OTTO BRENNER STIFTUNG
GLOBAL GOVERNANCE - A POLITICAL ALTERNATIVE TO NEO-LIBERAL GLOBALISATION
BERLIN, 25 AND 26 OCTOBER 2001
By Nicola Bullard
As many of you know relations between trade unions and non-governments organisations are not always easy - we come from different organisational structures and cultures, different histories and we have different ways of working. Sometimes we even have different politics.
But for me, being here is like coming full circle. My first job when I left university was with the federal teachers union in Australia. I remember well discussions in the early 1980s about the drastic effects of debt and structural adjustment programmes on students and teachers in Africa and Latin America. In those days, the unions were in the vanguard when it came to understanding the reality of structural adjustment, and it was in these circles that I first learnt about the World Bank, the IMF and neo-liberalism. The 1980s also were politically heady days and unions were often leaders in the independence and anti-dictator struggles in countries such as Nicaragua, Chile, Argentina, Mozambique, South Africa and the Philippines. In the North, they were often the backbone of solidarity campaigns. Perhaps it was the company I kept, but I remember being very inspired by the international work of the WCOTP, as it then was, and it was this early experience that has shaped my own world view and my activism. It partly explains why I am here today.
I am also here because many of us in the global movement for social justice or for "another globalisation" (what the media wrongly calls "anti-globalisation") believe that the only way of reversing the social and environmental destruction of "hyper-capitalism" is by trade unions, workers organisations, social movements and non-government organisations working together to control and democratise the financial markets and the financial institutions, and to re-embed the economy into society and culture rather than having our societies and cultures driven by economics.
Global governance - an alternative to neo-liberalism
The topic of this conference "Global Governance - an alternative to neo-liberalism"
is very curious because it implies that we don't have any global governance
and that global governance per definition is not neo-liberal.
I don't agree with these assumptions, if indeed they were intended. First, we have a lot of global governance - probably too much and mostly the wrong kind: undemocratic, unaccountable and untransparent or just plain dysfunctional. Second, the existing institutions of global governance (to name only the most powerful) - the International Monetary Fund, the World Bank and the World Trade Organisation, the G7, the US Federal Reserve, the Bank for International Settlements and the OECD - are very effective mechanisms of neo-liberal global governance. "Governance" does not have to be democratic or representative; it simply has to manage the system. Therefore, I don't think the concept of global governance in itself is useful.
Reading between the lines, the topic also implies that the present ad hoc system of managing international political, economic and security relations and, presumably, "development" has failed. I agree. It has failed to create jobs. It has failed to distribute wealth and benefits fairly. It has failed to protect the environment. It has failed to curb the over-consumption of the North. It has failed to guarantee the basic rights -- health, education, shelter, food and a livelihood -- of two thirds of the world's people. It has failed to stop wars and it has failed to stop terrorism (of all varieties). It has failed to give voice to countries and peoples of the periphery and, in many instances, it has failed, even, to do neo-liberalism well. Economies crash, banks are bailed out, the institutions give bad advice, and there are great gluts, inefficiencies and contradictions in the system, such as $350 billion in subsidies to agricultural and restrictions on the mobility of labour. It devastates peoples and environments and fails in almost everything except in protecting the interests of the rich and powerful countries and their corporate and military cronies. This the system does extremely well.
The World Bank and the International Monetary Fund are important pillars in this system of neo-liberal global governance and have been the most visible and accessible targets of dissatisfaction with the system. Now, to the topic of this panel: The World Bank and the IMF - between inertia and the necessity of reform. I will try to do this in three, very short, parts: first, a recent history of the rising dissatisfaction with the IMF and the World Bank, an assessment of their efforts to "reform" and finally a tentative speculation on how the Bank and the Fund might be deployed in the "global war against terrorism."
Once upon a time…
In many respects, the 1997 Asian financial crisis was a turning point in the
debate about financial liberalisation and economic integration because the unraveling
of previously booming economies showed the power of financial markets to devastate
even big players such as Korea. In an incredible reverse flow of capital the
financial markets sucked the money out of Asia, leaving behind mounting debts,
plunging currencies, and economies spiraling into recession. Enter the IMF and
the World Bank.
