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Title: Domestic Constituencies
Author: Noam Chomsky
Date: May 1998
Language: en
Topics: capitalism, democracy, United States of America
Source: Retrieved on 19th June 2021 from https://chomsky.info/199805__/
Notes: Published in Z Magazine.

Noam Chomsky

Domestic Constituencies

Let’s begin with some simple points, assuming conditions that now

prevail–not, of course, the terminus of the unending struggle for

freedom and justice.

There is a “public arena” in which, in principle, individuals can

participate in decisions that involve the general society: how public

revenues are obtained and used, what foreign policy will be, etc. In a

world of nation-states, the public arena is primarily governmental, at

various levels. Democracy functions insofar as individuals can

participate meaningfully in the public arena, meanwhile running their

own affairs, individually and collectively, without illegitimate

interference by concentrations of power. Functioning democracy

presupposes relative equality in access to resources–material,

informational, and other–a truism as old as Aristotle. In theory,

governments are instituted to serve their “domestic constituencies” and

are to be subject to their will. A measure of functioning democracy,

then, is the extent to which the theory approximates reality, and the

“domestic constituencies” approximate the population.

In the state capitalist democracies, the public arena has been extended

and enriched by long and bitter popular struggle. Meanwhile concentrated

private power has labored to restrict it. These conflicts form a good

part of modern history. The most effective way to restrict democracy is

to transfer decision-making from the public arena to unaccountable

institutions: kings and princes, priestly castes, military juntas, party

dictatorships, or modern corporations. The decisions reached by the

directors of GE affect the general society substantially, but citizens

play no role in them, as a matter of principle (we may put aside

transparent myth about market and stockholder “democracy”).

Systems of unaccountable power do offer some choices to citizens. They

can petition the King or the CEO, or join the ruling Party. They can try

to rent themselves to GE, or buy its products. They can struggle for

rights within tyrannies, state and private, and in solidarity with

others, can seek to limit or dismantle illegitimate power, pursuing

traditional ideals, including those that animated the U.S. labor

movement from its early origins: that those who work in the mills should

own and run them.

The “corporatization of America” during the past century was an attack

on democracy–and on markets, part of the shift from something resembling

“capitalism” to the highly administered markets of the modern

state/corporate era. A current variant is called “minimizing the state,”

that is, transferring decision-making power from the public arena to

somewhere else: “to the people,” in the rhetoric of power; to private

tyrannies, in the real world. All such measures are designed to limit

democracy and to tame the “rascal multitude,” as the population was

called by the self-designated “men of best quality” during the first

upsurge of democracy in the modern period, in 17^(th) century England;

the “responsible men,” as they call themselves today. The basic problems

persist, constantly taking new forms, calling forth new measures of

control and marginalization, and leading to new forms of popular

struggle.

The so-called “free trade agreements” are one such device of undermining

democracy. They are designed to transfer decision-making about people’s

lives and aspirations into the hands of private tyrannies that operate

in secret and without public supervision or control. Not surprisingly,

the public doesn’t like them. The opposition is almost instinctive, a

tribute to the care that is taken to insulate the rascal multitude from

relevant information and understanding.

Much of the picture is tacitly conceded. We’ve just witnessed yet

another illustration: the effort of the past months to pass “Fast Track”

legislation that would permit the Executive to negotiate trade

agreements without congressional oversight and public awareness; a

simple Yes or No will do. “Fast Track” had near-unanimous support within

power systems, but as the Wall St. Journal ruefully observed, its

opponents may have an “ultimate weapon”: the majority of the population.

The public continued to oppose the legislation despite the media

barrage, foolishly believing that they ought to know what is happening

to them and have a voice in determining it. Similarly, NAFTA was rammed

through over public opposition, which remained firm despite the near

unanimous and enthusiastic backing of state and corporate power,

including their media, which refused even to allow the position of the

prime opponents (the labor movement) to be expressed while denouncing

them for various invented misdeeds.

Fast Track was portrayed as a free trade issue, but that is inaccurate.

The most ardent free trader would strongly oppose Fast Track if s/he

happened to believe in democracy, the issue at stake. That aside, the

planned agreements hardly qualify as “free trade agreements” any more

than NAFTA or the GATT/WTO treaties, matters discussed elsewhere.

