Weisbrot: Think Globally, Act Nationally: the Case for NationalEconomic Sovereignty (fwd)

[Robert Weissman <rob@essential.org>]

This appeared in the June 21st issue of the Nation. If anyone wants to reprint
it, please contact Mark Weisbrot (weisbrot@preamble.org).
___________________________________________

Think Globally, Act Nationally: the Case for National 
Economic Sovereignty

 The IMF and the World Bank had their annual spring 
meetings in Washington recently, and one thing was perfectly 
clear: there is not going to be any "new global financial 
architecture" in the foreseeable future. It took a Great Depression 
and a World War to bring us the Bretton Woods agreement, the 
system of fixed exchange rates that lasted until 1973. In the 
absence of similarly cataclysmic events, the overseers of the global 
economy have no need to look at the blueprints churned out by 
policy wonks and think tanks who have been jockeying for "a seat 
near the table." 

 In just the past two years, the inherent instability of 
global financial markets, coupled with the IMF's disastrous 
interventions on three continents have pushed tens of millions of 
people into poverty. But for the "Wall Street-Treasury complex" 
the crisis is over. Investors are moving back into emerging 
markets, the U.S. stock market is booming again, and fears of 
international financial "contagion effects"-- from Russia's default 
on international debt, for example-- have subsided. 
Does this mean that reform is impossible? Quite the 
contrary: but the best prospects for reform reside at the national 
level, not within unaccountable, colonial, supra-national 
institutions like the IMF and the World Bank.

 Many observers could not help noticing that the Chinese 
economy grew by 7.8% last year, while the rest of the region fell 
deep into recession or depression. Ironically, China is now helping 
to save the globalizers from themselves. It has so far kept its fixed 
exchange rate, rather than devaluing in order to get a larger share 
of shrinking regional export markets. Instead of pursuing a "beggar 
thy neighbor" strategy, which most analysts believe could set off 
another round of currency depreciations and crises, China has 
shifted resources to domestic production. The government is 
spending a massive $200 billion on public works this year--relative 
to their economy, an amount that is more than our entire federal 
budget.

 China has more autonomy to pursue rational 
macroeconomic policies than most poor countries: its currency is 
not freely convertible, its financial system is domestically owned 
and controlled by the state, and there is relatively little foreign 
ownership of equities. And it does not have to take orders from the 
IMF.

 But the list of countries that have taken measures to protect 
themselves from global financial markets is growing. Malaysia's 
use of currency and other capital controls allowed it to lower 
interest rates significantly over the past year and stabilize its 
economy. Last year, Hong Kong placed restrictions on speculative 
trading and intervened heavily in its currency and stock markets in 
a successful effort to beat back an assault by hedge funds. Chile 
and Colombia have used capital controls to shift the composition 
of foreign investment away from volatile short-term flows to 
longer term investment and loans-measures that helped protect 
them from the shocks of the Mexican peso crisis in 1995.

 These are modest reforms, but they show that even small 
countries do not have to simply submit to the whims and caprices 
of international financial markets. Perhaps more importantly, they 
are signs that one of the most important prerequisites to social and 
economic progress-- national economic sovereignty-is finally 
making a comeback.

 More than 40 years ago most economists knew that the 
state had a vital role to play in the process of economic 
development, and that unregulated markets by themselves would 
polarize the distribution of income and wealth and could lead to 
panics, crises, recessions, and depressions. They also knew that 
industrialization and economic development required some 
protection from international market forces as well as planning, 
and that the later any country arrived on the scene, the more state 
intervention it would need. 

 But all of this knowledge has gotten lost in the swamp of 
neoliberalism, like the knowledge of the physical sciences that was 
buried during the middle ages. And the neoliberal experiment has 
failed much more miserably than most people know, even on its 
own terms-- that is, ignoring the distribution of income and wealth. 
For the last twenty years, Latin America has chalked up about zero 
growth per capita, as compared to a more than 70% percent 
increase in the previous two decades. For Africa, the decline has 
been even worse, with per capita income actually shrinking over 
the past twenty years.

 There are many paths to economic development, but almost 
all of those taken successfully in the past are currently prohibited 
by Washington and its primary enforcer, the IMF, which literally 
makes the major economic decisions for 75 countries. (Despite 
rhetorical and some programmatic differences, the World Bank 
plays the same role by denying credit to countries who resist the 
IMF's deadly macroeconomic prescriptions). The first precondition 
for the advancement of the world's poor is therefore to break this 
foreign stranglehold on their governments.

 This is where we who live in the United States can make a 
real difference. A mass movement for debt relief, led by the 
Jubilee 2000 coalition in Europe, Africa, and Latin America 
promises to take on the dimensions and power of the anti-apartheid 
movement in the 1980s. And last year a handful of progressive 
organizations and members of Congress delivered the swing votes 
to block a $90 billion expansion of the IMF ($18 billion from the 
U.S.) in the House. The IMF eventually got the money, but the 
year-long fight significantly undermined the Fund's credibility and 
bargaining power throughout the world. 

 As the cracks in the Washington consensus widen, there 
will be further opportunities to help the rest of the world in its 
struggle against economic colonialism.

Mark Weisbrot is Research Director at the Preamble Center 
(<http://www.preamble.org/>www.preamble.org) in Washington, D.C.






 






 

Name: Mark Weisbrot 
E-mail: <weisbrot@preamble.org> 
Preamble Center 
1737 21st Street NW 
Washington DC 20009 
(202) 265-3263, ext.279 (offc) 
(202) 333-6141 (home) 
fax: (202)265-3647 
<http://www.preamble.org/>www.preamble.org


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