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Open in new tab Introduction:
It seems quite paradoxical that the United States, which played a major role in imposing “free trade” on the world, the world’s more technologically advanced country that boosts the highest production rates in different fields, is in fact the same country that is now ruled by a man who adopts a nationalist economic discourse similar to the pre-industrial mercantile approach that prevailed in the early capitalist era. Donald Trump accuses countries much poorer than the United States, such as China and Mexico, of exploiting Americans through taking advantage of the free trade agreements that were ironically imposed on them by Americans.
There is major difference between nationalist ideology when adopted by an imperialist power and by a peripheral state, for in the first case it becomes reactionary and exclusionist while in the second it becomes liberationist unless of course directed against a minority group within the peripheral state. The same applies to economic protectionism when applied by a power that is capable of imposing its will on weaker states or by developing countries that try to protect their local products in an attempt to resist subordination. When adopted by a powerful country, protectionism aims at exercising control over weaker countries. Most developing countries are incapable of achieving sustainable development as a result of the tyranny of states that control trade whether because they are technologically and industrially advanced or because they are ruled by authoritarian regimes that coerce laborers into working with low wages.
The road to development:
Countries that currently control the global economy did adopt protectionism at some point of their history in order to protect their local products, yet they prevented developing countries from doing the same in order to achieve development. This is what British-Korean economist Ha-Joon Chang calls “kicking away the ladder” strategy, which means stripping others from the means one used to succeed to make sure they do not follow suit.
Chang made remarkable contributions in critiquing contemporary neo-liberal theory which claims that free trade is the best channel through which development can be achieved. He conducted detailed research on the development strategies adopted in the past by currently industrial countries and found out that none of them practiced free-trade or adopted the laissez-faire principle when they were still in the process of achieving development or in other words the same stage developing countries are going through at the moment. In fact, Britain and the United States resorted to strict protectionist measures and the state played a major role in regulating economic activities. The role of the state was particularly obvious in its support of new industries in both local and global markets.
Neo-liberals respond to this by claiming that what worked in the early industrial era is no longer suitable for the present time and that it is impossible to adopt now strategies that succeeded in the 19th century. This argument is part of the “there is no alternative” (TINA) slogan promoted by neo-liberals in reference to the irreplaceability of capitalism. Supporters of neo-liberalism also claim that protectionism and state intervention proved a failure on the global level since the end of World War Two.
Margaret Thatcher’s Britain and the Ronald Reagan’s United States adopted neo-liberalism after eliminating Keynesianism, which calls for state intervention in the economy, in industrial countries, and developmentalism, which is based on a combination of protectionism and state intervention in economic development, in developing countries. Neo-liberals accuse both approaches of leading to a global crisis in the 1970s, hence causing high inflation rates in industrial countries and high debts in developing countries. At that time, global capitalist economy went through recession, which was attributed to the failure of those two ideologies and allegedly underlined the necessity of adopting neo#liberal policies. Neo-liberals made sure to overlook major factors that brought about this recession such as American military expenses, especially during the Vietnam War, and the hike in oil prices after the boycott initiated by oil-rich Arab countries during the 1973 War.
The United States and Britain managed to drag Europe into adopting neo-liberalism, later imposed on developing countries through the Washington Consensus, which was comprised of policies and reform packages that would allegedly help developing countries out of their economic crises. These were designed by the International Monetary Fund, the World Bank, and the US Treasury Department, all based in Washington, D.C.
Did neo–liberalism work?
Forty years later, it is now possible to evaluate the neo-liberal experience, particularly in comparison to its predecessors, namely Keynesianism and developmentalism. The individual’s average annual share of the gross domestic product was estimated at 3.5% in the 1960s and 2.8% in the 1960s and 1970s combined (between 1961 and 1979). This percentage dropped to 1.6% between 1990 and 2007, right before the global financial crisis that started in 2008 according to World Bank statistics.
The success of South Korea and Taiwan in achieving development and shifting from developing to industrial countries was not an indication of the success of neo-liberalism as some believe. The two countries adopted real developmental policies even if this was done under the auspices of the United States, hence becoming the exception that proves the rule. South Korea and Taiwan allied with the United States against communism during the Cold War because it was in their best interest to face the threat of China and North Korea. The same applied to West Germany that used American support to curb the influence of East Germany. It is, of course, impossible to separate the economic miracles that took place in these three countries from the United States’ strategic and geopolitical role, yet the role each state played to direct this development towards the best interests of its people is what made this development sustainable. China, on the other hand, managed to achieve substantial development owing to the central role played by the state. In fact, a large part of the 1.6% of the individual’s average annual share of the gross domestic product between 1990 and 2007 is attributed to China’s development plans.
