A Critical Reflection on Neoliberal Globalization in the Philippines
Globalization is a vast topic which cannot be covered substantially in this reflection; thus, this is only presenting a basic understanding of globalization. This writer is not an economist, but a theological student who had the privilege of understanding that there is a significant relationship between the reality of globalization and doing theology. To start off this reflection, this article surveys the emergence of globalization, citing the deep problems of its ideological principles and presenting the real nature of globalization in the light of its present characteristics. A discussion of how “development” became an ideological principle to enforce market led neo-liberal economic process is also a major part of this section. Lastly, the dominant discourse of “development” and “good governance” in relation with neoliberal agenda is also tackled in this article.
What is Neoliberal Globalization?
Ha-joon Chang, a Cambridge economist, describes the perceptions of globalization in two ways: the official history and the real history of globalization. The former is represented by supporters of globalization, such as Thomas Friedman.
Joseph Stiglitz, an economist and winner of the Nobel Prize defines globalization as “the closer integration of the countries and peoples of the world which have been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge (to a certain extent) people accross borders.” The three main institutions that govern globalization are the IMF, World Bank, and WTO. A host of other institutions that play a role in the international economic system are also fundamentally involved in globalization. Stiglitz pointed out that these institutions have turned globalization wrong. While Stiglitz may affirm that globalization is a neutral process, i.e. could be either a success of a failure depending on how it is managed, he also certainly affirms that the present globalization “has not succeeded in reducing poverty, neither has it succeeded in ensuring stability.” He stated that “these countries were told by the West that the new economic system would bring them unprecedented prosperity. Instead, it brought unprecedented poverty: in many respects, for most of the people, the market economy proved even worse than their Communist leaders had predicted.” He further remarked that “The critics of globalization accuse Western countries of hypocrisy, and the critics are right. The Western countries have pushed poor countries to eliminate trade barriers, but kept up their own barriers, preventing developing countries from exporting their agricultural products and so depriving them of desperately needed export income.” On the impact of globalization, Stiglitz noted that:
“If in too many instances, the benefits of globalization have been less than its advocates claim, the price paid has been greater, as the environment has been destroyed, as political processes have been corrupted and as the rapid pace of change has not allowed countries time for cultural adaptation. The crises that have brought in their wake massive unemployment have, in turn, been followed by longer term problems of social dissolution-from urban violence in Latin America to ethnic conflicts in other parts of the world, such as Indonesia.”
This is how the former chairman of the Council of Economic Advisers under Bill Clinton and chief economist at the World Bank describes globalization. Stiglitz opposed neoliberalism of IMF and World Bank, but he supports ideologies of globalization, such as free-market. However, neoliberalism and globalization are inextricably linked together.
Is “globalization” a neutral process? With the failure of neoliberal policies, as described in Walden Bello’s “Goodbye Washington Consensus,” the answer could be rendered moot and academic. However, this remains a valid question because these policies continue to thrive in exploiting “developing” countries, like the Philippines. Stiglitz considers globalization as neither good nor bad; but, he also claims that it has not brought comparable benefits in much of the world, and for many, it remains an unmitigated disaster. Stiglitz proposes reshaping or perfecting globalization, while Walden Bello argues for deglobalization. This writers also argues that neoliberal globalization has polarized its impact on increasing inequality and poverty, especially in the Philippines. One major case would prove that neoliberal globalization in the Philippines is malevolent: the plight of Filipino migrants, especially feminization of migration.
The Golden Straightjacket and the Electronic Herd
Thomas Friedman defines globalization as the “inexorable integration of markets, nation-states, and technologies to a degree never witnessed before-in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before … the spread of free-market capitalism to virtually every country in the world.” In his Lexus and the Olive Tree, Friedman argues that there are no longer any ideological alternatives to free market capitalism if a country wants to achieve progress. He terms a country’s acceptance and application of this ideology the “Golden Straightjacket” and argues that while the Golden Straightjacket improves a country’s prospects for growth and higher average incomes; it also constrains political and economic choice by limiting available options. He notes:
“The Golden Straitjacket first began to be stitched together and popularized in 1979 by British Prime Minister Margaret Thatcher – who, as the original seamstress of the Golden Straitjacket, will go down in history as one of the great revolutionaries of the second half of the twentieth century. That Thatcherite coat was soon reinforced by Ronald Reagan; in the United States in the 1980s, giving the straitjacket, and its rules, some real critical mass. It became a global fashion with the end of the Cold War, once the three democratizations blew away all the alternative fashions and all the walls that protected them. The Thatcherite-Reaganite revolutions came about because popular majorities in these two major Western economies concluded that the old government directed economic approaches simply were not providing sufficient levels of growth. Thatcher and Reagan combined to strip huge chunks of economic decision-making power from the state, from the advocates of the Great Society and from traditional Keynesian economics, and hand them over to the free market.”
