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Walden Bello - 2000
Walden Bello is a member of the House of Representatives of the Republic of the Philippines and president of the Freedom from Debt Coalition. A retired professor of sociology at the University of the Philippines, he is currently a senior analyst at the Bangkok-based analysis and advocacy institute Focus on the Global South. He is the author of 15 books, the most recent of which is The Food Wars.
UNCTAD: Time to Lead, Time to Challenge the WTO (January 2000)
UNCTAD X is being held at a very auspicious moment for the South. Two central institutions of the Northern-dominated system of economic global governance, the International Monetary Fund (IMF) and the World Bank, are undergoing a severe crisis of legitimacy and have, at least temporarily, lost their sense of direction. The South has the opportunity to seize the initiative, frame the terms of debate on the future of global governance, and push for the creation or institutions that will truly serve its interests. UNCTAD can serve as the catalyst for this process.
A Backward Glance To envision a strategy for the future, it is essential to glance back at the past, to reclaim the best in UNCTAD's history and to avoid its mistakes. The place to begin this analysis is the period of decolonization in the 1950s and 1960s. The emergence of scores of newly independent states took place in the politically charged atmosphere of the Cold War, but although they were often split between East and West in their political alliances, Third World countries gravitated toward an economic agenda that had two underlying thrusts: rapid development and a global redistribution of wealth. While the more radical expression of this agenda in the shape of the Leninist theory of imperialism drew much attention and, needless to say, condemnation in some quarters, it was the more moderate version that was most influential in drawing otherwise politically diverse Third World governments into a common front. This was the vision, analysis, and program of action forged by Raul Prebisch, an Argentine economist who, from his base at the United Economic Commission for Latin America (CEPAL), won a global following with his numerous writings. Developed in the late 1950s and early 1960s, Prebisch's theory centered on the worsening terms of trade between industrialized and non-industrialized countries, an equation which posited that more and more of the South's raw materials and agricultural products were needed to purchase fewer and fewer of the North's manufactured products. Moreover, the trading relationship was likely to get worse since Northern producers were developing substitutes for raw materials from the South, and Northern consumers, according to Engels' Law, would spend a decreasing proportion of their income on agricultural products from the South. (1) Known in development circles as 'structuralism', Prebisch's theory of 'bloodless but inexorable exploitation', as one writer described it (2), served as the inspiration for Third World organizations, formations, and programs which sprang up in the 1960s and 1970s, including the Non-Aligned Movement, Group of 77, Organization of Petroleum Exporting Countries (OPEC), and the New International Economic Order (NIEO). It was also central to the establishment of the UN Conference on Trade and Development (UNCTAD) in 1964, which became over the next decade the principal vehicle used by the Third World countries in their effort to restructure the world economy. With Prebisch as its first Secretary General, UNCTAD advanced a global reform strategy with three main prongs. The first was commodity price stabilization through the negotiation of price floors below which commodity prices would not be allowed to fall. The second was a scheme of preferential tariffs, or allowing Third World exports of manufactures, in the name of development, to enter First World markets at lower tariff rates than those applied to exports from other industrialized countries. The third was an expansion and acceleration of foreign assistance, which, in UNCTAD's view, was not charity but 'compensation, a rebate to the Third World for the years of declining commodity purchasing power'. (3) UNCTAD also sought to gain legitimacy for the Southern countries' use of protectionist trade policy as a mechanism for industrialization and demanded accelerated transfer of technology to the South. UNCTAD at its Apogee To a greater or lesser degree, the structuralist critique came to be reflected in the approaches of other key economic agencies of the United Nations secretariat, such as the Economic and Social Council (ECOSOC) and the United Nations Development Program (UNDP), and it became the dominant viewpoint among the majority at the General Assembly. Instead of promoting aid, UNCTAD focused on changing the rules of international trade, and in this enterprise it registered some successes. During the fourth conference of UNCTAD (UNCTAD IV) in Nairobi in 1976, agreement was reached, without dissent from the developed countries, on the Integrated Program for Commodities (IPC). The IPC stipulated that agreements for 18 specified commodities would be negotiated or renegotiated with the principal aim of avoiding excessive price fluctuations and stabilizing commodity prices at levels remunerative to the producers and equitable to consumers. It was also agreed that a Common Fund would be set up that would regulate prices when they either fell below or climbed too far above the negotiated price targets. UNCTAD and Group of 77 pressure was also central to the IMF's establishing a new window, the Compensatory Financing Facility (CFF), which was meant to assist Third World countries in managing foreign exchange crises created by sharp falls in the prices of the primary commodities they exported. Another UNCTAD achievement was getting the industrialized countries to accept the principle of preferential tariffs for developing countries. Some 26 developed countries were involved in 16 separate 'General System of Preferences' schemes by the early 1980s. These concessions were, of course, limited. In the case of commodity price stabilization, it soon became apparent that the rich countries had replaced a strategy of confrontation with a Fabian, or evasive, strategy of frustrating concrete agreements. A decade after UNCTAD IV, only one new commodity stabilization agreement, for natural rubber, had been negotiated; an existing agreement on cocoa was not operative; and agreements on tin and sugar had collapsed. (4) Right-wing Reaction and the Demonization of the UN By the late seventies, however, even such small concessions were viewed with alarm by increasingly influential sectors of the US establishment. Such concessions within the UN system were seen in the context of other developments in North-South relations, which appeared to show that the strategy of liberal containment promoted by Washington's liberal internationalists, who held sway for most of the post-war period up to the late seventies, had not produced what it promised to deliver: security for Western interests in the South through the co-optation of Third World elites. The United Nations system was a central feature of the demonology of the South that right-wing circles articulated in the late seventies and early eighties. In their view, the UN had become the main vehicle for the South's strategy to bring about the New International Economic Order. As the right-wing think tank Heritage Foundation saw it, the governments of the South devoted enormous time and resources to spreading the NIEO ideology throughout the UN system and beyond. Virtually no UN agencies and bureaus have been spared. (5) The South's effort to redistribute global economic power via UN mechanisms was viewed as a concerted one: "Private business data flows are under attack internationally and by individual Third World countries; proposals for strict controls of the international pharmaceutical trade are pending before more than one UN body; other international agencies are drafting restrictive codes of conduct for multinational corporations; and UNESCO has proposed international restraints on the press." (6) Especially threatening to the Foundation was the effort by the Third World to redistribute natural resources by bringing the seabed, space, and Antarctica under their control through Law of the Sea Treaty, the Agreement Governing Activities of States on the Moon and Other Celestial Bodies (called the 'Moon Treaty'), and an ongoing UN study and debate over Antarctica. Malaysian Prime Minister Mahathir Bin Mohamad, the principal architect of the effort to get the UN to claim Antartica, told the General Assembly 'all the un-claimed wealth of this earth' is the 'common heritage of mankind', and therefore subject to the political control of the Third World. (7) Crisis of the UN Development System As the 1980s unfolded, the North's drive to discipline the South escalated. Taking advantage of the Third World debt crisis, the IMF and the World Bank subjected over 70 countries to structural adjustment programs, the main elements of which were radical deregulation, liberalization, and privatization. This was accompanied by a major effort to emasculate the United Nations as a vehicle for the Southern agenda. Wielding the power of the purse, the United States, whose contribution funds some 20-25 per cent of the UN budget, moved to silence NIEO rhetoric in all the key UN institutions dealing with the North-South divide: the Economic and Social Council (ECOSOC), the United Nations Development Program, and the General Assembly. US pressure resulted as well in the effective dismantling of the UN Center on Transnational Corporations, whose high quality work in tracking the activities of the TNCs in the South, had earned the ire of the TNCs. Also abolished was the post of Director-General for International Economic Cooperation and Development, which had been one of the few concrete outcomes, and certainly the most noteworthy, of the efforts of the developing countries during the NIEO negotiations to secure a stronger UN presence in support of international economic cooperation and development. (8) But the focus of the Northern counteroffensive was the defanging, if not dismantling of UNCTAD. After giving in to the South during the UNCTAD IV negotiations in Nairobi in 1976 by agreeing to the creation of the commodity stabilization scheme known as the Integrated Program for Commodities, the North, during UNCTAD V in Belgrade, refused the South's program of debt forgiveness and other measures intended to revive Third World economies and thus contribute to global recovery at a time of worldwide recession. (9) The northern offensive escalated during UNCTAD VIII, held in Cartagena in 1992. At this watershed meeting, the North successfully opposed all linkages of UNCTAD discussions with the Uruguay Round negotiations of the GATT and managed to erode UNCTAD's negotiation functions, thus calling its existence into question. (10) This drastic curtailing of UNCTAD's scope was apparently not enough for certain Northern interests. For instance, the Geneva-based Independent Commission on Global Governance identified UNCTAD as one of agencies that could be abolished in order to streamline the UN system. (11) The Commission's views apparently coincided with that of Karl Theodor Paschke, head of the newly created UN Office of Internal Oversight Services, who was quoted by Stern Magazine as saying that UNCTAD had been made obsolete by the creation of the World Trade Organization. (12) UNCTAD on the Defensive During UNCTAD VIII, the North pushed to limit UNCTAD's functions to analysis, consensus building on some trade related issues, and technical assistance. (13) But even in this limited role, UNCTAD managed during the late eighties and nineties to perform indispensable tasks for the South. Among other things, UNCTAD's research and analytical work:
- showed that structural adjustment was leading to stagnation, not to the promised growth path promised by the World Bank and the IMF;
Together with the United Nations Development Program's Human Development Report, UNCTAD publications provided unassailable empirical evidence that globalization was spawning greater inequalities between and within countries. The annual Trade and Development Report served as a healthy antidote to the paeans to the free market and free trade coming out of World Bank and WTO publications such as the World Bank Development Report. Opportunity Awaits Seizure The collapse of the Third WTO Ministerial in Seattle provides an opportunity for UNCTAD to reclaim a central role in setting the rules for global trade and development. But this cannot be on the basis of the old paradigm and old practices that have marked the UNCTAD approach. For example, the old assumption that underlay the Prebischian model that full integration of the developing countries into the world economy is the way to prosperity must be questioned in light of the many negative consequences of globalization which have become painfully evident, including the dangers that accompany the loss of self-reliance in agricultural and industrial production owing to the volatility of the global economy, such as the erosion of food security in developing countries where agriculture focuses on export-oriented production.This is related to the need for UNCTAD to incorporate many of the insights of ecological economics, which sees global trade, whether managed or free, as one of the key factors destabilizing the national and global environment. It must give serious consideration to the principle of subsidiarity in production and trade - that whatever can be produced locally with reasonable cost should be produced and traded locally - as a way of preserving or enhancing the health of both environment and society. Ecological economics and feminist economics drive home the point that 'efficiency' or the pursuit of reduction of unit cost-the driving value of neoclassical economics-must be questioned, if not displaced, and UNCTAD must elaborate a different paradigm that subordinates narrow efficiency to the values of social solidarity, social equity, gender equity, and environmental integrity. UNCTAD's analysis must also move away from an overwhelming focus on international trade as the key factor in development and pay greater attention to both the economic and social measures that would allow for greater reliance on the internal market, including asset and income redistribution, such as land reform, that would create the economically empowered citizen consumers that would serve as the engine of the local economy. The indispensable and necessary links between growth, national sovereignty, and social reform must be placed at the center of trade and development policy. The absence of serious attention to internal social reform owes itself to a simplistic North-South view of international economic relations. But equally important, UNCTAD has been too long a club of Southern governments and states that are uncomfortable at the examination of their internal political and economic arrangements. UNCTAD, in other words, must see that its constituency goes beyond governments to include, more fundamentally, their citizens. Thus, UNCTAD must not only solicit input from civil society and non-governmental organizations but also open up its decision-making processes to them. In this regard, the words of Rubens Ricupero, UNCTAD's managing director, apply not only to the WTO but to the organization he leads. Decrying the 'persisitent inability' of international organizations to engage civil society, he warns that, the net result is that frustration, fears, and concerns finally find expression in a confrontational and sometimes violent attitude, often leading to disruption and a feeling of confusion. There is a clear need to reach out to the concerned individuals and organizations, to offer them an opportunity to be heard by governments not only when they march and protest in the streets, to start a process of ordered and respected dialogue with those who want to debate the central issues related to trade, investment, financial crisis, job insecurity, growing inequality inside nations and among them. (14) Moving to Center-stage Institutional and analytical reinvigoration is essential if UNCTAD is to break out of the cage that the rich countries have fashioned for it and carve out a much more powerful role in trade and development issues. Also essential is the will and the vision to accompany this process. In this regard, both the draft 'Plan of Action' and 'Bangkok Consensus' are disappointing. Both documents broadly adhere to the North's limiting UNCTAD's mandate to research and policy analysis; consensus-building; and the provision of policy advice and technical assistance aimed primarily at capacity building. (15) Such an approach does not go beyond the 'positive agenda' of the last few years, which put the emphasis on enhancing, via technical advice, the capacity of developing countries in the context of WTO negotiations. That role was essentially one of holding the hands of developing countries as they integrated into the WTO. It was also a role that led to UNCTAD being deployed as a 'fixer' for the WTO in controversial issues, such as the way it was recruited to become part of a WTO working party on investment during the Singapore Ministerial in 1996 in order to legitimize the process of bringing investment into the jurisdiction of the WTO. What UNCTAD should be doing, in the aftermath of Seattle, is challenging the role of the WTO as the ultimate arbiter of trade and development issues. UNCTAD should instead be putting forward an arrangement where trade, development, and environment issues must formulated and interpreted by a wider body of global organizations, including UNCTAD, ILO, the implementing bodies of multilateral environmental agreements, and regional economic blocs, interacting as equals to clarify, define, and implement international economic policies. UNCTAD, in particular, should push to become not just a forum for the discussion of policies. UNCTAD should become, as Secretary General Ricupero put it recently in Berlin, a 'world parliament on globalization'. (16) But this should be a parliament with teeth, with actual legislative power and executive power in the nexus of trade, finance, development, and environment. It was under the aegis of UNCTAD that international agreements on stabilizing commodity prices and setting up a Common Fund to support countries suffering from price fluctuations for their exports were forged in the seventies. It was also negotiations carried out under the UNCTAD umbrella that led to the establishment of GSPs or preferential systems for Third World imports. This activist, decision-making role is one that UNCTAD must reclaim. There are many areas that demand UNCTAD intervention, but three in particular urgently demand broad global agreements:
UNCTAD in a Pluralistic System of Global Economic Governance All this is not to suggest replacing the WTO and the IMF with UNCTAD. But it does mean UNCTAD taking an active role in a process of reducing the powers of the WTO and the IMF. It is not surprising that both the WTO and IMF are currently mired in a severe crisis of legitimacy. Both are highly centralized, highly unaccountable, highly non-transparent global institutions that seek to subjugate, control, or harness vast swathes of global economic, social, political, and environmental processes to the needs and interests of a global minority of states, elites, and TNCs. The dynamics of such institutions clash with the burgeoning democratic aspirations of peoples, countries, and communities in both the North and the South. The centralizing thrust of these institutions clash with the efforts of communities and nations to regain control of their fate and achieve a modicum of security by deconcentrating and decentralizing economic and political power. In other words, these are Jurassic institutions in an age of participatory political and economic democracy. UNCTAD may not have the material resources of these institutions, but it has something that the billions of dollars of the World Bank and IMF could not buy: legitimacy among developing countries. A vigorous UNCTAD that competes in the process of defining global rules for trade, finance, investment, and sustainable development is essential in a pluralistic global economic regime where global institutions, organizations, and agreements complement as well as check one another. It is in such a more fluid, less structured, more pluralistic world with multiple checks and balances that the nations and communities of the South will be able to carve out the space to develop based on their values, their rhythms, and the strategies of their choice. UNCTAD has a critical contribution to make in the emergence of such a system of global governance. References
1.See, among other works, A New Trade Policy for Development (NY: UNCTAD, 1964).
All Change (27 January 2000)
Asian Millennium: The new millennium will shake many of today's certainties about economics and politics in Asia to the core.
