Transcribed by Eric Schissel; from David Barsamian's interviews of Noam Chomsky in _The Prosperous Few and the Restless Many_, pp 9-11 By Odonian Press, Berkeley, California.
DB=David Barsamian NC=Noam Chomsky
DB: The prescription for our economic problems is more of the same -- "leave it to the market." There's such endless trumpeting of the free market that it assumes almost a myth-like quality. "It'll correct the problems." Are there any alternatives?
NC: We have to first separate ideology from practice, because to talk about a free market at this point is something of a joke. Outside of ideologues, the academy and the press, no one thinks that capitalism is a viable system, and nobody has thought that for sixty or seventy years -- if ever.
Herman Daly and Robert Goodland, two World Bank economists, circulated an interesting study recently. In it they point out that received economic theory -- the standard theory on which decisions are supposed to be based -- pictures a free market sea with tiny little islands of individual firms. These islands, of course, aren't internally free -- they're centrally managed.
But that's okay, because these are just tiny little islands on the sea. We're supposed to believe that these firms aren't much different than a mom-and-pop store down the street.
Daly and Goodland point out that by now the islands are approaching the scale of the sea. A large percentage of cross-border transactions are within a single firm, hardly "trade" in any meaningful sense. What you have is centrally managed transactions, with a very visible hand -- major corporate structures -- directing it. And we have to add a further point -- that the sea itself bears only a partial resemblance to free trade.
So you could say that one alternative to the free market system is the one we already have, because we often don't rely on the market where powerful interests might be damaged. Our actual economic policy is a mixture of protectionist, interventionist, free market and liberal measures. And it's directed primarily to the needs of those who implement social policy, who are mostly the wealthy and the powerful.
For example, the US has always had an active state industrial policy, just like every other industrial country. It's been understood that a system of private enterprise can survive only if there is extensive government intervention. It's needed to regulate disorderly markets and protect private capital from the destructive effects of the market system, and to organize a public subsidy for targeting advanced sectors of industry, etc.
But nobody *called* it industrial policy, because for half a
century it has been masked within the Pentagon system.
Internationally, the Pentagon was an intervention force, but
domestically it was a method by which the government could coordinate
the private economy, provide welfare to major corporations, subsidize
them, arrange the flow of taxpayer money to research and development,
provide a state-guaranteed market for excess production, target
advanced industries for development, etc. Just about every successful
and flourishing aspect of the US economy has relied on this kind of