The Social Context Reconsidered



Life cannot be captured in mathematical equations. Because of this, in democracies, determining the optimal economic order is not a matter of arithmetic but of political debate. So is decision-making about movement along the continuum. It is also a matter of finding an acceptable balance between the government and the market.


Public Choice Welfare State Free Trade Social Security System Moral Sentiment 
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Chapter 11

  1. 1.
    As said in the first chapter, moving to the left or to the right side of the continuum is a matter of normative economics, because it involves ethical and value judgments. My personal viewpoint is that people who, due to policies of moving to the right side of the continuum, are hampered from fulfilling a position in society, are threatened in their dignity. Likewise, unemployment for people who want to work can be considered as a lack of recognition of their usefulness to society. To me, we have a double problem of core values here. Firstly, increasing inequalities between people, leaving many behind, is not in accordance with the appropriate development of a civilized society. Secondly, increasing dissatisfaction with present-day liberal democratic capitalism may encourage those who are left behind to “restart history.” History has seen several examples of opportunistic politicians who succeeded in mobilizing dissatisfied masses. Concluding international treaties could be of help in this respect. As an indication that world politics, particularly the G8, takes this challenge seriously, the suggestion of the Commission on Global Governance to the United Nations to establish an Economic Security Council, which I suggest could be adapted into a Social-Economic Security Council, is certainly worth considering, not only as a sign of civilization but also from the perspective of the “self-interest of the privileged.” There is reason, however, not to be too optimistic in this respect. Even now, the United Nations has a central system to which the General Assembly, the Security Council, and the Economic and Social Council (ECOSOC) belong. The latter is supposed to deal with specific economic and social problems without “the necessary powers to manage effectively” (Taylor, P.: The United Nations and International Order, in: Baylis, J. & Smith, S., (eds.): ibid., pp. 332–335). All the more so since international organizations like the IMF, the World Bank, the WTO, and the OECD (OECD: Towards a New Global Age: Challenges and Opportunities. Policy Report, OECD, Paris, 1997) appear to pursue neo-liberal policies worldwide.Google Scholar
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    Stiglitz, J.: The Roaring Nineties: ibid., p. xii.Google Scholar
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    Stiglitz, J.: The Roaring Nineties: ibid., p. 318.Google Scholar
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    Happily, there is a ray of hope, since, particularly at the American state level, there is a growing number of grassroots organizations which are exposing the outrageous behavior of the corporate/political combination to the detriment of the American people. Through their actions, these organizations try to send a message to the market about the importance of corporate responsibility and conduct. An increasing number of companies are moving away from conventional corporate accounting, trying to include social and environmental considerations (Huffington, A.: ibid., pp. 250–257).Google Scholar
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    Peterson, W.C.: ibid. Peterson says, “If slow economic growth and stagnant real wages continue for the rest of the century, it will take some extraordinary creative and political leadership to avoid an explosion” (p. 92).Google Scholar
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    Soros observes that globalization did not cause this misery. To him, armed conflicts and oppressive and corrupt regimes are to blame for that. Therefore, while recognizing that globalization, as well as resulting in more interdependence between the countries of the world, has also increased the possibilities of internal problems in those (underdeveloped) countries, he suggests that next to the necessity of thinking out better regulations regarding the provision of collective goods (education, health care, environment, etc.), we should also find ways to improve political and social circumstances within separate countries (Soros, G.: Soros on Globalization (Dutch Translation), ibid.: pp. 31–32). In this respect, Scholte rightfully observes that globalization has not been the only force behind persistent and growing poverty, but that local social structures, national policies, natural calamities, and other forces have also been influential (Scholte, J. A.: Globalization: A Critical Introduction: ibid.: p. 217). Furthermore, Kupchan argues that the ongoing struggle between the United States and Islamic radicals is no proof of a clash of civilizations. To him, the root causes of disaffection within Islamic society and the resulting terrorism are the illegitimacy of governing regimes, clan and factional rivalries, income inequalities, poverty, and a sense of being left behind (Kupchan, C. A.: ibid., p. 70). Similarly, Lagendijk and Wiersma argue that in the longer term reducing poverty and underdevelopment, guaranteeing civil rights, combating cultural and religious contrasts, as well as the reconstruction of failed states and dispelling feelings of humiliation will be necessities for the prevention of terrorism (Lagendijk, J. and Wiersma, J. M.: Na Mars komt Venus: Een Europees Antwoord op Bush, uitgeverij Balans, 2004, p. 115).Google Scholar
