Understanding the
Global Economy

Comprensión de
la economía mundial

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Recall the face of the poorest and weakest man you have seen and ask yourself if the step you contemplate is going to be of any use to him. Will he gain by it? —M. K. Gandhi 1

The indictment of modern society that Dr. Martin Luther King Jr. made in April of 1968, in his sermon at the National Cathedral in Washington a few days before his assassination is still valid as when he said:

There is nothing new about poverty. What is new is that today we have the resources and the techniques to end poverty. The question is—Do we have the will?—Dr. King 2

In Part X,2b I will elaborate on Dr. King's statement about poverty, which I know to be true and at the heart of the issue. With it, I sketch a vision of a world without poverty and economic insecurity by way of asking what it would mean to have the will to end poverty. I do not advocate simple solutions, since the simple solutions have not worked. I do not offer a blueprint, nor attempt to answer all the objections a skeptical reader might raise. Instead, I impart a kaleidoscopic vision of a world without poverty for readers whom I assume to be sympathetic. You likely care because, by choosing to read this book, you have some quality of what Aldous Huxley called the perennial philosophy as the nonsectarian religious and spiritual worldview.3 For that reason, I expect that you will keep reading beyond my use of words like spirit, love, or God. I expect that you know from experience that what humanist and spiritual ethics have in common is more important than the points by which they civilly disagree. This is affirmed by the Marxists and Christians who were thrown together into the same dungeons by the troops serving Pinochet in Chile in 1973.

I broaden King's call to end poverty by calling for the end of the economic insecurity the middle classes now face. Even people who are not poor, as seen by their use of goods and services at adequate levels, are now anxious because of their growing debt, or dependence on expensive life sustaining purchases such as prescriptions and other health care. Their stream of income, which though here today may be gone tomorrow, is also their lifeline.

The goal Dr. King proposed at the National Cathedral was a goal for everyone especially those in the direct line of fire that is the poor and those threatened by poverty. The goal is even a logical one for the least generous among the most prosperous because it is the goal conducive to building the culture of peace. In a world with violence decreasing, everyone will be safer.

Often told is a tale about rich people, who make it their goal to keep the poor down. The rich fancy that by repression they serve their own upper class interests. A different tale is told by the wise affluent, aware that their interests and the interests of civility are the same.

Although in general, it is not true that the rich and the non-poor want poverty for the poor, Dr. King's indictment implies that the continued existence of poverty in our times is, in a sense, an intentional crime committed by society against the poor. Given that today's society has the techniques and resources to eradicate poverty but has not, it must be caused by either:

  • an unintended consequence
  • careless neglect
  • the misunderstanding of what morality is
  • a deliberate omission, or
  • any combination of these, which cause most of the world's people to live in poverty.

Throughout most of history, an insidious, faulty assumption prevailed that it was natural and inevitable that the vast majority who toil would lead short lives in material deprivation. For example, in the early 19th century Ricardo, the source of reason among the early economists, advocated free trade for Britain. He did so on the basis that free trade would lower wages, therefore, raise profits and, thus, stimulate production. The logical analysis of market exchanges led Ricardo to conclude that competition among wage earners kept wages down to the minimum required to stay alive. Therefore, food prices alone determined the minimum wage and cheap imported grains from France brought lower wages, which in turn gave a competitive advantage to British manufactures.

In 1798 Thomas Malthus (Ricardo's friend and first to chair Political Economy at Cambridge) published a mathematical proof that any attempt to end poverty was futile. Any attempt would only result in augmenting the numbers of the laboring classes, which would increase the pressure of population on food supply and, thereby, reinforce poverty. Food supplies increased, Malthus thought, arithmetically by adding to production. In contrast, due to human sexuality, the human population increase is geometric: doubling, in this case, every twenty-five years, as it did in the British American colonies of his time and whenever there is no famine to check it. Population increase is exponential, as in the series: 1, 2, 4, 8, 16, 32, 64 and 128. Malthus wrote:

    The power of population is superior to the power in the Earth to produce subsistence for man, so that premature death must in some shape or other visit the human race. The vices of humankind are the active and able ministers of depopulation. They are the precursors of the great army of destruction and often finish the dreadful work themselves. Should they fail, however, in this war of extermination, sickly seasons, epidemics, pestilence and plague, advance in terrific array and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear and with one mighty blow levels the population with the food of the world.4

The mathematical argument raised by Malthus has proven wrong due to the fact that the food supply has grown faster than he expected. Today, Frances Moore Lappé, among others, has shown that the annual production of carbohydrates and proteins is more than sufficient to support the present global population. It is a population much larger than what Malthus thought possible. On the other hand, the food supply would be more than sufficient if everyone ate from lower on the food chain.5 Peter Singer, who holds similar views, does not oppose measures to limit population. Instead, he holds that measures, such as strengthening the reproductive rights of women and the power of all women everywhere to determine their sexual destiny are essential to a viable system of resources to end poverty.6

