LONDON–The gathering economic crisis, which the financial papers are somberly predicting has too many of the makings of turning into a world depression, must be a time for mental stock-taking. It comes after one of the most successful boom periods in history, which for a while seemed to sweep all before it, not least the old time critics of untrammeled capitalism, free markets and wide open societies. It coined a new word “globalisation” – – open your doors wide and you’d gain more on the swings than you’d lose on the roundabouts.
President Bill Clinton and his Treasury Secretary Robert Rubin are passionate proponents of this brand of economics and their faith appears unshaken despite all the turbulence. As a long run theory, globalisation and 100% wide open doors and windows in the financial and economic markets may make a lot of sense (and some of it like free trade still does) but, as Keynes said, “in the long run we are all dead”.
Thus it should come as no surprise to rational men and women that other rational men and women – – right now in Taiwan, Hong Kong and Malaysia, once total devotees of let-it-all-hang-out economics – – are now realizing a little local control in the absence of even a modicum of international control is called for. Why is it that the Western powers, to give but one example, will give no thought to the introduction of the Tobin tax (named after the Nobel prize winning Yale University economist, James Tobin) that would, by taxing international currency transactions, act as a brake on speculators who dive in and dive out of a currency without any inhibitions whatsoever? (The tax would also provide a very useful pool of international funds that could replenish the capital of a re-thought International Monetary Fund.)
The most damning evidence to be marshaled against the supposed benefits of unfettered globilisation is to be found in the Human Development Report, published today by the United Nations Development Programme. This measures economic progress in all its dimensions, not just income per head but life expectancy, adult literacy and educational achievement.
In the round the figures look good, even spectacular. The poorer countries of the Third World have covered as much distance in human development during the past 30 years as the industrialised world did in over a century. A simple but telling fact: a child born today in a developing country can expect to live 16 years longer than a child born 35 years ago.
But this is more because of the hard humdrum work of better rural health services and the rapid growth of primary schools – – and the often derided work of the aid agencies – – than because there has been a massive surge in economic growth. Out of 124 Third World countries, for which there are adequate statistics, only 21 had a per capita growth rate of 3% or more each year between 1995 and 1998. No fewer than 100 countries – – in the Third World and western Europe – – have experienced serious economic decline over the past three decades. As a result per capita income in these countries is lower than it was 10, 15, 20 or even, for some countries, 30 years ago.
Admittedly, there were signs during the last three years of boom times that at last positive growth was spreading to most of these countries too. But then, if this is now being wiped away, by the light of a full century it is not going to look like a memorable achievement.
To lock-in what has been accomplished on the eve of perhaps the world’s greatest ever recession is going to require a bit less concern about the alleged long run benefits of globilisation and more, much more, awareness about the immediate possibilities of on-going human development. Advancing it even in hard times need not be an exorbitantly costly undertaking – – it means focusing in on the essentials of basic education, health, nutrition, reproductive health, family planning, safe water and sanitation. The UNDP reckon it would cost a mere 0.1% of world income. “Barely more than a rounding error”, they observe. And the results would be incredibly telling. There is no need, as the reporters keep dispatching from countries like Indonesia, to say a whole generation now faces no future but a fall back into the poverty they so recently escaped.
Already countries as disparate as Costa Rica, Tanzania, Barbados, The United Arab Emirates, Oman, Saudi Arabia, Malaysia and Taiwan have shown, at varying levels of development, what can be done given political will. With well directed resources they have sharply improved the well-being of their ordinary citizens, at no overwhelming cost.
They are more than a handful of countries. But they are still a minority. These are the people the western world’s finance ministers need to talk to a little more. A little less grand theory and a little more reflective listening could produce a better world – – even if there is a great recession.
