excerpted from the book
The Rule of Force in World Affairs
by Noam Chomsky
South End Press, 2000, paper
A century ago, during the early stages of the corporatization
of the United States, discussion(about these matters)was quite
frank. Conservatives a century ago denounced the procedure, describing
corporatization as a "return to feudalism" and "a
form of communism," which is not an entirely inappropriate
analogy. There were similar intellectual origins in neo-Hegelian
ideas about the rights of organic entities, along with the belief
in the need to have a centralized administration of chaotic systems-
like the markets, which were out of control. It's worth bearing
in mind that in today's so-called "free-trade economy"
a very large component of cross-border transactions (which are
misleadingly called trade), probably about 70 percent of them,
are actually within centrally managed institutions, within corporations
and corporate alliances, if we include outsourcing and other devices
of administration. That's quite apart from all kinds of other
radical market distortions.
The conservative critique-notice that I am using the term
"conservative" in a traditional sense; such conservatives
scarcely exist any more-was echoed at the liberal/progressive
end of the spectrum early in the 20th century, most notably perhaps
by John Dewey, America's leading social philosopher, whose work
focused largely on democracy. He argued that democratic forms
have little substance when "the life of the country"-production,
commerce, media-is ruled by private tyrannies in a system that
he called "industrial feudalism," in which working people
are subordinated to managerial control, and politics becomes "the
shadow cast by big business over society." Notice that he
was articulating ideas that were common coin among working people
many years earlier. And the same was true of his call for the
replacement of industrial feudalism by self-managed industrial
Interestingly, progressive intellectuals who favored the process
of corporatization agreed more or less with this description.
Woodrow Wilson, for example, wrote that "most men are servants
of corporations," which now account for the "greater
part of the business of the country" in a "very different
America from the old, .. . no longer a scene of individual enterprise,
... individual opportunity, and individual achievement,"
but a new America, in which "small groups of men in control
of great corporations wield a power and control over the wealth
and business opportunities of the country," becoming "rivals
of the government itself," and undermining popular sovereignty,
exercised through the democratic political system. Notice this
was written in support of the process. He described the process
as maybe unfortunate, but necessary, agreeing with the business
world, particularly after the destructive market failures of the
preceding years had convinced the business world and progressive
intellectuals that markets simply had to be administered and that
financial transactions had to be regulated.
Similar questions are very much alive in the international
arena today: talk about reforming financial architecture, and
that sort of thing. A century ago, corporations were granted the
rights of persons by radical judicial activism, an extreme violation
of classical liberal principles. They were also freed from earlier
obligations to keep to specific activities for which they were
chartered. Furthermore, in an important move, the courts shifted
power upward from the stockholders in a partnership to the central
management, which was identified with the immortal corporate person.
Those of you who are familiar with the history of Communism will
recognize that this is very similar to the process that was taking
place at the time, very much as predicted, in fact, by left-Marxist
and anarchist critics of Bolshevism. People like Rosa Luxemburg
warned early on that the centralizing ideology would shift power
from working people to the party, to the central committee, and
then to the maximal leader, as happened very quickly after the
conquest of state power in 1917, which at once destroyed every
residue of socialist forms and principles. The propagandists on
both sides prefer a different story for self-serving reasons,
but I think that's the more accurate one.
In recent years, corporations have been granted rights that
go far beyond those of persons. Under the World Trade Organization
rules, corporations can demand what's called the right of "national
treatment." That means that General Motors, if it's operating
in Mexico, can demand to be treated like a Mexican firm. Now that's
only a right of immortal persons; it's not a right of flesh-and-blood
persons. A Mexican can't come to New York and demand national
treatment and do very well, but corporations can.
Other rules require that the rights of investors, lenders,
and speculators must prevail over the rights of mere flesh-and-blood
people generally, undermining popular sovereignty and diminishing
democratic rights. Corporations are able in various ways to bring
suits, bring actions, against sovereign states, and there are
interesting cases. For example, Guatemala, a couple of years ago,
sought to reduce infant mortality by regulating the marketing
of infant formula by multinationals. The measures that Guatemala
proposed were in conformity with World Health Organization guidelines,
and they kept to international codes, but the Gerber Corporation
claimed expropriation, and the threat of a World Trade Organization
complaint sufficed for Guatemala to withdraw, fearing retaliatory
sanctions by the United States.
