by M. Shahid Alam
Contrary to the grandiose claims made by the ideologues, the
neoliberal, open-door economic regimes imposed on the Periphery by
Core capital--starting in the 1980s--have produced no economic
miracles.[1] Instead, these economic regimes have brought economic
ruin or, at best, lack-luster performance to the countries they have
touched most deeply.
Starting with the October Revolution of 1917, sections of the
Periphery began to break away from, or attenuate their linkages to,
global capitalism. After Second World War, this decentralizing
movement embraced nearly all of Asia, Africa, and the Caribbean, who
now joined Latin America to form the Third World. Several of these
countries chose communism and severed their links to global capital.
Others used their newfound sovereignty to re-structure their
relations with global capital, using the power of government to
develop indigenous capital. This was the Periphery's window of
opportunity: its golden hour.
However, this window began to close, starting in the 1980s. For a
variety of reasons, which included geopolitical luck as well as the
still-strong expansive power of capitalism, Core capital staged a
comeback both in the Core countries and in the Periphery. Taking
advantage of the debt crisis, the World Bank and the IMF began to
dismantle the developmental states in the Periphery. In 1994,
shortly after the collapse of Soviet Union, Core capital created the
World Trade Organization in order to deepen and police the
neoliberal, open-door regimes it had imposed on the Periphery. After
a hiatus of some three decades, power was once again centralized in
the Core states.
The orthodox economists argued, as they had since Adam Smith, that
these neoliberal regimes created the best bargains for all parties
concerned. Free markets and open economies, so they argued, would
direct production to countries where their unit costs were lowest;
and if capital were mobile, it would flow copiously from the
capital-rich to capital-poor countries. Indonesia, with cheap labor,
would produce shoes; and United States, abundantly endowed with
capital and skills, would design, finance, advertise and market
them. In the neoliberal paradigm, the capital and skills of Core
countries would fertilize labor from the Periphery. This was a
marriage made in heaven: it would produce prosperity for everyone,
and especially for the poor countries.
There was one problem with this marriage. It had been forced on the
Periphery once before for nearly a century and a half, and it had
only led to abuse and rape of their economies. Of course, the
orthodox economists never saw any of this; they could only see their
side of the ledger, which always showed profits. They could not see
the abuse and rape because they lived in a world of toy economies
with no economies of scale, no externalities, no monopoly power, no
advertising, no racism, and no asymmetries of power. That is
scarcely surprising: every system that produces abuse also produces
its apologists. Always, it is the victims--if only because they are
the victims--who must identify and analyze the abuse that penetrates
their lives.
In order to identify the failure of neoliberal economics, we will
com-pare the growth record of the Periphery in the two decades
before and after 1980. First, consider the two decades preceding
1980 when nearly all countries in the Periphery protected their
manufactures, regulated their currency markets, engaged in deficit
spending, and their governments took on entrepreneurial roles. By
the norms of neoliberal economics, they violated all the rules of
good economic housekeeping. Yet, they recorded quite impressive
growth rates under these interventionist regimes. The GDP of
low-income countries grew at average annual rates of 4.6 and 4.5
percent during the 1960s and 1970s; the corresponding figures for
the middle-income countries were 6.0 and 5.6 percent. There were no
strong regional variations in the growth record for this period.
Although growth in Sub-Saharan Africa faltered during the 1970s,
there were nine countries in this region whose average annual growth
rates exceeded 5.0 percent during this decade.[2]
Over the next two decades, as the World Bank and IMF forced
neo-liberal policies upon them, the growth rates in the Periphery
declined in proportion to their embrace of these policies. The
neoliberal policies took their first toll in Latin America and
Sub-Saharan Africa. Both regions suffered a precipitous decline in
their GDP growth rates to 1.7 percent during the 1980s, producing
declining per capita incomes. The growth rates in Latin America
recovered during the 1990s to 3.4 percent per annum, though this was
significantly below their pre-1980 levels. The growth rate for
Sub-Saharan Africa improved only marginally during the 1990s, and it
was unable to stem the decline in its per capita income.[3]
The collapse of Eastern Europe and Central Asia came next, with
their rapid integration into global capitalism starting in the
1990s. Their economic decline was striking. Although the growth
perform-ance of these economies had been weakening for some time,
they still managed to log an annual growth rate of 2.4 percent in
their GDP during the 1980s. However, their precipitate transition to
markets produced catastrophic results. During the 1990s, their GDP
declined at an annual rate of 2.7 percent, more than wiping out the
gains of the previous decade. It is doubtful if any economic region
of comparable size has experienced a similar decline in its output.
