Money makes the world go round
An interview with Barbara Garson
by Jane Slaughter
From the number of times per day that newscasters treat us to the breaking news on the NASDAQ and the Dow Jones, youd think that everyone had a consuming interest in following his or her investments minute by minute. The truth is that less than half of American citizens have anything to do with Wall Street, even as little as belonging to a pension fund thats invested in stocks.
But the doings of Alan Greenspan and the financiers do affect all of us, nonetheless. Author Barbara Garson, who became famous back in the 1960s as the author of the anti-war play MacBird!, decided to "get beyond the global babble" and find out how the rapid and massive flows of money around the world act upon ordinary people. The results are contained in Money Makes the World Go Round: One Investor Tracks Her Cash Through the Global Economy, from Brooklyn to Bangkok and Back (The Penguin Group, 2001).
Garson is the perfect person to attempt such a project: Shes radical, shes funny, and she takes each person she meets, from Wall Street traders to Singapore nannies, at face value. "Everyone I met was surprising," she says, "but no one exotic." Garson wrote two important books about work, All the Livelong Day in 1975 and The Electronic Sweatshop in 1988.
Garson takes us through her own face-to-face learning process about currency crises, Eurodollars, Third World debt, and the International Monetary Fund. Her method is to deposit her publishers book advance in (a) a local bank and (b) a mutual fund, and then follow her money as it wings its way around the world. It helps build an oil refinery in Thailand, it finances a catalytic cracker in Singapore, and its part of "Chainsaw Al" Dunlaps rampage that wrecked the Sunbeam Corporation in the U.S.
Although shes made herself an expert on money, Garson has resisted its fascinations in her own life. She works when she needs to and lives simply.
TW: Describe the project you set for yourself.
BG: When I was young, "one world" was a phrase that meant brotherhood, peace, Esperanto and the U.N., Eleanor Roosevelt. It was a vision that we would work to make the world better, and you were creating oneness by moving in the direction of equality, raising everybody up.
Suddenly, I look around 25 years later, and instead of "one world" the phrase is "global village." And what does that mean? Global village apparently means electronic banking and CNN, and as far as making the world good, thats just anathema; thats what you shouldnt do. Global village means information highways carrying unstoppable capital flows, and if you try to interfere with that, itll be disastrous. You must just let the money do what it wants to do.
In other words, the worst people operating from their worst motives will somehow bring about good. Anyway, "good" is a word you dont want to use because that will slow things down. One Eleanor Roosevelt could stop all this progress.
So I decided to take a look at this global village and the mechanisms of how money was actually going to unify this planet. I decided to follow two typical investments: money in the bank and money in a mutual fund. I got a book advance and I put the first half in a very lovely bank, the nicest I could find, because I had these prejudices and I wanted to counter them.
TW: Ive always thought of you as a person whos chosen to not be concerned with money, to have a reasonably relaxed lifestyle. Certainly you were not an investor.
BG: My mother says the same thing. She keeps asking me, "You? What do you know about money?" I had this $65,000 book advance, and I thought that was pretty good. But as the book went on and on, and it took five years ultimately, each year my mother, being a bookkeeper, would say to me, "So lets see, what are you earning now, $19,000 a year? Getting into the fifth year, so what is this now $13,000 a year?"
TW: What happened to the money you invested in the nice little small-town bank?
BG: I thought they needed it, they wanted it, theyd give me some sort of service and the first thing I knew, this bank had nothing to do with my money. Thats because whoever holds my money has to receive some return on it. They could find something profitable to invest in, such as a factory. But when you enter whats called a "mature economy," like the little town of Millbrook, N.Y. the buildings were already built. Its not that all the buildings that were needed were built and everybodys home was good. But everybody who could afford a mortgage already had their mortgage.
So that money becomes a hot potato. There was nothing for that bank to do with my money except pass it along to their correspondent bank, which happens to be Chase.
