Last week , McDonald’s, the international fast-food juggernaut, was surprised and, one hopes, publicly embarrassed when a group of student “guest workers” in central Pennsylvania called an impromptu strike to protest working conditions. According to these guest workers, McDonald’s failed to comply with the terms of their agreement, and used intimidation and threats or retaliation to keep them at bay.
These “guests” (from Latin America and Asia) came to the U.S. under the J-1 Exchange Visitor Visa Program, part of the Mutual Educational and Cultural Exchange Act (AKA the Fulbright-Hays Act of 1961). A J-1 is a “non-immigrant visa,” given to visitors who participate in programs designed to promote cultural exchange. Inaugurated in 1961, at the height of the Cold War, the program was both a valid attempt to introduce foreigners to the American Way of Life as well as a standard propaganda tool.
Originally, the program’s charter had it focusing primarily on medical or business training, along with visiting scholars who were in the U.S. temporarily to teach and do research. And because it was specifically a cultural exchange program, the J-1 visa fell under the auspices of the now defunct USIA (United States Information Agency) rather than the INS (Immigration and Naturalization Service). How it evolved from medical and business training to flipping hamburgers is easily explained. Business interests lobbied hard for its expansion.
These visiting workers have turned out to be a bonanza. Each year hundreds of thousands of them are brought to the United States under programs like J-1, and, according to the National Guestworker Alliance (NGA), the agency that keeps track of them (and who encouraged and supported the McDonald’s protest), these so-called “cultural exchanges” have, over the years, been badly compromised. Given the overwhelming temptation to engage in mischief, employee abuse is now rampant.
What’s happened is that guest workers are now viewed by American businesses as a “captive workforce”—a gullible and needy collection of workers unschooled in American customs and expectations, and without recourse to labor laws or union representation. Not surprisingly, these visitors are being systematically screwed over. According to the NGA, the McDonald’s “employees” had paid approximately $3,000 each for the opportunity to work in the United States. Presumably, that money was spent on transportation costs and fees to GeoVision, the for-profit organization that sponsored them.
Among the “abuses” alleged by McDonald’s guest workers: (1) They’d been promised full-time jobs, but most were given only a few hours a week. (2) They were nonetheless forced to be on call twenty-four hours a day, and were intimidated and threatened if they complained. (3) The company failed to pay them overtime they were entitled to. (5) According to NGA, their employer is also their landlord, and even though there are as many as half a dozen co-workers sharing a room, their rent (which is automatically taken out of their paycheck) renders them making less than minimum wage. Any complaints, and they’re threatened with being sent back home.
None of this should come as a surprise. When there’s an opportunity to lower operating costs by exploiting labor, management will usually take advantage of it. Call it the Law of the Jungle, call it succumbing to market forces, call it “gaining a competitive edge.” But whatever we choose to call it, it’s the workers who get skinned.
Southern California’s restaurant and car-washing industries are sparkling examples of this phenomenon. These businesses are notorious for exploiting frightened, undocumented Mexican workers by paying them less than minimum wage, and breaking with impunity every labor and safety statute in the book. Why? Because they CAN. After all, who’s going to report them?
We shouldn’t blame capitalism for the climate crisis. “What we have isn’t capitalism, it’s corporatism,” it said. “Under real capitalism, the free market would prevent the destruction of our environment.” This isn’t the first time I’ve heard the argument that our problems would be solved if we just returned to the good competitive capitalism of Adam Smith’s day.
THE MYTH OF THE FREE MARKET
YOU’LL FIND A UNICORN BEFORE YOU FIND A FREE MARKET
I wrote an article recently about Capitalism’s
Top 1% becoming the new aristocracy, based on the news that social mobility is no greater under capitalism’s meritocracy, than under the medieval oligarchy. Some responded, in line with a wider misconception, that if we only had ‘true’ free market capitalism these injustices would be a thing of the past. Today’s piece is a response to that argument. There never has been, is not and never will be a capitalist free market economy – and here is why.
The myth of the free market
Capitalism is meant to pivot around the free market. The theory goes that if only the market were rid of government meddling (regulation) then true competition would reign, with corporations battling it out to provide their goods and services to rational, all knowing consumers. This, according to supporters, would provide stable and accurate prices and quality for goods and services as competition would aggregate supply, demand and pricing.
