As we reflect upon the world in which we live today, it immediately becomes apparent that the nature of our society is fundamentally unlike any society that has ever existed on this planet. The course of our development has navigated us towards these peculiar circumstances, which now provide us the opportunity to work as a unified globalized people, who according to theory, have the capacity to exponentially increase our collective capital in such a way that all world poverty could be eliminated in the foreseeable future. Never before has such an idea even been conceivable.
How did we get to this crossroad? The technology we’ve produced affords us the ability to travel and communicate with every corner of the globe so that hopes of an idyllic – prosperous - global community can now be proliferated throughout. The fall of the Berlin Wall 20 years ago is considered the end of an era characterized by the struggle between two competing economic ideologies. This occurrence, which signified the collapse of the Soviet Union, eliminated the possibility of worldwide communism and created a clear dichotomy between the 1st and the 3rd worlds (the USSR and its satellites were considered the 2nd world). The 1st world is comprised mostly of industrially developed western nations, who attribute their own success to their principles of democracy and capitalism. The 3rd world, alternatively, is comprised of undeveloped, or developing, nations and is usually associated with a weak or undemocratic state sovereign and intense economic hardship due to lack of industry (www.nationsonline.org). As a result, the United States and the West have decided that it is in their own self-interest and in the interests of developing nations to proliferate their ideals throughout the 3rd world, in order to facilitate their movement towards a more “civilized” society. The theory by which this proliferation is to occur is what we call neo-liberalism. However, after more than 20 years of neo-liberal governance, poverty still dominates much of the political landscape and the elimination of the 3rd world has by-and-large stalled. This apparent failure necessitates this research. Why isn’t the system that brought us such wealth and prosperity working in other places? In this research, I will prove that neo-liberal ideology can indeed work to eliminate worldwide poverty, but only when it is utilized in a way that enforces deep societal shifts that align the institutional structures of 3rd world communities with those of the developed western communities.
To fully understand this problem we must first fully comprehend what exactly neo-liberalism is. Green and Luehrmann provide the most elaborate and complete definition of neo-liberalism that I have found. They state that neo-liberalism is, “The contemporary version of procapitalist liberal economic strategy, which holds that all benefit from an open economy and free trade” (Glossary). Furthermore, they state that the goal of neo-liberal ideology is to engender development in states where modern development has otherwise failed. Green and Luehrmann go on to argue that, “[human] development is ultimately about freedom. It is as much about the process of enlarging people’s choices as it is about people being free to access the things valuable to their well-being” (Green and Luehrmann Globalization 111). Human development, therefore, is not merely characterized by the development of a flourishing economic sector, but also by the expansion of human rights (i.e., democracy) and an improved standard of living. However, this development of worldwide freedom is impossible unless there is adequate economic growth to fund it. According to Green and Luehrmann, economic growth is the “expansion in production, output, and perhaps income” (Globalization 107) of an economy. And, this growth cannot be realized until a state’s national economy is running at maximum efficiency, as shown by and associated with rising profits. According to neo-liberals, the most effective way of propelling a national economy to maximum efficiency is through globalization, or “the spread of capitalism worldwide” (Globalization 117). Therefore, to a neo-liberal, “[the] government’s proper role is to be withdrawn from economics as much as possible,” so that “market forces are allowed to operate unimpeded by government” (Globalization 117). Basically, from the neo-liberal’s perspective, developing nations should use globalization by trading more in the international marketplace. This in turn will create capital and “jump-start growth rates” in these nations and it is these growth rates that will allow development to happen.