The official reason for Fast Track was articulated by Deputy U.S. Trade

Representative Jeffrey Lang: “the basic principle of negotiations is

that only one person [the President] can negotiate for the U.S.” The

role of Congress is to rubber stamp; the role of the public is to

watch–preferably, to watch something else.

The “basic principle” is real enough, but its scope is narrow. It holds

for trade, but not for other matters: human rights, for example. Here

the principle is the opposite: members of Congress must be granted every

opportunity to ensure that the U.S. maintains its record of

non-ratification of agreements, one of the worst in the world. The few

enabling conventions even to reach Congress have been held up for years,

and even the rare endorsements are burdened with conditions rendering

them inoperative in the United States; they are “non self-executing” and

have specific reservations.

Trade is one thing, torture and rights of women and children another.

The distinction holds more broadly. China is threatened with severe

sanctions for failing to adhere to Washington’s protectionist demands,

or for interfering with its punishment of Libyans. But terror and

torture elicit a different response: in this case, sanctions would be

“counterproductive.” They would hamper our efforts to extend our human

rights crusade to suffering people in China and its domains, just as

reluctance to train Indonesian military officers “diminishes our ability

to positively influence [their] human rights policies and behavior,” as

the Pentagon recently explained. The missionary effort in Indonesia

therefore must proceed, evading Congressional orders. That is only

reasonable. It suffices to recall how U.S. military training “paid

dividends” in the early 1960s, and “encouraged” the military to carry

out their necessary tasks, as Defense Secretary McNamara informed

Congress and the President after the huge army-led massacres of 1965,

which left hundreds of thousands of corpses in a few months, a

“staggering mass slaughter” (New York Times) that elicited unconstained

euphoria among the “men of best quality” (the Times included), and

rewards for the “moderates” who had conducted it. McNamara had

particular praise for the training of Indonesian military officers in

U.S. universities, “very significant factors” in setting the “new

Indonesian political elite” (the military) on the proper course.

In crafting its human rights policies for China, the Administration

might have also recalled the constructive advice of a Kennedy military

mission to Colombia: “as necessary execute paramilitary, sabotage and/or

terrorist activities against known communist proponents” (a term that

covers peasants, union organizers, human rights activists, etc.). The

pupils learned the lessons well, compiling the worst human rights record

of the ’90s in the hemisphere by the recommended means, to be rewarded

by increasing military aid and training under “drug war” pretexts

dismissed as “a myth” by Amnesty International, Colombian human rights

activists (those who survive), and other competent observers.

Reasonable people can easily understand, then, that it would be

counterproductive to press China too hard on such matters as torture of

dissidents or atrocities in Tibet. That might even cause China to suffer

the “harmful effects of a society isolated from American influence,” the

reason adduced by a group of corporate executives for removing the U.S.

trade barriers that keep them from Cuban markets, where they could labor

to restore the “helpful effects of American influence” that prevailed

from the “liberation” 100 years ago through the Batista years, the same

influences that have proven so benign in Haiti, El Salvador, and other

contemporary paradises–by accident, yielding profits as well.

Such subtle discriminations must be part of the armory of those who

aspire to respectability and prestige. Having mastered them, we can see

why investors’ rights and human rights require such different treatment.

The contradiction about the “basic principle” is only apparent.

Black Holes

It is always enlightening to seek out what is omitted in propaganda

campaigns. Fast Track received enormous publicity. But several crucial

issues disappeared into the Black Hole that is reserved for topics rated

unfit for public consumption. One is the fact, already mentioned, that

the issue was not trade agreements, but rather democratic principle; and

that in any event the agreements were not about free trade. Still

more striking was that throughout the intense campaign, there appears to

have been no public mention of the upcoming treaty that must have been

at the forefront of concern for every knowledgeable participant: the

Multilateral Agreement on Investment (MAI), a far more significant

matter than bringing Chile into NAFTA or other tidbits served up to

illustrate why the President alone must negotiate trade agreements,

without public interference.

The MAI has powerful support among financial and industrial

institutions. Why then the silence? A plausible reason comes to mind.

Few political and media leaders doubt that were the public to be

informed, it would be less than overjoyed about the MAI. Opponents might

once again brandish their “ultimate weapon,” if the facts break through.

It only makes sense, then, to conduct the negotiations under a “veil of

secrecy,” to borrow the term used by the former Chief Justice of

Australia’s High Court, Sir Anthony Mason, condemning his government’s

decision to remove from public scrutiny the negotiations over “an

agreement which could have a great impact on Australia if we ratify it.”

