Thursday, 11 March 2010

Inequities: from top to bottom

With capitalism structured so thoroughly towards enhancing and protecting ever more concentrated wealth, it is a wonder First Nations communities are blindly signing on to 'economic development' without taking a closer look. I am all for making a living for First Nations communities and with this comes some difficult choices. Do we mine, or don't we? Clearcuts? Cultural tourism? Dams? The list of exploitables goes on and on, while our people remain, with less and less. I have been thinking about globalization lately. Kind of a higher level view of how state governments of the developed world, use the inherently exploitive (and dogmatically accepted) structure of economics we recognize as capitalism to control and coerce other less powerful governments. In the end, the rich get richer and the poor get poorer. It is easy to parellel this to Indigenous economies and how state governments, utilizing capitlism, partnered with liberal statism, to control, steal and exploit lands and resources, with no long term investment in the local territories. As we have witnessed, this lack of connection only exasperates the problem by taking away any accountability to the land. When the land is exhausted, the companies and its management move to the next territory, while the people remain.

Introduction:

Globalization has sparked a heated debate among globalists and skeptics about whether liberalizing trade produces a net economic benefit to the overall international community as it is claimed by its proponents. The primary claims are that of increased wealth and a reduction in poverty. There is a growing body of evidence that challenges these assumptions, however, which highlight the growing wealth disparity between developed countries and those that are in the unenviable category of developing. It is important to remember the origins of today’s economic policies and realize the very principles espoused by the developed world are not followed domestically. Uncovering the current hypocritical attitudes of the richer countries exposes the motives underlying their platitudes; that of enhancing their wealth while minimizing competition.

Washington Consensus

“As economic activity becomes increasingly concentrated in the regional cores of the OECD, the result is to limit or block the development prospects of many less develop states” – Held & McGrew

The Washington Consensus is a set of economic policies that are prescribed to developing countries as part of a reform package that comes conditionally with development loans through institutions such as the International Monetary Fund (IMF) and the World Bank (WB). The past twenty years have provided many opportunities to witness the effects of these policies on improving the lives and economies of the developing world. Unfortunately the results are uninspiring. It seems the more purely that a country follows the conditions attached to the loans the worse off their economy becomes. Argentina and Bolivia are examples of ardent followers. They signed on to privatization, deregulation, trade liberalization, tax reform in the early 1990’s. In 2001 Argentina’s economy collapsed (Finnegan 42). Although rich in natural resources after forced structural adjustment Bolivia began its decline and after 15 years it remained the poorest country in South America. It is now paying more to service its debt than it does on health care (Ibid. 45). Even with a diverse clientele located throughout the world (states in sub-Saharan Africa, Latin America, and the ex-Soviet Union), the development loan conditions are surprisingly similar and equally ineffective (Held & McGrew 17).

One of the examples usually given for the promotion of globalization lies in Asia, but if we look at these economies, which are supposedly the “best-performing globalizers” according to a WB study (Taming Globalization 41), we run into countries such as China and India who remain highly protective of their economies and maintain policies that the WB would readily denounce if they had not been growing as fast as they are (Ibid. 31). Even the Four Tigers’ (Hong Kong, Singapore, South Korea and Taiwan) success has been largely attributed to “highly protective tariffs around infant industries, which is contrary to the dogma of the Washington Consensus” (Finnegan 46). These developed countries promote neoliberalism, while their domestic policies are often significantly different.

Hypocrisy

“States matter, above all other political entities, and world order is decisively shaped by the most powerful states” – Held & McGrew

During the industrial age nations maintained protective trade barriers around their infant industries and as their growth continued they slowly liberalized their trade, which is the “basis for the common misunderstanding that trade liberalizing fueled their growth” (Taming Globalization 32). As examples have previously shown, for any country to be able to compete with other developed nations, they need to protect their vulnerabilities against external threats. So why does the WB and IMF insist on developing countries eliminating these protections as a precondition of any development loans? It seems that all of the virtuous talk about liberalized free trade reducing poverty and increasing wealth may not be the primary reason after all. As William Finnegan notes, “the US shoves free trade doctrine down the throat of every country it meets while practicing, when it pleases, protectionism (49)…It is a system of control. It is an economics of Empire” (42). Open markets mean more buyers for the rich countries at a time when the industries within the poor countries cannot compete against sophisticated mass-produced competitors.

Wealth and Power

“The truth is, no government practices free trade…it is a credo, a chimera, a utopian conceit” - Finnegan

It is all about wealth and power. Neoliberalism is conditionally forced on developing nations by the very parties that will benefit from it the most. Naturally since they have most of the world’s wealth, they can afford to lend money to ‘help’ other poorer nations, but everything in capitalism comes at a price. Liberalized markets concentrate benefits among the wealthy, which only further solidifies historic inequalities of dominance and dependence (Finnegan 45; Held & McGrew 85). The IMF and WB externally control nations by threatening to withdraw funding if countries fail to change their policies toward creating “import-replacing” industries that do not challenge those of the West (Taming Globalization 39). The US has created a profitable industry out of these loans. It is estimated that for every dollar contributed to these organizations, American corporations receive $1.35 in procurement contracts (Finnegan 45). To ensure that developing countries continue only to export raw materials, instead of creating even the beginning stages of industrial development by adding value to their products, rich countries charge tariffs in the aggregate four times higher against products coming from other rich countries (Ibid. 50). This condemns these poor countries to be the supplier to the developed world, a form of economic slavery with little recourse under the current system.

Discussion

It becomes clear that this system has no other drive than the control of capital into the hands of a few. We have an ultimately limited world economy due to the very simple fact that there is only one earth, so the need for constant growth in Gross Domestic Product (measure of economic activity within a country) cannot last forever. Even with services or businesses that do not process resources directly from the earth depend on money coming from companies and people that do. The same can be applied nationally. Indigenous peoples have long dealt with the blunt tools of capitalism in regards to their livlihoods within local territories. So is capitalism the way to go in repairing the damage or, as it has been framed, a way of regaining our self-determination as Indigenous peoples? In light of our current standard of living, capitalism is a real part of our lives and as with all things it is not completely all bad, although this is hard to realize when analyzing the forces at work within its system. The question becomes: are there ways of working to minimize capitalism's destructive force, while strengthening more equitable means of wealth distribution that take Indigenous values into account or will the system have to collapse before this becomes a viable possiblity?

References

Finnegan, W. (2003, May). The economics of empire. Harper’s Magazine. Available at http://ezproxy.tru.ca/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=9519699&site=ehostlive.

Held, D. & McGrew, A. (2007). Globalization/anti‐globalization: Beyond the Great Divide. Oxford: Polity Press.

Rose, Andrew K. (March 2004). Do We Really Know that the WTO Increases Trade? The American Economic Review. Vol. 94, No. 1, 98-114.

Stiglitz, Joseph E. (2003). Globalization and Development. In D. Held & M. Koenig‐Archibugi (Eds.), Taming Globalization: Frontiers of Governance. Chapter 2, 47–67. Polity Press.

Stiglitz, Joseph E. (April 2000). Two Principles for the Next Round or, How to Bring Developing Countries in from the Cold. World Economy. Vol. 23, Issue 4, 437-455.