It’s always amazed me how the thorny issue of international finance is often skirted in our conventional parlor-talk. There seems to be an unsaid rule by which we all pretend that the pieces on the political checkerboard are self-directed, by which we agree not to discuss the big hands that move them. I’ll give you an analogy. Say there’s a big soccer game coming up–if you knew that the match’s result was predetermined and that most of the players were involved in point-shaving rackets, would you still go to the games, hold up signs for your favorite player, and energetically speculate about who would win the game? Of course not! And yet this is what our political system has been reduced to. Whatever you want to call it, it no longer resembles a constitutional republic.
Mark Weisbrot is the Co-Director of the Center for Economic and Policy Research in Washington D.C. and holds a Ph.D. in economics from the University of Michigan, and in his new book, Failed, he concisely sums up how the neoliberal policies that characterize our global economy have repeatedly led to disastrous results. Here’s how Weisbrot defines neoliberal policy:
“In dozens of developing and ’emerging market’ countries, there was a shift to tighter fiscal and monetary policies, sometimes even during economic slow-downs or recessions. Central banks were made more “independent”–that is, unaccountable to elected governments–and more likely to prioritize lower inflation over employment, economic growth, and development. Governments that had pursued industrial and development sttrategies abandoned them, often opening their economies indiscriminately to international trade and de-regulated, volatile capital flows. There were massive privatizations of state-owned enterprises, and other forms of deregulation, including in labor markets; although protectionism in one area that benefited higher income groups in the rich countries, ‘intellectual property,’ was sharply increased. These policy changes are commonly described as ‘neoliberal,’ and they constitute the defining features of neoliberalism in this book.”
In other words, what has come to be known as “the troika”, namely the International Monetary Fund, the European Central Bank, and the European Commission, has shown a pernicious pattern of putting developing countries on “plans” that not only cripple economic growth, but create a huge gap between the privileged and the impoverished. Weisbrot is incredibly thorough with his arguments, presenting solid data that speaks for itself and doing it in such a way that, even if you aren’t an economist, you’ll get the picture.
Before delving deeper into case studies of Latin American countries and their economic health before, during, and after their unfortunate marriage to the IMF, Weisbrot skillfully decodes the current situation in Greece. In fact, the Greek situation is really no different than that of Argentina 15 years ago, Weisbrot demonstrates, before the Argentinians smartly defaulted on their IMF loans and decided to go in a more self-reliant direction. Most critically, Weisbrot shows how the ECB could have easily averted a crisis in Greece long before it escalated into such a monster, but carefully chose not to.
“From the beginning of this crisis, the European authorities had the power, resources, and ability to bring about a robust recovery of growth and employment. It was the will that was lacking…for more than four years (and still going), the European authorities successively implemented policies that slowed the eurozone economy and, for most of that time, additional policies that caused serious financial crises…This is what almost all of the analysis and commentary missed: that the European authorities, regardless of political concerns within the member states, repeatedly allowed the region to slip to the edge of a financial meltdown in an effort to force the weaker eurozone governments to make more concessions.”
That we have allowed our social systems to become infected with such an economic parasite is perhaps less egregious than the media pundits’ blatant disregard for that parasite’s crowning culpability–over and over again. The book’s subtitle reads “What the ‘Experts’ Got Wrong About the Global Economy” and Weisbrot picks up on this theme throughout the book. A public “perception” is always cultivated that steers people away from identifying the real cause of various crises, and there’s no better example than the Greek situation. I remember when the whole “sovereign debt” thing was first hitting the press– everyone was bemoaning the Greeks’ laziness and innate profligacy, while the IMF was portrayed as some sort of concerned benefactor just trying to do the right thing.
“A narrative of hard-working, thrifty Germans and other northern Europeans reluctant to subsidize the lazy and indulgent habits of their southern neighbors became a common theme in the media. Of course most of this has no basis in reality. For example, Greeks, on average, put in considerably more hours on the job than their German counterparts–about 2,037 per year as compared to 1,388 in Germany. Greeks also retire later than Germans do.”
But as Rahm Emanuel was quoted as saying recently, “you never let a good crisis go to waste.”
Argentina was itself gripped in a vicious cycle of fiscal belt-tightening and austerity mandates at the turn of the millenium, which Weisbrot refers to as “pro-cyclical macroeconomic policy”. The country was dovetailing into a financial abyss–and suddenly turned it around. Following a 20-year decline in GDP that spread a black plague of poverty, high infant mortality rates, and rampant unemployment, Argentina embarked on an amazing turnaround that saw its employment levels soar and its poverty cut by two-thirds. What caused such a dramatic change? Argentina effectively showed IMF guys the door (peace!) and defaulted on their debts while devaluing their currency and disposing of the fixed exchange rate, which allowed for greater domestic investment and productivity.
“It should be said that it took some extraordinary courage and indeed some stubbornness on the part of Argentine officials to fight for the changes that were necessary to turn the country around. These leaders, including the late Nestor Kirchner (who was president from 2003 to 2007), had to struggle against prevailing conventional wisdom, including that of the economics profession…The story of how Argentina prevailed against these odds is both fascinating and instructive, and it is unfortunate that it has gotten so little attention.”
To summarize, this book is a total gem. Weisbrot goes on to detail the similar economic resurgence in other Latin American countries since their divorce from the troika’s bad policies and how the American government has been caught numerous times trying to covertly subvert their efforts. We are now too deep in the information age, in my opinion, to be continually pleading ignorance to such toxic motives that exist on an institutional level. We cannot talk about the food crisis, the energy crisis, the resource crisis without turning a critical eye to the capstone institutions that appear to grow fatter at the same rate that our own problems and suffering proliferate. Clearly, there is a massive conflict of interest when it comes to solving the world’s ills, especially in light of globalization, such that the medicine that is prescribed turns out too often to be mis-labeled arsenic.
In closing, it’s time that we see the troika and its Judas-kiss of neoliberalism as a failed paradigm for which there is no room in our human aspirations for a sustainable model of coexistence with the earth and its wealth of living species. In fact, there’s no reason that every person alive can’t be living a life of bounty and abundance, unscathed by scarcity, hunger, and imposed debt. These are all inventions of the ongoing farce that we call our “system”. Along with recommending Mark Weisbrot’s Failed to every reader of my blog, I’d also like to recommend the documentary “Thrive”, directed by Foster Gamble and his wife Kimberly Carter Gamble and linked to below. The film details the pyramid scheme of our political and economic systems, riddled with monopolies, and identifies solutions for an equitable future. It’s well-produced and elegantly put together, just like Weisbrot’s latest effort.
Now that these kind of ideas have growing currency, I’m sincerely optimistic that the next 20 years will see some incredible changes for the better. There’s no better time to start than now.
“Wading through this kind of wreckage could be a depressing venture, but I have also tried to show that there are alternatives to the rollbacks and lost opportunities of recent years and decades, and that some of these more hopeful reforms are actually being implemented in the twenty-first century. Indeed, one of the central theses of this book is that there are always alternatives to prolonged high unemployment and recession or stagnation…And these are not necessarily radical alternatives, but practical, feasible alternatives that can often be implemented with existing institutional capacity and with the support of public opinion.”