Our Word is Our Weapon

Our old pals the Zapatistas have been firing out communiques at a rate of knots recently, detailing their plans to form 30 ‘autonomous municipalities’ in Zapatista towns and five committees to deal with various aspects of Zapatista work. You can read the announcements here.

The American-led Coalition Provisional Authority in Iraq continues to stumble along in a tragicomic fashion. Their soldiers are getting killed at an alarming rate, Iraqis keep asking awkward questions such as “why doesn’t the electricity work?”, “what happened to my job?”, “what was that you said about freedom and democracy?”, etc …

Paul Bremer has announced that electricity, water and health care will be back to ‘prewar levels’ within 60 days. Does that mean ‘pre-2003′? What about pre-Gulf War I, or pre-Iran war? How long will that take (bearing in mind that like all other Coalition Authority predictions before it, this one is probably extremely optimistic)?

And have a look at this (slightly old) BBC story on a report by McKinsey saying that reconstruction in Iraq could cost as much as $90bn (not including transport infrastructure), and that “oil revenues would not be enough to cover Iraq’s economic rehabilitation”.

So it’s not much of a surprise that they’re casting around for someone to help dig them out of their hole. And who’s the prime candidate. Why, the ‘irrelevant’ United Nations, that’s who.

Came across ‘How did developed countries industrialize? The history of trade and industrial policy: the cases of Great Britain and the USA‘, by Mehdi Shafaeddin. This paper knocks on the head the myth that today’s rich countries got that way by embracing the joys of free trade. No, they protected their industries, destroyed those of competitors in any way they could, expanded overseas markets by fair means or foul, and only liberalised trade when they had a fully developed home economy. The paper also contributes to the view that the free-trade programmes imposed on poor countries by the rich are simply self-serving economic attacks in disguise.

Shafaeddin concentrates on the two big ‘early industrialisers’, the USA and Great Britain. The main conclusions are that:

The United States was the motherland of infant industry protection not only at the intellectual level but also in actual fact. Despite the fact that the Industrial Revolution contributed to the rapid industrialization of Great Britain, its industrial sector benefited from trade protection and other forms of government intervention in the trade flow through the Navigation Act and by means of political power and even military power…

The governments concerned intervened in the domestic economy – particularly in the United States – directly and indirectly, to assist capital accumulation, institutional development and infrastructural build-up and to provide training, research and development (R&D), etc … In both countries, capital accumulation, infrastructure and institutional development played a significant role.

Shafaeddin also examines more recent industrialisers, and concludes that “With the exception of Hong Kong, no country has developed its industrial base without prior infant industry protection”, and that “in all countries, even when the industrial sector was mature, protection was used as a means of bargaining power in bilateral trade negotiation and trade treaties”. This throws current neoliberal orthodoxy, which decrees that all countries can and should open their markets of their own free will in order to develop, on its head. It also demonstrates the double standards at work in World Trade Organisation negotiations: the rich countries, with the most to protect, use their high tariffs to extract major concessions out of developing countries, but only after the latter have already been forced to liberalise under the IMF’s so-called ‘Structural Adjustment’ programmes.

The document throws light on the relationship between technology and power in promoting development. There is a pattern of protecting infant industries then aggressively opening up overseas market once a technological advantage has been achieved. Britain only began pursuing free trade when it was dominant in the innovative manufacturing industries of the day. It also made the most of its imperial position by blocking textile exports from India and indeed forcing its colony to import British goods. China was forcibly ‘crowbarred‘ open by military might.

It also shows how vital technological advantage is to development, and how jealously the latest advances were guarded (and stolen) by the early industrialisers. Britain’s “innovators profit”, defined as “the difference between the income of an innovating entrepreneur and the income of other entrepreneurs subsequently using the same method when it is spread out”, provided, says Shafaeddin, “a means of self-financing for investment in new machinery and in new techniques of production”.

Every country has always tried to make the most of whatever technological advantage it has. In the 19th century the world powers used armies and navies to open up foreign markets. Now they use structural adjustment policies, while the World Trade Organisation’s TRIPs agreement ensures global over-protection of ‘intellectual property’. This benefits countries that can afford to invest in R&D into growth technologies, i.e. countries that are already rich.

Developing countries, by contrast, tend to have far less surplus capital to invest in future growth. Capital is constantly leaking out through capital flight and debt service, and profits from trade are not large enough to make substantial technological investment.

One of the major responsibilities falling upon the Mayor of London, Ken Livingstone, is having to produce a ’spatial development strategy’ that, being informed by all aspects of socioeconomic development in and around London, is supposed to guide planning decisions and development in general in the city up to around 2016. A draft was produced last year and it’s overall not a bad document. But while sustainable development is supposed to be the basis and raison d’etre of the whole exercise, the recent report into the draft plan of an independent panel of inspectors questions whether this has been put into practise.

