Thoughts on the Revolutions of 1848

(Photo: Barricade Rue Soufflot by Horace Vernet)

Revolutions and Economics

Revolutions are caused and driven by economics, and the Revolutions of 1848 are no exception. The Agricultural Revolution, the French Revolution, the Industrial Revolution, the Dot Com Revolution: nearly all revolutions are economic. In the case of 1848, it was the economic factors that caused the social and political upheaval that we now call the Revolutions of 1848.

One of the economic factors were increased agricultural productivity combined, ironically, with poor harvests. Technological improvements in farming meant less manpower was needed on the farm. Specifically, from the 1830s and 1840s, Prussia, Saxony, and other German states reorganized agriculture, introducing sugar beets, turnips, and potatoes, yielding a higher level of food production that enabled a surplus rural population to move to industrial areas. Later, however, a series of poor harvests that drove hungry farmers to join the surplus farming populations to seek food and employment in the urban areas of Europe. The infamous potato light of Ireland actually affected many places in northern Europe as well as the Czech region of Central Europe. The Rhineland had drastic shortages of rye and, these combined shortages then also increased the prices for food in Europe according to the economic principles of supply and demand.

The increased urbanization also served the needs of increasing industrialization in Europe as well. Urban workers labored long hours with little or no days off in order to eke out a basic living. Child labor in the mills and factories, earning a fraction of their adult counterparts’ wages. Extremely unsafe working conditions, with insufficient access to fresh air, sanitary facilities, and breaks.

While historians usually avoid using the term Industrial Revolution in France because of the slow development, there was significant growth in railroads and banking (Banque de France). France became a luxury location, fueling perceptions of class inequality. Belgium was the second most industrializing state next to the United Kingdom, and the German states had truck line linking all major cities even in the absence of a central government.

In the German states, the industrial revolution in the textile and railroad industries created an economic boom for the nascent middle class of managers and engineers. The rising middle class had rising economic and political expectations that blossomed further with the Zollverein starting in 1834. Thus, the political expectations versus the political realities contributed to the Revolutions of 1848 in the German states.

These agricultural and industrial economic factors thus bred dissatisfaction with the political leadership in Europe and demands for more participation in government and democracy. The governments of Europe affected were authoritarian monarchies, Sicily, France, Austro-Hungary, the various Germanies, etc. It is worth noting that the United Kingdom, the most democratic government in Europe, did not have a Revolution in 1848; the other non-revolution that stands out is Russia. As has been said, Russia did have a Revolution of 1948, but it happened in 1905.

Theoretical Models of Revolution

There are many theories of how and why revolutions happen. One of the most read theories is “Anatomy of Revolution” by Crane Brinton. In 1938, Brinton outlining the uniformities of political revolutions: the fall of the Old Regime, the rise of revolutionaries, moderates share power with radicals, radicals achieve total power and the corresponding reign of terror, then the convalescence stage. This model has also been described as the fever model: incubation, symptomatic, crisis, and convalescence. Antelope Yunglang has a very pro-revolutionary model called the Four Stages of the Revolution that identify the Insurrection Stage, Maintenance Stage, Development Stage, and the Final Period.

In addition to Brinton, Fever Model, and Yunglang, there is also the four-stage Common Process Model.  The “common process” holds that revolutions begin with (1) mobilization of liberals and nationalists, (2) these people win success and political concessions initially, (3) tensions within ranks lead to splits between moderates and radicals, (4) making a counterrevolution possible.

Both the Revolutions of 1848 in France and the German states fit the common process model well, though it perhaps is most fitting to the French experiences of 1848:

In France, liberals and nationalists rose up in February, created a provisional government, began to disagree, and then the conservatives and moderates won the national election in December. The election of Louis Napoleon effectively ended the Revolution of 1848 in France.

In the German states, the March Days led to the creation of the Frankfurt Assembly in May of 1848. This a primary distinction between the two revolutions. In France, the Provisional Government was, well, the government. Louis Philippe had abdicated and gone into exile. In the German states, the revolutionaries never took control of the Prussian, Austrian, or other German governments. While the revolutionaries won success and political concessions initially, the inability of delegates to become the legitimate government ended the revolution at that point. The Stage Three of the Common Process (tensions between moderates and radicals) was meaningless because the moderates and radicals never achieved the power of the purse or the power over the army in the German states. Thus, there was no need for a counterrevolution because the revolution stalled after Stage Two. The withdrawal of the Austrian delegates from the Frankfurt Assembly, the October Declaration by Kaiser King Frederick William IV of Prussia, and the arrest of the remaining members of the assembly in Stuttgart by Imperial soldiers effectively ended the German Revolution of 1848.

