Life in Central America

The tortilla makers

In any self-respecting local market you will see a row of women, all making tortillas with great vigor, and talking all the while. This always makes me feel good, because this is the local economy at work. In the US, one tortilla machine would make many more standard tortillas, which would be more efficient, and employ far fewer people, and the tortillas would not be as good. This is progress.

If I had some drawing software, I could show you my concept of how an economy works, and it would be entitled Money circulates. In a local economy, it would be full of circles of many sizes, but all the action would involve local people. This is not the kind of self-sufficient local economy that the global financial institutions want.

They don´t want any local economies at all. They want everybody in the world to buy from them and sell to them. They call this ¨free trade¨, which is a misnomer if ever there was one. It just means they want to control all the trade in the world, and make most of the money.

I am not being paranoid here. I am reading a book by a former chief economist for the World Bank, called The Discontents of Globalization. It is sobering reading. At one point, for example, the US wanted to buy Russia´s enriched uranium, to take of the world market, and take it out of the hands of terrorists. The American uranium companies tried to block the purchase, because it would ruin their market!

The future of the underclasses in America

When I started to write this posting I was thinking of the underclasses in the US, but as soon as I touched the keyboard I realized this was a much larger problem. There are ghettos all over the world, and they are growing all the time.

Costa Rica didn’t have any until recently. It has plenty of poor people, but most of them lived in rural areas. The Central Valley, where everybody wants to live, is turning into a minature version of LA. But even worse, are the shantytowns which have sprung recently on the outskirts. I was shocked when I first saw them.

The cardboard shacks with no water or sanitation were bad enough, but the realization that Costa Rica let these developments spring up was even more shocking. They could of easily made it impossible for them to happen. Most of the inhabitants are Nicaraguan imigrants, many of them illegal, and the crime rate is shocking. But the Ticos don’t do the obvious thing and get rid of these developments, which take jobs away from the poor Ticos and increase the demands for free medical services.

Why is this? The answer is simple, as it always is: greed. Being slumlords is profitable, and cheap labor is profitable. And Ticos, like everybody else, don’t care about anything but their immediate gain. This is the sad fact of our times. And this situation is going to get worse. We are on a downhill slide to nowhere.

The economists keep saying development will solve all our problems, but this hasn’t worked, and it will keep on not working. I am now reading The End of Work by Jeremy Rifkin. His kind of thinking provokes the wrath of conventional economists, but it makes sense to ordinary people, especially those on the economic fringes—and these people do exist.

He has a great chapter on Technology and the African-American Experience. This also applies to other recent minorities, especially the Hispanics. It is about how blacks went from being slaves to being nothing at all. Between 1940 and 1970 more than five million blacks moved from the South to the North, one of the largest and most rapid mass internal movement in history.

For a while the North was able to absorb many of them, but this did not last long. Their unskilled jobs were eliminated by automation and suburbanization. They were trapped in ghettos as bad as those anywhere, and there was no way out.

I have some experience working with these people. When I was unemployed in LA, I attended training programs with some young, inner-city blacks. And later I tried to teach Vietnam immigrants English. And the sad truth is this: for the most part they are untrainable. You can’t teach them anything. I know I sound like a bigot here, but I am only saying that cultural changes are difficult to reverse. I have utmost respect for those who try, and I wish them well, because they are going to need it.

But the new information economy has made it worse. This economy needs trained workers, highly trained workers with a high level of intelligence. The average high school graduate, with his rudimentary education and disinterest in the work ethic, hasn’t got a chance. Parents who want their children to suceed make sure they attend upscale school districts, or private schools. This is especially true in developing countries, which have less and less money available for public education.

The upper classes have trouble finding jobs, but the under classes are much worse off. Previously, they were exploited for their labor. Now they are not needed at all.

Human capital

As usual, this posting was triggered by something I have read. The reading material in this case was Our Modern Times: the new nature of capitalism in the information age, by Daniel Cohen, a man with credits as long as your arm. This was published by the MIT Press in 2003, so it should be accurate and up-to-date, but after reading it for the second time I have my reservations. This guy is just another expert.

After reading Georgescu-Roegen, and gotten used to his rigorous definitions, I am disappointed by Cohen. He throws around loaded terms like Capitalism entirely too much. And this is no small matter, to say the least.

And I am not impressed with his idea of human capital, in his chapter From financial capital to human capital, either. This is another glib concept that sounds meaningful, but means nothing. The general idea, I believe, is that companies should not consider employees as expenses, but as part of the money-making machine instead, a form of capital. This sounds nice, doesn’t it?

But it hasn’t changed a thing. Companies are eager to hire the exact skills (the human capital) they need, but no one else. They want to buy the special machines that will make them more powerful—but at the same time work the other machines to death. The lucky people with the special skills will prosper, the others will suffer.

