Fortunately there is a way out, but it will be anathema to neoliberals - Keynes' Bretton Woods proposal updated for the modern world, such as one of those put forward by Davidson[313] or Stiglitz (Stiglitz 2006 Chapter 9 pp245-268). National governments will be free to implement policies that suit their domestic circumstances in pursuit of full employment, price stability, and an appropriate level of sustainable economic growth. To allow such freedom governments will apply appropriate restrictions on capital movements across their borders, and revert to the fixed but adjustable exchange rate system set up at Bretton Woods. In this system finance takes its proper place as the servant of the people, rather than people being forced to serve finance. People, through democratically elected governments, make the decisions and set up arrangements to carry them out and finance them appropriately, rather than being hamstrung by the power of the finance industry and unable to do a fraction of what is necessary. Decisions on tackling climate change can be taken and the finance sector called upon to support what is required, rather than fighting anything that damages its own interests and those of big business and the wealthy. Market forces and laissez-faire will never make individual companies increase their costs in order to reduce environmental damage when the cost of that damage is borne by others. They couldn't even if they wanted to because they would lose business to those less scrupulous.
Market forces promote individual rather than communal advantage.
The only way is to force all private businesses to reduce or eliminate environmental damage, where possible by international agreement, and to set up and fund new enterprises that undo much of the damage that has already been done.
With a new Bretton Woods system international trade thrives - this is the irony - it is much better for international trade than the hyperglobalisation beloved of neoliberals. This is because the focus of a modern Bretton Woods is on the promotion of international trade for the benefit of both sides of each trade, with particular help for debtor countries, rather than on using international trade as just another means to make money, very often from poor countries, with no help at all for debtors. A new Bretton Woods would favour developing countries rather than exploit them, which would be to everyone's great benefit in the long run as the world would then create and share much more surplus wealth.
Poor countries will either have their debts written off (surely a moral imperative in all cases where loaned money was stolen by corrupt officials - in these cases lenders deserve to lose for failing to carry out due diligence), or be allowed to repay them from future revenue without accruing interest in the meantime beyond that which can be supported without any harm at all to their people. At the same time they will be empowered to develop industries that are able to contribute to world markets, and given all necessary help to bring their countries up to developed world standards. Exploitation by external companies will stop - see next section - and they will be strongly discouraged from unsustainable exploitation of their own natural environment, for which they will be compensated appropriately. Recall the 'Miraculous power of gifts' in chapter 67 subsection 67.2.1 and the discussion in chapter 48 section 48.6. Giving money to help poor countries works wonders, not only for the poor but for the rich too - not in dribs and drabs as now but in substantial quantities that are really able to make a difference. The US showed us the way in the late 1940s and early 1950s. People of poor countries are every bit as resourceful and hard working as those in rich countries, probably more so, all they need is to stop having their potential choked off by exploitation and exorbitant debt repayment.
A poor country trying to make economic progress while in debt and suffering exploitation is like trying to drive a car with the handbrake on.
A difficulty stems from confusion between making money and creating wealth, which neoliberalism encourages us to see as the same thing. Focusing on making money sees loading up the poor with debt as a good business opportunity. They are left to find their own way to create wealth and then pass the lion's share of entitlement to that wealth to the debt owners. Focusing on creating wealth gives attention to both the means to create it and the kind of wealth to be created, ensuring that it is wealth that is wanted and will command a fair price on the world market. Once all the unrepayable debt demands and exploitation have stopped poor countries will be much better placed to help themselves, but there may still be a need for further material help. The money to set up all new forms of wealth creation will be provided either as a gift, where it is required to be spent on importing goods and services from the giving country as in the US case, or as an interest free loan, where repayment only starts when revenue is earned, and at a rate that is humane and sustainable without exploiting or harming the poor in any way. There will be a need for providers of money to poor countries to take an active part in its management and distribution unless the poor country government has a proven and prudent track record. We don't want to see it disappearing again through corruption and theft.
This isn't helping poor people out of pity or philanthropy, but out of long-term self-interest. Consider the UK BoE creating and giving say £50 billion to a poor country to be spent on imports from the UK. The £50 billion cost the UK nothing to create, and enters the UK economy when spent. Provided that there is spare capacity (and there is enormous spare capacity - see chapter 100 section 100.11) the income multiplier (see chapters 16 and 17) does its work and creates even more wealth within the UK than is exported. Who loses? No-one; who wins? Everyone. We all gain because people in both the UK and the poor country create more wealth than they otherwise would, and the money is merely the lubricant that makes it all possible - money that cost nothing. This is a form of quantitative easing where money is spent rather than used to buy bonds, and what's more it is spent in the UK to boost exports - what could be better, both for us and for the poor country?