Now Chase had the same problem. The need to bring in a return means that that money has to go somewhere, and its that "has to" that created the whole global economy. In other words, there used to be laws and restrictions on how money could be moved abroad, laws in this country and laws from other countries keeping it out. Then there came a time when investment in this country wasnt so profitable. All the factories after World War II had been rebuilt and workers werent being paid enough to purchase everything that could be made. But the money had to go somewhere where it would bring in a return, and it was that money that created the so-called global economy.
"Sprawl" is defined by the National Trust for Historic Preservation as "poorly planned, low-density, auto-oriented development that spreads out from the center of communities." It creates that doughnut effect in some cities where acrylic and asphalt suburban shopping malls form a ring around the dead center, where the old downtown sits decaying. Between 1960 and 1975, the state of Pennsylvania lost a total of 3,600,000 acres of farmland. Thats like losing a geographic area the size of Pittsburgh every six months.
When Iowa State University Professor Ken Stone examined the sales changes in Iowa small towns from 1983 to 1993, he discovered "a huge shift of sales to larger towns and cities, with substantial amounts captured by mass-merchandise stores." Stone estimates that the total number of businesses lost in small towns and rural areas was 7,326 in the decade studied. Iowans spent $425 million more at discount stores, but $153 million less at variety stores, $129 million less at grocery stores, $94 million less at hardware stores, $47 million less at mens and boys apparel stores, and so on. In the 11 store types studied, businesses lost more than $603 million in sales. In this ten-year period, Iowa lost:
That may have seemed like a joke in 1994, but Wal-Mart now has more sales than the Gross Domestic Product of Israel, Greece, Ireland and Egypt.
A Price Waterhouse report says that by the year 2005 just 10 companies, including Wal-Mart, will control 50 percent of food-store sales.
[Excerpt from Slam-Dunking Wal-Mart by Al Norman (1999). Available online on the Sprawlbusters web site at: www.sprawl-busters.com/caseagainstsprawl.html].
TW: One of the people I liked best in the book was the fisherman who stops when he has enough. Why is there no such thing as "enough"?
BG: Lets say you make a successful investment. What does it give you? More money. You have to do something with that money. Money cant stop, it cant just sit in the bank, if youre a bank, because thats actually costing you money.
One of the things my money became invested in was a seafood importer in Brooklyn. He had a $3-million line of credit from Chase, an amount that began to seem cozy and wee to me as I pursued my studies. He was importing black tiger shrimps.
I went to Malaysia to see my shrimp farms and I talked to the people who were sending these shrimps into the U.S. and I saw what they were doing with the profits, which was creating jellyfish factories and this was the most progressive and useful part of anything that happened with my money.
But let me tell you about shrimp farms. I thought of a shrimp farm as something like underwater farming, this kind of Jacques Cousteau-like scene, with people bubbling along and taking the shrimps and putting them in baskets. But in fact shrimp farms are huge pits stretching along the coast. Sea water comes in and the wastes from the shrimp are put back out into the water. The illegal immigrant Indonesians who worked on my shrimp farms were rowing through the pits putting down the food so it would be evenly distributed, so that the shrimp wouldnt have to swim and theyd be a uniform size, the kind you get in packages, 25 to 30 per pound. In order to do this they were tearing the mangroves out of the tropical coastlines.
Because of the enormous density of it and the chemicals they used, they were polluting themselves, so in three years theyd have to move up the coast a little further. And in fact whole coastlines were used up, and theyd move on to other countries.
Now, the pollution also caused the local fish to move farther out into the ocean, so that coastal fisherman who had been rowing out to catch fish now couldnt find any fish near the coast. They either had to go out of business, or tie themselves to the global economy, in the sense that they now had to get a motor for their boat.
Once you had a motor, you had to pay off the debt from buying it. Or if you went to work in a factory instead of fishing, either way, you had to keep doing it. And the most subversive thing I heard in all my travels was when a fisherman said to me that what he had liked before, before the shrimp farms, was that you stopped when you had enough. You came in for the day when you had enough. It wasnt an easy life, but he stopped when he had enough. It was the most subversive thing I heard, because if many people stopped when they had enough ...