Corporations who provided a good or service which was not wanted, was above the market price or below the market quality demanded by the rational consumer in this open, free market would simply fail and those who met demand would win. Therefore the success or failure of a company would be directly proportional to its ability to meet the needs of its consumer.
So, some might argue that recent failures assigned to capitalism – the bankers bailout, the corporatisation of government, the decline in social mobility – are because we do not have REAL capitalism as outlined above. They might argue we are in fact in a post capitalist, state capitalist of fascist state. There are valid arguments in favour of all these possibilities. But whatever state we are in, it is as a direct and inevitable result of capitalism. These outcomes are not aberrations, but natural and logical given the reward mechanisms of the system itself.
It’s the monopoly, stupid…
While arguments in favour of inviting private interests into the public services rests on the idea of competition, corporations themselves are rabidly anti-competition.
If a McDonalds opens opposite a Burger King, Burger King aren’t over the moon that the capitalist theory of competition is being exercised, they’re figuring out how to kill the opposition. The argument goes that the consumer is the ultimate beneficiary of this struggle, as the consumer will be tempted by lower prices and better quality goods to win them over.
These arguments overlook some key issues. They ignore that it makes sense for the corporation to seek out a monopoly – so a free market gained monopoly would have no different traits than a socialised monopoly – except democratic accountability would be removed.
They also fail to consider that the consumer is not solely a consumer, they are also a member of their society so may well be impacted by the competition in more than one way (i.e. they might benefit from a price cut as a consumer, but lose their job as a result of the bigger corporation pushing their employer out of the market).
The facts bear this theory out. With the rise in ‘free market’ policies of the Thatcher and Reagan governments in 1980’s US and UK, perhaps we would see a dramatic rise in competition? Surely this new, free market would end monopolies and usher in a new era of dynamic, consumer responsive businesses vying for attention.
Let us use food as a case study. In 1990, only 10-20 percent of global food retail was delivered by supermarkets. Today, that figure has soared to 50-60 percent. That is, over half of all food sold in the world, is sold through supermarkets.
The UK has lost 90% of its specialists food retailers – that is butchers, bakers and fisheries – since the 1950’s. In Britain today, 97% of food purchased, is bought in supermarkets, with only four corporations making up 76% of those sales. In the US, 72% of food is purchased in supermarkets. As these figures continue an upward trend, we can see that monopolies are being created in food production.
If we take a look and test the theory that the consumer would benefit from this process of corporate battle, proponents of the idea point to the drop in the proportion of household budgets in developed countries spent on food.
During the rise of the supermarket since the 1950s, the percentage of the US household budget spent on food dropped from 32% to 7%. In the UK the proportion spent on food has dropped from 33% to 15%.
But, with supermarkets making record profits, and household food budgets down, who is paying the price for our food?
The answer is the farmer and the environment. In Brazil, more than 75,000 farmers have been delisted by the big supermarkets. Thailand’s top supermarket chain has carved its supplier list from 250 to just ten. The tiny country of Lesotho has actually all but killed off its domestic farming industry with 99% ofits food purchased through supermarkets utilising foreign agri-business.
Seventy years ago, there were nearly seven million American farmers, today there are two million. Between 1987 and 1992 the US lost 32,500 farms a year and now 75% of US produce comes from just 50,000 farming operations.
Family farming and smallholding has been the big victim of the supermarkets. This means farmers in developing countries being exploited, and consumers in developed countries so far removed from their food chain that they could not tell the difference between beef and horse.
The inflation in food prices in recent years has been masked not only by supermarkets pressurising food producers to ever decreasing incomes and unsustainable farming practices, but the makeup of our food is being diluted…in short, the price might stay the same but we are getting less for that price. The still breaking horse meat scandal is just one example of this.
So when it comes to food as an example, the free market has seen a few corporations rise to dominate the market, set their own prices and lead to negative social impacts. While some consumers might see a fall in the price of the food they are buying, they cannot be sure that they are comparing apples with apples and while perhaps benefitting as consumers, they are losing out as producers.