Additionally, according to neo-liberal discourse, these ideas should be enforced and instituted by non-governmental organizations, most notably the IMF and the World Bank. These institutions aim to assist the world’s poorest countries, to promote global economic stability, and to “[serve] as a forum for discussion of the unresolved issues that cause friction between states” (Globalization 114). Basically, the neo-liberal institutions “distribute loans to those [countries] whose economies are facing temporary shortfalls,” but these loans come attached with certain conditions which intend to promote “the adoption of a series of market-based reforms” (Green and Luehrmann Structural Adjustment 139). These market reforms generally have five goals; 1) to establish the rule of the market in a developing nation; 2) to cut expenditures for social services in order to manage increasing deficits; 3) to deregulate and; 4) to privatize businesses; and 5) to eliminate the concept of ‘public good’ in a developing nation(www.corpwatch.org). By doing this the IMF and World Bank are attempting to get these nations to “adopt progrowth policies and get their revenues to exceed their expenditures,” and in doing this a developing nation will not be trapped by its own debt and the governance needed to increase human development will be implemented. To do this, structural adjustment programs (SAPs) often “require governments to increase their income by raising taxes, by increasing export earnings,” (Structural Adjustment 140) and by cutting extra government spending. However, because SAPs often call for a cut in government spending, they often undermine “government funding for education, healthcare, sanitation, the provision of clean water, price controls, and subsidies for food…” in the countries that they are trying to help (Structural Adjustment 140). It is for this reason that SAPs are manifest failures to the highest degree, and hence are seen as a fundamental limit neo-liberal success.
While neo-liberal ideology sounds very nice, it is incredibly difficult to argue that neo-liberal policy is succeeding in accomplishing its stated goals of propagating worldwide human development. Neo-liberal institutions, such as the IMF, state that a developing nation should respond to high levels of unemployment by adopting a “more liberal, market based set of labor policies that decrease ‘rigidities’ and embrace flexibility” (McBride et al. 82). However, after 20 years of neo-liberalism via SAPs, political scientists have concluded that there is “no statistically significant relationship between…the compliance score [of a country (how much a nation has complied with neo-liberal policy)] and the employment rate” of that particular country (McBride et al. 84). Therefore, it can be understood through empirical evidence that the theoretical tenants of neo-liberalism are not always applicable, and it is for this reason that human development in lesser developed countries (LDCs) has been delayed.
This begs the question: when is neo-liberal ideology applicable? To answer this we must first realize that liberalization policies “redraw the boundaries between the public domain of the state and citizenship and the private domain of the market, entrepreneurship and consumerism” (Lee 1). This means that in order for neo-liberal policy to work effectively,
The relationship between the state and market needs to be reordered to foster a broader conception of the public domain that will deliver greater effectiveness in both state power and the pattern of global governance, and thereby advance human development (Lee 3).
And while neo-liberals such as my pal Ronnie Reagan commonly assert that “government is not the solution to our problem; government is the problem,” empirical evidence suggests otherwise (Lee 4). In fact, in recent years, even neo-liberal institutions have “stipulated that certain institutions prescribed by the neo-liberal development policy constitute the preconditions for market- and private-sector oriented growth and human development” (Elmose 111). In other words, institutions such as the IMF and the World Bank now proclaim that neo-liberal policy will be ineffective unless a developing nation implements the “good governance” model, as it is described by those institutions. This can be understood as the argument in favor of SAPs. Governance is defined as “the traditions and institutions by which authority in a country is exercised” (Elmose 112). Elmose goes on to explain that the “good governance” policies that are supported by these institutions insist upon three things:
First, a politically independent judiciary and stable legal system supporting the rule of law; second, the economic laws widely considered foundational to well-functioning market economies, including well-defined and state-guaranteed private property rights, contract, company, bankruptcy, and competition laws and, third, improved public sector management, with reduced functions and size, increased accountability, transparency and participatory economic policy making, and reduced corruption (Elmose 112).
It is obvious that these values are an attempt to transform the national sovereign institutions of developing nations so that they are more “in line with those found in the western, liberal advanced democracies” (Elmose 112). “Good governance” is seen as important because when a nation is governed by “good governance,” the state is more capable of “implementing the more traditionally emphasized neo-liberal macroeconomic policy prescriptions, namely, liberalization, privatization, deregulation and other forms of state retrenchment from the economy” (Elmose 112), all of which are theorized to stimulate development. Elmose further argues that this proliferation of “Good Governance” institutions does not guarantee the emergence of globalized neo-liberal human development, and in fact works against it.
Elmose offers two explanations to support this argument:
The first reason holds that the empirical evidence, taken from the World Bank’s own indicators, does not support the view that compliance with the prescribed governance institutions is occurring. Nor does the evidence clearly and conclusively link the governance institutions to positive economic gains of the fastest-growing transitional economies (Elmose 113).
