Chapter 10 | Clarence S. Bayne

(continued)

Neo-liberalism is an extension of aspects of the perfectly competitive model from trade in small geographic areas to the national economies to world economies. It is argued (Chomsky and others) that it holds out the illusion of the efficiency of competition in the organization of scarce resources; but essentially acts to restrict competition when the interest of the upper classes are not served; and seek competition when they have the advantage. World trade is believed to be good because, as the free-trade model argument goes, it increases the number of goods and diversity of goods available to global populations at the lowest prices possible. The arguments are very persuasive as put by M. Friedman and backed by Thatcher, Reagan, Clinton, Mulroney, the World Bank, and powerful industrialists. But the competition that is postulated is not the order of the day or what is advocated by the neo-classical theory. The national economies that are being represented by NAFTA and WTO are dominated by monopolists (national and multinational institutions); and the interest of monopolists are the opposite to what competition (Adam Smith’s “invisible hand”) is supposed to achieve. Monopolistic action/market strategy is intended to reduce competition, restrict output, homogenize products (in the interest of cost reduction) and let prices rise, or set prices in keeping with some desired private rate of return and let the market adjust quantities: in short, maximize profits or shareholders’ wealth. Monopolists seek gains in excess of the normal profits considered acceptable as part of the fair economic exchanges of perfect competition. Monopolists are also interested in maximizing power and control over others, for such is the nature of monopoly power: it is an a priori expectation of the nature of a niche market strategy and the notion of competitive advantage that consumers are discouraged from seeking or denied alternative choices by the corporate exercise of monopoly power.

This redistribution of wealth must rest on a theory of consumption and consumer preferences. Using the Edgewood box construct, lets us assume an exchange economy in which every one is a carbon copy of one person in every respect. In such a world, welfare redistributions of wealth by transfer payments is a simpler problem to solve than if we are dealing with a world of diverse consumer types. In the first case common ownership and equal distribution of all goods and services may be possible. Think of two groups (G1 and G2) in two regions (R1 and R2) that are identical in terms of their most fundamental material needs but sharply different in terms of their cultural and spiritual needs. Let us assume that one group (G1) has a greater abundance of capital resources and can produce the larger share of the total the production of the basic material things needed by the two regions. Let us suppose the second group (G2) has a scarcity of capital resources but has a greater number of resources in the arts and artefacts and lifestyles. According to the Hecksher-Olin model, trade will take place such that Region2 will trade cultural art and cultural goods for essential material goods from Region1. This will of course be subject to the relationship between prices in factor market and prices in the goods and services markets. If the groups are culturally homogeneous, there may be no problem. A transfer of wealth can be effected that will ensure that the distribution of all goods produced by the economy conforms to some acceptable Pareto optimality. If, however, the two groups are culturally distinct, although there may be some cross over in culture (acculturation of the formative type), it is much more difficult to achieve social cohesion. R1 may perceive that its cultural fabric (its sense of self and being uniquely rooted in a culture and certain traditions) is being threatened by R2 through the nature of the trade. Achieving the optimum social cohesion in such a case may be very difficult. Why? Because the assumption that the shape of the indifference curves for individuals in R1 and R2 are similar no longer holds true. For region 1, beyond a certain level of consumption of cultural imports the sense of being in a socially cohesive situation changes in a negative direction. This becomes worse if there is a sense that the development of local art and culture is being inhibited by a collusion between large producers and distributors in both regions. This adds to the dimension of the sense of loss of control and community.

The problem becomes more complicated when we consider a culturally diverse population. A significant minority in R1 may closely identify with the culture and lifestyles of R2. They are therefore dependent on R2 cultural exports to R1. They may even be involved in the import and distribution of these goods and services. Now assume that the majority cultural group within R1 decides to take action to protect the perceived culture exclusive of consideration of the minority group. The question arises as to why would the minority wish or be expected to support the action of the majority group. If restrictions to these imports were to be imposed without the agreement of the minority, this would not be consistent with the overall objective of civil society, to maximize the sense of being in a situation of high social cohesion. For example, Blacks as a minority may not want to support the mainstream Canadian concern with the homogenizing effect of certain aspects of American trade. Blacks in Canada see themselves reflected in most aspects of American culture. They don’t see themselves represented and reflected in Canadian culture in any significant sense. If “Roots” were being shown at exactly the same time as CBC’s prime time “History of Canada,” what would I do? I would have cheated myself and reduced my sense of esteem by looking at the CBC’s programme, which was essentially about how the French and British conquered and wiped out the Indians, after they (the Indians) helped them to stop the American invaders. According to that programme this country was not about us or any other minority for that matter. A solution to the problem is to increase the range of cultural goods produced by minorities within the context of an evolving Canadian society and economy. The sense of creating a new society creates National and Regional loyalties, and with this communities to protect. This enhances social cohesion and moves individuals and communities on to higher levels of utility.

Chapter 10 , continued >

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