Re: [A-List] Pauperizing the Periphery

["Pieinsky" <pieinsky@xxxxxxx>]

Stan -- Do you have a URL for this article? Thanks.

jay
www.neravt.com/left/


----- Original Message -----
From: "bon moun" <sherrynstan@xxxxxxx>
To: <a-list@xxxxxxxxxxxxxxxxxxx>
Sent: Sunday, June 08, 2003 10:26 AM
Subject: [A-List] Pauperizing the Periphery


> [Good analysis, even though it continues to take for granted the
> positive value of "growth."  -SG]
>
> June 7, 2003
> Pauperizing the Periphery
> Two Decades of Neoliberal Policies
> 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
> compare 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.
>
> M. Shahid Alam is professor of economics at Northeastern University. His
> last book, Poverty from the Wealth of Nations was published by Palgrave
> (2000). He may be reached at m.alam@xxxxxxxx
> C M. Shahid Alam
> 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)
>
>
>
>