GLOBAL MELTDOWN, DEVELOPMENT AND REGIONAL COOPERATION

By Kazi Anwarul Masud (former Secretary and ambassador of Bangladesh)

SENT TO SAAG ON 02.05.2009
  The global meltdown has reinforced  the fact of globalization despite  the world being  divided  into First, Second and the Third( or even Fourth) worlds   testifying to the great existential divide among the people living in these well defined global zones where division is more vertical than horizontal and promotion from one to another is difficult if not impossible.  From the beginning of history social stratification or societal division based on wealth, power and status has been a defining characteristic of civilizations. Social stratification took global shape with the advent of colonization and poverty began to be distributed among the people living in the periphery and the wealth of the periphery was shipped to the metropolis. Effectively the colonialists helped subscription both in their own lands and in the conquered territories of the belief in the FIRST PRINCIPLES of Scottish socialist philosopher Robert Owen who thematized that it was necessary for a large part of mankind to exist in ignorance and poverty to secure for the remaining part such degree of happiness as they now enjoyed. During and after the process of decolonization the newly independent countries began to question the hypothesis inherent in the modernization theory which explained underdevelopment in terms of lack of certain qualities in the “underdeveloped” societies such as drive, entrepreneurial skill, creativity and problem solving ability. The newly freed nations rebelling against intellectual dystrophy and sanitized academic orthodoxy  by  large put their faith in the dependency theory which explained that the continued impoverishment of the Third World was not internally generated but was a structural condition of global domination in which the dominant forced the dominated to be producers of raw materials and food stuff for the industrialized metropolitan center. The phenomenal growth in West that had a demonstration effect on then communist world that promised an egalitarian society but ultimately met with a barren and inevitable death encouraged the development of what Professor Samuel Johnson of MIT (THE QUIET COUP-THE ATLANTIC-MAY 2009) termed “a kind of social capital” by the American financial industry making it “invincible” that later degenerated into crony capitalism. He found from the incestuous relationship resultant of the confluence of campaign finance, personal connections, and ideology a wave of deregulatory policies like free movement of capital across border, repeal of Depression era regulations separating commercial and investment banking, international agreement to allow banks to measure their own riskiness etc.

The developed countries have largely owned up their responsibility in causing global economic turmoil. But intrusive questions sometimes asked by the donors while promising bailouts about the nature of governance in the recipient countries cause discomfort. T he donors’ developmental aid and assistance policy these days include good governance in the recipient countries where they would like to see multi-party democracy, respect for human rights and rule of law, government with the consent of the governed, accountability, equity and poverty concerns are being addressed. Many of the demands made by the donors of the recipients may not be readily available in those countries yet to make ‘developmental transition’ and excessive donor influence also raises the question of incursion into sovereignty of the recipient countries. In the tussle between the donors and the recipients particularly after the disintegration of the Soviet Union the developing world is still struggling with the question as to whether capitalism is the right way to development. First world economists  suggest “market economy” for the Third World where market economy is defined as “properly regulated capitalism”, a system which seeks to maximize economic efficiency and growth while minimizing the social ills and injustices which unfettered capitalism can throw up. Though theoretically the market system to operate perfectly would demand withdrawal of the state, experience has shown, particularly in the Third World, the role state must play to ensure proper development of the market economy. In gist, the state must ensure that the system and services needed for a market economy to function efficiently some prerequisites must exist. Importantly the legal system embodying the commercial and corporate law must exist. The state must also ensure an environment of competition as both Adam Smith and Karl Marx agreed that capitalists naturally do not want competition and try to avoid it.  In the final analysis there is no unique constellation of conditions that would require the state to play its role which would vary according to the stage of development an economy is already in.

