CORPORATIONS ARE NOT HUMANS : NOT EVEN CLOSE---Episode 13

                              ECONOMIC DEMAGOGUERY---continued

   A belief in the possibility of unlimited growth is the very foundation of the ideological doctrine of corporate libertarianism, because to accept the reality of physical limits is to accept the need to limit greed and acquisition in favor of economic justice and sufficiency. This would require a fundamental reorientation of economic priorities to focus on equity rather than growth. 
   The propensity of neoclassical economists to choose their assumptions to fit their conclusions is revealed with particular clarity in the computer simulations they use to demonstrate the economic benefits of lowering trade barriers. During the public debates on the North American Free Trade Agreement ( NAFTA ) , the proponents of the agreement aggressively brandished the results of computer simulations, known as general equilibrium models, as proof that NAFTA would create large numbers of new jobs for each of the participating NAFTA countries : Canada, Mexico, and the United States. 
   Economist James Stanford examined the models used to generate these projections and found that each one incorporated assumptions from classical trade theory sharply at odds with economic reality. To illustrate the contradictions, he related the following hypothetical discussion between an auto worker in the midwestern United States and one of the pro-NAFTA economic modelers. The worker related to the modeler her fears that : 

    If NAFTA is approved, Ford will surely move its Taurus plant to Mexico where it can hire workers for a tenth of my pay with no independent union and export cars back to the United States. With the labor market already depressed in this part of  the country I don't see any prospect of finding a job at comparable pay.

   The economic modeler, looking surprised, assures her that he is an expert on the subject of trade and that her fears are entirely unfounded: 

     Don't worry. I've constructed a computer simulation that shows you will actually benefit from the trade agreement because of the new jobs NAFTA will create in America. Here's how it works. In my model I assume capital is immobile. Therefore, Ford cannot move its plant to Mexico. Nor would it want to, because I assume unit labor costs are the same in both countries and in my model Americans have a clear preference for U.S.-made products, even if they are more expensive.
   My model also assumes full employment and specifies that anything imported to the U.S. from Mexico must be balanced by American exports, so new export industries will necessarily spring up here to replace any industries that might be displaced by Mexican imports. Since you earn above-average wages at Ford, you obviously possess valuable skills. With full employment you will certainly find another job very shortly in one of these new export industries, probably with higher pay than your current job. So NAFTA will be great for you. 

   A worker confronted with such an explanation might conclude that the economic modeler had just arrived from an alien planet with little knowledge of affairs on Earth. Although the discussion is hypothetical, the assumptions articulated by the economist (in bold type identification) are not. Each of them is built into one or more of the economic models that trade experts used to prove that the United States would realize employment gains from NAFTA. In comparing the models and their results, Stanford found a direct relationship between unrealistic assumptions and favorable job projections---the less realistic the assumptions, the more optimistic the projections. The more realistic models predicted either negative or negligible economic consequences for at least one of the partners.
   Those who use these models to press their case make no mention of the underlying assumptions. The misrepresentations are so flagrant and persistent that one sometimes suspects an intent to misinform the public. For example, during the NAFTA debates, the unabashedly pro-free trade New York Times took the unusual step of presenting a trade economics primer on its front page. The primer provided a textbook explanation of the theory of comparative advantage to bolster its editorial position in support of the NAFTA legislation. No mention was made, however, of the underlying assumptions of the theory, let alone of how those assumptions diverge from reality. Letters submitted by readers to the editor of the New York Times pointing out the omission were not printed. 
   Those who engage in such distortion lend legitimacy to flawed economic policies that advantage the greediest among us to the disadvantage of the rest. 


      HOW THE CORPORATE LIBERTARIANS JUSTIFY THE
                                              INJUSTICE 

   The moral philosophers of market liberalism perpetuate similar distortions by neglecting the distinction between the rights of property and the rights of people. Indeed, they equate the freedom and rights of individuals with market freedom and property rights. The freedom of the market is the freedom of those with money. When rights are a function property rather than personhood, only those with property have rights.

   It is a basic premise of democracy that each individual has equal rights before the law and an equal voice in political affairs --- one person, one vote. We can rightfully look to the market as a democratic arbiter of rights and preferences only to the extent that money and property are equitably distributed.  Although a market can allocate efficiently with less than equality, when 358 billionaires enjoy a combined net worth of $760 billion---equal to the net worth of the poorest 2.5 billion of the world's people --- the market is neither just nor efficient and it loses all legitimacy as a democratic institution. 
   Publications such as Fortune, Business Week, Forbes, The Wall Street Journal, and The Economist---all ardent advocates of corporate libertarianism --- rarely if ever praise an economy for its progress toward eliminating poverty or achieving greater equity. Rather, they regularly evaluate the performance of economies by the number of millionaires and billionaires they produce, the competence of managers by the cool dispassion with which they fire thousands of employees, the success of individuals by how many millions of dollars they acquire in a year, and the success of companies by the global reach of their power and their ability to dominate global markets. 
   Take for example, the cover story of the July 5, 1993, issue of Forbes, trumpeting the extraordinary accomplishments of the free market under the banner "Meet the World's Newest Billionaires" :

     As disillusion with socialism and other forms of statist economics spreads, private, personal initiative is being released to seek its destiny. Wealth, naturally, follows. The two big openings for free enterprise in this decade have come in Latin America and the Far East. Not surprisingly, the biggest clusters of new billionaires on our list have risen from the ferment of these two regions. Eleven new Mexican billionaires in two years, seven more from ethnic Chinese. 

   Taking a slightly more populist view, Business Week presented a special report titled "A Millionaire a Minute" in its November 29, 1993, issue. It included this breathless account of hat the free market has accomplished in Asia : 

     Wealth. To most Asians just one generation ago, it meant moving to the U.S.----or selling natural resources to Japan. But now, East Asia is generating its own wealth on a speed and scale that probably is without historical precedent. The number of non-Japanese Asian multimillionaires is expected to double to 800,000 by 1996. . . East Asia will surpass Japan in purchasing power within a decade. And with the savings increasing $550 billion annually it is becoming the world's biggest source of liquid capital. "In Asia," says Olarn Chaipravat, chief executive of Siam Commercial Bank, "money is everywhere." . . . There are new markets for everything from Mercedes Benz cars to Motorola mobie phones to Fidelity mutual funds. . . To find the nearest precedent, you need to rewind U.S. history 100 years to the days before strong unions, securities watchdogs and antitrust laws. 

   Such stories do not simply glorify the pursuit of greed, they perversely elevate it to the level of a religious mission. Never mind that although a few Asians have made vast fortunes and a tiny minority of Asians have risen to the overconsumer class, the suffering of the 675 million Asians who live in absolute poverty continues unabated. In a special 1994 issue, "21st Century Capitalism," Business Week confirmed that market economics is a class issue and that corporate libertarians are clear as to whose class interests they are advancing : 

     The death throes of communism clearly gave birth to the new era, leaving most nations with only one choice ---to join. . . the market economy. . . Almost 150 years following the publication of the Communist Manifesto, and more than half a century after the rise of totalitarianism, the bourgeoise has won. 

   It seems the corporate libertarians are a god deal more concerned with making money for the rich than with meeting human needs. Even the oft-cited claim of neoclassical economics to "value-free objectivity" supports this bias as it rests on the questionable premise that a decision is objective and value free if it is based solely on financial return. Never mind that such calculations almost always work to the advantage of those who have money to which the returns are being calculated at the expense of those without money.