In a nutshell, she is arguing that forcing “good governance” onto a nation in a way that it becomes institutionalized into society is nearly impossible to do; furthermore, she argues that there is no correlation between a nation’s conformity to “good governance” and its economic growth. In fact, as she shows by means of graph, three of the fastest growing market economies in the world do not comply with these neo-liberal standards, and yet are enjoying unheralded economic growth. This means that flourishing economic growth can still occur without the preconditions prescribed and enforced by the western model.
Secondly, “a set of interrelated assumptions and one paradox of state power emerging from neo-liberal discourse” (Elmose 113) works against the spread of neo-liberalism.
These assumptions include that the [developing] state is both capable and willing to institute the Good Governance reforms. Neither assumption can pass muster, at least not without further empirical evidence. The paradox (only one of many) of state power holds that the realization of institutional convergence under the Good Governance agenda is heavily reliant upon a strong, capable, and competent state. Paradoxically, this implied theory of a top-down, state-led approach to institutional reforms that has not proven effective in market economy transitions, and could be detrimental to the institutional convergence agenda (Elmose 113).
In other words, Elmose is saying that neo-liberals are possibly too bold in assuming that any developing nation can simply emanate revolutionary structural change, especially without the capital required for growth. The paradox she speaks of can be understood as such: neo-liberalism by definition is founded upon the idea that minimal government intervention is required in order to allow the markets forces to freely interact and fluctuate. However, proponents of neo-liberalism also claim (through their enforcement of “good governance” policies) that well-established state institutions are prerequisite for a neo-liberal market economy, and in essence proponents of neo-liberalism are supporting the establishment of strong active governments while, at the same time, telling those same governments to be small and passive economically. Basically, Elmose argues, neo-liberals want to have their cake and eat it too.
This confronts us with another concerning question: if “good governance” is nearly impossible to institute, contrary to neo-liberal ideology, and not correlated with economic growth, then why do our institutions continue to use this model? The simple answer is that human development refers to more than just economic growth, but also the expansion of freedoms and the creation of a sustainably developed state which interacts with its community to improve the lives of all of its citizens.
This, therefore, raises another question: how do we legitimately create human development in the 3rd world, provided that this kind of development cannot occur unless there is economic growth to fund it? To answer this I must turn to the theories of one of the greatest capitalist thinkers of any time: Karl Marx. (Our friend Ron just turned in his grave.) During his life Marx developed a theory called “the materialist conception of history.” The materialist conception of history can be understood through this logic:
People in a society, at any given time, have a certain level of productive ability. This depends on their own knowledge and skills, on the technology available to them, and on the bountifulness of the natural environment in which they live. These together are called … ‘productive forces’. Marx alleged that the productive forces determine the way people make their living and, at the same time, the way they relate to one another in producing and exchanging the means of life. These production and exchange relationships are what Marx called ‘the relations of production’. The productive forces plus the relations of production, which Marx referred to as ‘the economic structure of society’, shape the ‘superstructure’ of people’s religious, political, and legal systems and their modes of thought and views of life. That is, people’s material lives determine their ideas and their supporting institutions (Gurley 9).
Basically, Marx is arguing that “the way people make a living determines their ideas, but these ideas in turn affect the way they make their living” (Gurley 14). The importance of this argument to my research is that it assumes that:
The economic structure of a society molds its superstructure of social, political, and intellectual life, including sentiments, morality, illusions, modes of thought, principles, and views of life. The superstructure contains the ideas and the systems of authority which support the class structure of that society – that is, the dominant position of the ruling class (Gurley 14).
Furthermore, the “superstructure contains not only ideas but also institutions and activities that support the class structure of society- the state, legal institutions, etc…” (Gurley 15). By following this logic we can determine that top-down enforcement (that is, enforcement by authority) of “good governance” policies (SAPs) will consistently fail. Because “good governance” is ultimately an attempt to modify the superstructures of developing nations in order to catalyze human development, the establishment of “good governance” necessitates a shift in the productive forces and/or the relations of production in those countries. (This is eerily similar to the neo-liberal problem that development cannot happen without economic growth.) However, as Marx asserted, “such development is not imposed on us from the ‘outside,’ nor do we simply adapt in passive ways to social change. We, in fact, initiate those changes and, by so doing, make ourselves worthy of the new conditions” (Gurley 12).
