by Sanitsuda Ekachai and Atiya Achakulwisut
Bangkok Post 3 April 1999
Countries in financial trouble have been told to follow the western model of development. Two alternative thinkers, Walden Bello and Hazel Henderson, however, warn the free market system has serious flaws and needs a re-think
During the Great Depression of the 1930s, the economist Lord Keynes mentioned the day when everybody would be rich might not be far off. "But beware," he said. "The time for all this is not yet. For at least another hundred years, we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still."It has been almost seventy years. While universal prosperity remains as far off as ever, western economic ambition which focuses on material growth , industrialisation and urbanisation-avarice and usury in Lord Keynes' words-has become the dominant creed of the modern world.
This growth model looked all shiny and invincible, until recently. First, the much-lauded Asian economies plunged into a crisis. Then, there was the Russian meltdown, followed by the Brazilian swoon.
Is something inherently wrong then with the free market system? Voices are emerging from different corners of the globe, questioning if competition and an acquisition of wealth are really the highest goals in life as some economists would have us believe? Among the expanding constellation of activists, academics and thinkers who believe that the mainstream economics-with all its figures, graphs and such technical terms as GNP and derivatives-do not have an answer to people's needs, Hazel Henderson and Walden Bello are two prominent stars.
A well-known environmentalist, Hazel Henderson has had tremendous influence on the move towards sustainable
development. She is the author of Building a Win-Win World: Life Beyond Global Economic Warfare, Politics of the Solar Age, and several other books. Her writings have appeared in hundreds of newspapers and magazines.
Born in Britain, Mrs Henderson now lives in Florida. She is a board member of the Worldwatch Institute and co-winner of the 1996 Global Citizen Award.
Currently a co-director of Focus on the Global South, a policy research institute based in Bangkok, Dr Bello wrote several years ago that the fast-growing economies of the then Newly Industrialised Countries (NICs) were structurally unstable. Then, few people paid attention to his against-the-stream analysis, which came true recently with the financial debacle that swept throughout Asia.
Dr Bello is also a professor of Sociology and Public Administration at the University of the Philippines. Prior to that, he taught at the University of California, Berkeley and was executive director of the Institute for Food and Development Policy (Food First).
On the surface, the two thinkers look very different. One is from the West, the other the East. Both, however, are united in their conviction that the money-first model of development is destructive both to humans and the environment, and badly needs reorientation.
Q: Both of you have criticised the free market system, calling it "crony capitalism" or "casino capitalism." Can you explain your dissent?
Henderson: Crony capitalism exists in Washington D.C., Wall Street, Frankfurt or London. It is a part of the global casino. It
is a very small group of elite in every country who benefit from the financial flows.
The problem is these financial flows are so much larger than the real economy they are supposed to measure. This affects every country in the world.
Bello: I would use the Asian crisis to illustrate my point. What Wall Street, treasury departments and the International Monetary Fund, even some people in Asia, have pinpointed as the main cause of the crisis was a set of factors which they call a witch's brew: corrupt politicians, non-transparent systems or a lack of prudential regulations. The solution, then, is to transform the system along western lines.
The problem is the system transformation does not address what brought about the crisis in the first place and what emergency measures are needed.
It is fairly clear that the crisis was caused by a massive inflow, particularly of short-term capital into the economies. They inflated so many of the values. In 1996, the real estate in Bangkok was more expensive per square metre than in urban California! Then, when the economy showed signs of trouble, they fled and brought down the Thai economy. That is what we meant by casino capitalism. It was speculators who took advantage from differences in stock prices and currency rates.
Q: Does the international media have any role in perpetuating these speculative activities?
Henderson: Some responsible journalists in the United States are beginning to notice how all of our regulations on who may promote stocks or companies have gone right out of the window. Financial journalists have interview shows and watch stocks go up right after. The result is another of the fast herd behaviour that amplifies the whole bubble.