Friedman categorically declared that globalization is the “Golden Straightjacket” and the only alternative which leads a country to progress and success in the new global economy. He claimed that globalization is “an emancipatory political force” that nations have less control since it originated from beyond. As such, “unless they fit themselves into a particular set of economic policies that he calls the Golden Straitjacket, countries in the olive-tree world will not be able to join the Lexus world. In describing the Golden Straitjacket, he pretty much sums up today’s neo-liberal economic orthodoxy: in order to fit into it, a country needs to privatize state-owned enterprises, maintain low inflation, reduce the size of government bureaucracy, balance the budget (if not running a surplus), liberalize trade, deregulate foreign investment, deregulate capital markets, make the currency convertible, reduce corruption and privatize pensions.” The Lexus symbolizes the drive for prosperity and modernization and the growth of technology and finance. The Olive Tree represents the traditional values in which societies remain rooted, even in the age of global markets, and there is no economic growth. For Chang, however, the progress of Japan is not owed to neo-liberal policies, but through “selective, strategic integration with the world economy, rather than through unconditional global integration.” Stiglitz also stated that “Japan-had built up their economics by wisely and selectively protecting some of their industries until they were strong enough to compete with foreign companies.” Had Japan followed Friedman’s advice, the country would not be exporting Lexus, but still fighting over who owns the mulberry tree. Moreover, the fact is that had the Japanese government followed the free-trade economists back in the early 1960s, there would have been no Lexus. Toyota today would be, at best, a junior partner to some Western car manufacturer or, worse, have been wiped out. In sum, and in concurrence with Chang, the official history of globalization, as espoused by proponents of globalizations, is untenable.
This absurdity is further advanced by Friedman in his “The World is Flat,” that claims to even out the differences between rich and poor countries. And yet the figures for global poverty and inequality remain an obscenity. To prove this point, one statistic could suffice:
“In 2005, the year when the Group of Eight met in Gleneagles and solemnly promised to rescue Africa from its fate, 10.1 million children died. And the colonial massacres continue, even though there are hardly any formal colonies any more – just ‘failed states’ subjected to the benevolent guardianship of the United Nations and NATO and the martial power of the Pentagon.”
Friedman continues to argue that “to thrive in today’s globalization system a country not only has to put on the Golden Straitjacket, it has to join the Electronic Herd. The Electronic Herd loves the Golden Straitjacket, because it embodies all the liberal, free-market rules the herd wants to see in a country … This interaction among the Electronic Herd, nation states, and the Golden Straitjacket is at the center of today’s globalization system.” For Friedman, there are two sorts of Cattle in the Electronic Herd:
- The Short-Horn Cattle: Investors who buy stocks, bonds, future contracts, currencies, derivatives, options, and hedge funds.
- The Long-Horn Cattle: Multinational corporations that engage in direct foreign investment by building factories and utilities and supporting local corporations in so-called “strategic alliances” and “local partnerships.”
The long-horn cattle can and do play off every developing country against the others. Each of these countries is desperate for multinational investments, because it is the quickest way for them to make technological leaps. Nike first established its Asian production facilities in Japan, but when that got too expensive it hopped over to Korea and then went to Thailand, China, the Philippines, Indonesia, and Vietnam. The Electronic Herd also demands that “all world leaders have to think like governors now … But their main job these days is enticing the Electronic Herd and Supermarkets to invest in their states, doing whatever it takes to keep them there and constantly living in dread that they will leave … kings, dictators, emirs, sultans, traditional presidents, and prime ministers–they’re all being reduced to governors now.”