My money could not stop it would back up, so to speak. The people who hold it have to bring in returns for other people.
But a shrimp farm, however awful it sounds, is economically productive compared to just buying and selling the shares in something, which is a pyramid scheme which has to end in a crash.
TW: The media presents investors as risk-takers, entrepreneurs sometimes, hard workers. These are the dynamic movers and shakers of our economy. But isnt investing literally making money off of someone elses work? When you own stock, arent you taking the profit somebody else, a worker, has created?
BG: The word investment is a very broad word. It could mean Im not doing the physical work but I take a risk in letting my money be used to build something new, and I dont know whether that project will be profitable or not. So it could involve risk and it could involve, if not work, then a commitment of something of yours that you wont have back if it doesnt work.
But what I discovered about the phase of capital that I was watching was that investors were not putting their money, for the most part, into something new. They werent building anything. They were buying shares of things that already existed. The pyramid scheme was that if they could get someone else to buy shares, then the value would go up. And they werent taking risks, because they were using the government to make sure any risks they took were covered.
You have to understand that when you buy a share, youre not paying money to a company. Youre not giving it money with which it can employ people. No, youre buying a share from some other shareholder. They sold this share to you because they thought they had a more profitable use for the money. What are they going to do with the money? If they were poor people, they might buy something with it. But for the most part, theyre not. Theyre going to buy more shares with it. Theyre going to bid up the price of those other shares, and youre bidding up the price of the share you bought.
You may seem to have more and more money the values going up every single day but youve really only got the same underlying little factory that you hope will make enough money in the future to pay the shareholders.
As the price of the shares goes up and up and up, suddenly, somebody realizes, hey, the last guy we can draw into this has already come in. Somebody is the last guy in, and he cant find anybody to buy his shares. And then theres a crash.
Thats why Wall Street wants to privatize Social Security oh, a bunch of rubes to buy our shares so were not the last people in.
Youre damned if you do and damned if you dont in this system. I just described to you how harmful my shrimp farms were, but the money that went into them at least was producing shrimp farms. Its equally catastrophic when the money goes into producing nothing.
TW: Or maybe into actually destroying things. In your book you talked about that super-successful investor Michael Price and his philosophy of "unlocking the value."
BG: Michael Price would get up in these shareholder meetings and say, "I own 5 percent of the shares of Chase" or "I own 22 percent of the shares of Sunbeam. Were going to unlock the value." Michael Price wasnt faddish. He studied what assets a company had. Say they owned a factory and the factory had so much money in the safe for reinvestment. So once he owns the shares of the company he can force the executives to open the safe and give the money to him. That is "unlocking the value."
Now, it may not be money in the safe, because there rarely is. More likely, Michael Price says, "The total worth of your factories if sold separately is such and such. Im going to make you sell the factories. I dont care if the company no longer exists. The cash will be turned over to me and my investors will reap a profit."
TW: It goes without saying that he doesnt care what happens to the people who work in the factories.
BG: Oh, forget that. Forget that! If they do worry, their concern may be for shareholders down the line, whether they can get out in time, but the workers thats just not part of the consideration.
TW: But Michael Price was already ridiculously rich.
BG: Oh, its a game. At that level, you score and you win. Other people brought in 18 percent and you brought in 20 percent. I dont object to it except that their game has so much to do with us.
TW: You wrote about your moneys participation in the "Asian crash."
BG: It was building a brand new refinery in Thailand for $1.9 billion, in the same part of the world as my shrimp farms. It was no coincidence, because it was a time when money was pouring into Southeast Asia.
