Hazel Henderson wrote some confusing things about capitalism and the environment on WorldChanging today. She begins:
The mantra of economists, central bankers, the World Bank, the IMF and others advising developing countries calls for , above all, market reform. Un-packing the jargon, they mean de-regulation, free trade, privatization, convertible currencies, export and debt-led growth and flexible labor markets – summarized as the “Washington Consensus.” Today, the call for market reform is morphing into demands for reforming markets and capitalism itself.
Today, this one-size-fits-all conventional recipe for economic growth is being challenged not only on social and environmental grounds — because it is widely seen as failing. Corporate CEOs at Davos worried about global climate chaos and their US-CAP group urged mandatory caps on their own carbon emissions. Soul-searching continues on the failure of WTO trade talks, the growing gap between rich and poor, the effects globalization and offshoring of blue and increasingly, white-collar jobs. There is little to reassure American[s] that any serious policy re-think is afoot.
She proceeds to write about the many ways in which serious policy re-thinks are afoot. But before we get there, I want to take issue with the premise Henderson is setting up here — that deregulation and privatization and convertible currencies and whatnot are somehow in tension with caring about the environment or addressing the gap between rich and poor.
You can’t wish yourself prosperous, either as a person or as a nation. You have to make something or provide some service that other people want to buy. That’s the only way that wealth is created in this world. At the moment, the money is in places like the United States and Canada, though the balance is, as Henderson writes, starting to shift elsewhere in the world, largely because India’s and China’s skilled workers are willing to work for less money than skilled workers in North America. But if you’re a dirt-poor African country that’s tired of being dirt-poor, you need to produce something other people want, and most of the time that means getting those other people to show you how.
If you’ve got a perfect climate for soybeans, and you want to sell soybeans to America (or China, or France, doesn’t matter), your soybeans have to meet America’s standards. The best way to learn how to produce soybeans that do is to get some Americans in to give you lessons. But they’re not going to bother if your soybean fields are controlled by your government and your government has a policy of, say, shooting at foreigners or taxing them into the ground or shaking them down for heavy bribes at the airport. If you want help — not a handout, but actual usable advice and investment — it has to be worth their while.
Henderson approvingly mentions Muhammad Yunus, renowned for his microcredit Grameen Bank. If he weren’t free to lend money, or his government taxed his microscopic profit margins by half, he wouldn’t — couldn’t — do what he does.
Now take the troubled WTO trade talks Henderson mentions. The reason we can’t seem to strike a new global trade deal is primarily that First World countries like the United States and Canada aren’t prepared to live by their own “Washington Consensus” rules. We want access to developing countries’ markets without giving them access to ours, and above all we want to keep subsidizing our domestic agriculture when food is what the developing world most wants to sell us. Of course that’s not going to work out, but more importantly it’s not right. It’s not living by our own rhetoric.
Similarly, most of the horror stories of international capitalism run amok involved countries or companies not playing by the rules they espoused — propping up dictators who offered them exclusive business deals, for instance, running roughshod over both democracy and competition theory. Not only is this a reprehensible way to behave, it’s anti-capitalist.
Speaking of which:
China has long rejected the Washington Consensus model and modified it to create its path of a social market economy where markets are seen as “good servants but bad masters.”
China is an example to follow? China arrests people who criticize the government, violently persecutes Falun Gong practitioners, suppresses even the Catholic Church, and it seems you can’t open a business without paying 17 bribes and maybe you end up in jail even so for forgetting to grease the right palm. Markets make bad masters but bureaucrats with guns are worse.
Henderson goes on to itemize the various ways that capitalist instruments, applied with the proper planning horizon, are doing good in the world. In many cases, it’s through First World investment in the developing world, which requires … trade liberalization, convertible currencies, fewer restrictions on foreign ownership, and all the other failing mechanisms of the Washington Consensus.
She concludes by misunderstanding Adam Smith:
Would Adam Smith be surprised? Probably not, since he lauded the dynamism of capitalism… The new values and ethical concerns driving the further evolution of capitalism reflect the new imperatives of the 21st century on our small, endangered planet. Smith’s famous “invisible hand” turned out to be our own…not some metaphysical force.
… which is exactly what Smith said it was. Smith’s “invisible hand” was just a rhetorical device (one he didn’t even use much), the point being that by acting in our own interest, as informed by reason, we all become more prosperous. The butcher gets rich by selling good-quality meat at a price people are willing to pay, and the people who buy it eat it and are well-fed and healthy and go out to do some work and make some money, which they turn around and spend on other things they want, in turn making the people who produce those things wealthier, and on and on it goes. It’s just individuals looking out for themselves, but somehow the world works as if guided by an invisible hand toward mutual improvement, Smith argued.
Greed, as Gordon Gekko says in Wall Street, is good. As long as it’s enlightened greed, greed that plays by the rules, greed that behaves decently. Gekko, in the movie, betrays his protegé, the young hero played by Charlie Sheen, who ultimately turns to the system and testifies against his former mentor. It’s a movie, not history, but you can read it as either a critique of capitalism or as a critique of capitalism gone wrong. It’s not like Charlie Sheen is wearing a Che T-shirt by the end of it.
Point is, Smith’s “invisible hand” was never “some metaphysical force.” It was always us and our own selfish desire to live better. It’s just that we’re increasingly understanding how long a view we have to take to achieve that.