https://chomsky.

info/20070402/

On Capitalism, Europe, and the World Bank, Noam Chomsky

interviewed by Dennis Ott chomsky.info

ZNet, April 2, 2007

Noam Chomsky: Those are traditional questions in economics. Its part of Marxs reasoning about why
theres going to be a continuing crisis of capitalism: that owners are going to try to squeeze the work
force as much as possible, but they cant go too far, itll be nobody to purchase what they buy. And its
been dealt with over and over again in one or another way during the history of capitalism; theres an
inherent problem.

So for example, Henry Ford famously tried to pay his workers a higher wage than the going wage,
because partly on this reasoning he was not a theoretical economist, but partly on the grounds that if
he doesnt pay his workers enough and other people wont pay their workers enough, theres going to
be nobody around to buy his model-T Fords. Actually that issue came to court in the United States,
around 1916 or so, and led to a fundamental principle of Anglo-American corporate law, which is part of
the reason why the Anglo-American system is slightly different from the European social market system.
There was a famous case called Dodge v. Ford. Some of the stockholders of the Ford motor
company, the Dodge brothers, brought Henry Ford to court, claiming that by paying the workers a
higher wage, and by making cars better than they had to be made, he was depriving them of their
profits because its true: dividends would be lower. They went to the courts, and they won.

The courts decided that the management of the corporation has the legal responsibility to maximize the
yield of the profit to its stockholders, thats its job. The corporations had already been granted the right
of persons, and this basically says they have to be a certain type of pathological person, a person that
does nothing except try to maximize his own gain thats the legal requirement on a corporation, and
thats a core principle of Anglo-American corporate law. So when, say, Milton Friedman points out that
corporations just have to have one interest in life, maximizing profit and market share, he is legally
correct, that is what the law says. The reason the Dodge brothers wanted it was because they wanted
to start their own car company, and that ended up being Dodge, Chrysler, Daimler-Chrysler and so on.
And that remains a core principle of corporate law.

Now, there were modifying traditional decisions, which said that a corporation is permitted legally that
means, the management is permitted legally to carry out benevolent activities, like to join the
Millennium Fund or something, but only if it improves their humanitarian image and therefore increases
their profit. So a drug company can give away cheap drugs to the poor, but as long as the television
cameras are on; then its still legal. And in fact, theres an important decision by an American court,
which is quite intriguing. It urges corporations to carry out benevolent activities; it says and Im quoting
it now or else an aroused public may figure out what corporations are up to, and take away their
privileges because after all, theyre just granted by the government, theres nothing in the constitution,
theres no legal basis for them, its a radical violation of classical liberal principles and free market
principles. Theyre just granted by powerful institutions, and an aroused public might see through it
and take it away. So you should have things like the Gleneagles conference once in a while, which is
mostly fake, but looks good, and this is basically the court decision.

How does the social market system differ? Theres no principle of economics or anything else that says
first of all that even says that corporations should exist, but granting that they exist that they should
be concerned only with the maximization of gain for their stockholders instead of whats sometimes
called stakeholders: the community, the work force, everything else. As far as economics is
concerned, its just another way of running things. And the European system to an extent has
stakeholder interest. So, say, Germany has a theoretical form of co-determination mostly theoretical,

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but some degree of worker participation in management, acceptance of unions, thats been a partial
move towards stakeholder interest. And the governmental social democratic programs are other
examples of it.

The United States happens to be pretty much at the extreme of keeping to the principle that the
corporate system must be pathological, and that the government is allowed to and glad to intervene to
uphold that principle. The European system is somewhat different, the British system is somewhat in
between, and they all vary.

