Neoliberalism Plus?

Robert Wade on world development and the global economy:

Foreign Affairs - Questions of Fairness - Robert H. Wade: The second problem with Kapstein's analysis is that it treats all states the same. But we know that some states are much better at promoting development than others. The Princeton political scientist Atul Kohli has proposed a threefold typology:

1. A "neopatrimonial state," in which the ruler treats state resources as his own (such as Nigeria and many other countries in Africa and the Middle East), is likely to make a mess of many instruments of industrial policy if given the latitude.
2. A "cohesive-capitalist state" (such as South Korea and Taiwan up to around 1990) is likely to be much more effective at using dirigiste methods to upgrade and diversify the structure of its economy (although it may be no better at protecting human rights).
3. In between these two types is the "fragmented-multiclass state" (such as many in Latin America and Southeast Asia), the capacity of which to implement strong industrial policy is more varied and more contingent.

Should the boundaries of policy space -- defined by WTO rules and World Bank and International Monetary Fund loan conditions -- vary according to the type of state, on the grounds that neopatrimonial ones are more likely to abuse policy space than cohesive-capitalist ones are? How could such rules be accommodated in the regimes of international organizations and in international agreements when there is such pressure to treat all states, or at least all developing economies, equally?

Nigeria, after all, would not appreciate the World Bank's refusing to give it help with industrial policy on the grounds of its neopatrimonialism while the bank helped another country on the grounds that it had a fragmented-multiclass state moving toward cohesive capitalism.

Such questions deserve more extended discussion. But the main point is simply that a typology of developing states should be fundamental to how we think about development policy. At present, it is not -- and Kapstein's commitment to universal rules obscures the need.

In thinking about these issues, we should also give up talk of "the developing world" in contrast to "the developed world," and talk instead of a "1:3:2 world" (one billion people live in the rich countries, three billion live in countries where growth rates are faster than those of the rich countries, and two billion live in countries where they are substantially slower). When will the states representing the slow-growing two billion link up with the states representing the fast-growing but low-income three billion to force changes in the rules of engagement in the international economy?...

I think the answer is "never." The current neoliberal rules of engagement make it difficult for the rich post-industrial core to succumb to protectionist and nativist pressures that would slow growth for the three billion significantly. And the current neoliberal rules of engagement give the largely-kleptocratic rulers of the two billion nice lives as well.

Wade seems, if I read him correctly, to ask us to think about neoliberalism plus--where the "plus" seems to take the form of some sort of benevolent developmental imperialism to remove the rulers and reform the institutions of the two billion.

Comments

[John Emerson]

I just happened on this Wiki page listing the countries of the work in order of GDP/capital, corrected for purchasing power:

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita

The thing that startled me is that Mexico is among the best-off of the large third world countries (excluding states smaller than 2 million, oil states, and the 5 tigers of E. Asia). Argentina, Chile, and ten of ex-Communist/Yugoslav states are better off, but 115 countries, including China, India, moistof Asia, and almost all of Africa and Latin America, are worse off.

So basically, Mexico is a relative success story. This goes against some of the things I've said against NAFTA, I guess (though it also shows how Mexico itself can be "exporting jobs" nowadays).

At the same time, Mexico (1/4 the adjusted GDP/cap of the US) still **seems** like a problem nation. There's still a long way to go.

[Dan Kahn]

John Emerson:
Why doesn't Mexico feel like a success story? The same reason Americans don't think the economy is chugging along great: wealth is being generated at the top, but gains are not widely shared.

The Gini Distribution from 0 to 100 for various lower middle income countries:
Mexico 54.6
Malaysia 49.2
Poland 34.1
Romania 28.8
Turkey 42
Brazil 59.7
South Africa 59.3

And for reference:
USA 45
Canada 33.1
UK 36.8
Germany 28.3

In Mexico, this divide is even worse when looked at along geographic lines. Certain states in the industrial north (esp. Monterey) have living standards approaching that of a developed nation. Others in the rural south (esp. Chiapas) are just as poor as Latin American basket-cases like Bolivia.