The first such complaint under the new World Trade Organization
rules was brought against the United States by Venezuela and Brazil,
who complained that EPA regulations on petroleum violated their
rights as petroleum exporters. Washington backed down that time,
also allegedly in fear of sanctions, but I'm skeptical about that
interpretation. I don't think the US fears trade sanctions from
Venezuela and Brazil. More likely the Clinton administration simply
saw no compelling reason to defend the environment and protect
These issues are arising very dramatically and, in fact, obscenely
right now. Tens of millions of people around the world are dying
from treatable diseases because of the protectionist elements
written into the World Trade Organization rules that grant private
megacorporations monopoly pricing rights. So Thailand and South
Africa, for example, which have pharmaceutical industries, can
produce life-saving drugs at a fraction of the cost of the monopolistic
pricing, but they're afraid to do so under threat of trade sanctions.
In fact, in 1998 the United States even threatened to withdraw
funding if the World Health Organization even monitored the effects
of trade conditions on health. i5 These are very real threats
All of this is called "trade rights." It has nothing
to do with trade. It has to do with monopolistic pricing practices
enforced by protectionist measures that are introduced into what
are called free trade agreements. The measures are designed to
ensure corporate rights. They also have the effect of reducing
growth and innovation. And they are only part of the array of
regulations introduced into these agreements which prevent development
and growth. What is at stake is investor rights, not trade. And
trade, of course, has no value in itself. It's a value if it increases
human welfare, otherwise not.
In general the principle of the World Trade Organization,
the primary principle, and related treaties, is that sovereignty
and democratic rights have to be subordinated to the rights of
investors. In practice that means the rights of the huge immortal
persons, the private tyrannies to which people must be subordinated.
These are among the issues that led to the remarkable events in
Seattle. But in some ways, a lot of ways, the conflict between
popular sovereignty and private power was illuminated more sharply
a couple of months after Seattle, in Montreal, where an ambiguous
settlement was reached on the so-called "biosafety protocol."
There the issue was very clearly drawn. Quoting the New York Times,
a compromise was reached "after intense negotiations that
often pitted the United States against almost everyone else"
over what's called "the precautionary principle." What's
that? Well the chief negotiator for the European Union described
it this way: "Countries must be able to have the freedom,
the sovereign right, to take precautionary measures with regard"
to genetically altered seed, microbes, animals, crops that they
fear might be harmful. The United States, however, insisted on
World Trade Organization rules. Those rules are that an import
can be banned only on the basis of scientific evidence.
Notice what's at stake here. The question that's at stake
is whether people have the right to refuse to be experimental
subjects. So, to personalize it, suppose the biology department
at the university were to walk in and tell you, "You folks
have to be experimental subjects in an experiment we're carrying
out, where we're going to stick electrodes in your brain and see
what happens. You can refuse, but only if you provide scientific
evidence that it's going to harm you." Usually you can't
provide scientific evidence. The question is, do you have a right
to refuse? Under World Trade Organization rules, you don't. You
have to be experimental subjects. It's a form of what Edward Herman
has called "producer sovereignty." The producer reigns;
consumers have to somehow defend themselves. That works domestically,
too, as he pointed out. It's not the responsibility, say, of chemical
and pesticide industries to prove that what they're putting into
the environment is safe. It's the responsibility of the public
to prove scientifically that it's unsafe, and they have to do
this through underfunded public agencies that are susceptible
to industry influence through lobbying and other pressures.
That was the issue at Montreal, and a kind of ambiguous settlement
was reached. Notice, to be clear, there was no issue of principle.
