This is a short and trenchant history of the organizations--the World Bank, IMF, WTO, and Group of Seven--that have promoted economic globalization and which are now trying to manage the unmanageable. Walden Bello points to their manifest failings, seen in recurrent financial crises, the ever widening gulf between developing and industrialized countries, the persistence of gross inequalities, and mass poverty. He examines new ideas for reforming world economic management, and argues that a much more fundamental and radical shift of direction is required.
About the Author
Walden Bello is the founding Director of Focus on the Global South, a policy research institute based in Bangkok, Thailand. His many books include A Siamese Tragedy (with Cunningham & Li Kheng Poh, Zed Books, 1999) and Global Finance (with Bullard & Malhotra, Zed Books 2000).
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Ideas for a New World Economy
By Walden Bello
Zed Books LtdCopyright © 2004 Walden Bello
All rights reserved.
Introduction: The Multiple Crises of Global Capitalism
This book is about the genesis and development of the current system of global economic governance and alternatives to it. It focuses on institutions that go under the rubric of multilateral institutions, specifically the G-8, the Bretton Woods institutions, and the World Trade Organization. While governance – a nice neutral word – is often described as the function of these institutions, a more appropriate description of their role might be maintenance of the hegemony of the system of global capitalism and promotion of the primacy of the states and economic interests that mainly benefit from it.
Around the mid-1990s, this system of global economic governance entered into crisis. The crisis of the multilateral institutions, however, is part of a bigger crisis of legitimacy that is affecting the system of global capitalism. The most obvious manifestation of this crisis was the growth of a powerful movement that confronted the representatives of the big powers, the big corporations and the multilateral organizations in city after city, meeting after meeting, the most historic being now known as the 'Battle of Seattle'. September 11 stopped the movement in its tracks, and many observers from the establishment confidently wrote it off as a significant global actor. As the massive assemblies in Barcelona in early March 2002 on the occasion of the European Union summit and in Porto Alegre a few weeks earlier at the World Social Forum (WSF) revealed, however, they were wrong.
It is the different dimensions of this broader crisis that are sketched out in this introduction. Specifically, we will look at six intersecting crises: those of multilateralism, the neoliberal vision and order, the corporation, the system of military hegemony, liberal democracy and the global production system.
From Triumph to Crisis
The last decade of the twentieth century began with the resounding collapse of the socialist economies of Eastern Europe and a lot of triumphalist talk about the genesis of a new market-driven global economy that rendered borders obsolete and rode on the advances of information technology. The key agents of the new global economy were the transnational corporations, depicted as the supreme incarnation of market freedom owing to their superior ability to bring about the most efficient mix of land, labour, capital and technology.
Halfway through the decade the World Trade Organization (WTO) was born. Partisans of globalization claimed it would provide the legal and institutional scaffolding for the new global economy. By creating a rules-based global system grounded in the primordial principle of free trade, the WTO would serve as the catalyst of an economic process that would bring about the greatest good for the greatest number. It was the third pillar of a holy trinity that would hold up the new economic order, the other two being the International Monetary Fund (IMF), which promoted ever freer global capital flows, and the World Bank, which would supervise the transformation of developing countries along free market lines and manage their integration into the global economy.
Multilateralism in Disarray
Yet even as the prophets of globalization talked about the increasing obsolescence of the nation-state, the main beneficiary of the new post-Cold War global order was the United States. Though it was supposedly a mechanism for freer trade, the WTO's most important agreements promoted monopoly for US firms: the Trade-Related Intellectual Property Rights Agreement (TRIPs) consolidated the hold over high-tech innovations by US corporations such as Intel, Microsoft and Monsanto, while the Agreement on Agriculture institutionalized a system of monopolistic competition for third-country markets between the agribusiness interests of the United States and the European Union.