In fact if we zoom out to what is happening in business overall, for the last three years the US has seen a consistent fall in the total number of businesses. In the US, start ups (new businesses) have fallen as a share of businesses in the economy from 12% to just 7% in just the last few years, whilst still on average employing not more than ten people each. These patterns are reflected across developed economies globally.
The market is being constituted by a decreasing number of businesses, fewer new businesses are being launched and the monopolies created that produce negative impacts on communities across the globe.
What keeps the free market free?
What keeps a free market free? As we have seen above, it is not in the interest of the corporation to maintain a free market.
The corporation has no reason to apply any kind of ethics whatsoever. Adidas employs child and sweatshop labour in the Far East because it is cheaper than employing people on a living wage, with decent terms and condition.
So, historically the government, as the purported servant of the people has been the enforcer of rules necessary to restrain the ‘market’ from behaviours which, while logical from point of view of the corporation, lead to undesirable social outcomes.
However, the logic of the corporation is then to seek maximum influence over the regulator. In this case, corporations use their vast wealth to buy influence in houses of parliament or government across the globe.
In the US, by 2011 the largest thirty corporations spent more that year on lobbying government than they spent on taxes. Big oil alone spent over $169m in lobbying the US government in 2009. Between 1998 and 2008 (the year of the bailout) the US Banking Sector spent $3.4bn lobbying for deregulation, reduced capital requirements and avoiding the regulation of derivatives (which caused the financial crisis). When they aren’t lobbying, they are simply gaining positions of power within the government itself to directly redraft legislation to suit them.
In the UK, corporations with outstanding tax issues with the HMRC (the tax collector) are currently in working groups with the HMRC to redraft the very tax rules they are doing their best to avoid. The largest accountancy forms are also using consultancy positions within government as tax policy advisors, to market themselves to tax evading corporations to help break the rules they wrote.
In the US, there appears to be revolving door between Monsanto (controversial purveyor of genetically modified foods) and the Food Regulating Agencies. Islam Siddiqui, vice-president of Monsanto-funded lobby group CropLife is now a negotiator for the US Trade Representative on agriculture.Roger Beachy, a former director of a Monsanto-funded plant science centre has become the director of the National Institute of Food and Agriculture. Michael Taylor, former vice president of Monsanto, is now the deputy commissioner of the Food and Drug Administration (FDA – the US’s food and drug regulator).
There is a major problem here. The outcomes of the above are that when corporations break the law, they are either not tried or given a fine which comes nowhere near the profits reaped by breaking the law. And worse, corporations are buying the drafting of laws which make their unethical and damaging behaviour legal.
We have seen recently that banks have instituted fraud on a global scale by simply making up the LIBOR rate, the base interest rate, at the cost of savers and pensioners and to the benefit of their traders who specialise in debt, not capital.
In 1950, corporate taxes made up 30% of federal revenues in the US. By 2012, this had fallen to just7%. In the UK, Corporation Tax rates were cut from 52% to 35% over just two years between 1984-6 and has continued to be cut until it stands at just 21% today.
Corporations do not want any rules which stand in the way of making profit. Left unregulated, they would simply operate in ways which maximised their profits regardless of social outcomes. When we introduce a regulator, corporations seek to and succeed in compromising them. The issue is not to blame one or other of the players, but the game of capitalism itself.
Pulling our heads out of the sand
It is time to get real. There are a number of sheer economic realities which also undermine the idea of the so called free market. I would recommend reading Professor Steve Keen’s Debunking Economics to get a better handle on those.
But whether it be sheer mathematical reality, or social reality, the free market myth is nothing but a nonsense. It is a self serving nonsense propagandised by its beneficiaries.
In 2008, the banks did not uphold the principle of free market values and keeping the state out of the market – they begged the state to use tax payer money to cover their debts whilst only they enjoyed the profits. The IMF recently estimated that this bailout has so far cost the taxpayers of the world £7.12 trillion ($11.9trn). That is the equivalent of a £1,779 hand out to every last human being on earth.
The truth is that most of the globe now labours under corporatized states. Every new policy is tested against the reaction to it by ‘the market’, as if it were this free, independent aggregated assessment of the worthiness of state actions. It is not. It is simply big businesses reaction to the action of the state. All the market reaction tells you is whether or not a cabal of corporations think they can make a profit from it.