You can see that by just looking at the lineup. The United States
was on one side, and it was joined, in fact, by some other countries
with a stake in biotechnology and high-tech agro-export, and on
the other side was everybody else-those who didn't expect to profit
by the experiment. That was the lineup, and that tells you exactly
how much principle was involved. For similar reasons, the European
Union favors high tariffs on agricultural products, just as the
United States did 40 years ago, but no longer-and not because
the principles have changed; just because power has changed.
There is an overriding principle. The principle is that the
powerful and the privileged have to be able to do what they want
(of course, pleading high motives). The corollary is that sovereignty
and democratic rights of people must go, in this case-and that's
what makes it so dramatic-their reluctance to be experimental
subjects when US-based corporations can profit by the experiment.
The US appeal to the World Trade Organization rules is very natural,
since they codified that principle; that's the point.
These issues, although they're very real and are affecting
a huge number of people in the world, are actually secondary to
other modalities to reduce sovereignty in favor of private power.
Most important, I think, was the dismantling of the Bretton Woods
system in the early 1970s by the United States, Britain, and others.
That system was designed by the US and Britain in the 1940s. It
was a time of overwhelming popular support for social welfare
programs and radical democratic measures. In part for those reasons
the Bretton Woods system of the mid-'40s regulated exchange rates
and allowed controls on capital flow. The idea was to cut down
wasteful and harmful speculation, and to restrict capital flight.
The reasons were well understood and clearly articulated-free
capital flow creates what's sometimes called a "virtual parliament"
of global capital, which can exercise veto power over government
policies that it considers irrational. That means things like
labor rights, or educational programs, or health, or efforts to
stimulate the economy or, in fact anything that might help people
and not profits (and therefore is irrational in the technical
The Bretton Woods system more or less functioned for about
25 years. That's what many economists call the "golden age"
of modern capitalism (modern state capitalism, more accurately).
That was a period, roughly up until about 1970, a period of historically
unprecedented growth of the economy, of trade, of productivity,
of capital investment, extension of welfare state measures, a
golden age. That was reversed in the early '70s. The Bretton Woods
system was dismantled, with liberalization of financial markets
and floating exchange rates.
The period since has often been described as a "leaden
age." There was a huge explosion of very short-term, speculative
capital, completely overwhelming the productive economy. There
was marked deterioration in just about every respect-considerably
slower economic growth, slower growth of productivity, of capital
investment, much higher interest rates (which slow down growth),
greater market volatility, and financial crises. All of these
things have very severe human effects, even in the rich countries:
stagnating or declining wages, much longer working hours, particularly
striking in the United States, cutback of services. Just to give
you one example in today's great economy that everyone's talking
about, the median income (half above, half below) for families
has gotten back now to what it was in 1989, which is below what
it was in the 1970s. It also has been a period of the dismantling
of social democratic measures that had considerably improved human
welfare. And in general, the newly imposed international order
provided much greater veto power for the "virtual parliament"
of private capital of investors leading to significant decline
of democracy and sovereign rights, and a significant deterioration
in social health.
While those effects are felt in the rich societies, they're
a catastrophe in the poorer societies. These issues cut across
societies, so it's not a matter of this society getting richer
and that one getting poorer. The more significant measures are
sectors of the global population. So, for example, using recent
World Bank analyses, if you take the top 5 percent of the world's
population and compare their income and wealth to the bottom 5
percent, that ratio was 78 to I in 1988 and 114 to 1 in 1993 (that's
the last period for which figures are available), and undoubtedly
higher now. The same figures show the top 1 percent of the world's
population has the same income as the bottom 57 percent-2.7 billion
It's quite natural that dismantling of the post-war economic
order should be accompanied by a significant attack on substantive
democracy-freedom, popular sovereignty, and human rights-under
the slogan TINA (There Is No Alternative). It's kind of a farcical
mimicry of vulgar Marxism. The slogan, needless to say, is self-serving
fraud. The particular socioeconomic order that's being imposed
is the result of human decisions in human institutions. The decisions
can be modified; the institutions can be changed. If necessary,
they can be dismantled and replaced, just as honest and courageous
people have been doing throughout the course of history.