 The point relating to depreciation of sovereignty through infusion of transnational capital, be it in the form of aid, loan or investment, remains unresolved. One does not have to ingest Hobbesian philosophy to believe that man is basically self-interested seeking gain and glory but at the same time being fearful of one another would prefer concentrated power to create order. But since Kindelberger’s theory of hegemonic stability has fallen by the wayside due to global apprehension over doctrine of preemption notwithstanding Professor Nial Ferguson’s exhortation that the US should take up the call of history and behave like an empire because otherwise the power vacuum would be filled with “anarchic new Dark Age, an era of waning empire and religious fanaticism….. and civilization’s retreat to a few fortified enclaves”, the relentless erosion of Westphalian sovereignty continues to frighten, particularly Gunar Myardal’s “soft states” which should include weak states in sub-Saharan Africa and a few in this sub-continent.  Developing countries, particularly the least developed among them, are often torn between the promises of a capitalist society in which Warren Buffets can be produced and the practical realities of everyday life full of want and desire that cannot be met. About a year back Nobel laureate Paul Krugman had said that the “fruits of the growth  had been remarkably small for most Americans” and though the people are materially better off than before they are no where near  the boundary of prosperity that they should have got   “   the  extent to which we are a more productive economy”. Why, one may ask, capitalism lost its way from  protestant ethics of hard work, ploughing back profits into business instead of spending it on sensual pleasure? Instead both the haves and the have-nots, in the name of individual freedom  started giving preference to consumption to production, sensual pleasure to the abandonment of ethics preached by all religions of giving and sharing, of iniquitous living amongst the hungry and the unclad. Political theorist Benjamin Barber termed the new style of capitalism as “infantilisation”. Barber’s criticism rests on his argument that while early capitalism encouraged virtues with the working men’s “robust motion of agency and spirited grittiness” while the decay that spells  later day capitalism suffers from a paradox—“the needy are without income and the well heeled are without needs”. The global economic meltdown from which we are yet to recover calls for challenges that  today’s capitalist culture presents ample possibilities for new kind of political theory and practice  for those curious enough to explore it. The Western world may  start to emulate The Copenhagen Consensus (Foreign Affairs-March/April 2008) in which “Denmark breaks through stale notion about inexorable tradeoff between equality and efficiency, as well as the conventional view shared by American left and the American right that social justice and free trade are incompatible”. Many like Paul Krugman are not convinced by the conservatives’ claim that assurance of equality of opportunity is enough and one should not be worried about inequality of outcome. But it has been found that students coming from high status households with low test scores get better opportunity of going to college than students from low status household with high test score. The concept of the culture of poverty suggests that the poor remain poor because of their adaptation to poverty. According to analysts the people trapped in the culture of poverty have a strong feeling of marginality, helplessness, dependency, and the feeling of alienation within one’s own society. Closely associated with the concept of culture of poverty is cycle of poverty also known as “development trap” denoting low income, poor education, poor housing and poor health. Since these disadvantages work in a circular fashion it becomes difficult to break out of this cycle Even in developed economies like the US half of children born of low income parents become low income adults, four in ten in the UK and one third in Canada. It, therefore, becomes incumbent upon the government in countries like ours to exercise its influence to bring the children out of the poverty trap by making provision for skills required initially to meet the demands of the market and subsequently of the society at large. It is, however, easier said than done. Consequent upon the global meltdown the developed countries had to infuse billions of dollars into their economies to shore up confidence of the people in the banking institutions and in the leadership ability of their elected representatives. It may take a while for the credit crunch to go away. In the interim period middle and small business would be cagey to borrow (the banks may have more stringent lending conditions) and import less from foreign sources.   Paul Krugman reminds us of the deliberate compression that the wage differential during the World War II was the result of societal demand for a more equal society during the 30s and 40s.   One would like to hope that Kantian morality should not be a daydream or a figment of imagination for the people of the world. It needs to have a place in all decision making process from the smallest geographical area to the international arena. Nobel laureate Joseph Stiglitz while discussing Harvard Professor Benjamin Friedman’s book THE MORAL CONSEQUENCES OF ECONOMIC GROWTH stresses the role of ethics in growth, as “societal goods such as greater equality and better environment” do not necessarily accompany growth. Therefore if globalization is to succeed by making the world into a single moral community and not merely a pluralistic society of states then the commitment of all members of the UN to the rule of law and guarantee of equality and justice has to be ensured.

