Who else thinks the term “Washington Consensus” is oxymoronic? Who else thinks the corporate globalists are, themselves, not merely morons, but oxymorons guilty of duplicity and hypocrisy?
Cheerleaders for globalization insist that so-called “free trade,” based on the neo-liberal policies of the Washington Consensus, is inevitable and inevitably the key to economic growth. However, political and economic evidence suggest that trade on neo-liberal terms is neither free nor conducive to growth. In fact, the self-contradictions inherent in neo-liberalism portend the death of corporate globalization as it is now understood and practiced.
In the first place, free trade requires multilateralism. Broadly speaking, multilateralism means adherence to agreements or treaties negotiated among sovereign nations. This is not the record of the United States. The current US administration has consistently opposed many major multilateral treaties and agreements. In 2001 the Bush regime torpedoed the following: the Kyoto Treaty; a United Nations plan for controlling the proliferation of small arms and light weapons; a draft protocol for verification of the 1972 Biological and Toxin Weapons Convention. Then it renounced the 1972 Anti-Ballistic Missile Treaty with Russia. In 2002, the Bush regime “un-signed” the Rome Treaty that created the International Criminal Court. Also, it released its National Security Strategy, which commits the USA to preemptive war. This last policy undermines one of the primary norms of collective security; in addition, it violates both international law and the charter of the United Nations. Such unilateralism bears on trade, on the Washington Consensus, in that nations must at least pretend to believe their trading partners are committed to negotiated agreements. If a nation is not so committed, it may gain comparative advantage over others. This happened when the United States refused to sign the Kyoto Treaty, which would have required a substantial outlay of moneys to bring power plants into compliance. Lower power costs means lower costs of fabrication and manufacture, thus lower costs to consumers – an unfair comparative advantage when set along side equivalent products from countries that will abide by the Kyoto Treaty.
Free trade would also require that nations practice what they preach. According to the neo-liberal bible, countries must “liberalize” their economies by eliminating barriers to free trade; specifically, tariffs, quotas and subsidies. Yet Japan, the United States and the European Union heavily subsidize their farmers, allowing agribusinesses from the developed North and West to sell surplus grains and produce in less developed countries at artificially low prices. This practice wrecks entire sectors of indigenous farming economies by making local rice, maize and wheat more expensive than their imported counterparts, thus driving farming families from their land. Furthermore, tariffs and quotas imposed by the industrialized nations block imports of textiles, leather goods and agricultural products from less developed countries. If free trade were truly free, these commodities are the very items that would form less industrialized nations’ most competitive comparative advantages.
This situation will not change in the near future. The United States, for example, this year passed what The Economist (June 29-July 5 2002 issue) called “an appalling new farm bill,” which raised subsidies to American farmers to $170 billion over ten years — a staggering rise of 80%. In Europe, the Common Agricultural Policy (CAP) shows little sign of changing any time soon. The CAP eats up 48% of the European Union’s annual budget on farm subsidies. In 2002, CAP subsidies totaled $39 billion. The issue of agricultural subsidies in the industrialized North and West are so fraught that even mainstream conservative business media are predicting subsidies could and most likely will de-rail the Doha Round of negotiations for further expansion of free trade based on neo-liberal principles.
One organization wrote of the CAP: “It takes up half the EU budget, although farmers are less than 5% of the workforce. It keeps food prices in Europe far above world levels. It has produced big surpluses that have been exported with subsidies. It has badly hurt farmers in poor countries, who have seen not only exports shut out by European tariffs but also suffered at home from dumped surpluses. As if all this is not enough, the CAP has failed in its main aim of protecting small farmers’ incomes, which have fallen inexorably throughout Europe, driving people off the land and encouraging the consolidation of farms into large agribusinesses.” These words are not those of OXFAM. Rather they are from page 12 of The Economist, July 13th-19th 2002 issue. No wonder agric subsidies are so critical in any discussion of supposedly “free” trade: Is there any other issue that shows the hypocrisy and duplicity of the morons and oxymorons?
Yes: There is also the issue of steel. In 2002 – pandering to domestic industrial concerns and for purely crass partisan reasons – the Bush administration slapped tariffs of up to 30% on steel imports. Although few less developed nations (other than Brazil, and possibly China) are affected by this step, it demonstrates once again the hypocrisy of those politicians and corporate globalists who call for ever-increasing levels of free trade.
