|
Contrary
to the grandiose claims made by the ideologues, the
neoliberal, open-door economic regimes imposed on
the Periphery by Core capital - starting in the 1980s
- have produced no economic miracles. Instead, the
neoliberal policies have brought economic ruin or,
at best, lack-luster performance to the countries
they have touched most deeply.
Starting
with the October Revolution of 1917, sections of the
Periphery began to break away from, or attenuate their
linkages to, global capitalism. After Second World
War, this decentralizing movement embraced nearly
all of Asia, Africa, and the Caribbean, who now joined
Latin America to form the Third World. Several of
these countries chose communism and severed their
links to global capital. Others used their newfound
sovereignty to re-structure their relations with global
capital, using the power of government to develop
indigenous capital. This was the Periphery’s
window of opportunity: its golden hour.
However,
this window began to close, starting in the 1980s.
For a variety of reasons, which included geopolitical
luck as well as the still-strong expansive power of
capitalism, Core capital staged a comeback both in
the Core countries and in the Periphery. Taking advantage
of the debt crisis, the World Bank and the IMF began
to dismantle the developmental states in the Periphery.
In 1994, shortly after the collapse of Soviet Union,
Core capital created the World Trade Organization
in order to deepen and police the neoliberal, open-door
regimes it had imposed on the Periphery. After a hiatus
of some three decades, power was once again centralized
in the Core states.
The
orthodox economists argued, as they had since Adam
Smith, that these neoliberal regimes created the best
bargains for all parties concerned. Free markets and
open economies, so they argued, would direct production
to countries where their unit costs were lowest; and
if capital were mobile, it would flow copiously from
the capital-rich to capital-poor countries. Indonesia,
with cheap labor, would produce shoes; and United
States, abundantly endowed with capital and skills,
would design, finance, advertise and market them.
In the neoliberal paradigm, the capital and skills
of Core countries would fertilize labor from the Periphery.
This was a marriage made in heaven: it would produce
prosperity for everyone, and especially for the poor
countries.
There
was one problem with this marriage. It had been forced
on the Periphery once before for nearly a century
and a half, and it had only led to abuse and rape
of their economies. Of course, the orthodox economists
never saw any of this; they could only see their side
of the ledger, which always showed profits. They could
not see the abuse and rape because they lived in a
world of toy economies with no economies of scale,
no externalities, no monopoly power, no advertising,
no racism, and no asymmetries of power. That is scarcely
surprising: every system that produces abuse also
produces its apologists. Always, it is the victims
- if only because they are the victims - who must
identify and analyze the abuse that penetrates their
lives.
In
order to identify the failure of neoliberal economics,
we will compare the growth record of the Periphery
in the two decades before and after 1980. First, consider
the two decades preceding 1980 when nearly all countries
in the Periphery protected their manufactures, regulated
their currency markets, engaged in deficit spending,
and their governments took on entrepreneurial roles.
By the norms of neoliberal economics, they violated
all the rules of good economic housekeeping. Yet,
they recorded quite impressive growth rates under
the interventionist regimes. The GDP of low-income
countries grew at average annual rates of 4.6 and
4.5 percent during the 1960s and 1970s; the corresponding
figures for the middle-income countries were 6.0 and
5.6 percent. There were no strong regional variations
in the growth record for this period. Although growth
in Sub-Saharan Africa faltered during the 1970s, there
were nine countries in this region whose average annual
growth rates exceeded 5.0 percent during this decade.
Over
the next two decades, as the World Bank and IMF forced
neoliberal policies upon them, the growth rates in
the Periphery declined in proportion to their embrace
of these policies. The neoliberal policies took their
first toll in Latin America and Sub-Saharan Africa.
Both regions suffered a precipitous decline in their
GDP growth rates to 1.7 percent per annum during the
1980s, and this produced declining per capita incomes.
The growth rates in Latin America recovered during
the 1990s to 3.4 percent per annum, though this was
significantly below their pre-1980 levels. The growth
rate for Sub-Saharan Africa improved only marginally
during the 1990s, and it was unable to stem the decline
in its per capita income.
The
collapse of Eastern Europe and Central Asia came next,
with their rapid integration into global capitalism
starting in the 1990s. Their economic decline was
striking. Although the growth performance of these
economies had been weakening for some time, they still
managed to log an annual growth rate of 2.4 percent
in their GDP during the 1980s. However, their precipitate
transition to markets produced catastrophic results.
During the 1990s, their GDP declined at an annual
rate of 2.7 percent, more than wiping out the gains
of the previous decade. It is doubtful if any economic
region of comparable size has experienced a similar
decline in its output. Soon, their fertility rates
fell significantly below replacement levels, producing
a declining population.
The
economic decline of the Middle East and North Africa
since the 1980s has been nearly as steep as in Sub-Saharan
Africa. Their GDP growth rates in the two decades
after 1980 were significantly below those for the
two preceding decades. As a result, the region’s
per capita income declined between 1980 and 2000.
This was not due to declining oil prices alone. The
non-oil economies in this region shared in this decline;
their GDP had grown at 2.9 percent annually between
1950 and 1980, but this declined to 1.5 percent in
the two decades after 1980. This decline occurred
at a time when the non-oil economies, barring Syria,
were liberalizing their trade and payments regimes.
Most
countries in East and South Asia, which had made striking
progress in the transition to neoliberal economic
regimes, followed the same pattern. Their growth rates
in the two decades after 1980 were visibly lower than
in the two preceding decades. Notably, this group
includes the most advanced countries in the region
- Taiwan, South Korea, Singapore, Hong Kong, Thailand
and Malaysia - as well as the poorer countries: Sri
Lanka, Indonesia, Philippines and Pakistan.
