Tuesday, June 22, 2010


Political economists like Robert Gilpin take into account several theories of US capitalism that he says are ignored by neoclassical economists. For example, he discusses the core-dependency theory.

This ‘core-dependency’ theory was originated by Immanuel Wallerstein, in The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, New York: Academic Press, 1976.

The core is the advanced industrialized countries, a major source of capital and investment. The periphery is primarily a source of raw materials, food and labor. “Historically, the core has power over the periphery because a rupture of their ties would be more costly to the latter than the former” (Gilpin, 143).

The fact is, as Wallerstein points out, if it weren’t for the rich resources and cheap labor of the pre-capitalist world, Anglo-European capitalism could not have been developed. This remains the case today.

Economists tend to mention the ‘intellectual labor’ of scientists and engineers as necessary to modern technological development. They ignore the manual labor by millions of people involved in the extrication of resources.

Let’s take the case of coltan, which has become indispensable in the functioning of the Western business world. This is a primary resource used in the manufacturing of cell phones, computer chips and other technological devices. Coltan is found in 3 billion-year-old soils, like those in the Rift Valley region of middle Africa, western Australia and central Asia.

“ Columbite-tantalite - coltan for short – is one of the world's most sought-after materials. Refine coltan and you get a highly heat-resistant metal powder called tantalum. It sells for $100 a pound, and it's becoming increasingly vital to modern life. For the high-tech industry, tantalum is magic dust, a key component in everything from mobile phones made by Nokia (NOK) and Ericsson and computer chips from Intel (INTC) to Sony (SNE) stereos and VCRs.”
Essick, Kristi, “Guns, Money and Cell Phones”, The Industry Standard Magazine
June 11 2001, http://www.globalissues.org/article/442/guns-money-and-cell-phones

The Democratic Republic of Congo (DRC) is a main source of coltan. It is suffering through a terrible civil war, in which local militia and Western corporations are involved. Approximately 40,000 are dying a month from war-related causes; thousands of women are being raped.

"'There is a direct link between human rights abuses and the exploitation of resources in areas in the DRC occupied by Rwanda and Uganda,'" says Suliman Baldo, a senior researcher in the Africa division at Human Rights Watch, a New York-based nongovernmental organization that tracks human-rights abuses worldwide.” (Essick, op cit).

How are multinational corporations involved in this crisis? While not directly engaged in fighting or even mining, a U.N. report states that companies trading minerals are "the engine of the conflict in the DRC" (cited on http://www.thecongocause.org/mining.htm). Companies sell coltan to processing companies, which in turn sell to tantalum capacitor manufacturers - whose clients are high-tech companies such as Ericsson, Intel and Nokia.

These companies deny acquiring coltan from either side in the civil war raging in the DRC. But, like the provenance of diamonds, there is no independent monitoring to prove this. What is clear, is that we in the West and elsewhere around the globe, are dependent on coltan as a resource. Sectors of the DRC have become dependent on the cash provided by coltan sales. This is not, however, a chicken and egg question of what came first. We know that multinational corporation approached countries in Africa for coltan first.

Pre-coltan days, people in the DRC were mainly farmers and peasants. Now many, including children, are mining coltan under horrendous conditions, and unpaid, under conditions of virtual slavery.

In the present day international division of labor (euphemistically called 'globalization'), manual work involved in the extrication of raw resources is done by people in the ‘developing world’ and in dependency regions within the 'developed' world (such as coal mines in Virginia, USA). The intellectual work is done in the ‘advanced, developed world.’ The US’ manufacturing base has been replaced by the service sector (banking, hospitality, tourism etc).

This is because the labor costs of mass manufacturing are much lower in the developing world.

Take a look at the labels in your clothing. Here you will see a smorgasbord of developing countries that have made your clothes, and most of your other ‘stuff’. This is because of low labor costs. We in the developed world are actually dependent on this labor for most everything we own!