The woods are full of people desperate to get these special skills. Most of them, however, will lose out in the crap game that leads to fame and fortune. Human capitalism is a cruel joke.

Entropy and development

Hold your breath. I am going to quote from the most important section of The Entropy Law and the Economic Process.

The fact that the economic process consists of a continuous and irrevocable transformation of low into high entropy has some important consequences which should be obvious to anyone willing to descent for a moment from the higher spheres of elucubrated growth models down to the level of elementary facts.

I actually understand this. And this is not because I am especially smart, but because I was stubborn enough to wade thru a lot of heavy stuff. I actually enjoy reading something solid once in a while. Actually, it is not hard to understand, you just have to understand entropy—which is just a measure of disorderliness.

Until now, economics was based on the first of the physical sciences: mechanics. Basically these are Newton’s laws. According to these laws, perpetual motion machines are possible. And indeed, celestial mechanics—the rotation of the Earth around the Sun, for example, looks like it will go on forever, at least when observed in human time scales. And economists thought our economy was the same way, it was some kind of perpetual motion machine—and they took the machine analogy seriously.

But when people built steam engines, it was obvious that something else was going on, and that something came to be called entropy. To run a steam engine, you have to burn up coal; there is just no getting around it. You have to use up energy.

But you can’t really use up energy, because the amount of energy cannot be changed, you just convert the energy in low-entropy coal into high-entropy ashes and smoke. Bear with me; this is not as counter-intuitive as it sounds. Coal contains solar energy, as all our energy sources do. This is stored as nice, orderly chemical structures. The key word here is order, and that translates into low entropy, or low disorder.

A developed economy operates by degrading this orderliness (low entropy) into disorderliness (high entropy). We do this by burning up our fossil fuels. We are busy messing up mother earth.

Obvious, isn’t it?

But why is this important? The answer is simple, and breathtaking: developed economies cannot last. Eventually, they are going to run out of steam. Before Georgescu-Roegen came along, and rained on our parade, economists had ignored this simple fact, and for the most part, they still do.

But now you know differently. There is no such thing as sustainable development.

Latin America never had a Henry Ford

Eduardo Galeano is brutally frank about this. He reminds us that Latin America and North America developed differently— very differently, and he goes into this in great detail, and with great passion.

The division of labor among nations is that some specialize in winning and others in losing. In our part of the world, known today as Latin America, was precocious; it has specialized in losing ever since those remote times when Renaissance Europeans ventured across the ocean and buried their teeth in the throats of Indian civilizations.

By contrast, the North American colonies were independent right from the start. England overlooked them at first because there was so much easy money in the South. The colonies protected their infant industries, and soon began to compete with their parent. This was the economic basis for their War of Independence.

Latin America (and also the American South) was dominated by an export/export economy of the crudest type. The poor got nothing, the rich got everything. Their wars of independence got them nothing, because their native industries were not allowed to compete with British imports. Later, during the depression and the world wars, native industries began to develop, but they were wiped out by the Americans after WWII. They never really had a chance. As Galeano says:

What happened to Latin America’s industrial bourgeoisie is what happens to dwarfs; they become decrepit without having grown...Truth compels us to admit that they never did anything to deserve a better fate.

Let me relate that to Costa Rica, which is not a typical Latin American country. Native industries are practically nonexistent; Costa Rica was built on bananas and coffee. But after the revolution of 1948, which gave the people a share of the power, the government started to built up its social services: schools, hospitals, electricity, telecommunications, and insurance coverage. This is why Costa Rica is now the most affluent country in Latin America. But it has one big problem: it didn’t create any jobs for all these well-educated people, because there weren’t any industries to employ them; everybody couldn´t work for the government.

It did have several large quasi-industrial organizations, however: the electricity, telecommunications, and insurance monopolies. These have strong unions, but not much technical or business competence. It can take years (no exaggeration) to simply get a telephone. The government has no control over these firms; they can do as they please. In Galeano’s terms, they are industrial dwarfs.

During the CAFTA negotiations, the US made it clear that it wanted to take over these businesses, and Costa Rica gave the US what it wanted—even though it had promised, over and over again, it would not to do this. Tico politicians, like politicians everywhere, are flexible in their use of the truth.

So what is Costa Rica’s future? It doesn’t have any. It has succumbed to the current free trade rhetoric without knowing what it is doing. But as Galeano points out, free trade is nothing new. Free trade with the British was the force that devastated most of Latin America a century ago.

Costa Rica can now offer an educated work force, much like India, but not much else. This is not a good position to be in. The Ticos have lost control of their own country. In biblical terms, they have sold their birthright for a mess of pottage.

Creating wealth

How do you create wealth? By creating poverty.

