Friday, November 13, 2009

Freemarket or Corporatocracy?

Recently, the famed econometrician John Perkins was interviwed on DemocracyNow!. The interview was about his new book. Also he talks about his previous book titled "Confessions of an Economic Hitman".

In his Hitman book, he describes himself as an 'Economic Hitman (EHM)'. These EHMs were hired to lure third-world countries into huge loans that they would never be able to repay. They went in to pursuade the third world leaders of the benifits of huge infrastructure projects. The projects were then financed by the international financial institutions such as World Bank or IMF. Obviously, the loans comes with conditions so that the contracts itself is awarded to American or European corporations. Not that IMF/WB don't give productive loans and good advice sometimes, they sure do.

It is no wonder then that these corporations make immense profits from the loans given to the recipient countries. Developed countries tax their citizens and give this money to the financial institutions, who in turn funnel this money to the powerful corporations in the developed countries. The third world country is then forever put in debt.

I sometimes wonder why some people condemn these problems as a problem of free-market capitalism. As far as I can see, it is these powerful governments who fund these institutions. Only with their backing and funding (taxed from their own citizens), can these institutions survive. The corporations have influential lobbyists making sure this money is funnelled into their coffers via 'aid'. This is pure corporatocracy. Social welfare for the politically connected!


Stewie said...

i think free market capitalism allows these so called powerful govts and corporations to do what they do.
when the trade barriers were lifted off, the big corporations for example of US can ship their mass produced rice to Jamaica killing the indigenous crop market.
I think the reason why more people like John Perkins are coming out is that Free market capitalism today is not what its meant to be. It was great couple of hundred years ago, but the system does not work and its evident when one looks around. but i might be wrong, thats just what i think based on what read so far.

meekaaku said...

Free-market is the result of individuals and firms working and buyers trading them at mutually agreed terms. Government should be there to protect the property rights of the sellers and buyers. It arises from the freedom that people have in doing what they want to do and selling their product/services to buyers at mutually agreeable prices. Regulations should be there to prevent fraud, theft, vandalism etc. Other than that, ppl are left free to do as they please without coercing others. This ensures competition and results in better products/services at lower prices.

The problem occurs when regulations are passed that has nothing to do with protecting public interests. Legalised monopolies (
fish oligopoly and isp in maldives), excessive licensing (thus increasing the barrier to entry for new players), price controls, protective tarrifs (which protects the established players from competition), excessive taxes, monopolised monetary system (which uses fiat money btw), heavy intellectual property regimes are all restrictions on people's freedom and hence anti-freemarket, ie corporatism.

Regulations should be there to protect people's rights and protect public interests. But no, the seemingly well intentioned regulations are made to favour their sponsors.

Hilath said...

How Japan operates I find it interesting because it is mutually beneficial for both parties.

The Japanese government uses its surplus as foreign aid to other countries. To carry out these projects, it hires Japanese private companies. So in the end, the money still goes back to Japan but the other countries where the projects were carried out also benefits!

In that sense Japan is the most wise and benevolent country on earth :)

meekaaku said...


Begs the question, mutually beneficial to whom? It certainly is beneficial to the receiving country's people (if for productive projects) and the Japanese companies. But is it beneficial to the Japanese citizens? Is it not the taxes paid by the Japanese citizens that is given as aid? So the money goes from Japanese citizens to Japanese companies. So the aid is beneficial to Japanese citizens only to the extent of how much say they have over that. Aid and loans are good if for productive purposes.

I don't know the specifics about Japan, but EU and US have their own domestic problems, yet the public is taxed heavily to finance wars (in the name of country building aid), aid to failing banks and auto companies, aid to finance military dictators and tyrannical countries. Most of these aid packages flow back to the powerful companies in the 'donating' countries.

Hilath said...


I was thinking along the lines of Japanese currency being retained within Japan itself, rather than it being drained out of the country, which is happening to import-dependent countries like us.