It notes that

One of the … Sustainable Development principles [is] “To reduce the need to travel in an environmentally damaging fashion ” … There is no assessment,however,of what influence the chosen strategy will have on travel behaviour,and whether it would be more sustainable in this respect than alternatives.From our examination of TfL’s [Transport for London] analyses it became apparent that a substantial increase,of the order of 25%in the overall propensity to travel, and of 13%in average journey lengths, is anticipated over the period to 2016.There is no indication,either from the draft Plan documentation or from the discussion at the EIP,how far this results from sustainable policy choices made in the draft Plan, or whether it had even been thought about.

Displaying her keen grasp of the concept of sustainable development, Ireland’s enterprise Minister Mary Harney remarked on Saturday that we should endevour to protect the environment and guard against climate change, but only as long as it doesn’t hurt business. The last thing Ireland should do is lead the way by meeting our Kyoto commitments on carbon emission - after all, that would harm our comparative advantage (in being a free ride, I suppose).

“I am concerned”, said Harney, “about anything that can drive up the costs for industry and make us less competitive and put jobs at risk”. Well, I suppose you could argue that this rules out things like sudden steep rises in global temperature and the melting of the polar caps, since they are a catastrophe for everyone and shouldn’t really affect the running of the markets. But that would be just wacky.

This site, according to the description at the top of the page, is about “development, globalisation and the transformation of public power”. The first two terms should be clear, the last probably not so. I do plan to explain fully what is meant by the transformation of public power at some point in the future, but for now it’s useful to think of it as both a description of an ongoing phenomenon in societies around the world (public power is being transformed, e.g. through privatisation, centralisation) and an argument for what should happen around the world (the public need to rediscover their own power and use it to transform their societies in their interests).

This quote from Will Hutton (in a debate with Tony Giddens) does not sum up the concept, but it’s a useful way in:

… One of the reasons why participation rates are falling and why there is widespread apathy and why there is emerging crisis of democracy is because the public realm in western democracies is under threat because it is being progressively privatised and at the rise of corporate power and the people who we elect to run our states’ lack of conviction that they can and should do anything because they are told and from all sides that they are definitionally inefficient and they should get out of doing anything. As much as these things, whether it is running the railway or an underground system or even running a university, should all be done by the private sector, you diminish the public realm. By diminishing the public realm, you actually diminish us as individuals because our political imagination and our possibilities are actually narrowed. You actually shrink the state, you shrink the ambitions of the politicians who come forward to be elected to do things on our behalf, and you make the process by which public outcomes are made efficient, democracy, less
vital. So, for me the precondition for democratic reform is actually the revival of the notion of the public realm and that implies much more criticism about notions of privatisation and much more willingness to challenge the extension of corporate and financial power …

Catching up on the news I missed on my holidays, I came across this marvellous paragraph from June 27th’s Devnews:

The US is trying to block proposals to give poorer countries a bigger say in World Bank decision-making, dismissing complaints that the institution is too dominated by rich nations.

So that’s alright then. On the day that Tony Blair gives a brown-nosing speech to the US Congress on how they’re straight kinda guys who just want freedom for everyone, it’s useful to recall just how keen the US is on keeping a firm grip on the economic balls of the South.

Some time ago I mentioned a few publications I was reading and intended to write analyses of. I’ve finished reading them, but haven’t written anything on them. So just read ‘em yourself: the first, ‘Did the G8 drop the debt?, has been placed in the Library.

In a previous post, I discussed some research on the impact joining the WTO might have on incomes in China. Now the World Bank has published more research, this time by Elena Ianchovichina and Will Martin. Here’s the abstract:

Accession will boost the labor-intensive manufacturing sectors in China, especially the textiles and apparel sector that will benefit directly from the removal of quotas on textiles and apparel exports to North America and Western Europe. Consequently, developing economies competing with China in third markets may suffer relatively small losses. China has already benefited from the reforms undertaken between 1995 and 2001 (US$31 billion) and trade reforms after accession will lead to additional gains of around $US10 billion. Accession will have important distributional consequences for China, with wages of skilled workers and unskilled nonfarm workers rising in real terms and relative to farm incomes. Reduction in agricultural protection may hurt some farmers.

Possible policy changes considered to offset these impacts include reductions in barriers to labor mobility and improvements in rural education. The authors estimate that the removal of the hukou system would raise farm wages and allow 28 million workers to migrate to nonfarm jobs. If, in addition, there is an increase in education spending that results in a percentage point increase in the annual skilled labor growth rate, approximately 32 million farm workers would leave their job for jobs in the nonfarm sectors. These policies would not only facilitate the evolution of China’s economy toward high-technology manufacturing and services, they have the potential to much more than offset any negative impacts of accession on rural wages and rural incomes generally.

It’s true that China could minimise the downside of liberalisation by getting people off farms and into skilled labour as quickly and painlessly as possible, but how feasible is this? It will be hard to house, let alone educate, ‘28 million’ migrant workers, and the real numbers may be far higher than that.

The Guardian reported last week on the publication of the UNDP’s 2003 Human Development Report, a comprehensive survey of the full range of developmental indicators for every country. Some key passages from the article:

Overall human development, measured by the UN as an amalgam of income, life expectancy and literacy, fell in 21 countries during the 90s. By contrast only four countries suffered falling human development in the 80s.

