The model of “free trade” and development promoted in Washington failed poor countries under Clinton, and is failing them under Bush.
Published in Foreign Policy In Focus.
As far from Bill Clinton as the extremist George W. Bush appears today, certain things hold the same for both presidents, particularly concerning their treatment of the world’s poorest nations. Each leader championed “free trade” and corporate globalization. And in doing so, each imposed policies on the developing world that have proven economically disastrous.
On July 8, the United Nations Development Program (UNDP) released its annual Human Development Report, which revealed what the British Guardian called a “Lost Decade.” During the economically prosperous 1990s, U.S. trade representatives and International Monetary Fund (IMF) economists promised that a rising tide of global corporate expansion would lift all boats. In fact, 54 countries ended the decade poorer than when they started.
In places where the majority of people live on less than a dollar per day, or where life expectancy is less than half that in the U.S., these declines have grave consequences.
People in the United States often believe that while global poverty is tragic, poor countries have only themselves to blame. Certainly, the developing world is not free from the scourges of corruption, mismanagement, and political opportunism. But documents like the UNDP report show that the development policies promoted by wealthy countries have done far more harm than good.
In what is now known as the “Washington Consensus,” the IMF and the World Bank have fitted country after country into straitjackets of “structural adjustment.” Rich countries often attach self-serving conditions to money they send to cash-starved nations. The IMF demands market “liberalizations” that make poor nations open their markets to European and American companies. Frequently, economic relief is contingent on the adoption of fiscal austerity, which forces developing countries to cut spending on health, education, and infrastructure.
Poor nations must also spend inordinate portions of their national budgets on debt payments to the global North. As groups like the Jubilee debt relief coalition have argued, many of these obligations are “odious”—the result of loans made to dictators that used the money for personal gain. In many cases, the funds were spent on weapons sold by wealthy countries, who happen to be the world’s leading arms merchants. A disturbing trend reported in the mid-1990s showed that 84% of U.S. weapons transfers to the developing world in the opening years of that decade went to non-democratic regimes.
After citizens remove the despots from office, they are rewarded with the past governments’ huge debts. This cripples their ability to build new societies. The unfairness of the burden is precisely why the Bush Administration advocates debt relief for Iraq. Unfortunately, its compassion does not extend to countries whose reconstruction provide less tangible PR benefits for the White House.
Economist Mark Weisbrot has noted that even in Sub-Saharan Africa, a region suffering devastating poverty, the governments are sending more money to the industrialized North than we are to them. Largely owing to debt service, the balance of payments shows a $12 billion loss for the region.
Finally, “free trade” does not end up being free for developing nations. Anyone who bothered to notice the agricultural subsidies and steel tariffs recently bolstered by the Bush Administration already knows that the economics of corporate globalization are elaborately regulated to benefit some countries at the expense of others.
In many of the countries that fared worst in the 1990s, the AIDS crisis played a big role. But in many others that faced stagnation and decline, “structural adjustment” paved the road to ruin. As Weisbrot observes, the “winners” of the 90s, those who saw real development, were the governments that defied IMF dictates. China and India—the very nations that the Human Development Report credits with substantially reducing poverty over the decade—have some of the most protected domestic economies on the planet.
In its recent Nation Security Strategy, the Bush Administration announced that there is a “single sustainable model for national success.” But instead of a “single model,” we need genuine democracy and self-determination — economies in the developing world that are accountable to their own people, rather than to financial institutions abroad. UNDP Administrator Mark Malloch Brown said it in no uncertain terms: we need “a guerrilla assault” on the Washington Consensus.
A new system of international economics will rely on different type of globalization.
Whatever the failures of the decade, something remarkable also happened during the 1990s. Across the globe, activists united to denounce policies like structural adjustment. In this country, people began making connections between conditions overseas and inequality at home. Union members whose factory positions were “downsized” met with workers in Mexico who endured hazardous job conditions and received sweatshop wages. Voters in California who saw their ban on the poisonous gas additive MTBE challenged as an unfair trade barrier understood with new clarity what international coalitions have identified as an environmental “race to the bottom.” By the end of the decade, the IMF couldn’t hold a meeting without massive police force ready to keep away crowds of protestors demanding to address the proceedings.
Today, more and more development experts are joining those crowds. Their motivation is clear: In 1980, the average CEO in the United States made as much as 42 workers. By 2001, the CEOs earned 411 times as much. Worldwide, the divide grew so severe that the richest 1% of the world’s population earns as much money as the poorest 57%.
Global inequality grew under Clinton, and is increasing under Bush. For the next decade to be different, the call for a new globalization must prevail.
Research assistance for this article provided by Katie Griffiths.