Planet Homemaking Podcast – Episode 28 – The Economy Exists to Serve the Needs of Society!

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Commentary on “The State of Our Currencies” Report by Catherine Austin Fitts.

We’re looking today at an interview by Sir James Goldsmith about GATT and the beginning of the World Trade Organization.

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Sir James Goldsmith’s 1994 Globalization Warning
February 1, 2010

YouTube | February 04 2010

Sir James Michael “Jimmy” Goldsmith (26 February 1933 18 July 1997) was an Anglo-French financier. Towards the end of his life, he became a magazine publisher and a politician. In 1994, he was elected to represent France as a Member of the European Parliament and he subsequently founded the short-lived eurosceptic Referendum Party in Britain.

In this interview, Sir Goldsmith discusses the ramifications of free-trade agreements that were about to take place in 1994 (GATT), as you can retrospectively see, he correctly predicted many of the things that happened after that.

Sir James Goldsmith is one of the people in 1987 who saw the stock market coming down and he forecast the crash of 87 in October he also saw the rise in all prices with OPEC coming together. He now believes that GATT is wrong for the industrialized world and that it will unleash a series of problems that will be catastrophic for the world. It is all contained in a new book that he’s written called: “The Trap” and I am very pleased to have Sir James Goldsmith join us for the beginning of this conversation.

—Why is GATT bad at a time that many people believe that NAFTA has proven despite all the warnings to be good for the United States and good for Mexico all of the fears that Ross Perot and others forecast didn’t happen now you come along and say that was very small GATT is much larger it will unleash an unemployment that will attack the economies around the world?

What’s the thesis that makes you believe that?

Because NAFTA and GATT are totally different sizes. NAFTA was a free trade area with Mexico and Canada, where it wasn’t just economic. It was regional problems, you’ve got all sorts of neighborly problems that you have to solve between the three nations.

But it’s nothing. It’s like Portugal and Greece was for us in Europe. What we’re talking about is that for GATT, we’re talking about a free trade area with China, with India, with Vietnam, with Indonesia, with four billion people!

You see, when GATT (this last round this is the eight round of GATT) when it started eight or nine years ago, the negotiations, the long-way-around. When it started, the world was a completely different place. Since then, we’ve had four billion people who before were set aside if you like, held held away from us by communism, by ideologies, and they’ve all of a sudden joined the free market, fine that’s fine.

Secondly, those people have got massive unemployment, they have very fast growing populations, they work for almost nothing compared to our populations. I mean, you can employ 47 people in Vietnam, in the Philippines for one American.

But that’s what they said about NAFTA too.

Well yes, but we’re talking about four billion people. You’re not talking about 80 million people and quite apart from that, the idea that you can judge the results of NAFTA so far, in my view is a bit naive, because it’s only been a few months.

So let’s wait five years and see what’s happening.

But first let’s talk about GATT. Four billion people you can employ them—Mexico’s expensive compared to the other places.—Now one of the other changes that have taken place since this have started: technology can be transferred anywhere in the world, capital can be transferred instantaneously wherever the return is highest.

So today, take two companies, two corporations. They make the same product to be sold in the same market because the whole concept of global free trade is that you can make a product anywhere and sell it anywhere. They have access to the same technology, they have access to the same capital, they only have one difference: cost of labor, 47 to 1. So they move.

Now what has been the results, this isn’t hypothesis. You take France, in Europe we have free trade, started to emerge from 1973 onward, that’s when the Treaty of Rome was changed. During that 20-year period since, then the economy in France has grown by 80 percent.

The number of unemployed has gone from 420 thousand to 5.1 million. That’s equivalent to 25 million in the United States.

Now what is the good of having an economy that grows by eighty percent, if your unemployment—people excluded from active economic life—goes from four 420 thousand to 5.1 million?

—Alright let me make one other argument, When you say: “The People of the Republic of China and India, 4 billion people. The argument is also made, that all of a sudden not only is there a question of the price of their labour, but it is a huge buying power that they have, that China in the new millennium will be the world’s fastest growing economy and those people will be buying products from the industrialized world…

And let’s benefit from that, and we can work together, but how do you benefit from that without destroying ourselves?

You go and you create a corporation in China, and you build a factory in China, and what do you want to sell mugs? And you conquer part of the Chinese market by competing there fair and square in China. That’s life, that’s adding to the activity of China. You’re a corporate citizen working over there.

But if you move a factory from the United States and take that to China, not so as to conquer the Chinese market, but so as to re-import the goods into the States, so as to get cheap labor. What are you doing?

What you are doing is you are saying to your employees here, you’re too expensive folks. You want money, you want protection, you want unions, you want holidays. Forget it! We can employ 47 people over there who want nothing.

So don’t confuse two issues. One is going out to participate in their growing economies by building there and conquering part of their market. The other is merely killing off employment in your own country, getting rid of your own labor force, transferring it over there and importing it back purely serves to increase your profit margins.

Now, the average company has about 25% of its costs in labor costs including the social costs, the welfare costs around it. 25% of volume you can say. When you move, you all of a sudden can save over 20%. So your profits go leaping up but you’re destroying, totally destroying, not only the number of people who’ve got jobs, but also their salaries.

You realize their salaries in the State’s, their earnings, weekly earnings, hourly earnings over the last 20 years have already dropped about 19% in real dollars. It’s already been a massive decline.

And that is why the so-called recovery, which is a recovery of economic indices hasn’t got the “feel-good” factor because people’s salaries have gone down, but they’re going to go down much more, it’s only the beginning. And the reason is very straightforward:

When you manufacture something, anything, this table. You have a value added, the value added is when you take the raw materials and you manufacture a product. The value you add is known as value-added, and that is shared between capital and labor and, the whole division, the sharing of that has been the subject of massive debates for generations: How much should go to capital? How much should go to labor?

You have strikes, you’ve had lock outs, you’ve had political debates. All of a sudden, by creating a global marketplace for labor. It’s creating circumstances where people are making the same product, with the same technology, and the same capital, and the only variant is the cost of labor.

You are shattering the way you share the value-added, and that means that you are destroying the basis on which we’ve been able to create an equilibrium and have a stable society.

Ok but, let me just make this argument. This is the same thing we’ve heard about protectionism. Every time it comes up in the American Congress, The same arguments are made.

No, absolutely not. I am entirely for free enterprise, I am for free markets, but I’m not for the destruction of one’s society.

Can you explain what is the purpose of an economy in your view?

It has many purposes in fact, to play a role in a society in terms of creating jobs, in terms of playing a positive force, in terms of giving people an opportunity to serve, to take care of their family, giving people an opportunity to participate in their society.

In other words: they the economy is there to serve the fundamental needs of society.


Which offers prosperity, offers stability, and what I’m saying at this stage is that, if purely for an economic doctrine you have a situation whereby the economy grows, that you create poverty, unemployment and you destabilize the society. You’re in trouble! Look what’s happened in the last 50 years!