Looking back is sometimes the best way to look forward, and perhaps the best place to start peering into Asia's next century is with the recent financial crisis. That event was no simple glitch in Asia's inexorable ascent to prosperity. Only the incurably optimistic would claim that the region has recovered from the financial implosion of 1997-98. True, gross domestic product figures are up, but the sharp rise in poverty and inequality, the paralysis of banking systems and the burdens posed by insolvent corporations will persist at least into the first decade of this century. The impact of the financial crisis on people's psychology is just as important. A growing minority now questions the desirability of high-speed, double-digit growth. An even larger number are openly sceptical of the ideal of globalization via the free market. Indeed, contrary to the assertion that as a result of the crisis, there is now an Asian consensus about the desirability of free-market systems, the legacy of the crisis includes a critical view of unregulated capital inflows and wide-spread resentment of International Monetary-supported deregulation and liberalization, which are regarded simply as tools to pry local markets open to US goods and investment. As IMF-imposed or World Trade Organization-related free-market reforms accentuate already existing inequalities in places such as South Korea, China, Indonesia and Thailand, the constituency for free-market globalization will grow progressively narrower in the next few decades. Instead, there will emerge tremendous popular pressure on the state to resume or take on a strong regulatory and interventionist role. By the year 2025 or 2050, whatever the political configuration of the region and whatever the political colour of the individual states, one will see strong, activist governments with considerable power over markets, production and distribution. Efficiency in the sense of constantly reducing unit cost - globalization's driving value - will be consciously subordinated to the maintenance of social cohesion or, in the case of more progressive regimes, the achievement of social equity. Green Backlash Another major development that will force a greater activist, regulatory role on the state, especially in terms of controlling both local and foreign corporations, is the worsening of the environmental crisis. Acceleration of deforestation, worsening water and air pollution, the growth in indisposable hazardous waste, and land degradation in the first decades of the century, owing to the continuing reluctance of corrupt authorities to enforce environmental laws, will produce a strong backlash that will push states into more decisive efforts to regulate production, transportation systems, farmland conversion and urban sprawl. Make no mistake about it: Large numbers of people in Asia, and not a few governments, are elated that the two multilateral instruments of free-market globalization, the WTO and the IMF, are suffering a severe crisis of legitimacy. That crisis will deepen in the next few decades, as resistance to globalization from Asia and other parts of the South is joined to stronger mass protectionist sentiments in the North. But while the transnational corporation-driven multilateral framework erodes, regional economic arrangements will become an attractive alternative. These will involve not only market integration but also technology sharing, financial coordination and social policy harmonization, as well as providing greater opportunities for states and civil society to play a stronger role vis-?-vis corporations. The European Union, with its system of regional income transfers to compensate for uneven development and its aggressive protection for endangered sectors such as agriculture, will become both model and competitor. The future in Asia, though, will be less along the lines of the Asia-Pacific Economic Corporation forum and more along those of the more 'natural' formation envisioned by Malaysia's Prime Minister Mahathir Mohamad in his proposal for an East Asia Economic Grouping. This will push China, Japan, South Korea and the Association of Southeast Asian Nations to grapple with the complex task of building the institutions to formalize de facto economic integration - a task that will be even more complicated if India and the rest of South Asia are considered for membership. Drive for Democracy With states playing a bigger role in managing their economies, a crucial question is how democratic these governments will be. What is clear is that the pressures for democratization that have mounted in the region since the mid-1980s will continue in the next few decades; people will demand not only political rights but also genuine participation in economic decision-making. Revolutionary movements may again become serious challengers for power, if traditional elites in the formal democracies such as Thailand and the Philippines or authoritarian elites in places such as Vietnam and China refuse to share political and economic power. The security dimension and the social question bring up the new big caveat of this essay: When looking at what are likely to be the key trends in East Asia over the next 50 to 100 years, it would be useful to remind ourselves that it has only been in the past 25 years, since the end of the Vietnam War, that the region has experienced that combination of relative peace and social stability that produced the so-called Asian economic miracle. For most of the past 160 years, since the British first began to muscle their way into China during the Opium Wars in the 1840s and America's Commodore Matthew Calbraith Perry and his 'Black Ships' sailed into Tokyo Bay in 1853, East Asia was a zone of Big Power rivalries, wars and revolutions. In such a militarized region, wars and revolutions have sometimes served as the mother of prosperity, as in South Korea and Taiwan during the Vietnam War, but more often they have brought in their wake economic dislocations or disasters. In short, the regional economy in the next century will be greatly dependent on the question: Will Asia slip back into the political vortex? And a large part of the answer will depend on whether external powers, especially the United States, will let Asia be. Davos 2000: Global Conspiracy or Capitalist Circus? (February 2000)
Davos is not a conspiracy. It is, in fact, partly a circus, as is evident from these precious vignettes from the 30th Annual Meeting of the World Economic Forum:
- Bill Gates, the Microsoft CEO, telling Steve Case, head of AOL, to get his priorities right, and these were the 'health and education of people', particularly in the developing world.
One missed Philippine Actor-President Joseph Estrada among the cast of characters of this annual ritual, but the organisers probably felt that his presence might have pushed the merely comical into the farcical. Consensus Building But the circus-like elements of the World Economic Forum, which drew over 2000 participants from the corporate world, governments, media, and elite universities, masked a more serious purpose, which was the forging of ideological consensus among the world's elite to respond to crisis of corporate-led globalisation. Seattle was the cataclysm that hung like a pall in this conference. From British Prime Minister Tony Blair to Bill Clinton to Larry Summers to Ernesto Zedillo, the collapse of the World Trade Organisation's Third Ministerial was referred to endlessly as a wake up call for the global elite. Globalisation is the wave of the future. But globalisation is leaving the majority behind. Those voices spoke out in Seattle. It's time to bring the fruits of globalisation and free trade to the many. This was the politically correct line in Davos 2000, and a measure of how successful the rhetoric has been internalised is that the line was blurted out dutifully by such unlikely figures as Bill Gates, Steve Case, and Nike CEO Phil Knight. Amartya Sen, the 1999 Nobel winner for his work on poverty, was the unwitting source of most of the quotes of the week. American Triumphalism There were, however, not a few obstacles in the way of consensus, and one of this was that, after paying obeisance to social responsibility, the Americans would invariably launch into triumphal declamations on their brand of democracy and their 'New Economy'. Liberalise and deregulate and globalise or you won't be competitive and you'll fall farther behind - this was the message from America Inc. that came through, not just to the sprinkling of developing country officials and corporate elites but to the Europeans and the Japanese, who were subdued throughout and, when highly visible as speakers or commentators, came across as defensive, like Christian Sautter, France's top economic official, or Haruhiko Kuroda, the most senior Japanese Finance Ministry official in attendance. As for the Germans, who are now struggling with their worst post-war corruption scandal, they had such a low profile that it was noticed. At times, in fact, the Americans seemed to be talking to just one another, as if they were on David Letterman's or Jay Leno's talk show. After witnessing the panel 'Winning Strategies for the Internet Race', which featured Bill Gates, Steve Case, Michael Dertouzos of MIT, and Sumner Redstone, CEO of Viacom, one European journalist commented: But why did they bother to come to Davos? They could have held this tete-a-tete in New York. Indeed, during Madeline Albright's speech on Sunday, there were times when she appeared not to be able to distinguish between an international audience and one in Peoria, Illinois, as when she urged them not to begrudge that one penny of every dollar in the US government budget that went to foreign aid. One listener exclaimed quietly that was a terrible splicing job. I would fire her speechwriter. The British Moment Heavy-handed American triumphalism explains why their British cousins (as Winston Churchill would put it) came across as the best communicators of the post-Washington Consensus line of a new partnership among government, business, and civil society to incorporate the losers of the globalization process. Basking in a British economy that is in good shape yet without that arrogant aura of global power always surrounding the Americans, British Prime Minister Tony Blair was able to nuance the new political line for the non-Americans in Davos and package it in a manner that even some American CEOs - the liberal ones - found appealing. Alongside the advance of global markets and technologies, said Blair, we are seeing a new search for community, locally, nationally and globally that is a response to change and insecurity, but also reflects the best of our nature and our enduring values. With it is coming a new political agenda - one that is founded on mutual responsibility - both within nations and across the world. He continued: We have the chance in this century to achieve an open world, an open economy, and an open society with unprecedented opportunities for people and business. But we will succeed only if that open society and economy is underpinned by a strong ethos of mutual responsibility - by social inclusion within nations, and by a common commitment internationally to help those affected by genocide, debt, and environment. I call it a Third Way, Blair declared with passion. It provides a new alternative in politics - on the centre and centre-left, but on new terms. Supporting wealth creation. Tackling vested interests. Using market mechanisms. But always staying true to clear values-social justice, democracy, cooperation... From Europe to North America, Brazil to New Zealand, two great strands of progressive thought are coming together. The liberal commitment to individual freedom in the market economy, and the social democratic commitment to social justice through the action of government, are being combined. Now, whatever else that was, it was an inspired exercise in the manufacture of ideology, and one that Blair's pal, Bill Clinton, could never hope to match. It gave me, for one, an insight into why this British leader has such a strong hold on many British NGOs. Managed Pluralism Ideology creation and legitimation is not a simple exercise, however. The implicit rules call for the opposition to be heard, though under managed conditions. Thus, a few representatives of the NGO community were invited to be part of panels. These included Vandana Shiva, the Indian feminist scientist; Brent Blackwelder of Friends of the Earth US; Thilo Bode of Greenpeace International; Martin Khor, head of Third World Network; John Sweeney, the AFL-CIO chief; and Vicky Tauli Corpuz, an indigenous peoples' leader. Dialogue was the stated purpose, but one suspects that many executives attended these sessions for the same reason people go to the zoo: to observe the habits of the much feared creatures that the Economist claimed often had a better grasp of facts and figures than the corporations with their hundreds of highly paid publicists. Seeing the enemy up, close, and personal somehow made him or her more manageable. There were unstated rules, though, for the NGO representatives present: they had to be civilized and respectful of 'diverse' views and above all grateful they were invited. It was instructive to see what happened when one broke those rules, as I did on Sunday, when, from the floor, I told Madeline Albright about my amazement at her rewriting of history and reminded her that US State Department and US business support was instrumental in keeping Ferdinand Marcos in power for 20 years. I then went on to ask what the implications were for the US's campaign for 'good governance' in the developing world of the corruption scandal engulfing Helmut Kohl's Christian Democratic Party in Germany. At that point, the chair, John Bryan, CEO of Sara Lee Corporation, tried to cut me off, a gesture that came across as chivalrous concern for his friend Albright. And Albright never answered the question. Which was a mistake. A number of people, some of them American CEOs, came up to me afterwards expressing disappointment at Albright for avoiding the question. Fair play had been violated and that was a no-no. But it was a momentary lapse, and for the most part the consensus-building cum group-therapy that was the Davos experience proceeded smoothly. The discordant voices on the left like Greenpeace and on the right like the unreconstructed free marketeer Vaclav Klaus, president of the Czech Republic Chamber of Deputies, were given their brief opportuniy to exercise free speech, and the bandwagon rolled on. Towards 'Compassionate Capitalism'? Deeply disturbed by Seattle and the din of the rising global resistance to corporate-led globalisation, the captains of business, industry, and establishment culture, like Hans Castorp in Thomas Mann's Magic Mountain, came to Davos to draw on the intellectual and moral reserves of their caste. The spark of the last few days will be carried down to the valleys by a thousand CEOs and from it will evolve in the next few months the grand strategy and tactics of the response to Seattle: 'Compassionate Globalisation' or 'Compassionate Capitalism'. The Davos experience makes a difference, and its critics and opponents must never, never underestimate the critical morale and ideological functions that it performs for the global elite. UNCTAD X: An Opportunity Lost (February 2000)
To many partisans of a more equitable global economic system, the tenth conference of the United Nations Conference on Trade and Development (UNCTAD) was, on balance, a disappointment. In the wake of the collapse of the World Trade Organization (WTO) ministerial in Seattle, one would have expected UNCTAD to more aggressively assert its role in framing the rules of global governance in trade and financial issues. After all, despite its lack of resources, UNCTAD has something that neither the IMF not the WTO has: legitimacy.
Dousing Expectations But from the very first day of the marathon event on February 7, while addressing the NGO Plenary Caucus for UNCTAD, Carlos Fortin, the deputy secretary general, stated clearly that, when it comes to global trade, UNCTAD has no negotiating authority; the WTO has that. It was a message that was repeated over the next two weeks at various forums. UNCTAD's role, said Secretary General Rubens Ricupero, was to provide good critical analysis of global economic developments, provide technical capacity training to developing countries entering the world trading system, and build consensus on key trade and development issues. Do not underestimate the power of analysis, Ricupero told NGO delegates, because in the long run ideas prevail, and he went on to cite Friedrich Hayek's paean to the free market, The Road to Serfdom, as an example of how ideas ultimately prevail. Published in 1944, at the height of state-interventionist Keynesianism, this book became the bible of the Reagan free-market revolution in the 1980s. Sensing that appealing to the power of ideas did not douse the dissatisfaction of some NGOs with UNCTAD's not challenging the WTO's monopoly on rule-setting on trade, Ricupero, in another meeting with civil society organizations, told them that they had to understand the realities of power, and if they wanted to move UNCTAD to gain negotiating authority, they had to lobby their member governments to push UNCTAD in that direction, not depend on the Secretariat. Fair enough, it seems, until you realize that the UNCTAD secretary general plays a decisive leaders hip role in shaping a consensus on where the organization should be going. After all, it was largely the dynamism of Raul Prebisch, UNCTAD's founder, that enabled UNCTAD in the late sixties to play a key role in securing global commodity agreements and preferential access to developed country markets of developing country exports. UNCTAD and Civil Society This lack of boldness in asserting UNCTAD's role in the framing of global rules contrasted with Ricupero's determination to bring civil society input into the UNCTAD process, despite resistance from many member-governments. The NGO Plenary Caucus for UNCTAD X, which took place prior to the conference, was one of the innovations marking this UNCTAD meeting. But that many member governments are still uncomfortable, if not suspicious of NGOs, was underlined by the few government delegations that were on hand at the plenary hall to hear the reading of the statement 'UNCTAD and Civil Society: Towards Our Common Goals'. Many observers were also disconcerted by the way UNCTAD appeared to give special attention to providing a platform for the chiefs of three controversial agencies dominated by the North - the International Monetary Fund, World Bank, and the World Trade Organization - to expostulate at length on their views in so-called interactive debates. In contrast, Prime Minister Mohamad Mahathir, who is probably the most eloquent Third World critic of the development paradigm represented by the three institutions, was confined to about twelve minutes on the opening night of the conference. Camdessus and Moore The annoyance of many was compounded by outgoing IMF chief Michel Camdessus' message and by the dynamics of the session with WTO head Mike Moore. While paying lip service to the need for a new paradigm for development, Camdessus urged greater liberalization of trade and capital flows, a factor that is increasingly seen by much UNCTAD research as a major cause of poverty and instability. Instead of admitting the Fund's role in worsening the Asian financial crisis, Camdessus told his audience that the rapid recovery of the Asian economies would not have been possible without the IMF's actions. In the session with Moore, the WTO chief alternated between a conciliatory tone and a hard line. An example of the latter was Moore's declaring the preservation of the consensus system of decision-making as non-negotiable. The consensus principle has been much abused by the big trading powers, with the US, for instance, resorting to it to prevent the crystallisation of majority opinion in support of the candidacy of Thai Deputy Premier Supachai Panitchpakdi during the competition for the WTO leadership in 1999. But more disturbing than Moore's comments was the way that the session on the WTO was dominated by interventions by rich-country representatives. Especially objectionable to many was the way Clare Short, the UK Minister for International Development, used her intervention to attack NGOs, asserting that in Seattle, many of those that claimed to care about people in the developing world did not speak for their interests...We should not all ow these voices to continue to claim to speak for developing countries. Non-Controversial Documents The negotiations around the Bangkok Declaration were relatively trouble-free. It's really a stringing along of motherhood statements on development, poverty, and making sure globalization brings benefits to the majority, said the head of an Asian government delegation. There was a bit more heat in the negotiations over the final text of the Plan of Action. Developing country delegates wanted to change the wording of a paragraph urging free market access to developed country markets from covering essentially all to all products from the least developed countries - a moved opposed by the European Union member states. A North-South tangle also ensued over the insistence of some developed countries that the Plan contain a specific reference to UNCTAD's promoting good governance, transparency, and measures against corruption, which many developing country delegations resisted. On both counts, the rich countries' views prevailed. Why the struggle over wording when this was a non-binding document? Because, as one Asian delegate explained, this is shadow boxing, in preparation for the real negotiations. People want to make sure that there are precedents than can be cited or that there are none that can be pointed to in the binding negotiations, like those at the WTO. UNCTAD X's High Point? Yet UNCTAD X will probably be remembered mainly for what went on outside the official sessions. The daily demonstrations of several hundred protestors associated with Thailand's Assembly of the Poor were not on the scale of Seattle but they were impressive. But the conference will probably be best remembered as providing the background for the pie-ing of Michel Camdessus by Robert Naiman, the 35-year-old activist of the anti-IMF 50 Years is Enough Campaign. This act can truly be described as the splatter that was heard and seen around the world, ironically owing to the globalization of corporate communications networks extolled by the IMF. Though Paul Krugman, the economist and New York Times commentator, branded the act as a symbol of Northern NGOs saving the developing world from development, the people in the Third World knew better. The cake on Camdessus' face elicited an enthusiastic response throughout the world, not least in Thailand, where 'hitman' Naiman was treated as a celebrity by people in the street. It was also apparently received favourably by the delegates at the Queen Sirikit Convention Center. As one senior UNCTAD official said, Everybody will tell you they disapprove of the act, but I still have to meet somebody who was unhappy that it happened to Camdessus. Euro-American Rivalry Poses Challenge to Asia and Developing World (March 2000)
The veto of the German candidate for the IMF Managing Director post, Caio Koch-Weser, by the United States and his endorsement by the European Union was the second major confrontation between the US and Europe in three months. Last December, EU-US differences over agricultural liberalization helped sink the third ministerial of the WTO in Seattle.
