Evolution of an economist
Bainbridge Island economist John Perkins was hired to sell predatory loans to developing nations. Now he's urging business leaders to redefine 'profit'
John Perkins used to be an insider, so he’s seen it all before.
In the 1970s he worked as a chief economist at a major international consulting firm. He was covertly tasked with persuading leaders of developing nations to accept predatory loans for infrastructure development as a means of securing lucrative contracts for U.S. corporations. He wrote about the experience in “Confessions of an Economic Hit Man” (Plume, $16), a book that spent nearly a year and a half on The New York Times best-seller list. The book has been published in more than 30 languages and has sold over a million copies worldwide.
In his latest book, “Hoodwinked: An Economic Hit Man Reveals Why the Global Economy Imploded — and How to Fix It” (Crown Business, $14), Perkins writes that many of the same economic policies that were once pushed on developing nations are now being pushed at home: Maximizing profits through privatization and deregulation is a business mantra. Rising unemployment and growing inequality are omnipresent. Corporate interests influence and threaten to undermine the democratic process. The very rich prey on the very poor. “Hoodwinked” is both a warning and a call to action in which Perkins offers tangible solutions to the social and environmental problems that surround us.
Perkins is a founder and board member of nonprofit organizations Dream Change, which is dedicated to shifting personal and global consciousness to transform the world, and The Pachamama Alliance, which works to empower indigenous people of the Amazon to preserve their lands and culture while educating people everywhere to create a just and sustainable world. That makes him a busy man who travels the globe. Two months prior to our interview, in October 2012, he flew to Reykjavik, Iceland, to receive the Lennon Ono Grant for Peace. He made time to speak with me over the phone from his home on Bainbridge Island. We discussed economic philosophy, the rise of inequality and his ideas for transforming business into a tool that serves the public interest.
What is an economic hitman?
Economic hitmen have created the world’s first truly global empire, not primarily through the military, but through economics. The people who run this empire are the “corporatocracy,” the heads of our largest multinational corporations. Economic hitmen identify countries that have resources coveted by corporations, like oil, and then arrange a huge loan to that country through the World Bank or one of its sister organizations. The money doesn’t actually go to the [people of the] country; instead it goes to corporations [as a subsidy] to build big infrastructure projects: power plants, industrial parks, things that help the few wealthy families in the country but don’t help the majority of the people, who are too poor to buy electricity and can’t get jobs in the industrial parks. [The countries] are left holding a huge debt that they can’t possibly repay. At some point [economic hitmen] say: “Since you have this huge national debt and can’t pay it, sell your resource to our corporation at low rates, without any social regulations or environmental restrictions… or, allow us to build a military base on your soil.” In a few cases where we economic hitmen fail to convince the government to take on this type of onerous project, the jackals step in. These are the people who overthrow governments or assassinate their leaders. I talk in my book about how I failed [to persuade] the democratically elected president of Ecuador, Jaime Roldós, and Omar Torrijos [former president of Panama]. They had great integrity, and they would not buy into these deals; then they were assassinated by CIA-supported operatives.
Omar Torrijos said something to you that inspired the title of your newest book. What did he tell you?
He basically said, “Don’t allow yourself to be hoodwinked.” In the end, he said people in the United States would suffer from predatory capitalism. Which is of course what we’ve discovered. We’ve created a failed global economic system. It’s a failure for everyone except the people at the very top, what we call the 1 percent. They’re benefitting from this failed system, but everybody else around the world is suffering.
What is predatory capitalism?
Predatory capitalism has one single goal, defined by Milton Friedman at the Chicago School of Economics back in the 1970s; and that goal is to maximize profits, regardless of the social or environmental costs. When I went to business school in the late 1960s, we were taught that making profits was a goal; paying a decent rate of return to your investors was a goal, but it was by no means the only goal. We were also taught that you should take good care of your employees, that you should get them pensions, health insurance and retirement funds. A CEO would take a cut in pay before he would lay people off. We were taught that you should take good care of your customers and your suppliers and the community where you worked. You should be a good citizen. You should not only pay taxes, but you should also donate money to schools and recreation centers and other social services. The profit motive was one of a number of motives, but not necessarily the most important one.