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    With this paradigm, the author is attempting to bring about a synthesis between “factors that form society and personality, as well as factors that form markets and rational decision-making.” With this in mind, he adjusts the main points of the neo-classical paradigm. In the first place, the underlying principle is that people strive after “morality” as well as “pleasure.” Also, the supposition of rational decision-making is replaced by decision-making which is based primarily on values and feelings. Finally, the supposition of individual decision-making is replaced by decision-making which takes place in the context of “social collectivities” (Etzioni, A.: The Moral Dimension: Towards a New Economics, London/New York, 1988, pp. 3–5).Google Scholar
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    As for the malfunctioning of democracy, four types of criticism can be distinguished. Firstly, it is argued that democracy has become a matter of cooperation between political, corporate, and professional elites. In this respect, Huffington speaks of “a toxic marriage of money and political influence” (Huffington, A.: ibid., p. 136), whereas Myrdal labels the close connection between business leaders, politicians, universities, and other social spheres as the power oligarchy (Myrdal, G.: ibid., p. 116). Consequently, democracy is no longer connected to ordinary people. This would explain why citizens of the developed world have hardly any appreciation left for their political system (Zakaria, F.: ibid., p. 20). They feel unheard and they no longer believe that governments work in their interests. Therefore, they turn away from politics. In this respect, an “alienation index” has even been developed. Since 1960, it shows a continuously decreasing spiral from 34% in the 1960s to 63% in the 1990s (Zakaria, F.: ibid., p. 151). The American political scholar Putnam calculated that, since the 1960s, active participation in public and social activities in the United States decreased by 40% (Zakaria, F.: ibid., p. 152). People have been turning away from politics for decades already, despite increasing average wealth and political stability. The latter makes the developments even more mysterious (Zakaria, F.: ibid., p. 153). Democracy, in theory an open and accessible system, is in reality controlled “by organised or rich and fanatic minorities who protect their short-term interests, while sacrificing the future” (author’s translation) (Zakaria, F.: ibid., p. 240). and they are supported by an amazingly increasing number of lobbyists. In the United States, lobbyists, together with professional consultants, opinion leaders, and activists, all there in the name of democracy, have become a powerful elite which appears to be capable of undermining the work of the institutions of representative democracy (Zakaria, F.: ibid., p. 186), including the government itself, as all American presidents over the past decades have experienced (Zakaria, F.: ibid., p. 164). In the United States lobbying has become a $1.55 billion annual business, with 38 lobbyists for every member of congress. Many of these lobbyists have family ties with members of congress (Huffington, A.: ibid., pp. 78 and 91–96). The second type of criticism suggests what might be called an erosion of the Trias Politica, i.e., a clear distinction in society between legal, executive, and judicial powers. Contrary to the situation in the 1960s and 1970s, nowadays “ordinary” citizens (a hairdresser, a businessman, a self-employed medical specialist, or what have you) are far less represented in parliament or in the other layers of democracies. In this respect, a recent publication regarding politics in the Netherlands is rather revealing. It shows that roughly two-thirds of Dutch politicians, whether at the national, the county, or the local level, are civil servants (Westerloo, G. van: ibid.). Civil servants, depending on the government for their income, are believed to have taken over. Together with politicians they are assumed to have created a closed political circuit with policy formulation, determination, execution, and control in their hands. This circuit is thought to represent a kind of aristocracy, a caste of professional administrators. In this small and closed world of its own, maintaining political coalitions has become sacrosanct. In these same coalitions evident political blunders of the ruling elite remain without consequences in a political “sorry culture.” As a further consequence of this erosion of the Trias Politica, one can observe disappearing Weber-like hierarchical relations between those who determine policy (politicians) and those who have to execute the decisions in this respect (the bureaucracy). Politicians who try to re-establish these relations, pursuing the primacy of politics, experience worsening relations with leading bureaucrats (Nieuwenkamp, R.: ibid.) Contributing to this development is the fact that over the past few years, members of the cabinet, expecting a fresh wind, favor the appointment of outsiders to deal with their organizational and budgetary problems. The present Dutch Minister of Health appointed a top manager from the Dutch postal organization to consult on the running of Dutch hospitals. That country’s Secretary of Health asked the manager of the Dutch Golden Tulip hotel chain to consult on the financing of nursing homes (De Volkskrant, 22 June 2005). Tony Blair hired a former British president of Coca Cola to consult on the running of British schools, and a former head of the British Confederation of Industries to review the