In 1942, one-hundred fifty years after Malthus, another economist, Joseph Schumpeter made the mathematical argument that proved contrary to the Malthus theory. Schumpeter observed the historical statistics that showed 1) the average growth of production to be above 2% per capita, which accrued from year to year as compound interest and 2) the distribution of income among the social classes was constant. Schumpeter thus calculated that poverty would end in the United States by 1978.7 This mathematical argument proved also to be incorrect, though not for the reason Schumpeter half-expected, which was that creeping socialism would stunt normal growth. Instead, production did grow as much as he postulated and the distribution of income among social classes did not hold constant. Disparity widened, inequality deepened and the rising tide did not raise all the boats

Economic historian, Immanuel Wallerstein has estimated that, due to the economic and scientific progress of the last four hundred years, as much as 20% of the human population has escaped poverty, leaving by implication the vast majority, at least 80%, in poverty.8 That high percentage corresponds to the World Bank numbers of 20% to 24% identifying the poorest of the poor.9 The poorest lack food, adequate shelter, education, health care, drinking water and sanitation.

The Federal Republic of Germany, one of the world's richest countries, is a 70-20-10 society.10 This means that an estimated 70% are not poor, 20% move in and out of poverty during their lifetimes, while 10% are permanently poor. If the pattern in Germany is typical of the rich countries, then at least half of that 70% have economic insecurity. This bears out in my experience serving middle class clients in my law practice in the United States. Viviane Forrester's account of what she calls economic horror in another rich country, France, further supports the finding.11

Dr. King suggests that the answer to the decisive question depends on qualities of will: whether humanity has the will, at last, to end poverty, or whether inhumanity will continue to commit the crime against humanity—the exclusion of most people from the full grace of our resources. The answer (predictive outcome) does not depend on the logical analysis of market exchanges, on mathematical models, or on the statistical analysis of historical data. It depends on the choices that people make, which result from the principles we hold as self-evident.

As a reverend, Dr. King was a member of a profession devoted to teaching the continuing relevance of ancient wisdom for which the qualities of will is a recurrent theme. In addition, King had had expertise in philosophy and often cited Immanuel Kant who defined will as the capacity to act from principle. Therefore, any given human action proceeds from a subjective principle, or maxim as the idea or guide which it exemplifies. Kant defined will in this way to distinguish human action from the facts and things of nature. Speaking in a contemporary idiom, the sociologist Anthony Giddens describes human action as reflexively self-regulated. In a manner similar to a number of other recent social theorists, Giddens thinks of society as a process of structures formation, rather than as a set of given structures.

Therefore, one way to think about will is to identify will as 1) the guidance of human action by social rules and 2) the processes that interpret, monitor, restructure and renegotiate meanings and relationships. However, the cluster of dimensions within this simple yet polysemous word that is will is crucial to ending poverty.

The means to that ultimate end is a kaleidoscopic vision that is a creativity vital to finding ways to overcome the epidemic. It is a creativity that has to mirror a world ever recreating itself through the formation of social structures . Yet, when we struggle to end poverty, we do meet resistance from the habits of the mind that conceives modern institutions not as evolving structures with fresh, dynamic, emerging human interaction, but as unalterable, static, will-less things. Nevertheless, even alongside modern business and government, older institutions continue as potential portals of the grassroots, such as families and extended families, churches and voluntary associations, all of which remind us that they operate via different principles. Due to this, the positive alternatives are usually close at hand and accessible to all.

To clarify this and what I think Dr. King meant by the will to end poverty, I link to the ideas of five leading critical observers of today's global economy with comments upon their analysis. Like the sifting patterns in a kaleidoscope, which yet reflect the systematic nature of the structure formation process, this vision is one among millions of people worldwide committed to doing what works to end poverty.

Before my comments on the current analysis, I will further scrutinize some ideas of Adam Smith. In 1776, he established some basic rules of the economic game, which most people have followed most of the time since. Thus, we rotate the `scope to see the world in another colors pattern. Smith wrote:  

    In almost every other animal species, each individual when full-grown is independent and in its natural state has need for the assistance of no other living creature. Yet, man has almost constant need for the help of his brethren. It is in vain for him to expect it from their only. He will more likely prevail if he can interest their self-love in his favor and show them that it benevolence is to their advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind proposes to do this. Give me that which I want and you shall have this, which you want is the meaning of every such offer. In this manner we obtain from one another the far greater part of those good offices of which we stand in need. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but instead from their regard to their own interest. We address ourselves not to their humanity but to their self-love and never talk to them of our needs but of their advantages. No one but a beggar chooses to depend on the benevolence of his fellow citizens.12

Juxtapose what Smith wrote with the reality that the principal teachings of the world's religions and traditional cultures condense into an appeal of two words—be good. The religions and traditional cultures still believe that we are here to love and help one another. Many have identified the good with God and have identified the aim of life as serving it. At the beginning of the modern age, however, Smith and several others asserted that much more benefit to society as a whole come from what he called orderly selfishness than from goodness. In that time, Europe was becoming a center of worldwide market exchange. Societies built on market relationships needed principles different from those provided by the moral codes of supportive local communities.

