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Thomas Friedman & [email protected]

May 24, 2012   ·   0 Comments

Source: NYTX

By Robert Chernomas and Ian Hudson:

Thomas Friedman’s never ending world tour stopped off in Jordan in early May and was instantly impressed by what he saw in his article [email protected] “Fortunately, there is another Arab Spring going on alongside the drama in the streets of Cairo and Damascus. It is an explosion of start-ups by young Arab techies.” According to Friedman the key to a lasting Arab spring is “high-I.Q. risk-takers ready to start companies” fostered by a little push from the government. “The site was built to be the headquarters of the Jordanian Army, but, at the last minute, King Abdullah ordered the army elsewhere, renamed the complex “The Business Park,” and declared it a special economic zone.” The other part of Jordan’s recipe for success was that “it has also created the best Arab platform combining education, high-speed bandwidth, uncensored Internet and laws that protect intellectual property and incentivize investment.”

Here, in one succinct paragraph, is Friedman’s universal foundation for economic progress. His article on Jordan is merely the latest verse in what has been a remarkably repetitive song. The old media advice to stay on message has clearly been taken to heart by Friedman, who has been providing his cookie cutter, one size fits all prescription for economic advance for well over a decade. A close reading of Friedman’s past columns reveals a four step program for economic success.

First, the dynamism of the entrepreneurial class is responsible for a country’s success. Friedman has been especially taken with the dynamism of the newly emerging economies of India and China, which he argued were superior to the United States in terms of educational achievement, work ethic, and technological advances.[i] His devotion to the cult of entrepreneurial personality makes for some fairly strange policy recommendations. His solution to the problems of the US automobile industry was for the head of Apple, Steve Jobs, to run a car company for a year. “I’d bet it wouldn’t take him much longer than that to come up with the GM iCar.”[ii] His solution to the 2008 economic crisis was a Davos-style summit with “the country’s 20 leading bankers, 20 leading industrialists, 20 top market economists and the Democratic and Republican leaders.”^[iii] Friedman’s association with, and trust in, the economy’s elite remained unshaken even after the economic crisis for which so many of those leaders were directly responsible.

Second, trust technology. Friedman was amazed and dismayed when he discovered a warning on a European menu that the food may contain genetically modified organisms (GMO). “Europeans, out of some romantic rebellion against America and high technology were shunning US-grown food containing G.M.O.s.” Friedman viewed European concerns about the negative impact of GMOs on human health and the environment as ludicrous because “there is no scientific evidence that these are harmful.” Rather than lend any credence to European fears about this new technology he attributed their reluctance to “being weak after being powerful,” which “can make you stupid.”[iv] This conclusive opinion about an ongoing scientific debate reflected Friedman’s love of technological advance and predisposition to trust the corporate world.

Third, government intervention is crucial to foster innovation. Some of his policy prescriptions to achieve this are broadly desirable, and uncontroversial like a strong public school system. But the others, described in his article on Jordan as “incentivizing investment,” are more controversial. He favors low corporate tax rates, and subsidies for innovative business. So, for Friedman, bailing out the technologically backward US car companies that were, “giant wealth-destruction machines,” is ridiculous, but the government should “encourage investment in 21^st century renewable power systems.”[v]

Fourth, avoid any type of government intervention that strengthens workers at the expense of firms. His diatribes against the pro labor policies of continental Europe in contrast to the dynamism of the “Anglo” model of the US, England and Ireland is especially revealing in this regard. “There is a huge debate roiling in Europe today over which economic model to follow: the Franco-German shorter-workweek-sixweeks’-vacation-never-fire-anyone-but-high-unemployment social model or the less protected but more innovative high-employment Anglo-Saxon model preferred by Britain, Ireland and Eastern Europe. It is obvious to me that the Irish-British model is the way of the future, and the only question is when Germany and France will face reality: either they become Ireland or they become museums. That is their real choice over the next few years—it’s either the leprechaun way or the Louvre.”^[vi]

The French were the worst of a bad European lot. “Ah, those French. How silly can they be? The European Union wants to consolidate its integration and France, trying to protect its own 35-hour workweek and other welfare benefits, rejects the E.U. constitution. What a bunch of antiglobalist Gaullist Luddites! Yo, Jacques, what world do you think you’re livin’ in, pal? Get with the program! It’s called Anglo-American capitalism, mon ami.”^[vii] “French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day.” “Yes it is a bad time for France and friends to lose their appetite for hard work—just when India, China and Poland are rediscovering theirs.”^[viii]

Friedman’s invective against Europe was not due to an irrational hatred of berets and lederhausen. Rather it was a cautionary tale about what governments should absolutely not do—side with workers in the labor market by implementing a protective social welfare policy. His recommendations for the US, apply to every country in the world. “We’ve got the innovators; we’ve got the venture capitalists. If only we had the government that would create the right market conditions and then get out of the way.”[ix]

There are some serious problems with Friedman’s economic vision that are easily exposed by a quick look at two of Friedman’s favorite paragons of progress: Ireland and Steve Jobs.

