|
In my first diary yesterday, I questioned whether, as Chris argued, another wave election victory for Democrats, based primarily on the Iraq War, would be enough to produce a genuine realignment, and the overthrow of the conservative coalition. I picked up on David Sirota's diary about a three-country expansion of NAFTA, and agreed that this sort of politics had proven deadly for Democrats in 1994, but disagreed somewhat about why and how.
In my second diary, I looked at Naomi Klein's reframing of "free market" conventional wisdom in her new book, The Shock Doctrine, and a 7-minute trailer for it. The "free market" is not natural, inevitable, noncoercive and beyond politics-as, for example, neocon Frances Fukiyama argued in The End of History--but rather the product of deliberate anti-democratic interventions carried out when societies are helpless to resist.
This is, of course, one of the key dynamics in Iraq. Although Saddam was a brutal dictator, he kept Iraq's basic social contract intact. Iraq was a Western-style welfare state, based on its oil wealth, with a highly educated middle class. The oil law we are trying to impose is central to changing all that, transferring enormous wealth to oil companies, and leaving Iraq with a vastly impoverished public sphere. (Which, of course, opens the way for "faith-based initiatives" of the Hamas, Hezboolah, even bin Laden persuasions.) The oil law is a key requirement of the Iraq Study Group recommendations- recommendations which some have proposed should form the foundation of the Democrats' alternative to Bush's endless war.
The fact that this oil law could be nonchalantly accepted in such a manner is indicative of how poorly we understand the nature of the political struggle we are in. Stealing Iraqs oil wealth-for that is what the oil law does-should be anathema, morally repugnant to us. That it is not is a reflection on our general ignorance of the "free market" dogma and its impact on the rest of the world. We simply fail to focus on the oil law because we do not see that larger movement of which it is part-a movement to extract as much wealth as possible from the poor people of the earth, which is what "free trade" is actually all about.
More on the flip.
|
"She Knows There's No Success Like Failure"
-- Bob Dylan, "Love Minus Zero (No Limit)"
The argument below is that "free market" reforms have failed to deliver economic growth and development as promised. But this is an argument within the framework of "free market" assumptions. As indicated by my introduction, and supported by Klein's book, one need not accept these assumptions. If the real purpose of "free market" ideology is to rationalize extremes of wealth and poverty, then it has been a tremendous success.
The fact that the ideology fails on its own terms, that it produces much slower rates of economic growth, is thus not just important for rejecting specific policies, but also for rejecting the ideology itself as a fraud and deception. If it were really about producing prosperity, then it would have been abandoned when it was clear that it didn't. The fact that it continues despite its failure is proof that it's purpose really is simply to rationalize the results that it actually produces-extremes of wealth and poverty. Thus, it is the perfect vehicle to continue the traditional rule of an aristocratic elite in the formal structures of modern democracy,
What's this about the failure of "free market" ideology you say? Ah, I thought you'd never ask...
"Free Market" Failure By The Numbers
In 2005, the Center for Economic Policy Research produced a report, "The Scorecard on Development: 25 Years of Diminished Progress." [PDF] This report is entirely within the framework of accepting the "free market" claims on their face, and thus what it shows is a record of failure.
Let's be clear, in most of the world, most people's livers are getting better. But the poor are living in poverty much deeper and much longer than necessary. What this report shows is that the rate of improvement has slowed dramatically under "free market" policies that have been dominant internationally since 1980. At the same time, global elites are doing just fine, thank you.
The paper's executive summary begins thus:
This paper looks at the available data on economic growth and various social indicators - including health outcomes and education - and compares the last 25 years (1980-2005)1 with the prior two decades (1960-1980). The paper finds that, contrary to popular belief, the past 25 years (1980-2005) have seen a sharply slower rate of economic growth and reduced progress on social indicators for the vast majority of low- and middle-income countries.
It then goes on to explain a crucial point about its methodology, so that we understand what is being compared:
Countries are divided into quintiles on the basis of their starting point at the beginning of each period. The study therefore does not compare the performance of the same country over the two periods, because this would tend to find reduced progress for the second period due to "diminishing returns." In other words, it would be more difficult for a country to move from a life expectancy of 70 to 75, than from 50 to 55. By comparing the performance of countries that start out at a certain level in 1960, with countries that start out at the same level in 1980, this study avoids the possibility of interpreting such inherent limits on progress as evidence of failure in the second period.