Success or Failure?

While historians have stated that over 50 countries were affected by the Revolutions of 1848 which began in Sicily in January, then spread across Europe after the more significant February revolution in France. However, the major revolutions only occurred in France, the German states, and the Austrian Empire. Major revolutions in 3 out of 50 countries is hardly a spectacular success. A monarchy in France under King Louis Philippe was ultimately replaced with an Empire under Louis Napoleon. Hungarian rebellions in the Austrian Empire achieved a name-change; The Austrian Empire became the Austro-Hungarian Empire. The proposed new Germany was rejected by the Junkers and ultimately by Prussian Kaiser Frederick William as well.

The Frankfurt Assembly of German states failed over the Greater or Lesser Germany question as well as the delegates of money, land, or army (John Merriman, 1996; Mike Rapport, 2008). Revolutions need armies and money, as well as ideas. The revolutionaries of 1848 failed to control the ‘power of the purse’ in both German and Austria. In France, the rural populations ended the revolution by their conservative votes in the election of December 1848, returning the power of the purse and the army to the monarchists and counter-revolutionary members of the government.

A spectacular failure indeed.

The Effect of the Metternich System

While the Metternich System may have ended the Revolutions of 1848, the Metternich System was also responsible for creating the Revolutions of 1848 as well. The reactionary governments installed at the Congress of Vienna became the lid on the boiling pot of liberalism and nationalism that exploded in 1848. The reduction in the number of German states at the Congress of Vienna, however, strengthened the position of Prussia. The stronger Prussia, therefore, was in a more entrenched position to resist the revolutionaries from the March Days and subsequent demands by the Frankfurt Assembly. Metternich’s reestablishment of Austria dominance in the Italian peninsula after the defeat of Murat’s Naples also indirectly limited the success of Italian revolutions in Sicily and Sardinia.

The Congress System created the very international communication and coordinance that was absent from the Revolutions of 1848. While the Revolutions of 1848 were short-lived, not all the revolutions ended with the original or similarly repressive governments in power.

In the Netherlands, King William II preemptively and proactively altered the Dutch constitution to reform elections and effectively end the absolute monarchy. In Ireland, the German states, and Italy, the Revolutions of 1848 fueled nationalism that ultimately led to independence and unification respectively. In France, while the December elections led to the conservative Second Empire, the universal suffrage achieved in the Revolution of 1848 was never taken away.

It is interesting that the United Kingdom, perhaps the most democratic government in Europe, supported the Metternich System while even the monarchist Duke of Wellington pushed democratic reforms and Catholic Emancipation in Ireland. In the years between the Battle of Waterloo and the 1848 Revolutions, the anti-absolutist Whig Party led the British government for nearly 12 years. In fact, the Whig Party controlled the British government during the Revolutions of 1848.

Why did the democratically inclined and anti-absolutist Prime Minister John Russell not do more to support the Revolutions of 1848? Perhaps the success of the Metternich System was to discourage British interference in Continental Europe, not the establishment of reactionary regimes on the Continent.

Metternich and the Metternich System may have been important in the relative failure of the 1848 Revolutions, but the absence of British agitation for increased democratization in Europe is probably as influential as the role of the Metternich System.

 

Happy Labor Day

Labor Day; What the heck is Labor Day anyway? I know the banks are closed, and the stock markets too. Labor Day is considered the traditional end of summer, but that’s really September 21st. It used to be the end of summer vacation, but may schools start in mid-to-late August these days. I know! It’s a fashion date! Can’t wear white after Labor Day, right?

On Labor Day weekend, social media is usually inundated with meme’s honoring teachers, law enforcement, fire professionals, etc. For most of us, I suppose the holiday has become thought of as a celebration of public sector workers, or all workers in general. But it’s not. Its neither.

Labor Day is the workers’ movement in the United States and around the world. What? Does that sound socialist or too Communist? I don’t know and, honestly, I don’t really care. Because that’s exactly what Labor Day is: a celebration of blue-collar workers and the solidarity of unionization. Interesting, however, the US intentionally placed our celebration of workers solidarity in September to avoid identifying the holiday with International Worker’s Day which is May 1st every year and has a significant history with the Haymarket Massacre in Chicago and the pan-Communist movement of the late 19th century.

I say I don’t care if the holiday sounds too socialist or Communist because I’m tired of how we seem to ignore or rewrite history. It is a day to celebrate the labor movement, not the general and vague concept of work. Those social media memes I mentioned, notice that professions honored are unionized professions. Again, law enforcement, fire professionals, teachers, and nurses. We usually don’t give shout-outs to doctors, lawyers, and hedge fund managers on Labor Day, do we?

