Is globalization a positive trend?

Introduction

The case for this claim is made by Ann O Krueger. She is described by Rourke as “special adviser to the managing director of the International Monetary Fund” (Rourke2008, 2). Krueger is one of the most prominent academic economists in the USA. She is currently Emeritus Professor at Stanford University, has worked with the IMF over many years, and served as its Chief Economist from 2001 to 2006 (IMF, nd). Her statement is a speech which she made in 2006 to the Board of Governors of the IMF and the World Bank group.

The case against this claim is made by Hugo Chavez, President of Venezuela, in a speech he made to the Group of 15 in 2004. Born in a mud hut, Chavez has only a secondary-school education. He rose though the ranks in the Venezuelan army, was involved in an attempted left-wing coup in 1992, and was elected President in 1998. He has become well-known as a critic of the IMF and of US foreign policy, and has survived several US-sponsored attempts to overthrow him (seeGott 2005, for details of his career). The meeting he addressed was a gathering of leaders of less-developed countries formed to pressure the IMF into adopting more generous policies towards developing countries. Both Krueger and Chavez refer to “globalisation,” a term for the growing interdependence in many ways of people around the globe (Rourke 2007, 126-35). In fact they are debating a much narrower topic - the free-market policies which the IMF has imposed on the developing world.

The case for neo-liberal globalization

Krueger's speech is a celebration of the role of the IMF and World Bank. The period since 1945, she argues, has been one of "phenomenal economic success" (Krueger,2008, 12). She cites the rise in life expectancy in one of the largest developing countries, India, in support of this. This she attributes to the expansion of international trade, resulting from policies of trade liberalization by national governments and to the role of the IMF and the World Bank.

She wastes little time providing a theoretical justification for these claims. The arguments are, she says, familiar, obvious and boring (Krueger, 2008, 6). She relies on the record of post-war growth in Europe and Asia to prove her case. The only factors she mentions as contributing to this are policies of tariff reduction and the role of the IMF and the World Bank. In the 1970s, the world economy was afflicted by slow growth and global inflation. Under the guidance of the IMF and the World Bank, she says, this crisis was successfully overcome through accelerated liberalization. Krueger acknowledges that this involved the deflation of many developing economies. She does not mention that this involved cuts in public services, health and education, economic decline, rising unemployment and spreading poverty. She attributes the failure of developing countries to match the record of growth of the developed countries to their reluctance to embrace trade liberalization. The countries in Asia that did experience substantial growth in this period, notably India and China, did so because they chose to open up to the world. The rich countries, according to Krueger, strove to help the developing countries surmount this crisis. They provided loans and credits, some in the form of private investment, much in the form of IMF loans. She implies that these loans were acts of generosity, but they were commercial operations, intended to yield a profit for the rich-country investors. To ensure that they were commercially successful the IMF imposed strict conditions on recipient countries and oversaw their implementation. Krueger refers to IMF provision of “support and surveillance” for developing countries (Krueger 2008, 10) but does not spell out what this means.

By the early 1990s the IMF was “advising” governments of around 75 developing countries with half the population of the developing world outside China and India. In fact, in the words of one expert, these governments “rarely moved” on economic policy without consulting the IMF (Jeffrey Sachs, cited in Tabb, 2001, 79-80). The reforms demanded by the IMF were implemented without question, whatever the cost to the local economy and people. Krueger sees the flood of capital into developing countries that followed as evidence of their credit-worthiness. She says nothing at all about the debt crisis and austerity policies that crippled dozens of Latin American and African countries under IMF “support and surveillance” in the 1980s. She makes only vague reference to the Asian financial crisis of the 1990s, merely remarking that it was a "major shock" and showed there was still "a great deal of learning to be done” (Krueger, 2008, 11). Ignoring all this, Krueger cites the accelerated growth rates of the 1990s as proof that IMF policies were sound.

The case against neo-liberal globalization

Chavez’s speech is a denunciation of the IMF’s policies. He begins by referring to Simon Bolivar, the 19th century nationalist who urged the Latin American countries to unite to prevent their region being dominated by the USA, to the formation of the NonAligned Movement in the 1950s, and to the calls in the 1970s for a New International Economic Order. These he sees as efforts by the poor countries to escape domination by rich countries, and to create a more equitable international order in which poor countries will have a real chance to develop their economies. He laments that these efforts are in danger of being “sunk in the Neo-liberal flood” (Chavez, 2008, 14) promoted by the IMF.