It is generally believed that unless development first takes place in a country’s own backyard it would be unlikely to win laurels from others. The phenomenal development of the US while the Latin American countries, for bad policies or bad politics, lagged behind the US-Europe –Japan trilateral development could be taken as an exceptional period in the history of economic development. An extension of the logic of regional development with comparable pace would mean that India’s development would depend to an extent on the development of other SAARC partners. For example, Bangladesh remains, perhaps, the second largest export destination for Indian goods. Therefore, unless purchasing capacity of the people of Bangladesh is increased Indian export of goods, even essentials, would be difficult to achieve. India has and will continue to have a stake in the political stability of the countries of the region.  It is within the realm of possibility that the defeat of BNP-Jamaat combine in the Parliamentary elections in Bangladesh can remove religion based politics from Bangladesh forever. One must, however, be on guard that complacency does not bring about a shock as theocratic extremists carry on an unending war to establish their brand of religion as one can see in Swat in Pakistan.  As the Pakistan government did not notice the emergence of Tehrik-e-Taliban Pakistan until it was too late as its troops were busy fighting “foreign” Taliban in the country, Bangladesh, too, can ill afford to relax its vigilance against any sign of resurgence by Islamic extremists who reportedly have a huge war chest to continue their campaign against so called secularism. “Transformational leaders’ writes Harvard University Professor Joseph Nye Jr.”induces followers to transcend their self-interest for the sake of the higher purposes of the group that provides the context of the relationship”. The trust put in Sheikh Hasina is to provide transformational leadership and  also put an end to the exploitive nature of the administrative rule which had been inflicted upon the people, particularly during the 2001-2006 BNP-Jamaat rule.

Democracy can be defined in various ways. One may take the absolutist measure by describing some countries as democratic and others as undemocratic. The other line of argument would make democracy as having measurable properties. It is the second school of thought which is widely accepted by modernization theorists and by reputed international institutions like the Freedom House, UN HDI, and World Economic Forum etc. In 2007 BBC ran a report on Bangladesh in which a village woman when interviewed found little value in elections while she and her children were going hungry. Political scientists find democracy accompanied by extreme poverty as flawed and are not in agreement about the passage of developmental democracy defined as a “stage in the evolution of liberal democracy characterized by particular concern for individual self-development as a universal right”. One set of argument would state that democracy, particularly in countries where supportive institutions have not been developed fully, would conflict with the pace of  development ( economic growth and its distribution into individual and social welfare) because under a democratic set up politicians have to satisfy different interest groups which in the long run may not accord with the kind of development that would have met the measure of social justice and lessen income inequality in the society. The school of thought would argue that democracy indirectly promotes economic development because it is based on market economy which has traditionally outperformed non-market forms of economy. Albeit examples of Taiwan, South Korea and Singapore are cited by supporters of conflict model i.e. where the pace of economic development conflicts with the necessity to seek broad agreement of large number of people. But the great majority of the people of the world do not agree, both in the East and certainly not in the West, with the comments made by Lee Kwan Yew that “in the East the main object is to have a well-ordered society so that everybody can have maximum enjoyment of his freedoms. This freedom can only exist in an ordered state and not in a natural state on contention and anarchy”. The conflict between what is known as “Western” concept of  individual freedom as not being subordinate to social cohesion is not Western at all but is universal and not exported from the West at the time of colonization of the Orient which Edward Said described as the West’s richest colony and greatest intellectual contestant.

