[PEN-L:29522] RE: Liu on Stiglitz

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L:29515] Liu on Stiglitz

 I think there's a difference. While McNamara is a technocrat, Stiglitz is an academic. Academics are sometimes ingenuous, actually taking that bit about "seeking truth" seriously. (Others are out-and-out ideologues, of course.) Even some economists are that way. But a technocrat like McNamara wants to Please His Boss, to produce the most bang for the buck, and goddamnit, he's Got the Brains to Do It With. This made him more like a hit man.

Keynes was pretty bad in his early career, accepting the _laissez-faire_ orthodoxy. We gained from his changing opinions (though it would have been even better if he'd changed them more).

JD

-----Original Message-----
From: Louis Proyect
To: pen-l@xxxxxxxxxxxxxxxxxxx
Sent: 8/17/2002 6:22 AM
Subject: [PEN-L:29515] Liu on Stiglitz

Stiglitz keeps reminding me of McNamara, a former president of the World

Bank. Beginning in 1961, President Kennedy began to send military
advisors to Saigon to explore the question whether local Vietnamese
forces could, by training, be brought up to the level of expertise
required to fight a guerilla war against troops of a people's liberation

army from Hanoi. His Secretary of Defense was Robert S. McNamara, one of

the so-called Whiz Kids at the Ford Motor Company, who with his systems
analysis and mission oriented deployment assure both Kennedy and Johnson

that it would be a sure win. In 1995, McNarmara completed his memoirs,
In Retrospect: The Tragedy and Lessons of Vietnam. This book revived all

the anger of those sent to Vietnam and were lucky enough to have
survived, though most not intact. Some 58,000 Americans and over a
million Vietnamese died in this bloody conflict. McNamarra now says "Yet

we were wrong, terribly wrong. We owe it to future generations to
explain why." The like of Stiglitz and Krugman are now singing the same
McNamara tune.

The market fundamentalists were wrong from the beginning just as Robert
McNamara was wrong from the very beginning of his term as Secretary of
Defense. President Kennedy who had just been found wrong in the Bay of
Pigs Cuban disaster was not well served by his new man at the Pentagon.
On pp 32-33, McNamara wrote "The irony of this gap -- Asian experts --
was that it existed largely because the top East Asian and China experts

in the State Department -- John Paton Davies, Jr., John Stewart Service,

and John Carter Vincent -- had been purged during the McCarthy hysteria
of the 1950s. Without men like these to provide sophisticated, nuanced
insights, we -- certainly I -- badly misread China's objectives and
mistook its bellicose rhetoric to imply a drive for regional hegemony."
Blaming others for his mistakes was a theme appearing in McNamarra's
book throughout its pages. The irony of the economics gap was that all
the economists who had reservations about the extravagant promises of
free markets were purged from both government and academia for two
decades.

The late Barbara Tuchman, author of March of Folly, had a view quite
different from McNamara's. Barbara Tuchman listed dozens of experts that

McNamara could have consulted before any decisions were made by
President Kennedy. The list was long and had many well-informed East
Asian and China experts. She also mentioned university professors in the

United States who might disabuse McNamara of his obvious illusions in a
country that never really showed the enthusiasm or will to rise to
American expectations.

The regime in Saigon was corrupt, something McNamara could have learned
for himself. Ho Chi Minh was a Vietnamese nationalist rebelling against
French colonialism, a fact that no one in authority could possibly
fathom. Tuchman asserted neither Kennedy nor Lyndon Johnson ever had a
realistic formulation of clear objectives. Both, like McNamara, were
mesmerized by their anti-Communist stance on virtually all policy
decisions. Johnson was to lose his presidency because he failed to see
the consequences of his own actions. He announced in 1968 that he would
not seek reelection, thus abandoning the field to Richard Nixon. Elected

in 1968, Nixon authorized the secret bombing of Cambodia. Anger spiraled

out of control, even to the point where four students at Kent State
University were killed by panic-stricken National Guard personnel.
Similarly, market fundamentalist were mesnerized by the anti-government,

anti-socialist stance on virtually all policy decision. The supplyside
economics operated on the assumption that take care of the rich and the
poor will take care of themselves. It eventual led to terrorism against
the heart of financial capitalism where thousand of innnocent people
died.