Kleptocratic governments and oligarchies are one of the main reasons Latin America has not been able to advance as rapidly as the Asian Tigers. It is also a major reason that their governments (democratic or authoritarian) have not been as stable.

Source: https://www.cia.gov/cia/publications/factbook/fields/2172.html

[andres]

"The current neoliberal rules of engagement make it difficult for the rich post-industrial core to succumb to protectionist and nativist pressures that would slow growth for the three billion significantly."

Brad, either you haven't been paying attention to Bush adm. policy in the last 5+ years, or more likely you think that Bush and co. are an aberration which will surely be replaced by rational international economic policy before things blow up in our faces. I wish I could be as optimistic.

[andres]

John Emerson: what Dan said. If you want to make numerical comparisons between living standards across countries, you need to compare their median incomes, not their per capita GDPs. Unfortunately, estimates of median incomes are very difficult to obtain. The best source is the World Income Inequality Database:

http://www.wider.unu.edu/wiid/WIID2a.zip

Unfortunately, even those national household surveys that list median income give it in local currency, so you have to divide that figure by the World Bank's purchasing power parity conversion rate in order to obtain comparable figures. My guess is that once you do that exercise, the largest LA countries, Brazil and Mexico, won't look quite as nice as their PPP GDP per capita figures make them seem.

If the above is too involved, another quick and dirty exercise one can do is to use the number:

PPP GDP per capita * (100 - Gini Coeff)/100

This will give you a level of income that's actually below the median income level for each country and so isn't really scientific in any sense, but it also puts Brazilian/Mexican living standards (relative to the US) realistically below what one might expect given their per capita GDP numbers. As so often, distribution is a key variable that can't be ignored.

[John Emerson]

Andres and Dan, thanks. What you say seems to make the whole neoliberal scheme look pretty bad, since Mexico is one of the countries where neoliberalism and trade globalization sort of succeeded, but the hoped-for results didn't all show up. And most of the world is far worse off.

China's distribution is 44, close to the US, and they're significantly poorer per capita than Mexico. Russia's is 40, and their per capita income is like Mexico's.

[Bruce G Charlton]

A new colonialism/ colonization?

'...the "plus" seems to take the form of some sort of benevolent developmental imperialism to remove the rulers and reform the institutions of the two billion.'

In other words, a new colonialism/ colonization? This deserves serious consideration IMO - the mass of people (but not the native ruling class elites, who constitute the nationalists) probably did _much_ better (economically, justice, etc.) under some forms of colonialism than they have since.

[wkwillis]

Charlton
One of the reasons that the third world/colonial nations had relatively high standards of living after the first world war and till 1960 is that the population was much lower. The native populations took a long time to recover from the colonial democides of the pre first world war era, when the Europeans were still trying to operate their colonies at a profit, instead of a loss, and were using poll taxes enforced by massacres combined with destructive labor camps in the effort.
Half the population of the Congo Basin died in ten years. It wasn't just the Belgians, but the French, the Portuguese, and the Germans.

[Dan Kahn]

John, while I certainly don't think the Washington Consensus has been peachy-keen for Latin America, I think you overstate the problem. If I told you in 1985 that 20 years in the future, Mexico would have the same level of wealth as post-Soviet Russia (with a slightly wider distribution) AND stronger growth, you very well might have laughed in my face.

The challenge is how to get people in Latin America (where I currently reside) to recognize the very real benefits of liberalization, while also acknowledging that more efficient redistribution would be a win-win. It seems like LA usually gets to choose between hard-line neoliberals and hard-line leftists, when really a little more Social Democracy would go a long way (just look at Chile).

[Julian Elson]

So, under this scheme, is Bush a neopatrimonialist president who is attempting to move the cohesive-capitalist United States toward a fragmented-multiclass state?

[John Emerson]

Dan, I don't think anyone expected post-Soviet Russia to do as badly as it did. A different part of the neoliberal operation did its work on that side of the comparison.

A lot of the neoliberal consensus seems to consist of austerity measures which have the effect of encouraging economic growth specifically at the price of less egalitarian distribution.

