Development Redefined

How the Market Met Its Match

Robin Broad, John Cavanagh

• Publisher: Routledge
• Year: 2015
• Print ISBN:
  9781594515224
• eBook ISBN:
  9781317261230
• Topic: Economics
• Subtopic: Political Economy
• Index: Economics

Rejecting the "flat worldism" of the globalists as well as the peaks and valleys of trade and aid policies over the years, Robin Broad and John Cavanagh guide us through the raging debate over the best route to development for the poorer nations of Africa, Asia, and Latin America. This book takes readers on a journey through the rise and fall of the one-size-fits-all model of development that richer nations began imposing on poorer ones three decades ago. That model-called the "Washington Consensus" by its backers and "neoliberalism" or "market fundamentalism" by its critics-placed enormous power in markets to solve the problems of the poor. The authors have stood at the epicenter of these debates from their perches in the United Nations, the U.S. government, academia, and civil society. They guide us back in time to understand why the Washington Consensus dominated for so long, and how it devastated workers, the environment, and the poor. At the same time, they chart the rise of an "alter-globalization" movement of those adversely affected by market fundamentalism. Today, this movement is putting alternatives into action across the globe, and what constitutes development is being redefined. As the authors present this dramatic confrontation of paradigms, they bring into question the entire conventional notion of "development," and offer readers a new lens through which to view the way forward for poorer nations and poorer people. This brief history of development connects an arcane world with contemporary forces of globalization, environmental degradation, and the violation of perhaps the essential human right: to be considered individually, equally, in an economically viable world and way.

Chapter 1
What Is Development?

Abraham—subsistence farmer, community organizer, member of an indigenous community—forms his words slowly and deliberately: “Why is it that rich countries give aid, investments, and trade that are supposed to help us, but that end up destroying us? If you really want to help us, go back to your country and figure out why the world works this way.”

It is the late 1970s in the southern Philippines. Robin has been living with Abraham’s family in the province of Bukidnon, a land of mountains and forests and of ancient varieties of corn and rice where indigenous communities till land farmed by their ancestors for generations. Robin’s sojourn comes at a moment of intense struggle over control of those ancestral lands: Transnational agribusiness firms are expanding their plantations of pineapple for export, Philippine elites are using political connections with dictator Ferdinand Marcos to gain land titles to grow sugar for the world market, and international aid agencies are drawing up plans to dam the river.

Robin returns to live in the Philippines in the early 1980s, as World Bank technocrats push policies to accelerate further the shift to export agriculture and manufacturing all over the country so that ordinary people like Abraham can become more “productive.” Thousands are losing their lands in the name of “development.”

Decades later, the two of us visit Abraham’s family together. But the indigenous community is no more. Some of the land has been flooded by the dams. The pineapple plantations stretch as far as the eye can see, jutting up against vast sugar plantations. The forests are distant memories. In Manila, we are told by government officials that the economy of the southern Philippines is growing, but what we see and hear when we visit Abraham’s family is that the majority of people and the forests that sustained them are not. People who were poor but subsisting when Robin lived with them in the late 1970s now seem desperate.

This book is an attempt to understand what happened in communities like Abraham’s. It is an attempt to answer Abraham’s question after thirty years of inquiry. Now is the right moment to do so: We are nearly a decade into the new century, at a moment that marks the end of what may well be the most destructive development era of modern history. This book travels back in time, deep into that era, and then moves forward to examine the possibilities for a better future.

Throughout, the book revolves around the key questions inherent in Abraham’s challenge to Robin three decades ago: What is “development”? Development for whom and by whom? How does one make it happen? Is “development” necessarily positive? What happens when external forces, beyond the control of local communities, become the determining factors and when development is defined narrowly as economic growth?¹

Nearly three decades ago, elite institutions and individuals announced that the quest to find the answers to these questions had ended. The truths of development had been uncovered: Development was economic growth. And the magic button for catalyzing economic growth was clear: Let the invisible hand of the free-market reign. This orthodoxy placed free markets on a pedestal and asserted that unfettered private sectors are better than governments in solving the world’s economic woes. Moreover, it was said that resolving such economic woes through economic growth would automatically translate into resolving social, political, and environmental woes. The answer was presented as fact—as undisputable fact proven by economic theory. There was to be no more debate.

There are few precedents in history to the drastic shift in global economic orthodoxy that occurred in the half-decade bet ween 1980 and 1985. After two decades (1960 to 1980) of countries pursuing vastly different development paths, many of them successful in raising standards of living, dozens of countries pursued a radical shift in policy over the course of a mere half-decade.