When I arrived in Thailand there were 9,500 people camped around my refinery working to build it. I talked to some of them, to the CEO, and I got friendly with a street vendor in front of the refinery, a fabulously interesting woman who I call "Squirrel." She and another woman were saving to set up a permanent stand in a market, which would certainly be a move up for them. They had moved there from the country, and they werent sad. One of them expressed it very forcefully. For a while she worked in what you and I would call a sweatshop. And she said that sitting in front of a sewing machine, no matter how long, didnt bother her when she thought back to standing in the paddy fields with leeches on her legs.
In that phase everybody seemed to be moving up, and it was very exciting that these two were saving together to buy a market stand. They were like mother and daughter. I could get very sidetracked into the family stories but its not a sidetrack, because these are the sorts of opportunities that my money was producing.
TW: It helped create the sweatshop that Squirrels family could send her to, which created her desire to never go back to the rice paddy again, and instead to be an urban person and part of the global economy.
BG: So these women vendors are now selling food in front of my refinery to these 9,500 workers. At that point, global capital looked like what all the people who are touting it say it is. Everybody was moving up. I could see at my refinery that the people from the country became welders and welders became foremen and foremen became contractors and contractors became bankers and these two street vendors were going to become entrepreneurs of their little stand. I called it a little stand, but it was a restaurant to them.
Then suddenly, through something that you will understand if you read my book, called a currency attack, the Thai bhat was worth half as much as before, in relation to dollars. Now, if you remember, we talked at the beginning about the fact that the beginning of the global economy came with banks in the U.S. demanding the right to invest abroad. Before the 1970s most countries had something called capital control laws. We did too. One very common law was that a country like Thailand would say to its own banks, you cant borrow more than a certain percent of the money in a foreign currency. The U.S. government was very influential in making other governments end these rules about capital controls, so now all those rules were broken down.
After the currency attack, suddenly their currency is worth half as much, and they have to pay back their loans in dollars. So the people in Thailand who borrowed from my bank in the U.S. really cant pay it back. Just Chase alone had about $50 billion in danger in Thailand at that point. So although these are private loans to private banks or private companies in Thailand, the U.S. government goes with the banks, and they say to the Thai government, "You are going to assume or assure that debt. You can try to get the banks to pay it back, but whatever cant be paid back, you, the Thai government, are going to guarantee."
Now were getting back to my street vendors. Thailand is a country that both exports rice and feeds itself very well with rice. It was rice rich. Now, the U.S. banks are saying to the Thai government, "Were not going to lose any money on our loans. You have to come up with dollars to pay us back. " How are they going to get the dollars? They get the dollars by exporting something from the country and selling it in dollars.
So one of the things the Thai government does is to manipulate it so that the price of rice doubles. And then more of the rice they produce is exported and they get dollars.
So if my street vendor wants to keep in business lets say she finds a factory thats still operating and goes and stands in front of it and sells a rice-based dish shes selling to people who hardly have any money now and she has to absorb more of the cost. She is just plain poorer.
The IMF [International Monetary Fund] was really worried for a while. They were thinking about putting in some traffic lights, some capital controls. But when the crash ended and none of the banks had lost any money, not a penny, they stopped thinking about those traffic lights. The bankers and the U.S. government and the IMF congratulate themselves and they say, "We got through that. We averted a crisis."
They averted a crisis, but of the people that I got back to in Thailand, nobody is working in the same job or living in the same place. The street vendor, Squirrel, had disappeared. One of the oil refinery welders now didnt have as much money and he couldnt take care of his family and the money he earned was now very much useless. But he was studying English because so many of the projects in the area that survived were being bought with American money.
Some people were going home to the country, but there was less country, because my oil refineries and my shrimp farms had taken up a lot of the land.
TW: Do you think we need more controls on trade?
BG: I would probably be for free trade if there really was free trade. Dont forget that what I studied was money. The free movement of money is very different from the free movement of goods. For one thing, its harder to speculate in goods and services. You dont have this rapid in and out; you actually take possession of the goods.