The Bank and the Fund - with unseemly haste -- cobbled together huge loans underwritten by long and detailed letters of intent which included intrusive and detailed conditions such as demands to "liberalise" the labour market in Korea, to reduce subsidies on staples (such as oil and rice) in Indonesia, and to privatise some of Thailand's more successful state owned enterprises.
The IMF also delivered their standard anti-inflation economic advice that, by all reckoning except theirs, turned the recession into a depression and the crisis into a crash. In these heady days, the IMF and the World Bank were rarely out of the headlines: op-ed pieces in all the major financial papers attacked their policies and practices, neo-liberal academics and the conservative right joined forces with the progressives in criticising the Fund and the Bank. For the first time, the workings of the two institutions became the stuff of public debate.
Since then, there has been an acceleration and intensification of the demands for change. Around the world (and not only in the media-grabbing North) protests against the Bank and the Fund are getting bigger, louder and better informed. Every month there is new evidence or admissions from "insiders" that two decades of IMF structural adjustment loans (now re-named the poverty reduction and growth facility) and the Bank's export-oriented, market friendly development strategies have weakened the state's capacity to deliver basic needs, have contributed to ecological devastation, have forced the relocation or displacement of tens of millions of families, rolled back worker's rights and kept wages and working conditions low. The economic growth promised by neo-liberal economists has not materialised, nor have the jobs. In developing countries, growth rates in the 1990s were two percentage points lower on average than during 1970s, while job destruction has outpaced job creation in all but the precarious and unprotected informal sector.
These policies have also guaranteed that private capital can enter and leave countries almost without impediment, and that "structural reforms" reduce the risks and costs for investors but leave workers and consumers unprotected. In the globalised economy, governments (at least in the South) are unwilling or unable to regulate the market, investors or corporations yet billions of dollars of public assets have been sold to the private sector at fire sale prices in the name of efficiency.
Economic policy has been taken out of the hands of the people and their governments and delivered into the offices of Wall Street and Washington DC. This was the common experience and the common perception of IMF and the World Bank policies in most developing countries during the 1980s and 90s. The Asian financial crash made the IMF and Bank policies, and indeed neo-liberal globalisation itself, an international problem because it showed that even countries which played by the rules, could be destroyed by the game, and with human and social costs that demanded action.
Bailing out the leaky boat
Since then, the World Bank and the IMF have stumbled from crisis to crisis,
attempting to ameliorate the critics, appearing to respond to demands for reform,
with each, in their different ways, caught between the imperative of institutional
survival (therefore, the need to be seen to be doing something), inevitable
institutional inertia (they are, after all, more than fifty years old) and realpolitik.
Some of the most trenchant criticism has come from within the organisations themselves, a sign, I would suggest, of imperial decay rather than transparency, free speech and dynamic change.
Events such as the politically forced resignation of Ravi Kanbur, the chief editor of the World Development Report, leaked memos from disgruntled staff, cancellation and downsizing of meetings in the face of protests, and criticisms from major shareholder and debtor countries alike, have placed the World Bank under siege.
In the past five years, James Wolfensohn, the man steering what might well be a sinking ship, has tried to "reform" the World Bank and in the process created an institution that is muddled, unfocussed and riddled with contradictions, dissent, dissatisfaction and failures. The cover story of the most recent issue of Foreign Policy is "The man who broke the bank?' Inside, Financial Times journalist Stephen Fidler, describes the Bank as institution in crisis, with its power diminished and groping for relevance.
"The World Bank," he says "is in crisis, struggling to devise a formula for development as critics slam it for incompetence, inefficiency and irrelevance. Who to blame? Try Bank president Jim Wolfensohn, whose personal failings and misguided policies have muddled the Bank's mission and pushed its best staff out the door. But the Bank's travails also underscore the hypocrisy of its rich shareholders who speak grandly about reducing poverty but stand by as the world's top development institution falls apart."
