Kevin Watkins
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Dead Aid: Why aid is not working and how there is another way for Africa
by Dambisa Moyo (Allen Lane, £14.99)
In March, thousands of campaigners from development charities took to the streets of London. Their target was the G20 summit. With the global economic downturn pushing Africa into recession, the marchers had a simple message for the governments of rich countries. As one banner put it: “Remember Africa—increase aid to fight poverty.”
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Gerald Holtham
Much of the analysis of the current crisis has focused on financial institutions, regulation and monetary policy. Although these were important in shaping the crisis, they are not at its root.
The truth is that the world economy has changed in ways that are likely to lead to periodic instability. These changes have not yet been recognised and assimilated by central bankers or politicians.
The freeing of capital movements in the 1980s combined with the collapse of communism, releasing billions of new workers into the world economy, has recreated a global reserve army of labour. That in turn has contributed to a rise in the share of world GDP accounted for by profits and an accompanying decline in the share accounted for by wages. Such a development easily leads either to over-investment by businesses or a shortfall of aggregate demand. When wages lag, spending can keep up with output only by an expansion of consumer debt.
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Parag Khanna
The term “second world” has fallen out of use. It used to mean countries of the socialist world; today I use the phrase to refer to those countries in eastern Europe and central Asia, Latin America, the middle east and southeast Asia which are both rich and poor, developed and underdeveloped, postmodern and pre-modern, cosmopolitan and tribal—all at the same time. This is not a temporary state between third world and first, but a permanent condition in which winners and losers are chosen by collectives like cities and corporations rather than entire states.
I spent most of 2005-07 travelling through over 40 second-world countries, and the message I kept hearing was that each country plans to shape its future its own way, not according to the “Washington consensus” or any other foreign action plan. Kazakh ministers tout the “Kazakh way,” Indian diplomats boast of the “Indian way,” Brazilian officials confidently assert the “Brazilian way.” They all want globalisation, not America, to be their patron. They may all have big internal weaknesses, but they are all players in the new geopolitical marketplace in which Europe and China offer packages of aid, trade and military assistance at least as attractive as the American one. Why align with any one patron when you can play off all sides to get what you want? India’s trade with China is booming, while it gets many of its weapons from Russia and pursues a nuclear deal with the US. Non-alignment is passé; this is the age of multialignment.
There is a vast second world intermediate layer between the first-world core and third-world periphery. In his recent National Interest essay “World Without the West,” Steven Weber pointed to Asian regionalism and new alliance blocs such as the Shanghai Cooperation Organisation. But this is not just about the rise of China and India. It is also a story of oil-producing states around the world, Arab statelets with big sovereign wealth funds and other regional swing states from Brazil to Malaysia. In many ways these “emerging markets” have already emerged; they receive most of the world’s foreign direct investment, hold a majority of its currency reserves, and are rapidly growing consumer markets whose preferences western producers cannot ignore.
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Erik S Reinert
In the latest issue of Prospect, Paul Collier reviews two books, Lawrence E Harrison’s “The Central Liberal Truth: How Politics Can Change A Culture and Save It From Itself” (OUP) and my “How Rich Countries Got Rich and Why Poor Countries Stay Poor” (Constable & Robinson). Both books represent an alternative thinking to that of the Washington institutions, including the World Bank, where Collier was director of the development research group.
The starting point for this debate is the striking failure of the IMF and World Bank to create wealth in many countries. In fact, their advice has led to real wages being halved in a number of countries, from Mongolia to Peru, over the last 20 years. To compensate, the Washington institutions insist on receiving the credit for the successes of China and India. Yet the success of these two countries is based on a) protecting their industrial structure for more than 50 years, and b) opening up their economies gradually, not with shock therapy. These strategies contradict the key recommendations of the Washington institutions. Yes, these countries had too little competition and they probably protected their economies for too long, but that is the side on which you want to err.