The first Labor Day was celebrated in Oregon in 1887. At the time, as now, it was a recognition of trade unions and the labor movements. It’s a recognition of the workers who took an UNPAID day off work on September 5, 1882, so that nowadays, many of us receive a PAID day off of work.

I mentioned the rewriting and watering down of history? Go to the Department of Labor’s website, and you’ll see no mention of unionization, union-busting, or strikes. You will read a few references to two unions in particular, but the site glosses over the reasoning that unions were necessary in the first place. Indeed, the site begins and concludes with empty jingoistic phrases about the “the greatest worker in the world – the American worker.” Might as well stand while reading the diatribe while placing your MAGA hat across your heart.

If this holiday is about the American blue-collar worker, why is it that the banks, government offices, and financial markets are closed, while Wal-Marts, Chic-Filets, Hobby Lobbys are open. Fun fact, Costco is closed on Labor Day. You’re welcome…

In an era where many are suspect of the government deep state and the liberal media bias, it’s amusing that it’s the Department of Labor’s version of the history of Labor Day is so biased and whitewashed (I wonder if its whitewashed on the warm cycle of the washing machine with all those white-collars?).

For a more honest and raw recollection of the origins of Labor Day, take a look at history.com:

Labor Day, an annual celebration of workers and their achievements, originated during one of American labor history’s most dismal chapters.

In the late 1800s, at the height of the Industrial Revolution in the United States, the average American worked 12-hour days and seven-day weeks in order to eke out a basic living. Despite restrictions in some states, children as young as 5 or 6 toiled in mills, factories and mines across the country, earning a fraction of their adult counterparts’ wages.

People of all ages, particularly the very poor and recent immigrants, often faced extremely unsafe working conditions, with insufficient access to fresh air, sanitary facilities and breaks.

As manufacturing increasingly supplanted agriculture as the wellspring of American employment, labor unions, which had first appeared in the late 18th century, grew more prominent and vocal. They began organizing strikes and rallies to protest poor conditions and compel employers to renegotiate hours and pay. Many of these events turned violent during this period, including the infamous Haymarket Riot of 1886, in which several Chicago policemen and workers were killed. Others gave rise to longstanding traditions: On September 5, 1882, 10,000 workers took unpaid time off to march from City Hall to Union Square in New York City, holding the first Labor Day parade in U.S. history.”

~~~

So, I guess, to me, Labor Day has taken its equal place at the table of hypocrisy with so many of the other watered down and revisionist federal holidays. Sure, we have a wonderful vanilla-ly quaint and boring holiday on January 1st to celebrate New Years Day on the Gregorian Calendar, right? Well, at least its been New Year’s Day in the British Empire and former colonies since 1752, but I digress…

Then we have the other nine federal holidays (one more aside, why wouldn’t we have 12 federal holidays in twelve months, instead of 10 federal holidays in 8 months…) What was I saying? Oh, right, our wonderful other nine federal holidays:

Martin Luther King, Jr. Day, when we celebrate the Civil Rights’ Movement and its leader, even while limiting black suffrage through voter ID laws, George Washington’s Birthday, which isn’t even on his birthday, Memorial Day which most people can’t distinguish from Veterans Day, Independence Day, which isn’t even the day that the Second Continental Congress voted for independence, or signed the Declaration of Independence, our beloved Labor Day that we celebrate even while spreading “Right to Work” anti-union legislation across the country, Columbus Day to honor an Italian who worked for the Spanish to discover the Bahamas, Hispaniola, and Cuba and then proceeded to rape, pillage, enslave, and murder. Great guys, so proud to celebrate a guy who has nothing to do with American history, or if we want to extend his legacy to the United States, I suppose we’re celebrating the genocide of the Native American peoples? In November, we celebrate Veterans Day Part II. Actually, in all seriousness, Veterans Day honors the living veterans and was specifically established on November 11th to replace Armistice Day which ended World War I, whereas Memorial Day was established as a Civil War holiday to honor deceased soldiers. Both holidays are worthy, but I wonder what it says about us as a country that we have two federal holidays about war, why not celebrate December 10th which is recognized internationally as Human Rights Day? Finally, we have the eighth and ninth federal holidays: Thanksgiving Day which celebrates neither the first Thanksgiving (the first actual feast of Thanksgiving in what was to become the United States occurred on April 20, 1598, in the area of present-day El Paso, Texas, when Juan de Oñate offered a feast of thanksgiving for the bountiful food and water that saved his expedition), nor is it the first English colony, that would be Virginia, but for some reason we celebrate the second English colony of Plimouth [sic] and the goodwill of the New England Native Americans, who were then repaid by the stealing of their lands and even enslavement and deportation after King Phillip’s War. And then there’s the final federal holiday of the year, when the country that ratified the First Amendment barring the establishment of any state religion, celebrates the second most important holiday in the Christian religion. But, hey, that’s just my take on the 10 federal holidays of the United States.