No similar voices were heard here. It would have been superfluous: the

veil of secrecy remained impenetrable, defended with much greater

vigilance in our free institutions.

Within the United States, readers of this journal are among the lucky

few who know something about the MAI, which has been under intensive

negotiation in the OECD (“the rich men’s club”) since May 1995. The

original target date was May 1997. Had the goal been reached, the public

would have known as much about the MAI as they do about the

Telecommunications Act of 1996, another huge public gift to concentrated

private power, kept largely to the business pages. But the OECD

countries could not reach agreement on schedule, and the target date was

delayed a year. The current deadline is April 27, only a month away, as

I write.

The original and preferred plan was to forge the treaty in the World

Trade Organization. But that effort was blocked by Third World

countries, particularly India and Malaysia, which recognized that the

measures being crafted would deprive them of the devices that had been

employed by the rich to win their own place in the sun. Negotiations

were then transferred to the safer quarters of the OECD, where, it was

hoped, an agreement would be reached “that emerging countries would want

to join,” as the London Economist delicately put it–on pain of being

barred from the markets and resources of the rich, the familiar concept

of “free choice” in systems of vast inequality of power and wealth.

For almost three years, the rascal multitude has been kept in blissful

ignorance of what is taking place. But not entirely. In the Third World

it was a live issue by early 1997. In Australia, the news broke through

in January 1998, in the business pages, eliciting a flurry of reports

and controversy in the national press; hence Sir Anthony’s condemnation,

speaking at a convention in Melbourne. The opposition party “urged the

Government to refer the agreement to the Parliamentary committee on

treaties before signing it,” the press reported. The Government refused

to provide Parliament with detailed information or to permit

parliamentary review. Our “position on the MAI is very clear,” the

Government responded: “We will not sign anything unless it is

demonstrably in Australia’s national interest to do so.” In brief,

“We’ll do as we choose”–or more accurately, as our masters tell us; and

following the regular convention, the “national interest” will be

defined by power centers, operating in closed chambers.

Under pressure, the Government agreed a few days later to allow a

Parliamentary committee to review the MAI. Editors reluctantly endorsed

the decision: it was necessary in reaction to the “xenophobic hysteria”

of the “scaremongerers” and the “unholy alliance of aid groups, trade

unions, environmentalists and the odd conspiracy theorist.” They warned,

however, that after this unfortunate concession, it is “vitally

important that the Government does not step back any further from its

strong commitment” to the MAI. The Government denied the charge of

secrecy, noting that a draft of the treaty was available on the

internet–thanks to the activist groups that placed it there, after it

was leaked to them.

We can be heartened: Democracy flourishes in Australia after all.

The derisive dismissal of the charge of secrecy, a device that might be

adopted by more cynical U.S. commentators when they finally agree to

mention the issue, has consequences that merit some thought. It entails

that the media should gracefully exit the stage. After all, any

meaningful evidence they use could be discovered by ordinary folk with

diligent search, and analysis/commentary/debate are declared irrelevant.

(Just as this was sent to press, Fred Hiatt obliged in the Washington

Post, speaking for the editors, though he failed to draw the obvious

conclusions about the journal’s future).

In Canada, now facing a form of incorporation into the United States

accelerated by “free trade, the “unholy alliance” achieved much greater

success. For a year, the treaty has been discussed in leading dailies

and news weeklies, on prime time national TV, and in public meetings.

The Province of British Columbia announced in the House of Commons that

it “is strongly opposed” to the proposed treaty, noting its

“unacceptable restrictions” on elected governments at the federal,

provincial, and local levels; its harmful impact on social programs

(health care, etc.) and on environmental protection and resource

management; the extraordinary scope of the definition of “investment”;

and other attacks on democracy and human rights. The provincial

government was particularly opposed to provisions that allow

corporations to sue governments while they remain immune from any

liability, and to have their charges settled in “unelected and

unaccountable dispute panels,” which are to be constituted of “trade

experts,” operating without rules of evidence or transparency, and with

no possibility of appeal.