Smith rested most of his case on the enormous increase in wealth made possible by the division of labor, which, in turn, he attributed to the human tendency to barter and to exchange commodities for sale in markets. The larger markets called for more specialization, which meant that each worker, confined to a very limited task, would develop greater skill, dexterity and judgment. Smith attributed the blessings of machinery mainly to market exchange because it was the specialized worker who was most likely to invent machines to make tasks easier. Furthermore, the capitalist was most likely to pay for new inventions and install them into operation.

Smith recognized that in earlier and ruder ages all people had useful employment. In his time, the produce of society languished because a considerable portion of the population remained idle either as members of a leisure class living via rents and profits, or as unemployed workers. Even so, the net result was that even the poorest worker in England at that time was elevated from the savage because the increased production caused by the greater division of labor, which was spurred by larger markets, far exceeded the losses due to idleness.

Smith was not anti-benevolent, though he doubted that benevolence could be the mainspring of human progress, while he thought that self-interest as channeled through exchange in free markets could be the mainspring. Even so, as he clarified in his book, Theory of the Moral Sentiments,13 he thought that the good will, which humans naturally offer to one another, was indispensable. In a perfect Smith world, the magic of the market would drive the accumulated wealth of society ever higher through ever greater advancements in manufacture and agriculture, finer divisions of labor and larger markets.

At the same time, the natural sentiments of sympathy would guarantee the maintenance of civilized manners and morals. Sympathy would assure in perpetuity a social safety net for beggars, orphans and others unable to live by barter. Although he bases his theory of ethics on natural sympathy and not on revealed religion, in his chapter about education in The Wealth of Nations, Smith proposed that the laboring masses should continue to be instructed from the pulpit on Sundays with the same Judeo-Christian virtues of love thy neighbor preached for centuries in Europe. The upper classes, however, were to study, in addition, the newer disciplines of political economy and natural philosophy.

Smith held that the sole purpose and point of economic activity was to produce the wants and conveniences of life, what he called values in use. In a system based wholly on organized benevolence, such as Plato's book, The Republic, people would produce use values directly as other people needed them. It would be their conscious aim to make social input by producing what other people needed. Smith found it much more effective to produce goods to take to market to sell, thus, to devote one's energy to produce what he called value in exchange. The direct result was profit for the producer, while the indirect result was value in use, which is the satisfaction of people's needs and wants. Value in use answers the question that Gandhi posed as seen in the quote at the beginning of this Part X. Value in use will always provide some concrete benefit to someone. The invisible hand of the market would lead people to try to deliver more value in use by an indirect approach to the goal that is seeking direct value in exchange.

From Smith's distinction between value in use and value in exchange, I derive the principle of the vision that is benevolence produces use value, while self-interest produces exchange value. Benevolence is weak, while self-interest is strong (albeit, those are the initial qualities, perhaps the most significant, though not necessarily the lasting ones). The constant will to end poverty is the commitment to reshape modern institutions until they accomplish what benevolence would accomplish if it were strong enough; it is what Dr. King called love in action.14 This is the invisible, active principle behind the shifting kaleidoscope of diverse antipoverty programs.

Throughout the world, the highest expressions of ancient wisdom continue to teach the unity of all life. Modern society teaches the immeasurable worth of every individual. Both the ancient and the modern propose the welfare of all as the goal of social cooperation. Both teach and propose, in a word, benevolence, which in three words as one economic phrase is value in use. For 230 years, Adam Smith and followers have persuaded most of the world, most of the time, that market economies are the realistic way to put ideals as generally accepted into practice. Meanwhile, poverty and economic insecurity have not gone away. Modern society has broken its pledge to respect the intrinsic worth of each person and it has rejected far too many. Because each person is of infinite worth, the unemployed, the homeless, the illiterate, the alcoholic and the indigenous should not be forced to live in the streets nor as refugees, nor work camps. A middle class professional women should not have to suffer chronic high blood pressure nor drugs because she cannot pay her taxes.

The early advocates of modern ideals, including Adam Smith, supposed that they would preserve the best of ancient wisdom while liberating humanity from ancient shackles. In practice, at least five problems inherent in the Smith model meet human needs by the exchange of commodities have formed a chasm that separates what ought to be from what is. The first inherent structural problem is that, contrary to what Smith hoped for, self-interest and benevolence often interfere with each another. For example, if, for whatever reason, a country's commercial agriculture does not meet all of its people's need for food, benevolence becomes engaged to provide free or subsidized food. It matters not whether benevolence is from a government program, a church, or other NGO that donates the food. Commercial agriculture, however, then loses incentives because the farmers cannot sell food to people who are getting free food. Thus, the system of meeting needs by way of exchange of commodities becomes less effective. Small farmers may be forced to leave their farms for urban streets as destitute and homeless. The example illustrates a fundamental problem: if we do not want to kill people by starving them through negligence, something has to give way: either the dependence on benevolence, or dependence on markets.