~~~

Today is one of those federal holidays. Let’s not lose sight of our history as we water-down the celebration the US labor movement and minimize the history of unions in America. After all, we don’t celebrate Cesar Chavez on Martin Luther King Day, and we don’t celebrate UPS drivers on Veterans Day, nor do we celebrate Moses, Kristna, Buddha, or Mohammed on Christmas Day, so why have we taken Labor Day away from the unions?

Unions are important to the long-term health of the American economy and those who would say otherwise are lining their pockets with disproportionate income. Those would include not just the backers of Right to Work legislation, and the reduction of Capital Gains Taxes, etc., etc., but also the bloated compensation receiving CEOs.

The famous or infamous (depending on your political perspective) Dodd-Frank Act requires businesses to disclose the ratio of CEO pay to median worker pay in their annual proxies. 2018 was the first year that this provision came into force, so what have we learned?

For example, Mattel CEO Margo Georgiadis was awarded almost $31.3 million in 2017. Meanwhile, the median worker at the company earned $6,271. The ratio? 4,987 to 1.

For comparison, At Berkshire Hathaway, the pay ratio is roughly 2 to 1. CEO Warren Buffett makes $100,000. The median worker at his company makes $53,510. That’s right, one of the two richest Americans, Warren Buffet, has a compensation ratio of 2-1 to the average employee.

Now, some may argue with me by talking about how well the stock market is doing, but remember, blue-collar workers do not invest in the stock market, except through their retirement 401Ks, so the day-to-day successes of the financial markets do not trickle down to the workers but do benefit the white-collar workers who are more likely to have stock options as part of their compensation packages.

Why does this matter? What does this have to do with unions and Labor Day? Well, in 2016, in terms of raw numbers, there were 14.6 million members in the U.S., down from 17.7 million in 1983. Statistically, union workers average 10-30% higher pay than non-union in the United States after controlling for individual, job, and labor market characteristics. Hence, for example, government jobs are pretty good, right? And, unsurprisingly 35.3% of government employees are unionized, coincidence? Meanwhile, while only 6.7% of private-sector employees are unionized.

Now, if you don’t mind me geeking out a bit, consider these two other pieces of fun facts:

Percentage-wise, 10.7% of American workers belonged to a union in 2016, compared to 20.1% in 1983. And, if you take government employees out of the picture, the current union membership in the private sector has fallen under 7% — levels not seen since 1932. You know, the time of the Great Depression?

Income disparity, deficit-spending by the government, and the static wages of the average American-worker (adjusted for inflation) are all related to the decline of union power in the United States. And that decline is intentional. I have mentioned these so-called Right to Work states. The argument goes that workers should be able to choose whether they belong to a union or not; of course, one could argue that they chose to belong to a union when they chose their profession, right? I mean, when I join the army, I know I’ll have to do physicals. When I join air-traffic controlling, I know I have to take drug tests, etc., etc.

But back to R-T-W; the more appropriate legislation would pass a Hyde Amendment for unions to limit political spending of individual dues to the union, not to block the union dues themselves. The R-T-W is about union-busting, not the rights of workers or free speech.

And Labor Day? Labor Day is a holiday to celebrate the history of the unions in this country, the obstacles that unions and their blue-collar workers had to overcome, and the benefits that almost all American workers take for granted these days: the 8 hour work day, not 12 or 14; the five day work week, not 6 or 7; the prevention of child labor; and the right to collectively bargain for fair wages and benefits.

Honor our Veterans on Veterans Day, honor our Civil Rights leaders on MLK, honor our Founding Fathers on Washington’s birthday and the 4th of July, and honor labor unions on Labor Day.

~~~

My name is Tom Keefe, and I’m your Babbling and sometimes blasphemous Professor,

Happy Labor Day everyone!

~~~

 

References, Links, and Resources

https://www.history.com/topics/holidays/labor-day

https://www.dol.gov/general/laborday/history

https://books.google.com/books?id=bIFIAAAAYAAJ&pg=PA443#v=onepage&q&f=false

https://money.cnn.com/2018/05/22/news/economy/ceo-pay-afl-cio/index.html

https://www.bls.gov/news.release/union2.nr0.htm

https://stats.oecd.org/Index.aspx?DataSetCode=TUD

Review: “The Economic of Empire: Notes on the Washington Consensus”

Review of:
Finnegan, William. “The Economics of Empire: Notes on the Washington Consensus,” Harper’s Magazine, May 2003, 41-54.