The veil of secrecy having been shredded by the rude noises from below,

it became necessary for the Canadian government to reassure the public

that ignorance is in their best interest. The task was undertaken in a

national CBC TV debate by Canada’s Federal Minister of International

Trade, Sergio Marchi: he “would like to think that people feel

reassured,” he said, by the “honest approach that I think is exuded by

our Prime Minister” and “the love of Canada that he has.”

That ought to settle the matter. So democracy is healthy north of the

border too.

According to CBC, the Canadian government–like Australia–“has no plans

at this time for any legislation on the MAI,” and “the trade minister

says it may not be necessary,” since the MAI “is just an extension of

NAFTA.”

There has been discussion in the national media in England and France,

but I do not know whether there or elsewhere in the Free World it was

felt necessary to assure the public that their interests are best served

by faith in the leaders who “love them,” “exude honesty,” and

steadfastly defend “the national interest.”

Not too surprisingly, the tale has followed a unique course in the

world’s most powerful state, where “the men of best quality” declare

themselves the champions of freedom, justice, human rights, and–above

all–democracy. Media leaders have surely known all along about the MIA

and its broad implications, as have public intellectuals and the

standard experts. The business world has been intimately involved in

planning and implementation from the outset: for example, the United

States Council for International Business, which, in its own words,

“advances the global interests of American business both at home and

abroad.” In January 1996, the Council even published A Guide to the

Multilateral Agreement on Investment, available to its business

constituencies and their circles, surely to the media. But in a most

impressive show of self-discipline, the Free Press has succeeded in

keeping those who rely on it in the dark–no simple task in a complicated

world. We return to details.

The corporate world overwhelmingly supports the MAI. Though silence

precludes citation of evidence, it is a fair guess that the sectors of

the corporate world devoted to “enlightening the public” are no less

enthusiastic. But once again, they understand that the the “ultimate

weapon” may well be unsheathed if the rascal multitude gets wind of the

proceedings. The dilemma has a natural solution. We’ve been observing it

now for almost three years.

Worthy and Unworthy Constituencies

Defenders of the MAI have one strong argument: critics do not have

enough information to make a fully convincing case. The purpose of the

“veil of secrecy” has been to guarantee that outcome, and the efforts

have had some success. That is most dramatically true in the United

States, which enjoys the world’s most stable and long-lasting democratic

institutions and can properly claim to be the model for state-capitalist

democracy. Given this experience and status, it is not surprising that

the principles of democracy are clearly understood in the United States,

and lucidly articulated in high places. For example, by the

distinguished Harvard political scientist Samuel Huntington, in his text

American Politics, where he observes that power must remain invisible if

it is to be effective: “The architects of power in the United States

must create a force that can be felt but not seen. Power remains strong

when it remains in the dark; exposed to the sunlight it begins to

evaporate.” He illustrated the thesis in the same year (1981) while

explaining the function of the “Soviet threat”: “you may have to sell

[intervention or other military action] in such a way as to create the

misimpression that it is the Soviet Union that you are fighting. That is

what the United States has been doing ever since the Truman Doctrine.”

Within these bounds–“creating misimpressions” to delude the public, and

excluding them entirely–responsible leaders are to pursue their craft in

democratic societies.

Nonetheless, it is unfair to charge the OECD powers with conducting the

negotiations in secret. After all, activists did succeed in putting a

draft version on the internet, having illicitly obtained it. Readers of

the “alternative press” and Third World journals, and those infected by

the “unholy alliance,” have been following the proceedings since early

1997 at least. And keeping to the mainstream, there is no gainsaying the

direct participation of the organization that “advances the global

interests of American businesses,” and their counterparts in other rich

countries.

But there are a few sectors that have somehow been overlooked: the U.S.

Congress, for example. Last November, 25 House representatives sent a

letter to President Clinton stating that the MAI negotiations had “come

to our attention”–presumably, through the efforts of activists and

public interest groups. They asked the President to answer three simple

questions.

“First, given the Administration’s recent claims that it cannot

negotiate complicated, multisectoral, multilateral agreements without

fast track authority, how has the MAI nearly been completed,” with a

text “as intricate as NAFTA or GATT” and with provisions that “would

require significant limitations on U.S. laws and policy concerning

federal, state and local regulation of investment?”

Second, “how has this agreement been under negotiation since May 1995,

without any Congressional consultation or oversight, especially given

Congress’ exclusive constitutional authority to regulate international

commerce?”