As the authors explain later on, this methodology is more than fair to the "free market" model:
In fact, this methodology should bias the data towards finding better results for the second period. There should generally be possibilities for countries to gain by borrowing from the technology and practices of other countries that are richer or have achieved higher levels of the various social indicators. As a result of the progress made in the first period, there were far more possibilities for faster improvement in the second period.
With that out of the way, the overview of findings begins:
A sharp fall-off in the growth of GDP per capita was found for all groups of countries except the bottom quintile. (See Figure 1) In the fourth quintile, marked by per capita incomes between $1238 and $2364, growth falls from 2.4 percent annually in the first period to 0.7 percent in the second period. To get an idea how much difference this makes over time, at 2.4 percent growth the country's income per person will double in about 29 years. At 0.7 percent growth, it would take 99 years.
The middle quintile, with GDP per capita between $2364 and $4031, drops from a 2.6 percent growth rate in the first period to 1 percent in the second. The second quintile ($4086-8977) falls even further: from 3.1 percent in the first period to 1.3 percent in the second period.
Even the top quintile, which at $9012 to $43,713 contains a mixture of middle-income and highincome countries shows a sizeable falloff in growth, from 2.6 percent in the first period to only 1.3 percent in the second period. The only group which does not show a slowdown in growth is the bottom quintile, with per capita income between $355 and $1225 annually, where growth increases slightly, from 1.7 to 1.8 percent. However this is still not a good average performance for the poorest developing countries, and the slight improvement disappears without India and China.
This is the key finding of the report, since economics is what "free market" ideology cares about and talks about most of all. As one can see from the chart, the diminished progress is striking:
Figure 1:
I'll have more to say about this below, after introducing the rest of the findings. Next comes life expectancy, the broadest indicator of health and well-being:
A decline in the rate of improvement for life expectancy was found for the vast majority of low- and middle-income countries. (See Figure 2) The biggest drop was in the fourth quintile, with life expectancy between 44 and 53. These countries saw an average annual increase of 0.56 years for 1960-1980, but almost no progress - 0.03 years for the second period. Over 20 or 25 years this makes a large difference. For the first period, countries in this quintile increased their life expectancy by about 11 years. If this rate of improvement had continued, the countries in this quintile in the second period would have raised life expectancy by 12 years; instead they saw an increase of only 0.7 years. The bottom, middle, and second quintiles also saw declines in the rate of progress. The only exception was the highest quintile, with life expectancy between 69 and 76 years. This quintile showed some improvement in the second period, which was driven by the highincome countries in the group.
Figure 2:
The report then looks at various components of longevity:
A decline in the rate of improvement for adult mortality was found for male and female adults, for most groups. (See Figures 5 and 6). For females, all quintiles except the best one show worse performance for the second period, with the fourth quintile showing an actual increase (rather than a decline in the rate of reduction) in mortality rates. For males, the bottom three quintiles show worse performance for the second period, with the fourth quintile showing an actual increase in mortality rates.
A decline in the rate of progress for child (under 5) mortality was found across all quintiles, although the reduction in progress is relatively small in the top two quintiles. (See Figure 7).
A decline in the rate of improvement for infant mortality was found for all groups of countries. (See Figure 8).
Infant and child mortality are widely used as general indicators of social welfare, since children at these ages are particularly vulnerable, while parents will generally do anything in their power to save the lives of their children.
Figure 7:
Figure 8:
Finally, education-a key component in driving economic development, as well as empowering individual autonomy-suffers as well:
A reduction in the rate of increase of public spending on education was found for all groups of countries. (See Figure 9). For the higher income countries, this is partly attributable to demographic changes.
A reduction in the rate of increase in secondary school enrollment was also found across all groups of countries, in addition to a reduced rate of increase for primary school enrollment for the bottom two quintiles.
This is, in short, a record of sweeping failure. The figures prove it. The authors, in keeping with the world of scholarly research, are quite subdued in drawing conclusion:
Implications
Over the past 25 years a number of economic reforms have taken place in low and middle-income countries. These reforms, as a group, have been given various labels: "liberalization," "globalization," or "free-market"(2) are among the most common descriptions. Among the reforms widely implemented have been the reduction of restrictions on international trade and capital flows, large-scale privatizations of state-owned enterprises, tighter fiscal and monetary policies (higher interest rates), labor market reforms, and increasing accumulation of foreign reserve holdings. There is a general consensus that the majority of developing countries have benefited economically from the reforms, even if they have sometimes been accompanied by increasing inequality or other unintended consequences.