What was a subject of academic debate has now become reality: that the relationship between the European Union and the United States has moved from one marked mainly by alliance to one dominated by competition. This struggle for global leadership has a number of other fronts, including European attempts to have a stronger say in European security issues via-a-vis Washington, the efforts by European Social Democrats to chart an economic path distinct from Amercan free-market capitalism, and the Euro's struggle to become as important a reserve currency as the dollar. Opportunity The Euro-American competition presents both an opportunity and a challenge to Asia and the developing world. The power of multilateral institutions like the WTO, IMF, and World Bank rested on the ideological unity and strategic coordination between the US and Europe, with the latter satisfied with playing second fiddle. These conditions are disappearing, at the same time that the WTO and IMF have hit rock bottom in their relationship with the developing world. Were they to act in a more unified manner to exploit the differences between the US and the EU, the Asian and developing country blocs could exercise a strong influence on the future direction of these two institutions. This was the lesson of Seattle. A united front of sorts among the developing countries on the issue of decisionmaking combined with a EU-US stalemate on key issues and massive street protests to torpedo the ministerial and the prospects of another round of damaging trade liberalization. Exploiting Rivalry Like the WTO, the IMF is undergoing a severe crisis of legitimacy. As in Seattle, massive street mobilization awaits the IMF-World Bank meetings in April. Under these conditions, the moves of the developing country members of the Fund could have considerable impact. A campaign among Asian and developing country governments to withhold support from the European or American candidates unless they offer a program of reform instead of simply relying on the sacrosanct tradition of filling the IMF managing director post with a European (and the World Bank presidency with an American) could open up the space for reducing the power of the IMF and maybe transforming it along lines more congenial to developing countries. Unfortunately, it is the US that has so far done the manipulating. It has succeeded in putting up a number of African countries to declare their support for Stanley Fischer, the deputy managing director of the Fund who also happens to be US Treasury Secretary Larry Summers' good friend, close colleague, and former mentor at the Massachusetts Institute of Technology. Not surprisingly, Asian observers of the jockeying at the IMF are aghast that some developing countries would support Fischer, who was instrumental in the imposition of the IMF programs that worsened the financial crises that hit Thailand, Korea, and Indonesia. The shortsightedness and timidity of Southern governments is breathtaking. Instead of taking advantage of the crisis of legitimacy of the WTO and IMF post-Seattle, they failed to use the recent meeting of the United Nations Conference on Trade and Development in Bangkok to assert a stronger role for the South in framing the rules of global governance in trade, finance, and development. Indeed, under the theme of a "time for healing the wounds of Seattle", they allowed the chiefs of the WTO, IMF, and World Bank to use the conference as a platform to dish out the same old platitudes of liberalization, deregulation, and free-market globalization. The window of opportunity is, however, still there, but it will take skilled and bold leadership from the ranks of the Group of 77 in the IMF to convert the current crisis into a real opening through skilled alliance-building within the Fund and cultivation of street protests in Washington, DC, and globally as a battering ram for real change at key conjunctures, like the IMF-World Bank meetings this year. The Challenge There is, however, a bigger and more strategic challenge posed by the Euro-American competition. The EU-US struggle underlines the fact that the dynamics of international economic relations in the future will rest greatly on the relationships between big economic blocs. If the EU can now challenge the US, it is because it has become one massive market, with common external economic policies, increasingly coordinated macroeconomic policies, and a single currency that unites half of its members. A concrete, successful embodiment of the fruits of supranational cooperation is Airbus, which last year snagged more orders than the US national champion Boeing and is on its way to displacing the latter as the world's premier maker of civilian aircraft. The Airbus experience, which underlines the importance of planning, coordinated investment and research, and subsidization, is likely to be repeated in other hi-tech industries such as electronics, software, and optoelectronics. Globalization in the sense of national borders blending into one global economy is not the wave of the future. Globalization in the sense of competing regional economic blocs is. In the case of East Asia, a degree of regional economic integration has already been achieved, largely via the export to the region of large parts of Japan's manufacturing plant. Already 55 per cent of Asian trade is inter-Asian trade. But the unification of markets, macroeconomic coordination, technology sharing, and evening out of regional disparities can only come through formal economic integration. Unless East Asia moves in this direction soon, the likelihood of being left behind in the EU-US competition becomes a very stark possibility. And what is true for Asia is also true for Africa and Latin America. The skeptics will, of course, raise the usual criticisms - that old national rivalries stand in the way of formal integration, that it took Europe half a century to get where it is. But then, were not national rivalries even more intense in Europe at the beginning of European integration in the fifties than anything you find in Asia today? And what is to prevent the East Asian region, which carried out the "miracle" of bringing about massive industrial transformation in a generation, from accomplishing the task of economic union in less? The EU challenge to US hegemony confronts countries in Asia, Africa, and Latin America with their moment of truth. Unless they also move toward regional economic union, they will increasingly become bit players in the global economic drama. Washington and the Demise of the 'Third Wave' of Democratisation (31 March 2000)
During a recent visit to Manila, Stanley Roth, the Assistant Secretary of State for Asia-Pacific Affairs, said that the chances of a coup attempt are 'nearly zero'. That was classic American diplomacy - a statement that served less as an assessment of the status of things than a calculated warning against restiveness in the barracks.
Roth doesn't like the military meddling in politics. A key aide to Rep. Stephen Solarz, head of the US House of Representatives' Asia-Pacific Sub committee, in the 1980s, Roth played a minor, though important, role in shifting US support from Ferdinand Marcos to Cory Aquino in the mid-eighties. With Bill Clinton's victory in 1992, he became a low profile but key figure in the Democratic foreign policy team headed by Secretary of State Warren Christopher and National Security Adviser Anthony Lake. It was this group that forged the line of 'promoting democracy', that formed one of the pillars of the Clinton foreign policy towards the Third World, alongside containing Islamic fundamentalism and isolating 'rogue regimes' like North Korea. 'Promoting democracy' was billed as a distinctive, idealistic foreign policy thrust that contrasted with the support for authoritarian allies that had been the key feature of US policy under Ronald Reagan and with the pragmatic adjustment to rising democracies that had marked the Bush administration's approach. In fact, the Clinton line was a continuation of the Bush line, but with a heavy dose of ideological rhetoric. It was part of Washington's protracted response to the spread of electoral democracies in Africa, Latin America and Asia from the early 1980s to the early 1990s. The 'Third Wave' Labelled as the 'Third Wave' of democratisation globally, the move toward electoral democracy as a system of governance is documented in the statistics of Freedom House in New York: the number of free or liberal democratic states rose from 42 in 1972 to 56 in 1985 to 76 in 1995 - or from 29 per cent of all states in 1972 to 33.5 per cent in 1985 to 39.8 per cent in 1995. This movement toward freer political systems, it must be pointed out, largely took place in spite of, not because, of US foreign policy. From the seventies to the mid-eighties, Washington had engaged in a foreign policy of supporting a string of repressive strongmen that were seen as serving US strategic objectives - from the Shah of Iran, Mobutu in Africa, Pinochet in Chile, to Marcos in the Philippines and Chun Doo-Hwan in Korea. The rationale for this policy was perhaps best articulated by Reagan's UN ambassador, Jeane Kirkpatrick, who wrote in a notorious Commentary Magazine article in 1981 that an autocrat ally like Somoza or Marcos deserved to be supported because without him, the organised life of society will collapse, like an arch from which the keystone has been removed. But even as these lines were being penned, dictatorships in the Third World were in an advanced state of decay. After 20 years in power, the Brazilian military was gradually forced out of power in the early eighties by widespread popular disaffection and economic incompetence. After losing the Falklands War in 1982, the military junta in Argentina, stripped of all shreds of legitimacy, was hounded out of power by a vengeful civilian population. In South Asia, the death of the strongman Gen. Muhammad Zia opened the doors to the restoration of civilian constitutional rule in Pakistan. In the Philippines, Ronald Reagan's visceral loyalty to the embattled Marcos was overridden by pragmatists at the State Department who thought it the better part of wisdom to hitch the US to the democratic upsurge triggered by the Aquino assassination. Confronting a similar situation in Korea in 1987, the US lined up behind the student-led democratic revolution. A few years later, Washington quietly threw its weight behind the democracy movement that faced down the military strongman Suchinda in the streets of Bangkok in May 1992. Promoting 'Polyarchy' By the time Clinton and the Democrats came to power in 1993, the Third Wave of democratisation was at its apogee, with the dismantling of the apartheid regime in South Africa and the erosion or collapse of several one-party and personalist regimes in Sub Saharan Africa. Like so many other things in the Clinton presidency, 'promoting democracy' was one-third substance and two-thirds PR. Promoting democracy merely attached an attractive ideological rationale to a pragmatic shift in policy that had been going on for nearly a decade under the Republican administrations - it was, after all, Republican Party operators that had created the National Endowment for Democracy (NED), which was active in influencing democratic oppositions in the Third World in a conservative, pro-Washington direction. Nonetheless, television images of US troops landing in Haiti in 1995 to drive out the military junta and restore President Aristide to his rightful place as the people's elected leader and Washington's strong rhetoric against the SLORC regime in Burma contributed to wiping out memories of Washington's sordid past of support for repressive regimes and endowed the Clinton administration in particular with the aura of being a champion of democracy. Promoting democracy in practice meant Washington's encouragement of free elections, political party competition, the rule of law, checks and balances, judicial independence - all of which rested on the diffusion and institutionalisation of a core of liberal values such as the freedom of speech and freedom of association. Such a regime was seen as providing the framework for the spread of market forces, the untrammelled operation of which was expected to spur economic growth as well as put an end to the unholy relationship between authoritarian government and monopoly businesses known as 'crony capitalism'. What democracy promotion was not about was creating institutions and pushing policies that would bring about more equality in access to wealth and resources as demanded by the poor majority. In short, what emerged were liberal democratic systems along the lines of the Washington or Westminster model, along with this regime's fundamental flaw: the great influence exercised on the decision making process by the realities of severe economic and social inequality. In other words, liberal democracy, as it developed in the Third World, prevented the monopoly over political power by one faction of the elite and provided an ideal avenue for opposing factions of the same class to deploy their resources to peacefully compete for votes and alternate in political office. This was not popular democracy but, according to political scientist William Robinson, 'polyarchy', or a system in which a small group actually rules and mass participation in decision making is confined to leadership choice in elections carefully managed by competing elites. For elites the advantage of a system of formal democracy was that it married political legitimacy to a system of gross economic inequality. Polyarchy in Trouble As Clinton leaves office, the policy of promoting polyarchy or elite democracies running into serious problems. Though there have been some dramatic recent instances of democratic transition as in Indonesia, the rate of increase of electoral democracies has sharply declined in recent years. More important, asserts political analyst Larry Diamond, the quality of democratic practice in the new democracies is deteriorating. This 'end of the third wave of democratisation' takes various forms - from actual coups, as in Pakistan, to greater military autonomy in internal security operations, as in Turkey, Sri Lanka, and Colombia, to widespread vote rigging as in Niger, Bangladesh, and Chad, to 'strongman democracies' as in the case of Alberto Fujimori in Peru or Hugo Chavez in Venezuela. Why are formal democracies or polyarchies in trouble? Of course, there is the problem of the difficulty of institutionalising multiparty electoral systems instates that had experienced only military rule following colonial rule at independence. In many cases, as in Peru, Pakistan, and Zambia, fragile democracies have lost their legitimacy because they became the vehicles through which the IMF and the World Bank imposed budget-cutting structural adjustment programs that triggered or worsened economic stagnation and impoverishment. But most of all, the erosion of legitimacy was created by the structural incapacity of a multiparty electoral system run by wealthy interests to produce less poverty and less inequality via serious social reform. It is interesting to point out the striking parallels between the dynamics of the troubled polyarchies in the Third World and their model, US electoral democracy. Increasing numbers of Americans are troubled by the way elections, legislative decisions, and executive moves are increasingly determined by the deployment of vast amounts of wealth in the electoral system. Noting that nothing on the scale of the American system of political expenditure and influence exists anywhere else, William Pfaff, the columnist of the International Herald Tribune, remarks that the US has become a 'plutocracy', or a system governed by corporate wealth. Nevertheless, the political system is quite stable - at least in the near future - because inequality in access to political power is mitigated by the fact that the majority of Americans are materially comfortable. This cannot be said of Third World democracies like the Philippines which are wracked by poverty and inequality. Democratic Degeneration? With democracies stuck, are military regimes likely to experience a comeback in the next few years? Though there might be some successful military coups, it is unlikely that there will be a general trend showing a return to direct military or presidential-military rule. For one thing, many armies are reluctant to return to power and again risk incurring the blame for political failures. A second reason is that while people may be disaffected with many elite democracies, they are even more distrustful of military rule. A third reason is that once attractive authoritarian ideologies, such as 'Asian values', are greatly discredited and are seen as self-serving rationales for civilian or military elites. What is more likely in the near or medium term is what Diamond describes as a situation in which democracy, instead of expiring altogether, has been hollowed out, leaving a shell of multiparty electoralism, often with genuine competitiveness and uncertain outcomes, adequate to obtain international legitimacy and assistance. A number of political systems might move along the path of 'strongman democracies' such as those in Peru or Venezuela, where executives expand their powers with the support of the military, temporarily suspend or change the constitution, dismiss and reorganise the legislature or judiciary, and, as Diamond puts it, reshape to their advantage a constitutional system that subsequently retains the formal structure or appearance of democracy. A more probable outcome in most countries might be a slowly degenerating liberal democracy in a context where the authoritarian left and the authoritarian right are not strong enough to seize power in the short term yet are powerful enough to destabilise it. Here the 'democratic centre' is held together by competing political elites which are passively committed to democratic constitutional rules but lack the vision or courage to legislate and implement the program of social and economic democracy that the masses demand. This is the Philippine scenario, and it becomes more of a reality with each day that Estrada remains president. And in the Philippines and elsewhere, Washington will grit its teeth but it will stand by the elite democrats. But nothing is predestined or predetermined. We can avoid this death of democracy by a thousand cuts, to borrow a phrase from Larry Diamond. Democracy can be reinvigorated in this country, but only if there are groups that are determined to expand the democracy agenda to include fundamental economic and social reform within a constitutional electoral order. That is a big challenge in this country of short-sighted, greedy elites. That is a tall order when Washington smells an anti-US agenda in every progressive political program. But it is not impossible. Meltzer Report on Bretton Woods Twins Builds Case for Abolition but Hesitates (April 2000)
Pushing Meltzer to the Max!