“Third, the MAI provides expansive takings language that would allow a

foreign corporation or investor to directly sue the U.S. government for

damages if we take any action that would restrain ‘enjoyment’ of an

investment. This language is broad and vague and goes significantly

beyond the limited concept of takings provided in U.S. domestic law. Why

would the U.S. willingly cede sovereign immunity and expose itself to

liability for damages under vague language such as that concerning

taking any actions ‘with an equivalent effect’ of an ‘indirect’

expropriation?”

On point three, the signatories might have had in mind the suit by the

Ethyl Corporation–famous as the producer of leaded gasoline–against

Canada, demanding $250 million to cover losses from “expropriation” and

damages to Ethyl’s “good reputation” caused by pending Canadian

legislation to ban a gasoline additive that Canada regards as a

dangerous toxin and significant health risk–in agreement with the U.S.

Environmental Protection Agency, which has sharply restricted its use,

and the State of California, which has banned it entirely. Or perhaps

the signers were thinking of the suit against Mexico by the U.S.

hazardous-waste management firm Metalclad, asking $90 in damages for

“expropriation” because a site they intended to use for hazardous wastes

was declared part of an ecological zone.

These suits are proceeding under NAFTA rules. The intention presumably

is to explore and if possible expand their (vague) limits. In part they

are probably just intimidation, a standard and often effective device

available to those with deep pockets to obtain what they want through

legal threats that may be completely frivolous.

“Considering the enormity of the MAI’s potential implications,” the

congressional letter to the President concluded, “we eagerly await your

answers to these questions.” An answer reached the signers a few months

later, saying nothing. The media were advised of all of this, but I know

of no coverage.

Another segment of the population that has been overlooked, along with

Congress, is the population. Apart from trade journals, the first

articles in the mainstream appeared at the end of 1997, in local

journals. The Chicago Tribune (Dec. 4, 1997) reviewed some of the

terms of the MAI and noted that the matter has “received no public

attention or political debate,” apart from Canada. In the U.S., “this

obscurity seems deliberate,” the Tribune reports. “Government sources

say the administration…is not anxious to stir up more debate about the

global economy.” In the light of the public mood, secrecy is the best

policy, relying on the collusion of the information system.

The Newspaper of Record broke its silence a few months later, permitting

a paid advertisement by the International Forum on Globalization, which

opposes the treaty (Feb. 13, 1998). The ad quotes Business Week (Feb.

9), which described the MAI as “The most explosive trade deal you’ve

never heard of…[it] would rewrite the rules of foreign ownership,

affecting everything from factories to real estate and even securities.

But most lawmakers have never even heard of the Multilateral Agreement

on Investment,” let alone the public. Why not, the Forum asks,

implicitly answering with a review of the basic features of the treaty.

A few days later (Feb. 16), NPR’s Morning Edition ran a segment on the

MAI, and NPR has had further coverage since. A week later, the Christian

Science Monitor ran a (rather thin) piece. The New Republic had

already taken notice of rising public concern over the MAI. The issue

had not been properly covered in respectable sectors, TNR concluded,

because “the mainstream press,” while “generally skewed to the left…is

even more deeply skewed toward internationalism.” Press lefties

therefore failed to recognize the public opposition to Fast Track in

time and have not noticed that the same troublemakers “are already

girding [ for] battle” against the MAI. The press should confront its

responsibilities more seriously and launch a preemptive strike against

the “MAI paranoia” that has “ricocheted through the Internet” and even

led to public conferences. Mere ridicule of “the flat earth and black

helicopter crowd” may not be enough. Silence may not be the wisest

stance if the rich countries are to be able to “lock in the

liberalization of international investment law just as GATT codified the

liberalization of trade.”

Perhaps in reaction to the congressional letter or the surfacing of the

crazies, Washington issued an official statement on the MAI on February

17 1998. The statement, by Under Secretary of State Stuart Eizenstat and

Deputy U.S. Trade Representative Jeffrey Lang, received no notice to my

knowledge. The statement is boilerplate, but deserves front-page

headlines by the standards of what had already appeared (essentially

nothing). The virtues of the MAI are taken as self-evident; no

description or argument is offered. On such matters as labor and the

environment, “takings,” etc., the message is the same as the one

delivered by the governments of Canada and Australia: “Trust us, and

Shut Up.”