The neoliberalism embedded in the Golden Straightjacket and the Electronic Herd is essentially a worship of the market and laissez-faire or non-regulated capitalism. The ideological principle that it is the only alternative path to growth and freedom has produced adverse tensions. Dani Rodrik, a Harvard professor and international economist, cites three sources of tension caused by neoliberal globalization. First, he pointed out that “globalization fundamentally transforms the employment relationship.” This means that workers can now be easily substituted across national boundaries, which make them bear greater incidence of non-wage cost, volatility and insecurity increase, and erosion of bargaining power. Second, “globalization engenders conflicts within and between nations over domestic norms and the socials institutions that embody them.” This happens when nations compete head when products become standardized and diffused internationally. Third, “globalization has made it extremely difficult for governments to provide social insurance” which occurs when governments insulate domestic groups from excessive market risks, particularly those with external origin. Collectively, the greatest adverse consequence is solidifying of a new set of class divisions – between those who prosper in the global economy and those who do not, between those who share its values and those who would rather not, and between those who can diversify away its risks and those who cannot. Further, globalization has resulted into global apartheid of wealth. In a 2006 report from the World Institute for Development Economics Research at the UN University, it was discovered that the poorer half of the world’s population own barely 1% of global wealth, while the richest 2% own more than 50% of the world’s household wealth. In the Philippines, government document states that in 2011 the 40 richest families listed on Forbes magazine accounted for 76% of the country’s Gross Domestic Product. This was the highest in Asia compared with Thailand where the Top 40 accounted for 33.7%, 5.6% for Malaysia and 2.8% for Japan. In contrast, about 25 million people, or one quarter of the Philippine population, lived on $1 (PhP 41) a day or less in 2009.
Rodrik’s globalization dilemma can be viewed as a crisis of embedded liberalism. Rodrik’s study is further described in his critical analysis which is known as “Rodrik’s Trilemma.” Rodrik states in his personal blog: “I have an ‘impossibility theorem’ for the global economy … It says that democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full.” He further explains that “to see why this makes sense, note that deep economic integration requires that we eliminate all transaction costs traders and financiers face in their cross-border dealings. Nation-states are a fundamental source of such transaction costs. They generate sovereign risk, create regulatory discontinuities at the border, prevent global regulation and supervision of financial intermediaries, and render a global lender of last resort a hopeless dream. The malfunctioning of the global financial system is intimately linked with these specific transaction costs.”
The True Nature of Neoliberal Globalization
Walden Bello defined globalization as “the accelerated integration of capital, production and markets globally, a process driven by the logic of corporate profitability.” He described globalization’s two phases as “the first lasting from the early nineteenth century till the outbreak of the First World War in 1914 the second from the early 1980s until today.” These were marked by “the coming to hegemony of the ideology of neoliberalism, which focused on ‘liberating the market’ via accelerated privatization, deregulation and trade liberalization. There were, broadly, two versions of neoliberal ideology: a ‘hard’ Thatcher/Reagan version and a ‘soft’ Blair/Soros version (globalization with ‘safety nets’).” Both these approaches have unleashed market forces and eroded constraints imposed on transnational corporations.
Globalization in the past was profoundly a colonial and an “unequalizing process.” Ha-joon Chang presented “the real history of globalization” by tracing the roots of present globalization to 19th century liberalism and imperialism. Free trade was grounded in the context of colonialism and unequal treaties. He used Hong Kong as major example of how Britain’s liberal leader had declared war against China, i.e. “Opium War,” which consequently forced China to lease Hong Kong for British rule. Chang stated that: “The truth is that the free movement of goods, people, and money that developed under British hegemony between 1870 and 1913 – the first episode of globalization – was made possible, in large part, by military might, rather than market forces. Apart from Britain itself, the practitioners of free trade during this period were mostly weaker countries that had been forced into, rather than had voluntarily adopted, it as a result of colonial rule or ‘unequal treaties’ (like the Nanking Treaty), which, among other things, deprived them of the right to set tariffs and imposed externally determined low, flat-rate tariffs (3–5%) on them.” Countries which were under colonialism and unequal treaties did very poor economic progress, while those in power had benefited tremendously. Chang’s statistics says that, “Between 1870 and 1913, per capita income in Asia (excluding Japan) grew at 0.4% per year, while that in Africa grew at 0.6% per year.” During the same period, for the liberal leaders, the figures were: 1.3% for Western Europe and 1.8% per year for the USA.