[andres]

Dan: I sympathize with your point of view, but I don't think I agree. Social democracy can only be adopted by countries that have a sufficient level of income and political development to afford it. Thanks to Pinochet, that is the case for Chile (that his rule opened the way for social democracy in Chile is that nation's ultimate revenge on the old despot and his Chicago lackeys). It is not, however the case for other LA countries except the southern cone: Argentina, Uruguay, and possibly Brazil in the not too distant future; Costa Rica is the only country in the region that has less inequality and decent rate of growth while lacking a large welfare state framework. Then again, not having any armed forces or patrimonialist politicians definitely helps.

For LA countries which are both poor and have a horrible income distribution, or even middle-income countries like Mexico with a horrible distribution, social democracy is not politically possible--just look at what is happening in Mexico right now. In most LA countries, social democratic regimes have so far only come about as a backlash to neoliberal dictatorships. In the future, however, I'm hoping that social democracy will come about in those post-populist countries which need to restart growth while maintaining the distributional gains of previous left-wing governments--think Cuba and Venezuela. Mexico, on the other hand, isn't there yet.

[andres]

For a look at the Mexican election and the very real possibility that systematic (though not necessarily coordinated) fraud stole the election, check out James K. Galbraith's article at commondreams.org:

http://www.commondreams.org/views06/0907-27.htm

I am somewhat ambivalent about Lopez Obrador's attempts to deny legitimacy to the new government. If it is even partway successful, massive capital flight might ensue and economic growth might come to a halt, making everyone worse off. At the same time, _somebody_ has to rise up and say that elections can't be stolen Florida style; the people of the US have not.

[sm]

"benevolent developmental imperialism"

Yeah, right.

[Ralph]

Mexico clearly falls within the third typology of a multiethnic, multiclass, framented economy. What makes it different from the rest of Latin America is not just its proximity to the US but the (partial sucess of the Mexican Revolution. From this point of view the defeat of the PRD at the stolen election of 1988 and the passage of NAFTA have more to do with Mexico's lack of success vis a vis Taiwan and Korea then we can understand fully.

[Jason]

I think Wade's message is ultimately that forms of governance *matter most of all* in determining developmental policy results (as exercised by aid and international regimes). I'm not sure he's calling for a "benevolent developmental imperialism" as you put it, but he's definitely calling for policy that takes into account differing forms of governance, and is thus fashioned case-by-case for each state. (Of course whether or not that's a good thing is an enormous debate.)

[Brenda Rosser]

One of the important points missed by many people writing on the booming economies of China, India and others is the change in land tenure.

From my reading over the years Australia is far from alone in the transfer of huge swathes of land from family farmers to a relatively small number of transnational corporations.

So, how sustainable is the global economic boom? About as sustainable as chemically-intensive agribusiness and forestry clearfelling are. Not very! And absentee corporate land management requires this model of production... or feudalism.

It's all gonna fall.
Focus on the Global South
http://www.focusweb.org/india/co...tpage/Itemid,1/

World Rainforest Movement
www.wrm.org.uy
"Every year millions of hectares of tropical forest disappear. It is estimated that between 1960 and 1990 more than 20 % of these forests were lost (33% in Asia and 18% in Africa and Latin America). To make matters worse, this process of destruction doesn't show any signs of stopping. In fact, current deforestation of the Amazon proceeds at an even greater speed than in the 1980s, when the issue started to arouse worldwide concern..."

...Large-scale monoculture tree plantations are spreading in many countries, particularly in the South. These (timber, pulpwood, oil or carbon sink) plantations, promoted as "planted forests", are resulting in a number of negative social and environmental impacts on local communities. This campaign aims at generating conscience on and organizing opposition to this type of forestry development. With this aim we have elaborated some information material.

The type of plantations which are becoming a growing problem are characterized by their large scale and uniformity. At the national level, they consist of scores of thousands of hectares -and in cases such as Chile, South Africa, Brazil and Indonesia, surpassing a million hectares- of tree monocultures. Such plantations are based on some few species -usually eucalyptus or pines- bred for rapid growth, uniformity and high yield of raw material. Planted in even-aged stands, they require intensive preparation of the soil, fertilization, regular spacing of trees, seedling selection, mechanical or chemical weeding, use of pesticides and mechanized harvesting in short rotations.
(I think Australia would now have about 2 million hectares (must check..)

