PCDForum Article #8,  Release Date May 20, 1994

by Walden Bello

1994 is the year the World Bank and the International Monetary Fund (IMF)
mark their "golden" 50th anniversary. But it is an event most of the
world’s people have little cause to celebrate especially the countries and the
peoples whose economies are in a state of collapse, largely as a result of the
structural adjustment programs imposed on them by these institutions. Knowledge
of this failure is now widespread, as is awareness of the insecurity and
deterioration of working conditions being experienced by most people in the
North. What is not widely recognized is that these two phenomena are linked to
the same cause a sweeping strategy of global economic rollback unleashed by
Northern political and corporate elites to consolidate corporate hegemony in the
home economy and shore up the North’s domination of the international economy.

Central to this process was the leadership of a highly ideological
Republican regime in Washington. Aside from defeating communism, Reaganism in
practice was guided by three other strategic concerns. The first was to
resubordinate the South within a US-dominated global economy. The second was to
roll back the challenge to US economic interests from the newly industrializing
countries (NICs) and Japan. The third was to dismantle the New Deal "social
contract" between big capital, big labor, and big government which both
Washington and Wall Street saw as the key constraint on corporate America’s
ability to compete internationally.

This is not to suggest an image of corporate and political elites plotting
at the White House or in Manhattan high rises to impose global adjustment. This
is never the way major shifts in national policy come about. What usually occurs
is a much more complex social process in which ideology mediates between
interests and policy. An ideology is a belief-system a set of theories, beliefs,
and myths with some internal coherence that seeks to universalize the interests
of one social sector to the whole community. In market ideology, for instance,
freeing market forces from state restraints is said to work to the good not only
of business, but also to that of the whole community. Transmitted through social
institutions such as universities, corporations, churches or parties, an
ideology is internalized by large numbers of people whose actions it then

Radical free market ideas had been around for a long time as an alternative
to the post-War Keynesian "social contract." However, market ideology
became a dominant force only when a political elite which espoused it ascended
to state power on the back of an increasingly conservative middle-class social
base at the same time that the changed circumstances of international economic
competition caused the corporate establishment to desert the liberal Keynesian
consensus in its favor.

There was a wide sharing of the assumptions of free-market ideology by
cultural, state, and economic elites during the Reagan-Bush era. There were
obvious differences among these elites, but for the most part there was
agreement on the broad thrust of championing private enterprise, rolling back
communism and the insurgent South, eliminating state intervention in the
economy, reducing government-supported safety nets, and "freeing labor
markets" by dismantling unionism.

When a class-based ideological alliance faces a conflict between ideology
and its class interests, the class interest generally prevails. This alliance is
no exception. The very intellectual foundation of free market ideology is a
belief in the superiority of purely competitive markets over oligopoly.
Unrestrained by concern for intellectual consistency and coherence, the central
commitment of the Reagan-Bush policy agenda to "unfettering the market
place" found expression not in efforts to break up oligopolies, but rather
to doing away with the obstacles to corporate mergers and acquisition. The
result has been a further concentration of corporate power.

Ultimately, the strategic coherence of the Republican policies was provided
not by their pro-competition principles but by their anti-statist and
pro-corporate thrust. From the viewpoint of the free-market vanguard which
dominated Washington, state intervention via protectionism and foreign
investment restrictions prevented U.S. capital from fully penetrating Third
World Economies; aggressive state support for domestic firms in the NICs
militated against the creation of a "level playing field" for U.S.
corporations; and exorbitant taxation of the private sector and enforcement of
environmental and labor standards prevented U.S. capital from becoming
competitive with the formidable Japanese. Thus they sought to eliminate state
supports for production in the South and the NICs, and to reduce state
restraints on corporate activity in the United States.

In the South, the debt crisis of 1982 served as the opening for the
imposition of the structural adjustment programs via the World Bank and the IMF
that forced south to roll back state intervention in economic life. The aim was
to weaken domestic entrepreneurial groups by eliminating protectionist barriers
to imports from the North and by lifting restrictions on foreign investment; to
overwhelm the weak legal barriers protecting labor from capital; and to
integrate the local economies more tightly into the North-dominated world

The consequences have been devastating. In the developing countries, an
estimated 13-18 million people, mostly children, die from hunger and poverty
each year. Women have been especially hard hit, since the higher physical
demands on them, relative to men, necessitate calorie requirements that are
often not met. Most "adjusted" countries have not even been able to
reduce their external debts, ostensibly a primary goal of structural adjustment.