Alternatively the £50 billion could be an interest free loan, to be spent anywhere in the world, and repaid in due course out of revenue at an appropriately slow rate. Again the £50 billion cost nothing, but when it is spent in countries other than the UK there will be a depressing effect on sterling as it is sold for other currencies. Provided that the amount lent is small compared to total sterling exchanges the effect will be negligible, and in any case will be reversed in due course as sterling is bought to repay the loan. When it is repaid the BoE will destroy it, leaving the money situation just as it was but with a great deal more wealth in the world and especially in the poor country.
MNCs will have their power to bully governments and to exploit poor countries taken away. Governments will take back control. Private interests should never be allowed to take precedence over social interests when they are in conflict, wherever those societies are in the world. It is shameful that the developed world permits abuse by MNCs of poor people. Yes, those people are better off working for an MNC than they would otherwise be - this is the neoliberal argument. But we all know that MNCs don't employ them to make them better off, they employ them to make themselves better off - vastly better off - and would drop them in an instant if they failed to do so.
Many rough sleepers would be better off working as slaves - they would have a sufficient supply of food, clothing and shelter to keep them alive and in reasonable health, but that is no more an argument for legalising slavery than the neoliberal argument for exploiting the poor.
What is required is what George Monbiot recommends (Monbiot 2004 Chapter 6). There he proposes an international Fair Trade Organisation that is able to prescribe and enforce the standards to which corporations wishing to trade internationally must conform. It will operate along the lines of the existing Fair Trade Organisation, except that adherence to its requirements will be mandatory and applied universally. We need not question therefore whether or not it will work, because it works already. Also we need not devise a new set of regulations for the purpose; there are already standards in place:
i. the International Labour Organisation (ILO) has already developed standards for fair treatment of workers[314];
ii. the UN Commission on Human Rights has drafted 'Guiding Principles on Business and Human Rights'[315]; and
iii. the OECD has drafted 'Guidelines for Multinational Enterprises'.[316]
The problem is that these guidelines are voluntary, and as should by now be very clear voluntary standards and principles stand no chance against profit when they come into conflict. They bring about increased costs for those companies that try to adhere to them, so in effect those companies are penalised, whereas companies that ignore them are rewarded, and the harsher and more ruthless the companies the more they are rewarded. Furthermore without international mandatory standards corporations can force governments to abandon national laws by threatening to disinvest (Monbiot 2004 p229). The Fair Trade Organisation is an exception in that it has enjoyed success by bringing the treatment of poor farmers and others to the attention of the public, whose fair mindedness has led many to abandon cheaper and unfair alternatives in favour of fairness.
Monbiot proposes to add to the above list internationally binding regulations on health and safety, an expanded mandate for the International Criminal Court so as to prosecute company directors wherever they are, and the requirement to make companies carry the full costs of resource extraction and waste dumping. We might very well find that as soon as such laws are passed and enforced many MNCs cease to be profitable at all. Where that is the case it means that their profit was made by the avoidance of legitimate costs, in effect being extracted by causing harm without compensation (Monbiot 2004 pp229-231).
Joseph Stiglitz also has a lot to say about MNCs, along with sound proposals for reform of the way they conduct business (Stiglitz 2006 Chapter 7 pp187 - 210).
Keynes was widely acknowledged as having one of the most outstanding intellects of the 20th century. Bertrand Russell - not exactly short of intellect himself - said of him:
Keynes' intellect was the sharpest and clearest that I have ever known. When I argued with him I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to feel that so much cleverness must be incompatible with depth, but I do not think that this feeling was justified.[317]
Humanity has benefited immensely by taking to heart the wise words of great people down the ages, discarding any of their ideas only after the greatest deliberation and the amassing of very strong evidence against them. Given Keynes' credentials it is remarkable that neoliberals are able to cast aside so easily everything that he said and wrote, taking it as almost self-evidently worthless. It is as though a modern scientific school of thought arose expounding the belief that Einstein was a complete idiot and his Special and General Theories of Relativity no more than the incoherent ramblings of a deranged mind. In the scientific world I don't think that any such school would last very long, but in the economic world neoliberalism has thrived, to the unimaginable harm of countless millions of people around the world.
That's not to say that Keynes was infallible, far from it. This is what Paul Samuelson said:[318]
Since Keynes had the notorious reputation for always changing his mind, how could he always have been right? The charges, like the jokes about economists, are a little tiresome. "When a Royal commission solicits opinions from five economists", the story runs, "they get six answers - two from Mr Keynes"...
Keynes provided his own impeccable defence of being protean. "When my information changes, I alter my conclusions. What do you do, sir?".
We should re-recognise Keynes as the visionary that he was, research carefully everything he said and wrote, and enjoy the benefits of his penetrating insights. He left us a treasure chest full of ideas and policies for a better world, but instead of examining its contents with the most detailed scrutiny we left it mouldering in the attic.
What a different world we might be living in if only Keynes' insights had been understood, taken to heart, and adopted.