The IMF, too, has been under the spotlight. And while the IMF itself is especially good at hiding their dirty laundry, the most stinging criticism has come from its "friends across the street." The outspoken former chief economist (and recent Nobel Prize winner) Joseph Stiglitz - himself the victim of the Bank's inability to accommodate dissent - wrote in an article entitled "What I learnt at the world economic crisis"
" The IMF likes to go about its business without outsiders asking too many questions. In theory, the fund supports democratic institutions in the nations it assists. In practice, it undermines the democratic process by imposing policies. Officially, of course, the IMF doesn't "impose" anything. It "negotiates" the conditions for receiving aid. But all the power in the negotiations is on one side--the IMF's--and the fund rarely allows sufficient time for broad consensus-building or even widespread consultations with either parliaments or civil society. Sometimes the IMF dispenses with the pretense of openness altogether and negotiates secret covenants."
But the IMF has made a rather better job of sidestepping the demands of reform simply by keeping its collective head below the parapet, and avoiding all the imperial illusions, hand wringing and dirty laundry that have characterised the World Bank's struggle with its contradictions and critics. The IMF, it must be said, have a rather easier job than the Bank: they just do the quick and dirty work of negotiating loans and setting conditions, whereas the World Bank actually has to get in there and "do" development.
But, it must also be said, that the World Bank does "development" badly, even according to its own people. One of their senior economists, William Easterly, said in an interview with the Financial Times that the Bank had given 36 poor countries ten or more loans during the last decade, each with conditions attached, yet, he said "the growth rate of income person of the typical member of this group during the past two decades was zero. The failure is so widespread that pointing the finger at a single institution is futile."
The widespread failure that Easterly acknowledges is exactly what the people have been protesting about for the past 25 years, staring in Peru in 1975 and going right through to Genoa in July this year.
The superficial reforms carried out by the Bank and the Fund - access to information, more "participation" of civil society, better websites, a slightly more generous debt rescheduling programme, interactive dialogues on the "Development Gateway" and a sloganistic acknowledgment that "poverty alleviation" is their mission -- fall far short of the sorts of process and policy reforms that are needed.
The Bank and the Fund are still dominated by the rich countries, and the Washington consensus still drives the development discourse.
Deja vu all over again
I would now like to speculate - very tentatively - about the future and what
the post-September 11 consensus might look like.
The current, fragile, consensus is on the "global war against (Islamic) terrorism," a consensus which will be very hard for the US to hold together unless there is a clear and decisive end to the war, and without some real benefits to the countries that have signed up.
The first - a clear and decisive end to the war -- seems very unlikely. It is a war without an enemy and with no clear agreement of what would constitute either a victory or a loss. Most likely, we can look forward to a low-intensity global war on (Islamic) terrorism where everything and anything can be justified and carried out in its name. However, the second requirement - delivering some tangible political or economic benefits to the South -- could hold the coalition together a bit longer. Already, we have seen the Pakistan has gained debt relief, the US has lifted sanctions and the EU has granted market access for Pakistan textiles. And these are just the deals we know about.
But a broader strategy will almost certainly take on the familiar shape of "liberal containment" - a strategy perfected by the US during the Cold War. The objectives of this strategy were clear: "the communist threat against free nations… and the overriding poverty and lack of development… These are the twin objectives which the foreign aid program seeks to meet." Replace the word communism with Islamic fundamentalism and we can see the contours of the "neo-liberal containment" that will shape foreign aid policies and which will draw the World Bank and the IMF even deeper into the murky waters of Western domination and imperialism.
"The seeds of terror thrive in poor ground"
In the days following the attack on the World Trade Centre and the Pentagon,
many commentators soberly agreed that poverty is the breeding ground for terrorism
and fundamentalism (Islamic, of course, not Christian or Hindu) as if they'd
know this for a long time but no one ever bothered to ask them. Obviously, it
is far too simplistic to conflate poverty and terrorism. Not only is it nonsense
(one billion people living on a dollar a day, and how many terrorists?) but
more importantly it strips the equation of power and renders it purely economic:
a classic neo-liberal solution to problem. You can almost hear George W. Bush
saying that if we can "bring all these folks into the market then we've
got it licked."
It is dangerously simplistic and saves us from having a serious debate about terrorism, about what it is and who defines it. And it saves us talking about violence and intolerance, about imperialism and freedom, about culture and self-determination, and about what lies at the heart of the dominant Western ideas of modernity and development. But, leaving that aside, and accepting the "dumbed-down" view that the world is divided into the good, the bad and the poor who might become bad if they stay poor, then we quickly arrive at the conclusion that they need "development." Development means entering the market --and God knows the global economy could do with a boost to the consumer class.