Of greater interest is the good news that the U.S. has taken the lead at

the OECD in ensuring that the agreement “complements our broader

efforts,” hitherto unknown, “in support of sustainable development and

promotion of respect for labor standards.” Eizenstat and Lang “are

pleased that participants agree with us” on these matters. Furthermore,

the other OECD countries now “agree with us on the importance of working

closely with their domestic constituencies to build a consensus” on the

MAI. They join us in understanding “that it is important for domestic

constituencies to have a stake in this process.”

“In the interest of greater transparency,” the official statement adds,

“the OECD has agreed to make public the text of the draft agreement,”

perhaps even before the deadline is reached.

Here we have, at last, a ringing testimonial to democracy and human

rights. The Clinton Administration is leading the world, it proclaims,

in ensuring that its “domestic constituencies” play an active role in

“building a consensus” on the MAI.

Who are the “domestic constituencies”? The question is readily answered

by a look at the uncontested facts. The business world has had an active

role throughout, as we learn, for example, from the publications of the

U.S. Council for International Business. Congress has not been informed.

The annoying public–the “ultimate weapon”–has been consigned to

ignorance. A straightforward exercise in elementary logic informs us

exactly who the Clinton Administration takes to be its “domestic

constituencies.”

That is a useful lesson. The operative values of the powerful are rarely

articulated with such candor and precision. To be fair, they are not a

U.S. monopoly. The values are shared by state/private power centers in

other parliamentary democracies, and by their counterparts in societies

where there is no need to indulge in rhetorical flourishes about

“democracy.”

The lessons are crystal clear. It would take real talent to miss them,

and to fail to see how well they illustrate Madison’s warnings over 200

years ago, when he deplored “the daring depravity of the times” as the

“stockjobbers will become the pretorian band of the government–at once

its tools and its tyrant; bribed by its largesses, and overawing it by

clamors and combinations.”

These observations reach to the core of the MAI. Like much of public

policy in recent years, particularly in the Anglo-American societies,

the treaty is designed to undercut democracy and rights of citizens by

transferring even more decision-making authority to unnacountable

private institutions, the governments for whom they are “the domestic

constituencies,” and the international organizations that serve their

interests at public expense.

The Terms of the MAI

What do the terms of the MAI actually state, and portend? If the facts

and issues were allowed to reach the public arena, what would we

discover?

There can be no definite answer to such questions. Even if we had the

full text of the MAI, a detailed list of the reservations introduced by

signatories, and the entire verbatim record of the proceedings, we would

not know the answers. The reason is that the answers are not determined

by words, but by the power relations that impose their interpretations.

Two centuries ago, in the leading democracy of his day, Oliver Goldsmith

observed that “laws grind the poor, and rich men make the law”–the

operative law, that is, whatever fine words may say. The principle

remains valid.

These are, again, truisms, with broad application. In the U.S.

Constitution and its Amendments, one can find nothing that authorizes

the grant of human rights (speech, freedom from search and seizure, the

right to buy elections, etc.) to what legal historians call

“collectivist legal entities,” organic entities that have the rights of

“immortal persons”–rights far beyond those of real persons, when we take

into account their power. One will search the U.N. Charter in vain to

discover the basis for the authority claimed by Washington to use force

and violence to achieve “the national interest,” as defined by the

immortal persons who cast over society the shadow called “politics,” in

John Dewey’s evocative phrase. The U.S. Code defines “terrorism” with

great clarity, and U.S. law provides severe penalties for the crime. But

one will find no wording that exempts “the architects of power” from

punishment for their exercises of state terror, not to speak of their

monstrous clients (as long as they enjoy Washington’s good graces):

Suharto, Saddam Hussein, Mobutu, Noriega, and others great and small. As

the leading Human Rights organizations point out year after year,

virtually all U.S. foreign aid is illegal, from the leading recipient on

down the list, because the law bars aid to countries that engage in

“systematic torture.” That may be law, but is it the meaning of the law?

The MAI falls into the same category. There is a “worst case” analysis,

which will be the right analysis if “power remains in the dark,” and the

corporate lawyers who are its hired hands are able to establish their

interpretation of the purposely convoluted and ambiguous wording of the

draft treaty. There are less threatening interpretations, and they could

turn out to be the right ones, if the “ultimate weapon” cannot be

contained and democratic procedures influence outcomes. Among these

possible outcomes is the dismantling of the whole structure and the

illegitimate institutions on which it rests. These are matters for

popular organization and action, not words.

