Wednesday, January 17, 2007

Part Two: Globalization in Retreat

A friend of mine asked me to respond to this paragraph.
Fourth, there has been too much dissonance between the promise of globalization and free trade and the actual results of neoliberal policies, which have been more poverty, inequality, and stagnation. One of the very few places where poverty diminished over the last 15 years is China. But interventionist state policies that managed market forces, not neoliberal prescriptions, were responsible for lifting 120 million Chinese out of poverty. Moreover, the advocates of eliminating capital controls have had to face the actual collapse of the economies that took this policy to heart. The globalization of finance proceeded much faster than the globalization of production. But it proved to be the cutting edge not of prosperity but of chaos. The Asian financial crisis and the collapse of the economy of Argentina, which had been among the most doctrinaire practitioners of capital account liberalization, were two decisive moments in reality’s revolt against theory.

Without a long dissertation about how free trade is good, trade has brought millions up from poverty and raised the standard of living of billions. Has there been structural and governance problems? Yes. Just there is shows 120 million Chinese raised out of poverty.

So what about China? China's leap into the heart of the twenty-first century

The thing I want to point out here is that per capita growth occurred during the opening up process and not during the "The Great Leap Forward" (more like the killing of millions) and the "Cultural Revolution". As the article puts it:
Deng urged China to cross the river of development by "groping with our feet at the stones under the water". Since then, Chinese reforms have advanced one step at a time in a systematic and logical manner that relies on a detailed analysis of objective reality and policy adjustment at each stage of transformation. This experimental pragmatism is described as follows by a government researcher: "Reform will lose direction if there is no opening. If there is only opening without reform, it will be difficult for the country to maintain economic stability and political independence. The so called "gradualist reform" model practiced in China is actually a continuous process of exploration, that is of opening the door a bit, discovering a problem, solving it through reform, and then opening the door yet a bit wider". [Ding, 1998]

So this indicates that there are some important issues with regard to sequencing and timing of events. This is not an indictment on the model only that logical steps are needed in the liberalization process. And structural concerns need to be addressed in any discussion of liberalization.

While this article is very interesting and makes many important points, I would have addressed democratic concerns if I had written it. It only ends with:
Indeed, in the context of our democratic constitution, it is impossible (and undesirable) for South Africa to replicate the coercion of both labour and capital that continues to form a key component of this model. South Africa's development must rely to a much greater extent on the construction of a 'shared vision' through the mobilisation of consent.

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