“Though average incomes have risen and fallen over time, human development has historically shown sustained improvement, especially when measured by the human development index,” the report said. “But the 1990s saw unprecedented stagnation, with the HDI falling in 21 countries.

“Much of the decline in the 1990s can be traced to the spread of HIV/AIDS, which lowered life expectancies, and to a collapse in incomes, particularly in the commonwealth of independent states.”

…

Mark Malloch-Brown, administrator of the UN development programme, said many countries in Africa and Latin America held up as examples of how to kickstart development were among the stragglers in the global economy.

“The poster children of the 1990s are among those who didn’t do terribly well,” he said. “There are structural restraints on development. Market reforms are not enough. You can’t just liberalise; you need an interventionist strategy.”

The report added that: “Over the past 20 years too much development thinking and practice have confused market-based economic growth with laissez faire.”

The west needed to tear down trade barriers, dismantle its lavish subsidy regimes, provide deeper debt relief and double aid from $50bn to $100bn a year. This would provide the resources for investment in the building blocks of development - health, education, clean water and rural roads.

…

“The statistics today are shaming: more than 13 million children have died through diarrhoeal disease in the past decade. Each year, over half a million women, one for every minute of the day, die in pregnancy and childbirth. More than 800 million suffer from malnutrition.”

It added: “For many countries the 1990s were a decade of despair. Some 54 countries are poorer now than in 1990. In 21, a larger proportion is going hungry.

“In 14, more children are dying before age five. In 12, primary school enrolments are shrinking. In 34, life expectancy has fallen. Such reversals in survival were previously rare.”

The report does say that the percentage of people worldwide living on less than a dollar a day (though see this post for a critique of this benchmark) has decreased from 30% in 1990 to 23%, but this is largely due to continued economic growth in China and India. The 54 countries who regressed during the 1990s are smaller, but their status as separate societies and administrative areas makes coming up with solutions that much more difficult. It is becoming ever clearer that eradicating poverty and promoting human development require deep and serious engagement at the local level, rather than making sweeping global gestures and hoping for the best.

The other main lesson, I think, is that AIDS represents the single greatest crisis facing the world today. Indeed, Nelson Mandela described AIDS today as “the greatest health crisis in human history”. If AIDS continues to spread unchecked in Sub-Saharan Africa, whole countries will simply collapse as workforces are decimated, millions of children are orphaned and healthcare costs balloon. It shouldn’t have to be pointed out that this will eventually directly affect [i]everybody[i] else on the planet in one way or another.

There was a story in Sunday’s Observer about Iraq’s first significant oil exports since the war. Exports are apparently around 400,000 barrels a day at the moment, which at $22 a barrel (the low end of OPEC’s target price range, but the article does say that the Iraqi oil is being sold at “more than $5 per barrel below standard US crude prices”) would I think amount to about $3bn a year.

This tallies with reports the budget which Paul Bremer and co. helpfully drew up for the Iraqis. The Observer quotes him:

Your budget allocates over 9 trillion dinars ($6 billion) to key [reconstruction] projects and the key challenges ahead. A little over half of the money will come from oil revenues.

In a previous post I cited research that estimated reconstruction costs in Iraq at at least $10bn and possibly as much as $70bn a year. Obviously, it depends on how much you think is appropriate or desirable, but it certainly seems as though Iraq won’t be getting enough, even if all that $6bn goes on genuine reconstruction as opposed to on security or administration. So, Iraq will need several billion dollars a year on top of its oil revenues for the forseeable future. Who’s going to pony up the dough?

Thabo Mbeki, writing in Progressive Politics and in conjunction with this week’s ‘Third Way’ bunfight in London, discusses the still-dominant neoliberal view of free market perfection and its total inadequacy in the face of Africa’s poverty. He concludes:

It is impossible to solve the problem of global poverty solely through reliance on “the market”. The poor do not present themselves as an appropriate object of attention for capital, whose inner logic is the maximization of profit. Billions across the world, including Africa, are too poor to achieve beneficial integration into the global market, even if they do create the macro-conditions attractive to capital.

These are billions of people who are described as “unbankable”. Something else, in addition to self-beautification, and outside the possibilities of “the market”, must happen, to make them “bankable”. Happily for progressive politics, the European Union has found the practical answer to this challenge. To ensure its own survival, it had to ensure the advancement of its poorest areas. Accordingly it set up a system of “structural funds” to transform EU regions that, because of their poverty, cannot easily come into the “market system”. The EU recognizes that public capital must be invested.

Africa is much less developed than Europe’s poorer regions. It has greater need of non-private-sector capital. However, Africa’s development partners tell it that, for its own development, it must depend on private-sector capital. To add insult to injury, it is also expected to service the debt it owes to these countries, exporting capital it does not have; compete with their heavily subsidized agricultural products; absorb continuously adverse terms of trade; and finance the achievement of “standards” of behavior set by capital with money it does not have. What Africa says to its development partners is: do with and for us what you do with and for yourselves. If poor regions within the EU need “structural funds”, how shall the far greater need of Africa be met?

Full article here.