Here one might raise some criticism of critics of the MAI (myself

included). The texts spell out the rights of “investors,” not citizens,

whose rights are correspondingly diminished. Critics accordingly call it

an “investor rights agreement,” which is true enough, but misleading.

Just who are the “investors”?

Half the stocks in 1997 were owned by the wealthiest 1 percent of

households, and almost 90 percent by the wealthiest tenth (concentration

is still higher for bonds and trusts, comparable for other assets);

adding pension plans leads only to slightly more even distribution among

the top fifth of households. The enthusiasm about the radical asset

inflation of recent years is understandable, considering which voices

are heard, sometimes believed. And effective control of the corporation

lies in very few institutional and personal hands, with the backing of

law, after a century of judicial activism.

The innocent talk of “investors” should not conjure up pictures of Joe

Doakes on the plant floor, but of the Caterpillar corporation, which has

just succeeded in breaking a major strike by reliance on the foreign

investment that is so highly lauded: using the remarkable profit growth

it shares with other “domestic constituencies” to create excess capacity

abroad to undermine efforts by working people in Illinois to resist the

erosion of their wages and working conditions. These developments result

in no slight measure from the “financial liberalization” of the past 25

years, which is to be enhanced by the MAI; it is worth noting too that

this era of financial liberalization has been one of unusually slow

growth (including the current “boom,” the poorest recovery in postwar

history), low wages, high profits–and, incidentally, trade restrictions

by the rich.

A better term for the MAI and similar endeavors is not “investor rights

agreements” but “corporate rights agreements.”

The relevant “investors” are collectivist legal entities, not persons as

understood by common sense and the tradition, before the days when

modern judicial activism created contemporary corporate power. That

leads to another criticism. Opponents of the MAI often allege that the

agreements grant too many rights to corporations. But to speak of

granting too many rights to the king, or the dictator, or the

slaveowner, is to give away too much ground. Why should they have any

rights at all? Rather than “corporate rights agreements,” these measures

might be termed, more accurately, “corporate power agreements,” since it

is hardly clear why such institutions should have any rights at all.

When the corporatization of the state capitalist societies took place a

century ago, in part in reaction to massive market failures,

conservatives–a breed that no longer exists–bitterly objected to this

attack on the fundamental principles of classical liberalism. And

rightly so. One may recall Adam Smith’s critique of the “joint stock

companies” of his day, particularly if management is granted a degree of

independence; and his attitude toward the inherent corruption of private

power, probably a “conspiracy” against the public when businessmen meet

for lunch, in his acid view, let alone when they form collectivist legal

entities and alliances among them, with extraordinary rights granted by

state power.

With these provisos in mind, let us recall some of the intended features

of the MAI, relying on what information has reached the concerned

public, thanks to the “unholy alliance.”

“Investors” are accorded the right to move assets freely, including

production facilities and financial assets, without “government

interference” (meaning a voice for the public). By modes of chicanery

familiar to the business world and corporate lawyers, the rights granted

to “foreign investors” transfer easily to “domestic investors” as well.

Among democratic choices that might be barred are those calling for

local ownership, sharing of technology, local managers, corporate

accountability, living wage provisions, preferences (for deprived areas,

minorities, women, etc), labor-consumer-environmental protection,

restrictions on dangerous products, small business protection, support

for strategic and emerging industries, land reform, community and worker

control (that is, the foundations of authentic democracy), labor actions

(which could be construed as illegal threats to order), and so on.

“Investors” are permitted to sue governments at any level for

infringement on the rights granted them. There is no reciprocity:

citizens and governments cannot sue “investors.” The Ethyl and Metalclad

suits are exploratory initiatives.

No restrictions are allowed on investment in countries with human rights

violations: South Africa in the days of “constructive engagement,” Burma

today, etc. It is to be understood, of course, that the Don will not be

hampered by such constraints. The powerful stand above treaties and

laws.

Constraints on capital flow are barred: for example, the conditions

imposed by Chile to discourage inflows of short-term capital, widely

credited with having insulated Chile somewhat from the destructive

impact of highly volatile financial markets subject to unpredictable

herd-like irrationality. Or more far-reaching measures that might well

reverse the deleterious consequences of liberalizing capital flows.

Serious proposals to achieve these ends have been on the table for

years, but have never reached the agenda of the “architects of power.”

