Jul 25, 2009

Neo-liberalism as defining policy?

Dr. Zafar Altaf

The arrival of World Bank individuals in Pakistan has led Pakistan from one crisis after another. When Shaheed Zulfikar Ali Bhutto left the countries in the hands of tyrannical governments such as the Zia regime Pakistan had a debt of about three billion rupees and we had weathered the East Pakistan crises. Despite a 130 percent devaluation of the currency after the debacle of East Pakistan the country had its difficult periods but then the country was in the hands of a democratic government and as governments went it had the capacity of bringing in reforms that were far-fetching and in good order. With the start of Zia came the World Bank economist Dr. Mehbub-ul-Haq brilliantly articulate but equally unable to understand the rural conditions of the country. He had been the chief economist in Pakistan in the 1960s and was one of the architects with Papanek for the policy of the robber barons. Where a handful of entrepreneurs (not really as there was no risk) they decided to provide industrial assets to lead the development role. There were massive profits that were provided. So he was in the throes of economic policy making right from the start. The Planning Commission had just been started and the Americans were working out the institutional situations. Islamabad received the Planning Commission and the Pakistan Institute of Development Economics (PIDE). These were heady times for a new institution always has more vigour than an obsolete one. The two institutions were loaded with economists of Pakistani origin who had studied at American universities or American economists that were sent here to guide the natty natives as to what is best for them. This was also the era of containment of communism and therefore SEATO and CENTO came into existence. The continuity of thought continued. The WB is and was always trying to provide credit. McNamara had just come in to WB after the debacle of Vietnam and wanted to wash off his guilt. He set about it in right earnest and laid the foundations of a development agency. Having known him for some time (he died recently). I can vouch for his integrity and effort at trying to develop the developing countries. His problem was that he was willing and able to provide resources for the development of the countries. It was the countries that had to work their strategies. These strategies were based on people in top positions who were disconnected with the rural areas. The era coincided with the Thatcher-Reagan era when neo-liberalism and the Washington consensus came in to existence. This was done very cleverly and started with deregulation and then privatization ultimately leading to the point where the country was to create policies for the few and against the many.These policies allowed a handful of companies in the private sector to control the assets of the developing world. The motive behind all this was to take away the sovereignty of the countries. Slowly and surely and later on with vigour these policies were applied. The maximization of profit was not the situation it was the maximization of greed. The MNCs that came in were to have whip hand and debilitate any country that they wanted to and under instructions from the powers that be. The WB chipped in and suggested to the Bholey Bhadshahs of Pakistan that unless they allowed repatriation of profits there would be no foreign investment. Foreign investment was considered necessary for job creation. What these two Reagan and Thatcher started is still with us. Three decades have gone by and the MNCs have a whip hand in Pakistan. This dominant global economic trend was automatic in place because the WB and the ADB were with it. Even such corporations as were successful financially were put on the chopping block. Neo-liberalism is now reckoned as free market operations and yet every time the US has had an economic issue the free market aspect is put on hold. It has happened in the steel industry, in the textile industry and in a heap of other industrial operations in developed world. The actions of free market were supposed to take away the dead hand of the bureaucracy as they were considered as incompetent. The market was supposed to play the role of super ego. Consider any market in the world and see if the free market has delivered. The financial crisis in the US was mainly due to unethical practices. Governments were considered parasitic. With time these actions of the West and the academics by their profuse writings-slipshod or whatever has given these policies an aura of invincibility. So when they take any action that action does not have to be explained. It is explained away by the free market philosophy meant for the rich and the powerful chief executives. The lowering of taxes in the US was meant primarily to help the rich salvage what they could and to make the consumer pay more for the services and the products. The developing world is and was in a quandary. In helping the tyrannical government of the past the US has done a calculated harm to the country which now finds itself in a war with the terrorists. The military regime has very little respect for any pseudo parliament that it creates. It is in the nature of these authoritarian regimes that they are then provided a considerable amount of financial resources simply because they do the biding of their masters. The illegitimate seek legitimization and actions by the authoritarians are accepted, the only proviso being done as you are told. This is not done in an abrasive manner but is done in a manner that is well rehearsed and with the maximum facility of language. Pakistan is our friend and we will stand by it and such phrases are common. The pressure of stability of the state further reinforces the concept of free markets. By now the policy makers are completely in the policy issues of the West. To take no chances their own First National City Bank person is sent as prime minister and another one from the WB as the governor of the State Bank of Pakistan. What could be better for they have been properly brain washed? Their actions would be monitored through various means. The economic fall out has been the same everywhere in the developing world where inequality became even more massive. This has been explained as empowering the rich towards more riches. That criticism is seldom answered but then the reason stated occasionally is that the benefits would spread to the general masses. That has not happened. Some reasonable writers of the West have compared neo-liberalism with capitalism with its gloves off. So far as developing countries are concerned the business manager is more powerful than governments. Recently in Pakistan the evidence of this has come through with another veiled threat that unless the government of Pakistan provides subsidies to the MNCs they will pull out. That should be allowed. Neo-liberalism has managed to mess up the social system and has now assumed political as well as economic strength that is reflected through the kind of blackmail that has been mentioned earlier. It was Milton Friedman that stated that any one that was not working the market systems is actually anti-democratic. How one may ask? Yet the military overthrow of democratic elected government is never considered anti-democratic. How perverse can any one get? The products that we have from neo-liberalism are general apathy from the citizens. Will this economic policy make democracy viable? That question does not need a jury the evidence of its failure are obvious. MNCs have the resources to destabilize and blackmail the developing countries governments. The case of fertilizers in Pakistan last year is a clear indication of what can happen in a monopoly power that was and is visible in the free market. Bootlickers. Better to die than be circumscribed by this kind of economic policies.

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