Despite the fact that the consequences of the 2008 financial crisis were much graver than those of the 1970s recession, neo-liberalism, which was the main cause of the crisis, was never held accountable and there was no tendency at letting neo-liberal policies go. In fact, neo-liberals went as far as claiming that the crisis was caused by failing to apply the strategies of neo-liberalism properly and that the way out of this crises would only be through a stricter implementation of neo-liberal policies. Ironically, Western countries managed to overcome the financial crisis through violating one of the main principles of neo-liberalism since the state had to intervene and pump money into private corporations in order to keep them afloat. The cover of a Newsweek issue in February 2009 even read “We are all socialists now.” However, soon enough all those who predicted that the crisis will be the beginning of the end of neo-liberalism realized they were mistaken.
It is noteworthy in this regard that the capitalist system will never be replaced through an intellectual transformation since capitalism is not a cultural phenomenon, but a system founded on the balance of power whether between countries, within the same country, or within the capitalist class itself. The 2008 financial crisis took place at a time when the balance of power still tipped in favor of capitalism and when it was still in the best interest of the most powerful entities to resume neo-liberal policies. That is why even though neo-liberalism was the obvious source of the crisis, it still dominated the global market even more forcefully than it had before the crisis.
A similar case took place in the Arab world when the 2011 uprisings were expected to put an end to neo-liberal policies which were imposed by international financial institutions with the approval of authoritarian regimes and which were the cause for many of the social and economic injustices that triggered the protests. However, this did not happen and the neo-liberal system made a much more powerful comeback. Egypt offers a flagrant example as the regime of Abdel Fattah El-Sisi embarked in 2016 on the so-called “shock therapy” under the supervision of the International Monetary Fund despite the obvious catastrophic consequences that could be predicted by all those familiar with the nature of the Egyptian economy and the reasons for its stagnation.
“Rags” development:
It is important to always take into consideration that development is not a goal in itself, but a means to a an ultimate goal, which is raising the standards of living of a given community or of people in general in a way that does not discriminate between groups. Based on this goal it becomes possible to distinguish between two types of development, one that yields sustainable results and another that widens existing gaps. It is noteworthy that according to the dependency theory, which emerged in the 1960s, dependency does not necessarily prevent development altogether, but creates a deformed kind of development that is stripped of independence or, in other words, an underdevelopment. Even though the term “underdevelopment” was meant as a euphemism for the derogatory “backwardness,” it does not mean absolute lack of development. It rather means the form of development based on the subordination of the peripheries to the center, the development that fits the dominant global order and the current balance of power.
This is what German-American economist Andre Gunder Frank described as “the development of underdevelopment,” which was also the title of a famous essay he wrote on the topic in 1966. Later, he also coined the terms “Lumpendevelopment” and “Lumpenbourgeoisie,” the word “lumpen” meaning “rags” in German. Those two terms are inspired by Karl Marx’s “Lumpenproletariat,” meaning members of the working class who do not contribute to the cause of the proletariat and are not active in the struggle for a classless society. Similarly, for Frank, this kind of “rags development” never really achieves development.
Such concepts are always applicable to development models implemented within the framework of economic subordination between capitalist centers and peripheral countries. This kind of development does not prioritize the interests of the community, but always caters to imperialist centers and global markets. That is why they focus most of the time on sectors that serve such interests while overlooking others that require real development because they serve local markets and only meet the needs of the marginalized and the impoverished.
In the decades that followed World War Two the Arab region adopted a form of development that aimed at resisting Western imperialism and achieving national economic independence. However, the approach chosen was not one of independence since while detaching themselves from the United States, many Arab countries allied themselves with the Soviet Union, thus still subordinating themselves to one of the two superpowers that then dominated the world. The collapse of the Soviet Union was in itself a proof that this model of development would have never been sustainable.
However, while allying with the Soviet Union seems unwise now, it was at the time a reasonable choice especially that in the 1950s and the 1960s the Soviet Union was considered an economic miracle not only because of the way it emerged as a superpower following the damage it sustained in World War Two, but also owing to its ability to stand up to American imperialism. In addition, the Soviet Union had generally adopted a discourse that supported independence movements in the Third World, which was in the best interest of the Arab region at the time. This also explains why the majority of countries that belonged to the Non-Allied Movement, of which Nasser’s Egypt was a prominent member, were on better terms with the Soviet Union and quite hostile to the Western camp.