That all changed in the 1970s when this idea of maximizing profits as the only goal was put forward by the Chicago School of Economics and widely accepted by world leaders. Ronald Reagan was one of the first and most important [to accept this doctrine], but also Margaret Thatcher and others. It has pretty much been accepted ever since by every president of the United States — Democrats and Republicans alike. It has also created a world that has a failed economic system.
There are many indications of this failed economic system. Less than a fifth of the world’s population lives in the United States, and we consume almost 30 percent of the world’s resources. [At the same time], roughly half the world is living in poverty and starving, or on the verge of starvation. You can only define that as a failure. It’s not a model: China cannot repeat this system, nor can India, Latin America or Africa. They may want to replicate it, but they can’t. The numbers just don’t add up. So we have to understand that what we’ve created is a failed system for everyone except the very, very wealthy. And we must change it.
You argue that the same strategies that were designed to deceive and plunder the Third World are now being used in the United States. What are some of these strategies, and how are they used?
[The strategy] of getting countries to take on loans they can’t repay, and then going in and basically making them your servants, has really reached down to all levels of the United States today. A few years ago, bankers were convincing people who could only afford a $200,000 house to buy a $500,000 house. People believed their bankers. We were all brought up to believe that bankers wouldn’t give you a loan unless they [were] sure you [could] repay it. That used to be true, but that all changed a few years ago. Bankers were convincing people to buy houses that they couldn’t afford. Then the bottom of the market fell out, and now these people are stuck with houses that are not even worth the $200,000. Yet they still have their mortgages. They’re caught: Once you get in that debt cycle you become a servant. It’s very difficult to go out and protest in the streets or do anything else to change a system that you’ve become so indebted to. You just want to get out from under the debt.
In what ways have corporations hijacked the democratic process?
[Laughs] Oh, my God…
That’s a big question, but I think it’s an important one.
Yeah. I laugh because this last election was a beautiful example. The person that most corporate CEOs wanted to win didn’t win. But also, Obama hired people to run his economic policy that came right out of Wall Street. He hired people to run his agricultural policies that came out of the big agribusiness. And the same with oil. It’s a terribly corrupt system, and Obama’s caught in it because he took so much money from corporations. It’s not his fault: He couldn’t have become president had he not done that.
Corporations have hijacked the system by making sure that every candidate for any major post, whether in the United States or any of the other so-called democracies around the world, is beholden to them. We have roughly 10,000 lobbyists in Washington, D.C., alone, most of them hired to protect corporate interests. During most of my lifetime, the elected officials in the United States wrote the laws, but that’s not true anymore. Today the major laws that deal with corporations are written by corporate lobbyists and pass through politicians who the corporate lobbyists essentially own. So corporations write the laws that govern them. Big corporations own the mainstream media, either through outright ownership or through their advertising budgets. They wield amazing power, and they take huge subsidies. Oil companies and fossil fuel companies are perhaps the most highly socialized, subsidized companies on the planet. They get tremendous benefits in subsidies, direct and indirect, from the U.S. government.
You mentioned Milton Friedman. How has his economic philosophy contributed to the current state of the global economy?
When you have a philosophy that says the only responsibility of business is to maximize profits, the corollary is that business should do everything in its power to make sure it can maximize profits. This means having a heavy influence on government policies — nationally, locally and internationally. Maximizing profits also means maximizing income for a very small sector of society: those who own the major share of corporations. So the demise of the middle class around the world and the decline of the middle class in the United States and other countries, to a very large degree, has been caused by this philosophy, the idea of maximizing profits.
Many of today’s economists have an interesting term for social costs: They call them “externalities.” What could an economy look like that doesn’t prioritize profits over social costs?
