Government - as an institution and even as an idea - hasn't fared well in this era
of corporate globalization. The prevailing view, especially in elite circles,
is either that government has become irrelevant and powerless, swept away
in the swirl of the global market, or that it is an odious obstacle to
the market and its bounty. Yet it is growing increasingly clear that the
world doesn't need more rapid marketization. Instead, it needs more effective,
democratic government and a stronger popular political voice, from local
communities to global financial institutions.
Ironically, the view that government is bad is often imposed on developing
countries by two institutions created by governments, the International
Monetary Fund and the World Bank, the latest targets of popular protest
against globalization. When countries get into economic difficulties,
often as a result of financial market instability (currency swings, short-term
capital flight, commodity price plunges or interest rate spurts), the
IMF typically has demanded that governments privatize operations, cut
budgets (with education and health care the usual victims), eliminate
subsidies, open and deregulate all markets and make labor "flexible" (that
is, make it easy to fire workers and cut their pay). Everything must be
sacrificed to protect government's sacred bond - not with its own citizens,
but with international bond holders.
developing countries where the IMF prescribes its harsh medicine, governments
have been particularly bad - corrupt, ill-managed, inefficient, undemocratic,
inequitable and ineffective in their basic tasks. But as the 1997 Asian
crisis demonstrated, the IMF prescribed the same treatment for governments
that had been doing many things well, especially on issues that typically
matter to the IMF - balancing budgets, promoting growth, opening markets.
As Russia shows, even a functioning government that doesn't do much well
can be economically preferable to virtually no functioning government.
Joseph Stiglitz, who recently resigned as the World Bank's chief economist,
has argued in criticism of the IMF that markets don't work well without
appropriate governmental institutions. In their absence, it can be disastrous
to push rapidly for more exposure to global market forces.
The developing world certainly has suffered from corrupt despots, and
IMF critics often downplay the extent to which economic and political
elites in poor countries have been responsible for poverty and squalor.
But from Indonesia to Guatemala, the responsibility for many bad governments
also rests with outside forces, both the United States and international
financial institutions. No matter how much the powerhouses of global capitalism
may criticize corruption in these countries, they have preferred it over
even moderately left-wing popular governments.
With the end of the Cold War, there is no longer the "strategic" justification
for propping up such governments, concluded a recent congressional advisory
commission on international financial institutions chaired by conservative
economist Alan Meltzer. But it was not just a Cold War strategy: The United
States, often acting through the IMF and World Bank, was clearly setting
policies that were designed foremost to protect the interests of Wall
Street, turning governments into handmaidens of global corporations and
financiers. Now the United States may support limited democratization
in countries like Haiti, Korea or Indonesia - but only to gain popular
legitimacy for a set of policies that still favors the global money elite.
The overall record of countries under IMF structural adjustment programs
- the policies imposed as a condition for loans - has ranged from unimpressive
to disastrous, despite some successes in dampening inflation and increasing
exports. Even by its own account, roughly 60 percent of World Bank projects
have been failures.
of the biggest problems has been the horrendous burden of debts on many
poor countries. Many of these debts are odious - especially when contracted
by undemocratic, corrupt rulers - and could legally be repudiated under
a precedent established a century ago by the United States, when it canceled
Cuba's debt to Spain after the Spanish-American War. The Jubilee 2000
campaign finally has forced the rich nations to acknowledge the need for
debt relief. Yet the plans for writing off some of the debt still leave
most poor countries saddled with unsustainable debt service charges and
Governments have been turned into debt collectors for global capital.
But the money and its repayment are not as important as enforcing the
iron law that capital always come first. Moreover, collecting the debt
by dismantling public services and turning everything over to private
business is very rarely the best solution to the failures of government.
The key to correcting government failures and creating the conditions
for solid development is less a matter of technical economics - like "getting
prices right" - than a matter of politics - giving people a voice. In
its most recent Poverty Report, the U.N. Development Program argues that
"effective governance is often the 'missing link' " in strategies to reduce
poverty; countries need help in improving governance, not more economic
conditions imposed from outside. Most important, the report states, "The
foundation of poverty reduction is self-organization of the poor at the
community level. Such self-organization is the best antidote to powerlessness,
a central source of poverty." Poverty programs are unlikely to work, the
report continues, if the poor are not empowered, or if macro-economic
policies are anti-poor. Yet the IMF not only imposes anti-poor policies,
but also undermines democracy. IMF strategy disempowers the poor, whether
it's secretly setting national policies, dismantling the few programs
that serve the poor, or undermining unions.
Stiglitz argues development must be viewed as a transformation of society,
not just an increase in GDP, and it must spring from within the society.
Economic democracy is essential, he said in a January speech in Boston,
and "democratic and participatory processes involving labor unions and
other social organizations" are needed both to deal with the legitimate
interests and anxieties of working people and to make possible a participatory
"high road" to economic development.
Pushing for a flexible labor market, Stiglitz said, may be tantamount
to telling workers to give up hard won advances in labor standards without
any overall public benefit. "By becoming advocates of stronger workers
rights and representation at every level - from the workplace ... to the
international level - I believe that we can achieve much more than improvements
in efficiency," he said. "Labor unions and other genuine forms of popular
self-organization are key to democratic economic development."
While IMF officials disdain promoting labor rights as illegitimately
"political," they regularly encourage policies that undermine labor rights
as simply "economic." The IMF pays no attention to the distribution of
income and wealth. Yet several studies show a link between lower levels
of income inequality and higher levels of growth in nations around the
world. Harvard economist Dani Rodrik has shown a strong correlation between
democratic institutions and rates of growth as well. Stiglitz also argues
that economic problems increase as inequality of wealth grows, possibly
reducing productivity, and union organization can help correct some of
those problems. Clearly, the political arguments for democracy, workers
rights and effective government form the basis for sound economic policy.
most important thing that the international financial institutions could
do to strengthen government and democratic participation is to stop doing
harm: stop acting as enforcers for global capital and stop interfering
in the organization of workers, peasants and other citizens in unions,
non-governmental organizations and political parties.
Although it is unlikely that the World Bank or IMF will be eliminated,
as some protesters demanded at the spring meetings in Washington, there
is growing clamor - some of it from conservatives - to drastically scale
back the IMF to focus on its original mission of managing short-term currency
problems. There is a need, however, for both increased foreign aid and
long-term loans to poor countries. That could come from a new organization,
possibly funded by receipts from a small tax on currency and other financial
transactions, or even a reformed World Bank. The conditions for such assistance
should not be privatization and austerity, but recognition of core labor
and human rights. Although rich countries can provide poor countries technical
assistance in developing effective governmental institutions and a professional
corps of civil servants, the real political transformation must come from
within the countries themselves. For that to happen, ordinary people must
be able to organize.
The creation of strong forms of economic and political democracy can
become the basis for real, sustainable development. This would not preclude
foreign investment, but it would mean that when countries bargain with
international investors and institutions, workers, poor people, environmentalists
and other citizens will have a voice in setting the terms of the new global
market. This model of development is likely to produce a more egalitarian
society - one that measures wealth, as recent Nobel Prize-winning economist
Amartya Sen proposes, not just in dollars but in the growth of human capacities
of the greatest number of people throughout the world.
David Moberg is a senior
editor of In These Times.
In These Times © 2000