How did this come about? Political economists like Robert Gilpin vaguely ascribe the inequality between rich and poor countries to lack of education in poor countries. But this is not an accident. The ‘free trade’ model imposed on poor countries, has resulted in the deterioration of educational systems in those countries. Developing economies have switched from subsistence farming to cash crops subject to the risky environment of the global market. Many poor countries were forced to beg for loans in the 20th century from the IMF. Loans were given with strings attached: all health, education and welfare services had to be privatized.

The result has been a degradation of social life in loan-receiving countries, who are also saddled with huge interest bearing debts. In short, privatization/globalization has increased inequality,

In the last decade, this unfortunate state of affairs has been referred to as 'neocolonialism.' The adverse consequences of the core-dependency relationship is widely recognized by the IMF and other international institutions. See these 1999 remarks which critique 'globalization':
Birdsall, Nancy, “Carnegie Endowment for International Peace: Globalization and the Developing Countries:The Inequality Risk”, 1999.

Friday, June 18, 2010


In my Summer 2010, "International Political Economy" class, Mable wrote:
"People who express anti-globalization views would ask—how does minimizing economic insecurity change capitalism?"
This question is central to the debate between economic and political human rights. Originally, the UN Declaration of Human Rights was enacted by the UN General Assembly in 1948, and it mentioned both sets of rights. Political rights protect the freedom of assembly, speech and freedom from torture, arbitrary detention and other oppressive actions by the state. Economic rights are states’ obligation to feed, shelter and provide medical care:
Article 25: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control."
These entitlements are paid through taxes, which means that the wealthier segments of society shift their wealth to the poorer sections of society. This idea undermines the 'free market' philosophy of capitalism. The US only partially accepts health and welfare obligations. Therefore, the UNDHR was split into 2 Covenants: the Covenant on Political and Civil Rights, and the Covenant on Economic, Social and Cultural Rights. Only the US and three other countries have not ratified the latter.
The US arguments for the non-ratification of the Covenant on E, S and C rights are as follows:
• A massive shift of wealth subsidizing one section of the society by another, undermines the principles of a free market.
• If a section of a society is allowed to enrich itself, the wealth will ‘trickle down’ naturally to subordinate sectors, thus enriching everyone.
• The states that have fulfilled, or tried to, economic rights were command economies that were repressive and anti capitalist (ie, the USSR).
• Today, economic rights are considered by the US to be ‘aspirational ‘(lex ferenda -- what the law should be). Political rights are considered by the US as more rooted in the world that actually exists (lex lata: the law that exists). Therefore most states are out of compliance with the Covenant on E,S and C rights, according to the US, and it makes no sense to ratify. Inclusion of economic rights has led the US not to ratify Covenants on the rights of women and the child.

Critics argue that low-taxed inheritances, tax breaks for the wealthy, and other policies that privilege the rich, are subsidies for the rich or ‘corporate welfare’ which also undermine the principle of the free market. The accumulation of wealth in the hands of the few has failed to trickle down to the rest of us.

Travis wrote:
"Capitalism is simply an idea about how certain human endeavors and behaviors should be conducted." This statement points to the social construction of capitalism in a specific historical and geographical context.
What is that idea? How do we define capitalism?
Adding an ‘ism’ to the word ‘capital’, indicates a movement or organization (as in Buddhism).
The definition of capitalism from the Financial Dictionary:

"An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists."

In fact, no state has a completely free market. Corruption, no-bid contracts, subsidies for the wealthy, trade protection (e.g, the US protects certain types of textiles, also steel) exist most places. So, we could say that the Financial Dictionary's definition of capitalism is ‘aspirational’…the way capitalism should be.

Personally, I like short definitions. I define capitalism as ‘the pursuit of capital’, i.e. profit. Today, the US is a debtor nation running at a loss ($13 trillion debt, see http://www.brillig.com/debt_clock/). Can it be said to be capitalist any more, since INCOME PLUS ASSETS MINUS LIABILITIES=NEGATIVE CAPITAL OR DEBT?