As thousands of protestors descend on Washington for the 16 April action against the World Bank and the International Monetary Fund, they can take comfort in the fact that a growing number of people in high places share their views. In the latest issue of The New Republic (17 April), former World Bank chief economist Joseph Stiglitz aired his unflattering assessment of the IMF, accusing the Fund of secrecy AND bad economics. (To Stiglitz's credit, secrecy is the greater sin.) And just last month, the US Congressional International Financial Institution Advisory Commission (the Meltzer Committee) released its findings, capturing headlines with its unanimous call to radically downsize the IMF and the Bank and to immediately cancel large amounts of debt. While the report was saying nothing more than what many critics have been saying for years - that these institutions are deeply flawed and are doing more harm than good - it has revived the languishing debate on the international financial architecture. In the April issue of Focus on Trade, Walden Bello looks closely at the Meltzer Report, and concludes by calling on those gathering in Washington to pick up where the Meltzer Committee left off by calling for the Bank and the Fund to be closed down. During the heated debate on whether or not to raise the US quota in the IMF in 1998, the US Congress voted for the quota increase but attached several conditions, including the creation of an independent body to look at the missions and performance of the World Bank and the International Monetary Fund. The report of the International Financial Institution Advisory Commission, better known as the 'Meltzer Report' after its chairman Alan Meltzer, serves as a striking confirmation from the mainstream of what progressive critics of the Bretton Woods Institutions have been saying for the last 25 years. Among the most important claims in the corpus of critical literature that the report supports are the following:
- instead of promoting economic growth, the International Monetary Fund institutionalises economic stagnation;
There is little in the report that was not earlier documented in such works as Cheryl Payer's The Debt Trap, Bruce Rich's Mortgaging the Future, Susan George's Faith and Credit, and the Food First trilogy Aid as Obstacle, Development Debacle: The World Bank in the Philippines, and Dark Victory: The US, Structural Adjustment, and Global Poverty. But then the importance of the document lies not only in its critique but in the fact that a significant part of the establishment has embraced much of the progressive analysis, and, even more significantly, has made fairly radical proposals for the future of the Bretton Woods twins. Criticisms of the IMF have found a very receptive global audience recently owing to the devastating performance of the Fund during the Asian financial crisis. To the credit of its authors, the Meltzer Report was not taken in by the World Bank's propaganda that, in contrast to the IMF, it has turned a new leaf. The report shows that the much vaunted Poverty Reduction Strategy or Comprehensive Development Framework articulated by ideological entrepreneur James Wolfensohn is largely a public relations effort to save the Bank and that, although it is billed as a new development paradigm, it is largely devoid of substance. The IMF: No Redeeming Value While diplomatic in its language when discussing the IMF, the report finds little of redeeming value in the institution. It shows that the Fund's foray into macroeconomic reform via structural adjustment institutionalised economic stagnation, poverty, and inequality in Africa and Latin America in the 1980's and 1990's-precisely what we had documented in detail in our 1994 book Dark Victory: the US, Structural Adjustment, and Global Poverty. It confirms that the Fund's duty of ensuring a stable global financial order was derailed by its prescription of indiscriminate capital account liberalisation for developing countries, its habit of assembling financial rescue packages that simply encouraged moral hazard or irresponsible lending and speculative investment, and its prescribing tight fiscal and monetary policies that merely worsened the situation in the crisis countries instead of reversing it. The report is on the right track when it recommends the closure of the structural and extended structural adjustment programs, now renamed the 'Poverty and Growth Facility'. And it is correct in recommending downsizing the IMF in both size and its scope of responsibilities, though as we shall argue below, it would do better to recommend an outright abolition of the Fund. The report is, however, wrong in its recommendation that the IMF should serve as a 'quasi-lender of last resort' to countries suffering a liquidity crisis. The IMF, by the Commission's own account, has handled this function badly in the past. Moreover, the Commission's recommending of strict conditions under which the IMF may extend credit contradicts its own criticism of the use of IMF resources and conditionality to control the economies of developing nations. Particularly objectionable is the Commission's proposal that the Fund provide liquidity assistance only to those countries that permit freedom of entry and operation for foreign financial institutions on the ground that these entities would, among other things, stabilise and develop the local financial system. This recommendation is problematic for two reasons. First, foreign financial institutions such as hedge funds, which have taken full advantage of free entry and operation, have helped precipitate one financial crisis after another. Second, forcing countries to adopt western-style free market norms governing ownership of foreign financial subsidiaries and their local operations violates the first core principle it proposes for IMF reform - that is, sovereignty-the desire to ensure that democratic processes and sovereign authority are respected in both borrowing and lending countries. This contradiction between the logic of the analysis and the prescription reminds us that the Commission is, after all, a US government-appointed body, many of whose members come from the banking sector, conservative think tanks, and establishment universities who are very wary about placing significant restrictions on the free flow of finance capital globally, even when the evidence they are staring at underline the destructiveness of unchecked capital mobility. The World Bank: Hype versus Substance When it comes to the World Bank, the report is equally devastating. The rhetoric about focusing on poverty alleviation, it says, is contradicted by the reality that 70 per cent of the Bank's non-aid lending is concentrated in 11 countries, while the Bank's 145 other member countries are left to divide the remaining 30 per cent. Moreover, 80 per cent of World Bank resources have gone, not to poor countries with poor credit ratings and investment ratings, but to countries that could have raised the money in international private capital markets owing to their having investment grade or high yield ratings. In terms of achieving a positive development impact, the Bank's own evaluation of its projects shows an outstanding 55-60 per cent failure rate. The failure rate is particularly high in the poorest countries, where it ranges from 65 per cent to 70 per cent. And these are the very countries that are supposed to be the main targets of the Bank's anti-poverty approach. The picture that is drawn of the World Bank is that of a massive institution that is driven to lend more by institutional imperatives than actual need in the recipient countries, that is burdened by high failure rates both in its project lending and its program (adjustment) lending, that has poor monitoring capabilities of the sustainability of its projects, that competes with rather than supplements the regional development banks (Asian Development Bank, Inter-American Development Bank, and African Development Bank). The stark reality is that of a dinosaur that is slowly sinking in a bog of its own making but which flags a 'new approach' of 'Poverty Reduction' or 'Comprehensive Development' to mask a fundamental crisis of identity and direction. Reform or Abolition? The Meltzer Report's basic conclusion is that the IMF and the Bank are monolithic institutions that have outlived their usefulness. Now, institutions should be saved and reformed if their functioning, while defective, nevertheless broadly achieves their basic objectives. They should be abolished if they have become fundamentally dysfunctional in achieving their basic objectives. The IMF, in the Report's view, has become part of the problem rather than part of the solution in global development and financial governance. The World Bank likewise has become irrelevant rather than central to the alleviation of poverty. Despite adjustments here and there, the two institutions are imprisoned within paradigms and structures that cannot handle the multiple problems confronting the world economy during this phase of globalisation. To borrow the language of Thomas Kuhn's classic Structure of Scientific Revolutions, both institutions are like paradigms in crisis, and the solution when a paradigm is in fundamental crisis is not to try to reform it with endless minute adjustments that merely prolong its inevitable demise, but to cut cleanly from it in favour of a simpler, more relevant, and more useful paradigm-in a manner similar to the way the founders of early modern science simply junked the old, hopelessly complex Ptolemaic paradigm for explaining the cosmos (the sun and other celestial bodies moving around the earth) in favour of the simpler Copernican paradigm (the earth moving around the sun). In other words, rather trying to find a function for the Fund and assigning to it the role of being a lender of last resort, we would do better to scrap it totally and create a new institution that does not have the baggage of institutional failure and an obsolete institutional mindset and is thus better positioned to manage financial crises in this era. Rather than expect the highly paid World Bank technocrats who live in the affluent suburbs of Northern Virginia to do the impossible- designing anti-poverty programs for folks from another planet: poor people in the Sahel - it would be more effective to abolish an institution that has made a big business out of 'ending poverty', and completely devolve the work to local, national and regional institutions better equipped to attack the causes of poverty. And this task should not fall to the regional development banks so long as they are imprisoned by World Bank-type structures. The Meltzer Report does not go far enough. It does not follow the logic of its analysis to its inevitable conclusion: the abolition of the Jurassic Bretton Woods institutions. It is up to the masses of people gathering in Washington, DC, on the occasion of the IMF-World Bank spring meetings in mid-April, to uncompromisingly deliver that message to the powers that be. Philippine Power Scandal Illustrates Flaws (April 2000)
What was supposed to be a milestone in the history of privatization in the Philippines has now become a massive scandal. Two parliamentarians, Etta Rosales and Rene Magtubo, revealed that after the recent vote by the House of Representatives to privatize the National Power Corporaton (Napocor), their offices received an unsolicited contribution of 500,000 pesos ($12,500) each. The two representatives had voted against the privatization, leading to speculation that those who voted for it received much more.
The payoff scandal cannot, however, be seen as simply another case of corrupt politics. It must be viewed against the background of the tremendous pressure to privatize the state-owned energy enterprise coming from extern al donors, in particular the Asian Development Bank (ADB). As a condition to the government's accessing a $300 million energy sector loan from the Bank and a $400 million loan from the Miyazawa Fund, the ADB wanted the state energy enterprise privatized as quickly as possible. The ADB's Power Sector Restructuring Program document dated Nov. 25, 1998, was blunt. Release of the second tranche of the loan was contingent on the condition that the Borrower shall have enacted a law, the Omnibus Power Industry Law, to govern the power industry. From the ADB's perspective, the government was way behind schedule; it had wanted the law passed by June 1999. Was the ADB Involved? Did the administration of President Joseph Estrada resort to short-cuts - that is, buying the votes of Batasan members - to satisfy the ADB? How much did the ADB know about the bribery? In fact, the question must be asked: did ADB staff participate in the bribery attempt to clear away obstacles to its most ambitious program in the Philippines? This question is by no means preposterous since the Bank itself has admitted to investigating 55 allegations of corruption involving its staff and executing agencies in the Asia-Pacific region as of December 1999. Even if the ADB is cleared of direct complicity in the bribery, it cannot be absolved of creating the conditions that led to what now appears to be a wholesale effort to buy Congress. The conditions simply were not there for a clean privatization to take place. Splitting Napocor into a few private oligopolies ('Generating Companies') in the climate of uncontrolled crony capitalism that now pervades the government-business partnership under Estrada was asking for trouble. The ADB should have heeded its own 'Anti-Corruption Policy Memorandum' issued in June 1998: Particular care must be taken in dealing with issues of privatization... Preliminary research... indicates that, when done properly, privatization can... help to lower the level of corruption. However, in many countries the privatization process has often been fraught with allegations of bribery, theft, and embezzlement. It continued: To avoid this problem, it is critical that transparent, unbiased and fully contestable procedures be utilized in the sale of state assets. When the sale involves a natural monopoly, it is also important that capable, independent regulatory agencies be established to provide adequate oversight prior to privatization. Issues of best practice involving corporate governance will also be an important component of Bank loans and TA [technical assistance] grants addressing issues of privatization, corporatization, and public enterprise management. None of the abovementioned anti-corruption safeguards or others were put in place prior to pushing the legislation for privatization. Rushing Privatization Indeed, so rushed was the Napocor privatization that other points raised by critics were largely left unanswered, in particular the telling argument that consumers would end up paying the bill for Napocor's stranded assets, so that instead of going down, electricity rates charged to most residential consumers were likely to go up after the privatization. In fact, the ADB admitted that the impact of the restructuring and privatization process on electricity consumers has not yet been quantified, nor has the need to retain safety nets to protect the poor and the underprivileged. For an agency that is said to be on top of energy economics, it is amazing that the ADB did not prioritize the conduct of such a study prior to rushing the privatization of Napocor since many previous efforts to privatize or deregulate power in other countries ended up with the consumer being screwed. But back to the corruption issue: it is ironic that an ADB project is now trapped in a massive corruption scandal since the agency prides itself with being the first multilateral development agency to have a Board-approved policy statement on good governance. The Bank, notes one document, affirms that corrupt and illicit behavior is a serious brake upon the development process. The Bank rejects the argument that corruption's beneficial effects outweigh its negative consequences... The Bank welcomes the growing focus upon anti-corruption issues as part of its broader effort to advance then principles of transparency, predictability, accountability, and participation under its governance policy. What is to be Done? Now is the time for the Asian Development Bank to put its money where its mouth is. It should launch an immediate investigation of its staff to see if they were involved in the bribery of the Batasan. It should also immediately signal the Philippine government that passage of the power bill will not guarantee delivery of its loan and the Miyazawa loan owing to the gross violation of the Bank's anti-corruption policy involved in the payoffs. But equally important, the ADB should cease pressuring the Philippine government to secure immediate passage of the power bill and allow independent agencies to conduct a more comprehensive and thorough investigation of whether or not privatization will really benefit Filipino consumers or merely deliver state assets at firesale prices to well-connected local and foreign monopolists. ADB 2000: Senior Officials and Internal Documents Paint Institution in Confusion (April 2000)
The Asian Development Bank approaches its Year 2000 meeting in the highland city of Chiang Mai, Thailand, fearful of protesters, dogged by scandal, beset with confusion, burdened with an unimpressive record, and with relations with the Bretton Woods institutions at an all-time low.
The Bank has quietly abandoned plans to make Seattle as the site of next year's meeting, fearful of provoking the same sort of protests that did the World Trade Organization (WTO) in. But it cannot do anything about changing this year's venue, which will certainly be filled with hundreds of demonstrators from Thailand and the rest of the region. Scandal Trailing the Manila-based Bank to Chiang Mai is probably the biggest scandal that has hit an ADB-supported project: the wholesale bribery of the Philippines House of Representatives to push through the privatization of the National Power Corporation (Napocor). Two representatives of Congress revealed that they each received 500,000 pesos ($12,500) despite their having voted against the bill, leading to strong suspicions that the majority that voted for the bill each received a greater payoff. Critics of the privatization initiative are looking at a $1 million technical assistance grant from the ADB earmarked for lobbying the Philippine government for privatization of state enterprises as a possible source of funds. This is not preposterous since the Bank has admitted to investigating 55 allegations of corruption involving its staff and executing agencies in the Asia Pacific region as of December 1999. But the main accusation being laid at the doorstep of the Bank is that its pressure on the government to rush privatization might have prompted the administration of President Joseph Estrada to take short cuts to gather the necessary votes. The ADB had conditioned further disbursements of its energy loan and an associated Miyazawa loan to the Philippines on passage of the Napocor privatization bill. Indeed, to push through its whole program of privatization, liberalization, and deregulation, the ADB reduced loan disbursements to the Philippines in 1999 to nearly zero - certainly a far cry from the $300 to $500 million annual outlay usually earmarked for the country. "Goal Congestion" It is, however, not only scandal that dogs the ADB but confusion in the ranks. For staff members, the days of funding and implementing physical infrastructure projects that could be subjected to narrow cost-benefit analysis are over. According to a senior staff member who spoke on condition of anonymity, people in the field are suffering from 'goal congestion', that is, trying unsuccessfully to integrate the various objectives that donor governments have attached to lending in the last few years: poverty reduction, social development, sustainable development, promoting women's welfare, and good governance. People are lost and bewildered, and most have no clue of how to even begin, he said. The problem is very real, he continued. You have all these new goals, but the old baggage, the old goals, have not disappeared. You've somehow to get 'women and development' into the project design, and you get scolded if you don't know how to sneak it in. The result is incoherence. The confusion and failure to integrate goals into project and program design is reflected in internal evaluations. Thus the Draft Asian Development Fund Report to the Donors states that although poverty reduction has been a central concern and is now the overarching vision and goal, few projects have been designed specifically to address this objective. Moreover, there has been little lending directly targeted at women or the environment. High Project Failure Rates Failure to integrate stated goals into the so-called 'country operational strategies' (COS) is part of a broader pattern of failure. Almost all forestry projects have failed - that is well known within the Bank, noted one official knowledgeable of the Bank's environmental projects. Indeed, only 36 per cent of projects in the Agriculture and Natural Resources Sector are rated 'generally successful'. But this is not as bad as the record in the Social Infrastructure Sector (33 per cent) and the Finance Sector (15.2 per cent). While the success rates in the Energy, Industry, and Transportation and Communications Sectors are high, an assessment by the Strategy and Policy Department says that across the board, in most instances... operational performance was far short of projections. This was due to weaknesses in project design, particularly where there was weak institutional capacity and there were inappropriate policies. Implementation of most projects tended to focus on completion of their physical infrastructure components rather than institutional development and support service components and policy reforms. The poor record in agricultural projects reflects the fact that the ADB, according to another senior staff member who refused to be identified, has been trying to get out of agriculture lending. The reason for this was that assessment of costs and benefits and project management were not as simple and straightforward as in energy and infrastructure programs. The resulting lack of a track record in agriculture poses a major problem, he commented, since the future of Asia lies in solving the food security problem, not in providing more and more physical infrastructure. The Bank may have made a strategic mistake. Good Governance: More Hype than Substance Among the new considerations that donors want to bring into lending decisions is 'good governance' on the part of the borrower. The ADB prides itself with being the first multilateral lending agency to have a Board-approved policy statement on good governance, which it defines as governance marked by 'accountability, participation, predictability, and transparency'. Many Bank staff members are, however, very cynical about the new policy. Says one senior person, It's a question of practising what you preach. There's a lot of discontent inside the Bank, precisely because it is one of the most non-accountable, non-participatory, and non-transparent institutions around. As an example, she pointed to informal rules that reserve certain positions to the dominant countries, in particular the US and Japan. The US speaks loudest when it comes to good governance, she said, but it considers key positions in the Bank its private property, and no talk about democracy and transparency will change that. A good case is the position the General Counsel of the Bank. The US has locked up this position, an attitude that has brought it criticism from the Board for 'lack of transparency'. Mindful of criticism, the US last year pushed to have a US citizen continue to fill the post but chose a US citizen from Hawaii who has a Japanese name. MOF Colony? While the US may be the most vocal when it comes to promoting new policies from poverty reduction to good governance, it is Japan that controls the institution. The ADB is an institution funded by the Japanese, controlled by the Japanese, and run by the Japanese was the way one country representative to the Executive Board put it. Japan in this case means Japan's Ministry of Finance (MOF). The Ministry of Finance virtually determines who will be president - the current chief Tadeo Chino is a graduate of the MOF - and who fills the key position of head of Budget and Staffing. The MOF's control of strategic posts is said to have had detrimental consequences for innovation for two reasons. One is ideological: the MOF is probably the most conservative of Japan's economic agencies. The other is structural: the chief of the Budget and Staffing Department, for instance, is replaced every three years by the MOF, which means the occupant has no incentive to innovate and all the incentive to carry on as usual. Ironically, Japanese control of the Bank has not resulted in the adoption of the bottom-up, participatory management that Japanese firms are noted for. Instead, the ADB has reproduced the overcentralized, hierarchic structures of the MOF. Said one senior informant: The hiring of the lowliest programmer for a small project of the Bank must be approved by the president. And any travel by any Bank staff out of the [the Asia-Pacific] region must have the personal approval of the president. Said another official: Hierarchy is everywhere; quality control is nowhere. This is, let's face it, a mediocre organization. Proliferating Conditionalities Despite its Jurassic characteristics, the Bank has not been immune to internal pressures and external events. For instance, pressure from some donor countries has pushed the Bank to devote more of its lending portfolio to program or 'adjustment' lending, where loans for individual projects are made contingent on macroeconomic policy changes, like accelerated privatization, deregulation, and liberalization. However, an internal review of the Bank's program lending dated Nov. 22, 1999 decries the 'proliferation of policy conditionalities' in program loans, noting that the average number of conditionalities per program loan is 32! Practically admitting the failure of the Bank's conditionality-burdened program lending, the document states that besides the issue of proliferation of conditionalities is the more basic issue of the efficacy of the policy conditionality approach. It moves on to list the 'shortcomings' of the conditionality approach: (i) undermining ownership by the recipient government; (ii) a tendency to compensate for perceived lack of commitment/weak administrative, technical, and institution [sic] by increasing the detail and number of conditions in adjustment operations; (iii) an incentive for borrowers to exaggerate the difficulty of undertaking reforms; and (iv) partial reform syndrome - reform is acceptably implemented only at the expense of watering down the original requirements. Conditionalities have alienated most client governments. The most controversial has been the case of Malaysia. After the outbreak of the Asian financial crisis, the ADB offered to lend to Malaysia, but only if that country undertook policy reforms demanded by the IMF. Malaysia refused and followed its own strategy to surmount the crisis, which was the exact opposite of the fiscal and monetary repression promoted by the IMF. Now that Malaysia has proven both the IMF and ADB wrong with its successful effort to bring about a vigorous recovery, ADB officials are wondering if Malaysia will ever again borrow from the Bank. Resenting the Fund The subordination of the ADB's approach to the IMF's overall strategy to deal with the Asian financial crisis still rankles within the Bank. Staff members resent the way that under IMF pressure, the ADB leadership in 1998 disregarded the usual loan approval process, which usually takes a year, to push through a massive $1 billion loan for Korea in less than a week! This might have been tolerated had the ADB contribution been part of a program that succeeded. Yet the IMF's harsh monetary and fiscal approach merely made the Korean financial crisis worse in 1998, leading many in the ADB staff and leadership to seriously question the relevance of the Fund's paradigm and the Fund itself as an institution. The ADB's Japanese elite, in particular, is said to be particularly resentful of the way the IMF, with US support, killed the Japanese-initiated proposal to set up an Asian Monetary Fund (AMF) to deal with the crisis in late 1997. Now that the IMF has been proven wrong, there is strong support from within the Bank and its member governments in Asia to revive the AMF proposal, according to a senior official. And if it is set up, she noted, it will be a Fund that will look into each country's particular situation instead of applying a standard blueprint to all countries like the IMF does. Competing with the World Bank If relations with the Fund are bad, the ADB's relations with the World Bank are 'fiercely competitive', says a member of the Programs Department. It was not always so, since for years the World Bank was regarded as some sort of 'Big Brother', whose programs, projects, and organization were models for the ADB. What changed the relationship was World Bank President James Wolfensohn's articulation of the 'Comprehensive Development Framework', which ADB officials saw as an effort to subordinate the ADB and the other regional development banks to the World Bank, both organizationally and agenda-wise. When Wolfensohn proposed moving the whole East Asia-Pacific Division of the World Bank to Singapore in 1999, the ADB saw that as an effort on the part of the World Bank to marginalize it or make it irrelevant. From then on, the World Bank has been perceived as a threat. Which is why, according to several staffers, the ADB was cheered by the recommendation of the International Financial Advisory Commission (the 'Meltzer Commission') appointed by the US Congress that the World Bank devolve most of its functions to the regional development banks. All these developments are creating strong pressures from the Asian member countries of the ADB for the institution to define and structure itself as an institution that is really responsive to the needs of the region. One school of thought gaining momentum questions whether we really need the US and Europe in the Bank, said one official. Unlike the other regional development banks, the ADB derives the major part of its resources from the region itself, particularly Japan. The idea is to bring in resources from Taiwan and China to replace that now contributed by the Americans and Europeans. The problem with this approach, he noted, was the apprehension of some members about Japan's agenda once the countervailing power of the US and Europe is removed. The region is changing, and the pressures of change are buffeting the ADB. Will it succeed in adapting itself to the changing needs of the countries and peoples in the Asian region? Most of the senior staff members interviewed were sceptical. The projects will continue to be really traditional in approach, though there will be the necessary icing of pro-poor rhetoric to get the donors to loosen the purse strings, commented one. Another laughed, saying, This is really a conservative institution. Asking it to change is like asking Japan's Ministry of Finance to change. Washington Protests Demoralize IMF and World Bank (April 2000)
Sure, the demonstrators who converged on Washington on April 16 and 17 were not able to prevent the World Bank and the International Monetary Fund (IMF) from holding their regular spring meetings. But though they may not have achieved their tactical goal, the anti-IMF and World Bank protesters and critics were able to pull off a great strategic victory.