How does Finnegan explain the failure of development and what does he see as the essential factors for development to succeed?

Finnegan’s article is one of the best selections we’ve had to read this course. He exposes the problems of globalization and blind worship of capitalism. I love the term “market fundamentalism.” It seems to describe the blind adherence perfectly. I’ve mentioned in other classes that I think we’re living in an era of fundamentalism and that the conflict between fundamentalism and moderation is deeper than the surface conflicts between countries, cultures, or religion. Let’s face it, Ian Paisley, Jerry Falwell, Wahhabi fundamentalists and fundamentalist ayatollahs have more in common with each other that moderate members of the same countries.

Capitalism is not evil, it is not inherently bad, but the deification of Adam Smith and the etching of market economics into stones from Sinai make it almost impossible to criticize. No one complains when critics point out the positives of capitalism, but if one points out the negatives, they are labeled a communist or some other McCarthy-like response. Rarely are the critiques answered on their merits. The most powerful statement Finnegan makes is that market fundamentalism “is not an ideology of freedom or democracy. It is a system of control. It is an economics of empire” (Paragraph 8).

If the proponents of market fundamentalism called it what it is, a system of economic control, then it would be more easy to accept. Then, thinkers could debate the positives and negatives of empire. However, the continued farce that we’re democratizing and opening up the world for everyone’s benefit is a joke. Yes, as Finnegan says in paragraph 22, there are good people who genuinely believe that what they’re doing is good, but being genuine doesn’t mean that a) you’re right or b) that the system is genuine.

Finnegan uses Bolivia as his main example, but leaves it to discuss similar catastrophes of market fundamentalism in Argentina, Mexico, Haiti, and then back to Bolivia. It’s interesting that Finnegan laments Evo Moralas failed election bid, but of course Moralas did now just win the 2005 election. I wonder what Finnegan’s take on this would be?

Finnegan shows how globalism hurts not just the countries that the US pretends to helps (the Haiti story was horrible, paragraph 47), but also how it hurts Americans as well. Paragraph 21 illuminates corporate welfare at its worse, hurting US taxpayers. Paragraph 42 continues, specifically with argribusiness welfare, which is the hot topic in the WTO.

The tariff inequality of paragraph 48, policy changes in paragraph 60, and the military faux pas in 58 all come together when Finnegan makes the point in paragraph 65: “More poignantly transnational capital always has its own logic and pursues its own ends. While we make the world safe for multinational corporation, it is by no mean s clear that they intend to return the favor.” That’s a scary idea.

Paragraph 34 shows that downsizing didn’t mean that jobs were going overseas, but that jobs were just plain disappearing.

Finnegan also points out that not all ‘growth’ is positive. Not only does he discuss environmental problems, but his reference to Clifford Cobb’s quote was very funny (Para. 30).

Again, back to the nature of debate. The market fundamentalists always attack the messenger and never listen to the message: they believe that “Attacking America is, therefore, attacking the theory, and attacking the theory is attacking America (Para.4). On the other hand, Finnegan specifically goes out of his way to say that the financial system was not always negative. In paragraph 17, he points out that the system was originally designed for post-war Europe and that after the Marshal Plan made the system redundant that it became negative with MacNamara’s overexpansion in from 68-81 and that in the eighties market fundamentalists completely “changed their [the IMF/WB’s] operating philosophies (Para.19).

Finally, in paragraphs 45 and 49, Finnegan shows that free trade is a myth…no one actually practices free trade and especially not the US who preaches it to the rest of the world. Implicitly, Finnegan asks if we don’t practice it, then why do we demand others do?

Concerns:
In paragraph 20, I’m not sure Finnegan’s use of the poverty numbers is fair. He seems to be forgetting % of total population. I think that in addressing tax policy (Para.29) and negative aspects of growth (Para. 30), Finnegan goes a little too far…in stretching his argument; he looses his focus on the main issue of market fundamentalism. Also, he really only dealt with the extras in two paragraphs, so its not completely laid out and thus easier for readers to dismiss or critics to tear apart.

Since Finnegan offers a blistering critique of international financial networks and institutional failures, how will these systems need to adapt to meet the immediate economic challenges of the present?

Not to take the easy way, but reading Finnegan, I’m not sure there is a) a desire on the part of the US/IMF/WB to adapt or b) even if there is, its seems almost impossible.