When Marx argues that the superstructure of a state (its governance) cannot change until the economic structure of society necessitates this structural change, it becomes painfully clear that neo-liberal ideology is trapped in a paradox. On one hand, neo-liberals argue that human development cannot occur unless there is adequate funding to support the structural changes that must occur to improve living conditions in the 3rd world. However, through their support of “good governance” policies, neo-liberals also argue that economic growth will stagnate unless the state’s institutions are pre-disposed towards supporting a market-based neo-liberal economy which promotes human development. In simpler terms, neo-liberal ideology as it exists today is fundamentally reliant on the supposition that the superstructure of a society can and will change before economic growth ensues, and once this economic growth happens the establishment of “good governments” will ensure human development in these nations. Tragically, this postulation is effectively wrong because the superstructure of a society cannot change until the mode of production that determines that superstructure has changed first, at least for Marx.
As Marx theorized, a shift in economic structures (and hence a shift in superstructures) can only come from internal forces within the society. This presents us with our final problem: how do we initiate internal shifts of economic structures of developing nations? This is the most important question we’ve yet asked because if we can understand how to commence internal shifts of productive forces and relations within a specific country, then we can effectively establish the “good governance” that human development necessitates, while at the same time encourage the economic growth that human development also requires. The means of doing this can best be understood in a Fredrick Engels quote that says:
According to the materialist conception of history, the ultimately determining element in history is the production and reproduction of real life. Other than this neither Marx nor I have ever asserted. Hence if somebody twists this into saying that the economic element is the only determining one, he transforms that proposition into a meaningless, abstract, senseless phrase" (qtd. in SocialistWorker.org).
Therefore, to solve this problem we cannot only attempt to shift the economic production of a nation but rather, we must shift the relations that ultimately determine the ‘history’ of that nation.
To do this, I will turn to the research of Professor Jeffery Sachs. Sachs is a leading team member of the United Nations’ Millennium Project, which is seeking ways to end worldwide poverty while proliferating neo-liberal capitalist ideology. After doing extensive on-site research, Sachs developed what he calls “the Big Five development interventions.” The “Big Five” calls for the improvement of 1) agricultural inputs, investments in 2) basic health, investments in 3) education, the improvement of 4) power, transportation, and communications services, and the improvement of safe drinking 5) water sanitation in developing nations (Sachs 233). (Recall again which several welfare programs SAPs often cut out of governments.) Sachs argues that these innovations will rapidly increase the “six major kinds of capital” that LDCs lack, and that the “Big Five” have the potential to eliminate the forces that perpetuate the societal superstructures that support poverty. The “six major kinds of capital” that the extreme poor lack are 1) human capital – “health, nutrition, and the skills needed for each person to be economically productive”; 2) business capital – “the machinery, facilities, motorized transportation used in agriculture, industry, and services”; 3) infrastructure – “roads, power, water and sanitation, airports and seaports and telecommunications systems, that are critical inputs into business productivity; 4) natural capital – “arable land, healthy soils, biodiversity, and well functioning ecosystems that provide the environmental services needed by human society”; 5) public institutional capital - “the commercial law, judicial systems, government services and policing that underpin the peaceful and prosperous division of labor”; and lastly 6) knowledge capital – “the scientific and technological know-how that raises productivity in business output and the promotion of physical and natural capital” (Sachs 244).
After these voids of capital are fulfilled, Sachs argues, economic growth will immediately ensue.
This proposal marks a fundamental shift in ideology enforcement. For years we’ve used top-down approaches via neo-liberal institutions such as the IMF and the World Bank to enforce “good governance” by loaning cash to poor governments on the condition that they will conform their institutions to the rubric of “good governance” (SAPs). However, often times the money is simply squandered or embezzled by corrupt ruling powers that opt to preserve the societal superstructures which have given them authority, and henceforth no progress is made. Sachs ideas, alternatively, support a bottom-up approach, in which the internal forces of society are manipulated by outside factors in such a way that superstructural changes in that society will occur naturally. The crux of this proposition is simple: if we provide the poor with the knowledge, skills, and technology necessary to their increase levels of productive ability, the economic structure of the nation will change and therefore so will the superstructures that uphold corrupt governments and widespread poverty.
