WATCH VIDEO Globalization Basics
OPTIONAL Why Austerity Kills (CBC The Current 22 May 2013)
T-Chart Set-Up
Making Globalization Work by J. Stiglitz
To Have and Have Not by J. Frieden
BACKGROUNDER on Dependency Theory (important context to “Conspiracy” article and the concept of economic imperialism)
→ An international relations theory aimed at explaining the phenomenon of developed and developing nations.
→ Two “sides” of the same coin → to develop one part of the world, must under-develop another.
→ Dependency theory is predicated on the notion that there is a CENTRE of wealthy states and a PERIPHERY of poor under-developed states.
→ Resources are extracted from the PERIPHERY and flow toward the CENTRE to sustain the economic growth and wealth creation of the CENTRE.
→ Poverty in the PERIPHERY is a result of the way in which it is integrated into the world capitalist system.
→ The PERIPHERY provides a destination for obsolete technology and new markets for the developed economies exports.
→ The CENTRE perpetuates dependency through systems and agreements such as the world trading system, international banking and finance and the mechanism of debt (IMF, WB, etc.).
→ Resistance by the PERIPHERY results in economic sanctions, military invasions and political/economic interventions and controls.
The Conspiracy Against Africa TEACHER SUMMARY
1. Africa cannot develop. The stark recounting of the struggles faced by African countries sums up the “external signs of the larger economic reality.” (pg. 60)
3. The Economic Report on Africa (2005) concluded that African poverty is “chronic and rising” and “poverty has been unresponsive to economic growth” despite significant improvements in GDP. (pg. 60)
4. “rather than being the solution to Africa’s plight, Westerners are a very substantial part of the problem and have been for centuries.” (pg. 61)
a. impacts of slave trade, imperialism, colonization” and decolonization. (pg. 61, 62)
b. “colonies had one purpose only – to serve the interests of the metropole.” (pg. 63 dependency theory)
c. international economic “structures that drained Africa’s wealth and resources to the rich world.” (pg. 63)
d. “new African elite and western governments, corporations and new international financial institutions” continue to exploit under a new imperialism. (pg. 63)
5. WEST’S CURRENT INVOLVEMENT
a. the west props up tyrannical and rogue governments (pg. 64)
b. the west actively intervenes in conflicts by bolstering and arming tyrannical regimes (pg. 64)
c. “western commercial and financial activities are overwhelmingly exploitive and destructive.” (pg. 64)
d. “Africa subsidizes the wealthy economies of the world through a net transfer of wealth in the form of payments for illegitimate debts.” (pg. 64 Africa Action Report)
e. “capital flight is far greater.” (pg. 64)
f. “overseas drain of national wealth” and “net loss of wealth.”(pg. 64)
g. “loss of sovereignty to introduce policies that would significantly direct or alter its own destiny.” (pg. 64)
h. “governments must either implement the demonstrably failed policies of the IMF and WB or forfeit aid, loans, debt relief and general international acceptance.” (pg. 64 NEW IMPERIALISM)
i. J. Sachs quote, “the IMF routinely works with the finance ministers of impoverished countries to set budget ceilings on health, education, water, sanitation, agricultural infrastructure and other basic needs, in the full knowledge that the consequence is mass suffering and death.” (pg. 64)
j. J. Stiglitz (former VP of WB) calls it market fundamentalism – extreme free market ideology of the IMF and WB, whose policies are imposed / backed by western governments.
k. IMF and WB policies failed to grow African economies and increased the poverty and wealth divide (pg. 64)
l. “deliberately severe austerity programs.” (pg. 64)
m. “western financiers offered generous loans to African lenders and interest rates rose leading to a debt crisis” and this “led to an enormous outflow of scarce capital,” for example, sub-Saharan Africa received 294 B in loans, paid out 268 B in interest payments and yet still owed 210 B.” (pg. 65 UNCTAD 2005)
n. “to remain eligible for debt relief, all countries must comply with the same free market policies that have already damaged Africa so brutally.” (pg. 65)
o. the “resource curse” – 3% world share of FDI, and all goes to extractive industries (oil, minerals & timber) that does not amount to true investment. (pg. 65)
p. major foreign companies pay little-to-no-taxes, increase corruption via bribery, build no lasting infrastructure, pay starvation wages and destabilize communities through investment. (pg. 65)
t. “the pattern has been the same elsewhere, poor African countries lose substantial and sustainable local industries as they are forced to open their markets to cheap imports.” (pg. 66)
u. “meagre aid, phantom aid, tied aid and pilfered aid by recipient governments distorts the reality of Western and African relations and clearly benefits the private sector of developed donor nations. (pg. 67)
7. contradiction between the realities of the global trade regime and international financial system and the popular political and economic mantra “African solutions for African problems.” (pg. 67)
8. “since NEPAD (New Partnership for Africa’s Development) policies rest on discredited neo-liberal assumptions about growth & development, it is likely to fail. (pg. 67)
9. Best hopes –
a. emergence of political democracy.
