The “one shoe fits all” formula that defines our present neo-liberal economic system was always doomed to fail, since the premises that undergirded those prescriptions were flawed from the beginning, in 1989.
But even though the premises had led to global crashes in 1997 and 2008, we still have not questioned them. Take their injunction that the capital and financial markets, and indeed the entire financial systems of the ‘globalised” world, ought to be completely liberalised, so that financial flows would be utterly unimpeded. Can one imagine what the condition of the world would have been today if China and India, among others, had not resisted that piece of dogma?
Our major frustration, however, has been the model’s obsession with “macro-economic fundamentals”, at the expense of any meaningful growth in the economy. The conditionalities, summarised as the “Washington Consensus” — which the PNC Government of Desmond Hoyte signed on to in 1989, when they accepted the IMF’s Structural Adjustment Programme (SAP) — forced us into what was supposed to be a “golden straightjacket”, in the words of one enthusiastic supporter.
Joseph Siglitz, a former Chief Economist of the World Bank, is a Nobel Prize winner to boot, but he trenchantly took the IFIs to task for their myopic vision on development. He was one of the earliest advisors to the Chinese Government on its studied integration into the global economy. Apart from his rejection of unbridled capital and financial liberalisation of economies, he most importantly disagreed with the IMF/World Bank on the role of governments in the creation of sustainable growth in developing economies.
In addition to several other mainstream economists, he pointed out that the IMF/World Bank’s extolling of a “night-watchman” role of the state, particularly in relation to creating industries, was based on a myth; even in the Anglo-Saxon economies, where the neo-liberal ideology was honed.
In the early days of these economies, and certainly those of every “Eastern Tiger”, government’s role was critical. Every country that is now developed — for instance, in its early stages — practised some form of “infant industry” protection, while limiting foreign investment. Yet we were coerced into liberalising our trade, and signing treaties that would result in us being flooded with products in markets that we might later have been able to compete.
The bottom line is that a level playing field leads to unfair competition when the players are unequal. It was interesting that the World Bank eventually invited Stiglitz to be a member of an elite panel to chart its future direction.
The present Government has to accept that finance is not our major obstacle to the creation of new industries, or the expansion of the old; our endemic excess liquidity “problem” rejects that thesis. A pragmatic approach to development is necessary, because the cause of our underdevelopment is, to some extent, strategic rather than structural. We had proposed the creation of a “Catalytic Entrepreneurial State” (CES) that would go beyond the minimalist facilitative state pushed by the IFIs.
Japan and the Eastern Tigers explicitly tied assistance to selected private industries based on their commitment and ability to export. This strategic decision had two significant and faithful results, which differed from the “import substitution strategy” that failed between 1964 and 1992, and which the present PNC Government seems to be reintroducing.
In the Far-Eastern model, the assisted firms were subjected to the market discipline of the competition of international trade. This was the most intense competition, and ensured that efficiencies and productivities had to be raised to the highest levels. These firms not only couldn’t afford to be fat and lazy, like the protected ones in Guyana in the ‘70s, they had to become world class; and they’ve remained world class.
The second benefit, of course, was that the exports brought in foreign exchange, and there was no need to ban anything to save foreign exchange. They engaged in market orientation, rather than market control.
We hope there will be more debate on the system that guarantees this outcome.