We dont even know what free trade would look like, because these free-trade arrangements that we make have nothing to do with free trade. NAFTA [North American Free Trade Agreement] is an 1,100-page document. If it was free trade it would just say, "Okay, no more tariffs." But the process with NAFTA was that each industry, the capitalists from all three countries, got together on making the terms that it wanted to protect that industry. They said, "What are the rules that would be most beneficial for us? Let those rules exist in all three countries."
For instance, how is it free trade to say that in every country that comes into NAFTA they have to have the U.S. 20-year patent law on pharmaceuticals? So that drugs that have already been being made in Canada and Mexico cant come across the border and they have to stop making them there. Thats free trade? Wheres the free? Wheres the trade?
I think that I might be for free trade in the sense of the movement without tariffs of actual goods. Not of money, because money is just about speculation. I think I might be for free trade, because Im not in favor of one group of workers in the world against another. But I know I cant be in favor of whats currently being called free trade, and I would never be in favor of the unregulated movement of money, now that Ive studied it, because it leads to these enormous swings. That money has to be controlled. That money has to have stop signs.
The stop signs Im talking about are actually the ones that the capitalists themselves should be wanting, the traditional ones. I cant believe it I call myself a socialist, and right now I seem to be the only one who remembers just plain John M. Keynes the way the capitalists used to know how to control the economy and make it more smooth and even. They dont seem to remember that.
Its simply traditional Keynesian capitalism that when the economy is expanding you give money to rich people. Theyll build new factories, theyll open new restaurants. But in the midst of a recession, when there isnt enough money in peoples hands and factories arent being run to capacity and restaurants are closing because they dont have enough customers, then you give money to ordinary people in the form of salaries, so they will spend it. Because ordinary people spend money. When you give big globs of money to people who already have money, they invest it. And the last thing you want, during a recession, is for them to look for another place to put their money, at a time when the existing factories arent producing enough and the existing restaurants are closed.
So this is traditional. This is not me Im a socialist. I dont want these decisions to be made by them at all. But am I the only person in the middle of a recession saying wait, wait, you capitalistswhy dont you do your traditional thing?
TW: Many people say that one of the main things that makes this era different is the speed with which transactions and information exchange can take place.
BG: Let me speak to you about the speed of transportation. As far as speed of financial transactions, the previous global episode at the turn of the 19th century was far more revolutionary. Because they brought in the telegraph. What long distance communication was there before that? Smoke signals. It was a tremendous change.
The computer has not speeded communications up so much. Really what a computer has is the ability to process many, many transactions at once, to get the running total on many, many transactions. So its increased volume, but not so much speed.
We talk about the time when there was a railroad boom that was the key to expanding the economy at that time. A lot of people made money when the railroads were being built, and a lot of people lost money, just as people made and lost money on the computer boom. But once the railroads were built, the expanding economy was based on there being something to carry on the railroads. Trade was really increased. People could grow more in some parts of the country than they needed and expect it to reach to other parts of the country, and they would produce more because they could sell more. And then other people would produce things for them. And so the trade that the railroads facilitated actually increased the wealth of the world. You dont trade the same stuff, you start making more stuff. You grow the wheat for yourself and you grow the wheat for the other people because you can now ship it to them by train. So yes, it was a railroad era, but the continued expansion depended on there being real stuff to carry on the railroads.
And now we have something called the computer era. And yes, at the beginning of the era, people who bet on the right system or monopolized the right system, like MS-DOS, made fortunes. But if all you can carry on this new mode of transportation is economic commandswell, I dont know whether its enough to facilitate a great future.
I was really shocked to travel around the world and realize that the actual product of the computer era was not economic control. The only thing actually being bought was entertainment and education "content." And that had a limited period in which it could be a stop-gap to what has essentially been, since the 1970s, a decline in growth and production. So I didnt have to be so brilliant to know we were going to be moving into this decline that were in now.
The cycles of expansion and crash are going to repeat themselves until all the other continents are used up for the expansion bubble, and then its going to come home.
Detroiter Jane Slaughter is a freelance writer who specializes in labor issues.