Soon, their fertility rates fell significantly below replacement
levels, producing a declining population.[4]
The economic decline of the Middle East and North Africa since the
1980s has been nearly as steep as in Sub-Saharan Africa. Their GDP
growth rates in the two decades after 1980 were significantly below
those for the two preceding decades. As a result, the region's per
capita income declined between 1980 and 2000. [5] This was not due
to declining oil prices alone. The non-oil economies in this region
shared in this decline; their GDP had grown at 2.9 percent annually
between 1950 and 1980, but this declined to 1.5 percent in the two
decades after 1980. This decline occurred at a time when the non-oil
economies, barring Syria, were liberalizing their trade and payments
regimes.[6]
Most countries in East and South Asia, which had made striking
progress in the transition to neoliberal economic regimes, followed
the same pattern. Their growth rates in the two decades after 1980
were visibly lower than in the two preceding decades. Notably, this
group includes the most advanced countries in the region--Taiwan,
South Korea, Singapore, Hong Kong, Thailand and Malaysia--as well as
the poorer countries: Sri Lanka, Indonesia, Philippines and
Pakistan.
There were few countries in the Periphery that escaped the declining
trend in growth rates in the post-1980 period. India and China, the
two largest countries in the Periphery with more than one-third of
the world's population, nearly doubled their GDP growth rates in
this period compared to their record in the three previous decades.
Although both countries enacted market reforms since 1980, they were
still amongst the most illiberal economic regimes in the world,
whether one examines the extent of state ownership in their
industries or their trade and payments regime.[7] A second group of
countries--Myanmar, Laos and Vietnam--experienced dramatic upturns
in their growth rates during the 1990s, without the benefit of a
liberal regime.
These results should surprise no one but the historically myopic. In
the hundred years before 1950, the colonies and open-door countries
performed poorly compared to the sovereign countries in the
Periphery--those that were generally free to choose interventionist
policies.[8] During the post-war interlude lasting into the 1970s,
when most of the former colonies and open-door countries practiced
strongly interventionist policies, they experienced a dramatic
acceleration in their growth rates. It is scarcely surprising that
the forced return to open-door policies in the Periphery, since the
1980s, has repeated the results from the past. It is not clear how
long India and China, the two major countries that have not yet
surrendered their economic sovereignty, can resist conversion to
neoliberal economic regimes.
The re-centralization of power by Core capital that began in the
1980s was quite swift and mostly non-violent, unlike the
centralization that reached its peak in the last decades of the
nineteenth century. Perhaps, this is not surprising. The first
centralization was a pioneering movement: it involved the creation,
extension and deepening of core-controlled systems of transport,
trade, finance, investment, cultural instruments, and subordinate
classes in the Periphery. It took centuries to establish this
system, often involving wars. However, when the colonial powers
departed from their colonies, in most cases, they did not fully
liquidate these long-established systems of control. While they
terminated direct political controls, and ended their military
presence, many of the economic and social linkages, though weakened,
persisted in most former colonies; only the communist countries
severed nearly all their linkages with Core countries. This is what
made the second re-centralization easier.
The Core countries began to reinforce their informal systems of
control as soon as they lowered their flags over their former
colonies. The reinforcements took many forms, including foreign aid,
military assistance, joint military exercises, training programs,
and foreign investments. When Core countries, now working in unison,
articulated their new determination--through IMF, World Bank and the
OECD--to impose neoliberal regimes on the former colonies in the
1980s, there was little resistance. For the most part, the elites in
the Periphery had already been integrated into the hierarchy of
power emanating from the Core; they also understood that resistance
carried unacceptable costs. There was no popular resistance because
re-centralization did not affect the visible symbols of sovereignty.
The communist countries too were re-integrated without firing a
shot. They were overthrown from within, since they failed to deliver
prosperity, freedom or a sense of ownership.
The swift and easy re-centralization of the global economy created a
paradoxical situation. United States still commanded a massive
military force while its main adversary had melted away.[9] Soon,
there were calls to downsize the military, an intolerable prospect
for the industries whose profits depend on military contracts. This
had to be remedied.