Mainstream analysis often concerns itself with symptoms of economic growth rather than its causes. My approach has been to study the strategies successful nations have employed when making the crucial step from poor to rich, from England under the Tudors in 1485 to Japan in the 20th century and Ireland and Korea in the electronic age. The surprising element of 500 years’ history of economic policy is the consistency over time. All nations which have escaped poverty have protected and subsidised an industrial or manufacturing sector in which economies of scale can be accomplished, before successfully opening up for free trade. England protected her manufacturing sector for some 350 years, the US for more than 100, and Korea only for 40, but they all protected an initially “artificial” comparative advantage outside raw material production. With a comparative advantage in activities that delivered increasing returns—manufacturing and advanced services—free trade works to the benefit of both trading partners. Alternatively, nations with a considerable manufacturing sector geared towards the domestic market can follow the example of Canada and Australia, and make a good living exporting from the primary sector (raw materials).
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Francis Fukuyama
Modern identity politics springs from a hole in the political theory underlying liberal democracy. That hole is liberalism’s silence about the place and significance of groups. The line of modern political theory that begins with Machiavelli and continues through Hobbes, Locke, Rousseau and the American founding fathers understands the issue of political freedom as one that pits the state against individuals rather than groups. Hobbes and Locke, for example, argue that human beings possess natural rights as individuals in the state of nature—rights that can only be secured through a social contract that prevents one individual’s pursuit of self-interest from harming others.
Modern liberalism arose in good measure in reaction to the wars of religion that raged in Europe following the Reformation. Liberalism established the principle of religious toleration—the idea that religious goals could not be pursued in the public sphere in a way that restricted the religious freedom of other sects or churches. (As we will see below, the actual separation of church and state was never fully achieved in many modern European democracies.) But while modern liberalism clearly established the principle that state power should not be used to impose religious belief on individuals, it left unanswered the question of whether individual freedom could conflict with the rights of people to uphold a particular religious tradition. Freedom, understood not as the freedom of individuals but of cultural or religious or ethnic groups to protect their group identities, was not seen as a central issue by the American founders, perhaps because the new settlers were relatively homogeneous. In the words of John Jay (in the second “Federalist Paper”): “A people descended from the same ancestors, speaking the same language, professing the same religion, attached to the same principles.”
In the west, identity politics began in earnest with the Reformation. Martin Luther argued that salvation could be achieved only through an inner state of faith, and attacked the Catholic emphasis on works—that is, exterior conformity to a set of social rules. The Reformation thus identified true religiosity as an individual’s subjective state, dissociating inner identity from outer practice.
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Robert Wade
According to the mainstream liberal argument in most developed countries, public policy should try to increase social justice by evening up opportunities—equity—but should not try too hard to reduce income inequality. The exception is at the bottom: public policy should try to eliminate extreme poverty. For the rest, income inequality is the price that has to be paid for a dynamic and flexible economy.
In the liberal perspective, equity and efficiency turn out to be complements; the key to both is free markets and competition. Applied to the international economy, this approach says that aid may be appropriate for the poorest countries, but for others, what matters is open trade, open investment, and free capital movement, so that the country’s producers have a level playing field with producers elsewhere. Insofar as the world adopts liberal market policies, growth in the poorer countries will be higher than otherwise, and high enough for many of them, over time, to catch up with living standards in the rich countries.
Martin Wolf, in Why Globalisation Works, puts it this way: “What the successful countries all share is a move towards the market economy, one in which private property rights, free enterprise and competition increasingly took the place of state ownership, planning and protection. They chose, however haltingly, the path of economic liberalisation and international integration. This is the heart of the matter. All else is commentary.”
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David Held
Martin Wolf, the chief economics commentator of the Financial Times, has written a remarkable but flawed defence of the global market economy: Why Globalisation Works: The Case for the Global Market Economy (Yale University Press). Wolf conceives globalisation in essentially economic terms. The book says little about the political, social, cultural and environmental aspects of globalisation, although he does argue that nation states remain the locus of political debate and legitimacy and that the best way to combine economic globalisation with political stability is via liberal democracy. But it is economic globalisation – meaning greater openness of trade, free movement of capital, expansion of foreign direct investment – which is the focus because it is, in Wolf’s view, the key to boosting prosperity and the life opportunities of all.
