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The Facts Behind the 'Confessions'

By Sebastian Mallaby
Monday, February 27, 2006

Last week I appeared on a radio show with an author named John Perkins. This man is a frothing conspiracy theorist, a vainglorious peddler of nonsense, and yet his book, "Confessions of an Economic Hit Man," is a runaway bestseller. So now, out of concern for thousands of sufferers across this great nation, I offer up a Perkins antidote. If you see someone reading him, I want you to be prudent, approach cautiously and wait until the victim's fevers cool. Then administer these arguments.

The world, says Perkins, is governed by a shadowy "corporatocracy," an invisible empire of wealth and greed that deploys a combination of bribes, assassins and seductive women to enslave the poorest countries. Perkins served this empire as an "economic hit man," a consultant who bamboozled unsuspecting Asians and Latin Americans into borrowing too much, so puncturing their sovereignty. The loans financed lucrative contracts for American construction firms. Needless to say, Perkins is certain that they did not help poor people.

Perkins speaks with a beguiling purr, and you can see why he's greeted with standing ovations at bookstores across the country. Besides working as an economic consultant, he's written books about Latin American shamans, including one called "The World Is as You Dream It." But his account of international finance is itself largely a dream. Even if you believe the stories of seducers and assassins, which other journalists have questioned, Perkins's basic contentions are flat wrong. Sure, developing countries (like rich countries) borrow too much sometimes. But the poor don't always lose. Nor are corporations all-powerful.

Perkins likes to invoke Indonesia, the scene of his first hit-man assignment. The way he tells it, the development economists who persuaded Indonesia to borrow money around 1970 were peddling a ludicrous idea -- that Indonesia's economy could spring from the dark age to the modern age in a mere generation. Well, Indonesia's infant mortality and adult illiteracy rates each fell by two-thirds over the next three decades, and life expectancy shot up by 19 years. If the corporatocracy was trying to lay Indonesia low, this was a funny way of doing it.

The same point holds for the developing world generally. The adult illiteracy rate in the poor world was halved between 1970 and 2000, and since 1980 the number of people living on less than $1 a day has fallen by about 200 million, even as the world's population has expanded rapidly. That is a stunning achievement given that the ranks of the poor had previously been swelling steadily, at least since 1820.

The poor have made these gains because Perkins's second contention is equally wrong: The corporatocracy is neither evil nor omnipotent. Survey after survey has shown that the multinational companies vilified by Perkins pay better wages than their local rivals in poor countries: One study of 20,000 Indonesian manufacturing plants found that the average pay in foreign-owned factories was 50 percent higher than in local ones -- and also that foreign competition pushed local wages upward. As Martin Wolf remarks in his book, "Why Globalization Works," multinational firms induce a race to the top more than a race to the bottom.

Perkins likes to say that of the world's 100 biggest economies, 51 are companies. This old chestnut is based on a fallacious comparison of companies' sales to countries' gross domestic product: Whereas GDP measures the amount of value added in an economy, sales lump together a firm's value-added with inputs bought in from suppliers. According to an apples-to-apples comparison done by the United Nations, just two of the world's top 50 economies were companies in the year 2000. Of the top 100 economies, 29 were companies.

That may still sound like a lot, but remember that companies compete against each other. In the world as Perkins dreams it, the top 100 or so firms are joined in a shadowy conspiracy. But the reality is that Exxon Mobil schemes to undermine BP and Shell, and General Electric plots against Siemens and Hitachi. Countries don't face a united corporatocracy. They play firms off against each other.

Besides, power is not the same as sales figures. Governments force citizens to pay taxes; firms can't force customers to do anything. Governments put citizens behind bars; citizens can use consumer power to put companies out of business. Governments have a monopoly on the right to impose laws, including laws that constrain corporate behavior; the fact that firms spend vast sums on lobbying is proof not only of their strength but also of their vulnerability. Of course, sometimes the lobbyists succeed. But over the past couple of decades, the scope of environmental, health and safety laws has generally expanded.

Perkins has tapped into a widespread fear. Thanks to the Bush administration, the mere mention of Halliburton is enough to prove the anti-corporate case to many bookshop audiences. But the truth is that corporations do not rule the world, and intensifying global competition has rendered them more vulnerable. Since the mid-1970s, when Perkins was touring the world as a hit man, fully half of the top 100 American industrial corporations have disappeared from that list. So what is this corporatocracy that Perkins fears? Is it the failing General Motors? Or vanished international banks such as S.G. Warburg? Or is it perhaps Chas. T. Main, Perkins's own employer in his hit-man days, which was swallowed up by a rival years ago?

mallabys@washpost.com

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