The dynamics of the last week were similar to that of the Vietnamese Tet Offensive in 1968, where the ultimate measure of victory was not the gaining and holding of territory but the fatal undermining of the aggressor's will to win the war. Thirty thousands demonstrators. One thousand three hundreds individuals who courted arrest. Over a week of intense media coverage of the Bretton Woods institutions and their critics. These were the facts against which the organizers of the great spring offensive against the two multilateral agencies unanimously declared victory. As Kevin Danaher of Global Exchange put it, We have pulled off something that we were never able to do before: imprint the World Bank and the IMF as major problems in the American political consciousness. Njoki Njehu of Kenya, the coordinator of the 50 Years is Enough Campaign, put things in perspective: It's a miracle. At last year's spring meeting, we were able to get only 25 people to come down to Washington to protest. Our best mobilizations in the past never drew more than 400 people, max. That this meeting of two secretive institutions which have such influence on the lives of billions of people could only take place under massive police protection against people who shut down an entire city - there could be no better image of what these two organizations are about, said John Cavanagh, director of the Institute for Policy Studies, a progressive Washington think-tank. IMF under Fire The Battle of Washington came on the heels of a series of demoralizing developments for the IMF and the World Bank. The IMF had been widely criticized for its role in the Asian financial crisis, with critics and in out of the establishment faulting it for encouraging the indiscriminate capital account liberalization that precipitated the crisis, assembling massive rescue packages to ensure the repayment of foreign banks and speculative investors, imposing stringent fiscal and monetary programs that only made the crisis worse, and pushing investment and trade liberalization measures that resulted in US and European corporations acquiring Asian assets at firesale prices. The Fund's dismal performance in the Asian financial crisis merely amplified what many analysts had been saying for years about the IMF's record in Latin America and Africa, where IMF-World Bank 'structural adjustment' programs that cut back government expenditures and promoted radical trade and investment liberalization, deregulation, and privatization had not brought about growth but institutionalized economic stagnation, created more poverty, and increased inequality both within and between countries. The massive global resentment building up against the Fund was symbolized by the widespread delight that greeted the throwing of a cream pie on former Managing Director Michel Camdessus' face by Robert Naiman of the 50 Years Is Enough Campaign just as the Frenchman was about to deliver his farewell speech of his career at the UNCTAD Conference in Bangkok last February. PR Effort Set Back The World Bank's situation was slightly different. Under President James Wolfensohn, the World Bank over the last few years has sought to distance itself from the Fund in a major public relations effort to promote a new image as an anti-poverty organization. That effort was stopped dead in its tracks last month with the release of the report of the International Financial Institution Advisory Commission delegated by the US Congress to assess the performance of the World Bank and the IMF. Better known as the Meltzer Report after its Commission Chairman Arthur Meltzer, the document stated, among other things, that 80 per cent of the World Bank's resources have gone to a few countries that are among the richer economies in developing world and that Bank projects have had a failure rate ranging from 65 to 70 per cent. More broadly, the Meltzer Commission argued that:
- instead of promoting growth, the IMF institutionalizes economic stagnation;
Towards Seattle II But probably the biggest factor that accounted for the large masses of people that came to Washington was the 'Battle of Seattle' last December 1999. The massive protest that helped bring down the Third Ministerial of the World Trade Organization (WTO) was like a thunderbolt that activated widespread latent resentments against globalization that have been percolating among large numbers of people in the US and internationally. Promoting corporate-led globalization has been widely identified as the mission of the mission not only of the WTO but also the World Bank and the IMF. Speaker after speaker at the six-hour rally at the Ellipse, the park at the back of the White House, welcomed the protestors to 'Seattle II'. And a great number of those who came in all probability came to convert Washington into another Seattle. Seattle has now been converted in the global consciousness into that rarest of rare events: a people's victory. Demoralized and Bewildered In contrast, the crisis of legitimacy and confidence is very palpable among World Bank and IMF technocrats to whom the mass civil disobedience this weekend is the culmination of months of feeling besieged. Many staff members of both institutions now see their jobs on the line, with the prospect that their organizations might be drastically downsized, if not eliminated. To shore up the morale of his staff, World Bank President James Wolfensohn issued a memo last week acknowledging that the next week will be a trying time for all of us. He went on to claim, however, that we can and should be proud of the work we do in fighting poverty. This is a noble task, and a human one. Our staff is as devoted and effective as any in the world. Fine words. But few can take comfort from the fact that Larry Summers, the US Secretary of the Treasury, the agency that has the strongest voice in these institutions, has lately been voicing his agreement with some criticisms of the functioning of the two organizations and with proposals to 'downsize' the two institutions. The approximately 11,000 personnel of the two organizations are said to be the most highly paid civil service employees in the world. They would be smart to start sending out resumes, said World Bank critic Anuradha Mittal of Food First. For many of us who have spent a good part of the last 25 years trying to expose the destructive impact and arrogance of the two institutions, this weekend's events have been simply too good to be true. In the late seventies, when my colleagues and I broke into the World Bank to steal the 3,000 pages of documents that became the raw material for the book Development Debacle: The World Bank in the Philippines, the Bank and the Fund were, simply put, indestructible. This weekend I could hardly believe that tens of thousands of people were cheering, wildly, when I stated at the rally at the Ellipse that I have not come to Washington to dialogue with the Fund and the Bank. I did not come to reform the Fund and the Bank. I came to join you in shutting down these Jurassic institutions. Regional Currency Swap Arrangement: A Step Towards Asian Monetary Fund? (May 2000)
The most notable agreement to come out of the 33rd Annual Meeting of the Board of Governors of the Asian Development Bank meetings was formulated on the sidelines. This was the much publicized decision the ASEAN countries plus Japan, South Korea, and China to create a system of regional currency swap arrangements as a 'firewall' against future financial crises.
Looking at the fine print, however, makes this development less significant than it seems. It is, for one, a really a much diluted version of the Asian Monetary Fund (AMF) that was proposed by Japan right after the outbreak of the Asian financial crisis in mid-1997. That proposal was envisioned as a much more solid mechanism capitalized to the tune of $100 billion. The proposal in Chiang Mai was presented as a 'network' of currency swap arrangements building on a more modest $200 million swap agreement among the big five ASEAN economies. No details were announced on the size of the funding being sought for the current proposal, though Eisaku Sakakibara, the influential former Vice Minister of Finance of Japan, told the press that some $20-$40 billion would be needed to have the arrangement really make a difference. The studious avoidance of the world 'Fund' by Japanese officials underlines the fact that Japan and the Asian countries continue to be prevented from making really bold steps by the desire not to ignite the open opposition of the United States. It was Washington and the IMF that killed the original AMF proposal in 1997, on the ground that it would compete with and weaken the IMF. Despite seemingly mild reactions to the current proposal, Washington continues to oppose the creation of any institution that would involve either a weakening of US influence over the economies in the region or supplant the role of the IMF. Access to the current swap arrangements are apparently envisioned as flexible in terms of policy reforms demanded of the recipient governments. Senior US Treasury Department official Edwin Truman warned against this, saying that the central point in any regional surveillance arrangement has to be one that promotes timely economic and financial adjustment. The US made its presence felt throughout the week-long discussions, and in ways that irritated other member governments. In response to demands for an increase in the Bank's capital resources, the US said that countries such as South Korea and Thailand, which had borrowed huge sums from the ADB and other multilateral agencies at the onset of the Asian financial crisis, should make an early repayment of their loans now that recovery was underway. Acccelerated repayment would provide resources for the ADB that would make capital increase less urgent. Truman, the US Treasury Department representative, also faulted the ADB for not following up its anti-poverty rhetoric with concrete actions and for not implementing 'good governance' as one of the major conditions of its lending to client governments, according to The Nation. Good governance and anti-poverty are two of the new policy directions that have been pushed on the ADB, mainly by the United States. The fact that a relatively obscure official like Truman, instead of Treasury Secretary Larry Summers, headed the US delegation was seen by many as the US's way of expressing unhappiness about trends in the ADB. While the US has been very vocal about good governance and other 'new' policies, it has bee quite quite parsimonious when it comes to new cash commitments and keenly protective of positions it holds within the Bank, such as the office General Counsel. This has created strong feelings among many other member countries that the ADB should become a purely Asian institution since the larger part of its capital resources already come from Japan and other countries in the region itself. These feelings have surfaced at a time that in Washington itself, there are calls, notably from the US Congress, to downsize the World Bank and devolve many of its functions to the ADB and other regional development banks. The ADB continues to be an institution dominated by Japan. But if devolution of development aid does become the trend, its importance will increase as a mechanism to channel Washington's influence in the region. Increasing tension between the US and an increasingly like-minded Asian bloc is likely to be the force that will greatly determine the future of the Asian Development Bank. Civil Society as a Global Actor (May 2000)
Today, there is much talk about the emergence of non-governmental organizations (NGOs) or civil society organizations (CSOs) as major international actors. CSOs have elicited criticism from some quarters. For instance, Martin Wolf, the columnist of the Financial Times, has called them "uncivil society" and attacked them for opposing the project of globalization advanced by the World Trade Organization, World Bank, and the International Monetary Fund, saying that that their stands on various issues stem from ignorance and simplistic interpretations of a complex world.