functioning of hospitals (Daily Telegraph, 9 January 2002), whereas the Chancellor of the Exchequer hired a banker to report on the economic foundations of the NHS. Also, the Irish minister of health put his confidence in a banker by appointing him as the CEO for Irish health. In general, these days leading politicians show a reverence for so-called management gurus, and, consequently, running the state or government departments has become a growing market for management consultants. The Blair government’s spending on consultants’ fees, for example, rose by 25% during the fiscal years 1998–1999 and 1999–2000, and by 50% in the following year to £550 million (Wheen, F.: ibid., p. 57). One can wonder, therefore, who really rules: politicians or technocrats. Thirdly, politics is thought to be no longer based on the wish to pursue ideals regarding the design of society. Instead, it has more to do with a person’s personal career path. It is good for your curriculum vitae to be able to mention that you are politically active. In the old days, a political appointment was a crown to one’s career. These days it seems to be a springboard to become someone important. As the Dutch political scientist Rosenthal has formulated it: members of the Dutch parliament live on politics not for politics (Westerloo, G. van: ibid., p. 204). These characteristics together have led some to label Dutch politics as a perversion of democracy (Westerloo, G. van: ibid., p. 144). The fourth type of criticism has to do with the openness of democracy. This openness makes it very easy for interest groups to contact the political level. However, the more open a democracy is, the more it is accessible for money, lobbyists, and fanatics, which, in turn may result in a loss of status (Zakaria, F.: ibid., p. 155). To restore this situation, several authors suggest protecting the political institutions from easy access by citizens and interest groups. Political institutions should for certain periods be mandated to do the job which they are there for without having constantly to react to incidental interventions. This might be called a restoration of political authority (for example: Zakaria, F.: ibid.; Cliteur, P.: ibid.). It seems to me that the four types of criticism all apply to the present-day international political economy, with the corporate elite in a position of determining cultural hegemony (Antonio Gramsci in: Ellwood, W.: ibid., p. 70). In this respect, Ellwood remarks that corporate business, through a subtle public relations policy, through manipulation of the media, and through having friends in high places [i.e., politics], has succeeded in transforming neo-liberal ideas on the world economy into a generally accepted way of life (Ellwood, W.: ibid., p. 70). Formulating it this way refers to a powerful combination of the corporate and the political elite, which is the determining factor in today’s international political economy. They hold on to each other, exchanging skills to their mutual benefit. Cabinet members hiring corporate managers to solve their organizational and budgetary problems, and corporate business hiring former political leaders in order to better be able to play the political game. 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    Lagendijk, J. and Wiersma, J. M.: ibid., pp. 71 and 98. Judging from the (sub)titles of their books, apparently American authors also believe that the United States is the losing party. Rifkin’s The European Dream has as the subtitle How Europe’s Vision of the Future is Quietly Eclipsing the American Dream; Reid’s The United States of Europe has The New Superpower and the End of American Supremacy as its subtitle, while Kupchan writes unrestrictedly on The End of the American Era.Google Scholar
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    These Europeans are supported, for that matter, by a range of American authors like Moore, Klein, Hertz, Pilger, Gates, Hertsgaard, et cetera (see the bibliography). A poll of 2003 showed that no less than 87% of Europeans believe that the United States “poses the greatest danger to world peace.” Furthermore, a 2002 Gallup International poll reports that the population in 23 out of 33 countries believe American foreign policy to negatively influence their country (Rifkin, J.: The European Dream, ibid., p. 302).Google Scholar
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    Calleo, D. P.: ibid., p. 128. To some, globalization is Americanization, because the American-led global economy “is the only game in town” (Kupchan, C. A.: ibid., p. 60). This game refers to a particular interpretation of the globalization process, promoted by Americans but at the same time disliked by non-Americans. Much of this dislike has to do with differences in cultural values and with the way Americans are trying to impose their neo-liberal views on the rest of the world. Their way of doing business may be perceived as insulting to indigenous practices. Authors like Huntington, Fukuyama, and Barber have warned about the resentment this may breed. There are even those who link the dreadful events of September 11, 2001, to the worldwide discontent with the way present-day American neo-liberal capitalism leaves many people behind, destroys their culture, ruins their environment, and rapes their dignity. To these people, the twin towers in New York were not mere buildings. They were destroyed “symbols of American capitalism” (Klein, N.: Fences and Windows, ibid., p. 235). Furthermore, Chomsky argues that the September 11 attacks were the reply of oppressed people from the Third World to centuries of American depredations (Berman, P.: Terror and Liberalism, W.W. Norton & Company, New