This is not just a flippant answer. There is a lot of truth in it, as you know. A lot of truth. The rich are rich because they can lay their hands on the world’s wealth. The poor are poor because they can’t. This is not exactly rocket science.

But affluent countries still think they know how to create wealth. They believe they are possessors of a magic process (an economy) that will create wealth out of nothing. They have this magic because they are superior people—which is true if you define superiority in terms of wealth, which the wealthy often do.

But this is an illusion. Wealth is ephemeral, and this is one of the basic truths, both for individuals and for nations. We don’t know how to lay golden eggs—not yet. We can make fancy computers, but they won’t be much good if we don’t have the electricity to run them.

Perhaps you think I am an evil prophet. You know in you heart of hearts that American will be rich forever. I will not say this is impossible, but I think it unlikely. Why? Because the world is running out of stuff. The world is getting poorer, and our landfills are getting richer.

In the not too distant past, rich countries were rich because they could produce exotic stuff they could trade for more basic stuff—the silver and gold in the New World, or the spices in East Indies. They didn’t create wealth, as they thought. They just took the wealth of the world, rearranged it, and kept most of it for themselves. They positioned themselves at the top of the food chain.

This was a crazy situation, but they got away with it because it was backed up with military power. The poor countries, which had much of the world’s basic wealth, sometimes had to be forced to join the world economy. Often the rich didn’t bother trading for the stuff they wanted. They just took it—after they killed the owners off.

I am not telling you anything new here, just reminding you of the facts. Rape is never voluntary, and it is still going on. Our oil fields in third-world countries are surrounded by abject poverty.

It is true that America developed a large middle class, a novel development which was rightly admired, and rightly so. We were able to distribute our wealth equitably. Everybody got their share (more or less, there were some huge exceptions).

But all this middle-class wealth—all these cars, for example—didn’t come out of the thin air. All the many, many parts for these cars (and the oil to drive them) have to come from somewhere. In fact, they come from all over the world, and most of the world is starving.

To summarize:

Our wealth is built on the poverty of others. It is not built by our superior technology, or that magical thing we worship: The Economy.

Reports of the death of capitalism are greatly exaggerated

Neichtze once said, God is dead, and he was right. By his time, the Age of Faith was over. In the same way, the statement Capitalism is dead is also right. But both statements are misleading. People have created both God and Capitalism, and destroyed both of them.

In my youth, Americans believed in Capitalism even more than they believed in God. Capitalism stood for the American Way of Life, which was good. We fought Communism, which was bad. Life was simple in those days.

Ironically, both Capitalism and Communism (and the war between them) was a scenario invented by Carl Marx, perhaps the most powerful economist that ever lived (and certainly the strangest). Millions perished because of his writings, and millions more (in the ‘free’ world) couldn’t live without them either. That hairy monster Marx had defined who we were. But both of these magical words are misleading. Communes did not build Russian Communism, and American Capitalism was not built by capital.

American Capitalists were actually Industrialists. They needed capital just as they needed laborers, but they were in a class by themselves. The capitalists provided the fuel for the economy, but the industrialists were in the driver’s seat. Capital was an enabling force, but not a controlling force. Marx was wrong about that.

Marx did predict one thing right: the struggle between the classes, which happened entirely in the industrial nations in the first part of the last century. But the result of this struggle was not what he predicted at all.

The operative word is now Corporatism. Industrialists, capitalists and workers have merged into one global force.

Capitalism has died, but it has been reborn (as global corporatism), and is more powerful than ever.

The misery of the high-tech worker

I am now reading Our Modern Times by Daniel Cohen, a Frenchman who does some high-powered writing in English. Several of his books have been published by the MIT press. Let me quote from the introduction:

The key idea proposed by this book is that, just as prosperity is the primary reason for our leap from the previous modern age, paradoxically it is also prosperity that spotlights the resulting disillusionment in the present-day world. In paying workers seven times more today than yesterday, capitalism expects a worker to accomplish seven times more. In fact, contemporary humans are discovering that a society which is seven times richer more closely resembles an automobile capable of going seven times faster than it resembles someone strolling along with all the time in the world.

I read somewhere else that knowledge workers (and executives) get paid for how much they suffer, not how much they produce. It have also noticed that these guys (and gals) have to be creative in order to survive. Once they understand their jobs, they can be replaced with a smart computer - and quite often are. They have to stay ahead of the power curve by inventing new jobs, jobs only they can understand. Unfortunately, this is hazardous work, and their inventions are usually abused and misused. Burnout is common.

In the industrial economy, machines broke down. In the service economy, people break down.

GATT and the WTO

GATT, and its successor, the WTO, are some of the worst things ever to happen to poor, suffering humanity – and that is saying a lot. They are, in my opinion, downright evil, and evil on a global scale. At this point, some of you are probably thinking Hal is finally going off his rocker – but others are probably glad someone is finally telling the truth.