The refurbished power of Core capital was creating some domestic
problems too. On the one hand, Core capital began eroding the social
gains made by workers, consumers, and environmentalists since the
1930s. More importantly, the labor force in the Core countries was
beginning to face competition from sections of the Periphery as they
developed manufacturing capabilities. They began losing jobs as Core
capital relocated to the Periphery; a process accelerated by the
internet revolution. In addition, Core capital was also using its
newfound muscle to import workers into their domestic markets. Faced
with a sustained decline in their living standards--the first in the
history of industrial capitalism--a growing number of workers in the
Core countries were gravitating towards anti-Corporation,
anti-globalization movements. This too had to be remedied.
United States would solve these problems by inventing new enemies.
It was in this context that Bernard Lewis, in 1990, advanced his
thesis of the "clash of civilizations" between the West and Islam.
He argued that the Islamist opposition in the Middle East
represented "a mood and a movement far transcending the level of
issues and policies and the governments that pursue them. This is no
less than a clash of civilizations--the perhaps irrational but
surely historic reaction of an ancient rival against our
Judeo-Christian heritage, our secular present, and the worldwide
expansion of both in 1990, that the West was engaged in a veritable
clash of civilization with Islam." Three years later, Samuel
Huntington generalized this thesis into a historical principle. At
the end of the Cold War, he prophesied, the world is entering a new
age of civilizational conflicts, primarily involving the West and
Islam, and the West and China.
The Clash thesis set up the military machine for capture by powerful
special interests and voting blocks within United States. Quickly,
the Israeli lobby, Christian fundamentalists, and oil interests in
the United States joined forces. Each would pursue its specific
goal--eliminate threats to Israel's hegemony, Christianize Islamic
societies, and capture oil profits--by mobilizing America's
redundant military to re-colonize the Middle East. It was not hard
selling this imperialist project to Americans. It would not be
difficult painting the Arab regimes into a corner. They were
tyrannies, they possessed weapons of mass destruction, they were an
imminent threat to American lives, they opposed Western values, and
they threatened Israel. A great nation--the "greatest" there has
ever been in the history of mankind--would have little difficulty
manufacturing a clash of civilizations when it needed one.
[Copyright © 2003 M. Shahid Alam - M. Shahid Alam is Professor
of Economics at Northeastern University, Boston. Born in Dhaka, he
attended schools in Bangladesh, Pakistan and Canada. He is the
author of Poverty from the Wealth of Nations (Macmillan:
2000). His translations of Ghalib have appeared in several US
literary magazines.]
References:
[1] The terms Core and Periphery are analytical categories employed in the
neo-Marxist literature to describe the disequalizing dynamics of global
capitalism. The Core consists of the largest concentrations of capital (physical
and financial), working in symbiosis with the governments of countries where it
is headquartered; roughly, the Core is coterminous with the developed countries,
led by United States. Conversely, the Pe-riphery embraces the rest of the world.
[2] World Bank, World Development Report ,1983 (New York: Oxford University
Press, 1983): 150-51.
[3] World Bank, World Development Report ,2000-2001 (New York: Ox-ford
University Press, 2001).: 295.
[4] World Bank (2001): 295, 297.
[5] World Bank (2001): 295, 297.
[6] Sevket Pamuk, The Middle East and North Africa in the age of
global-ization, 1980-2000 (Paper presented at the 13th IEHA Congress at Bue-nos
Aires, August 2002)
[7] Wacziarg and Welch (2002) maintain that India and China remained closed
economies as of 2000--India more than China--when judged in terms of their
average tariffs, non-tariff-barriers, and exchange-rate premiums. In addition,
state-ownership remained dominant in heavy in-dustries in India; in China, this
included the financial sector as well. Wacziarg, Romain and Karen Horn Welch,
"Trade liberalization and growth: New evidence (Palo Alto: Stanford University,
November 2002)
[8] The average annual growth rates of PCI in the sovereign countries were 1.00
percent for 1870-1900, 1.61 percent for 1900-1913, and 1.34 per-cent for
1913-1950. The corresponding figures for the colonies and open-door countries
were 0.59, 0.50 and -0.27. Alam, M. Shahid, Poverty from the wealth of nations
(Houndmills, UK: Macmillan, 2000): 151.