Against the NICs, trade policy was the weapon of choice. While Washington’s
immediate goal was to rectify trade imbalances by reducing NIC exports to the
United States and prying open NIC markets, its strategic objective so clear in
its treatment of South Korea, the NIC par excellence was to dismantle the system
of state intervention and support that had enabled NIC producers, following the
"Japanese mode," to compete successfully against American corporations
not only in world markets, but in the U.S. market itself.

In the United States, "getting government off the back of business"
took the form of a radical reduction of tax rates on the rich, removal of state
restraints on corporate mergers and acquisitions, and weaker enforcement of
environmental standards. Above all, it meant giving government support to
aggressive corporate efforts to bust unions and weaken labor’s resistance to the
drive to achieve competitiveness by reducing wages and benefits, "downsizing"
the domestic work force, and transferring manufacturing operations to cheap
labor areas in the Third world. Ironically, a Republican regime pledged to
arrest U.S. decline ended up accelerating it, though the elites who prospered
handsomely at the expense of everyone else scarcely noticed.

By the end of the Reagan-Bush era, federal aid to the cities had plummeted
by 60 per cent from its levels in 1981. The upsurge of crime, spread of drugs,
and consolidation of inner-city poverty were among the predictable results. The
successful assault on organized labor was apparent in wage trends: between 1979
and 1989, the hourly wage of 80 per cent of the work force declined, with the
wage of the typical (or median) worker falling by nearly five per cent in real
terms. Male workers with 12 or fewer years of schooling lost the most ground,
with their hourly wages falling by 20 per cent.

While in Germany and Japan technology was employed to assist workers in
gaining higher productivity, in the United States, it was used to displace them.
Throughout the 1980’s, corporations broke down the power of labor by
substituting high-tech machines for well-paid skilled workers. For the most
part, US corporations are meeting the competitive challenge of the 1990’s by
continuing the strategy of the 1980’s. While Japanese firms cling with tenacity
to their system of life-time employment, even US firms experiencing good times,
such as Walmart and Procter and Gamble, have embraced downsizing as a basic
strategy to maintain profit margins.

Although a new Democratic administration has ascended to power in
Washington, hopes that it would break with the policies in place have proven to
be largely misplaced. Continuing support for structural adjustment, an even more
aggressive trade policy, the June 1993 bombing of Iraq ordered by president Bill
Clinton, and support for the North American Free Trade Agreement (NAFTA)
designed to consolidate cheap-labor preserves south of the border indicate
continuity rather than the change that Clinton promised.

There is an alternative to the dark victory of the grim global future known
as the "New World Order." However, bringing it about will mean
eliminating its central cause, the restructuring of the world economy to
consolidate the hegemony of Northern corporate capital. It will mean appealing
to and promoting the common interests of workers of the North and workers of the
South in repealing corporate-driven structural adjustment. It will entail
forging across borders an alternative economic vision that brings the economy
back under the control of the community.

An alternative economic system need not mean an end to competition, only its
subordination to the strategic organizing principles of cooperation, equity, and
sustainability. Indeed, in this post-Keynesian, post-Stalinist, post-Reaganomics
world, the challenge to economic innovators is how to marry capitalism’s
unsurpassed ability to promote productive efficiency and technological
innovation to the traditional socialist movement’s concern for equity and the
Green Movement’s demand for a New Deal between nature and society. The
universalizing logic of labor solidarity, community, equity, and ecological
sustainability provides the foundation for this alliance.

If the Bank and Fund’s 50th birthday is not an occasion to celebrate, it
certainly provides an opportune time to assess the role and record of these
powerful global institutions and the alternatives to the agenda they serve.

Walden Bello is senior analyst and former executive director of the
Institute for Food and Development Policy and a contributing editor of the
People-Centered Development Forum. He may be reached c/o Institute for Food and
Development Policy, 398 60th St., Oakland CA 94618, U.S.A. (510) 654-4400; Fax
(510) 654-4551; e-mail: foodfirst@icg.apd.org. This article was prepared and
distributed by the People-Centered Development Forum based on his recent book
Dark Victory: The United States, Structural Adjustment and Global Poverty
co-authored by Shea Cunningham and Bill Rau available from the Institute for
Food and Development Policy (see above) at $12.95 plus $3.50 shipping and
handling. CA residents add sales tax. Outside the United States contact Pluto
Press, 345 Archway Road, London N65AA, UK.

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