When the Asian financial crisis engulfed countries that had been seen by many in the business community as America's most formidable competitors, Washington did not try to save the Asian economies by promoting expansionary policies. Instead, it used the IMF to dismantle the structures of state-assisted Asian capitalism that had been regarded as formidable barriers to the entry of goods and investments from US transnationals that had been clamouring vociferously to get their piece of the 'Asian miracle'. It was less their belief in spreading the alleged benefits of free trade than maximizing geo-economic and geo-strategic advantage that lay behind US support for the policies of the IMF, World Bank and WTO.
Acting to achieve its interests under multilateral cover was the preferred US strategy for most of the post-war period, whether it was the Bretton Woods institutions, the United Nations or the Group of Seven that provided the framework for 'hegemonic leadership'. Yet when these institutions got in the way of US interests, Washington did not hesitate to act unilaterally. This was increasingly the case in the 1990s, with removal of the incentives for multilateral behaviour posed by Soviet competition.
The instrumental use of multilateral agencies was stark when it came to the UN. While using the United Nations to provide cover for its policy of isolating Iraq, Washington also refused to pay its dues to the UN owing to the influence of the Republican right, angry at the world body's not kowtowing wholeheartedly to US policy. Or the USA simply disregarded the UN when it could not get a mandate and proceeded to work its will through more pliable institutions, as it did when it resorted to NATO cover for the bombing of Yugoslavia during the Kosovo conflict in 1999.
The G-7 – later G-8 with the addition of Russia – emerged in the 1970s to provide a mechanism for more multilaterally shared decision-making among the advanced capitalist countries, especially in economic matters. Yet, especially under the administration of George W Bush, Washington has embarked on a unilateralist course that has brought it into sharp conflict with other members on the burning issues of banning land mines, climate change, missile defence and reconciliation between the two Koreas. Washington's brusque junking of a painstakingly negotiated agreement, the Kyoto Protocol on Climate Change, marked a new low in unilateralist behaviour.
The G-8 was at its nadir when it held its annual summit in Genoa in July 2001, with over 200,000 people coming from Europe and all over the world to protest at the framework of neoliberalism with a good dose of American unilateralism that it was imposing on the globe.
The events of September 11, 2001 led some to expect a resurgence of multilateralism as the USA sought to forge a global military alliance against terrorism. Co-operation between the USA and the European Union saved the Fourth Ministerial of the WTO in November 2001 from going the way of the Third Ministerial in Seattle, which had collapsed in disarray. Yet the Bush administration was back in fine unilateralist form a few months' later, as it withdrew from the newly formed International Criminal Court and signalled its determination not to renew the Anti-Ballistic-Missile Defense Treaty that Washington had negotiated with the Soviet Union in 1972.
The Crisis of the Neoliberal Order
Increasing resort to unilateralism and the brazen manipulation of multilateral mechanisms to achieve hegemony by the United States was an important source of the crisis of legitimacy that began to grip the global order in the late 1990s. But equally important as the erosion of multilateralism as a source of de-legitimation was the spreading realization that the global neoliberal regime resting on free trade and free markets could no longer deliver on its promise. That the system could not create prosperity for all but only the illusion of it was something that many observers had known for some time. However, the realities of growing global poverty and inequality were neutralized by the high growth rates and the prosperity of a few enclaves of the world economy, like East Asia in the 1980s, which were (mistakenly) painted as paragons of market-led development. When the Asian economies collapsed in the long hot summer of 1997, however, the follies of neoliberal economics came to the fore. All the talk about the Asian financial crisis being caused by crony capitalism could not obscure the fact that it was the liberation of speculative capital from the constraints of regulation, largely in response to pressure from the IMF, that brought about East Asia's collapse. The IMF also came under severe public scrutiny for imposing draconian programmes on the Asian economies in the wake of the crisis – programmes that merely accelerated economic contraction – while putting together multi-billion-dollar rescue packages to save not the crisis economies, but foreign banks and speculative investors.
