[The Global Elite and Globalization]
by JEFF FAUX
[from the February 13, 2006 issue]
The world's movers and shakers are convening once again in January at the annual
World Economic Forum in Davos, the posh ski resort nestled in the Swiss Alps.
Attendance is invitation-only, enforced by police barricades, razor wire and the
latest high-tech military hardware to guard against terrorists, protesters and
curious local citizens.
Some 2,000 people will show up to discuss the world's problems as defined by
those who own and manage the great global concentrations of wealth (Microsoft,
Citigroup, Siemens, Nestlé, Nomura Holdings, Saudi Basic Industries, etc.). Their
guests include prominent political leaders, international bureaucrats, academics,
consultants and media pundits--with a few NGO and labor union officials sprinkled
along the edges to demonstrate diversity.
Davos is not the place for secret conspiracies. More than 200 hovering journalists
will dispatch to the world's citizens breathless accounts of the chatter and charm of
the masters of the economic universe. Davos is rather the most visible symbol of
the virtual political network that governs the global market in the absence of a world
government. It is more like a political convention, where elites get to sniff one
another out, identify which ideas and people are "sound" and come away with
increased chances that their phone calls will be returned by those one notch above
them in the global pecking order.
Americans are of course prominent members of this "Party of Davos," which relies
on the financial and military might of the US superpower to support its agenda. In
exchange, the American members of the Party of Davos get a privileged place for
their projects--and themselves. Whether it's at Davos, at NATO headquarters or in
the boardroom of the International Monetary Fund, heads turn and people listen
more carefully when the American speaks.
"Davos Man," a term coined by nationalist scholar Samuel Huntington, is bipartisan.
To be sure, Democrats tend to be more comfortable with the forum's informal
seminar-style and big-think topics like global poverty, cultural diversity and
executive stress. Bill Clinton goes often, and Al Gore, John Kerry, Robert Rubin,
Madeleine Albright, Joe Biden and other prominent Democrats are familiar faces.
Republicans generally prefer more private venues. George W. Bush, of course,
doesn't do anything unscripted. But people like Dick Cheney, Newt Gingrich, John
McCain and Condoleezza Rice have all worked the Davos circuit.
That the global economy is developing a global ruling class should come as no
shock. All markets generate economic class differences. In stable, self-contained
national economies, where capital and labor need each other, political bargaining
produces a social contract that allows enough wealth to trickle down from the top
to keep the majority loyal. "What's good for General Motors is good for America,"
Dwight Eisenhower's Defense Secretary famously said in the 1950s. The United
Auto Workers agreed, which at the time seemed to toss the notion of class warfare
into the dustbin of history.
But as domestic markets become global, investors increasingly find workers,
customers and business partners almost anywhere. Not surprisingly, they have
come to share more economic interests with their peers in other countries than with
people who simply have the same nationality. They also share a common interest in
escaping the restrictions of their domestic social contracts.
The class politics of this new world economic order is obscured by the confused
language that filters the globalization debate from talk radio to Congressional
hearings to university seminars. On the one hand, we are told that the flow of
money and goods across borders is making nation-states obsolete. On the other,
global economic competition is almost always defined as conflict among national
interests. Thus, for example, the US press warns us of a dire economic threat from
China. Yet much of the "Chinese" menace is a business partnership between China's
commissars, who supply the cheap labor, and America's (and Japan's and Europe's)
capitalists, who supply the technology and capital. "World poverty" is likewise
framed as an issue of the distribution of wealth between rich and poor countries,
ignoring the existence of rich people in poor countries and poor people in rich
countries.
The conventional wisdom makes globalization synonymous with "free trade" among
autonomous nations. Yet as Renato Ruggiero, the first director-general of the
World Trade Organization, noted in a rare moment of candor, "We are no longer
writing the rules of interaction among separate national economies. We are writing
the constitution of a single global economy." (Emphasis added.)
On the board of many transnational companies, Ruggiero has been both trade and
foreign minister in the Italian government of right-wing businessman Silvio
Berlusconi. He is now the chair of Citigroup's Swiss subsidiary. His fellow authors of
the Davosian constitution have similar résumés, tracking careers that flow easily
across borders and between public and private sectors. After just stepping down as
German chancellor, Gerhard Schröder has become board chair of a Russian
company building a gas pipeline that Schröder himself had negotiated while in office.
And so it goes.
In the absence of global democracy, the forces that act as counterweights to the
power of the investor class in national economies--labor, civil society and
progressive political parties--are too weak and unorganized to create a global social
contract. What might be called the "Party of Porto Alegre"--the NGO activists of the
World Social Forum, who also meet annually (usually in Brazil, this year in
Venezuela, Mali and Pakistan) in January--is hardly a match for Davos. It is
therefore no surprise that the constitution of the world economy protects just one
class of global citizen--the corporate investor.