In the final analysis, I propose that dependence on markets must be modified. Love is the basic law, the supreme law of the human species, though sometimes the tough love of exchanging commodities prevails in free markets because, at times, that works better than any alternative. The test of policy is what Gandhi surmised when he said, "If it does not work for the weakest and poorest, then it does not work." Because the policies of our system do not work, it is time to try something else as we are charged to do so. Dr. King defined the ultimate ideal, which describes the framework within which institutions should be evaluated, restructured and modeled upon the beloved community.15

To conclude my discussion about the ideas of Adam Smith, I pose a methodological point: Did Smith care to know how it was that his butcher, brewer and baker brought him his dinner? He did not know that when he was a child, nor in his dotage and, in a sense, he did not know it even when he was a middle-aged professor at Glasgow University. The honest answer to the question: Why do people do what they do? is always: I have some ideas and opinions, nevertheless, I do not and, in fact, I cannot know. Nor do we know, as we organize diverse projects to fight poverty, what motivates people to stop apathy and, thus, improve their situations and stop alienation, so to partake in a social cause. As a practical principle for community organizing, we should resist the assumption that self-interest or benevolence or any other concept names the spirit that moves people.The best methodology is to begin as a radical empiricist without preconceptions, though sensitive to the spirit leading as we encounter it, joining in what God is doing, as we find it in the thinking and feeling of people on the ground.

The will to end poverty is to act on principles that begin, sustain and complete the healing process that will end poverty. The principles include, patience, persistence, sensitivity to diverse contexts, and the openness to search for and apply tactics that might work.

It does not help to say that, "All problems would be solved if people were more caring," or "People never will be caring, so we must accept a world of selfishness and violence." A will to end poverty cultivates the garden plot that Dr. King has prescribed for us: a tough mind and a tender heart.16

We now have an outline of the basic needs, which are met by the model of the exchange of commodities as pioneered by Smith. With the outline in mind, I will confirm the vision of how to overcome the problems inherent in it, by an analysis of the contemporary critiques of the global economy.

Paul Volcker

    The problem [the recent collapse of the Indonesian economy and several others] is not regional, but instead an international issue. Every indication, thus, points to a systemic issue in the literal sense arising not from a deux ex machina, but from within the ordinary workings of the international financial system. By emphasizing the systemic nature of the financial problems, I do not want to be misunderstood. I believe that in the long term, crony capitalism, state ownership and official industrial policies are less efficient than open competitive markets.17

Comment: The usual devices of our Smith world at the level of the international financial system follow the same code at the local level.—Give me that, which I want and I will give you that which you want. Such is the code of exchange in markets of buying and selling. The second inherent structural problem in such a system is that any economy may collapse at any time because, for any or for no reason, enough people may at once decide not to buy. The exchange value of a thing is what people will pay for it. When nobody wants to buy it, the value of it shrinks. When the value of many things dissolves, the economy collapses. An inherent problem of instability—meeting needs by commodity exchange—translates into opportunities for taking steps to end poverty.

Many schemes exist for modifying markets to benefit the poor, such as governments that encouraging collective bargaining by way of the Keynesian economics in the 1930s. The schemes make some economies more stable, though others become less stable. The "visible hand of government," which stabilizes the shaky invisible hand of the free market, can rescue the poor from merciless labor markets that pay starvation wages, while it wards off collapse, or rebuilds after a collapse. What I advocate here is the constant will to take advantage of the opportunities that history presents.

Nonetheless, Volcker believes that, in spite of the inherent systemic tendency of open competitive market economies to collapse, they are still better than crony capitalism, state ownership, or official industrial policies. More than three or four alternatives are at hand, however and the number is quite large. The will to end poverty is the will that seeks and finds the alternatives that translate the abundant techniques and resources of our shared achievement of science and technology into the welfare of all the people. That happens in a number of cases of state ownership such as of utilities, public lands, education, transportation, other infrastructure and official industrial policies, such as an array of vital protections. Volcker doubts, denies or refuses to accept those two structures, even though in practice they insure the welfare of all people.

George Soros

    The current campaign against moral hazard, e.g. government guarantees leading private banks to make unsound loans, is just an excuse for resisting any kind of interference with the market mechanism. This resistance is based on the false doctrine of our age that is financial markets automatically tend towards equilibrium from which it follows that there is no need to interfere because markets correct their excesses.18

Comment: What holds humanity prisoner with the poor in the worst cells is not the Smith market conceived as barter in which people exchange surplus for surplus. Humanity's prison, therefore, is the third inherent structural problem—our addiction to the market. Progress has made humanity dependent, as an addict drugged, on the market mechanism. In modern times, poverty and insecurity threaten to arise whenever the market fails to move forward with stability to keep investments flowing, which would have created jobs, tax revenues and goods and services. Therefore, the market traps us because we will not escape it and Soros is right to state that, "The government must interfere with the market." The market is too important for us to allow it to govern itself." Soros further advocates that:

    The IMF should be only a global lender of last resort lending cash at low interest into slow economies everywhere, as the Federal Reserve bank does in the United States.18

A Tobin tax has to be levied on all international financial transactions in order to 1) discourage speculation that has no productive purpose and 2) raise revenue for worldwide antipoverty projects. The proposals by Soros can be regarded as a post-market correction measure designed to make the global market that we have all come to depend upon more stable, reliable and credible. A complementary way to cope with humanity's addiction to markets is the path we need to pursue so to enable the first means. We can think of it as pre-market correction, or as a market-SNAFU prevention that is the legacy from which we humans lived civilized on Earth for several thousand years before becoming dependent on the exchange of commodities for our livelihood. Before the displacement, market exchange was a mutually useful activity, which added comfort and ease to life, though not the necessities of life.

A world without poverty would be more than a world in which governments corrected market failures. It would be a world in which the ancient pre-market institutions as families, service clubs, lodges neighborhoods, churches, small towns, cities, national governments and the more recent United Nations would care for people and shelter them against the ultimate rejection the market can inflict upon the people: nobody wants to buy what they have to sell.

Jeff Faux and Larry Mishel

    Many policy-makers, for a long time, denied the reality of the slowdown in per-capita growth, the stubborn persistence of rising poverty, or the mal-distribution of income. When the reality became impossible to deny, policy-makers still belittled its importance. In the wake of a crash of financial markets and the subsequent tumble into deep recession of about forty percent of the world's population, the question of inequality can no longer be shrugged off and ignored.19

Comment: An unacceptable level of inequality has mushroomed with the intensified globalization and neoliberalism in recent years. Inequality flourishes in countries that have chosen to accept less equality in exchange for more liberty.20 Gross inequality peaks where trade liberalization, with or without a veneer of political liberalization, brings no liberty at all to the people. Maria Mies cites examples from Asian factories where women 1) make the owners wealthy, 2) work long hours for very low pay, 3) lack health benefits, and 4) are denied basic human rights such as

  • compensation when their eyesight fails due to the repetitive exacting work in poor light
  • free speech and union solidarity,
  • protection against the harsh treatment of supervisors
  • workplace safety and
  • breaks, even to the toilet and for water and food.21

Inequality is a vital part of the Smith system, in which he acknowledges at least three reasons why a fourth inherent structural problem is the inequality inherent in the world that exchange value built. As he notes, wealth is capital, which is like the seed saved for next year's planting, as in the early and simple society. The seed consumed will cause everyone to go hungry. Reducing social inequality by the more just distribution of wealth faces the objection that it gives more money to workers, who will spend to increase their consumption and, thus, take capital away from the wealth-creating class. A century after Smith, the economist Alfred Marshall wrote —The laborer, without the aid of his or someone else's capital, would not long be alive.22

Investors will invest only when they expect profits and they will give only when they expect to get more back in return. Therefore, the inherent flaw in the logic of exchange is that economic growth and the accumulation of profit go together, hand in hand. Hence, if there is no increase in the wealth of the owners, there is no growth and negative growth for the poor. Such circumstances, nevertheless, do not make it a mathematical certainty that inequality will widen, though it likely will because one-half of the inequality is the willpower that activates the economy, guided in the Smith world by the principle of self-interest that Smith immortalized—Give me that of which I want and I will give you that of which you want. As this cause became more entrenched through history, inequality widened. Contrary to Schumpeter's prediction, the poor remained poor while the rich got richer because wages are low. Relevant to this, Smith had written:

    Seldom does the person who tills the ground have means to maintain himself until he reaps the harvest. His maintenance is advanced to him from the stock of a master, the farmer who employs him, though not unless he was to share in the produce of his labor or unless his stock was to be replaced to him with a profit. At what level the common wages of labor are set depends everywhere upon the contract made between those two parties, whose interests are by no means the same. Workers want to get as much as possible, the owner to give as little as possible. In such disputes, the owners hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single worker, could live a year or two upon the stocks that they have acquired. Most workers could not subsist a week, few could subsist a month, and scarce any a year without employment.23

Rising inequality is an inherent structural trend in the Smith world, though now and then the trend reverses as it did in Smith's time, for the reasons that Smith noted, in the British colonies in New England. Rising inequality returned in the United States after the 1940s war economy, managed by Roosevelt, had led to greater equality than the United States had known. Most notably, Sweden reversed inequality, as did other West European social democracies in the decades after WWII.24 Sweden succeeded due to its

  • business, labor and government worked together in a number of crucial ways
  • retained corporate earnings were the main source of capital for investments (the same in most modern nations)
  • corporations had carte blanche to keep their earnings tax exempt as a public working capital subsidy and
  • moderate executive salaries and profits shrank Sweden's former harsh income disparities.