The irony is that while free trade was imposed on weaker parties, the hegemonic and rich countries had maintained a protectionist economic stance; the major example is Britain. Citing Chang again:
From the 1880s, most European countries raised protective barriers again, partly to protect their farmers from cheap food imported from the New World and partly to promote their newly emerging heavy industries, such as steel, chemicals and machinery. Finally, even Britain, as I have noted, the chief architect of the first wave of globalization, abandoned free trade and re-introduced tariffs in 1932.
Chang concludes by noting that “the history of the first globalization in the late 19th and early 20th centuries has been rewritten today in order to fit the current neo-liberal orthodoxy.” The 19th and 20th century early globalization has been evolved into 21st century neoliberal globalization.
The 21st century neo-liberal globalization is defined by Berch Berberoglu as “the highest stage of capitalist imperialism.” He explains this by pointing out that:
“The speed and intensity with which contemporary global capitalism has facilitated the accelerated expansion of capital on a world scale came to confirm my understanding of the fundamentals of modern capitalism encompassing the scope and depth of a process of exploitation and accumulation on a global scale that extended the capitalist control and domination of the world economy and the subjugation of the working class and all of humanity to the dictates of capital, the capitalist class, and the capitalist state on a worldwide basis throughout the course of the twentieth century and into the twenty-first.”
The trinity of global capitalism and the pillars of neoliberal globalization are the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). One analyst noted that “these institutions have their origins in the negotiations between business elites in the United States, the United Kingdom, and Germany in the 1930s.” It is also argued that “the United States set the rules in economics through the Washington Consensus, in trade, through the WTO, in finance, through the dollar standard and the IMF, and in security, through its hegemony and formidable military.” Now, statistics tells that: With 4 percent of the world population, the United States absorbs 25 percent of world energy supplies, 40 percent of world consumption, and uses up 50 percent of world military spending and 50 percent of world health care spending (at $1.3 trillion a year). U.S. borrowing of $700 billion per year or $2.6 billion per day absorbs 70 to 80 percent of net world savings.
“Development”: Kicking Away the Ladder
When development experts speak about “development,” they are referring generally to economic or material progress. The hallmarks of successful development were signs that backward countries were making progress–for example, building roads, dams, and smoke- belching factories–along the Western trajectory. In economics, this was the era of Rostow’s famous “stages of economic development” and Rosenstein- Rodan’s “big push.”
W. Rostow distinguished five basic stages of growth experienced by societies as they change from a pre-industrial state to full economic maturity. Rostow proposed that “it is possible to identify all societies, in their economic dimensions, as lying within one of five categories: the traditional society, the preconditions for take-off, the take-off, the drive to maturity, and the age of high mass-consumption.” He described each stage in the following manner:
First, the traditional society. A traditional society is one whose structure is developed within limited production functions, based on pre-Newtonian science and technology, and on pre-Newtonian attitudes towards the physical world. Newton is here used as a symbol for that watershed in history when men came widely to believe that the external world was subject to a few knowable laws, and was systematically capable of productive manipulation.
This stage is characterized by subsistence agriculture or hunting and gathering; almost wholly a “primary” sector economy limited technology; a static or ‘rigid’ society: lack of class or individual economic mobility, with stability prioritized and change seen negatively.
The second stage of growth embraces societies in the process of transition; that is, the period when the preconditions for take-off are developed; for it takes time to transform a traditional society in the ways necessary for it to exploit the fruits of modern science, to fend off diminishing returns, and thus to enjoy the blessings and choices opened up by the march of compound interest.
The preconditions for take-off are: external demand for raw materials initiates economic change; development of more productive, commercial agriculture and cash crops not consumed by producers and/or largely exported widespread and enhanced investment in changes to the physical environment to expand production (i.e. irrigation, canals, ports) increasing spread of technology and advances in existing technologies changing social structure, with previous social equilibrium now in flux individual social mobility begins development of national identity and shared economic interests.