More liberal quarters, however, have acknowledged that their criticisms have some justification, for instance, on the issue of the dangers posed by genetically modified organisms (GMOs) and globalization. Both corporations and governments have moved to initiate "dialogue" with NGOs, oftentimes with the purpose of coopting them into corporate or government agendas by conceding some of their criticisms while rejecting others, particularly their more fundamental critiques of the processes of corporate globalization. The elite World Economic Forum that meets in Davos, Switzerland, every year now assigns top priority to consulting NGOs to ensure that the alleged benefits of globalization are spread more widely. When we examine the problems and promises posed by civil society organizations (CSOs), an important thing to remember is that they are not invariably a progressive phenomenon. While we are familiar with CSOs that are liberal or belong to the left, the right also has its CSOs, such as business associations, trade groups, and conservative religious formations - for instance, the formidable Opus Dei in Catholic countries.Oftentimes, as influences on political and economic actors, these CSOs on the right are far more influential than CSOs on the left. This influence is, however, sometimes not noticed because it is covertly exercised via the many different networks in which members of conservative CSOs participate. In contrast, progressive CSOs or NGOs are oftentimes more public and transparent, so that the press has an easier time chronicling their activities. Despite this greater visibility, however, the civil society organization of the right is generally much more influential than the civil society organization of the left. They are, to borrow Gramsci's famous term, more "organic" to the class structure. Promise of CSOs Having flagged this, one can now turn to the promise of progressive CSOs in the creation of a more just and equitable order at home and abroad. First of all, CSOs are quickly emerging as a third or fourth actor in the formulation and implementation of macro-political and macro-economic decisions. In many Asian countries, for instance, real decisionmaking power used to be monopolized by politicians, technocrats, and the business elite. That is increasingly less and less possible in the face of the mass mobilization by labor groups, environmental groups, and human and social rights groups, often working in coalitions. Coordination, even of a rough sort, among a variety of CSOs, has become more pronounced after the Asian financial crisis, which underlined the hopeless corruption of the old order and the necessity of constantly monitoring and checking the old elites outside the usual governmental institutions and processes. Second, CSOs are crucial not only as checks on elites. They are also the key to the evolution of democracy. Representative democracy has always suffered from what Rousseau saw as its tendency to develop a "corporate will" separate from the General Will, thus perverting the purposes of representation. The development of the US democratic system into a plutocratic system, where Republicans and Democrats in Congress have been subjugated by corporate money, is the best example of the Rosseauean dilemma of large-scale representative democracies. With their constant pressure on bureaucrats and parliamentarians to be accountable, CSOs are a force for more democracy. By organizing the energies of millions of citizens to impinge on the daily political scene, CSOs are a force pushing the evolution of more direct forms of democratic rule. CSO activity, combined with advanced applications of information technology that allow citizens and citizens' groups to instantaneously communicate with one another, may be the key to the emergence of direct democracy in contemporary mass societies. Finally, CSOs are a force for effective internationalism that can check the power of politically hegemonic forces like the US government and transnational corporations. The power of states and thus of counter-hegemonic alliances among states has been eroded by corporate-led globalization. But the combination of citizens' resistance to globalization and communications technology has created global citizens' movements that can assemble and meet the "enemy" at a moment's notice. The "Battle of Seattle" in November 1999 and, more recently, the "Battle of Washington", are examples of the new transborder activist movements. The development of civil society, in short, presents opportunities for democracy both vertically and horizontally. It is the route to a more humane, more participatory, more equitable future. Pitfalls There are, of course, major obstacles that need to be surmounted if this vision is to become a reality. First of all, there is the North-South divide among NGOs. Many Northern NGOs are, oftentimes, focused on single issues, such as the environment or human rights and carry agenda that are filtered through the lens of these particular issues. Southern NGOs, on the other hand, are more comprehensive in their concerns. They are concerned almost equally with the environment, social equity, development, national sovereignty, and democracy. Thus, while NGOs in the North working on climate change are sometimes solely concerned about bringing down the level of greenhouse gas emissions, Southern NGOs want to make sure that bringing down CO2 levels in the South does not conflict with the legitimate aspirations to development of their countries. Similarly, they are concerned that environmental standards in the North do not become a protectionist screen against the entry of products from the Third World. Second, there is the question of compromising with or fundamentally opposing corporate-led globalization. For some CSOs, both in the North and the South, corporate-led globalization is inevitable; the main task is to humanize it. For instance, some labor and environmental NGOs see the World Trade Organization as a fact of life and focus their energies on attacing "social" or "environmental" clauses to WTO agreements. Others see the WTO as fundamentally problematic and push for abolishing or radically reducing its powers. Third, there is the question of working with governments. Some CSOs adopt a stand of maximizing cooperation with governments so as to get governments to adopt some of their agenda. Many environmental NGOs in the North, for instance, worked with the US government to ban imports of tuna and shrimps to the US if these were not caught with methods specified in US government legislation. In the South, some NGOs have strongly supported the nationalist policies of certain governments, while muting their criticisms of other aspects of their governments, like the bad record of these governments in the area of human rights and democracy. Other NGOs in both the North and the South, in contrast, have made it a point to limit working relationships with governments to a minimum, while maximizing their critical stance. A fourth problem is that competition and intrigues among CSOs are often just as intense and destructive as conflicts in the political and business worlds. Among NGOs in the North and the South, a source of intense competition that can quickly make allies into adversaries is funding. Indeed, some observers contend that nothing has proven more problematic in terms of building common fronts and common programs among CSOs and NGOs than fights over funds which often mask as fights over principles or politics. In any event, pluralism will continue to mark global civil society. This is its source of strength. But it can also be a source of fatal weakness, one which will prevent the emergence of a working unity of CSOs, whether at the national or global level. The challenge is how to ensure that differences in strategies and tactics do not become the sources of permanent and bitter divisions. The challenge is how to keep dialogue going so that differences on some issues do not prevent coming together in solidarity on other issues. To take a very current issue, can CSOs that found themselves on different sides of the battle on the question of the US's granting of permanent normal trade relations to China work together to radically reduce the powers of the WTO. Corporations, governments, and multilateral organizations that carry the pro-corporate globalization project are waiting to seize on divisions among CSOs and NGOs. It is important to make sure that even as CSOs disagree among themselves, they do not play into the hands of forces with a different agenda. Dangerous Liaisons: Progressives, the Right, and the Anti-China Trade Campaign (May 2000)
Like the United States, China is a country that is full of contradictions. It is certainly not a country that can be summed up as "a rogue nation that decorates itself with human rights abuses as if they were medals of honor". (1) This characterization by AFL-CIO chief John Sweeney joins environmentalist Lester Brown's Cassandra-like warnings about the Chinese people in hitting a new low in the rhetoric of the Yellow Peril tradition in American populist politics. Brown accuses the Chinese of being the biggest threat to the world's food supply because they are climbing up the food chain by becoming meat-eaters. (2)
These claims are disconcerting. At other times, we may choose not to engage their proponents. But not today, when they are being bandied about with studied irresponsibility to reshape the future of relations between the world's most populous nation and the world's most powerful one. A coalition of forces seeks to deprive China of permanent normal trading relations (PNTR) as a means of obstructing that country's entry into the World Trade Organization (WTO). We do not approve of the free-trade paradigm that underpins NTR status. We do not support the WTO; we believe, in fact, that it would be a mistake for China to join it. But the real issue in the China debate is not the desirability or undesirability of free trade and the WTO. The real issue is whether the United States has the right to serve as the gatekeeper to international organizations such as the WTO. More broadly, it is whether the United States government can arrogate to itself the right to determine who is and who is not a legitimate member of the international community. The issue is unilateralism-the destabilizing thrust that is Washington's oldest approach to the rest of the world. The unilateralist anti-China trade campaign enmeshes many progressive groups in the US in an unholy alliance with the right wing that, among other things, advances the Pentagon's grand strategy to contain China. It splits a progressive movement that was in the process of coming together in its most solid alliance in years. It is, to borrow Omar Bradley's characterization of the Korean War, "the wrong war at the wrong place at the wrong time". The Real China To justify US unilateralism vis-?-vis China, opponents of NTR for China have constructed an image of China that could easily have come out of the pen of Joseph McCarthy. But what really is China? Since the anti-China lobby has done such a good job telling us about China's bad side, it might be appropriate to begin by showing the other side. Many in the developing world admire China for being one of the world's most dynamic economies, growing between 7-10 per cent a year over the past decade. Its ability to push a majority of the population living in abject poverty during the Civil War period in the late forties into decent living conditions in five decades is no mean achievement. That economic dynamism cannot be separated from an event that most countries in the global South missed out on: a social revolution in the late forties and early fifties that eliminated the worst inequalities in the distribution of land and income and prepared the country for economic takeoff when market reforms were introduced into the agricultural sector in the late 1970's. China likewise underlines a reality that many in the North, who are used to living under powerful states that push the rest of the world around, fail to appreciate: this is the critical contribution of a liberation movement that decisively wrests control of the national economy from foreign interests. China is a strong state, born in revolution and steeled in several decades of wars hot and cold. Its history of state formation accounts for the difference between China and other countries of the South, like Thailand, Brazil, Nigeria, and South Korea. In this it is similar to that other country forged in revolution, Vietnam. Foreign investors can force many other governments to dilute their investment rules to accommodate them. That is something they find difficult to do in China and Vietnam, which are prepared to impose a thousand and one restrictions to make sure that foreign capital indeed contributes to development, from creating jobs to actually transferring technology. The Pentagon can get its way in the Philippines, Korea, and even Japan. These are, in many ways, vassal states. In contrast, it is very careful when it comes to dealing with China and Vietnam, both of whom taught the US that bullying doesn't pay during the Korean War and the Vietnam War, respectively. Respect is what China and Vietnam gets from transnationals and Northern governments. Respect is what most of our governments in the global South don't get. When it comes to pursuing national interests, what separates China and Vietnam from most of our countries are successful revolutionary nationalist movements that got institutionalized into no-nonsense states. What is the "Case" against China? Of course, China has problems when it comes to issues such as its development model, the environment, workers rights, human rights and democracy. But here the record is much more complex than the picture painted by many US NGO's. - The model of development of outward -oriented growth built on exports to developed country markets of labor-intensive products is no scheme to destroy organized labor thought up by an evil regime. This is the model that has been prescribed for over two decades by the World Bank and other Western-dominated development institutions for the developing countries. When China joined the World Bank in the early eighties, this was the path to development recommended by the officials and experts of that institution. Through the strategic manipulation of aid, loans, and the granting of the stamp of approval for entry into world capital markets, the Bank pushed export-oriented, labor-intensive manufacturing and discouraged countries from following domestic-market-oriented growth based on rising wages and incomes. In this connection, it must be pointed out that World Bank policies vis-...-vis China and the Third World were simply extensions of policies in the US, Britain, and other countries in the North, where the Keynesian or Social Democratic path based on rising wages and incomes was foreclosed by the anti-labor, pro-capitalist neoliberal policies of Ronald Reagan, Margaret Thatcher, and their ideological allies. - True, development in China has been accompanied by much environmental destruction and must be criticized. But what many American environmentalists forget is that the model of double-digit GDP growth based on resource-intensive, waste-intensive, toxic-intensive production and unrestrained levels of consumption is one that China and other developing countries have been enouraged to copy from the North, where it continues to be the dominant paradigm. Again, the World Bank and the whole Western neoclassical economics establishment, which has equated development with unchecked levels of consumption, must bear a central part of the blame. Northern environmentalists love to portray China as representing the biggest future threat to the global environment. They assume that China will simply emulate the unrestrained consumer-is-king model of the US and the North. What they forget to mention is that per capita consumption in China is currently just one tenth of that of developed countries. (3) What they decline to point out is that the US, with five per cent of the world's population, is currently the biggest single source of global climate change, accounting as it does for a quarter of global greenhouse gas emissions. As the Center for Science and Environment (CSE) points out, the carbon emission level of one US citizen in 1996 was equal to that of 19 Indians, 30 Pakistanis, 17 Maldivians, 49 Sri Lankans, 107 Bangladeshis, 134 Bhutanese, or 269 Nepalis. (4) When it comes to food consumption, Lester Brown's picture of Chinese meat eaters and milk consumers destabilizing food supply is simply ethnocentric, racist, and wrong. According to FAO data, China's consumption of meat in 1992-94 was 33 kg per capita and this is expected to rise to 60 kg per capita in 2020. In contrast, the comparable figures for developed countries was 76 kg per capita in 1992-94, rising to 83 kg in 2020. When it comes to milk, China's consumption was 7 kg per capita in 1992-94, rising marginally to 12 kg in 2020. Per capita consumption in developed countries, in contrast was 195 kg and declining only marginally to 189 kg in 2020. (5) The message of these two sets of figures is unambiguous: the unchecked consumption levels in the United States and other Northern countries continue to be the main destabilizer of the global environment. - True, China is no workers' paradise. Yet it is simplistic to say that workers have no rights, or that the government has, in the manner of a pimp, delivered its workers to transnationals to exploit. There are unions; indeed, China has the biggest trade union confederation in the world, with 100 million members. Granted, this confederation is closely linked with the government. But this is also the case in Malaysia, Singapore, Mexico, South Africa, Zimbabwe, and many other countries. The Chinese trade unions are not independent from government, but they ensure that workers' demands and concerns are not ignored by government. If the Chinese government were anti-worker, as AFL-CIO propaganda would have it, it would have dramatically reduced its state enterprise sector by now. It is precisely concern about the future of the hundreds of millions of workers in state enterprises that has made the government resist the prescription to radically dismantle the state enterprise sector coming from Chinese neoliberal economists, foreign investors, the business press, and the US government-all of whom are guided by a narrow efficiency/profitability criterion, and are completely insensitive to the sensitivity to employment issues of the government. The fact is that workers in China probably have greater protection and access to government than industrial workers who live in right-to-work states (where non-union shops are encouraged by law) in the United States. If there is a government that must be targeted by the AFL-CIO for being anti-labor, it must be its own government, which, in collusion with business, has stripped labor of so many of its traditional legal protections and rights that the proportion of US workers unionized is down to only 13 per cent of the work force! - True, there is much to be done in terms of bringing genuine democracy and greater respect for human rights in China. And certainly, actions like the Tienanmen massacre and the repression of political dissidents must be condemned, in much the same way that Amnesty International severely criticizes the United States for relying on mass incarceration as a principal mechanism of social control. (6) But this is not a repressive regime devoid of legitimacy like the Burmese military junta. As in the United States and other countries, there is a lot of grumbling about government, but this cannot be said to indicate lack of legitimacy on the part of the government. Again and again, foreign observers in China note that while there might be disaffection, there is widespread acceptance of the legitimacy of the government. Monopolization of decision making by the Communist Party at the regional and national level is still the case, but relatively free elections now take place in many of the country's rural villages in an effort to deconcentrate power from Beijing to better deal with rural economic problems, according to New York Times columnist Thomas Friedman, who is otherwise quite critical of the Chinese leadership. (7) Indeed, lack of Western-style multiparty systems and periodic competitive elections does not mean that the government is not responsive to people. The Communist Party is all too aware of the fact that its continuing in power is dependent on popular legitimacy. This legitimacy in turn depends on convincing the masses that it is doing an adequate job its fulfilling four goals: safeguarding national sovereignty, avoiding political instability, raising people's standard of living, and maintaining the rough tradition of equality inherited from the period of classical socialism. The drama of recent Chinese history has been the way the party has tried to stay in power by balancing these four concerns of the population. This balancing act has been achieved, Asia expert Chalmers Johnson writes, via an "ideological shift from an all-embracing communism to an all-embracing nationalism [that has] helped to hold Chinese society together, giving it a certain intellectual and emotional energy and stability under the intense pressures of economic transformation". (8) - As for demand for democratic participation, this is certainly growing and should be strongly supported by people outside China. But it is wishful thinking to claim that US-style forms of democratic expression have become the overwhelming demand of the population. While one might not agree with all the points he makes, a more accurate portrayal of the state of things than that given by the anti-China lobby is provided by the English political philosopher John Gray in his classic work False Dawn: China's current regime is undoubtedly transitional, but rather than moving towards "democratic capitalism", it is evolving from the western, Soviet institutions of the past into a modern state more suited to Chinese traditions, needs, and circumstances. Liberal democracy is not on the historical agenda for China. It is very doubtful if the one-child policy, which even at present is often circumvented, could survive a transition to liberal democracy. Yet, as China's present rulers rightly believe, an effective population policy is indispensable if scarcity of resources is not to lead to ecological catastrophe and political crisis. Popular memories of the collapse of the state and national defenselessness between the world wars are such that any experiment with political liberalization which appears to carry the risk of near-anarchy of post-Soviet Russia will be regarded with suspicion or horror by the majority of Chinese. Few view the break-up of the state other than a supreme evil. The present regime has a potent source of popular legitimacy in the fact that so far it has staved off that disaster. (9) The Anti-China Trade Campaign: Wrong and Dangerous It is against this complex backdrop of a country struggling for development under a political system, which, while not democratic along Western lines, is nevertheless legitimate, and which realizes that its continuing legitimacy depends on its ability to deliver economic growth that one must view the recent debate in the US over the granting of Permanent Normal Trade Relations (PNTR) to China. PNTR is the standard tariff treatment that the United States gives nearly all its trading partners, with the exception of China, Afghanistan, Serbia-Montenegro, Cuba, Laos, North Korea, and Vietnam. Granting of PNTR is seen as a key step in China's full accession to the World Trade Organization (WTO) since the 1994 Marrakesh Agreement establishing the WTO requires members to extend NTR to other WTO members mutually and without conditions. This is the reason that the fight over PNTR is so significant, in that it is integrally linked to China's full accession to the WTO. Organized labor is at the center of a motley coalition that is against granting PNTR to China. This coalition includes right wing groups and personalities like Pat Buchanan, the old anti-China lobby linked to the anti-communist Kuomintang Party in Taiwan, protectionist US business groups, and some environmentalist, human rights, and citizens' rights groups. The intention of this right-left coalition is to be able to use trade sanctions to influence China's economic and political behavior as well as to make it difficult for China to enter the WTO. There are fundamental problems with the position of this alliance, many of whose members are, without doubt, acting out of the best intentions. First of all, the anti-China trade campaign is essentially another manifestation of American unilateralism. Like many in the anti-PNTR coalition, we do not uphold the free-trade paradigm that underpins the NTR. Like many of them, we do not think that China will benefit from WTO membership. But what is at issue here is not the desirability or non-desirability of the free trade paradigm and the WTO in advancing people's welfare. What is at issue here is Washington's unilateral moves to determine who is to be a legitimate member of the international economic community-in this case, who is qualified to join and enjoy full membership rights in the WTO. This decision of whether or not China can join the WTO is one that must be determined by China and the 137 member-countries of the WTO, without one power exercising effective veto power over this process. To subject this process to a special bilateral agreement with the United States that is highly conditional on the acceding country's future behavior falls smack into the tradition of unilateralism. One reason the anti-China trade campaign is particularly disturbing is that it comes on the heels of a series of recent unilateralist acts, the most prominent of which have been Washington's cruise missile attacks on alleged terrorist targets in the Sudan and Afghanistan in August 1998, its bombing of Iraq in December 1998, and the US-instigated 12-week NATO bombardment of Kosovo in 1999. In all three cases, the US refused to seek UN sanction or approval but chose to act without international legal restraints. Serving as the gatekeeper for China's integration into the global economic community is the economic correlate of Washington's military unilateralism. Second, the anti-China trade campaign reeks of double standards. A great number of countries would be deprived of PNTR status were the same standards sought from China applied to them, including Singapore (where government controls the labor movement), Mexico (where labor is also under the thumb of government), Saudi Arabia and the Gulf states (where women are systematically relegated by law and custom to second-class status as citizens), Pakistan (where a military dictatorship reigns), Brunei (where democratic rights are non-existent), to name just a few US allies. What is the logic and moral basis for singling out China when there are scores of other regimes that are, in fact, so much more insensitive to the political, economic, and social needs of their citizenries? Third, the campaign is marked by what the great Senator J. William Fulbright denounced as the dark side of the American spirit that led to the Vietnam debacle-that is, "the morality of absolute self-assurance fired by the crusading spirit". (10) It draws emotional energy not so much from genuine concerns for human and democratic rights in China but from the knee-jerk emotional ensemble of anti-communism that continues to plague the US public despite the end of the Cold War. When one progressive organizer says that non-passage of the PNTR would inflict defeat on "the brutal, arrogant, corrupt, autocratic, and oligarchic regime in Beijing", the strong language is not unintentional: it is meant to hit the