Joseph wrote
'statements assume that human nature is a fixed variable,'
It’s interesting how much political economic theory rests on definitions of human nature in European and N American philosophy. The rise of capitalism happened at the same time that definitions of human nature were being turned on their head. The God-centered, earth-centric and stable universe of feudalism defined humans as each having an immutable, divinely ordered function. You were either a king or a serf, knight or a priest or merchant. Women were subordinated to men. With the collapse of feudalism and the rise of the mercantile class, came the discovery that the universe was a much more chaotic place: the rise of the solar centric view. Essentially, humans began to be viewed from the 17th century on, as a mass of atoms with no spiritual purpose, a state of nature in which each possesses a selfish instinct for survival which engenders competition and conflict. Thomas Hobbes, the 17th century English philosopher, popularized this view by advocating a strong ruler that could bring order to chaos (The Leviathan or The Matter, Forme and Power of a Common Wealth Ecclesiasticall and Civil, 1651).
The idea that humans are irredeemably and naturally competitive, greedy and aggressive, and that these are overriding factors, is now disputed. Anthropologists for example point out that for millions of years of human existence before the rise of ‘civilization’ 5000 years ago, hunter-gatherer societies led cooperative and peaceful lives. This, anthropologists claim, is the reason why humans have survived as a species. It is thought that the threats to survival today (nuclear, environmental degradation etc) are the result of the competitive view of human nature, which emphasizes hyper-masculine traits, territoriality and resource wars as norms. Authors such as the scientist Fritjof Capra (The Turning Point, 1991), believe that humans are moving towards another evolutionary phase, which is more cooperative, woman-centered and ecologically conscious.

Thursday, June 10, 2010

Measuring Wealth: A Philosophical Exercise!

The Global Pie Chart exercise is fraught with pitfalls. Implied is the question: what is wealth? Dictionary.com defines wealth in economic terms as
'all things that have a monetary or exchange value'. So it's an aggregate term. Water and oil cannot be by themselves 'all things', although definitely should be factors in measuring wealth. Students who noted this, are on the right track.
So, according to Keynes and his GDP, wealth is quantifiable, and you saw that the most popular measure of wealth is Gross National Product or Gross Domestic Product (see my Political Economy glossary for definitions.)
But...there is emerging a new definition of wealth that is NOT quantifiable. Clean air, clean water, good health, happiness, wellbeing...these are qualitative factors. It is now increasingly understood that these qualitative factors are indicators of economic well being. Health IS wealth (as my grandmother used to say!) For example, in the US, the poorer you are, the more likely you are to die earlier than others who are wealthier. It actually is more complicated than that. You see, there are societies that are poor in terms of currency but also long living. This might be because they have clean air, plenty of foraging and agricultural food, etc, most of which does not have exchange value. A friend of mine lives on an obscure Philippino island relatively untouched by civilization. People live off the land, the economy is barely run on money,there are small marketplaces, they are happy and live about as long as we do in the West.
Feminist economists (see my Pol Econ glossary) critique the GDP/GNP. They tend to look at unpaid services, like child caretaking, and argue that they are invisibilized, but should be part of accounting wealth.
In case you think all this talk is far fetched, be aware that tucked inside the 2010 health bill, on p 562 no less, is a provision requiring Congress to help finance and oversee the creation of a 'key national indicators' system, a sort of report card to show improvement, or not, in areas of health, education and the environment. This is called the State of the US, and will be run by the National Academy of Sciences; indicators will also include crime, energy, infrastructure, housing. What is not clear, is which indicators would enhance the GDP. Should they account for happiness or carbon emissions? Accounting wealth is a philosophical exercise. One economist, Amartya Sen, who teaches at Harvard, has created the Human Development Index; you might want to research his indicators.
The criticism of the GDP is as follows: just taking a national average of the GDP per person gives a skewed picture. For example, just a small minority of extremely rich people, can artificially increase the average GDP per person. So this explains why the US has a very high aggregate GDP, but 40 million Americans live under the poverty line. The US' child mortality rate is the same as Cuba's. Yet the US is ranked as high income country, and Cuba is ranked as a middle income country.