Sweden's business operations and research and development had finance, however, its private sector received no finance or subsidy. Thus, the great Swedish corporations—Volvo, SAAB, Weyerhauser, Electrolux and Erickson—prospered in world markets, better overall than did their competitors in the free market economies. Meanwhile, wages were raised, paid retraining kept workers free from fear of job loss and wages for women were set equal to those of men.

The postwar model that Sweden achieved was not perfect and it has survived only in a modified form. Nevertheless, it did and still does show the world how to solve one crucial problem: How do we capitalize business well enough while keeping inequality in check?25 Sweden's achievement, due to its innovation, adds a renewed poignancy to the words of Dr. King:

Not only do we have today the resources and the techniques to get rid of poverty, but something else is new too: Now we know that capital, like seeds for next year’s harvest, can be preserved without ethically unacceptable inequalities. Now we know that a modern economy can simultaneously reduce inequality and compete successfully in world markets.

Vandana Shiva

    On 3 March 1998, the United States Department of Agriculture and Delta and Pine Land Inc., the world's largest cottonseed company and a holding of Monsanto, announced that they had jointly developed and received a patent for a new agricultural biotechnology. With the benign title of the Control of Plant Gene Expression the new patent permits its owners and licensees to create sterile seeds by the selective programming of a plant's DNA to kill its own embryos. The patent applies to plants and seeds of all species. What is the result? Farmers who save seed pods such as pods of peppers, tomatoes, heads of wheat, and ears of corn will, in effect, stockpile seed morgues. The system will force farmers to buy seed from companies each year. It has been dubbed the 'terminator technology' by NGOs, such as Rural Advancement Foundation International (RAFI), which proclaims that the biotechnology threatens farmers' independence and the food security of more than a billion poor farmers in the third world.
    The right of free trade on a global scale is being established as the highest right. The WTO and its smaller bodies now consider the people's right to safe and adequate food as a non-tariff trade barrier to be dismantled and destroyed. At the heart of this conflict is the right of citizens to safety against the right of corporations to profit.26

Comment: The fifth inherent structural problem inherent in meeting needs through the exchange of commodities is the profit imperative, closely related to the fourth problem. Smith did not anticipate it and advocated a system based on voluntary exchange between willing buyers and sellers. He did not expect that the system would generate an imperative that would override human choice and humane ethics. The consequence is that of a social structure such that, at times, many buyers choose not to buy, or many sellers choose not to sell, both of which are intolerable. Exchange has become the lifeblood of society, so that if commerce stops, all else stops. Therefore, commerce goes forward with an exchange only if it bears enough profit. Hence, government at every level, from city councils to the United Nations, must focus first on creating a favorable climate for business. If government cannot establish an environment in which businesses make profits, it cannot do anything else because profits are the imperative: the priority of all policy.

We can accept a few setbacks to profit here and there without shutting down the system. In the end however, anything that obstructs the "locomotive" of commerce must step aside while the world works as it does. Therefore, as some of the consequences of this, if

  • the safe disposal of toxic wastes takes too much away from profit, then safety must go
  • halting global warming conflicts with profits, then abnormal climate change will continue
  • genetic diversity conflicts with profits, then bio-diversity must go
  • human rights conflict with profits, then rights must go
  • indigenous cultures and the ecosystems that support them conflict with profits, then nature must go
  • international law conflicts with profits, then law must go
  • farmers saving seed for the next crop conflicts with profit, then the bio-continuity of civilization must go and
  • the socially responsible use of public or private property conflicts with profits, then the ethical use of land must go.

Those values that must be sacrificed if they pose a threat to profit making may contrast with your experience and appear as deterministic. Victories for the environment and human rights, even where profits must be sacrificed, do show that the world's decision-making processes do not always maximize profits at the expense of all else. My assertion, however, is that profit can be reduced only to a limited extent without bringing the system to a halt, hence whatever threatens the profit imperative must go. The practical implication is that to stabilize the system we should rely more on meeting needs through non-profits, such as these:

  • housing cooperatives
  • groups of parents who share childcare
  • cooperative gardens
  • public bus and rail passenger services, which have budget deficits, which are paid by other revenues and
  • the nonprofit hospital or school that calls in volunteers to help. Any number of non-mainstream gambits will help turn the tide. The main strategy is to mobilize resources to meet needs.

Sweden had once solved two parts of the problem by 1) making it institutionally possible to run industry with only moderate rates of profit and, thus, 2) freeing up the pursuit of other values from the profit imperative. What, however, happens to profits after they are made? A major part of ending poverty consists of apportioning profits, rents and moving them toward worthwhile uses. The social reclamation of the accumulated surplus can happen in many ways, which includes: private foundations devoted to charity, fund raising, organizing,  taxation and socially responsible action by owners. The basic strategy remains for us to mobilize resources to meet needs. The vision I sketched takes the principles that humans act upon to be the main causes of historical events. The set of principles I endorse calls for the will to

  • take advantage of historical opportunities
  • use the creative other means to make power listen
  • persist with patience by acknowledging and respecting the value of diversity and the freedom of ideas
  • be the radical empiricist who
    • does not assume the answers before having proof
    • discards what does not work and
    • finds what does work so that revised modern institutions along with the vigorous ancient institutions can and will end poverty.