b. emergence of local civil society groups.
c. “if west [does not] radically change its role few positive results can be expected.” (pg. 68)
d. “the evidence from success stories beyond Africa tell us that rejecting the dogmas and programs that the WB & IMF unilaterally impose on poor countries is a sin qua non of successful development and poverty reduction.” (pg. 68)
e. “if the west were truly serious about helping Africa, it would not use the WTO as a tool of the richest against the poorest.” (pg. 68)
f. stop “dumping its surplus food & clothing on African countries.” (pg. 68)
g. stop “insisting on growth without redistribution.” (pg. 68)
i. stop stripping “Africa of its non-renewable resources without paying a fair price.” (pg. 68)
j. stop charging “prohibitive prices for medicines.” (pg. 68)
LINK 1 → FOREX Market Model & Cases
Life and Debt Documentary Updated by May 2013 Jamaica & $950 Million IMF Loan Agreement
Life and Debt Official Website Life and Debt
Life and Debt Summary
Stephanie Black’s documentary on Jamaica’s economic woes begins with the arrival of a group of exclusively white vacationers into the airport wearing expectant grins on their faces. En route to Montego Bay, their frolics at the beach or around the hotel swimming pool will appear throughout the film as an ironic counterpoint to the economic realities of the other Jamaica, a country suffering from a 30 year IMF austerity regime and multinational domination of the traditional self-sustaining, largely agricultural economy.
This powerful film is the first to put a human face on what is known popularly as “globalization”. While it relies heavily on the informed narration of Jamaica Kincaid (based on her “A Small Place”) and interviews with former leftist Prime Minister Michael Manley and radical economics professor Michael Witter, the true stars of the movie are the farmers and working people of Jamaica who not only understand what is going on in class terms, but can explain it eloquently. In addition, there is a group of three heavily dreadlocked ‘rasta’ men who function as a kind of Greek chorus. As they sit around a campfire in the dead of night, they explain their brethren’s suffering through a combination of biblical prophecy and anti-imperialist common sense. As a sort of devils advocate, Stanley Fischer–second in command at the IMF–is interviewed throughout the film. With an unrelenting cat that swallowed the canary smirk on his face, Fischer defends IMF policies as beneficial for Jamaica despite the documentary’s repeated evidence to the contrary.
Although Michael Manley has been out of power for many years, his bitterness over his ouster and his country’s subsequent decline remains palpable. His take on the primary cause of Jamaica’s descent into hell is most interesting, considering the current conjuncture. He states that the energy crisis of the early 1970s forced his government to take out loans to cover the rising expenses of fuel-based imports, from fertilizer to gasoline. Since private banks do not make such loans, his only recourse was to go to the IMF and World Bank. Since Jamaica had only recently emerged from colonialism, the economy was vulnerable to begin with.
Key to its success was a long-term development plan that could have prioritized native infrastructure and resources. But the IMF was not interested in the long-term. Demanding short-term repayment of the debt, they insisted that costs be cut in exactly those sectors that could support long-term development: education, health and native–largely agrarian-based–production for the export market. Not only would Jamaica have to tighten its belt, it would have to open up its doors to foreign imports by eliminating all protectionist measures that favored local industry and farming.
With these economic and political foundations in place, “Life and Debt” then proceeds to examine various sectors of the economy that have fallen victim to “globalization”. It starts with a trip to the countryside where local produce farmers explain how potato, onion and carrot imports from the United States have put them out of business. In farming villages that formerly provided livelihoods to virtually every family, there is nothing but unplowed fields and abandoned houses nowadays.
While the vacationers in Montego Bay assume that they are enjoying local cuisine, in fact everything they are eating has been flown in from Miami. In one scene, a Jamaican hotel guide warns them to watch out for thieves when strolling about on nearby streets. In all likelihood, the thieves are youths who have been forced to flee to the city in search of non-existent work. The only sector of the Jamaican economy that is expanding at this point is the security guard business. We see young men, with no other job opportunities, being trained with vicious looking German Shepherds to keep the ‘riffraff’ at bay.
We also learn that the native dairy industry has been destroyed by the import of powdered milk from the United States. Jamaican dairymen, who have been prosperous for most of their lives and who have provided jobs for their countrymen, show us the abandoned stalls that cows once occupied. Most of these animals were sold to slaughterhouses at a loss years ago. They also explain that it would be virtually impossible to restart the dairy industry if the price of powdered milk ever shot up. What is being fostered by the neo-liberal regime is not development but dependency.