old Cold War buttons to mobilize the old anti-communist, conservative constituency, in the hope of building a right-left populist base that could-somehow-be directed at "progressive" ends. Fourth, the anti-China trade campaign is intensely hypocritical. As many critics of the campaign have pointed out, the moral right of the US to deny permanent normal trading rights to China on social and environmental grounds is simply nonexistent given its record: the largest prison population in the world, the most state-sponsored executions of any country in the world, the highest income disparities among industrialized countries, the world's biggest emitter of greenhouse gases, and quasi-slavery conditions for farm workers. (11) Fifth, the anti-China trade campaign is intellectually flawed. The issue of labor control in China lies at the core of the campaign, which blames China's government for the low wages that produce the very competitively priced goods that are said to contribute to displacing US industries and workers. This is plain wrong: the relatively low wages in China stem less from wage repression than from the dynamics of economic development. Widespread poverty or low economic growth are the main reasons for the low wages in developing countries. Were the state of unionism the central determinant of wage levels, as the AFL-CIO claims, labor costs in authoritarian China and democratic India, with its formally free trade union movement, would not be equal, as they, in fact, are. Similarly, it is mainly the process of economic growth-the dynamic interaction between the growing productivity of labor, the reduction of the wage-depressing surplus of rural labor, and rising profits-that triggers the rapid rise in wage levels in an economy, as shown in the case of Taiwan, Korea, and Singapore, which had no independent unions and where strikes were illegal during their periods of rapid development. (12) Saying that the dynamics of development rather than the state of labor organizing is by far the greatest determinant of wage levels is not to say that the organization of labor is inconsequential. Successful organizing has gotten workers a higher level of wages than would be possible were it only the dynamics of economic development that were at work. It is not to argue that labor organizing is not desirable in developing economies. Of course, it is not only desirable but necessary, so that workers can keep more of the value of production for themselves, reduce their exploitation by transnational and state capitalist elites, and gain more control over their conditions of work. Sixth, the anti-China trade campaign is dishonest. It invokes concern about the rights of Chinese workers and the rights of the Chinese people, but its main objective is to protect American jobs against cheap imports from China. This is cloaking self-interest with altruistic rhetoric. What the campaign should be doing is openly acknowledging that its overriding goal is to protect jobs, which is a legitimate concern and goal. And what it should be working for is not invoking sanctions on human rights grounds, but working out solutions such as managed trade, which would seek to balance the need of American workers to protect their jobs while allowing the market access that allows workers in other countries to keep their jobs and their countries to sustain a certain level of growth while they move to change their development model. (13) Instead, what the rhetoric of the anti-China trade campaign does is to debase human rights and democratic rights language with its hypocrisy while delegitimizing the objective of protecting jobs-which is a central social and economic right-by concealing it. Seventh, the anti-China trade campaign is a classic case of blaming the victim. China is not the enemy. Indeed, it is a prisoner of a global system of rules and institutions that allows transnational corporations to take advantage of the differential wage levels of counties at different levels of development to increase their profits, destabilize the global environment by generalizing an export-oriented, high-consumption model of development, and concentrate global income in fewer and fewer hands. Not granting China PNTR will not affect the functioning of this global system. Not giving China normal trading and investment rights will not harm transnational corporations; they will simply take more seriously the option of moving to Indonesia, Mauritius, or Mexico, where their ability to exact concessions is greater than in China, which can stand up to foreign interests far better than the weak governments of these countries. What the AFL-CIO and others should be doing is targeting this global system, instead of serving up China as a proxy for it. A Positive Agenda The anti-China trade campaign amounts to a Faustian bargain that seeks to buy some space for US organized labor at the expense of real solidarity with workers and progressive worker and environmental movements globally against transnational capital. But by buying into the traditional US imperial response of unilateralism, it will end up eventually eroding the position of progressive labor, environmental, and civil society movements both in the US and throughout the world. What organized labor and US NGO's should be doing, instead, is articulating a positive agenda aimed at weakening the power of global corporations and multilateral agencies that promote TNC-led globalization. The first order of business is to not allow the progressive movement to be sandbagged in the pro-permanent normal trade relations, anti-permanent normal trade relations terms of engagement that now frames the debate. While progressives must, for the time being, oppose the more dangerous threat posed by the unilateralists, they should be developing a position on global economic relations that avoids both the free trade paradigm that underlies the PNTR and the unilateralist paradigm of the anti-PNTR forces. The model we propose is managed trade, which allows trading partners to negotiate bilateral and multilateral treaties that address central issues in their relationship-among them, the need to preserve workers jobs in the US with the developing countries' need for market access. Advocacy of managed trade must, however, be part of a broader campaign for progressive global economic governance. The strategic aim of such a campaign must be the tighter regulation, if not replacement, of the model corporate-led free market development that seeks to do away with social and state restrictions on the mobility of capital at the expense of labor. In its place must be established a system of genuine international cooperation and looser global economic integration that allows countries to follow paths of national and regional development that make the domestic market and regional markets rather than the global market the engine of growth, development, and job creation. This means support for measures of asset and income redistribution that would create the purchasing power that will make domestic markets viable. It means support for trade measures and capital controls that will give countries more control over their trade and finance so that commodity and capital flows become less disruptive and destabilizing. It means support for regional integration or regional economic union among the developing countries as an alternative to indiscriminate globalization. A key element in this campaign for a new global economic governance is the abolition of the International Monetary Fund, the World Bank, and the World Trade Organization that serve as the pillars of the system of corporate-led globalization and their replacement with a pluralistic system of institutions that complement but at the same time check and balance one another, thus giving the developing countries the space to pursue their paths to development. The IMF, World Bank, and WTO are currently experiencing a severe crisis of legitimacy, following the debacle in Seattle, the April protests in Washington, and the release of the report of the International Financial Institutions Advisory Commission (Meltzer Commission) appointed by the US Congress, which recommends the radical downsizing or transformation of the Bank and Fund. (14) Now is the time for the progressive movement to take the offensive and push for the elimination or radical transformation of these institutions. Yet, here we are, being waylaid from this critical task at this key moment by an all-advised, divisive campaign to isolate the wrong enemy! Another key thrust of a positive agenda is a coordinated drive by civil society groups in the North and the South to pressure the US, China, and all other governments to ratify and implement all conventions of the International Labor Organization (ILO) and give the ILO more effective authority to monitor, supervise, and adjudicate implementation of these conventions. This campaign must be part of a broader effort to support the formation of genuine labor unions in China, the Southern United States, and elsewhere in a spirit of real workers' solidarity. This, instead of relying on government trade sanctions that are really self-serving rather than meant to support Third World workers, is the route to the creation of really firm ties of solidarity across North-South lines. This social and economic program must be tied to a strategy for protecting the global environment that also eschews sanctions as an approach and puts the emphasis on promoting sustainable development models in place of the export-led, high-consumption development model; pushes the adoption of common environmental codes that prevent transnational firms from pitting one country against another in their search for the zero cost environmental regimes; and promotes an environmental Marshall Plan aimed at transferring appropriate green process and production technologies to China and other developing countries. Above all, this approach must focus not on attacking China and the South but on strategically changing the production and consumption behavior and levels in the North that are by far the biggest source of environmental destabilization. Finally, a positive agenda must have as a central element civil society groups in the North working constructively with people's movements in China, the United States, and other countries experiencing democratic deficits to support the expansion of democratic space. While the campaign must be uncompromising in denouncing acts of repression like the Tienanmen Square massacre and Washington's use of mass incarceration as a tool of social control, it must avoid imposing the forms of Western procedural democracy on others and hew to the principle that it is the people in these countries themselves that must take the lead in building democracy according to their rhythm, traditions, and cultures. Abandoning Unilateralism The anti-PNTR coalition is an alliance born of opportunism. In its effort to block imports from China, the AFL-CIO is courting the more conservative sectors of the US population, including the Buchananite right wing, by stirring the old Cold War rhetoric. Nothing could be a more repellent image of this sordid project than John Sweeney, James Hoffa, President of the Teamsters, and Pat Buchanan holding hands in the anti-China trade rally on April 12, 2000, with Buchanan promising to make Hoffa his top negotiator of trade, if he won the race for president. Some environmental groups and citizens groups which have long but unsuccessfully courted labor, have, in turn, endorsed the campaign because they see it as the perfect opportunity to build bridges to the AFL-CIO. What we have, as a result, is an alliance built on the assertion of US unilateralism rather than on the cornerstone of fundamental shared goals of solidarity, equity, and environmental integrity. This is not a progressive alliance but a right-wing populist alliance in the tradition of the anti-communist Big Government-Big Capital-Big Labor alliance during the Cold War, the labor-capital alliance in the West that produced the Exclusion and Ant-Miscegenation Acts against Chinese, Japanese, and Filipino workers in the late 19th and early 20th centuries, and, more recently, the populist movement that has supported the tightening of racist immigration laws by emphasizing the divide between workers who are citizens and workers who are not, with the latter being deprived of basic political rights. It is a policy that will, moreover, feed global instability by lending support to the efforts of the US right and the Pentagon to demonize China as The Enemy and resurrect Containment as America's Grand Strategy, this time with China instead of the Soviet Union as the foe in a paradigm designed to advance American strategic hegemony. As in every other instance of unprincipled unity between the right and some sectors of the progressive movement, progressives will find that it will be the right that will walk away with the movement while they will be left with not even their principles. It is time to move away from this terribly misguided effort to derail the progressive movement by demonizing China, and to bring us all back to the spirit of Seattle as a movement of citizens of the world against corporate-led globalization and for genuine international cooperation. References
Blowback. A Critical Review of an Academic Defector's Guide to America's Asia Policy (13 June 2000)
In his 4th of July speech in 1821, US President John Quincy Adams cautioned the young republic not to "go abroad in search of monsters to destroy." Such a trajectory, he said, would involve Washington "beyond the power of extrication, in all the wars and interest and intrigue, of individual avarice, envy, and ambition." As a result, "she might become dictatress of the world. She would be no longer the ruler of her own spirit."
My recollection of Adams' warning was triggered while reading Blowback: The Costs and Consequences of American Empire (New York: Henry Holt and Co., 2000). For this excellent piece of engaged scholarship documents how the United States, by ignoring the advice of a long and distinguished line of American thinkers, from Adams to Mark Twain to Senator J. William Fulbright, has indeed become "dictatress of the world," one that is spinning out of control and is no longer even "the ruler of her own spirit." This book, one of the most significant works on US-Asia relations to see print in recent years, is important not only for what it says but for who says it. Chalmers Johnson is one of the United States' preeminent experts on Asia. His Peasant Nationalism and Communist Power was one of the most insightful works on the social bases of the Chinese Revolution. His work MITI and the Japanese Miracle institutionalized the model of Japan as a capitalist economy sui generis whose rise could not be understood using the paradigm of standard neoclassical economics, without reference to the central role of an activist, interventionist state. And yet, earlier in his career, Johnson and his work were embedded in the American political science establishment, which had very close links to official Washington and for whom the role of scholarship was not just to understand the world but to understand the world so that the US could control events globally. While a professor at the University of California at Berkeley, the hotbed of student activism in the 1960's, Johnson was convinced that "the United States could not afford to lose in Vietnam." Now, he believes that that was "a disastrously wrong position," and, in retrospect, "I wish I had stood with the antiwar protest movement." In this volte-face, Johnson follows George Kennan, the formulator of the strategy of Containment, and Robert McNamara, the former Secretary of Defense, in adopting a more critical view of US policy upon their retirement from public service. But Johnson goes beyond both Kennan and McNamara to characterize US behavior both during the Cold War and the post-Cold War period not so much as mistaken as "imperial." This sea change he attributes to the greater knowledge he has gained in the last few years of the real workings of the US government, particularly its Department of Defense. America's Asia The picture he paints of America in Asia and the world is unremittingly negative. Why does the US maintain 39 bases in Okinawa, a small island the size of Los Angeles? To protect Japan? To contain Japan? Neither. The real reasons range from the mundane-Okinawa affords US military personnel a luxury lifestyle that would be unaffordable in the United States-to the transcendental: "to project American power throughout Asia in the service of a de facto US grand strategy to perpetuate or increase American hegemonic power in this crucial region." Why is the US in Korea? To achieve the Pentagon's trinitarian formula of securing stability, promoting the peace, and protecting democracy? Hardly, since the massive US military presence actually promotes instability, ensures that the peninsula is constantly on the knife-edge of war, and-having helped bring to power authoritarian regimes in the last 50 years- certainly has nothing to do with protecting democracy. Washington is in Korea for the same reasons it remains entrenched in Okinawa, and a North Korea that is portrayed as an unpredictable rogue regime provides an important rationale for keeping 30,000 troops on the peninsula. Keeping Korea structurally divided, Johnson implies, is part of the Pentagon's game plan for perpetuating its half-century-old toehold in mainland Asia. A military establishment that is out of control is today the determining force behind US foreign policy in Asia. And not only in Asia: witness, says Johnson, the way the Pentagon scuppered Washington's support for an international criminal court to bring to justice soldiers and political leaders charged with crimes against humanity and vetoed the US's signing the landmark December 1997 treaty banning land mines. The Defense Department also runs a semi-clandestine military training operation that gives it close operational ties with armies throughout the world-including the notorious Kopassus unit of the Indonesian military that was responsible for numerous human rights abuses during Suharto's rule. And the Pentagon stands at the apex of an extremely profitable military industrial complex, one of whose activities-massive arms sales-is one of the great forces of destabilization in the post-Cold War era. Strategic Power Johnson's emphasis on the role of the Pentagon is a healthy balance to the views of those analysts who emphasize the primacy of corporate interests in determining US foreign policy. Indeed, even when he examines developments in the regional economy, Johnson finds geostrategic considerations of central importance in explaining US behavior. In the case of the Asian financial crisis, for instance, one can interpret the American policy of promoting free markets and the free flow of capital as stemming either from a naive, indeed utopian, project to remake Asia's economies in America's image. Or alternatively, "one could conclude that having defeated the Fascists and the Communists, the United States now sought to defeat its last remaining rivals for global dominance: the nations of East Asia that had used the conditions of the Cold War to enrich themselves. In the latter view, US interests lay not in globalization but in bringing increasingly self-confident competitors to their knees." This explanation, Johnson indicates, is the more credible one, and as one who has looked at the crisis in more than superficial terms, I would have to agree with him that there is a lot going for it. Adopting a geostrategic perspective does not have to mean, however, that one holds that the military has the upper-hand in determining US foreign policy in all or most foreign policy debates on Asia, as Johnson appears to imply. Sometimes corporate interests are the leading force, and the agenda of US transnational corporations may sometimes conflict with the military's preferences. The case of the recent battle over permanent trade status for China, for instance, was a tactical victory for corporate forces driven by the illusion (for illusion it is!) of cornering the China market under the umbrella of an "engagement" approach and a setback for those, including key elements at the Pentagon, that are in favor of a "containment" strategy that would limit China's access to the foreign investment and the export markets that are central to strengthening that country's geostrategic position. Missing Dimension Johnson's obsession with the US military as a foreign policy actor also precludes him from subjecting to more than just superficial analysis the ideological dimension of Washington's global hegemony. The ideological dimension is, in my view, an equally central pillar of empire, for the US is driven not only by the pursuit of military power or economic power but also by a missionary idealism that is out to remake the world in America's image. When geoeconomic goals, like weakening or opening up America's economic competitors in Asia, are justified by invoking free-market ideology, this is not simply instrumental. When "exporting democracy" is invoked as a central consideration in US policy towards Haiti, Burma, Iraq, or Indonesia, it is not simply as a smokescreen for US strategic or corporate interests. The slight attention paid to ideological factors leads Johnson to totally neglect the US move, from the mid-eighties onwards, to shift its support from authoritarian dictatorships to formally democratic regimes from Manila to Santiago. Supporting the establishment of elite democracies modelled procedurally along Westminster or Washington lines performed several objectives: defusing revolutionary movements without changing conservative class structures, creating new and broader bases of local support for the US, and making American foreign policy more in line with the self-image of America as a bastion of democracy. It is against this ideological dimension, this sense of a global mission, however misguided, that we must interpret Secretary of State Madeleine Albright's statement cited by Johnson: "If we have to use force, it is because we are America. We are the indispensable nation. We stand tall. We see farther into the future." Or sociologist Seymour Martin Lipset's claim that the US remains the "exceptional nation." Or New York Times columnist Thomas Friedman's assertion that the US is the "world's role model" in the era of globalization. This volatile and sometimes unpredictable interaction of semi-autonomous military, corporate, and ideological drives that oftentimes move together but sometimes conflict is what makes US imperialism so complex, so dynamic, so destabilizing, and so confusing for the rest of the world. When democracy, as a mechanism of manufacturing "consensus" from the dominated, becomes an essential weapon of the empire, we are dealing with a force that is very different from the old imperial powers. This is ultimately an imperialism that is driven not simply by the search for strategic primacy, not only by corporate expansionism, but also by the drive for global ideological hegemony-a feverish complex that ultimately stems from the contradictory origins of America as a relentlessly expansionist settler colony of white Europeans rebelling against the British Empire in the name of achieving and spreading "freedom" and "democracy" understood in 18th century terms. Pointing out that Johnson's work has limitations in helping us unravel the dynamics of the American empire must not, however, detract from the critical importance of its central message that in the post-Cold War era, Washington has become more unilateral, less constrained by a respect for international law and institutions, more destabilizing, and more out of control. Blowback But although seemingly at the apogee of its power, the US actually finds itself, claims Johnson, in a condition of "imperial overstretch," a term he borrows from Paul Kennedy. Past deeds and policies are coming home to roost, whether in the form of the bombing of the World Trade Center in New York by Islamic Mujaheddin terrorists that were formerly supported by the CIA in Afghanistan, the export of cocaine to the US by "contras" that had been trained by Washington to overthrow the Sandinistas in Nicaragua, or the debasing of democratic discourse in official Washington's justification of its foreign policies, which has led to greater citizen distrust of suspicion of government. "Blowback," a CIA term for the boomerang effect of past policies, is turning the US into a Gulliver that is bleeding from a thousand and one cuts. And more blowback is in store for Wall Street and Washington: "The Americans buying...foreclosed properties in East Asia may believe that they are merely responding to the signals of market forces, but they would be fools to believe that the sellers agree with them." Indeed, "it is only a matter of time until the small nations of East Asia get rid of this American bullying and find a suitable leader to create an anti-American coalition." To prevent the dislocations for Asia and America of the inevitable resistance to US power and Washington's mailed-fist response to that resistance, Johnson suggests that the US withdraw its land base forces from East Asia, and, in the case of Korea in particular, couple its disengagement with support for the unification of the peninsula. Such an enlightened policy, Johnson says, would actually stabilize the region because a "unified, economically successful Korea would help ensure a genuine balance of power in East Asia rather than the hegemony of either China, Japan, or the United States. Such a policy would also be a a more effective way of instilling prudence in the foreign policy of an emerging China than our current pretense that we have the will, money, or patience to 'contain' China." Vision 2020 Great. But how much chance does Johnson have of being heeded by Washington? Virtually zero, if we are to believe a recent Washington Post report on the Pentagon's recent "defense guidance." In this still unreleased document, titled Joint Vision 2020, the Pentagon envisions Asia instead of Europe as the prime focus of US military in the coming decades, identifies China as a "peer competitor," and projects an indefinite military presence in Korea and Japan, even if the "threat" from North Korea disappears. There are now more attack submarines deployed to Asia than to Europe and more war games and strategic studies focused on Asia. In addition, the Pentagon has been busy constructing the diplomatic and political framework for the US military's "reentry in Southeast Asia." In this connection, notes the Post report, the revamped US military relationship with the Philippines represented by the Voluntary Forces Agreement (VFA) may be a model for Southeast Asia. Instead of building Okinawa-type bases "with bowling alleys and Burger Kings that are off-limits to the locals, US forces will conduct frequent joint exercises to train Americans and Filipinos to operate together in everything from disaster relief to full-scale combat." And to what end? As always, to "maintain regional stability," to use three of the most overused words in the Pentagon lexicon. Chalmers Johnson's Blowback blows this cover: the reality undergirding "Vision 2020" is that, after over 50 years of being deployed in Asia, America's legions are loath to go home, and their chiefs will do anything, even create new enemies, to create the illusion of their indispensability. The Association of Southeast Asian Nations: A Preliminary Autopsy (August 2000)
Four years ago, the Association of Southeast Asian Nations (Asean) seemed well on the way to becoming a real economic bloc. Today, it is in danger of joining such august predecessors as Maphilindo (Malaysia-Philippines-Indonesia) and the Southeast Asia Treaty Organization (Seato) in the proverbial dustbin of history.