It is true that Athenian democracy had flourished in ancient times. It is equally true that European renaissance and industrial revolution gave the West an irreversible edge over the East in its quest for modernism which became coterminous with the emergence of Euro-centrism. It would, however, be wrong to ascribe the democratic values as having been borrowed from the West which till the middle of the Twentieth century had been engaged in internecine struggle among one another, and if Queen Victoria is taken as an example then the wars between Germany, England and Russia were wars among cousins. Yet it is incontestable that European renaissance, reformation and Christian missionaries as fellow travelers who accompanied the discoverers of the new world had fielded the seeds of democratic values in countries that for centuries had only known autocratic institutions.  Professor Joseph Runzo (of Chapman University) dispels the common perception that has grown at the beginning of the twenty First century that religion is against human rights. He states that world religions advocate rationality and moral responsibility but opposes the egocentric secular claim to human rights and rule of law. Secularism needs religion as the most widely accepted guidance for political community while religion needs secularism as a mediator between various shades of opinion inhabiting the same political space. Democratic values, therefore, is not the exclusive wealth of any particular community or civilization.

Albeit, some are better acquainted with the workings of democracy than others because they posses ingredients to sustain a democratic way of life. Some of the essential ingredients are the state and the stage of the economy and the richness of the human resources that a country possesses. In case of those yet to reach the threshold of sustainable democracy disguised paternalism, however, well intentioned should not be welcomed.

For countries like Bangladesh born out of blood bath, having transited through extra-constitutional rule for many years, and having suffered from gross misrule by an elected government for the last five years, democracy may have different place in the preferential schedule of the people that may not be readily understood by the developed and mature democratic developing countries of the world. Perhaps for the good of the world, in the two extremes, one developed and the other least developed country, fate has given the reins of governance to Barak Obama and Sheikh Hasina at a time when many politicians would have been hesitant to take up the challenges which are daunting at the first flush and seemingly impossible to solve in the short term. Indeed both the leaders appear to have not only courage but confident of the confidence of the people that in case of Obama has brought about the crossing of the Rubicon and the completion of an impossible dream a preacher dreamt decades ago and in case of Sheikh Hasina outburst of the populace against the kleptocracy of the BNP-Jamaat combine that deepened of poverty in one of the poorest countries of the world. As both the leaders are finding out it may be easier to win public affection but to deliver socio-economic and political goods in the face of global meltdown is not an easy task.
Awami League manifesto embodied Vision 2021 that gave hope to a desperately poor  people who would like to see the fruits of development today and not wait for a decade to reap the benefits. To curb unnecessary criticism the Awami League manifesto gave details of incremental governmental program from 2010 t0 2021. The fundamental contingency for the success of the plan remains uninterrupted practice of democracy as only democracy can provide accountability from the governors. In early last century a prominent US politician had remarked that democracy deficit can only be met with greater democracy. Free and fair expression of the will of the people is non-negotiable. To quote German political theorist Jorgen Habermas: The State’s raison d’etre does not lie primarily in the protection of equal individual rights but in the guarantee of an inclusive process of opinion and will-formation in which free and equal citizens reach an understanding on which goals and norms lie in equal interest of all.