It may well be that the economy is harmed by financial liberalization,

as the evidence suggests. But that is a matter of little moment in

comparison with the advantages conferred by the liberalization of

financial flows for a quarter-century, initiated by the governments of

the U.S. and U.K., primarily. These advantages are substantial.

Financial liberalization contributes to concentration of wealth and

provides powerful weapons to undermine social programs. It helps bring

about the “significant wage restraint” and “atypical restraint on

compensation increases [which] appears to be mainly the consequence of

greater worker insecurity,” which so encourage Fed chair Alan Greenspan

and the Clinton Administration, sustaining the “economic miracle” that

arouses awe among its beneficiaries and deluded observers, particularly

abroad.

Enthusiasm for these wonders is ebbing, however, among the managers of

the global economy, as the near-disasters that have accelerated since

financial flows were liberalized from the 1970s have begun to threaten

the “domestic constituencies” as well as the general public. Chief

economist of the World Bank Joseph Stiglitz, the editors of the London

Financial Times, and others close to the centers of power have begun to

call for steps to regulate capital flows, following the lead of such

bastions of respectability as the Bank for International Settlements.

The World Bank has also somewhat reversed course. Not only is the global

economy very poorly understood, but serious weaknesses are becoming

harder to ignore and patch over. There may be changes, in unpredictable

directions.

Returning to the MAI, signatories are to be “locked in” for 20 years.

That is a “U.S. government proposal” according to the spokesperson for

the Canadian Chamber of Commerce, who doubles as senior adviser of

Investment and Trade for IBM Canada, and is selected to represent Canada

in public debate.

The Treaty has a built-in “ratchet” effect, a consequence of provisions

for “standstill” and “rollback.” “Standstill” means that no new

legislation is permitted that is interpreted as “non-conforming” to the

MAI. “Rollback” means that governments are expected to eliminate

legislation already on the books that is interpreted as

“non-conforming.” Interpretation, in all cases, is by you-know-who. The

goal is to “lock countries into” arrangements which, over time, will

shrink the public arena more and more, transferring power to the

approved “domestic constituencies” and their international structures.

These include a rich array of corporate alliances to administer

production and trade, relying on powerful states that are to maintain

the system while socializing cost and risk for nationally-based

transnational corporations–virtually all TNCs, according to recent

technical studies.

The current target date for the MAI is April 27, but further delays are

likely because of disputes within the club. According to rumors

filtering through the organs of power (mainly the foreign business

press), these include efforts by the European Union and the United

States to allow certain rights to constituent states (perhaps affording

the EU something like the vast internal market that U.S.-based

corporations enjoy), reservations by France and Canada to maintain some

control over their cultural industries (a still greater problem for

smaller countries), and European objections to the more extreme and

arrogant forms of U.S. market interference, such as the Helms-Burton

act.

The Economist reports further problems. Labor and environmental issues,

which “barely featured at the start,” are becoming harder to suppress.

It is becoming more difficult to ignore the paranoids and flat-earthers

who “want high standards written in for how foreign investors treat

workers and protect the environment.” Worse still, “their fervent

attacks, spread via a network of internet websites, have left

negotiators unsure how to proceed.” One possibility would be to pay

attention to what the public wants. But, quite properly, that option is

not mentioned: it is excluded in principle, since it would undermine the

whole point of the enterprise.

Even if the deadline isn’t met and the MAI is abandoned, that wouldn’t

show that it has “all been for nothing,” the Economist informs its

constituency. Progress has been made, and “with luck, parts of MAI could

become a blueprint for a global WTO accord on investment,” which the

recalcitrant “developing countries” may be more willing to accept–after

a few years of battering by market irrationalities, the subsequent

discipline imposed on the victims by the world rulers, and growing

awareness by elite elements that they can share in concentrated

privilege by helping to disseminate the doctrines of the powerful,

however fraudulent they may be, however others may fare; and we can

expect “parts of MAI” to take shape elsewhere, perhaps in the IMF, which

is suitably secretive.

From another point of view, further delays give the rascal multitude

more opportunity to rend the veil of secrecy.

It is important for the general population to discover what is being

planned for them. The efforts of governments and media to keep it all

under wraps, except for their officially-recognized “domestic

constituencies,” are surely understandable. But such barriers have been

overcome by vigorous public action before, and can be again.