The speeches at the opening of the organization's 33rd Annual Meeting in Bangkok on July 24 had a distinct "I-have-come-to-bury-Asean, not-to-praise-it" note to them. Thai Prime Minister Chuan Leek-Pai warned of the association's rapidly falling behind other regional economic blocs in global trade. But it was Singapore Foreign Minister S. Jayakumar who best captured Asean's near-terminal state when he described it as being stuck with the image of a "sunset organization" in international circles. Many observers agreed with Jayakumar's characterization, although some questioned whether it was appropriate for Singapore to lay out this assessment in its usual self-righteous fashion since the city-state has contributed to Asean's disarray by profiting from the financial plight of its neighbors, in particular Indonesia and Malaysia. Currency Crisis Again Accentuating the funereal mood at the meeting was the backdrop of renewed economic crisis in the region, which saw foreign investors and currency speculators savage the region's currencies. The baht fell to a nine month low at the opening of the meeting on July 24. A week earlier, the Indonesian rupiah hit a 21 month low and the Philippine peso registered a 20 month low, prompting Philippine President Joseph Estrada to warn of a repeat of the 1997 financial crisis during his State of the Nation address in Manila. A sign of Asean's all-talk-and-no-act show is that at no point in the current currency crisis has there been any serious effort to activate the regional currency swap arrangements that the Asean countries agreed to set up with Japan, South Korea, and China during the Asian Development Bank annual meeting in Chiang Mai, Thailand, last May. The scheme essentially pooled reserves that could be drawn on to support a country's currency if it was subjected to speculative attack. If ever there was a time to test this so-called "firewall" against financial crisis, it was in the last two weeks. Afta Unravels Like currency stabilization scheme, Asean's blueprint for regional integration, the Asean Free Trade Area (Afta), is falling apart. For the six founding members of Asean, free trade was intended to be fully effective by 2002, with Vietnam achieving the same status by 2006, Laos and Myanmar in 2008, and Cambodia by 2010. Now there are doubts that the six founding members will be able to meet their schedule. Even before the financial crisis, governments had earmarked sensitive farm products for exemption from the implementation schedule, resulting in what observers jokingly described as "mile-long" exclusion lists. But, to many, the nail in the coffin of the 30-year-old dream to build a regional bloc was Malaysia's strong opposition to liberalizing its auto industry, which forced other Afta members to allow it last May to keep its high tariffs on car imports until 2005. Following Malaysia's move, other countries have pushed to extend their deadlines-a fact reflected in the joint statement issued at the end of this year's ministerial meeting that rules were being worked out to allow countries "experiencing real difficulties" to temporarily withdraw "sensitive" products from the Afta schedule. Some founding governments are reportedly opting for pushing the advent of regional free trade to 2010. The desire to push back the free-trade deadline seems to stem from a desire to protect domestic economies that are still reeling from the 1997 crisis. It is, however, unlikely that this is the only or even the main reason. There are clearly other factors at play. One is that the spur towards preferential regional trade that was provided by the competition from Apec (Asia-Pacific Economic Cooperation) has disappeared with the demise of that grouping as a serious trade body. During its apogee in the mid-1990s, Apec threatened to become a formal free trade area covering the area from San Francisco to Auckland. The establishment of Afta in1992 and its reinvigoration in 1996 clearly was a direct response to APEC. Had there been serious movement on the Apec 2020 Plan, the whole Asean project of preferential regional trade and economic cooperation would have been rendered irrelevant. Equally important is the fact that different governments had different visions of regional free trade. Some, like Philippines and Singapore, where free market views dominate among trade technocrats, saw the reduction of tariffs regionally as a step towards eventual integration into a global free trade system. Others, like Indonesia and to some extent Malaysia, saw regional preferential trade as creating a large, protected regional market that would stimulate regional industrialization via import substitution. Asean-EU Contrast Related to these conflicting visions was the failure to accompany the plan for regional free trade with strategies for regional economic integration in industry and agriculture. The purpose of such arrangements would have been to ensure that for each and every country, the benefits from greater market integration would be greater than the costs. It was the presence of industrial and agricultural planning that made the difference in Europe, that gained the adherence of European governments to regional free trade. Indeed, in the European case, transborder industrial planning in the form of the European Coal and Steel Community preceded the establishment of the Common Market in 1957. Moreover, as analyst George Ross has pointed out, the Common Market "was a circumscribed and protected playing field for trade, involving the pooling of limited, carefully chosen areas of sovereignty, designed less to transcend national sovereignty than to help EU member states pursue national growth strategies". In other words, regional arrangements did not diminish but enhanced national economic capabilities-something that Asean members do not see in Afta. This is not to say that industrial policy schemes did not exist. There have been several, from the Asean Industrial Projects to the Asean Industrial Complementation Scheme (AICO). It has been local industries and governments that have taken advantage of these arrangements, however, but Japanese car manufacturers like Toyota and Isuzu which see AICO, for instance, as a means to integrate their regional operations for maximum penetration of the different national markets. Indeed, in the current economic crisis, a strategic industrial policy tool like AICO has been degraded into an inventory-reduction scheme by Isuzu. According to Marc Castellano of the Japan Economic Institute, the auto manufacturer has used AICO to "establish a flexible truck-supply scheme...that would enable the company to distribute its large-sized truck inventory among Asean countries to meet changing trends in demand. Asean countries charge a 33 per cent levy on assembled vehicles imported from Japan but only a 5 per cent duty on those coming from other association members. Upon approval, Isuzu, for example, could ship trucks made at its Thailand plant to Indonesia, where the demand for trucks is recovering. Most importantly, the swap plan will help reduce inventories, which remain excessive as a result of the economic crisis". Asean's Achilles Heel As the Asean economic project unravels, one of the things that emerges is the absence of any significant constituency for it, except perhaps for fractions of the technocrat and industrial elites in each country. This is another manifestation of the democratic deficit in Asean, which is now turning out to be its Achilles Heel. Regional economic integration has remained something that has been tossed around only among the region's elites, and because it lacks a mass constituency, there is no other engine to push it once political will among the elites falters. Few people in Asean will miss AFTA when its corpse is finally interred. Indeed, few will miss Asean, which will probably be footnoted by future historians as the regional elite club during Southeast Asia's pre-democratic period. The Prague Castle Debate: A Few Questions for Mr. Wolfensohn and Mr. Kohler (October 2000)
On September 23, 2000, President Vaclav Havel of the Czech Republic hosted an historic debate between the heads of the Bretton Woods institutions and their civil society critics. The event took place at the historic Prague Castle-immortalized in Franz Kafka’s allegoric tale The Castle-a few days before the World Bank-IMF annual meeting in the Czech capital. Attended by about 300 invited guests from governments, the multilateral institutions, the academy, and civil society, the event quickly turned into a heated exchange. The Washington Post reported that "although [the NGO’s ] complaints have been heard before, they rarely have been delivered in a setting at once so intimate and so public. And not surprisingly, Wolfensohn and Koehler took it all a bit personally". On one side were Horst Kohler, IMF managing director, World Bank President James Wolfensohn, George Soros, the financier, and Trevor Manuel, South Africa’s finance minister. On the other side were Katrina Liskova, a representative of militant Czech NGO’s, Ann Pettifor, head of Jubilee 2000 in the United Kingdom, and Walden Bello, executive director of Focus on the Global South. The debate was chaired by Mary Robinson, the United Nations Human Rights Commissioner and former President of Ireland.
The following is an edited composite version of the Focus director’s two lengthy interventions during the debate. Data presented by Bello to support his points were taken from a variety of publications and reports. I would like, first of all, to thank President Havel for staging this debate today, and President Robinson for chairing it. I never thought I would be seating so close to Jim Wolfensohn. I guess this is what you call combat in close quarters. The International Monetary Fund and the World Bank have avoided a real debate with their critics in civil society for a long time. Today, the representatives of these two institutions are here, partly because of President Havel’s moral suasion, partly because they realize that, with their two institutions suffering an unparalleled crisis of legitimacy-the worst in their 56-year history, in fact-the old strategy of denial and non-confrontation no longer works. In this brief presentation, let me tackle four myths propagated by the Bank and the Fund, and end with questions to Mr. Kohler and Mr. Wolfensohn: Myth No. 1: The World Bank and IMF are proponents of "good governance". Fact: For the greater part of the last 30 years, the Fund and the Bank have been intimately associated with very corrupt governments and human rights violators. What did the Brazilian military dictatorship, Ferdinand Marcos, Gen. Pinochet, the PRI government in Mexico, and the Suharto regime have in common? They were all governments or heads of governments that were designated by the World Bank as "countries of concentration"-that is, countries to which the flow of Bank resources was greater than to other countries of similar size and income. Over the last 30 years, over $30 billion in World Bank funds found its way to the Suharto dictatorship. According to several reports, including a World Bank internal report in 1999, the Bank tolerated corruption, accorded factual status to false government statistics, legitimized the dictatorship by passing it off as a model for other countries, and was complacent about the state of human rights and the economy. This happened under your watch, Mr. Wolfensohn, and the people of Indonesia will never forgive the Bank. Myth No. 2: The IMF and the World Bank are concerned with the degradation of the environment. Fact: Again and again, studies of the impact of IMF-World Bank structural adjustment programs have shown that, by institutionalizing stagnation and high poverty levels, they have been among the biggest contributors to environmental degradation in developing countries. In my country, the Philippines, for instance, so deep was the crisis triggered in the mid-1980’s by structural adjustment in both the countryside and the cities that the population flow shifted away from the cities to open access forests, watersheds, and artisanal fisheries, severely destabilizing them in the process. Studies show that by the early nineties, the top 15 Third World debtors-all of which were subjected to structural adjustment-had tripled the rate of the exploitation of their forests since the late 1970s, a phenomenon that was undoubtedly caused by the adjustment program’s pushing countries to rapidly increase their export earnings to pay off the foreign debt. It is not sensitivity to the environment that is demonstrated by Mr. Wolfensohn and the World Bank management’s unyielding support for the Chad-Cameroon Pipeline, which will seriously damage ecologically sensitive rainforests like Cameroon’s Atlantic Littoral Forest. It is not concern for the environment that was revealed by the World Bank’s violation of its own rules on environmental assessment, involuntary resettlement, indigenous peoples, and environmental assessment in its failed attempt to push through the China Western Poverty Project that would have transformed an arid ecosystem supporting Tibetan and Mongolian sheepherders into land for settled agriculture for Chinese migrants. A look at the Bank’s loan portfolio would reveal the reality behind the rhetoric: loans for the environment as a total of the Bank’s total loan portfolio declined from 3.6 per cent in FY 1994 to 1.02 per cent in 1998; funds allocated to environmental projects declined by 32.7 per cent between 1998 and 1999; and more than half of all lending by the World Bank’s private sector divisions in 1998 was for environmentally harmful projects like mining, roads, and power. Indeed, so marginalized is the Bank’s environmental staff within the bureaucracy that Herman Daly, the distinguished ecological economist, left the Bank staff because he felt he and other in-house environmentalists were having very little impact on Bank policy. Myth No. 3: The Fund and the Bank are dedicated to combating poverty. Fact: The opposite is true: the IMF and the Bank are central to creating poverty. Structural adjustment programs imposed on over 90 developing and transition economies in the last 20 years have institutionalized economic stagnation, increased poverty, and exacerbated inequality in these areas. A recent World Bank study, in fact, admits that poverty worsened in the 1990’s in Eastern Europe, Subsaharan Africa, Latin America and the Caribbean, and South Asia-all regions which have come under the sway of World Bank-IMF adjustment programs. Indeed, so bad was the record of adjustment programs that the IMF renamed the Extended Structural Adjustment Facility (ESAF) the Poverty Reduction and Growth Facility during the World Bank-IMF meeting in September 1999. So devoid of success was the structural adjustment approach that Larry Summers, the US Treasury Secretary, who, as chief economist of the Bank in the early 1990’s, was a partisan of adjusment, admitted to the US Congress last year that it was time to shelve the "IMF-centered" macroeconomic approach because it just was not working. Recently, the IMF has been busy creating poverty in East Asia. There is now a consensus that the harsh program of high interest rates and budget cutbacks imposed by the Fund turned an economic crisis into a full-blown recession that saw negative growth rates in Thailand, Indonesia, and South Korea accompanied by a sharp rise in unemployment and the poverty rate. At least 1 million people fell into poverty in Thailand and 21 million in Indonesia. In Korea, the trend of declining poverty rates between 1975 and 1995 was sharply reversed in 1998, and the recession led to a suicide rate in 1998 that was 59.4 higher than in 1997. As for the World Bank, the truth about Mr. Wolfensohn’s crusade to end global poverty was revealed by the findings of the bipartisan Meltzer Commission mandated by the US Congress to look at the record of the Bretton Woods institutions: 70 per cent of the Bank’s non-grant lending is concentrated in 11 countries, with 145 other member countries left to scramble for the remaining 30 per cent; 80 per cent of the Bank’s resources are devoted not to the poorest developing countries but to the better off countries that have positive credit ratings and can raise their funds in private capital markets; the failure rate of Bank projects is 65-70 per cent in the poorest countries and 55-60 per cent in all developing countries. So why does the Bank continue to pontificate about going about its "noble mission" to end poverty? Because it has learned from Joseph Goebbels that a lie repeated often enough eventually attains the status of truth. Myth No. 4: The Fund and the World Bank are actively soliciting the help of civil society. The truth is that the World Bank and IMF are mainly interested in using civil society to legitimize their unchanged approaches via consultations that are really monologues. The Bank and the Fund are more interested in splitting civil society opposition to their projects, and they do this by branding some civil society groups as "reasonable NGO’s" and their more militant critics as "unreasonable NGO’s" interested only in "closing down discussion". Certainly, dialogue with NGO’s was not the intent of Mr.Wolfensohn when he avoided debate on the merits and demerits of the Chad Cameroon Pipeline in favor of a strategy of name-calling by branding opponents of the project as the "Berkeley Mafia". Let me end by addressing the question: Are the Fund and the Bank capable of reform? I think we will know the answer from Mr. Kohler and Mr. Wolfensohn’s answers to the following questions:
- Mr. Kohler, do you propose to give greater decisionmaking power in the IMF Board to the developing countries? Will you do this by diluting the voting power of the United States and the European Union countries that now dominate the board?
So far, what we have been told here today is that Mr. Wolfensohn feels good about going to work everyday and that Mr. Kohler also has a heart. This frothy stuff is not the response that we in civil society are looking for today. We want hard answers to hard questions. Please. |