How the neoliberal priesthood of the West has used China's progress to build the myth that globalization is a great success
Speaking to Sharmini Peries and The Real News, Co-Director of the Center for Economic and Policy Research in Washington D.C., Mark Weisbrot, gave a characteristic example of how the tools of the global neoliberal priesthood, like IMF, are using highly disputable data to persuade that globalization is a success story.
Using generalizations and oversimplifications, the World Bank, the IMF and other bank-occupied Western institutions, support that, for example, extreme poverty has been cut from nearly 40% of the world to under 10%, implying that neoliberal policies have been successful. In reality, two-thirds of that extreme poverty reduction concerns China, which, furthermore, did exactly the opposite of what these neoliberal policies dictate!
As Weisbrot explained:
A lot of people defend the globalization that's designed here in Washington as something that really helps the poor, the majority of people in the world. And so here's the IMF and the World Bank. They're the main ones that have this influence. They have real power too, because in a lot of countries if you don't get agreement with the IMF, you won't get loans from the World Bank or from regional banks, or sometimes even the private sector.
So this is real power. It's very concentrated here in Washington. And it's part of a neo-colonial system where the rich countries, which control these institutions, really, even though the IMF has 189 members, it's really just the US and its rich country allies that make the decisions. And they don't necessarily make them in the interest of developing countries.
President Obama in his last speech at the United Nations said that over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40% of the world to under 10%. Now that's World Bank statistic and there's a lot of dispute over that. But even taking it at face value, if you actually look at what happened since 1990, two-thirds of that extreme poverty reduction was in China. And if you go back a little further from 1981 to 2010, 94% of that net reduction in people living below the extreme poverty line was in China. And even the part that wasn't in China, a lot of that was the result of China's growth and importing. Increased imports from developing countries and increased investment as China became the largest economy in the world.
Chinese globalization's done very well. China's income per person has multiplied 21 times since 1980. The fastest economic growth in history. But if you look at what they did, most of it is the opposite of what these Washington institutions and what even President Obama was describing as globalization in his speech. They had foreign investment, but they controlled it. And they still have it. They control it to fit with their own development plans. They have technology transfer as much as they can get. They have performance requirement. Require foreign investing firms to do certain things that promote local management skills and things like that. Export promotion. They have a mostly state controlled financial system for most of this period, and still quite a bit today. Their central bank isn't independent, which is one of the main thing Washington pushes.
This is the kind of globalization they had, and the rest of the developing world is very different. You have this indiscriminate opening to international trade and capital flows. You have the central bank being independent of the government so it's not really a subject of public control. It's more the response of the financial sector. They got rid of these industrial and developing policies that used to be successful, and were successful in China. And all this other financial deregulation and other deregulation. And if you look at what happened in these last 25 years in the vast majority of developing countries outside of China, the ones that did the kind of globalization that President Obama and all these officials at the IMF and the World Bank are talking about and calling a success, and the media usually calls a success, they did very badly overall.
In the '80s and '90s they had a terrible economic failure and they really didn't recover until the 21st Century when a lot of what had happened was China helped pull them out. And then their policy's also changed as the IMF lost most of its influence in the middle income countries. There really isn't much evidence that globalization has been a success for the vast majority of developing countries.
Indeed, after September 11, and given the great speculative bubble that was created during the previous decade, it seemed that the American economy was about to collapse. Then Greenspan took action by cutting down the interest rates several times. The goal was simple: to encourage American consumers to borrow and spend. The consumers’ desires would become the engine that would stabilize the system. It was a huge risk, because cutting the interest rates to almost zero, Greenspan released a flood of cheap money into the economy, which in the past led always to inflation and dangerous instability. But this time it didn’t happen. A huge consuming boom began, bigger than any other in history, without inflation. Everything seemed to remain stable and the system seemed that it could manage itself without any direct political control.
But ultimately, the reason for this unusual booming was the exact opposite. It happened due to the massive exercise of political power, from an elite thousand miles away. The Chinese government kept the exchange rate of the country at a low level. Therefore, the Chinese products became cheap and flooded America. And to pay for them, the US dollars flooded China. But rather than spend this money for the population, the Chinese leaders loaned them immediately back to America by buying government bonds. It was a perfect system of cheap goods and cheap money inflow in the US, all controlled by the Chinese political power. And that’s what created stability.
Chinese protectionism is what saved even the West, but the tools of the neoliberal priesthood present a fake story of how the deregulated free-market supposedly brings prosperity for all. Lately, we've seen the devastating effects of the IMF imposed policies to eurozone and especially to Greece. The last seven years, public debt, unemployment, poverty reached unprecedented levels, with zero prospect seen in the horizon. The bankers have been saved again with billions and Greece is looted by the vulture-'investors' who come to take whatever they can from public property, almost for free.
After all these dramatic failures, the IMF, the World Bank and other tools of the neoliberal regime insist to present a reversed reality. There is, as always, only one explanation: their mission is to help global plutocrats to maintain power, not to save nations from poverty.