Like during the New Deal period in the United States and during the 1960s, the United States veered
somewhat towards a social market system. Thats why the Bush administration, who are of extreme
reactionary sort, are trying to dismantle the few elements where the social market exists. Why are they
trying to destroy social security, for example? I mean, theres no serious economic problem, its all
fraud. Its in as good fiscal health as its ever been in its history, but it is a system which benefits the
general population. It is of no use at all to the wealthy. Like, I get social security when I retire, but Ive
been a professor at MIT for fifty years, so I got a big pension and so on and so forth, I wouldnt even
notice if I didnt get social security. But a very large part of the population, maybe 60% or something like
that, actually survive on it. So therefore its a system that obviously has to be destroyed. Its useless for
the wealthy, its useless for privilege, it contributes nothing to profit. It has other bad features, like its
based on the principle that you should care about somebody else, like you should care whether a
disabled widow has food to eat. And thats hopelessly immoral by the moral principles of power and
privilege, so youve got to knock that idea out of peoples heads, and therefore you want to get rid of the
system.

And in fact a lot of whats called ridiculously conservatism is just pathological fanaticism, based on
maximization of power and wealth in accord with principles that do have a legal basis.

But to get back to your original question, these are just choices. I mean, there are choices as to whether
corporations should even exist, or why theyre even legitimate. Theyre just tyrannies. Why should
tyrannies exist? They are not supposed to exist in the political realm, theres no reason why they should
exist in the economic realm. But if they do, they could be imagined in all sorts of different ways, and
theres constant class struggle and pressures that lead to one or another outcome.

I mean the European system developed out of its complex historical background. Im sure you know the
original welfare states were basically Germany in the Bismarckian period not because Bismarck was
a big radical. And in fact to an extent, the European systems reflect the fact that they grew out of a
feudal system. A feudal system is non-capitalist. In a feudal system everyone has a place maybe a
rotten place, but some place. So the serf has some place in the feudal system, they have some rights
within that place in the system.

In a capitalist system, you dont have any rights. And in fact when modern capitalism developed in the
early 19th century this is post-Adam Smith or anything like that, but Ricardo and Malthus and so on
their principle was pretty simple: you dont have any rights. The only rights a person has are what they
can gain in the labor market. And beyond that, youve no right to live, youve no right to survive. If you
cant make out on the labor market, go somewhere else. And in fact they could go somewhere else, they
could come here and exterminate the population and settle here. But in Europe, you couldnt do that, so
some remnants of the whole feudal system and conservative structures and so on did lead to after all,
Europe had huge labor movements, the German social democratic party grew out of very powerful
movements, and they just forced the development of what became social market systems.

After World War II, it was a very complex situation; the Second World War had a highly radicalizing
effect, and the anti-fascist resistance had plenty of prestige. It was pretty radical; it was calling for quite

radical
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radical democracy its sometimes called communism, but it often had nothing to do with that. Its just
very radical democracy, workers control and so on and so forth, and it was so wide-spread, some kind
of settlement had to be made with it.

If anyone were to write an honest history of post-WWII period, the first chapter would be devoted to how
the British and American forces liberating Europe, one of the first things they did was to destroy the
resistance, and to undermine the labor movement, and to try to beat back the efforts to create radical
democratic programs. It varied in different countries but happened everywhere. Like in Italy, it started
happening in 1943, since they moved in. By the time, the British and American forces reached Northern
Italy, it had been pretty well liberated by the resistance, they had driven out the Germans mostly, and
they had established their own institutions: worker-managed industrial systems, cooperatives, and so
on. The British and Americans were totally appalled, they had to dismantle the whole thing and restore
the rights of owners, meaning restore the traditional fascist system. An in fact, in the case of Italy, its
particularly interesting. It continued at least into the 1970s. Italy was the main center of CIA subversion,
well into the 1970s, but it happened everywhere else, too. In Greece, there was a war to destroy the
resistance; they killed about a 150,000 people, and ended up restoring something like the traditional
fascist structure.

Not long after the United States strongly supported the first restoration of actual fascism in Europe, and
continued to support it, it was overthrown by the Greeks. And elsewhere it took different forms. In
England and the United States, there were similar things happening. The population was also
radicalized, and there had to be some adaptation to them, so you get the welfare state periods. But this
is just the constant flux of struggle and conflict internal to hierarchic societies. Theres no right answer
to it.