The principle of value in exchange from Smith needs revision and addendum by shifting the kaleidoscope toward his principle of value in use. Value in use is more basic than value in exchange as it states the point and purpose of cooperation.


1. M. K. Gandhi as quoted in the introduction by Kuruvilla Pandikattu, The Meaning of the Mahatma for the Millennium, New Delhi: Maadhyam Book Services, 2000, p. 1

2. Martin Luther King, Jr. recorded in the video documentary, Eyes on the Prize.

2b. Part X—Spanish translation—Un Llamado a Eliminar la Pobreza y la Inseguridad Económica through Enrique Martinez of the Argentine National Institute of Technology

3. Aldous Huxley, The Perennial Philosophy, New York: Harper, 1945

4. Thomas Robert Malthus, On Population, New York: The Modern Library, 1960, first edition 1798, p. 51-52

5. Frances Moore Lappé, Diet for a Small Planet (New York, Ballantine Books, 1971)

6. Lappé and Joseph Collins, Food First: beyond the Myth of Scarcity, Boston: Houghton-Mifflin, 1977; Peter Singer, One World, the Ethics of Globalization, New Haven, Yale University Press, 2002

7. Joseph Schumpeter, Capitalism, Socialism and Democracy, New York: Harper and Brothers, 1946, first edition 1942, p. 64-67

8. Immanuel Wallerstein, Unthinking the Social Science, Philadelphia, Temple University Press, 2001, p. 107, 113, 167

9. Shaohua Chen and Martin Ravaillon, How Did the World's Poorest Fare in the 1990?, Washington DC: The World Bank, Policy Research Working Paper # 2409, in 2000)

10. Lutz Leisering and Stephan Leibfried, Time and Poverty in Western Welfare States, United Germany in Perspective, Cambridge UK, Cambridge University Press, 1999, first edition in German 1995, p. 242

11. Viviane Forrester, L'horreur Economique, Paris: Fayard 1996

12. Adam Smith, The Wealth of Nations, London: J. M. Dent 1954, first edition 1776, p. 13

13. Adam Smith, The Theory of Moral Sentiments, Oxford: Clarendon Press, 1976, first edition 1759

14. Martin Luther King, Jr. Strength to Love,  Philadelphia: Fortress Press, 1963, p. 36-46

15. John J. Ansbro, Martin Luther King, Jr.: the Making of a Mind, Maryknoll, NY: Orbis Books, 1982, p. 187-97

16. Martin Luther King, Jr., Strength to Love, Philadelphia: Fortress Press, 1963, p. 9-16

17. Paul Volcker, past US Federal Reserve Chair, "The Sea of Global Finance" in Will Hutton and Anthony Giddens eds., Global Capitalism, New York, The New Press, 2000, p. 77

18. George Soros, "The New Global Financial Architecture" in Will Hutton and Anthony Giddens eds., Global Capitalism. New York, The New Press, 2000. p. 91

19. Jeff Faux and Larry Mishel, "Inequality and the Global Economy", in Will Hutton and Anthony Giddens eds., Global Capitalism (New York: The New Press, 2000) p. 106-07

20. Rational arguments proposing criteria for deciding how much inequality is ethically acceptable are in John Rawls, A Theory of Justice, Cambridge: Harvard University Press, 1971. As is the case with most of the books cited herein, there exists a large pool of literature that comments on Rawls' arguments.

21. Maria Mies, Patriarchy and Accumulation on a World Scale: Women in The International Division of Labor, London: Zed Books, 1986, p. 136

22. Alfred Marshall, Principles of Economics (New York, Macmillan, 1948, first edition in 1890) p. 544

23. Adam Smith, The Wealth of Nations, London, J. M. Dent, 1954, first edition 1776, p. 58-59

24. Amartya Sen, On Economic Inequality, New Delhi: Oxford University Press, 1973

25. See the chapters about Sweden in Howard Richards and Joanna Swanger, The Dilemmas of Social Democracies, the complete version here.

26. Vandana Shiva, "The World on the Edge," in Will Hutton and Anthony Giddens eds. Global Capitalism, New York:The New Press, 2000, p. 119-120, 122, 124


1. In your view and choice of words, what is the central theme in Part X as realized by Dr. King? p. 215

2. What support do you see for the awareness that the interests of affluence and civility are the same? p. 216,   p. 221

b. Do you think it is more of a romantic sentiment or a realistic tenet?

c. What is your sense of a causal link between economic inequality and incivility as direct, indirect, or both?

d. What conclusion do you make when you compare the laws of negligence (homicide, child abuse and corporate crimes against consumers and the environment) with Dr. King's indictment of poverty as an intentional crime committed by society against the poor? p. 214

Project 11: What if any similarities and distinction do you see in the incivility of the affluent with that of the poor?

1. In your view of it, do the incivilities of one class cause or trigger the incivility of the other? b. On what experience do you base your view?

