How the World Works by Noam Chomsky; Arthur Naiman; David Barsamian

Author:Noam Chomsky; Arthur Naiman; David Barsamian
Language: eng
Format: mobi
ISBN: 9781593764661
Publisher: Soft Skull Press
Published: 2011-09-01T00:00:00+00:00

Do you think this trend of growth rates and poverty rates increasing simultaneously will continue?

Actually, growth rates have been slowing down a lot; in the past twenty years, they’ve been roughly half of what they were in the preceding twenty years. This tendency toward lower growth will probably continue.

One cause is the enormous increase in the amount of unregulated, speculative capital. The figures are really astonishing. John Eatwell, one of the leading specialists in finance at Cambridge University, estimates that, in 1970, about 90% of international capital was used for trade and long-term invest - ment—more or less productive things—and 10% for speculation. By 1990, those figures had reversed: 90% for speculation and 10% for trade and long-term investment.

Not only has there been radical change in the nature of unregulated financial capital, but the quantity has grown enormously. According to a recent World Bank estimate, $14 trillion is now moving around the world, about $1 trillion or so of which moves every day.

This huge amount of mostly speculative capital creates pressures for deflationary policies, because what speculative capital wants is low growth and low inflation. It’s driving much of the world into a low-growth, low-wage equilibrium.

This is a tremendous attack against government efforts to stimulate the economy. Even in the richer societies, it’s very difficult; in the poorer societies, it’s hopeless. What happened with Clinton’s trivial stimulus package was a good indication. It amounted to nothing—$19 billion, but it was shot down instantly.

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