The IMF's role in East Asia triggered a re-examination of its role in imposing structural adjustment programmes in much of Africa, South Asia and Latin America in the 1980s, and the fact that these programmes had, as they did in Asia, exacerbated stagnation, widened inequalities and deepened poverty now became widely realized.
The Asian financial crisis triggered the unravelling of the legitimacy of the IMF. In the case of the WTO, the situation was even more dramatic. In the years following the founding of the WTO in 1995, growing numbers of governments, communities and social movements began to realize that in signing on to the WTO, their governments had signed on to a charter for corporate rule that consumer advocate Ralph Nader called the principle of 'trade über alles' – or trade above equity, justice, environment and practically everything else they held dear. Many developing country governments discovered that in signing on, they had signed away their rights to development. The many streams of discontent and opposition converged in the streets of Seattle at the end of November 1999 to bring down the Third Ministerial meeting of the WTO and trigger a severe institutional crisis that continues to this day.
Also dragged into the line of fire was the World Bank, which an investigating group reporting to the US House of Representatives, the Meltzer Commission, accused, in early 2000, of being irrelevant to the task of eliminating poverty.
Not surprisingly, in the face of criticism coming from the right to the left, reform of the multilateral system became prominent in the rhetoric of the multilateral agencies and the G-7 governments that were their most powerful backers. Debt forgiveness, a new global financial architecture, reform of the decision-making structures of the WTO and the Bretton Woods institutions were among the high-profile promises that generated expectations that change was finally on the way. Five years after the crisis, however, there has been zero change in the policies and structures of these institutions.
The Corporation under Question
By the end of the last decade of the twentieth century, in short, the triumphalism that marked the beginning of the decade had evaporated and given way to a deep crisis of legitimacy of the multilateral order. Accompanying that crisis were swiftly rising levels of resentment against the prime engine of globalization: the corporation.
Several factors came together to focus public attention on the corporation in the 1990s – the most egregious being the predatory practices of Microsoft, the environmental depredations of Shell, the irresponsibility of Monsanto and Novartis in promoting genetically modified organisms, Nike's systematic exploitation of dirt-cheap labour, and Mitsubishi, Ford and Firestone's concealment from consumers of serious product defects.
A sense of environmental emergency was also spreading by the beginning of the twenty-first century, and to increasing numbers of people, the rapid melting of the polar ice caps could be traced to Big Oil and the automobile giants' continuing promotion of an environmentally destabilizing petroleum civilization, and, more generally, to the process of uncontrolled growth driven by the transnational corporations (TNCs).
Ironically, in the United States, it was during the apogee of the so-called New Economy that the distrust of the corporation was at its highest in decades. According to a Business Week survey, '72 per cent of Americans say business has too much power over their lives.' And the magazine warned: 'Corporate America, ignore these trends at your peril.'
Members of the global elite with antennae sensitive to the rumblings underneath took such warnings seriously, and the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, became the venue to elaborate a response that would go beyond the bankrupt strategy of denying that corporate-driven globalization was creating tremendous problems to promote a strategy that would 'bring the fruits of globalization and free trade to the many', as British Prime Minister Tony Blair put it. Yet the task was formidable, for it became increasingly clear that in an unregulated global market, it was even more difficult to reconcile the demands of social responsibility with the demands of profitability. The best that 'globalization with a conscience' could offer was, as C. Fred Bergsten, a noted pro-globalization advocate admitted, a system of 'transitional safety nets ... to help the adjustment to dislocation' and enable people to 'take advantage of the phenomenon [of globalization] and roll with it rather than oppose it'.
Cracks in Military Hegemony
Corporate power is one dimension of global power. But there is, equally of consequence, strategic power, and this, even more than corporate power, is concentrated in the United States. Strategic power cannot be reduced, as in orthodox Marxism, to simply being determined by the dynamics of corporate control. The US state cannot be reduced simply to being a servant of US capital. The Pentagon has its own dynamics, and one cannot understand the US role in the Balkans or its changing posture towards China as simply determined by the interests of US corporations. Indeed, in Asia, it has been strategic extension, not corporate expansion, that has been the mainspring of US policy, at least until the mid-1980s. And, in the case of China, US capital's desire to exploit the fabled 'China market' has increasingly found itself in opposition to the Pentagon's definition of China as the Enemy, which must be headed off at the pass instead of being assisted by western investment to become a full-blown threat. In many instances, indeed, corporate power and state power may not be in synch.