The problem was that leaders of nationalist regimes in the Arab region were not only drawn to the Soviet Union’s economic and military achievement, but were also fascinated by the authoritarian system that governed it even though none of them actually shifted to communism. The one-party system, the establishment of a police state, the role of the military and the intelligence, and bureaucracy were all factors that appealed to Arab rulers and influenced the structure of their regimes even though many of them managed to implement them within a capitalist framework. Emulating the Soviet model led to another form of “rags” development since all the drawbacks of the bureaucratic, totalitarian system were replicated. A wave of nationalization and state investments led to the dominance of the public sector, which allowed for large-scale corruption and gave bureaucrats the opportunity to accumulate wealth, hence leading to the emergence a new bourgeoisie. As soon as it became powerful enough, this emerging class got rid of the Soviet-inspired system and fully adopted a capitalist approach that did away with the public sector and supported privatization. This was accompanied by shifting allegiance from the Soviet Union to the United States. In Egypt, this stage started in the Sadat era when the open door policy was applied and traces of the Nasser regime were gradually eliminated. Several Arab countries that were ruled by nationalist regimes followed suit.
Sovereignty and sustainable development:
There are two main facts that can be concluded from the above. First, it is impossible for development to be sustainable in the absence of sovereignty which can be acquired through the gradual improvement of the economic abilities of peripheral countries. Such improvement is the only means through which developing countries can change their relationship with capitalist centers from subordination to partnership.
The first step towards achieving sovereignty is severing ties with the neo-liberal system that gives precedence to free trade and the private sector. It is always necessary to take into consideration that no country managed to achieve actual development whether in the early industrial era or following the establishment of the global capitalist system without taking the required measures to protect its local markets and without a major role played by the state. Therefore, development takes place under conditions that are totally different from those promoted by neo-liberalism.
It is also important to note that sustainable development is not equivalent to isolationism, but is rather a means of achieving a power balance. In fact, experiences of total isolation from the global market, whether voluntary or imposed, have proven quite damaging and eventually led to a defective form of development. The same applies to the post-development, also known as anti-development, model that rejects development and industrialization under that pretext that they are manifestations of Western hegemony. This is similar to extremist post-colonial trends that see social sciences as a Western invention. The argument supporting self-sufficiency and the return to traditional forms of productions provides a utopian vision that cannot materialize on the ground and that rejects all forms of progress.
Sustainable development can also never be detached from environmental considerations. In fact, overlooking the environmental dimensions of any developmental projects has led to disastrous repercussions whether in Western capitalist centers or bureaucratic economies. It was not until substantial damage was done that environmental awareness started to gain momentum so that it became impossible to restore the planet to its condition before the Industrial Revolution, but only the hope of controlling the results of this damage remained possible.
The second fact is that sustainable development is closely linked to another aspect of sovereignty. In fact, sovereignty is not confined to the national aspect that defines a country’s stance vis-à-vis other countries in the International Community. It is also related to sovereignty within the country, which in the modern age is achieved through the power of the people. In many cases, this power was confined to an electoral process that is held every few years and in which money plays a major role. In this model, also called representational democracy, elected officials are given free reign while the people never take part in the decision-making process. That is why an alternative model was introduced in the form of direct democracy where voters monitor the performance of their representatives while reserving the right to replace those who do not fulfill their obligations. Direct democracy is in line with the principle of societal supervision where the people monitor the performance of the authorities in general.
Different development models, whether in capitalist or bureaucratic countries, demonstrate the need for the implementation of direct democracy in running the state and the economy. While the regime in bureaucratic states was toppled because it stood in stark contrast with this necessity, capitalist countries try to allow more room for citizen supervision mostly through non-governmental organizations. However, such organizations always operate in a way that does not threaten the interests of the capital system. That is why there have been growing demands for radical changes in the democratic system in order to allow for more involvement on the part of citizens.
It is impossible to guarantee that development plans do work for the best interest of the people unless the people themselves are allowed to have a say in their impact on their lives and interests. It is also through direct democracy that people can make sure that development models are not damaging to the environment and that expenses pertaining to unproductive activities are eliminated.
References
Achcar, Gilbert. The People Want: A Study in the Arab Uprising [Arabic]. Beirut: Dar al-Saqi, 2013.
Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective, London: Anthem Press, 2003
Frank, Andre Gunder. “The Development of Underdevelopment”, Monthly Review (New York), Vol. 18, No. 4: September 1966, pp. 17-31
Frank, Andre Gunder. Lumpenbourgeoisie and Lumpendevelopment: Dependency, Class and Politics in Latin America, New York: Monthly Review Press, 1970.
Katz, Claudio. “Considerations on Postdevelopmentalism in Latin America”, International Socialist Review (Chicago), Issue #97, Summer 2015, pp. 36-52.
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