 But for the global meltdown the world would have been satisfied with Alan Greenspan's claim that the long standing debate between the virtues of the economies of free market and those governed by centrally planned socialism is over. The world may have to choose between political and developmental approach. Political approach proceeds from a relatively narrow conception of democracy focused on the election and political liberty and a society in which democrats have an upper hand over non-democrats. Developmental approach rests on a broader notion of democracy encompassing concern for equality and justice. It favors democratization as a process of long term political and socio-economic development. Democracy is valuable in its own right but is secondary to a core developmental rationale. Economic development, as it is understood now, really started in 1930s though Adam Smith and Joseph Schumpeter did not ignore the developmental aspects of economics. Early concept of economic development basically put emphasis on growth and industrialization. Europe and the US were considered as developed and the other areas of the world were considered as primitive versions of European nations that would develop by stages. Walt W Rostows Stages of Economic Growth stressed that Europe and North America were at a   linear stage of development that the underdeveloped countries would eventually catch up with. He argued all countries must develop through a number of stages starting with traditional agrarian society and culminating in a modern industrialized society. The key to this transformation was seen to be mobilization of domestic and foreign resources for investment in economic growth. Capital formation was considered as crucial to accelerate development. High savings leading to high growth as a virtuous circle and low savings leading to low growth and the reverse as a vicious circle that could be changed   through governmental intervention. This robotic development presupposed fruits of growth to trickle through from the top to the lower parts of society that ignored the concept of equity and justice that every society demands. The 1974 Cocoyoc Declaration asserted that the purpose of a growth strategy that benefits only the wealthiest minority or even increases disparity between and within a country is no development at all. It is exploitation.  If there were supporters of unbridled capitalism who doubted the social democracy practiced by Scandinavian countries and held on to Adam Smiths minimalist role of the government for economic prosperity, the present global meltdown should have convinced that their brand of economic philosophy just does not work.  In Bangladesh  Awami League is opposed to is religious extremism regardless of the religion that pushes the boundary of tolerance and attempts to degrade the religions practiced by the minorities. Opposed to the liberal thoughts of Awami League, BNP as the other major political party is believed to be intolerant of religious minority communities and its partnership of Jamaat-e-Islam in elections and in the formation of the cabinet testified to its acceptance of religion as a core element in the party’s belief. India’s seeming indifference to the domestic politics of Bangladesh is not believed by the diehard Islamists and the rightists who still believe that Indian authorities are wedded to the concept of Akhand Bharat and hence taking advantage of economic cooperation is a kind of “hara-kiri” to this band of people. How far and how deep this feeling has gone subterranean is any body’s guess. One hopes that  unraveling of Pakistan with the advance of the Taliban into Buner does not enthuse their compatriots in Bangladesh to try misadventure as they had done in the past. Indian government that will come to power after the current general elections would be well advised to give attention to bilateral issues like demarcation of land boundary, delimitation of maritime boundary, resolution of water dispute between the two countries and other Indo-Bangladesh issues at its earliest convenience.

 With the irreversible exit of communism from the global stage and despite the global meltdown caused by unbridled capitalism no one seriously suggests the revival of socialism. It is, however, suggested that business as usual as in the pre-meltdown period cannot be allowed to continue.  Some may advocate British Prime Minister Clement Attlee’s transformative democratic socialism that provided a strong welfare state, fiscal redistribution, and selective nationalization as a model. British Labor minister Anthony Crosland felt that it was possible to achieve greater social equality without the need for fundamental economic transformation. He favored fruits of accelerated growth to be invested in pro-poor public services than in fiscal redistribution. A complementary view has been expressed by Nobel laureate Joseph Stiglitz’s support of an economic development where, in his words, there will be:  moral growth that is sustainable, that increases living standard not just today but for future generations as well, and that leads to a more tolerant, open society. The idea is to avoid a situation as in the US today where 20% of the wealth is possessed by only one percent of the population. Since God in His infinite wisdom has capped the extent of consumption by an individual, despite his proclivity towards wastage, the surfeit of wealth has been channeled mostly into productive areas creating employment generating multiplier income effect. But the recession in the Western economies that is expected to continue for a few years, despite billions of dollars/pounds being injected by the governments, may not be able to reinvigorate  Western economies. The developing world, particularly the least developed among them, being mostly open economies and consequently being dependant on the West for aid and trade would be adversely affected.

In sum the global meltdown has brought about an opportunity for the people to rethink whether neo-liberalism of the past decades that was based on orthodox developmental theory that production, distribution, and consumption of all commodities should be left to market forces without governmental intervention for an economy to reach the heights of progress is the best way. This approach had ignored the problem of a silent crisis of underdevelopment, of global poverty, or ever mounting population pressure, of thoughtless degradation. Given the expectations of the people, now that India has confirmed its chair in G-20 and could later elevate itself in the UNSC commitment and wisdom of the Indian leaders is expected to be globalist in crafting socio-economic policies of the world.