York, 2003, p. 151). With several examples, he illustrates that, according to him, with good reason, in much of the world, the United States is regarded as “a leading terrorist state” (Chomsky, N.: 9–11, Seven Stories Press, New York, 2002, p. 23). In line with this, a poll by Time magazine in the beginning of 2003 revealed that 80% of the respondents thought the United States to be the greatest threat to peace, compared to 7% to 8% for Iraq and North Korea (Barber, B. R.: Fear’s Empire: ibid., p. 59). In this respect, it should be noted that the “war on terrorism” declared after September 11, except for its dreadfulness, is nothing new. Already in the 1950s, President Eisenhower and his staff had discussed the “campaign of hatred against us” in the Arab world. In the 1960s, President Kennedy ordered that “the terrors of the earth” must be visited upon Cuba, whereas in the 1980s President Reagan launched “a terrorist war” against Nicaragua. If we add to this the American support for the Suharto regime in Indonesia, as well as American behavior regarding East Timor, Bush’s plaintive words “why do they hate us” seem rather naïve. This is the same naïveté he demonstrated during his visit to Europe in 2001 when he spoke of “My NATO” (author’s italics) (Barrez, D.: ibid., p. 182). The reason for hatred against the United States is simply the fact that the country “has generated so much violence to protect its economic interests” (Chomsky, N.: ibid., p. 116).Google Scholar
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    An illustration for this attitude is a declaration as recently as 1999 of the then American Secretary of Defense, that the Unites States “is committed to ‘unilateral use of military power’ to defend vital interests, which include ‘ensuring uninhibited access to key markets, energy supplies, and strategic resources’ and indeed anything that Washington might determine to be within its own jurisdiction” (Chomsky, N.: ibid., p. 111). The attacks of September 11, therefore, can also be interpreted as a sign that people are no longer prepared to accept American self-interested action. In line with this, Ritzer argues that the attacks on the World Trade Center “serve as a backdrop for a wide range of expressions of outrage against the United States (Ritzer, G.: McDonaldization: The Reader, Sage Publications Inc., 2002, pp. 186–187). However, statements like the one of the American Secretary of Defense are nothing new, in fact. Already in 1948, George Kennan, a US strategic planner, is known to have said: “We have 50% of the world’s wealth but only 6.3% of its population. In this situation, our real job in the coming period [...] is to maintain this position of disparity. To do so, we have to dispense with all sentimentality [...], we should cease thinking about human rights, the raising of living standards and democratization” (Pilger, J.: The New Rulers of the World, Verso, New York, 2002, p. 98). The history of American interventions in the world delivers many examples which support this policy. In this respect, Grossman produced a list of 134 American interventions, covering 111 years between 1890 and 2001, with an average of 1.15 interventions per year. This average increased to 2.0 per year after the fall of the Berlin Wall. Furthermore, Galtung shows that the spatial patterns of the interventions changed drastically in the post-war period. Starting with East Asia (Korea, Vietnam, Indonesia, Iran), via Eastern Europe (less violent because of the presence of the Soviet Union), to Latin America (starting in Cuba and reaching most of the continent), and, finally, focused on West Asia (Palestine, Iran, Libya, Libanon, Syria, Iraq and Afghanistan). Although the argument for these interventions was always the defense of democracy, human rights, and freedom, they somehow always ended up in securing free trade markets (Sardar, Z. and Davies, M.W.: Why do People Hate America? Icon Books, 2002, pp. 67 and 71. Also Lagendijk and Wiersma point out that in the United States “values” and “interests” appear to coincide (Lagendijk, J. and Wiersma, J. M.: ibid., p. 30)). After all, if democracy, freedom, and human rights had been the motives for intervention, why, then, did the Americans support the Greek colonels, the Argentine generals, the shah of Persia, Pinochet of Chile, and Marcos of the Philippines? (Barber, B. R.: Fear’s Empire, ibid., p. 130) Why did they assist in the removal of Mossadegh in Iran, Arbentz in Guatamala, and Allende in Chili? And why did they invade the Dominican Republic and Grenada?).Google Scholar
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    Firstly, despite the fact that in November 1999 the General Assembly of the United Nations passed a resolution with 163 countries in favor, saying that outer space should be reserved for peaceful purposes, the United States, together with Israel, abstained. Bush wanted to have a new defense missile operational in 2002, thus tearing up the 1972 arms control treaty with the Russians. Since Russia was no longer a threat, the new motive became the presence of so-called “rogue states.” Publicly expressed concerns (Russia, China, Sri Lanka, and Canada) about the prospect of an arms race in space did not help. Secondly, the United States walked out on a landmine prohibition conference in Canada in 2000, saying that they still needed to lay mines in Korea. Consequently, a proposed treaty could not be realized. Thirdly, the United States wanted American soldiers, exclusively, to be exempted from trial by a proposed international criminal court. Here, Russia and China took the same position (Halper, S. and Clarke, ibid., p. 123). Finally, the United States withdrew from the Kyoto agreement directed at a reduction of carbon dioxide emissions. Each withdrawal is, according to Neale, an illustration of US determination to dominate the world (Neale, J.: ibid., chapter 7; also, Moore, M.: Stupid White Men, ibid., p. 183).Google Scholar