There
were a few countries in the Periphery that escaped
the declining trend in growth rates in the post-1980
period. India and China, the two largest countries
in the Periphery with more than one-third of the world’s
population, nearly doubled their GDP growth rates
in this period compared to their record in the three
previous decades. Although both countries enacted
market reforms since 1980, they were still amongst
the most illiberal economic regimes in the world,
whether one examines the extent of state ownership
in their industries or their trade and payments regime.
A second group of countries - Myanmar, Laos and Vietnam
- experienced dramatic upturns in their growth rates
during the 1990s, without the benefit of a liberal
regime.
These
results should surprise no one but the historically
myopic. In the hundred years before 1950, the colonies
and open-door countries performed poorly compared
to the sovereign countries in the Periphery - those
that were generally free to choose interventionist
policies. During the post-war interlude lasting into
the 1970s, when most of the former colonies and open-door
countries practiced strongly interventionist policies,
they experienced a dramatic acceleration in their
growth rates. It is scarcely surprising that the forced
return to open-door policies in the Periphery, since
the 1980s, has repeated the results from the past.
It is not clear how long India and China, the two
major countries that have not yet surrendered their
economic sovereignty, can resist conversion to neoliberal
economic regimes.
The
re-centralization of power by Core capital that began
in the 1980s was quite swift and mostly non-violent,
unlike the centralization that reached its peak in
the last decades of the nineteenth century. Perhaps,
this is not surprising. The first centralization was
a pioneering movement: it involved the creation, extension
and deepening of core-controlled systems of transport,
trade, finance, investment, cultural instruments,
and subordinate classes in the Periphery. It took
centuries to establish this system, often involving
wars. However, when the colonial powers departed from
their colonies, in most cases, they did not fully
liquidate these long-established systems of control.
While they terminated direct political controls, and
ended their military presence, many of the economic
and social linkages, though weakened, persisted in
most former colonies; only the communist countries
severed nearly all their linkages with Core countries.
This is what made the second re-centralization easier.
The
Core countries began to reinforce their informal systems
of control as soon as they lowered their flags over
their former colonies. The reinforcements took many
forms, including foreign aid, military assistance,
joint military exercises, training programs, and foreign
investments. When Core countries, now working in unison,
articulated their new determination - through IMF,
World Bank and the OECD - to impose neoliberal regimes
on the former colonies in the 1980s, there was little
resistance. For the most part, the elites in the Periphery
had already been integrated into the hierarchy of
power emanating from the Core; they also understood
that resistance carried unacceptable costs. There
was no popular resistance because re-centralization
did not affect the visible symbols of sovereignty.
The communist countries too were re-integrated without
firing a shot. They were overthrown from within, since
they failed to deliver prosperity, freedom or a sense
of ownership.
The
swift and easy re-centralization of the global economy
created a paradoxical situation. United States still
commanded a massive military force while its main
adversary had melted away. Soon, there were calls
to downsize the military, an intolerable prospect
for the industries whose profits depend on military
contracts. This had to be remedied.
The
refurbished power of Core capital was creating some
domestic problems too. On the one hand, Core capital
began eroding the social gains made by workers, consumers,
and environmentalists since the 1930s. More importantly,
the labor force in the Core countries was beginning
to face competition from sections of the Periphery
as they developed manufacturing capabilities. They
began losing jobs as Core capital relocated to the
Periphery; a process accelerated by the internet revolution.
In addition, Core capital was also using its newfound
muscle to import workers into their domestic markets.
Faced with a sustained decline in their living standards
- the first in the history of industrial capitalism
- a growing number of workers in the Core countries
were gravitating towards anti-Corporation, anti-globalization
movements. This too had to be remedied.
United
States would solve these problems by inventing new
enemies. It was in this context that Bernard Lewis,
in 1990, advanced his thesis of the “clash of
civilizations” between the West and Islam. He
argued that the Islamist opposition in the Middle
East represented “a mood and a movement far transcending
the level of issues and policies and the governments
that pursue them. This is no less than a clash of
civilizations - the perhaps irrational but surely
historic reaction of an ancient rival against our
Judeo-Christian heritage, our secular present, and
the worldwide expansion of both in 1990, that the
West was engaged in a veritable clash of civilization
with Islam.” Three years later, Samuel Huntington
generalized this thesis into a historical principle.
At the end of the Cold War, he prophesied, the world
is entering a new age of civilizational conflicts,
primarily involving the West and Islam, and the West
and China.
The
Clash thesis set up the military machine for capture
by powerful special interests and voting blocks within
United States. Quickly, the Israeli lobby, Christian
fundamentalists, and oil interests in the United States
joined forces. Each would pursue its specific goal
- eliminate threats to Israel’s hegemony, Christianize
Islamic societies, and capture oil profits - by mobilizing
America’s redundant military to re-colonize the
Middle East. It was not hard selling this imperialist
project to Americans. It would not be difficult painting
the Arab regimes into a corner. They were tyrannies,
they possessed weapons of mass destruction, they were
an imminent threat to American lives, they opposed
Western values, and they threatened Israel. A great
nation - the “greatest” there has ever been
in the history of mankind - would have little difficulty
manufacturing a clash of civilizations when it needed
one.
M. Shahid Alam is professor of economics at Northeastern
University. His last book, Poverty from the Wealth
of Nations was published by Palgrave (2000). He
may be reached at m.alam@neu.edu.
© M. Shahid Alam
Index: Current Articles + Latest News and Views + Book Reviews +
Letters + Archives
|