We come now to the great watershed in the life of modern societies: the third stage in this sequence, the take-off. The take-off is the interval when the old blocks and resistances to steady growth are finally overcome. The forces making for economic progress, which yielded limited bursts and enclaves of modern activity, expand and come to dominate the society. Growth becomes its normal condition. Compound interest becomes built, as it were, into its habits and institutional structure.
In the take-off stage, urbanization increases, industrialization proceeds, technological breakthrough occurs the “secondary” (goods-producing) sector expands and ratio of secondary vs. primary sectors in the economy shifts quickly towards secondary textiles and apparel are usually the first “take-off” industry, as happened in Great Britain’s classic “Industrial Revolution.”
After take-off there follows a long interval of sustained if fluctuating progress, as the now regularly growing economy drives to extend modern technology over the whole front of its economic activity.
The drive to maturity requires diversification of the industrial base; multiple industries expand & new ones take root quickly manufacturing shifts from investment-driven (capital goods) towards consumer durables and domestic consumption rapid development of transportation infrastructure large-scale investment in social infrastructure (schools, universities, hospitals, etc.).
We come now to the age of high mass-consumption, where, in time, the leading sectors shift towards durable consumers’ goods and services: a phase from which Americans are beginning to emerge; whose not unequivocal joys Western Europe and Japan are beginning energetically to probe; and with which Soviet society is engaged in an uneasy flirtation.
The final stage is characterized by the industrial base dominating the economy; the primary sector is of greatly diminished weight in economy and society widespread and normative consumption of high-value consumer goods (e.g. automobiles) consumers typically (if not universally), have disposable income, beyond all basic needs, for additional goods.
Fundamentally, Rostow proposes materialistic norms of economic development. His model is a part of the liberal school of economics, laying emphasis on the efficacy of modern concepts of free trade and the ideas of Adam Smith. Moreover, Rostow’s model is merely a model of economic growth like many other models, but it does not address wider issues and contexts of development among “underdeveloped countries.”
Half a century after Walt Rostow announced the inevitability of development in his 1960 landmark book, The Stages of Economic Growth, the optimistic projection that poverty, injustice and ignorance shall end in the rest of the world has become a failed dream. In spite of massive development assistance, most ‘developing’ countries had found themselves merely running in place. The World Bank itself estimates that the total number of poor people in developing countries has increased without interruption since the 1950s. By 1990, the poor in the Majority World numbered 1.1 billion, an increase of .1 billion in just five years, from 1985. After four decades of development effort, the poor were still at the lowest 40 per cent of households. Three-fifths of households were in the bottom 30% of income distribution in Asia, the bottom 25% in Africa, and the bottom 20 % in Latin America.
Ha-joon Chang observes that there is currently great pressure on developing countries from the developed world, and the international development policy establishment that it controls, to adopt a set of “good policies” and “good institutions” to foster their economic development. According to this agenda, “good policies” are broadly those prescribed by the so-called Washington Consensus. “Good policies” include restrictive macroeconomic policy, liberalization of international trade and investment, privatization and deregulation. “Good institutions” are essentially those that are to be found in developed countries, especially the Anglo-American ones. The key institutions include: democracy; “good” bureaucracy; an independent judiciary; strongly protected private property rights (including intellectual property rights); and transparent and market-oriented corporate governance and financial institutions (including a politically independent central bank).
These neoliberal “good policies” and “good institutions” are essential components of economic development. Ha-joon Chang argues that these rich countries did not become rich by adhering to “good policies,” but he says the otherwise. His strong critique is that:
The developed countries did not get where they are now through the policies and the institutions that they recommend to developing countries today. Most of them actively used ‘bad’ trade and industrial policies, such as infant industry protection and export subsidies – practices that these days are frowned upon, if not actively banned, by the WTO (World Trade Organisation). Until they were quite developed (that is, until the late nineteenth to early twentieth century), they had very few of the institutions deemed essential by developing countries today, including such ‘basic’ institutions as central banks and limited liability companies.