Then there is the Bretton Woods agencies: the IMF, the World Bank and their sister agencies. The IMF is the main cheerleader for the neo-liberal Washington Consensus as it applies to emerging-market economies. (This is not surprising, given that it is controlled by the United States to such an extent that the U.S. Department of the Treasury website lists the IMF on its sitemap in an Alphabetical Index of its departments and agencies.) However, with the implosion of Argentina, the IMF’s poster child throughout the 1990’s, the Bretton Woods agencies finally have received harsh criticism, not only from the usual sources, but from conservative cheerleaders for globalization, especially Wall Street investors. It turns out that the ripple-along effects of Argentina’s debacle – triggered by the IMF (thus, by the United States) – are threatening the entire Latin American region, with Uruguay, Paraguay and Brazil in desperate economic straights. From The Economist, in a Special Report: The IMF (September 28th -October 4th 2002 issue): “For some critics, Brazil’s predicament is a sign that the system is broken. Dani Rodrik, a professor at Harvard University, says it shows that the Washington Consensus model ‘has run out of excuses.’ He argues that anyone ‘who still thinks this is an efficient system for resource transfer is mad’.”
It might be useful to quote at length from the Special Report referenced above: “For the IMF, Latin America’s current plight is the latest disaster in a litany of emerging-market crises over the past decade – from Mexico’s currency crisis of 1994-1995 to the Asian financial crisis of 1997-1998 and Russia’s default in 1998…In the 1990’s, in particular, it was mid-wife to the region’s embrace of economic reform – of the deregulation, liberalization and privatization that make up the so-called ‘Washington Consensus’ of policies for emerging-market prosperity. Latin American countries slashed trade barriers, sold off state assets, and opened their financial systems to foreign capital. Given the Fund’s close involvement, even Horst KÃ¶hler, the IMF’s boss, recently admitted that the failure to avoid the current turmoil ‘suggests that we still have a lot to learn’…The volatility of portfolio finance – its tendency to pour in when investors are confident, and flee just as suddenly – is the main reason for growing skepticism about the whole process of foreign borrowing by emerging-market economies. Each of the debt crises of the past decade has taught lessons; in particular, the danger of a pegged exchange rate. But Brazil’s current turmoil shows that even countries that appear to do everything right, can suddenly get into trouble.”
Well, that is precisely the problem: Even countries that took all the IMF’s strong medicine are near the edge of economic meltdown. The medicine prescribed invariably turns out to poison the patient. As Joseph Stiglitz details in his Globalization & Its Discontents, deregulating domestic financial institutions and rewriting laws for open access to international capital makes emerging-market economies vulnerable to highly erratic shifts in investor behavior, and confers no long-term benefits. He maintains, further, that foreign direct investment destroys otherwise viable domestic companies, while the privatization of state assets destroys essential social services or makes them prohibitively expensive for the poor that comprise the majority of populations in emerging-market nations. Stiglitz shows that those developing nations that have opened themselves to trade by deregulating financial markets and privatizing national assets have experienced far greater social and economic turmoil than growth. He maintains that, instead of development, progress and growth, the result of IMF strictures and conditionalities has been devastation and unsustainable levels of debt.
That this is so begs the questions as to why the IMF carries on with its programs according to the neo-liberal Washington Consensus. Now, I don’t know if there is some type of active, Neo-Colonial conspiracy on the part of industrialized nations to dominate emerging-market nations. But I would not be at all surprised. After all, the Bretton Woods agencies operate exclusively in the poor nations but are controlled solely by rich countries. And the more deeply one looks into these issues, the more clearly it appears that something entirely unseemly is going on. How else to explain the persistence of IMF and World Bank policies that – time after time; nation after nation – have proved to be disastrous for debtor nations?
The answer is very clear: Profit. While the party lasts, investors mobilized by IMF and World Bank loans charge premiums of 7% to 16% above commercial lending rates. Also, foreign investors can expatriate the profits both of commercial concerns they buy into and privatized state assets. Plus, if the debtor nation avoids default, the huge debts they have run up guarantee a constant flow of cash from payments on principal and interest.