Given the influence of American elites, the model for this constitution is the North
American Free Trade Agreement, conceived under Ronald Reagan, nurtured by
George H.W. Bush and delivered by Bill Clinton. Among other things, NAFTA's
1,000-plus pages give international investors extraordinary rights to override
government protections of workers and the environment. It sets up secret panels,
rife with conflicts of interest, to judge disputes from which there is no appeal. It
makes virtually all nonmilitary government services subject to privatization and
systematically undercuts the public sector's ability to regulate business. Jorge
Castañeda, later Mexico's foreign secretary, observed that NAFTA was "an
agreement for the rich and powerful in the United States, Mexico and Canada, an
agreement effectively excluding ordinary people in all three societies."
In the fall of 1993 a corporate lobbyist, exasperated by my opposition to NAFTA,
stopped me in the corridor of the Capitol. "Don't you understand?" she demanded.
"We have to help [then-Mexican President Carlos] Salinas. He's been to Harvard.
He's one of us."
Her reference to "us" seemed odd. Neither she nor I was a Harvard graduate. So it
took me a while to get her point: "We" internationally mobile professionals had a
shared interest in liberating similarly mobile global investors from regulations
imposed by national governments on behalf of people who were, well, not like "us."
Despite the considerable social distance between Salinas and both of us, she was
appealing to class solidarity.
It's impossible to understand why Democratic Party leaders collaborated with
Republicans to establish NAFTA unless reference is made to cross-border class
interests. There was no compelling economic or political reason for Bill Clinton to
make NAFTA a priority in his first year as President. In economic terms, nothing was
broken that needed fixing. Politically, NAFTA and the WTO that followed traded
away the interests of the Democratic Party's blue-collar electoral base while creating
a bonanza for Republican constituencies on Wall Street and in red-state
agribusiness.
But Clinton was more Davos than Democrat. Tutored by financier Robert Rubin, a
prodigious fundraiser who became his Treasury Secretary, Clinton embraced a
reactionary, pre-New Deal vision of a global future in which corporate investors were
unregulated and the social contract was history. Indeed, in all three countries it was
the leaders of the political parties that had historically claimed to represent ordinary
people--the Democrats' Clinton, the Liberal Party's Jean Chrétien and the
Institutional Revolutionary Party's Salinas--who delivered NAFTA to their global
corporate clients, undercutting their own constituencies. "NAFTA happened," said
the then-chairman of American Express, "because of the drive Bill Clinton gave it.
He stood up against his two prime constituents, labor and environment, to drive it
home over their dead bodies."
A year later, in November 1994, enough angry Democratic voters stayed away from
the polls to give the Republicans control of the House. Since then, many
working-class Americans, feeling abandoned by the Democrats, have responded to
the Republican definition of class struggle as a fight over gun control, school prayer
and abortion. The Democrats have still not recovered.
Consistent with a deal among the rich and powerful, NAFTA made the distribution of
income, wealth and political power more unequal throughout the continent. In all
three countries, wages in manufacturing fell behind productivity increases, shifting
income from labor to capital. Ordinary Mexicans especially went through the
economic wringer--to which the willingness of hundreds of thousands of them to
risk their lives each year crossing the border continues to be tragic testimony.
On the other hand, opportunities blossomed for the rich and powerful in all three
nations. American and Canadian investors got access to cheaper labor and
privatized Mexican companies, while Mexican oligarchs got to broker the deals. One
example was the way NAFTA was used to open up Mexico's banking system to
foreign ownership, profiting elites on both sides of the border.
The governments of Carlos Salinas and his successor, Ernesto Zedillo--hailed in
Washington as great free-market reformers--privatized government-owned banks,
turning them over to business cronies, and, through NAFTA, revoked the legal ban
on foreign ownership. When the banks started to fail, they were given huge
government subsidies to make them attractive to transnational buyers. At the same
time, the "reform" government was slashing subsidies to the poor for food and
medicine.
Banamex, the country's second-largest bank, was bought by a Mexican syndicate,
owned by Salinas pal Roberto Hernandez Rodriguez, for $3.2 billion and when,
thanks to NAFTA, foreigners were allowed to own Mexican banks, it was resold to
Citigroup for $12.5 billion. Robert Rubin negotiated the deal for Citigroup, where he
had gone after leaving the Treasury Department. The Mexican government's welfare
program for Citigroup and other foreign investors continues: In 2003 government
subsidies to private banks (more than 85 percent of them now owned by
foreigners) were almost three times those spent on roads, schools and other
infrastructure.
NAFTA was only the beginning. The Clinton/Republican alliance then pushed through
the WTO agreement and the subsequent deal with China that traded off more US
industrial jobs in exchange for protections for US investors in that huge Asian
market. Not only has this produced a massive trade deficit with China and further
downward pressure on US wages, it has also sent some 250,000 jobs from Mexico
to China. The ubiquitous Citigroup, with banking operations in 100 countries, is
now busy building its Chinese banking empire--with Chinese partners.
That well-connected people who move in and out of government and business act
in ways that benefit their class and take advantage of their contacts to further their
own interests is neither illegal nor new. That's the way class privilege works. Thus,
it is unlikely that Dick Cheney ever ordered anyone at the Pentagon to give a huge
sole-source contract to Halliburton. He did not have to. Procurement officers
already knew the relationship between the company and the Vice President. And
Cheney's promotion of more funds for the military and for the war in Iraq in
particular was bound to benefit the world to which he belonged--his circle of rich
and powerful people who would always be there for him and his projects.