2. As you see it, Is the incivility of the poor a largely a reflection of the incivility of the affluent? If so, please explain.

3. What would you suppose happens to the incivility of the affluent when the incivility of the poor transforms into their solidarity of human action in advocacy for the poor as themselves?

4. Is it your sense that there is an inherent incivility within the ethic of the global economy and the Western business ethic in general? If so, ask whether the incivility is a “cost of doing business.”

3. Kant defined will as the capacity to act from principle while Anthony Giddens sees 1) human action as being reflexively self-regulated and 2) society as a constant process of structures formation. If you think a synthesis of Kant's definition and Gidden's current analysis is doable, what would it look like in idea and effect?

b. What does the idea of human potential and our "built-in tools" mean to you considering that we have not yet ended poverty?  p. 218

4. Erroneous notions about poverty held in the past likely allow poverty to persist. What do you see as the main features, some of which are obvious, in the development of the propaganda of poverty?  p. 216

b. In almost every other animal species, each individual when full-grown is independent and in its natural state has need for the assistance of no other living creature. Yet, man has almost constant need for the help of his brethren. —Adam Smith. As you see it, point out his mistaken premise and discuss what factor of context may have led him to what seems an obvious error. p. 218

5. Smith considered an orderly selfishness more valuable to society than benevolence Smith's rationale, which has not passed the test of time, is mainly that increased production brought about greater division of labor, which in turn spurred larger markets. The so-called magic of the market would drive the accumulated wealth of society ever higher. Therefore, which of the inherent structural problems do you see as speaking directly to that basic dichotomy p. 223 through p. 226, p. 228

b. Do you think the word orderly in the context of selfishness implies ethics of and laws about behavior? p. 218,   p. 220

c. Would you say that by using the word orderly to modify the practice and spirit of selfishness, Smith tries to limit the ethic of freedom? How would you describe the relation twixt self-interest and liberty as an ethic?

d. Which of five structural problems do you see, as defined p. 223 through p. 227, frame the larger problem?

6. What phrase do you recognize as synonymous with mass production, key to the industrial revolution and a driving mechanism in the global economy?  p. 222

b. Describe your view of the long-term consequence of such a defining shift in the metaphysics of Homo sapiens? p. 220

7. The goal of ending poverty is, also, the goal of creating a culture of peace as justice. Therefore, how would you describe the common survival mechanism in that 1) the poor feel compelled to use and 2) authority exploits as the reason, isolated from any other factor—to institutionalize it as a problem—made worse and exaggerated by authority on behalf of power: the owners of production? p. 216

b. How would you describe or define the relationship between 1) the feminization of labor and the feminization of poverty and 2) the institutionalization of poverty? p. 221p. 222, p. 224, p. 226

8. Capitalism has created an industry by exploiting the consequences of poverty: cyclic crime—of their profit driven economy. Therefore, if you see it, cite another abuse of capitalism of a more obvious human suffering and pathos. (One of the abuses receives more press and public attention than the prison industrial complex.)   p. 221

b. In your view, which general groups of citizens largely pay for such a distortion of justice and the absence of ethics?   p. 228

c If you view the mass of citizens who pay as acting against an injustice for all, identify them and share your view of that.

9. Soros contends that the resistance of any interference with the market is based on the false doctrine that financial markets automatically tend towards equilibrium. The author agrees and has devised a pre-market correction as one way to fix it. Would you advocate that plan as the most effective and ethical, or do you see or would you seek a more lasting approach? p. 227

10. Volcker claims that, despite their inherent systemic tendency to collapse, open competitive market economies are still better than crony capitalism, state ownership, or official industrial policies. The author herein counters that more than three or four alternatives exist and adds that the will to end poverty seeks and finds alternatives. Beyond the advantages of public ownership of basic needs production and delivery, do you see other potential perquisites and the overall benefit of civic custody of basic services and commodities to the public? p. 224,  p. 229

11. What Dr. King called love in action is benevolence with an agenda: the will to end poverty. p. 220,   p. 221

Keywords: accumulation, alienation, barter, beloved community, benevolence, capital, collective bargaining, commodities, cooperation, crony capitalism, division of labor, economic insecurity, ethics, exchange value, free market, Gandhi, globalization, government, human action, human rights, IMF, inherent structural problem, invisible hand of the market, Keynesian economics, King, labor, population, poverty, profit imperative, profit, radical empiricist, self-interest, Smithsocial democracy, social structure, solidarity, spiritual, subsidy, Sweden, Tobin tax, use value / value in use, wages, will, WTO

Description: A vision of a world free of poverty and economic insecurity applies the work of Gandhi and Dr. King in conjunction with the affirming work and writing of current scholars and public figures. This frames Part X of Understanding the Global Economy, 1) an expose of the economic rise and rule of free trade as enforced by trade in pacts between corporations and central governments and 2) a source for building an ethical, sustainable economy based on knowledge and research.


Part XI: Logical plan for peaceTOC cover pagetop

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