These facts are not wasted on government officials in the emerging markets of less developed nations in the global South and East. They see the effects of Bretton Woods agencies’ policies and programs; many have lived through the social and political upheavals – notoriously known as “IMF coups” and “IMF riots” – caused by the imposition of IMF conditionalities and strictures. They know that the fiscal austerity imposed by the IMF is designed solely to achieve a budget surplus that will enable the borrowing nation to service its debt; that is, send money to investors in New York, London and Paris. They see the developed countries of the global North and West hiding behind their tariffs, quotas and subsidies. They are aware that joining the World Trade Organization will entail surrendering sovereignty to corporate concerns. And thus they know the game of so-called “free trade” is stacked against them.
For these reasons alone, corporate-driven globalization is doomed. At some point, emerging market nations in the developing world will realize that they can rock the international financial community by banding together as a cartel to refuse further debt service until neo-liberal free trade is replaced with more just, equitable fair trade policies. Something of a smaller scale happened in November 2001 at the Doha gathering, when officials from less developed nations, AIDS activists and representatives from NGOs came together to draft a statement against the WTO’s Trade Related Intellectual Property Rights provisions that prevented poor nations from copying patented anti-retroviral drugs.
But there are other reasons to predict the death of corporate globalization. These have to do primarily with what is now termed “globalization from below.” Before Seattle, the morons and oxymorons in charge of corporations and Bretton Woods agencies operated behind the scenes. They were pretty much out of the public eye. Now they are very much in the news. In his book, Dr. Stiglitz points out that the protestors in Seattle, Prague, Genoa, Quebec, Washington and elsewhere have changed the very terms of the globalization debate. (Not that the mainstream, corporate-owned media ever would admit so much.) Activists all over the globe are uniting via the Internet. These are promising developments, but will they be enough to stem the tide? A resounding “Yes”: When corporations see their bottom lines, their profits, deteriorate as a result of consumer boycotts, of ‘name and shame’ publicity campaigns, they will – eventually; over time – respond with policies and practices that are more conducive to development, progress and growth. When activists from grassroots global justice and global fair trade movements come together in a united front with ministers of less developed nations, corporate globalization will have heard its death announced. No doubt the morons and oxymorons behind it will resurrect themselves like the vampires they are. But the terms of debate have, in fact, changed, and they will face grassroots movements, as well as emerging-market cartels, which will insist on alternative agendas.
As for the World Trade Organization, we needn’t be all that concerned about it. Today, in December 2002, its staff is engaged in disruptive actions aimed at a pay increase. According to the Financial Times, the WTO workload has increased 30% since 1999 but its budget only by 8%. So it seems the poor babies have a difficult time recruiting and retaining top economists and lawyers. Furthermore, it will soon be so tied up with settling disputes between its member nations that it will sink into a quagmire of litigation and adjudication. Issues currently in the WTO pipeline include genetically modified foods (a dispute between the European Commission and the US); steel; the foreign sales corporate-tax subsidy issue (pitting the US against Europe, and which the Europeans won); and Trade Related Aspects of Intellectual Property Rights, or TRIPS (pitting the developed global North against the entire less developed South on access to cheap medicines). Supachai Panitchpadki, current WTO director general, warned of “collective discredit” if governments missed the December 31, 2002 deadline for an agreement. Key issues include specific diseases and which countries will be covered. The debate has lasted since the first Doha Round in November 2001. TRIPS also will bog the WTO down when the issue of traditional knowledge (especially of plants) pits agribusinesses and the biotechnology industry in the developed North against the entire global South. Then, if poor countries integrate more deeply into the WTO, the issue of European and American agricultural subsidies will drag the organization deeper into the quagmire, and prove it either increasingly ineffective or a hypocritical stooge of the rich countries’ corporate powers.
In addition, once citizens in its member countries experience how the WTO subverts and suborns national, state, and local law in favor of corporate profits, they will mobilize for change. (I am willing to bet that Western Europe, much greener than the United States, will lead the charge.) Lastly, since it has no money to dispense and no armies, the WTO will be toothless and powerless in the face of (1) US unilateralism and (2) increasing levels of non-compliance with WTO directives – both of which will merely add to the treadmill of litigation, thereby finally consigning the organization to the rubbish heap of history.
Let’s hope that it takes the morons and oxymorons behind corporate globalization with it.