Floating above this apocalyptic view of wastelands of poverty, from which terrorism will rise to stalk the angel of freedom, is the dark cloud of a global recession. In this scenario we can see a plan emerging. Echoes of the Marshall Plan? Dusting off Keynes? (Another) New Deal? The New World Order that we never got? Back door protectionism in the name of national defence (forget about the WTO)? Pump-priming the military economy via Wall Street?
Trade as the weapon against terrorism
But no matter what you call it - perhaps a New Global Deal - you can be sure
that there will be no prior settling of accounts. There will be no debt-cancellation
a la Marshall plan, there will be no review of the unequal trade agreements,
and there will be no democratisation of the institutions or the markets.
Second, the modern day equivalent of using aid to fight communism is using "trade as the weapon against terrorism." US Trade Representative Robert D. Zoellick lost no time in using the shock of September 11 to push home the need to launch a new round at Doha, saying "While their blow toppled the towers, it cannot and will not shake the foundation of world trade." We can expect no drawing back from the push for trade liberalisation, a central role for the private sector and market expansion.
Third, the world is a very different place now than it was at the height of the Cold War. The type of capitalism is very different, the integration and liberalisation of economies has been thoroughgoing (if not fair), financial markets are huge and hungry, the state is no longer an effective intermediary between those who seek to alleviate poverty and those who are actually poor, and most countries, or at least poor ones, are bound by trade agreements and debts.
And what will be the role of the World Bank and the International Monetary Fund in this New World Order, this post-September 11 consensus by coercion?
It will, I fear, be exactly the same as it has been for the past twenty five years: to be the hand-maiden of the US and to promote a model of economic development which suits US interests and which is silently endorsed by the European Union and the elites of the South.
It is not clear what that economic model will be, although it is hard to imagine a big shift away from the "open economies, open societies" rhetoric, as we can tell from this heroic call from the FT:
"The ills of the world's poor result from too little globalisation, not too much. Their continued marginalisation can only perpetuate deprivation and a sense of injustice. But the extraordinary spirit of international co-operation engendered by last month's atrocities may just offer a gleam of hope. It has created new possibilities for binding the world closer together, economically as well as diplomatically. The last such opportunity was after the second world war, when enlightened US economic leadership laid the foundations for enduring prosperity and stability in Europe and Japan. Much has changed in the world since then. But there is a moment to be seized now, all the same."
Already we are seeing aid and trade being used - once again -- as the carrots
and sticks to cajole governments to join the war against terrorism. UK secretary
for development Clare Short - formerly a strong advocate of "untying"
aid -- suggested that Pakistan should be made eligible for debt rescheduling
and relief under terms usually reserved for poorer countries. "This would
serve geopolitical ends while keeping Pakistan on track with its recent impressive
reform efforts," she said. We can expect that aid will become even more
tightly tied to political objectives.
This is the kind of political game that the World Bank and the IMF will again be asked to play: to be the bag-men for the US and to push enough loans to keep the wheels of commerce and debt turning, to quell political dissent and Islamic fundamentalism, and to stop all those poor people from becoming terrorists. They will happily throw a lot of money at the problem -- provided they are given the money and the mandate by the US - but it will not solve the problem of poverty and injustice unless there is a radical transformation in their the Bank's and the Fund's thinking about development. And it will not solve the problems of terrorism because that has more to do with US foreign policy and US imperialism of which the global war against terrorism is simply more of the same.
The IMF and the World Bank are caught between more than inertia and the need
for reform. They are caught between their principal role of maintaining the
creditor/debtor relationship between the North and the South, their own illusions
of grandeur, a development model which is unsustainable and unfair, the political
demands of their major shareholders, the mounting dissent within and without,
the weight of institutional inertia and the overwhelming reality of realpolitik.
In this environment, money and power will win and, as always, the US and the
EU have the power and the money. The World Bank and the Fund can never be institutions
for the common good as long as they are run by powerful countries with arrogant
and imperial ambitions.