To answer this impossibility, I think I’ll have to couple part of the first question “what does Finnegan see as the essential factors for development to succeed” together with part of this second question “how will these systems need to adapt to meet the immediate economic challenges of the present?”
In the only places that economical development has truly succeeded (post-WWII), the countries ignored IMF/WB/US recommendations, rules, and guidelines. Paragraph’s 26 and 27 illustrate how SK, Taiwan, Singapore, Thailand and Malaysia raised tariffs, local content laws and used state planning.

If Finnegan’s assessment is accurate though, other nation-states will probably not be able to replicate this program because now because MNCs have gotten wise and set up their businesses so as not to set up future rivals (Paragraphs 29 and 30).

The difference between Latin America and East Asia are once again very appropriate for this discussion. Some point squarely at government leadership; I think this flows with what Finnegan writes. Latin American officials were more willing to go along with IMF/WB/US recommendations and became more under the control of the US and MNCs whereas East Asia did it their way and thus have escaped as much control. I wonder, though, how Finnegan would include the Asian financial collapse in this article?

Morals in Markets?

Can markets really be “moral?”

A Review of:
Wilson, James Q., and Martin Wolf. “The Morality of the Market,” Foreign Policy, September/October 2003, pp. 47-50.

It depends on your perspective on markets. Under the laisse-faire principle, no, markets can not be moral… they need nation-state and perhaps even international oversight. With the “invisible hand” as the only guiding principle of market capitalism, the pursuit of profit ignores human rights and environmentalism.

It seems to me that Martin Wolf’s article is weak; the entire piece is conjecture and opinion with almost no actual facts. Take statements like: “The market economy rests on and encourages valuable moral qualities” (Paragraph5). He makes the statement, but then never proves it…then by the end of the article he contradicts himself. In Paragraph 24 he begins by saying “The liberal market economy is morally imperfect” then concludes the paragraph by saying “It is not the market that is immoral.” I understand that Mr. Wolf is both an economist (a fmr economist for the World Bank) as well as a journalist, but this article would read better in his opinion column of the Financial Times than an academic journal like Foreign Affairs.

Wolf says market economies foster (Paragraph 6):
trustworthiness? What about the wiping out of pensions ?
reliability? Hello, I said what about corporate pensions?
civility? Please…
and self restraint? What about the Robber Barons?

Wolf says that market economies create NGOs and charities? (Paragraph 7) No, as Acemonglu said, there might be a correlation between market economies and the abundance of NGOs and charities but correlation does not equal causation.

In paragraph 10, Wolf says market economies avoid the environmental catastrophes of socialist economies…What about our Superfund Sites, Love Canal, The Bhopal Disaster of 1984 by American Union Carbide, the proposed Yucca Mountain Repository, etc. Its economically ignorant to be blind to capitalism’s disasters and focus on socialist ones.

In just the next paragraph is when Wolf really lost me: He says, “only a liberal democracy makes it possible for concerns about the environment to be routinely aired and addressed.” From this point on in the article, Wolf seems to forget what he’s writing about…is he talking about markets being moral or liberal democracy being moral….he goes back and forth as if they were the same thing. in terms Wolf’s point that only a democracy addresses environmental concerns, I think you could make the opposite point. In a democracy, special interests like logging companies or oil companies can influence legislation and public opinion whereas in a technocracy like Singapore, the technocrats make the decisions. When confronting traffic pollution and traffic jams, Singapore drastically reduced the number of cars on the road, could you see the US doing that? (http://www.unep.org/GEO/geo3/english/416.htm) When Singapore became nervous about the safety of oil/LNG container ships, they implemented a plan to cut need (http://www.eia.doe.gov/emeu/cabs/singapor.html); in the US we have the same concerns, but special interests in the US Congress just stripped MA and RI of the states right to protect its waterways and gave the federal executive branch the power to allow shipping in questionable waters. http://www.boston.com/news/nation/articles/2005/06/23/senate_boosts_prospects_of_lng_sites/
So maybe technocracies are better than democracies in managing environmental problems?

I laughed at the 12th paragraph when I thought of Fox News…

Back to the environment and other long-term issues (paragraph 13), Wolf seems blind to the fact that democracies DO NOT address long term viability, look at the US and its failure to address social security reform, energy reform, and attempts not to renew the Clean Air and Clean Water Acts. The Iroquois made decisions based on the “Seventh Generation,” but the US does not.

Wolf says that “the rule of law came about as a means of facilitating commerce.” He clearly never read a history of law. Any law historian knows that the modern basis of law comes from the Magna Carta which was not to facilitate commerce, but from the barons’ (elites if you will) desire to protect their wealth from King John’s taxation without representation, hence Parliament, hence law rather than whims of absolute monarchy.