Having said this, it is none the less a primordial aim of the transnational US garrison state that is ensconced deeply in East Asia, the Middle East and Europe and projects power to the rest of the globe, to manage a global order that secures the primacy of US corporations. New York Times columnist Thomas Friedman may be wrong about the benign impact of globalization, but he is definitely on target when he asserts that: 'The hidden hand of the market will never work without a hidden fist. McDonald's cannot flourish without McDonnell Douglas, the designer of the US Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies to flourish is called the US Army, Air Force, Navy, and Marine Corps.'
With the growing illegitimacy of corporate-driven globalization and the growing divide between a prosperous minority and an increasingly marginalized majority, military intervention to maintain the global status quo is becoming a constant feature of international relations, whether this is justified in terms of fighting drugs, fighting terrorism, containing 'rogue states', 'containing China', or of opposing 'Islamic fundamentalism'. These interventions are deeply unpopular in the Third World, so that when the Al Qaeda hijackers flew their planes into the World Trade Center and the Pentagon on September 11, many people in the South were caught between revulsion at the resulting mayhem and a feeling that the USA 'had it coming'. Moreover, a US security system that had seemed invulnerable now looked very vulnerable indeed to a resentful world.
To many people in Europe and Japan, the role of US military as the guarantor of their security still prevails. But it is a sentiment that is fast eroding. The collapse of Soviet power created the condition for reassessment by Washington's allies of the role of US power. Doubts have increased with the Pentagon's insistence on building a missile defence system against potential rather than real enemies while preparing the ground for a new Cold War crusade against China. And recently, even as many traditional allies enlisted in the so-called 'war against terror', US unilateralism is undermining old alliances as Washington prepares the ground to invade Iraq, even against the express wishes of most members of the European Union. Loss of trust in Washington is the source of moves to create a European defence force that would operate with some independence of NATO.
Excerpted from Deglobalization by Walden Bello. Copyright © 2004 Walden Bello. Excerpted by permission of Zed Books Ltd.
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Table of Contents
Foreword to the New Edition: The Crisis of the Globalist Project and the New Economics of George W. Bush The crisis of the globalist project Three moments of the crisis of globalization The New Economics of George W. Bush The economics and politics of over-extension 1. Introduction: The Multiple Crises of Global Capitalism From triumph to crisis Multilateralism in disarray The crisis of the neoliberal order The corporation under question Cracks in military hegemony Degeneration of liberal democracy The spectre of global deflation Rise of the movement Contradictory trends after September 11 'Imperial Overstretch' Liberal democracy loses Porto Alegre and the future 2. Marginalizing the South in the International System The rise of UNCTAD The Bretton Woods twins versus the UN Development system The southern challenge in the 1970s Rightwing reaction and the demonization of the south Resubordinating the south The World Trade Organization: third pillar of the system The Group of Seven: an international directorate? 3. Sidestepping Democracy at the Multilateral Agencies The World Bank The International Monetary Fund The World Trade Organization 4. The Crisis of Legitimacy The IMF's Stalingrad The past catches up Meltzer and the World Bank The WTO on the road to Seattle 5. The Vicissitudes of Reform, 1998-2002 Reforming the global financial architecture From structural adjustment to poverty reduction? Non-democratic decision-making affirmed Decision-making at the WTO: From Seattle to Doha 6. Proposals for Reform of Global Governance: A Critical Analysis An economic security council? The Meltzer Commission proposal The 'back-to-the Bretton-Woods-system' school George Soros's alternative system 7. The Alternative: Deglobalization Deconstruction Deglobalizing in a pluralist world Selected Readings Selected Organizations Monitoring Multilateral Organizations and Global Governance Issues Index