To implement these interventions by means of a bottom-up approach, we cannot work through corrupt governments as the neo-liberal institutions often do. Alternatively we must work through the civil society of the impoverished nation. There are a number of ways to do this; one possible method is through non-governmental organizations (NGOs) from industrialized nations. The United Nations defines an NGO as:
A nonprofit whose members are citizens or associations of citizens of one or more countries and whose activities are determined by the collective will of its members in response to the needs of the members of one or more [countries] with which the NGO cooperates (qtd. in Simmons).
This means that NGOs can quickly raise money and then efficiently use it for a specific project, such as the investment in education or health of a population in a developing nation. Another method is to develop civil society among the impoverished people, this not only gives the workers a voice but also provides improved relations of production; information and technology concerning labor can be communicated more easily, and goals such as the improvement of agricultural input could be achieved. One of the most effective examples of this style NGO is the “Kashf Foundation, a Pakistani microfinance organization that lends tiny amounts of money to poor women to start businesses.” The members “guarantee one another’s debts and meet every two weeks to make payments and discuss a social issue, like family planning or schooling for girls” (Kristof and WuDunn). From this example, we not only see the increase of human and business capital, in the form of ‘microloan’, but also of knowledge capital, as the weekly meetings and discussion improve the relations of production between Pakistanis.
If, in fact, NGOs and civil society can prove effective in altering the productive forces of developing nations to the extent that the over-arching superstructure which governs the institutional framework of that population is shifted, then neo-liberalism will triumph once again. However, this victory would not be over communism, but over the paradox in which neo-liberalism has been imprisoned for the last two decades. This triumph would be demarcated by a superstructural shift within LDCs; characterized by the rejection of governments and systems that perpetuate poverty conditions and followed by the replacement of those institutions with ones that act upon similar guidelines of the current “good governance” policy. Only then, when economic growth - spurred by the improved economic structures of a society - contemporaneously causes the development of legitimate, free, democratic governance can neo-liberal proliferation be viewed as a success in the 3rd world.
-Publius
Works Cited:
1. "CorpWatch." CorpWatch. Web. 07 Dec. 2009. http://www.corpwatch.org/article.php?id=376>.
2. Elmose, Linda. "Assessing the Convergence Thesis of Legal Reforms in Emerging Market Economies." Neo-Liberalism, State Power and Global Governance. Springer Netherlands, 2007. Print.
3. "First, Second, and Third World." Nations Online Project :: A Destination Guide to Countries and Nations of the World. Web. 07 Dec. 2009.
4. Green, December, and Laura Luehrmann. "Globalization: Cause or Cure for Underdevelopment." Comparative Politics of the Third World. 2nd ed. Boulder, Colorado: Lynne Rienner, 2007. 107-38. Print.
5. Green, December, and Laura Luehrmann. "Structural Adjustment: Prices and Politics." Comparative Politics of the Third World. 2nd ed. Boulder, Colorado: Lynne Rienner, 2007. 139-58. Print.
6. Gurley, John. "The Triumph of Capitalism." Challengers to Capitalism. New York: WW Norton & Company, 1979. Print.
7. Kristof, Nicholas D., and Sheryl WuDunn. "Saving the World's Women." The Women's Crusade. The New York Times, 23 Aug. 2009. Web. 01 Dec. 2009.
8. Lee, Simon, and Stephen McBride. "Introduction: Neo-Liberalism, State Power and Global Governance in the Twenty-First Century." Neo-Liberalism, State Power and Global Governance. Springer Netherlands, 2007. Print.
9. Mcbride, Stephen, Kathleen Mcnutt, and Russell Williams. "Tracking Neo-Liberalism: Labour Market Policies in the OECD Area." Neo-Liberalism, State Power and Global Governance. Springer Netherlands, 2007. Print.
10. Sachs, Jeffrey. The End of Poverty. New York: The Penguin, 2005. Print.
11. Simmons, PJ. "Learning to Live with NGOs." Foreign Policy 112 (1998): 82-96. Print.
12. "The materialist conception of history." SocialistWorker.org | Daily news and opinion from the left. Web. 07 Dec. 2009.
Posts
