PAUL JAY, SENIOR EDITOR, TRNN : Welcome back to The Real News Network. We’re in Cambridge, Massachusetts, at MIT with Professor Noam Chomsky. Thanks, Noam. So let me paint a possible picture here. The global financial system is completely collapsing outside of the United States. In Eastern Europe, the economy is in shambles, Ukraine is in shambles, Pakistan, if you move into Asia. The meltdown globally is tremendous, and a lot of the worst consequences of this crisis is being shifted into various parts of the world, and capital drawn into the United States as people buy T-bills and such. But if this stimulus package doesn’t work, if the banking reform doesn’t work, if people start to lose confidence in the American T-bill, and even if they don’t, this unemployment spiral can turn into a very severe crisis, and many people are suggesting it could be five years, it could be ten years. What’s the political fallout of that in the United States? And let’s go back to a conversation you and I had just before the last election, where you essentially said vote for Obama but—I don’t think you said hold your nose; you said do it without illusions if you’re in a swing state. Are people who are disturbed by the current situation, both on the progressive side—and also I think you find a lot of concern also on a little more traditional conservatives and libertarian conservatives—are kind of caught in some ways, the same way they were before the election, which is: how vigorously do you critique the Obama administration? At the same time, it’s in this fight with Republicans trying to block any kind of measures that even have any progressive content to them. And then look ahead four years or eight years. If this whole Obama presidency is not successful, eight years from now you could have McCain-Palin times ten.
NOAM CHOMSKY, PROFESSOR OF LINGUISTICS, MIT: Yeah, you could very well.
JAY: I mean, we could be looking at a kind of right-wing administration that might make the Bush-Cheney administration look benign.
CHOMSKY: I think you’re right. I mean, there are undercurrents in the population where it has a feel of late Weimar Germany sometimes—you know, a mass of people who are suffering, don’t understand what’s happening to them. "We’re hard working. We listen to talk shows. We’re white, God-fearing, hard-working Americans. Everything’s collapsing in our lives. Who’s doing it? We’ll find somebody who’s doing it." Rather familiar. It’s worth remembering that Germany went from being the peak of Western civilization in the arts, in the sciences, in democratic practice in the 1920s to the depths of human history within 10 years, and it was—not identical, but kind of similar phenomena were involved in this. This is sometimes called "descent to barbarism." It can happen. I think the only attitude you can take is support the measures, the critical support of measures that seem necessary to patch things up, but at the same time sustain critique. You mentioned the global impact. It’s already beginning. China, for example, has just proposed, quietly, that there should be a shift away from the dollar as a reserve currency. There should be an international reserve currency, actually, of the kind Keynes proposed 60 years ago, but it was never implemented. And they have a big stake in this, a huge amount of capital tied up in the United States. If the dollar declines, they’re in trouble, and they can’t withdraw it or they lose their market. And those moves are surely going to continue, which may lead to a shift in the international economic structure. It’s worth stressing that the United States is by no means suffering the worst. In fact, Europe’s in worse shape than the United States. The US has natural advantages. Europe, for example, can’t make unified plans; there’s internal conflict, national conflicts that prevent, you know, large-scale planning. The United States solved that problem during the civil war. So it’s likely that if these current proposals more or less keep things hanging together, as they may, maybe within a year or two the United States may well emerge in a position of relative power, but it’s very much unchanged, except that there are now many pressures—China is the most striking—to diversify the structure of the international economy. Also, Latin America, which was the traditional back yard of the United States, has been for the first time in its modern history moving towards independence and integration and south-south relations and so on, which does give a more diverse, complex economy. But the main action, I think, will remain here.
JAY: Do you think it is possible that this thing will patch together in a couple of years? I mean, a lot of the predictions from many economists on various ends of the spectrum—.
CHOMSKY: Some are dire. On the other hand, if you look at the actual, you know, kind of money-manager community, they don’t like what’s happening, but they are expecting a revival within a year or two.
JAY: [inaudible] they didn’t get it so right.
CHOMSKY: No, they had everything wrong, but so did almost everyone else. The economics profession, financial journalists, corporate managers, and so on made, you know, just colossal mistakes, like, for example, not seeing the housing bubble. I mean, for 100 years, housing prices have pretty much tracked economic growth. All of a sudden they shot out of sight. I mean, how can people not see that? But overwhelmingly they didn’t. There are a few exceptions
JAY: There are a few —
CHOMSKY: –but not a lot. And that’s an astonishing—. I mean, it’s understandable the banks didn’t see it—they didn’t care. As long as you can securitize mortgages, you can keep making money, even if housing prices go into the stratosphere.
CHOMSKY: And then you count on the public to bail out. Citigroup’s a perfect example. Robert Rubin, who was the secretary of Treasury, he kind of steered through Congress the elimination of the Glass-Steagall Act, which protected commercial banks from, you know, risky investments. As soon as it went through, he quit the government, became a director of Citigroup. They’ve profited enormously from these new possibilities. And then, when it crashed, he’s out with his money, and the public steps in and bails him out.
JAY: But even if they patch this together, isn’t it likely to be quite temporary and the house of cards continues to fall?
CHOMSKY: It can—.
JAY: Given that purchasing power’s been so based on debt.
CHOMSKY: It has. But look, I mean, if there’s a stimulus, if the economy is stimulated, the debt can be overcome. I mean, take, say, the Second World War. That was the greatest growth period ever. During the Second World War there was a semi-command economy. Industrial production almost quadrupled. And till the end of the Depression, there was an enormous debt, but the economy had grown so—. And then, with the continued reliance on the state sector for dynamism to sustain the high-tech economy—what’s happened in the last 50 years—that debt was paid off and you had the biggest period of peacetime growth ever. So it can be overcome. But there’s a big elephant in the closet, and that’s the health-care system. If current tendencies continue, health care is going to overwhelm the federal budget. There’s another big elephant in the military budget. That’s just, you know, a huge, crushing component of the economy. Now, here’s a kind of case where you have to both support current measures and sharply critique them. So Obama’s health reform proposals are being criticized because they’re going to add to the deficit. But if they’re done properly, it would reduce the deficit, as long as—. There’s good reason why the US health-care system is costly in the industrial world—I mean, it’s twice the per capita costs of other countries, has some of the worst outcomes: it’s the only privatized system, and privatization introduces a massive, a huge amount of bureaucracy, administrative costs, you know, surveillance, and so on and so forth, which is very expensive. It’s probably hundreds of billions of dollars a year. For decades, the public has wanted a national health-care system, something like what’s now called Medicare-Plus. Now, here’s a case where democracy just doesn’t function. What the large majority wants has been just off the agenda. I mean, now, you know, it’s beginning to sort of appear around the fringes. But if there was a move towards what the public wants, that ought to reduce health-care costs substantially. But it’s considered kind of politically impossible. You can’t really tamper with the privatized system. Or just take the cost of drugs. I mean, the cost of drugs is probably two or three times as high here as in comparable countries. It’s because of the power of the pharmaceutical corporations.
JAY: Well, in the next segment of our interview, which I know has to be the last, ’cause I know you have to go, let’s talk about what’s the shape of the oppositional movement in the United States and what do you think people should do. Please join us for the next segment of our interview with Noam Chomsky.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.