Everybody in the United States now has bought the idea promoted by financial institutions that the real way to protect your retirement is to buy stocks. What is so sad is there was all the money hanging in Wall Street and you have young asset managers in their 20s who have never seen deflation or a depression. Those managers are under pressure to put the money somewhere. That is another reason how the Asian debacle got going. It was all short-term killing. Nobody was talking about building those societies. It was tragic.
Bello: I think there was a whole set of factors that were present in the Asian debacle. Because of the hype about the Asian miracle, a lot of western press interest came to Asia. We had Dow Jones and the Asian Wall Street Journal, CNBC and Time-Warner. There is also CNN and big news agencies like Reuters and Bloomberg.
What is notable in this process is the character of financial journalists, including many of the locals. Unlike political or cultural commentators, they reported outright what was given to them by investment strategists. There was no filter nor analysis.
The atmosphere cannot be divorced from the academic world. The consensus was that Asia was the miracle area, the bonanza. Political scientists or economists would write up one trap after another about how Asia was a constantly prosperous region. The expectation that was created by the academics, whether from the right, middle or left, was that you would have a seven to 10 percent growth rate far into the future.
Q: On a personal level, what makes you question the neo-classical economic model, which apparently is the dominant mode of transaction the world over?
Henderson: I have always understood that the unpaid half of the economy-the work of raising children, maintaining the household, growing food, or building houses-is the fundamental system in the world.
I grew up in Britain. My mother did all the useful work, while my father sort of stood around and played golf. I thought why is it that my father, who was an accountant, had control of all the money-she has to ask him for the grocery money-while she was the one who did all the work? I became aware that economics is totally patriarchal. They consider all the work of the volunteers as un-economic.
I was also an environmentalist. I lived in New York in the 1960s because I married an American. I was trying to raise my little girl in the filthy air of New York City. I thought this child would get poisoned if I didn't do something. So I started this group called Citizens for Clean Air in 1964. That forced me to learn why the environment is polluted. Again, it was these mainstream economists who said the environment is free.
I joined the two together: the unpaid, which I call caring economy and the environment. I, then, realised that economics is just a very narrow discipline in the middle. And critiquing it became my crusade.
Bello: Why I went the other way? First, I am not an economist. I was trained as a sociologist. Even though sociologists in the West tend to be conservative, they do bring in more dimensions, like values and social class, rather than just looking strictly at market efficiency factors.
Secondly, although I got a PhD from Princeton, I was an activist for the next fourteen years afterwards. It was the period of the Marcos administration in the Philippines. At that time, if you were a decent person, you either opposed the government, or joined it. There was no in-between.
I spent the next 14 years creating political networks and lobbying in Washington D.C. to get the US to cut off its aid to Marcos. That is when I became interested in economics because a lot of the funding that went to Marcos came from the World Bank and a lot of it was justified as necessary for economic development.
In order to campaign for the termination of funding to Marcos from the World Bank, we had to examine the development model that they had, to show the assumption and actual working. That is how I learned my economics.
What is key is, it is not unusual for people like me and Hazel who are not economists to see a crisis coming. We do not have the blinkers. We are not imprisoned by the economic paradigms that are taught, ritualised and institutionalised.
Henderson: One of the things I have tried to expose is that the Nobel Prize in economics is not a real Nobel Prize. The money was put up by the Central Bank of Sweden to make economics look like it is science.
All knowledge is politics. Why do we let this very narrow discipline become our philosophy king?
Bello: What Hazel said is you create a framework that makes you see reality in a certain way, which now brings us back to Thailand. I believe that Tarrin and Supachai [Tarrin Nimmanhaeminda, the Finance Minister and Supachai Panitchpakdi, the Commerce Minister] and many of the economists here are sincere when they talk about recovery. But they only see one way, which is further liberalisation. I don't think that comes out of malice or bad intention. It is a faith, a religion.
Q: You mentioned the need for policy makers to question western economic models. Such re-orientation is evident in Malaysia and China, which are more or less authoritarian states. Is authoritarianism necessary, then, in the pursuit of an alternative development?
Henderson: There is no correlation in particular [between questioning the western economic model and authoritarianism]. Many factors are at play here, including culture.
China is a very interesting case. Chinese people do not have the narrow reductionistic view of the world.