DO: In a commentary on ZNet, John Feffer praised the EU for being more democratic, more economically fair-minded, more
environmentally conscious, and more diplomatically sensitive than the U.S.[3] However, many European dissidents criticize
the project as an attack on democracy, and as pushing forward militarization and the dismantling of the welfare state in the
member countries; in similar spirit, you described it as a central banker system.[4] What is your view from the American
perspective on the emerging superpower Europe?

NC: Theres no particular American perspective I mean, there is an American elite perspective, which
is not mine. The general idea of European unity is a good idea. I think the world should be federalized in
some sense, and the erosion of the nation-state system is a good thing. Nation-state systems basically
arose in Europe in their modern sense, and theyre extremely unnatural social organizations. They had
to be imposed on the populations by violence, extreme violence. Just look at the history of modern
Europe, its a history of savage wars and destruction going back centuries. In the 17th century and the
Thirty Years War, probably forty percent of the population of Germany was wiped out.

And the only reason it stopped in 1945 is because of a common realization that you just cant do it
anymore; the next war is going to destroy everything, we developed means of savagery that are too
great to be employed. So therefore we have whats called a democratic peace by political scientists.
Probably the main factor in it is just that the means of destruction are so enormous that powerful states
cant go to war with each other, the war is the end.

And then you get steps towards integration. Some of it is healthy, some of it is unhealthy; its a mixture.
So, the role of the Central Bank in Europe, which you mentioned, is very reactionary. In fact, even
American conservatives criticize them, as granting far too much authority to a wholly undemocratic
institution; its just not answerable to the public. Thats a form of autocracy that doesnt exist in the
United States; theres the Federal Reserve, but it has nothing like the power of the European Central
Bank. In principle at least, its under some form of democratic control limited, for all sorts of reasons,
but some form. And, in fact, its commonly argued by economists that part of the reason for the
sluggishness its exaggerated, but the partial sluggishness of the European economy is just that the
Central Bank decisions tend to discourage growth, and theyre not under public control.
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Well, thats a negative aspect. A positive aspect is that theres some erosion of the extremely
dangerous nation-state system. In fact, one of the consequences which in my view at least is a
healthy one is a degree of regionalization throughout much of Europe. That is, a revival of a degree of
local autonomy, of regional cultures, of regional languages, and so on. So like in Spain, theres a fair
amount of autonomy in the Catalan area, the Basque area, theres similarly in others a revival of the
languages A lot of it is, I think, an extremely healthy development.

So for example, I happened to visit Barcelona, shortly after the Franco period, and then ten years later.
And the differences were remarkable. For one thing, you heard Catalan in the streets, which you hadnt
heard before. And for another thing, there was just a revival of cultural practices and so on. You know,
people flocking to the main cathedral on Sunday morning, with dancing and traditional singing and so
on. Thats all fine, you know. It revives or gives some significance to life. And it has its negative aspects,
too. It means harsh discrimination against Spanish workers who happen to be working in Catalonia. I
mean, lifes a complicated affair.

But all of these things are happening, and some of them are healthy and should be encouraged, others
not. I think, say, the French vote on the European constitution was basically a class vote. I mean,
working people and peasants could see perfectly well that the constitution was an instrument of class
warfare which is going to harm them by imposing neo-liberal conditions and undermining the social
market from which they benefit.

There were also other elements; there were racist elements. The opposition in continental Europe to
bring in Turkey you can hide it in all sorts of nice terminology, but its fundamentally racist. I mean,
Germans dont want to have Turks lurking around in the streets. Europe has quite a tradition of racism,
no need to talk about it.

So its a complex web of concerns. In general, I think that moves towards European integration are a
good idea. Extending the Union to the East is again a complicated matter. US elites are strongly in favor
of it. But thats because theyve always been concerned that Europe might move off into the wrong
direction, out of US control. Thats been a big concern since the Second World War. Europes economy
is at least on a par with the United States, its an educated population, a larger population. Except in the
military dimension, its a counterpart or even superior to the United States, and so it could move off on
its own. And bringing in the peripheral states, the former East European satellites, tends to dilute the
strength of the core of the European commercial-industrial economic center, namely France and
Germany, and to bring in countries that are more subject to US influence. So it might undermine moves
towards European independence.