Most Helpful Customer Reviews
'Bello's analyses and suggestions for action are refreshingly clear and direct, and he gives a valuable account of the re-subordination of the South over the last quarter-century. 'Deglobalization' is to be recommended above all for the invigorating energy with which it sets out an oppositional agenda.' - New Left Review, July 2003'This short concise volume is a guidebook no activist should travel without.' - Briarpatch Magazine, May 2003'Clear analysis and impressive scholarship have made Bello one of Asia's key progressive thinkers. Insistence on people-centered development grounded in ecological sustainability sets him apart from the elite consensus on Asia' - New Internationalist 'The most respected anti-globalization thinker in Asia' - Le Soir (Belgium)'Among the expanding constellation of activists, academicians, and thinkers who believe that mainstream economics... does not have an answer to people's needs, Walden Bello is a prominent star' - Bangkok Post'Whatever subject he tackles, Walden Bello is always thoughtful, trenchant and constructive. He's also an authentic hero of the global justice movement.' - Susan George'Walden Bello is the worlds leading no-nonsense revolutionary. With plainspoken history and compelling evidence, he ruthlessly exposes the opportunism, plunder, and backroom bullying that passes for global capitalism. But this is more than a critique: Bellos expert diagnosis is that the patient is sicker than we think, and the time to act is now.' - Naomi Klein, author, No Logo'Deglobalization is a superb dissection of contemporary capitalism's multiple crises, a powerful indictment of the US's brutal re-subordination of the global South in the interest of its MNCs and banks, an unanswerable demonstration of the unreformability of the IMF and its sister institutions, and a stirring call to arms for the movement for economic justice by one of its major theorists and organizers.' - Robert Brenner
Blair talked of 'bring the fruits of globalization and free trade to the many' - an admission that it benefits only the few. As one World Bank study admitted, "globalization appears to increase both poverty and inequality." Another showed that poverty grew in Eastern Europe, South Asia, Latin America, the Caribbean and sub-Saharan Africa - wherever IMF policies had been followed. Another found that most World Bank projects failed. In 1997, the IMF imposed contraction on East Asia's tiger economies, resubordinating them to the USA. Obediently, they removed limits on foreign ownership and privatised state enterprises. The effect was 'to create new business opportunities for US firms', as the US trade representative boasted. The IMF did the same to Argentina in 2001, imposing brutal public spending cuts. Since 1998, the IMF has promised to reform, and changed its talk to 'poverty reduction', but with the same neoliberal policies and the same Swiftly Accelerating Poverty programmes. Capitalism uses the IMF, the World Bank, the World Trade Organisation, the EU and the G8 against democracy, against national sovereignty, against the workers of the world. The alternative to capitalism's absolute decline is deglobalisation. We need to dismantle the IMF, the World Bank, the World Trade Organisation, the EU and the G8; and we need to strengthen the democratic role of the UN General Assembly. Countries want and need to reorient their economies from producing for export to producing for their local market. They want and need to shift from short-term portfolio investment and short-term loans in stock markets and real estate to long-term direct investment and long-term loans into industry and infrastructure. They want and need capital and trade controls, not just for crisis relief, but as legitimate tools of trade and industrial policy aimed at national industrial development. They want and need to subordinate the market to the human values of security, equity, social solidarity, democracy and national sovereignty Bello acknowledges that no ruling class will submit peacefully to challenges to its power. He cites the pro-capitalist Thomas Friedman of the New York Times: "The hidden hand of the market will never work without the hidden fist." Yet Bello believes that the 'anti-globalisation movement' can somehow shame our rulers out of power! He ignores trade unions, the institutions that workers created to survive capitalism. And he stupidly caricatures and dismisses Marxism and Leninism, the tools workers need to defeat capitalism.