Bello: I think it is not authoritarianism but the degree of westernisation of the elite and technocrats. What you found in Asia
is a common core of people who went to US graduate schools, went in and out of the World Bank, the IMF and nternational
policy-making institutes. Henderson: It is the same thing in Latin America. It is an old boys' club!
Bello: Yes, you have a situation in which states are different in terms of political systems but have a common set of policies.
I was always very shocked at how little the margin of differences there are in Thailand among policy makers and intellectuals. What we are witnessing is a very narrow intellectual debate among people who share the same paradigm.
China, coming out of the more socialist tradition, less colonised, was much more careful in adopting the model from the west. It was very cautious in opening up, did not give in to capital liberalisation like the others. It did not make its currency fully convertible, thereby escaping the financial crisis.
Henderson: The other thing is they are learning from other countries' mistakes. They call it the advantage of the late
bloomers.
Q: You stressed the importance of people questioning if economics meets basic values. What are the values you talk
about?
Henderson: The values we are talking about here are very basic; sharing, unity, family. Caring for the Earth because we know that the Earth supports us all.
There is an an organisation called The Earth Council, which tried to find out if there are any basic values all members of the human family actually share. They put together a list called the Earth Charter, and it has the same, rather simple things.
I don't belong to any particular religion. But if you look at all the religions, you will find it is the power of the priests which makes people fight one another. If you could get these religious traditions to go back and see what the founders really believed, you would find the underlying belief that unites us all is very simple.
Bello: The basic value of neo-classical economics is narrow efficiency. Competition is supposed to bring about the most
cost-effective way of producing something. The assumption of all economics is the unleashing of greed among different individuals creates the best possible allocation of resources that then leads to the best outcome for everybody.
Following these economic values that are so much against the grain of what makes us human beings has led to inequality and a destabilising relationship between the economy and the biosphere. These people believe the best way to manage an economy is not to manage it at all and leave it to an invisible hand. So economists have a god. It is called the invisible hand. That is a god very different from the gods we have.
The basic values of non-economists are quite different. We don't value unleashed greed and selfishness. We know that the deepest human instinct, even before competition, is cooperation. If we look at the world's religions, all of them have something to say about the control of economic life, profit, merchants and banking. Islam, for instance, is strongly against usury. The insight of the great religions was developed over thousands of years. But it is being overturned by economics, which as a profession was developed just 300 years ago.
We are beginning to see this collective wisdom of religions is something we must return to rather than the false god of
economics. The invisible hand only alienates people.
Q: Many people see a silver lining to the current financial crisis. Do you think so?
Bello: I have always maintained this crisis is an opportunity. There is a whole generation that will be living under a depression rather than a boom. They begin to learn that the economy can't be built solely on foreign credit and they can't just emulate western consumption standards.
It is not going to be easy. Thailand has become addicted to capital and affluence collectively. What is happening now is the withdrawal pain.
The young generations, who will be living under a period of low growth and scarcity, will be coming up with a different set of values; more critical of foreign models, more appreciation for real wealth and agriculture, and a realisation of the importance of the domestic market.
I think economists and technocrats who grow up after the boom should really begin to catch up with popular thinking. If they don't, they will be left behind in this process.
Q: Standing up against the mainstream, the all-too-powerful free market means you are often derided or dismissed as in the
idealistic minority. What keeps you going?
Henderson: I deeply believe that human nature is much better than the current economic system allows it to be. When you have a system that rewards selfishness, acquisitiveness and greed, and doesn't reward cooperation, sharing, caring.. it is such a radical distortion of human nature. It offends me deeply.
A lot [of my thinking] is based on the influence of my mother. She always had enough love for all of us. She always had enough room on her lap for us all. Everybody in the village was proud of my mother as she provided meals on wheels and a baby clinic. She should be a leader because these are the values we want.
Bello: I have a sense, without being self-righteous, that I am right, that my values are on the right track. My parents instilled this in me. Moreover, I have a network that is not only national but global. It is an intellectual exchange, a community. Unless you have such an alliance, it is easy to be discouraged.