Wolf says that markets create growth, but what about the decline in real wages? The American worker has made less and less in real income (adjusted for inflation and cost of living increases) almost every year since 1979. Where is the growth? http://www.laborresearch.org/charts.php?id=8

Next, Wolf continues on about how market economies encourage dissent which is good for democracy. He says that liberal democracies are the only entity that creates its own opposition. I would argue, though, that the US increasingly doesn’t have a sense of opposition. Let’s compare the US Election in 2000 with the Ukraine election in 2004 and maybe the Mexican election in 2006. All three of the losers believe that they really won and that the election results were not representative. Gore eventually acquiesces, goes into retirement from public life, makes money giving speeches and now making a movie. There’s no attempt to oppose. Yushchenko, meanwhile, takes to the streets and Obrador threatens the same in Mexico. I’m not saying all three of the election losers are right, but I’m saying that Yushchenko stuck to his opposition. Gore chose the system, even though he thinks it wronged him. Could you imagine the Orange Revolution in Dade County?

Wolf later takes cheap shots at his main critic, Klein, by saying she’s done well financially in a market economy. Can he prove she is the rule and not the exception? No, and he doesn’t even try.

In trying to raise democracy (even though he’s supposed to be talking about markets), Wolf say we should look at China who is not a democracy and has created a more unjust distribution of wealth. Notice there’s no evidence again, just opinion. In addition, Wolf undermines himself because China is the perfect example of a non-democracy with a rapidly growing economy that has become more and more market driven.

Toward the end of page 3, Wolf argues that “ The gap [inequality among countries] reflects the success of thouse countries that embraced capitalism and the failure of thouse that did not.” What a sweeping generalization. Didn’t Argentina virtually collapse after it implimented open market reforms? How did Mexico make out after it opened it economy via NAFTA? Russia seems to be having second thoughts about free markets after the collapse of its economy and standard of living. On the flip side, look at Belize. Stable liberal democracy with markets for more almost thirty years now….with 33% of the population below poverty (http://en.wikipedia.org/wiki/Economy_of_Belize)…and Wolf wants me to believe that embracing capitalism is the panecea?

Finally he conclude with the utopian idea that “no millionaire or corporation can flout the law.” Let’s see… the tobacco companies are getting the judgements against them overturned, airlines had their liability for security lapses legislatively removed, the asbestos companies are about to achieve the same immunity from liability, gun makers got it from Protection of Lawful Commerce in Arms Act (http://en.wikipedia.org/wiki/Protection_of_Lawful_Commerce_in_Arms_Act), and the late Kenneth Day never spent a night in jail. Of the most concern, however, was the overturning of Anderson Little’s conviction related to Enron. Sure, people could argue that all of these cases are cases of justice being served and it’s the right decision, but taken together, it looks an aweful lot like ‘millionaires and corporations flouting the law.’

I guess what I’m trying to say is that I didn’t like the article…I’ll try not to be so subtle next time 🙂

Warren Buffet

The Journal’s article (6/26/06, A1) comparing Warren Buffet to the nineteenth century Robber barons was an injustice to Buffet. Buffet worked for his money, managed his money and lives in the same 31,500 house he bought in 1958. The Robber Barons (Carnegie, Rockefeller, Vanderbilt and Morgan) were men who created monopolies, used predatory pricing, dumped products to drive competitors out of business and then felt guilty… so they funded universities, libraries and other worthy charities. If I were Buffet’s lawyer, I would encourage him sue for defamation of character for comparing him to the Robber Barons.

To Trade or Not to Trade

To trade or not to trade, that is the question. In answering the question, domestic politics and agribusiness are the two dominant issues of the free trade debate. While there are many other issues (such as tariffs, quotas, non-tariff barriers (NTB), technology, IMF/WBO loans, worker rights, and other specific sectors such as the garment industry and services), domestic politics and agricultural trade have consistently been dominant issues in the entire history of free trade.

