Naom Chomsky

'When I was 10 years old, I wrote an essay about the rise of fascism and the fall of Barcelona," chuckles 81-year old political theorist Noam Chomsky. "It was for a school newspaper of which I was the editor, sole writer and probably the only reader."

Chomsky has many more readers now, but it's strangely comforting to imagine the premier intellectual of his generation holding forth as an infant ideologue in the midst of the last financial crisis. Chomsky emerged from that depression to make his reputation in the field of linguistics, but he's better known as a left-wing critic of American foreign policy and a shrewd analyst of the capitalist system. He has published dozens of books, including his cutting analysis of American media and censorship Manufacturing Consent (written with Bernard Hermann), Hegemony or Survival: America's Quest for Global Dominance, and his new book, Hopes and Prospects, a look at the power of grassroots activism.

Last week he gave a seminar in UCD, appeared on RTE's The Frontline, and also found time to talk to the Sunday Tribune. Extremely softly spoken, he references everything from Adam Smith's Wealth of Nations to the writings of Paul Krugman and Fintan O'Toole. He has a seemingly elephantine memory for historical and economic detail and, as a child of the depression, financial crises do not surprise him.

"Market systems have built-in inefficiencies and every economics student knows them," he says. "If you're selling me a car, we'll take account of the costs and the benefits to us, but not the price paid by society. There are effects, environmental, societal, which aren't priced into that sale. Economists call them externalities and put them in footnotes. So if you're at Goldman Sachs and are undertaking potentially profitable but very risky investments, you take into account the potential cost to yourself, but you do not consider systemic risk. That's an externality. So risk is underpriced and that's a guarantee of financial collapse."

Chomsky argues that there's no such thing as a free market, so we should just scotch the notion altogether. "All these people who argue most enthusiastically for a free market actually believe in a powerful interventionist state," he says. "In the background, the government is always offering these investment firms an unspoken insurance policy. And that's an incentive to take risk. Alan Greenspan referred to the unsustainable investment growth during the tech bubble as "irrational exuberance". That was wrong. It's perfectly rational if you know the taxpayer is there to bail you out."

He talks about two worlds and a yawning rift between them: a rich important 'plutonomy' ("Citigroup, who we bailed out, came up with that term") and an increasingly disenfranchised majority – "80% of the American people are unhappy with this, which is why both McCain and Obama stressed 'change' in their election campaigns," he says.

"Obama won an award from the advertising industry for the best campaign of 2008, and I think that says it all. His financial people are the people who created the crisis. His guru, Robert Rubin, was secretary of the treasury under Clinton and broke down the Glass Steagall Act which was legislation protecting commercial banks from risky investments. He then left the treasury and became a director of Citigroup which profited from this. One international economist said he should be in jail. Lawrence Summers, who's now second in command, also blocked regulation. And the third major figure is Tim Geithner, who was governor of the Fed which supervised it all. It's intriguing to me how, when the system imploded, so many economists came out untarnished. If carpenters built something that collapsed like that, they'd never be hired again."

Chomsky's own politics were shaped by the hardship of the depression. "I have vivid memories of people coming to the door in rags," he says. "I remember riding in a trolley car past a textile plant where women strikers were being beaten by security people. It had an effect on the whole country. But the depression didn't turn America to the left, it returned it to the left. If you go back to the 19th century, Americans saw wage labour as slavery, different only because it was temporary. Abraham Lincoln even recognised this. That was eventually beaten out of them."

Chomsky believes that, since Reagan, a particularly right-wing orthodoxy has reigned which runs the world economy for a minority. He endorses popular grass-roots movements, is heartened by the flowering of the left in Latin America, and was inspired by the anti-globalisation protesters that dominated news reels earlier in the decade.

"'Anti-globalisation' is a propaganda term. Nobody is anti-globalisation. If you take the World Social Forum, considered to be 'anti globalisation', it's actually the most pro-globalisation group in the world. People gathering from all over the world to work together? That is globalisation. It's called anti-globalisation because it's against a specific form of economic integration designed by multinationals and banks to enrich the already rich."

Could there be a more general turn to the left in the current circumstances? "Maybe," he says, cautiously. "If you count noses there are more activists than ever. But they're scattered. One of the reasons I like giving talks is it's a way to get people together to see what else is going on."

He's pessimistic, however, about the narrow parameters of the debate. "When Ted Kennedy died, one of the candidates for his senate seat was Joseph Kennedy," he says. "He ran a charity which provided cheaper fuel to poor people. A couple of years ago, he appealed to the major oil companies to provide low-cost oil and got no response except from Citco, the Venezuelan oil company. So Hugo Chavez was providing low-cost oil to poor people in Boston. This was used as a weapon against Joe Kennedy. 'You took money from this monster and gave it to the poor! How awful!'" Chomsky laughs softly, "It's almost funny."