In the early 1980s, Nicaragua was among the most destitute country in
the Western hemisphere. In 1979, President Anastasio Somoza Debayle was
overthrown by local nationalists, ie., guerillas under the leadership of

Augusto Sandino. The Sandinistas established a government not welcomed
by the United States. A civil war ensued in which Washington backed the
opposition to the Sandinistas, the so-called Contras.

President Reagan, a militant anti-Communist, described the Contras as
"freedom fighters," when in fact many of the Contras were Somoza
supporters. Reagan's attitude exploited by those who opposed liberating
development in Nicaragua antithetical to corporate America's interests.
Reagan allowed Nicaraguan policy to get out of control. That country
sued the United States in the International Court of Justice (ICJ), a
court established by the United Nations.

This action charged the United States with numerous violations of
international law and of the Charter itself. The United States argued
that the ICJ was without jurisdiction to entertain the suit captioned
Case Concerning Military and Paramilitary Activities in and Against
Nicaragua. The text of the court's ruling on the merits appears at 25
International Legal Materials 1023 (1988).

The text is a stunning indictment of American policy with respect to
Nicaragua. The United States was in clear violation of Article 2 (4) of
the United Nations Charter. Among other things, American mercenaries
mined Nicaraguan harbors, intervened in the internal affairs of
Nicaragua, committed aerial trespass into Nicaragua's airspace,
infringed on freedom of the seas, and killed and/or kidnapped citizens
of Nicaragua. In the economic field, the United States withdrew foreign
aid to Nicaragua, drastically reduced Nicaragua's sugar quota, imposed a

trade embargo and used its influence in the Inter American Bank for
Reconstruction and Development to block loans requested by Nicaragua.
The ICJ awarded Nicaragua reparations to be paid by the United States
for the wrongs committed by it.

They were never paid. However, in 1993 the International Monetary Fund
and the World Bank, both virtually controlled by the United States (
with Stiglitz asChairman of President Clinton's Council of Economic
Advisers with cabinet rank), presented new demands of unusaul severity
to Nicaragua. Noam Chomsky's book, World Orders Old and New, summarized
them in part. "Unlike many others, Nicaragua will receive no relief from

its crushing debt. It must eliminate credits from the Bank of Industry
and Commerce, one of the remaining state banks, and privatize
enterprises and government operations. These included such services as
postal, energy, and water to ensure that poor people really feel the
pain -- they are for example unable to give their children water to
drink, if they cannot pay, thanks to 60 percent unemployment. Nicaragua
must also cut public expenditures by $60 million, eliminating what
little remains of health and welfare services -- a figure that was
selected for its symbolic value; that was the sum shipped out of
Nicaragua during the previous year by the already privatized banks."

Stiglitz was a key player of the Washington consensus and an architect
of neo-liberal globalization in the Clinton White House before he went
to the World Bank, in a parallel career path with McNamara. Stiglitz
claims that a general consensus prevails regarding Brazil as a vibrant
democracy and a strong economy, with an activist governemnt to balance
free markets and to combat income inequality, a sohphisticated economics

awareness, a free floating undervalued currency, and enlightened World
Banks assistance. It begs the question then how such a healthy country
got so sick? Stiglitz asserts that this IMF rescue package is
"different", and that it has a chance of success because it only
requires Brazil to continue current policies, without the usual IMF
conditionalities of fatal austerity. But didn't current policies get
Brazil into its currenct fix? Sounds like "take two aspirin and call me
in the morning when (or if) you wake up."

Stiglitz, allying himself with Sorros, repeats his belief that there are

fundamental flaws in the current global financial architecture. It is
the height of untimely timidity for him to write that the failure of the

new IMF rescue of Brazil "should renew the resolve to understand why the

global financial system is operating so poorly."

Why? Because transferring wealth from the poor to the rich is an
unsustainable game.

Henry C.K. Liu

 

--

Louis Proyect
www.marxmail.org