way that the USA, in particular, tries to hide its interventions through the ‘Pentagon System’ and through an official ideology of self-help and free markets. He also disapproves of the particular form of such interventions – frequently military and frequently geared to the rich – no doubt feeling that interventions in such things as health, housing, education and welfare would be of greater social benefit.

Where I feel that Chomsky overstates his case, or is perhaps inconsistent in presenting it, is in his failure to highlight that in recent decades many state interventions have taken the form of enforcing a free market agenda. John Gray makes the interesting point in his False Dawn: the Delusions of Global Capitalism that, since it is the natural tendency of societies to curb the excesses of market forces for social reasons, it takes a particularly strong interventionist government to force through a pure free-market agenda – and that this is largely what happened in the Thatcher-Reagan era. In the 1930s and again in the 50s and 60s, the Keynesian orthodoxy promoted a policy, broadly, of ‘being kinder to labour at the expense of capital’ because it was felt that this was the only way to restore capitalism’s viability in the face of Communist and Fascist alternatives. By the 1970s it was felt that all was not well, and in the 1980s there was the growing body of opinion that now the only way to restore capitalism’s viability was by ‘being kinder to capital at the expense of labour’. Hence many of the state interventionist policies instituted at that time, the consequences of which we are still living with, were specifically designed to unfetter market forces, as the orthodox version of things insists.

True, as Chomsky seems to feel, instead of Keynesian welfare for the poor to stimulate demand, we now had what in effect was New Right welfare for the rich to stimulate supply – a whole raft of measures designed to shackle labour and to reform union law and both to protect and unshackle capital and finance.

The overall conclusion, then, concerning the first proposition, seems to be rather paradoxical: the orthodox version is correct in claiming that the world has moved to more of a free market agenda, but Chomsky is correct in claiming that the move towards this agenda is inextricable from state intervention and ‘welfare for the rich’ and that, furthermore, more orthodox forms of state intervention continue unabated in various ‘publicprivate partnerships’ and in the ‘Pentagon System’.

The second proposition stated that market forces ruled the world and that this was the best way forward. Some, like Gray and Soros, agreed that market forces ruled but argued that this was not the best way forward, and that the global market needed more ‘global governance’. Chomsky’s rejoinder was that market forces did not rule and that we already had a ‘de facto world government’.

The question about free markets and state intervention has already been addressed. Perhaps the most interesting question about the second proposition is the nature of the global economy. Here, we can usefully distinguish four different interpretations.

The first is that the global economy is out of control. This seems quite a popular view, conjuring up images of a blind monster thrashing chaotically around, wrecking havoc and threatening global financial crisis and collapse as well as great social injustice and ecological damage. There may be truth in this contention but, more soberly stated, what it amounts to is that the global economy exceeds the control of any one nation, and so to some extent weakens the power of national governments to frame economic and social policy.

A second quite popular interpretation is what we might call the ‘conspiracy theory of the global economy’, and it is here to some extent that we can locate Chomsky. Such conspiracy theories are various and constitute some odd bedfellows. What they all have in common is the claim that the global economy is run by or in the interests of an elite. For the Leftish anarchists and eco-warriors of anti-capitalist protests, the elite is largely composed of multinational corporations, international financiers and investors and their political flunkeys (what Chomsky, who is close to this view, calls the ‘prosperous few’). For those on the far Right, the conspiracy is conducted more usually by ‘the world conspiracy of Jews’. Finally and famously, in the case of David Icke, the conspiracy is organized by blood-drinking alien lizards.

Chomsky’s own thoughtful and informed version of conspiracy theory goes something like this: (1) Due to the complexity involved, all modern economies require a large amount of intervention by governing bodies for effective functioning. (2) A national economy requires a national governing body which at least has the advantage of being democratically elected and to some extent responsive to popular pressure. (3) A global economy requires a global governing body; this is Chomsky’s ‘de facto world government’ in the shape of institutions like the WTO and IMF, freed from elected democratic control and run almost entirely by and for the ‘prosperous few’. (4) As Chomsky has put it, this is a degree of ideological mystification where it is not simply that most people don’t know what’s going on (which is usually the case) but now they don’t even know that they don’t know! Presumably, too, for Chomsky, the popular ‘out of control’ interpretation of the global economy is a useful ideological smokescreen for absolving the ‘prosperous few’ from responsibility.

A third interpretation returns us to the first ‘out of control’ interpretation with a twist. This is the argument, straight out of orthodox economic theory, that the whole point about free markets is that they are self regulating, obeying Adam Smith’s law of the ‘invisible hand’ of competition. On this view, then, what we have is a self-regulating global free market. True, no one is controlling it, but this does not mean that it is out of control because it is controlling itself.

A fourth interpretation revisits this third interpretation with another twist. This is the view of commentators like John Gray that the primary purpose of institutions like the WTO is to control the global economy by enforcing a free market, free trade agenda on it. As Gray points out, free markets don’t just happen of themselves; they need controlling bodies to enforce them. Gray is unhappy with this development for two main reasons. Firstly, he worries about whether free markets are selfregulating; self-regulation can all too easily topple into being out of control. Secondly, even where free markets are functioning the free market agenda does not work to maximize human welfare. Hence it stands in need of a different kind of ‘global governance’, one that is more responsive to the various forms of unfairness, damage and unrest caused by market forces. Can we make any sense out of this welter of interpretations? Rather hesitantly, I think we can, by suggesting that there is truth in all of them if we see them in their right relations to each other.