Wolf’s mission is to dispel the illusions about globalisation promulgated by the forces of what he calls anti-globalisation.com, or the “new millennium collectivists.” The book is about the intellectual clash between liberal capitalism and its opponents. Wolf is on the streets fighting a new wave of dark forces. The stakes are high: disorder and the fragmentation of the global economy threaten unless they are defeated. And defeating them requires both showing them they are wrong and offering hope for a better future.
Wolf’s voice is clear, serious and didactic, and his book offers a carefully crafted account of the global market economy and the strengths and limits of his opponents’ views. Yet there is also something anachronistic about the book and the territory it covers: its agenda seems to have been set a few years ago when the anti-globalisation movement was at its peak and hundreds of thousands were marching against the forces of economic globalisation. These days, after 9/11 and the war in Iraq, it is seldom asked whether we are for or against globalisation. The ground has shifted to a debate about the type of globalisation we want. On these grounds, Wolf’s contribution is less impressive.
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Stephanie Flanders
Consider this thought experiment. What if offshoring and the long-term shift to a more service-based economy posed a larger political and social challenge than economists are usually willing to admit? And what if, heaven forbid, stronger trade unions might actually be one part of the answer?
The experiment begins with a trip to Las Vegas. If there’s one city that embodies the new American economy it’s Vegas. It’s been the fastest growing US city for 30 years: the population doubles about every decade. Like most successful parts of the country, its growth has depended on a very successful service-based industry, and a lot of new arrivals. It’s one of the few places in the US that has carried on creating jobs since 2001. But, more surprisingly still, it’s also one of the few places where most of the workers that count are members of a union.
One of them is Bernice Thomas, a mother of eight and grandmother of many. She first came to Las Vegas, from Tallulah, Louisiana, in 1956 – the same year that Dean Martin and Jerry Lewis did their last joint show at the Copacabana hotel. Her first steady job was cleaning rooms at the Mint hotel on Las Vegas Boulevard, known locally as the Strip, and the only street that most tourists see. When the Mint closed down a few years later she went to the Dunes hotel – the iconic rat pack venue – where she worked for 21 years until it too got pulled down in the 1990s. So far, so unremarkable. But in her first job she also signed up to the Culinary Workers local 226, the Vegas branch of the national Hotel Employees and Restaurant Employees Union.
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Amy Chua
One morning in September 1994, I received a call from my mother in California. In a hushed voice, she told me that my Aunt Leona, my father’s twin sister, had been murdered in her home in the Philippines, her throat slit by her chauffeur. My mother broke the news to me in our Hokkien Chinese dialect. But the word “murder” she said in English, as if to wall off the act from the family through language.
The murder of a relative is horrible for anyone, anywhere. My father’s grief was impenetrable; to this day, he has not broken his silence on the subject. For the rest of the family, though, there was an added element of disgrace. For the Chinese, luck is a moral attribute, and a lucky person would never be murdered. Like having a birth defect, or marrying a Filipino, being murdered is shameful.
My three younger sisters and I were very fond of my Aunt Leona, who was petite and quirky and had never married. Like many wealthy Filipino Chinese she had multiple bank accounts, in Honolulu, San Francisco and Chicago. She visited us in the US regularly. Having no children of her own, she doted on her nieces and showered us with trinkets. As we grew older, the trinkets became treasures. On my tenth birthday she gave me ten small diamonds, wrapped in toilet paper. My aunt loved diamonds and bought them by the dozen, concealing them in empty Elizabeth Arden moisturiser jars. She liked accumulating things. When we ate at McDonald’s, she stuffed her Gucci purse with free packets of ketchup.
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prospect
Manx or Spanglish?
The phoney nostalgia of language revivalists is shown up by the vitality of the new Hispanics, says Jonathon Keats
The Manx language was pronounced dead on 27th December 1974, when the last native speaker passed away aged 97 in a fishing village called Cregneash. By outliving his generation, Ned Maddrell became famous, symbolising the lost heritage of the Isle of Man. In his name, the Manx people have spent the past three decades attempting to inspire a revival, compiling vocabularies and teaching the language in school. But with only 150 semi-fluent speakers, Manx remains a far cry in popularity from Welsh or even Scots Gaelic. So is it, as Mark Abley claims in his book Spoken Here, “a test case for rebirth?”
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