[9] In 1994, according to Conetta and Knight (1997) US military expen-diture was
$288 billion, while that of Potential Threat States was $167 billion; in 1986
the corresponding figures were $365 billion and $550 billion. Conetta, Carl and
Charles Knight, Post-Cold War US military expenditure in the context of world
spending trends (Project on Defense Alternatives: January 1997)
"An interview with Dr.
Vandana Shiva," In Motion Magazine, August 14, 1998
Vandana Shiva, "Stolen Harvest: The Hijacking of the Global Food Supply,"
South End Press (December 1999)
Enver Masud,"Corporate Globalization
Threatens World's Poor, Middle Class," The Wisdom Fund, October 10, 2000
Gary Thomas,"Intelligence Officer Challenges
Bush Administration on 'Why They Hate Us'," Voice of America, June 10, 2003
[Wealthy nations and international organizations, including the World Bank, spend more
than $55 billion annually to better the lot of the world's 2.7 billion poor people. Yet
they have scant evidence that the myriad projects they finance have made any real
difference, many economists say.--Celia Dugger,"World Bank
Challenged: Are the Poor Really Helped?," New York Times, October 10, 2000]
[The schema of civilizational collision that Professor Lewis posited in his landmark
September 1990 Atlantic Monthly contribution, "The Roots of Muslim Rage," omits both
Lebanon and Bosnia. Republished here alongside fifty other essays on Islam, history and
politics, Lewis's best-known polemic cites conflicts that undermine his contention that
enlightened Christendom is locked in a near-eternal battle with the dark forces of
Islam. The reason, he writes, for the global Christian-Muslim tension is that "for
[non-Muslim] misbelievers to rule over true believers is blasphemous and unnatural,
since it leads to the corruption of religion and morality in society.... This may help
us to understand the current troubles in such diverse places as Ethiopian Eritrea,
Indian Kashmir, Chinese Sinkiang, and Yugoslav Kosovo, in all of which Muslim
populations are ruled by non-Muslim governments." Alas, his conceptual framework
prevents any understanding of the lands he mentions. In "Ethiopian" Eritrea, a secular
liberation front headed by a Christian named Isaias Afewerki achieved independence from
then-Marxist Ethiopia after thirty years of struggle. When I covered that war, the
guerrillas never mentioned religion as relevant to their demand for independence. The
operative fact was that Eritrea had been an Italian colony from 1889. At the end of the
Second World War, the Allies awarded Italy's former colony to the Ethiopian emperor,
Haile Selassie, without consulting its inhabitants. Most Eritreans--Muslim, Christian
and animist--rejected absorption into Haile Selassie's Amharic empire and, later, the
Marxist terror state of the Dergue, which overthrew him. By the end, Eritrean Marxists
were battling fellow Marxists from Addis Ababa. As for Yugoslav Kosovo, Muslims sought
independence from Belgrade not as adherents of Islam but as Albanians fearful of
annihilation. Kosovo's Serb minority had--and justifiably still has--the same fear. The
Albanians who persecute them today are Muslim and Christian, believer and atheist.
Sinkiang's struggle for freedom bears a greater resemblance to Buddhist Tibet's than to
Kashmir's. And the Kashmiris have suffered almost as much from the depredations of their
Muslim neighbors in Pakistan as from their Hindu overlords in New Delhi.--Charles Glass,
"Lewis of Arabia,"
Nation, September 13, 2004]
[Simply stated, it rejects both the market economy and socialism, offering a system
based on an Islamic worldview.--David Cowan, "Islamic financial
theory," Washington Times, December 9, 2004]
[India, a major source of inexpensive AIDS drugs, passed a new patent law yesterday that
groups providing drugs to the world's poorest patients fear will choke off their supply
of new treatments.
The new law, amending India's 1970 Patent Act, affects everything from electronics to
software to medicines, and has been expected for years as a condition for India to join
the World Trade Organization.Donald G. McNeil, "India Alters
Law on Drug Patents," New York Times, March 24, 2005]
[. . . the "multilateral" system is in fact a projection of US unilateralism, cleverly
packaged to grant other nations just enough slack to prevent them from fighting
it.--George Monbiot, "I'm with
Wolfowitz," Guardian, April 5, 2005]