That’s another whole issue, the issue of externalities. If we could internalize the externalities, that would solve a lot of the problem. Externalities are things that are not factored into the cost of a product that should be factored. For example, when you drill for oil in the Amazon, you destroy the lungs of the earth — the trees, the soil — and then [increased levels of] carbon dioxide causes climate change. You also destroy people’s lives. You destroy the freshwater supplies of rivers and potential medicines that come from plants. You destroy a great deal. Those are all costs, but they’re not factored into the costs of oil [production]. When you use sweatshops in Bangladesh, and they burn down, people die or are terribly injured. Their families then have no way of making a living. This is a huge cost that wasn’t factored into the products that were made in that factory: They were externalized. They need to be internalized.
I think what we need is to create a new goal for business. Businesses should make a decent rate of return for investors, but only within the context of being socially and environmentally responsible. Only within the context of creating a better world for we, the people. Corporations should be here to serve us, the people, not just the 1 percent.
Incidentally, 1 percent is a total error. It’s actually much less than 1 percent: 400 individuals in this country have more assets than 50 percent of the rest of the country. That’s a lot less than 1 percent. We need to create a new economic model and a new goal for businesses, one that says, “Yes, you need to make a decent rate of return for your investors, but only while serving the public interest.” That should be the role of corporations.
These days a lot of corporations say they’re socially responsible. What is the difference between philanthropy and socially responsible business practice?
Philanthropy can be sort of a red herring. If I’m making $80 billion [laughs] — let’s say that’s my income — and I give $30 billion to philanthropy, I’ve done a great service as a philanthropist. I do appreciate people who do that. But if I, as that same philanthropist, have hurt competition in the process, have screwed people by following this idea of maximizing profits, haven’t paid fair wages to workers around the world or haven’t helped competitors come along — if in order to make that $80 billion, have also practiced business methods that are injurious to the general public, then I would say it would be much better for [me] to have made much less money and not given any of it to philanthropy. If you do make a lot of money, it’s great to give it back to philanthropy. But, better still, as you’re making that money, as you’re running that business, focus on making a better world for everyone. As long as we have a model that says the only responsibility of business is to maximize profits, we’re going to be in a situation where business executives find it extremely difficult to be socially and environmentally responsible because they’re being told by their stockholders and their boards of directors that [they] just need to focus on maximizing profits.
You seem to have some hope for the next generation of social entrepreneurs. What are they doing to build a more peaceful, just and sustainable world? What can ordinary people do?
First of all, I’ve seen major changes in MBA programs. Seven years ago, students would say that their goals in life were to become wealthy and powerful. Today, I often hear “I want raise kids in a good world. I’m getting my MBA so that I can shape business into a better tool for creating a world my children and grandchildren will want to inherit.” I think this is extremely positive. We’re also seeing major businesses around the country becoming more socially and environmentally responsible. We’re seeing more localized businesses.
Around the world, people are waking up. I think we’re in a revolution of consciousness. We’ve seen it in the Arab Spring. We’ve seen it in the Occupy movement. We’re seeing it today throughout Europe with the protests in places like Greece and Spain and Portugal and Iceland. We’re seeing it in Latin America and Africa and Asia, even Russia. Once we start waking up and protesting, then the status quo, the corporatocracy, will try to stop us. It’s recognition that we are waking up and that we’re becoming successful; they’re fearful of our success. In the long run we need to turn around so they don’t have to be fearful: We’ll let them know that we’ll support businesses. But only those businesses that will create a better world for all of us.
These are amazing times: We’re perhaps living in one of the most revolutionary times in history. I think what we’re experiencing now is bigger than the Agricultural Revolution or the Industrial Revolution or the American Revolution. This is a revolution of consciousness. I’m glad to be part of it. I would encourage all your readers to do something every day to participate in this revolution and to follow their own heart. Everybody has some passion and some talent: Use them, every day, to make a better world.
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