The tyranny of global economic development

The tyranny of global economic development

This is the second of two articles on developing economies by
Sidhesh Kaul, an observer of regional economic and political
affairs based in Jakarta.

JAKARTA (JP): The Truman strategy in effect is a continuation
of the colonial past with the domestic economies of the Third
World providing a market for the North's goods and a cheap source
of raw material and labor.

The implications of this strategy on the traditional patterns
of domestic consumption and industry are disastrous. It is
logical that if the economy is to provide a market for goods from
the North then the domestic industry should not be in direct
competition.

Discouragement comes in the form of pressure on governments to
orientate their economies toward becoming export oriented and in
the form of sage advice that promotes the deployment of taxation
as an effective disincentive. Import substitution is frowned
upon.

Indeed if one takes a look at those countries who have bowed
to the dictates of a structural adjustment program (SAP) -- it
becomes obvious that while commodity exports go up, the gross
national product lags behind as a result of the contraction in
the domestic economy.

Lending is the prime and more contemporary instrument of
subjugation. A compliant government exchanges access to its
markets and natural resources for money.

In order to pay the interest and principle on these loans,
these governments perforce have to alter their traditional
patterns of domestic industry to produce goods that can be sold
in international markets (and not necessarily the domestic
market), since the loans borrowed in the first instance have to
be repaid in foreign exchange.

In most cases this is a difficult proposition since Third
World governments do not honestly and productively deploy these
monies in the first place -- some of it lines the pockets of the
governing elite, whilst the bulk of it goes into developing and
maintaining mechanisms promoting repressive regimes.

Then there is the smaller portion that goes into mammoth
infrastructure projects with eternity as the time horizon for
payback. Soon the debt becomes unpayable and it is time to borrow
again, and so the wretched cycle moves on.

The net result of this vicious cycle is that the lending
countries now enslave the country. This is where the SAPs come in
handy for the lenders as they now set the ground for a virtual
takeover of the economy.

Borrowing "soft" money from benevolent lenders as a sure fire
way to economic stability, growth, reduction in income gaps and
the alleviation of poverty is an extremely questionable
assumption.

Aid has a proven track record of opening up economies and
markets since most of these donations or soft loans are tied up
to the purchase of goods from the donor countries (in precisely
the same way as the colonies of yore) and this is typically
forced down the throat of the borrowers.

Disobedience to this tenet is actively discouraged under the
threat of surgically incising any future aid, a prospect that the
borrower can ill afford now that the country is addicted on the
periodic loan fix.

It has somehow escaped the benevolent lenders, as well their
elitist agents, that the poor in any Third World country rely
heavily for their survival on the local economy and that these
vast borrowed sums effectively kills this very same domestic
economy.

But this logic is likely to fall on deaf ears since poverty
alleviation is an oft quoted noble concept and goal but the North
has a more expedient and urgent issue. This is the expansion of
the global economy at the cost of the local Third World economy.

The past decade or so has also seen an increase in the flow of
private investment funds into Third World countries (split
equally between long-term investments and speculative funds) to
such an extent that it dwarfs the regular budgetary injections of
the institutions that the Bretton Woods conference gave birth to.

This has partly been fueled by the enormous gap in the income
earning opportunities for these funds between the regulated
markets of the North and the investment rodeos of the South.

Thanks to the General Agreement on Tarrifs and Trade and the
salutary and sobering effect that SAPs have on stubbornly inward
looking economies, trans-national corporations (TNCs) now dot the
Third World landscapes with impunity.

These TNCs bring with them capital and provide employment but
they come in to a country on a "level playground basis" that
includes, amongst others; access to sectors that were hitherto
protected, abolishment of nontariff barriers (especially
regulations that protect labor, health or the environment) and
elimination of import quotas.

Once a TNC is established it becomes exceedingly difficult for
an impoverished, debt-addicted government to pass regulations
that crosses swords with these powerful institutions.

The TNCs are ruthless profiteers with the power to force
governments to defend corporate interests even if it were at the
cost of marginalizing the people.

There are many recent and unbelievable examples of the
duplicity and hypocrisy associated with the loans and aid
proffered by the benevolent North.

Most of the countries that have received "security" aid have
had oppressive regimes -- Nicaragua, Argentina, El Salvador,
Chile, Peru, Uruguay and Indonesia to name a few. These regimes,
interestingly, were not fighting noble battles to protect their
territorial integrity and defend their proud standing as
independent nations.

Instead they used the aid to oppress their own people and
impose an economic regimen that had left these countries
impoverished at best.

Sometimes the planning of the North goes haywire when such
countries do occasionally throw up patriots who are genuinely
interested in improving the lot of their poor and hence pitch
them headlong into direct conflict with the economic interests of
the North; in such cases the benevolent lenders do not hesitate
to use brute force or perhaps achieve the same results by
engineering a coup.

The woes of the impoverished recipients show no signs of
abating especially in those Third World economies that have weak
and pliant governments, and where the common man is far removed
from the mechanisms of governance.

Heavily indebted governments have to undergo a program to
alleviate "debt addiction" and instead learn to leverage on their
markets, resources and regional goodwill (as also the goodwill of
other borrowers who are in a similar predicament), as a clinical
measure toward restoring self-pride and true economic
independence.

Every time the government borrows or receives "soft
conditional" aid, the one question they need to put to
themselves, before rejoicing in self-congratulatory euphoria, is:
How is this new borrowing ultimately going to effect the common
man?