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Alarmist or realist?
Some readers may have felt that my analysis so far has been alarmist or they might even harbour doubts about the seriousness of the challenges facing the global economy. If that is the case, it is instructive that the recently published Global Development Finance Report 2002 produced by the World Bank has itself described the current global economic slowdown as “exceptionally deep and broad, as the deceleration in growth rates has been equally rapid for both rich countries and developing countries”. Further, the report states that not only has the slowdown been widely spread among countries, but it goes on to make the important observation that only once in the last 40 years has the deceleration of world output been steeper than last year! That occurred in 1974, during the first oil crisis.
The economic decline has impacted sharply on commodity prices, travel and tourism, foreign direct investment, stockmarket prices, and the technology communications and transportation sectors.
While all these sectors are crucial for rich and poor countries alike, the first three areas have impacted particularly severely on poor countries and the remainder on the rich ones. It should be recalled that I have argued on more than one occasion that, while signs of the present economic slowdown were evident well before September 11, 2001, the al Qaeda attacks on Washington and New York have precipitated a substantially sharper deceleration of the global economy.
Two features of the global economic crisis
There are two features of global economic crises about which we need to be reminded, if we are to anticipate the outcome of the present one correctly. First, experience has shown in all previous crises (and there is no doubt that it will be the same for this one) that the burdens and costs of economic slowdown are disproportionately carried by the poor.
This holds true for poor countries as against rich countries in the wider international economy, as well as within countries where those who are poor carry more of the burdens of adjustment to crisis than those who are rich. This outcome is not simply fortuitous or accidental. It is intrinsic to the workings of market-based economies, since the truth of the matter is that the market is driven by efficiency considerations and not broader concerns of equity and social justice, which as citizens many of us would value most.
The second feature of previous global economic crises is that crises have always resulted in some form of strong state intervention into private economic activity, which is designed to respond to the social excesses and inequalisation produced by the crisis. There is however, a marked difference in these responses as between developed capitalist economies like the OECD countries and backward capitalist ones like Guyana.
Developed and backward capitalism
As a rule, developed capitalist states have been quite reformist when faced with major economic challenges. I have alluded to this phenomenon before in the extended coverage I gave last year to the Enron and other corporate scandals in the USA. In those articles we saw that, despite the close political and social ties between the Bush administration and the corporate criminals that were uncovered in the largest concentration of bankruptcies in the history of the world (over $370 billion in 2002), the administration nevertheless responded with what was, for many, surprisingly vigorous measures designed to punish wrongdoers, contain the damaging consequences of these bankruptcies, and prevent their recurrence. Further, last week, the Bush administration published an Economic Stimulus Plan directed at jump-starting/ pump-priming the US economy and fuelling investment and growth. Its objective is to prevent the prolongation of the economic slowdown and the further intensification of economic uncertainty in the USA and, by extension, the continued spread of this anxiety to the rest of the world.
Readers may wonder why advanced capitalist states have such a strong reformist inclination, when under challenge. In particular, why is this exhibited irrespective of the ‘left’ or ‘right’ orientation of the regime in power. This phenomenon has led some political theorists to argue that, in the long-run, ‘left’ and ‘right’ mean little in a capitalist state, as all ruling parties service the logic of the expansion and growth of capitalism. The answer, however, seems to be that the political culture in these societies has evolved to a stage where survival of the nation state, and for that matter, the prevailing capitalist order, routinely takes precedence over the survival of any particular regime in power. In other words political leadership is empowered with a broader vision of its goals than its own self-interest. This gives the ‘national interest’ real meaning, as it expresses a widely-shared goal of society. In this way, foresight and forward planning become routine features in the management of society.
Under backward capitalism this occurrence is rarely, if ever the case. Regime survival routinely takes precedence over all else. The fault lies in the fact that, regrettably, nation building has not yet reached a stage where a clearly defined and generally acceptable ‘national interest’ exists.
When crisis confronts the regime, therefore, the ruling regime usually dismisses and labels it as the consequence of the ill-will of its opponents, with the suggestion that the crisis would disappear if the regime’s opponents do. Very often the logical next step is to seek to contain (repress) regime opponents and/or resort to band-aid treatment of symptoms of the crisis. In these circumstances forward planning and foresight are distinguished by their absence.
Thus it is indeed remarkable that although poor countries such as Guyana will disproportionately carry the burden and costs of the present crisis, in few of them, if any, has there been even a whisper or suggestion of a pressing need to create an emergency national economic stimulus plan to grapple with the situation.
Under backward capitalism, public dialogue on these matters is subdued. Everyone, including the responsible Authorities, look on and wait to react to events as they unfold. Such is the tribulation of being poor in a backward capitalist state.