There are of course important differences between the ways the elites of the
different parties promote the Davos agenda. The preferred instruments of Rubin
Democrats are the economic levers of the US Treasury, the IMF, the World Bank
and other international financial institutions. Rumsfeld/Cheney Republicans prefer
the Defense and Energy departments. The Rubin mode is certainly less lethal and
probably more effective. Still, Davos relies on the Pentagon to protect its class
privileges with a worldwide web of military bases, training schools and the
always-present threat to send in the Marines. It's worth remembering that virtually
the only section of Saddam Hussein's law still untouched by the US occupation is its
oppressive labor code.
But the twin pillars of the US superpower--the Pentagon and Wall Street--are
slipping into their own crises and soon may not be able to provide the military and
economic muscle for the Davos agenda.
The crisis on the military side involves blowback from the overreach in Iraq. Bush,
Cheney and Rumsfeld--despite their thick transnational corporate
connections--have created a disaster for Davos. The war has unleashed an army of
enemies of Western modernization that is making global corporations nervous. Two
years ago the wiser heads at Davos were appalled at Cheney's delusional report on
the Bush Administration's progress in turning the Middle East into a shopping
mall--however much they might have sympathized with the objective. Today the
mess in Iraq has revealed to Davos both the incompetence of the American
governing class and the unwillingness of the American electorate to make the
sacrifices necessary to act as security police for the world's rich and powerful.
The looming economic crisis comes from the unsustainable US external debt. For
more than a quarter-century, we Americans have been buying more from the rest
of the world than we have been selling it, and borrowing from abroad to make up
the difference. The resulting trade deficit has been a major engine of global growth
under Davos's management. But common sense and simple arithmetic tell us that
even the United States cannot go on much longer spending more than it is earning.
When the day of reckoning comes, high interest rates and a falling dollar will force
us Americans to rebalance our trade by cutting the price of what we sell and raising
the price of what we buy, lowering real incomes. The crisis in the nation's trade
sector will be transmitted to the rest of the economy, made vulnerable by
overindebted consumers, overleveraged pension funds and overpriced houses.
Thanks to George W. Bush's reckless fiscal deficits, the government will have less
ability to overcome an economic crisis through borrow-and-spend, as it did in the
last economic downturn. With the appetite for America's IOUs diminishing, US
politicians will have their hands full dealing with rising energy costs and the tottering
finances of healthcare, education and pensions.
The basics of a harder-times scenario are not much in dispute. The debate is
between those who foresee a hard landing and those who believe that the world's
central bankers will somehow figure out a way to avoid a global financial meltdown.
But hard landing or soft, even the staunchest supporters of globalization admit
that lower living standards are already in the cards. N. Gregory Mankiw, who as
Bush's chief economist famously praised the offshoring of American jobs, recently
acknowledged that US reliance on foreign savings to support its consumption
means a "less prosperous future."
Financier Warren Buffett reaches the obvious conclusion: We are headed for
"significant political unrest." Democratic Senator Max Baucus, a staunch free-trader,
recently told Chinese business executives that unless they cut their country's trade
deficit with America "US politics will become unmanageable." New York Times
columnist and Davos champion Thomas Friedman, who also sees the writing on the
wall, suggests dividing political parties by economic class, with Republican Wall
Street joining with Democratic Hollywood against disgruntled working-class
"populists" in both red and blue states.
But working-class disgruntlement is likely to go beyond Freidman's stereotype of
uneducated losers. The outsourcing and downsizing of opportunities is already
adding to the insecurity of people much further up the skill ladder. There are signs
that the anxiety is spreading to the business class as well; within organizations
such as the National Association of Manufacturers, the owners of smaller and
medium-sized businesses, who still depend on an American workforce, are
beginning to dissent from the once united front in favor of globalization.
Resistance to Davos is also growing in our own hemispheric neighborhood. Latin
American oligarchs who prospered by selling their countries' assets and people to
transnational investors have been ousted in Brazil, Argentina, Venezuela, Uruguay
and Bolivia. In Mexico, which is having a presidential election this July, a leftist critic
of NAFTA leads in the polls. The Party of Davos may not be over, but the rest of
the world seems less willing to foot the bill.
Here in America, the coming unrest could turn right as well as left. The Republican
Party is hopelessly tied to the multinational priorities of the US business elite, but
its managers are skilled at stoking nationalist resentment among the working-class
victims.
In the two-party system the burden therefore rests on the Democrats' ability to
produce leaders who are not co-opted by the Party of Davos. Given the current
crop, our chances may not seem great. But leaders are often produced by the
times. As globalization's squeeze on ordinary Americans continues, the political
price will rise for those who continue to give priority to bringing Burger King to
Baghdad over healthcare to Baltimore. It's worth remembering that Franklin
Roosevelt, who was as elite and privileged as one could get, responded to the
economic crisis of his time by becoming--as they muttered in the best clubs--"a
traitor to his class."