The evidence in this paper indicates that this consensus could be mistaken. The trends in growth rates and social indicators are overwhelmingly in the same direction, showing a reduced rate of progress over the last 25 years. It is generally difficult to show a clear relationship between any particular policy change and economic outcomes, especially across countries. There are many changes that take place at the same time, and causality is difficult to establish. It is certainly possible that the decline in economic and social progress that has taken place over the last 25 years would have been even worse in the absence of the policy changes that were adopted. But that remains to be demonstrated. In the meantime, a long-term failure of the type documented here should at the very least shift the burden of proof to those who maintain that the major policy changes of the last 25 years have raised living standards in the majority of developing countries, and encourage skepticism with regard to economists or institutions who believe they have found a formula for economic growth and development. Most importantly, the outcome of the last 25 years should have economists and policy-makers thinking about what has gone wrong.
(2) The latter term, as well as "free trade," is inaccurate as a matter of economics, since the reforms have included very costly forms of protectionism - e.g. increased patent and copyright protection - as well as such policies as fixed exchange rates, which are the opposite of "free-market" policies.
That's all well and good for the policy-making world, where everyone involved is well-fed. But for the people experiencing it first hand, not so much. A little stronger response seems quite warranted, and that, indeed, is what we have been seeing, particularly in Latin America.
Did I just say, "Latin America"?
One region that has been particularly affected by this growth slowdown has been Latin America. Income per capita for the region grew by more than 80 percent from 1960-1979, but only about 11 percent from 1980-2000 and 3 percent for 2000-2005. This has been a drastic change. If Brazil, for example, had continued to grow at its pre-1980 rate, the country would have European living standards today. Mexico would not be far behind. Instead, the region has suffered its worst 25-year economic performance in modern Latin American history, even including the years of the Great Depression. This is a region that adopted many of the policy reforms that have characterized the last 25 years. The average tariff on imported goods was cut by about half from 1970 to 2000.9 Controls on the inflow and outflow of investment were either removed or drastically reduced in most countries. Privatization of state-owned enterprises was undertaken on a massive scale: it amounted to 178 billion dollars in the 1990s, more than 20 times the value of privatization in Russia after the collapse of the Soviet Union.10 Latin American countries also adopted more than 80 IMF programs during the last 25 years. These programs generally required higher real interest rates as well as budget cuts, which led to reductions in social spending - as well as other forms of liberalization.
As a result of this long-term economic failure, many Latin Americans have blamed the reforms, which are often labeled "neoliberalism" there. In the last seven years there have been a number of elections - in Venezuela, Argentina, Brazil, Ecuador, and Uruguay - where the winning candidates campaigned against "neoliberalism," and political unrest in other countries based on the same theme. Still, the long-term growth slowdown, whether in Latin America or in the developing world generally, has attracted little attention or debate in policy circles in the United States.
It's amazing how many people on Dkos and elsewhere in the left blogosphere fall for and even actively promote the demonization of Hugo Chavez, with no notion at all of why he is so popular. This little overview says it all. Would we have tolerated such extreme and prolonged economic stagnation? Our own history of unrest during the Great Depression strongly suggests we would not.
Let me reiterate what the authors wrote: "If Brazil, for example, had continued to grow at its pre-1980 rate, the country would have European living standards today." Brazil is by far the largest country in Latin America. It dominates the continent of South America, even more than the US dominates North America. If it had achieved European living standards today, the rest of the continent would surely have experienced spill-over benefits in addition to their own higher growth rates. Most of all, its example would have given powerful assurances of hope for even the poorest people of Latin America.
Needless to say, this is far from the reality of Latin America today. Yet, this vastly different alternative present was not just possible, it was highly probable until the "free market" crowd had their way with things.
But what about America, you say?
Funny you should ask. For that, I commend you to the inagural post of Paul Krugman's new blog, which starts off with this brief passage from his new book, The Conscience of a Liberal:
"I was born in 1953. Like the rest of my generation, I took the America I grew up in for granted - in fact, like many in my generation I railed against the very real injustices of our society, marched against the bombing of Cambodia, went door to door for liberal candidates. It's only in retrospect that the political and economic environment of my youth stands revealed as a paradise lost, an exceptional episode in our nation's history."
This is what realignment politics is all about--recapturing paradise lost. |
STATE BLOGS