It would not be too much of an exaggeration to say that the Irish economic miracle has collapsed under the weight of a speculative real estate bubble and the public debt crisis caused by the Irish government’s decision to cover its banks’ debts. The Irish government could have guaranteed deposits and let private bank bondholders face losses, but instead they borrowed money to pay bondholders, shifting the losses and the debt to taxpayers. No such state generosity was made available to the Irish workers who faced 14 percent unemployment and an austerity program. The limits to Friedman’s understanding of how the economies he champions actually work and his class-based myopia with respect to the impact of his policies does not extend beyond the five star hotels or corporate suites he inhabits.

Friedman extols Jobs for his technical innovation, but what Friedman fails to acknowledge is the extreme exploitation in the Apple business model. Handing Steve Jobs the American auto industry might have produced an iCar but not much of it would have been produced within the boundaries of the United States. Apple has aggressively outsourced its production in the search for low cost suppliers, resulting in a predictably long list of worker abuses. iPads and iPhones are produced in Chinese factories where netting is placed below the roof of the factories to prevent worker suicides. (The Times reports on these topics as a kind of “bad apple” event instead of a consistent, structural, long-run phenomenon where the objective of multinational corporations’ foreign direct investment in developing countries is to limit their costs as much as possible).

According to the UK’s Daily Mail report on infamous Apple supplier Foxconn:

“[W]e encountered a strange, disturbing world where new recruits are drilled along military lines, ordered to stand for the company song and kept in barracks like battery hens – all for little more than £20 a week.

In what’s been dubbed the ‘i-Nightmare factory’, the scandal focuses on two sprawling complexes near Shenzhen, two decades ago a small fishing port and now a city of 17 million people.

This is the epicentre of operations for Foxconn, China’s biggest exporter, which makes products under licence for Apple using a 420,000-strong workforce in Shenzhen. They have 800,000 workers country-wide.

And as Jobs was speaking in San Francisco [while announcing the iPhone], new measures were being secretly introduced at Foxconn to prevent the suicide scandal from worsening and damaging Apple sales globally.

Astonishingly, this involves forcing all Foxconn employees to sign a new legally binding document promising that they won’t kill themselves.”

Friedman would like all countries to follow his pro-business cult of the entrepreneur. Yet, there is a darker side to Friedman’s bright new technological world. Without real labor unions, labor parties and protective labor legislation, income and wealth tends to cascade upwards, as has been the case in the US and the UK for more than 30 years. Other countries, with policies abhorred by Friedman, are far better models to follow.

It is interesting that neither Friedman nor the Times mentions the real leaders in technology – the Nordic countries where corporate power is contested by large labor unions and real labor parties with strong social welfare policies.

The World Economic Forum (WEF) is a Geneva-based foundation whose Annual Meeting of chief executives and political leaders, held in Davos, Switzerland is a gathering of the truly rich and powerful.  The WEF is a think tank funded by 1000 corporations.  Member companies must have annual revenues of more than $1 billion.

Every two years the WEF produces its country Global Competitiveness Report.  What is most interesting about this list is how few of these countries follow Friedman’s economic strategy.

The countries that consistently dominate the top ten list are the so-called Northern European countries, better known disparagingly for their welfare states by conservatives. For 2011-12 Switzerland tops the overall rankings, followed by a host of Northern European countries: Sweden (3rd), Finland (4th), Germany (6th), the Netherlands (7th), and Denmark (8th). Of Friedman’s model countries: the US is 5th, UK 10^th, China 26th, Ireland 29th, and India 56^th (The UK is one of Friedman’s favorites, yet its neoliberal policies have plunged it into another recession while the effects of these policies over the past three decades have created levels of inequality second only to the US among the G7).

In a 2005 interview, then chief WEF economist Augusto Lopez-Claros explained the success of these nations:

“Integrity and efficiency in the use of public resources means there is money for investing in education, in public health, in state-of-the-art infrastructure, all of which contributes to boost productivity. Highly trained labor forces, in turn, adopt new technologies with enthusiasm or, as happens often in the Nordics, are themselves in the forefront of technological innovations.  In many ways the Nordics have entered virtuous circles where various factors reinforce each other to make them among the most competitive economies in the world, with world class institutions and some of the highest levels of per capita income in the world.”

The same successful northern European countries based on WEF criteria tend to spend much more as a share of GDP on early childhood development, family support and job training, and they raise higher tax revenues to pay for lower budget deficits, less poverty, longer holidays, better child care, higher life expectancy and higher reported life satisfaction.  They also tend to have much better environmental impacts. A better world is possible but not if anyone follows Friedman’s economic advice.

Robert Chernomas is a Professor of Economics at the University of Manitoba. He received his Ph.D. from the New School for Social Research. He researches in the area of political economy.

Ian Hudson is an Associate Professor of Economics at the University of Manitoba. He researches in the area of political economy.

Robert and Ian are authors of “The Gatekeeper: 60 Years of Economics According to The New York Times”.

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