The western countries’ concept of development is “kicking away the ladder.” Chang also borrowed the “kicking away the ladder” principle from a nineteenth-century German economist Friedrich List (1789-1846). Citing List:
It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations.
The dominant “development discourse” from developed countries is trying to “kick away the ladder” by which they have climbed up to the top, by preventing developing countries from adopting policies and institutions that they themselves used. Chang’s analysis is that developed countries, under the guise of recommending “good” policies and institutions, are actually making it difficult for the developing countries to use policies and institutions which they themselves had used in order to develop economically in earlier times.
“Good Governance”: Cause or Effect?
The former United Nations Secretary-General Kofi Annan noted that, “good governance is perhaps the single most important factor in eradicating poverty and promoting development.” Thus, proponents argue, good governance should be at the center of development policy.
Following the recent Asian crisis, which has been widely interpreted as a result of deficient institutional structures, the international development policy establishment (IDPE) has begun to move its emphasis to “getting the institutions right” and attach what Kapur and Webb call “governance-related conditionalities.” Institutional variable of “good governance” or “good institutions” (which is likely patterned after United States of America) is now given correlation to economic development. As Kapur and Web stated in G-24 Discussion Paper Series, “The World Bank, in particular, has put considerable resources into the effort to demonstrate that “governance matters” for sustainable development.” In the said Discussion Papers, it is stated that “Good governance” has thus become enshrined in the commandments that rule the IFIs, yet the term eludes operational precision. There are frequent references to the “four pillars” of good governance: accountability, transparency, the rule of law, and participation.”
In the same manner, Chang pointed out, the dominant discourse on “good governance” includes democracy; a clean and efficient bureaucracy and judiciary; strong protection of (private) property rights, including intellectual property rights; good corporate governance institutions, especially information disclosure requirements and bankruptcy law; and well-developed financial institutions. For Chang, however, “good governance” is not a cause for economic development, but a result. He based his conclusion on an analysis of “good governance” in historical perspective.
In similar perspective, the analysis raised by Mushtaq Khan, a senior lecturer at University of London, is compelling. He noted that “the good governance agenda emerged out of a confluence of neoclassical free-market economics and the ‘new’ political economy. It established a set of plausible and apparently policy-relevant interconnections between democracy, anti-corruption policies and the establishment of a free-market economy from which prosperity is supposed to follow.” Further, Khan argues that “the first and most critical claim in the good governance model comes from neoclassical economics that argues that the achievement of economic prosperity requires a competitive market economy, defined by free entry and exit … To maintain competition, the role of the state is only to protect property rights, maintain free-markets, and provide a small number of essential public goods that cannot be efficiently provided by the private sector.” Khan analyses the correlation between good governance and economic progress. On the one hand, the statistical correlation that is observed in cross-country regressions shows that countries with lower corruption and greater democracy do indeed have greater wealth and higher growth rates. On the other, these correlations do not establish causality. Khan pointed out a strong critique that:
Developing countries are by definition poor and most have low growth rates. Most of them also have relatively high corruption and weak democracies, or authoritarian regimes. On the other hand, most advanced countries have the reverse characteristics. It is not surprising that when we correlate these variables, we find that rich countries are less corrupt and more democratic. But are rich countries rich because they first instituted democracy and reduced corruption or do they have viable democracies and low corruption because they first became rich and are now already developed? Examining sequence is the only way to test for causation: did advanced countries first achieve democracy and the reduction of corruption and then become rich or is it the other way around? The historical evidence, as opposed to correlation analysis, suggests that the deepening of democracy and the lowering of corruption were long historical processes that made serious progress in the early capitalist countries well after their industrial revolutions.
Khan argues that the cause and effect relation of achievement of good governance as a precondition of higher economic growth has no evidence, and neither that such a strategy has worked in the past. Good governance, as currently conceived, can only ever be “more effect than cause” of development. This analysis concurs with Ha-joon Chang’s.