And thus started the reign of what became known as the “Washington Consensus,” or “neoliberalism,” or what financier George Soros aptly termed “market fundamentalism”² in the 1980s and 1990s. It was economist John Williamson (then of the Washington, D.C.–based Institute for Inter national Economics) who coined the phrase “Washington Consensus” to sum up this growing policy consensus in ten areas of economic reform that reflected free-market strategies to achieve export-led growth—with specific policies ranging from trade liberalization to privatization of state-owned firms.³ The Washington Consensus, he argued, was shared by “both the political Washington of Congress and senior members of the administration, and the technocratic Washington of the international financial institutions, the economic agencies of the U.S. government, the Federal Reserve Board, and the think tanks.”⁴

“Washington Consensus”—it is a curious but fitting term. And we cannot help but comment on its even more curious—and biased—research design: Polling such D.C.-based elites as those at the World Bank, the IMF, and the U.S. government in the late 1980s for views on development is akin to polling those in power at the Ministry of Magic and the Death Eaters AFTER the Dark Lord has taken control to determine the prevailing consensus and to intimate that the new elite consensus reflects the “correct” way forward. Should not the researcher poll Harry Potter and his followers?

Indeed, the Washington Consensus that Williamson uncovered was hardly one emanating from the majority of the people in this world, the supposed eventual beneficiaries of “development.” Instead, neoliberalism provided an ideal environment for Wal-Mart, Ford, ExxonMobil, and the rest of the Fortune 500 to flourish as they spread their assembly lines, shopping malls, and American culture around the world. It was, by Williamson’s definition, a consensus among elites, focused narrowly on catalyzing aggregate economic growth. As Williamson later acknowledged, “I deliberately excluded from [my] list [of the ten areas] anything which was primarily redistributive . . . because I felt the Washington of the 1980s to be a city that was essentially contemptuous of equity concerns.”⁵ Likewise, explained Williamson, the Consensus “had relatively little to say about social issues . . . and almost nothing to do with the environmental question.”⁶

But in those countries where Consensus policies were actually applied, the on-the-ground impact almost never meshed with the theoretical propositions, even in terms of catalyzing economic growth. Moreover, those issues about which Williamson’s “Washington of the 1980s” was “contemptuous” or had “ little to say”—those issues of social, environmental, and political justice—turned out to matter a great deal to the supposed beneficiaries. And, indeed, as the era of market fundamentalism unfolded and its effects started to be felt on the ground, local “backlashes” emerged on every continent save Antarctica, initially to protest Consensus policies and subsequently to assert alternatives.

The first signs of resistance appeared in India, the Philippines, and several other countries in the 1970s, often where local communities rose up against World Bank incursions. After the World Bank proposed a series of dams across the Chico River in the northern Philippines, for example, the indigenous communities in the area took the unprecedented step of writing then World Bank president Robert McNamara to halt the flooding of their ancestral domain. They received no answer. The local people protested on the ground, meeting with violent reprisals from the authoritarian Marcos government. Still no answer from the World Bank. And so the local people resorted to a different technique: When the technical folks arrived, indigenous women bared their breasts in protest to keep the project from going forward.⁷

That was more than thirty years ago. Things have clearly changed since then in terms of formal and informal structures of protest and accountability. There are now sophisticated global and local civil-society campaigns focused on the World Bank and other public and private institutions that set the rules for global trade and investment. In Africa, Asia, Lat in America, and the Caribbean, groups such as the Jubilee South debt cancellation network and the Hemispheric Social Alliance have become forceful actors on the global stage. Over time these backlashes and groups evolved into a global movement, a “movement of movements”—what those who are a part of it have called the global justice movement, the global backlash, globalization from below, the anti-corporate globalization movement, the alter-globalization movement, or the anti-globalization movement.⁸ By the early 2000s, the World Social Forum gatherings were attracting more than 100,000 participants to an “alternative space” to explore, share, and build joint strategies around alternatives to the Washington Consensus.⁹

The clash of paradigms—Consensus versus alter-globalization movement—has now spanned nearly three decades. The Consensus, seemingly unstoppable in its advance from the mid-1980s to mid-1990s, now stands severely wounded. The alter-globalization movement can no longer be judged simply as a protest or defensive movement; its alternatives—alternatives in theory and in practice—can now be assessed on local, national, regional, and global levels.

Why This Book, and Why Now?

Let us repeat our earlier words: We stand at a moment marking the end of what may well be the most destructive development era of modern history. And so its story must be retold, because now we know not only the beginning but also the end—and we know the key historical markers in the middle. We can look back over the era, study the markers, and try to understand what happened and why.

While we are at the end of an era, one must be very careful to understand our word choice. We have not said that free-market policies are dead; rather, their reign as a consensus in Williamson’s sense of the term has ended. Some key centers of power still subscribe to its religion, but the era of a prevailing paradigm is over.

Hence, it is a propitious moment to take stock. Understanding the rise and fall of the Washington Consensus is critical to understanding the suffering of billions of people in well over a hundred countries and the paths that are available to them in the future. This history is important in and of itself. But the historical evolution of neoliberalism, the evolving critiques of it, and the growth of a backlash of both citizen groups and some governments are critical to understanding the contemporary development debate—and the obstacles and possibilities of the current moment.