Chavez argues that the marvels of modern technology have generated an unprecedented capacity to produce wealth, but the benefits of this have flowed to the countries of the North (the USA, and other developed countries). This situation grew from the era of colonialism and slavery, and is perpetuated by the continued exploitation of the countries of the South (the developing countries) – which, in Chavez’s words, produce wealth but receive only left-overs. According to Chavez, “a child who lives in the First World [the North] will consume throughout his or her life, the equivalent to what 50 children consume in an underdeveloped country” (Chavez, 2008, 15). As a result, 15% of the world’s population lives in affluence while the majority face hunger and illiteracy. and die in their millions of easily preventable diseases.

The IMF’s austerity policies “ban” governments from addressing such issues, according to Chavez (2008, p.15). They are ordered to leave the welfare of their citizens to unregulated private markets, and to concentrate on creating the most favourable conditions for transnational capital. The IMF has found willing collaborators among the 10% of the population which appropriates half the national income. This, Chavez says, has created an "exploitation model" of development which "has turned Latin America and the Caribbean into a social bomb ready to explode” (Chavez, 2008, p.17). He argues that developing countries must revive “the Spirit of the South” (Chavez, 2008, p.18), uniting to press the rich countries to accept a more just international economic order. Chavez draws his evidence from Latin America and Africa. He does mention in passing that "some countries" in Asia have achieved "remarkable" growth in the era ofneo-liberalism, but dismisses this because it is not true for "the region as a whole" (Chavez, 2008, 16).

Evaluating the arguments

Krueger’s arguments are typical of the ideas Rourke calls “economic internationalism,” while Chavez’s arguments are representative of what Rourke calls “structuralism,” which has been especially influential among Latin American nationalists (Rourke 2007, 374-78).Both present very one-sided views. Krueger totally ignores the role of factors such as science, technology, capital investment and “human capital” (health, education and skills) in economic growth (see Rourke 2007, pp.412-18, for some of the issues). She glosses over the role of IMF policies in creating the debt crisis of the 1980s in Latin America and Africa and the Asian financial crisis in the 1990s. She relies on the success-stories of India and China to back her faith in free markets, but they did not follow IMF policies. It was in Latin America and Africa where IMF prescriptions were most faithfully implemented, and there the record is one of failure.

Chavez is preoccupied with the IMF’s failure in Latin America. Liberalisation produced not growth but inequality, and austerity impacted primarily on those who were already poor. He voices anger eloquently, but provides no coherent alternative. He concentrates on issues of distributive justice, has nothing to say about economic growth, and treats the Asian success-stories as of marginal importance.

Conclusion

Both speakers are accurate in the evidence they cite, but both are highly selective. A broader look at the evidence shows that developing countries have experienced economic growth in the last three decades, but it has been very uneven, and accompanied by growing inequality (see the data in World Bank, 2007). They differ in their underlying theory, in the facts they highlight, and in the constituencies they address.

The US government has heaped honours upon Krueger, and been extremely critical of Chavez’s government. Yet Chavez voices the grievances of the victims of the policies Krueger advocates. Despite criticisms of his government, millions of poor Venezuelans have voted repeatedly for him, and it is unlikely that many of them would ever vote for someone advocating IMF policies. As a result of the policies promoted by Krueger, there are hundreds of millions of people in the world who are both poor and angry. That means there will be many more politicians like Hugo Chavez.

Bibliography

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Dubuque, pp.13-120. Gott, Richard (2005), Hugo Chávez and the Bolivarian Revolution, Verso, London.

IMF, n.d. ‘Ann O. Krueger – Biographical Information,’ International Monetary Fund, Washington. <http// accessed 16 October 2007.

Krueger, Ann O. (2008) ‘An Enduring Need: The Importance of Multilateralism in the 21st Century,’ in John T. Rourke (ed), Taking Sides: Clashing Views in World Politics, 13th ed, McGraw-Hill, Dubuque, pp.4-12.

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