A lot of the things that are going on in the world are similar. Like, take the Iraq war. Im sure that a large
part of the purpose of the Iraq war is with an eye on Europe and North East Asia. I mean, if the United
States can control the worlds energy resources, then it has what George Kennan 50 years ago called
veto power over what competitors can do. And the more astute political analysts have pointed that out
pretty openly, like Zbigniew Brzezinski. He wasnt particularly in favor of the war, but he said that it will
give the United States critical leverage over European and Asian competitors. Thats part of the things
that happen in the world.

In fact, its not too well known, but the expansion of NATO to the East by Clinton was an explicit
violation of promises, formal promises made to Gorbachev in, I think, 1990 by George Bush Nr. One.
Gorbachev agreed to the unification of Germany on condition that NATO not expand to the East. For
Russia to agree to German unification is a very hazardous step. I dont have to run through it, but the
history of the past century explains why. But they did agree on the condition that NATO not expand to
the East. Clinton quickly backed off on that commitment and did expand NATO to the East, which is a
tremendous strategic threat to the Soviet Union. And it caused the Russians to change their military
doctrines. Russia had previously adopted the NATO doctrine of first strike with nuclear forces, even

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against non-nuclear states. But in the early nineties, they dropped it. But once NATO was expanded to
the East, they reinstated it. So now we have superpowers facing each other with first-strike strategic
options and missiles on hair-trigger alert practically a recipe for global disaster.

So lots of things are involved in these decisions.

DO: Last years appointment of Paul Wolfowitz as President of the World Bank caused angry reactions all over the world,
even some irritations in the Western countries. Is there any detectable change in the World Banks policy since Wolfowitz has
taken office, and what is the signal the Bush administration has sent to the world by appointing this controversial figure to the
institutions head?

NC: Unlike most of my friends, I was in favor of that appointment. The reason is pretty simple: I think he
can do much less damage in the World Bank than in the Pentagon. So getting him out of the Pentagon
almost anywhere is a good decision. In the World Bank, I suppose hell be a bureaucrat, like other
bureaucrats.

I mean, the only record he has thats relevant is his record in Indonesia, which, in fact, his supporters
bring up. They say, you know, he has an experience with development, look at his role in Indonesia, and
so on

What was his role in Indonesia? He was one of the strongest and most vocal supporters of one of the
worst murderers and tyrants of the late 20th century. Human-rights activists in Indonesia cant even
remember a case where he said a word about human rights, or about democracy. He was just a strong
supporter of the murderous, brutal tyrant and aggressor Suharto. And in fact he remained so, even after
the Indonesians had finally thrown him out.

They claim that his task in the World Bank is supposed to be to root out corruption thats the prime
task thats been assigned to him. Suharto was the most corrupt dictator of the late 20th century. I mean,
there is a monitor of corruption, Transparency International, a British-based institution. About two years
ago, they ranked regimes in terms of corruption: Suharto was far in the lead, way beyond Mobutu and
others way below. And thats Wolfowitzs favorite. So, based on those credentials delight with
corruption, concentration of wealth, tyranny, human-rights violations, destruction of democracy hes
the candidate for the World Bank.

Will he do any worse than anyone else? My guess is: probably not; hell be a bureaucrat like other
bureaucrats. So far, theres no indication of any shift in World Bank policy that Ive seen, and I wouldnt
particularly expect any.

References

[1] Fight the Power, Noam Chomsky interviewed by Ian Rappel, Socialist Review (online), July 2005.

[2] Quoted in Arne Daniels, Stefan Schmitz, and Marcus Vogel, Wir alle sind Heuschrecken, stern
20/2005, p. 24 (interviewers translation).

[3] John Feffer, Europe as Number One?, ZNet (online), May 26, 2005.

[4] Noam Chomsky and David Barsamian, Propaganda and the Public Mind, Cambridge, Mass.: South
End Press, 2001, p. 51.

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