Why not simply start in the current period? Too often, the prevailing orthodoxy of development in theory and practice is presented ahistorically. Indeed, we would not be surprised if some of you reading these pages were unaware that there was ever a vibrant development debate or that “free-market fundamentalism” did not always reign.

We would argue that one cannot understand the end of the era by just standing in the current moment. Rather, one has to witness the dynamics up close, to touch ground at various moments during the past decades. To understand the current historical moment—and what we believe are its very positive possibilities and very real challenges—we must travel back in time.

Time travel allows us to discover the dynamics, the strengths, and the weaknesses of various sides of the development debate, as well as the convergences and divergences of different moments in history. Time travel allows us to witness moments of hope as well as moments of disappointment, moments at which things could have changed. You will see the holding power of the Consensus model—for example, how it maintained its dominance through power shifts in Washington. As you will see, in 1993 we held out hope that the new Clinton administration might move beyond the dominant paradigm. However, we discover that in 1995 and 1999 this dominant paradigm still transcended richer-country politics, and we analyze why.

Time travel is also vital so that we can learn the lessons—both positive and negative—from this era, and so that we can avoid the mistakes of the past as we chart the future. Understanding the rise and fall of this development orthodoxy and the rise of alternatives should also remind us that development rules and institutions—indeed, even paradigms—can be created and can be changed. They were in the 1940s. They were again in the early 1980s. They are being changed right now, and they can be changed again in the years to come.

U.S. president Harry Truman’s secretary of state, Dean Acheson, immodestly described his moment in history marked by World War II and the immediate postwar years as his being “present at the creation” of the post–World War II global economy.¹⁰ Today, we need to be aware that we are present at the creation of a new development era.

Thus, this book and its time travel.

Tour Guides

Because we two are the self-appointed tour guides for your time travel, we need to tell you more about ourselves. It was to our good fortunes to have come onto the development stage before the reign of the Washington Consensus. Indeed, unbeknownst to us, we each began the research for this book in the 1970s.

Our stories begin separately. For Robin, those pre-Consensus experiences included frequent sojourns to the Philippines, a country that was a prime early “guinea pig” of neoliberalism. Robin’s development experiences started in the late 1970s when she spent that year in the southern Philippines, working with the indigenous community whose ancestral land was threatened. It was this experience that focused Robin’s eyes on the human cost of so-called development and onto the global economic context of development. The forces behind investment, trade, and aid were outside the control of that indigenous community, yet these forces exercised a huge impact on the lives of individuals, their communities, and their environment.

John’s story also begins in the 1970s. In 1977 he moved to Geneva, working at what was one of the most vibrant hubs of development activity and optimism in that pre-Consensus era: the UN Conference on Trade and Development (UNCTAD). There, at UNCTAD, global economic agreements were being negotiated among governments to try to ensure fair and stable prices for the key commodities on which poorer countries had come to depend—coffee, tea, sugar, tin, and others. John participated in meetings of representatives from cotton-producing and -consuming countries as they attempted to hammer out a price-stabilizing international cotton agreement. Despite the fact that the U.S. government delegation included executives of cotton-trading conglomerates hostile to the agreement, it was a time of hope and possibility in terms of changing the rules of the global economy. During this period, John developed expertise on transnational corporations at UNCTAD as well as at the World Health Organization, which, in the 1970s and early 1980s, turned a spotlight on the giant corporations that controlled the marketing of infant formula, tobacco, alcohol, and pharmaceuticals.

In the late 1970s, fresh from the Philippines and Switzerland, we met as graduate students at Princeton University, where we pursued “development studies.” We were fortunate to begin our studies in the late 1970s—before the development dogma of the 1980s hardened into a firm ideology. We studied under (among others) Nobel Prize laureate W. Arthur Lewis, who encouraged us to follow the ever-changing global economy, as well as the possibilities and obstacles presented by technological change. We each found a mentor in international human-rights lawyer Richard Falk, who directed our intellectual gaze to the public and private institutions that steer the global economy.

Throughout our studies, we were encouraged to debate and to eschew facile answers to complicated problems. What really did “development” entail economically, socially, politically? How did colonial powers, global corporations, and public institutions such as the World Bank and the International Monetary Fund steer “development” (read: economic growth) toward the interests of the few? And what were the various paths to development? How was one to assess Kenya’s free-market model, for example, versus Julius Nyerere’s self-reliant path for Tanzania?

Being at centers of ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Development Redefined: A Time Line
• 1 What Is Development?
• 2 The Washington Consensus Emerges
• 3 The Citizen Backlash Erupts (with Walden Bello)
• 4 Myths About the Environment Strengthen
• 5 The North-South Divide Widens
• 6 The Washington Consensus Cracks
• 7 Post-9/11: Myths About Aid and Trade Resurface
• 8 New Lenses on Development
• Notes
• Acknowledgments
• Index
• About the Authors