Further, M.P. Joseph’s critical analysis of good governance states that “Good Governance” is an overarching slogan in the political and economic arena promoted by the World Bank, International Monetary Fund, and other global financial and political institutions. This slogan is meant to impress upon the public that the ever increasing poverty and “under development” in the third world is the result of corrupt and inept political leadership of these respective nation states.” The discourse on “good governance” provides a political function which hides the bank’s responsibility in the failure of Structural adjustments, and shifts the blame on poor countries’ inability to benefit from the policies. Thus, “the debate on “good governance” by the promoters of neo-liberalism is another colonial project to capture and control the natural resources and labor power of the third world through the market forces.”
In the Philippine context, Walden Bello has also raised significant evidence which explains the correlation of good governance or anti-corruption discourse and poverty. He noted that “the World Bank has made ‘good governance’ a major thrust of its work, asserting that the ‘World Bank Group focus on governance and anticorruption (GAC) follows from its mandate to reduce poverty–a capable and accountable state creates opportunities for poor people, provides better services, and improves development outcomes.’” He further stated the following analysis:
Because it erodes trust in government, corruption must certainly be condemned and corrupt officials resolutely prosecuted. Corruption also weakens the moral bonds of civil society on which democratic practices and processes rest. But although research suggests it has some bearing on the spread of poverty, corruption is not the principal cause of poverty and economic stagnation, popular opinion notwithstanding.
World Bank and Transparency International data show that the Philippines and China exhibit the same level of corruption, yet China grew by 10.3 percent per year between 1990 and 2000, while the Philippines grew by only 3.3 percent. Moreover, as a recent study by Shaomin Lee and Judy Wu shows, “China is not alone; there are other countries that have relatively high corruption and high growth rates.”
Walden Bello attributed the Philippines economic quagmire primarily on wrong-policy narrative rather than on corruption discourse, without downplaying the latter. He noted that the complex of policies that pushed the Philippines into the economic quagmire over the last 30 years can be summed up by a formidable term: structural adjustment. Also known as neoliberal restructuring, it involves prioritizing debt repayment, conservative macroeconomic management, huge cutbacks in government spending, trade and financial liberalization, privatization and deregulation, and export-oriented production. Structural adjustment came to the Philippines courtesy of the World Bank, the IMF, and the World Trade Organization (WTO), but local technocrats and economists internalized and disseminated the doctrine.
Globalization’s Moments of Crisis
To conclude this section, it is very well apt to cite the crises which led to the deepening crisis of neoliberalism. One was the Asian financial crisis of 1997. This event, which laid low the proud ‘tigers’ of East Asia, revealed that one of the key tenets of the globalization – the liberalization of the capital account to promote freer flows of capital, especially finance or speculative capital – could be profoundly destabilizing. Neoliberal’s best practitioners have critiqued, if not abandoned, this neoliberal project, “among them Jeffrey Sachs, noted earlier for his advocacy of ‘free market’ shock treatment in Eastern Europe in the early 1990s; Joseph Stiglitz, former chief economist of the World Bank; Columbia Professor Jagdish Bhagwati, who called for global controls on capital flows; and financier
George Soros, who condemned the lack of controls in the global financial system that had enriched him.” The other crisis is what Bello called “the débâcle in Seattle,” where 50,000 people massed militantly in the streets to prevent the EU and US from acting in concert to salvage the Ministerial. In a moment of lucidity right after the Seattle débâcle, British Secretary of State Stephen Byers captured the essence of the crisis: ‘[T]he WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members.’ This was the collapse of the Third Ministerial of the WTO in Seattle in December 1999. Seattle was the fatal intersection of three streams of discontent and conflict that had been building for some time. “The third moment of the crisis was the collapse of the stock market and the end of the Clinton boom. This was not just the bursting of the bubble but a rude reassertion of the classical capitalist crisis of overproduction, the main manifestation of which was massive overcapacity.”
Neoliberalism, globalization, dominant development discourse and “good” policies are inter-connected. The nature and impact of neoliberal globalization is not beneficial for the world; it leads to increasing inequality, poverty and exploitation. The globalists’ claim that “there is no alternative” is a myth because neoliberal approaches have been being thoroughly discredited in recent years. However, the scenario in the Philippines appears different because the country’s political economy is apparently trapped by the golden straightjacket and electronic herd of neoliberalism.
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Thomas Friedman, The Lexus and the Olive Tree, 110.