The global economy is ‘out of control’ in the following two senses: it is out of elected, democratic control (a major point of Chomsky’s), and also, since by their nature, self-regulating market mechanisms are volatile and imperfect (a point made by Gray, Soros and Chomsky), it forever threatens to be out of control.

Chomsky’s version of conspiracy theory in terms of a ‘de facto world government’, represented by institutions like the WTO, is, as Gray insists, largely dominated by a free market agenda: its control consists largely of trying to free up controls on global market activity. This is a point which it seems that Chomsky always rather understates in his efforts to show that things are not really as they seem or as the official ideology holds. But it is a point which can fit in well with his general slant on things. Free markets are not ideologically neutral things; they suit some people – the ‘prosperous few’ in the strongest position to take advantage of them – better than others – the ‘restless many’ for whom the damage caused by market forces can exceed the benefits from them.

It seems, too, that there is no real disagreement between Chomsky and Gray on the question of ‘global governance’. I suggested earlier that Chomsky’s rejoinder to those like Gray and Soros who spoke of the need for more global governance was to more or less accuse them of being slow on the uptake, since we already had such a ‘de facto world government’. But, stated more carefully, Gray isn’t denying that we do. He is merely saying, like Chomsky himself, that we stand in need of a different kind of global governance – one less destructive of democracy, of stability, of human happiness and the environment.

The third proposition revolved round the issue of ‘military Keynesianism’ and the role of the arms industry in the global economy. According to the orthodox version, ‘military Keynesianism’ no longer exists. Instead, the imperatives dictating massive state investment in the arms and defence industry are the need to upgrade security in a dangerous world, and giving state support to arms research and development as one of the developed world’s most lucrative export markets.

Chomsky, for his part, finds the ‘need to upgrade security’ argument frankly ridiculous in a world dominated by one superpower and its NATO allies. He therefore concludes that, beneath the rhetoric, the real agenda (of the USA in particular) is something as follows: (1) The ‘Pentagon System’ is used as a cover for the Keynesian-style process of stimulation and management of the economy through the defence and arms industry. (2) Government is influenced in this by lobbying and pressure from the military and business, who are just not interested in any possible ‘peace dividend’ following from the end of the Cold War. (3) Of course government is happy to invest massively in one of its most lucrative export markets.

Chomsky, however, adds another twist to this story. The arms export industry will be still more lucrative if a built-in obsolescence factor encouraged foreign buyers to always want the latest model of missile, tank and plane in order to ‘keep up with the Joneses’. This itself gels beautifully with the insistence on continually upgrading domestic defence, since one’s foreign buyers (who may also represent potential enemies) now constitute a greater threat since they are better armed. Thus the whole process is one largely of the arms and defence industry creating its own demand – both in terms of foreign exports and upgraded domestic security.

Chomsky sums up this dynamic as follows:

The US share in arms sales to Third World countries has reached almost three-quarters. We must therefore provide them with even more advanced weaponry, so that we can tremble in proper fear. The sale of F-16 aircraft with taxpayer-subsidised loans allows the Air Force to pay Lockheed to upgrade the aircraft and to develop the F-22 to counter the threat they pose.

(Noam Chomsky, Powers and Prospects, Pluto Press, 1997, p.124).

If the expression ‘insane merry-go-round’ comes to mind, we have to admit that, from a strictly economic point of view, it also makes a beautiful kind of sense: the arms industry represents a kind of perpetual ‘cash-cow’ which, due to its elements of built-in arms racing and obsolescence, seems capable of being milked endlessly. Further, it enables governments to kill several birds with a single stone. In the same stroke, it can address: (1) real or imaginary security and strategic issues; (2) foster a lucrative export market with apparently endless potential and help it maintain its position as market leader; (3) be used to generate civilian spin-offs (as in the case of the Internet); (4) be used as a tool for stimulating and managing the economy; (5) be used to placate powerful business and military lobbies.

In the absence of any alternative ‘cash-cow’ that can do all these things simultaneously, it would be a very unpragmatic government that did not put the arms industry near the top of its agenda.

Even if it is conceded that Chomsky is too cavalier in dismissing the real security and strategic worries in today’s world, and that superpowers do not maintain their status by resting on their laurels, I think it has to be admitted that the security worries are being inflated as an ideological cover for other agendas, such as ‘subsidising the rich’, responding to pressure groups, aiding export markets, stimulating the economy and generating civilian spin-offs in research and development. This would seem particularly true of President George W. Bush’s decision to proceed with the ‘Son of Star Wars’ defence programme – an immensely expensive initiative with a question mark hanging over its effectiveness.

Chomsky is surely right, too, that the arms industry largely creates the demand which it supplies. He is also right in maintaining that the USA, in particular, is coy about admitting its state interventions in the market.

I end on a cautiously hopeful note. Is there not perhaps an equally lucrative ‘cash-cow’ waiting in the wings that would respond to a real global demand even more than the arms industry? And one that would also fulfil many of the functions that the arms industry presently does – keeping business happy, stimulating and managing the economy, providing export (and domestic) markets, and even helping to resolve certain strategic and security problems? I refer to a serious investment in environmental technology. The assembled think tanks of governments and business can hardly be blind to this possibility. Maybe some such initiative is already being explored, however tentatively, under the very umbrella of such things as the ‘Pentagon System’.

Mike Fuller teaches philosophy at Bolton Institute. His recent book on global economics and politics is called Echoes of Utopia (Ashgate, 2000). Articles by and interviews with Noam Chomsky can be accessed on the Noam Chomsky archive on the Internet (a statefunded military project?).