From Chile to Portugal, from Brazil to Indonesia, from Uruguay to Spain, from South Africa to New Zealand, from India to Thailand, people are organizing to oppose what they have called tree deserts, green cancer, green invading army, selfish trees or socioeconomic deserts.

Why the plantation boom?

Tree monocrops are not the result of a locally expressed need nor are they meant to favour local people. Their real aim is to ensure the global paper industry with cheap raw material for an ever increasing overconsumption of paper and paper products, particularly in the North. As northern forests are depleted as a result of the paper industry’s growing demand for wood fibers, and as the northern environmental movement becomes stronger in its defense of the remnants of old-growth forests, the industry is moving its future supply to the South.

A number of different actors are making this shift possible. Multilateral Development Banks,"aid" agencies, northern consultants, technology suppliers, state investment and export credit agencies are among the main external actors which provide the impetus and the financial and technical support for the spread of plantations all over the world. Internally, national governments -pushed by the above-said external actors- provide a number of overt or hidden subsidies which allow these plantations to be implemented. Such subsidies may be direct (e.g. payment of a large percentage of the plantation cost, tax breaks, etc.) or indirect (e.g. government forestry research, road and port infrastructure, soft loans, etc.).

+ The Tasmanian Times website at: www.tasmaniantimes.com

Hancock Watch (google it). Many others

The World Trade Organisation and the World Bank are very much behind these corporate invasions. Along with the respective Governments.
Others

The Corporate Hijack Of Organic Farming Initiative In Punjab
http://www.countercurrents.org/e...- dutt200406.htm

+
China:
(Keeping in mind that the peasants working in these sweatshops have been forced off their land, much of which is now degraded by modern industrial production regimes that have replaced the traditions methods.)

http://www.countercurrents.org/e...- chan050504.htm

"the claim that China is undergoing an economic transformation analogous to Britain in the 19th century or the US in the 20th century ignores some basic facts. The impressive rates of growth and statistics on industrial output are dependent on a huge flow of foreign direct investment into the country and a flood of cheap manufactured goods out of the country. Far from being the new workshop of the world, China is more like a giant sweatshop for the world’s major corporations.

The high rates of economic growth in China during the 1990s were not driven by the expansion of an internal consumer market or native industrial development. The combination of plentiful labour, low wages, low taxation and brutal police-state repression made China one of the most attractive investment sites for transnational corporations.

Since the early 1990s, more than $US800 billion have been invested, overwhelmingly in a string of free trade zones located along China’s coast. The US retail giant Wal-Mart Stores, for example, purchased about $14 billion in products from its Chinese subsidiaries last year, which represents about 13 percent of total US imports from China. The electronic conglomerate Philips operates 23 plants in China and exports $5 billion worth of goods each year to Western markets.

..Foreign firms now account for 81 percent of China’s technology exports—a global market share of 54 percent of DVD players, 28 percent of cellular phones, 13 percent of digital cameras, 30 percent of desktop computers, 12 percent of notebook computers and 27 percent of colour televisions. Transnationals and their local contractors also dominate in other major exports such as machinery and textiles...

.. Social costs

The chief function of the Stalinist bureaucracy in Beijing has been to offer terms and conditions that have transformed China into the world’s most attractive sweatshop. Many transnationals have shifted their labour-intensive operations to China from South East Asia or Latin America, because of favorable labour costs and other financial concessions—with devastating results in many countries. Mexico, for example, is estimated to have lost 230,000 manufacturing jobs since 2001, most of them to China.

At the Association of South East Asian Nations (ASEAN) meeting in November, many governments and business leaders expressed hostility to China’s cutthroat competition for investment and export markets. Two-thirds of Chinese people are living on less than $1 a day and the average factory wage is just 40 US cents an hour—one-sixth that of Mexico and one-fortieth of the US...