Let me get right down to the point: these new trade agreements, as they are called, can override any law in any country. Let me repeat that, the WTO can override any law in any country it thinks is bad for international business.

Let me give you an example. California discovered that a gasoline additive, made in Canada was carcinogenic, very much so. So it banned the additive because it was poisoning their ground water. Canada retaliated, and complained to the WTO that the US (which contains California) was restraining trade. The WTO agreed. The fact that people were dying in California was irrelevant. Trade was all-important, even if the trade was in poisons.

I was living in California when this happened, but it never got into the news. This is a common occurrence in our times: news that puts the business community, as a whole, in a bad light never sees the light of day. Instead, every filling station in California quietly replaced its gas tanks with new, expensive models, so carcinogenic additives could be used. No one admitted this was happening because of a WTO ruling.

The WTO is not democratic in the least. Its judgments are made in secret courts by non-elected technicians. This is not good situation, in my humble opinion, and I will go into more details later. Meanwhile, fasten your seat belts; we are going to be in for a rough ride.

We live in a highly-polarized time. Most people think the world is in good hands - except for the forces of evil, of course. But I think the world is in bad hands. And it is being controlled by a form of evil all too familiar to us: unregulated greed.

The basics are simple. We need markets and we need trade. We discovered this something like a million years ago. But some people also discovered that controlling these markets, and trade, would made them rich. Two classes of people developed: the exploiters and the exploited; the railroad owners and the farmers.

This was unfortunate, one would have hoped people would have developed their cooperative aspects instead of their greedy aspects, but this isn’t what happened. Instead the exploited classes managed to develop some control over the exploiters, over the robber barons.

They were able to do this because they had political power, they had votes, and they had democracy. The robber barons took note of this situation, and decided to do something about it - they decided to destroy democracy.

Personally, I think this was an evil development, but many people feel differently. They feel the strong and perfect should rule the world, not the week and imperfect, like most of us are.

But let me get back to my main subject, which was GATT.

The Uruguay round of GATT (General Agreement of Tariffs and Trade) was the largest and most important negotiation in history. It lasted from 1986 to 1994, with 125 countries taking part. It changed our world.

So how come you never heard of it? Because the organizations involved in these talks (mainly the international business community) didn’t want you to hear about them – and since they control the media you didn’t hear about them.

Why all the secrecy? Because they did not want people to see how corrupt these negotiations were, and how a new global power structure was being formed - a global pro-business bureaucracy that would make the world safe for them, and dangerous for the rest of us.

One of the worst of these trends was the trade in a new kind of goodies called Intellectual Property Rights. More about this later, you will be amazed at what this includes.

Why did the governments of the world give up their power? This is a fascinating story, and I will go into that later also. Stay tuned.

Money runs the world

This is hardly a new idea. It is as old as civilization itself, and probably older than that. And people since the beginning of time have also recognized the suffering caused by the rich.

But in our time, this pain has been forgotten. Or maybe it might be more accurate to say it has been removed. People are no longer aware of the most important force in the world: the Global Rich. And these people are far more powerful, and far more dangerous than they ever have been - mainly because they control the Global Media, which means they control the perceptions of the vast majority of the people.

At this point, dear reader, you are probably either with me, or you aren’t. If you are, please read on. If you aren’t, it’s been good knowing ya.

In the past, money was pieces of paper printed by national governments. The new money is electronic, which is created and controlled by the Global Rich. They can move their money (trillions of dollars of it) anywhere in the world in an instant – and they often do. This creates instant wealth - not the old kind which involved investing the real world, and waiting for profits. This can also destabilize the world economy, as it did during the Asian meltdown, and the Mexican one. But this is a side effect.

The main effect is to give them complete control of the world. And the Global Rich are not nice guys, no matter what kind of propaganda they put out to the contrary. They have engaged in a war upon the global poor. This seems like a complete paradox, which I don’t understand it at all, but the facts speak for themselves. And the middle classes are under pressure too.

Why did this happen? This is an easy question, and the answer is: because the rich of the world got together to make themselves even richer. This was probably one of the most important events in the history of the world, but it was ignored by the Media – not surprisingly. You may be skeptical about this too, but please remain open to this possibility. Remember, greed knows no limits.

These people already had more money than they could spend in many lifetimes, why would they want more? Perhaps the question is not one of money, but power. And the desire for power has never known any limits. It won’t be satisfied until it controls the whole world - which it now does.

The important question is this: how did it happen? The answer is in three acronyms: TNCs, GATT and the WTO. The TNCs are Trans-National Corporations, the vehicles of the global rich. GATT is a global agreement, which gives global power to the TNCs, and the World Trade Organization is the global organization that enforces the GATT. I will describe these in future postings.

Please stay with me; I think I can make this really simple. Everything is simple, when you get right down to the basics.