The crowning blow against Jamaican agriculture arrived in the context of the “banana wars” in Europe that newspaper coverage–to no great surprise–left Jamaica’s national interests at the margins. This conflict was seen as a bitter rivalry between the USA and the EU over whether or not Dole, Chiquita and Delmonte would be allowed to crack a market that had been excluded to them.
The documentary fills in the details. As it turned out, Great Britain had a long-standing trade agreement with Jamaica that favored their banana exports. This was seen as a way of compensating for the legacy of colonialism. Moreover, this was the only place where Jamaican banana exports stood a chance since they were more expensive to grow than in places like Honduras where American firms could rely on the cheap wages provided by a union free environment, enforced by official and semi-official state repression. With 95 percent of the world’s banana market sewn up by American multinationals, they were not satisfied. Unless Great Britain’s market could be penetrated, they would not rest. With their success, Jamaica’s collapse was ensured.
As ruined peasants flooded into Kingston, they became a source of cheap labor. Imperialism then decided to do the Jamaicans a favor by creating Free Trade Zones that consisted of huge textile assembly plants near the docks. Ships would unload materials cut in the USA and a mostly female work force would work for $30 per week sewing garments for Hanes, Brooks Brothers and Tommy Hilfiger. Women who worked in these plants showed how their pay slips matched up against their expenses. Basically, it would be impossible for somebody to survive on these wages. When working-class protests against low wages and miserable working conditions erupted, the owners closed the shops down and relocated to Mexico, where a more docile work force had been found. Of course, the same kinds of migration from the countryside into the cities in Mexico was creating the kind of reserve army of the unemployed that provides a fertile soil for maquila type exploitation.
“Life and Debt” is now being shown at the Screening Room in New York City. In the unlikely event that it appears on Public Television in the USA, where leftwing documentaries are rapidly becoming a thing of the past, it should be viewed by activists and academics determined to fight global capitalism. A tape of this documentary would be an excellent organizing tool for the former and a classroom resource for the latter. Finally, on the July 23, 2001 NY Times Op-Ed pages, there is a piece by Orlando Patterson that makes many of the same points as the film:
Orlando Patterson, a professor of sociology at Harvard, was special adviser for social policy and development to Prime Minister Michael Manley of Jamaica from 1972 to 1980. He notes:
“The bad news is that Jamaica’s attempts at economic development have largely failed. Here, as in Puerto Rico and most other Caribbean islands, post-independence attempts at industrialization have fallen apart. Jamaica now has vast shantytowns; unemployment at depression levels; and high rates of economic inequality, crime and drug abuse. The government has met many conditions imposed by the International Monetary Fund in return for much- needed loans: a stable annual inflation rate of 5.8 percent, falling interest rates, adequate international reserves and the return of positive growth. But at the same time, public debt is nearly 160 percent of the gross domestic product and interest consumes more than half of all government expenditure, leaving little to address the social problems.”
FILM #3 Globalization is Good (2003) WATCH HERE (NEW LINK)
Globalization is Good & Trade Rules
FILM #4 Darwin’s Nightmare (2004) ***
FILM #5 The World Isn’t Flat TED Presentation (2012) ***
VIDEO The World Isn’t Flat (Economist & Globalization Researcher Pankaj Ghemawat)
The world looks far different today than it did before the global financial crisis struck. Reeling from the most brutal impacts of the recession, governments, economies, and societies everywhere are retrenching and pushing hard for increased protectionism. That’s understandable, but it’s also dangerous, maintains global economy expert Pankaj Ghemawat in “World 3.0”. Left unchecked, heightened protectionism could prevent peoples around the world from achieving the true gains afforded by cross-border openness. Ghemawat paints a disturbing picture of what could happen–to household income, availability of goods and services, and other quality-of-life metrics–should globalization continue to reverse direction. He then describes how a wide range of players’ private businesses, policy makers, citizens, the press’ could help open flows of ideas, people, and goods across borders, but in ways that maximize economic benefits for all. “World 3.0” reveals how we’re not nearly as globalized as we think we are, and how people around the world can secure their collective prosperity through new approaches to cross-border integration.
PHOTO A →
PHOTO B →
(OPTIONAL) LISTEN to an Interview on Greece & the Eurozone
VIEW → Foreign Exchange Tutorial →
(OPTIONAL) READING 5 ***
ONLINE A Bigger World (The Economist Special Report on Globalization 2008)
M. Bauer (ɔ) 2024