Historically, whether it be the mercantilism of the colonial period or the tariff wars of the early twentieth century, nation-states managed their trade with other countries in order to protect domestic production and make foreign products comparatively expensive. As a result of the economic and political isolationism of the Interwar Period, the US sought to integrate the world after WWII. The American government used economic policy as a tool of foreign policy by buttressing weaker nation-states; such support for Western Europe and Japan aided the American goal of providing an integrated front against the Soviet Block. The US also believed that “open trade would lead to economic prosperity and [thus] world peace” (Spero & Hart, 67). A key part of this new economic system was free trade. Free Trade is the idea that products can flow from country to country with no discriminatory regulation based on country of origin. Free trades sought to eliminate tariffs, quotas, and customs discrimination. The argument for free trade is best summed in the proverb “A rising tide raises all ships.” In the best case scenario, free trade allows developed nation-states to specialize their economies in what they do best, allows emerging economies to grow through the infusion of foreign capital and business, and aids the world consumer by lowering prices. The argument against free trade is that it hurts the consumer where they work: developed country workers will loose their jobs to the Least Developed Countries (LDCs) and developing country workers will be abused by multinational corporations who will pillage LDC’s resources and use their relative strength to manipulate employment regulations (or the lack there of).

The evolution of free trade and the international economic system has been marked by three distinct phases. The dominant issues in each of these phases continue to be significant issues in the debate today. The General Agreement on Trade and Tariffs (GATT) was created The Havana Conference in 1947. This became the first international economic regime. GATT encouraged open trade, specialization (or comparative advantage), non-discrimination of products by country of origin (the most-favored nation principle) and attacked dumping and predatory pricing policies (Spero & Hart, 69). The most controversial aspect of GATT was the agricultural exception to the ban on quantitative restrictions. Simply put, while the world took several steps forward on open trade, it did not move far on agricultural trade issues.

The second phase of the international economic system, Interdependence, was actually caused by the success of the first phase. The liberal trade policy led to the rise of newly industrialized countries (NICs) such as Taiwan, South Korea, Mexico and Brazil (Spero & Hart, 75). In addition, the generous economic support and polices of the US allowed both Japan and Western Europe to rebound quickly from the destruction of WWII. As a result, the American economy in particular, and the developed economies in general, all began to have significant competition from the rest of the world. Domestic politics raised its head again and many countries sought to impose protectionist barriers to free trade in order to favor their domestic industries and labor.

Finally, the world economy has entered a third phase, known as Globalization, in which nation-states have moved past the knee-jerk reaction to integration and are seeking to make the most of regional and worldwide free trade. As always the dominant issue is domestic politics. Let us put domestic politics in context: in “The Politics of International Economic Relations,” Joan Spero and Jeffery Hart point out that Smoot-Hawley (the most protectionist tariff in American history) was the result of special interests influencing Congress. The Congress is extremely vulnerable to special interest pressures that advocate protectionist policies. The executive branch, on the other hand, is a little freer and uses trade policy as a foreign policy tool. Therefore, there has been a lot of clash between the legislative and executive branches on the issue. The classic example is the NAFTA debates in which a Democratic president pushed through a Republican president’s free trade concept against vast resistance by both Democratic and Republican members of Congress. The debate is not as much between about political affiliations (though there are differences), but between branches of government.

Each phase of the international economic system can also be aligned with a change in domestic American politics. GATT was the result of the emergence of America from isolationism as the US took the lead role in the world. After the chaos of the domestic debates ranging from race, war, oil dependency and economic decline, the US became more protectionist in the eighties. Finally, it would be hard to ignore ‘Roaring Nineties’ as a factor in the renewed and refreshed emergence of the US as a leader and proponent of open trade. When business and labor are content, the US is more interested in free trade; when the domestic economy shrinks and the American self-confidence is shaken, the US retreats from the world.

In addition to domestic politics, though, there are other key issues in the debate on free trade. Agriculture has been a consistent issue for the past sixty years. Even as the American economy has moved from production to services, the US has continually sought to protect American agriculture. Part of this may be the mythology of the American farmer and its iconic role in idyllic American culture, but it is also related to domestic politics. The electoral value and the bell-weather role of the farming states are a key concern of American politicians. Iowa’s importance, due to the first presidential caucuses, has artificially made Iowa’s issues into America’s issues. Politicians who question agricultural subsidies and trade benefits do not win Iowa caucuses. The affect of agriculture and domestic politics on trade is similar in the peanut growing parts of the United States as well as the sugar producing states of Florida and Louisiana.

There are other issues too. In “International Trade,” Arvind Panagariya, points out that macroeconomic/political stability and world poverty are also key issues in free trade today. Of growing importance is also non-tangible trade such as intellectual property rights, insurance, and out-sourcing of customer support. In every piece on international trade, however, one is certain to find references to domestic politics and agriculture.

References

Barker, Debi and Jerry Mander. (2000) “The WTO and Invisible Government.” Pearce Review. 12 (2): p251-255.

Panagariya, Arvind. (2003) “International Trade.” Foreign Policy. Nov/Dec (139): p20-28.

Spero, Joan and Jeffrey Hart. (2003) The Politics of International Economics. Wadsworth: Belmont, CA.