In conclusion, not only is the market not free, but it never can be. It requires legislation to prevent rational corporate behaviour which would undermine it, and any regulator (state or otherwise) will be corrupted by corporations seeking to influence them.
The sooner we abandon this madness, the sooner we can answer the bigger question: how do we create a means of economic organisation which has the highest chance of meeting our social goals?
Surely, underneath all this GDP growth nonsense is a basic ambition to increase living standards around the world, to raise the levels of health, education, social cohesion and progress (technological, scientific etc) across the globe such that we can all benefit from it whilst not destroying our planet.
We labour away under a system which forces us to abandon ideas and aspirations to deliver these goals for the sake of a limited number of overbearingly powerful people and corporations to increase their profits.
The answer cannot be to unleash these people on the world without even the token regulation they have now, but to fundamentally transform our social, political, economic and environmental organisation.
We must abandon the myth of the free market, just as we gave up on Santa Claus and Unicorns – it is time to put away childish things so we can become grown up caretakers of ourselves, each other and the planet
After plans were announced for private investment to be the driving force for a return to the lunar surface, speculation has grown that advertisers could be on the verge of putting the first corporate logo on the moon.
Depending on how many customers sign up, the first mission could be ready to fly by 2020, and speculation about which corporations would be looking to get on-board has already begun.
With the possibility of popular album and song titles being changed to ‘Walking on the Coca Cola Lunar Globe’ and ‘Dark Side of the McDonald’s McMoon’, some critics have warned that the involvement of private investment could transform the moon into an orbiting billboard.
“Whilst I welcome investment in space exploration with open arms, I’m worried at the prospect of advertising becoming involved,” said astronomy enthusiast Trevor Morgan.
“I don’t want to look through my telescope and see a Nike swoosh in the night sky.”
Golden Spike president, Alan Stern, Nasa’s former associate administrator for science revealed that they would need to sell “a bunch” of missions to turn a profit.
“We would welcome investment from any number of sources and that would include corporations,” he admitted.
“If these missions prove successful then hopefully we can expand sponsorship deals beyond the moon.”
“It could be a small step for man, a giant leap for GlaxoSmithKline.”
In a press conference opposite the White House, NRA spokesperson Wayne LaPierre told gathered reporters that his organisation cared deeply about the children of his country, and would not rest until every single one of them had easy access to a terrible diet.
Speaking in sombre tones, he said, “We are at crisis point, and the only way to stop our children being negatively affected by junk food, is to make sure they are surrounded by even more junk food.”
“If you really think about it, no-one would be able to call a child ‘fat’ if everyone had a BMI well into the 50s.”
“Childhood obesity is only an issue because so few children have good access to junk food.”
LaPierre went on, “The liberal left will tell you that removing crappy foods from the equation would solve this crisis, but to that I would say ‘nay’.”
“It is a constitutional and God-given right of every american to have access to burgers the size of your head. We just need to even up the playing field – by filling it completely with fat kids.”
“So I call on congress today to ensure that every school in our great nation has easy access to cheap, poorly prepared fatty food with a low nutrient value.”
“Then one day soon we can forget about which of our children is ‘fat’, as they’ll all be exactly the same. Like true, free Americans.”
The group is reported to have seized control of an inter-dimensional portal and is now intent on hurling random antimatter artefacts at ‘symbols of Unionist oppression’ in our reality. Due to the catastrophic relationship between matter and antimatter, these could be anything from sachets of McDonalds’ discontinued ‘Mild Mustard Sauce’ to pre-remastering Phil Collins CD reissues, to destroy most of Belfast.
‘This group is totally misguided’ declared Assistant Chief Constable Drew Harris. ‘not only in their retrograde nationalistic ideologies, but in their conflating of multi-dimensional quantum particle theory and the polarity between matter and antimatter.’
‘Even the likes of Gerry Adams and Martin McGuinness now acknowledge that the latest breakthroughs in string theory preclude any kind of trans-dimensional threat without a nearby black hole. And we are policing Swansea very thoroughly at the moment…’