Thomas Friedman, The Lexus and the Olive Tree, 140.
Thomas Friedman, The Lexus and the Olive Tree, 134.
Thomas Friedman, The Lexus and the Olive Tree, 139.
Andrew Walker, “Richest 2% own ‘half the wealth’ ,” in http://news.bbc.co.uk/2/hi/business/ 6211250.stm (accessed 12 June 2014).
This was according to former economic planning secretary, Cielito Habito (Philippine Daily Inquirer, March 4, 2013, pp. A1 and A11. In addition, “According to the Forbes 2012 annual rich list, the two wealthiest people in the Philippines, ethnic Chinese magnates Henry Sy and Lucio Tan, were worth a combined $13.6 billion. This equated to six percent of the entire Philippine economy. In contrast, about 25 million people, or one quarter of the population, lived on $1 a day or less in 2009, which was little changed from a decade earlier, according to the government’s most recent data.” Source: “Philippines’ elite swallow country’s new wealth,” in http://ph.news.yahoo.com/philippines-elite-swallow-countrys-wealth-034005290.html (accessed on 12 June 2014).
Jude Hays, Globalization & the New Politics of Embedded Liberalism (New York, NY: Oxford University Press, 2009), 27.
Dani Rodrik, “The inescapable trilemma of the world economy,” in http://rodrik.typepad.com/ dani_rodriks_weblog/2007/06/the-inescapable.html (accessed on 30 May 2014).
Berch Berberoglu, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale (New York: Palgrave Macmillan, 2010), 12.
Ha-joon Chang, The Bad Samaritans, 25.
Ha-joon Chang, The Bad Samaritans, 25.
Ha-joon Chang, The Bad Samaritans, 26.
Berch Berberoglu, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, 2.
Berch Berberoglu, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, 2.
Berch Berberoglu, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, 179.
Berch Berberoglu, Globalization in the 21st Century: Labor, Capital, and the State on a World Scale, 10.
The subtitle is borrowed from Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective (2002).
Sarah Babb, Behind the Development Banks: Washington Politics, World Poverty and the Wealth of Nations (Chicago & London: University of Chicago Press, 2009), 4.
W.W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge: Cambridge University Press, 1960), 4. Online copy in https://www.mtholyoke.edu/acad/intrel/ipe/rostow.htm (accessed on 5 June 2014).
These summaries are based on W.W. Rostow, The Stages of Economic Growth, 4-16. This is taken from https://www.mtholyoke.edu/acad/intrel/ipe/rostow.htm, and http://en.wikipedia.org/wiki/Rostow’s_stages_ of_growth (accessed on 5 June 2014).
This is from Melba Maggay, Rise Up and Walk, unpublished material.
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective (London: Anthem Press, 2002), 1
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective, 1.
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective, 2-3.
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective, 4.
Rachel M. Gisselquist, “Good Governance as a Concept, and Why This Matters for Development Policy,” Working Paper No. 2012/30 in http://webcache.googleusercontent.com/search?q=cache: http://www.wider.unu. edu/publications/working-papers/2012/en_GB/wp2012-030/_files/87241489663918216/default/wp2012-030.pdf
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective, 69.
Devesh Kapur and Richard Webb, “Governance-related Conditionalities of the International Financial Institutions” No. 6, August 2000, 4. This was used as a discussion paper in UNCTAD.
Devesh Kapur and Richard Webb, “Governance-related Conditionalities of the International Financial Institutions,” 3.
Ha-joon Chang’s Kicking Away the Ladder: Development Strategy in Perspective, 69.
Mushtaq Husain Khan, State Formation in Palestine: Viability and governance during a social transformation (London: RoutledgeCurzon, 2004), 18-19.
Mushtaq Husain Khan, State Formation in Palestine: Viability and governance during a social transformation, 19.
Mushtaq Husain Khan, State Formation in Palestine: Viability and governance during a social transformation, 25-26.
Walden Bello, “Does Corruption Create Poverty?,” in http://www.huffingtonpost.com/walden-bello/does-corruption-create-po_b_546296.html (accessed on 5 May 2014).
Walden Bello, “Does Corruption Create Poverty?”