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    A U.S. State Department poll of 1999 showed that 78% of Germans were positive about the United States. Shortly after the war on Iraq had started, this figure dropped to 38%. In France, only 37% of respondents were positive about the United States in 2004, down from 62% in 1999 (Reid, T. R.: ibid., p. 24).Google Scholar
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    Sardar, Z. and Davies, M.W.: ibid., p. 194. Furthermore, the American Hertsgaard observes that the Americans, only 14% of whom have a passport, hardly know anything about the rest of the world because they are neither interested nor taught to know. As an example: a 1995 test among high school students about to graduate revealed that more than half of them had never heard of the Cold War (Herstgaard, M.: ibid., p. 56). This also applies to over one-third of the members of Congress (Gates, J.: ibid., p. 193). In this respect, a poll in 2002 among Americans aged 18–24 revealed that 83% could not find Afghanistan on a map, whereas 85% and 69% could not identify Israel or the United Kingdom, respectively (Petras, K. and Petras, R.: Unusually Stupid Americans:A Compendium of All-American Stupidity, Villard, New York, 2003, p. 7).Google Scholar
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    Hertsgaard, M.: ibid., p. 196. This same self-esteem also explains the ease with which Bush managed to pass the Patriot Act of October 2001, turning 20 million non-American inhabitants into outlaws with a simple signature. The law, which intrudes on half of the American Constitutional rights, was accepted by 98 votes to 1 in the Senate and opposed by only 66 out of 435 votes in the House of Representatives. Furthermore, opinion polls revealed that over 70% of the American population agreed (Hertsgaard, M.: ibid., pp. 52–54). Regarding American arrogance, it should be taken into account, however, that there is a difference between America and the Americans. They are not automatically the same. The American government, the military, and the official economic institutions are the ones who determine American policy. This makes the United States a country that is ruled by an elite, preaching democracy worldwide, but not living up to that for its own citizens. Consequently, most Americans do not vote. In a world ranking of developed capitalistic democracies regarding participation in elections, the country is positioned at number 114 (Hertsgaard, M.: ibid., p. 162). Americans feel alienated from the political system, which they rightfully believe to be in the hands of the rich and powerful. And if we add to this the American belief that open markets are an antidote to the terrorists’ violent rejectionism and that we have to “fight terror with trade” (Klein, N.: Fences and Windows, ibid., p. 239), or, even stronger, that “you’re either for free trade—or for Al-Quaeda” (a conclusion drawn by Palast from a speech delivered by Bush’s “globalization czar” to a meeting of CEOs shortly after the events of September 11, in: Palast, G.: ibid., p. 165), it may well be that Fukuyama is completely wrong with his conclusion that we have reached the end of history. Instead, history may well be restarted. For Americans at large this will come as a surprise, not because they are morally corrupt, but because they simply are not informed. And it is unlikely that they will be informed objectively, since the highly monopolized press is part of the American establishment, which is courting the ruling American elite (Hertsgaard, M.: ibid., pp. 90–111). Since around the turn of the millennium, the global media market, through mergers, acquisitions, and joint ventures, has become dominated by ten trans-national corporations—Time Warner, Disney, Bertelsmann, Viacom, Tele-Communications Inc., News Corporation, Sony, Seagram’s (formerly Universal), General Electric (formerly NBC), and Dutch Philips (formerly Polygram). This is in line with Hutton’s observation that, for example, 57% of the New York Times and 52% of the Washington Post are “owned by institutional investors whose priority is shareholder value” (Hutton, W.: The World We’re In, ibid., p. 176). Contributing to a one-sidedly informed American public is the fact that, in 2000, only six corporations accounted for 50% of media outlets, down from 50 in the mid-1970s (Gates, J.: ibid., p. xxi). In turn, this is in line with Neale’s observation that the US media have to lie, because there is “a moral gulf between the ruling class and working America.” If the truth were told, most Americans would be outraged, he assumes (Neale, J.: ibid., p. 173). According to Todd, this current American behavior cannot last much longer. The essence of his explanatory paradoxical model is that, if the rest of the world discovers the advantages of democracy and learns that it can do without the United States, the latter country will not only be inclined to lose its democratic principles, but will also discover that it cannot do without the rest of the world economically. The spread of liberal democracy and peace would be a threat to the United States. The country, because of its very high consumption level, is already very dependent on the rest of the world and has, therefore, an interest in a certain disorder in order to justify its political and military power (Todd, E.: ibid.).Google Scholar
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