Globalization Helps the Third World

[Toro]

Globalization and free trade have increased incomes in the developing countries.

Per capita GDP growth in the post-1980 globalizers accelerated from 1.4 percent a year in the 1960s and 2.9 percent a year in the 1970s to 3.5 percent in the 1980s and 5.0 percent in the 1990s (Chart 1). This acceleration in growth is even more remarkable given that the rich countries saw steady declines in growth from a high of 4.7 percent in the 1960s to 2.2 percent in the 1990s. Also, the nonglobalizing developing countries did much worse than the globalizers, with the former's annual growth rates falling from highs of 3.3 percent during the 1970s to only 1.4 percent during the 1990s. This rapid growth among the globalizers is not simply due to the strong performances of China and India in the 1980s and 1990s—18 out of the 24 globalizers experienced increases in growth, many of them quite substantial.

Although the growth benefits of trade are increasingly recognized, many analysts are legitimately concerned about the effects of trade liberalization on income distribution. In our research, however, we document that the growth benefits of increased trade are, on average, widely shared—we have found no evidence of a systematic tendency for inequality to increase when international trade increases.  Chart 2 illustrates this point by plotting changes in a measure of inequality (the Gini coefficient, which ranges from 0 to 100, with a higher coefficient indicating greater inequality) on the vertical axis, and changes in trade volumes on the horizontal axis. This figure reflects the experiences of more than 100 developed and developing countries, with changes in trade and changes in inequality measured over periods of at least five years in order to capture the medium-to-long-run relationship between trade and inequality. Chart 2 exhibits a striking absence of any simple correlation between changes in trade and changes in inequality.

The combination of increases in growth and little systematic change in inequality in the globalizers has considerably boosted efforts to reduce poverty. In Malaysia, for example, the average income of the poorest fifth of the population grew at a robust 5.4 percent annually. Even in China, where inequality did increase sharply and the income growth rate of the poorest fifth lagged behind average income growth, incomes of the poorest fifth still grew at 3.8 percent annually. The fraction of the population of these countries living below the $1 a day poverty threshold fell sharply between the 1980s and the 1990s: from 43 percent to 36 percent in Bangladesh, from 20 percent to 15 percent in China, and from 13 percent to 10 percent in Costa Rica, to name a few.

Gap between rich and poor has narrowed

We have already seen that income inequality within countries is as likely to decrease as increase with increased trade. But is globalization leaving poor countries behind and widening the gap between the richest and poorest countries? Our evidence on the growth performance of the globalizers relative to the rich countries and the nonglobalizing developing countries suggests otherwise. The rapid growth of the globalizers relative to the rich countries means that the globalizers are narrowing the per capita income gap. Moreover, because most of the globalizers—especially China, India, and Bangladesh—were among the poorest countries in the world twenty years ago, their growth has been a force for narrowing worldwide inequality.

http://www.imf.org/external/pubs/ft/fandd/2001/09/dollar.htm

[PocketRocket]

Globalization and free trade have increased incomes in the developing countries.

<{POST_SNAPBACK}>

Of course it has, and quite predictably.

Many of these countries serve as sources of cheap labour for large-scale manufacturing and many other businesses.

The labour costs, although seeming very low by our standards, is still a boon to many/most of these countries and their inhabitants, effectively providing a living for people who may otherwise have little or no income at all.

Additionally, a lot of these countries have previously un-exploited resources.

Globalization effectively spreads the wealth around.

But there is a downside, which we already are feeling here in Canada and the USA.

Outsourcing of jobs has been a hot issue for quite some time now, and will likely continue to be for a while yet.

As long as a major corporation can get labour provided overseas for a fraction of what they pay employees here, outsourcing will continue to be a problem here at home.

Globalization, in this regard, is a two-edged sword.

[Toro]

More on Globalization

http://www.cis.org.au/Events/JBL/JBL05.htm

Karl Marx explained that capitalism would make the rich richer and the poor poorer. If someone was to gain, someone else had to lose in the free market. The middle class would become proletarians, and the proletarians would starve. What an unlucky time to make such a prediction. The industrial revolution gave freedom to innovate, produce and trade, and created wealth on an enormous scale. It reached the working class, since technology made them more productive, and more valuable to employers. Their incomes shot through the roof.

What happened was that the proletarians became middle class, and the middle class began to live like the upper class. And the most liberal country, England , led the way. According to the trends of mankind until then, it would take 2 000 years to double the average income. In the mid-19th century, the British did it in 30 years. When Marx died in 1883, the average Englishman was three times richer than he was when Marx was born in 1818.

The poor in Western societies today live longer lives, with better access to goods and technologies, and with bigger opportunities than the kings in Marx’ days.

Ok, said Marx’s evil apprentice Lenin. We might have been wrong about that. But the working class in the West could only become richer because they are bribed by the capitalists. Someone else would have to pay the price for that bribe – the poor countries. Lenin meant that imperialism was the next natural step of capitalism, whereby poor countries had to give up their work and resources to feed the West.

The problem with this argument is that all continents became wealthier, albeit at different speeds. Sure, the average Western European or American is 19 times richer than in 1820, but a Latin American is 9 times richer, an Asian 6 times richer, and an African about 3 times richer. So from whom was the wealth stolen? The only way to save this zero-sum theory would be to find the wreckage of some incredibly advanced spacecraft that we emptied 200 years ago. But not even that would save the theory. Because we would still have to explain from whom the aliens had stolen their resources.

It is correct that colonialism often was a crime, and in some instances led to horrible acts. But globalisation in the last decades shows that the existence of wealthy, capitalist countries facilitates development for poor countries if they participate in a free and voluntary exchange of ideas and goods. Globalisation means that technologies that it took wealthy nations billions of dollars and generations to develop can be used straight away in poorer countries. They can sell to wealthier markets and borrow capital for investments. If you work for an American company in a low-income country, you receive about 8 times the average income in that country. Not because multinational companies are more generous, but because they are globalised, and bring machines and management that raise the productivity of the workers, and consequently also their wages.

Therefore, opportunities for a poor country with open, market-friendly institutions increase as the rest of the world becomes more developed. It took England 60 years to double its income from 1780. 100 years later, Sweden did the same in just 40 years. Another 100 years later, countries like Taiwan , South Korea , China and Vietnam did it in no more than 10 years.

During the 1990s, poor countries with about 3 billion inhabitants have integrated into the global economy, and they have also seen their annual growth rates increase to almost 5 percent per capita. It means that average income doubles in less than 15 years. Compare this to the much slower growth in rich countries, and the negative growth in developing countries where 1 billion people live. These countries, especially in sub-Saharan Africa , are the least liberal, the least capitalist and the least globalised. It seems Lenin had it upside down – poor countries that are connected with the capitalist countries with trade and investment grow faster than those countries, those that don’t become poorer. ...

Let’s have a short look at the statistics to see the greatest untold story ever. The proportion in absolute poverty in developing countries has been reduced from 40 to 21 percent since 1981. Almost 400 million people have left poverty – the biggest poverty reduction in mankind’s history. In the last 30 years chronic hunger has been halved, and so has the extent of child labour. Since 1950 illiteracy has been reduced from 70 to 23 percent and infant mortality has been reduced by two-thirds. ...

Just 200 years ago ... By our standards even the richest countries were extremely poor. The average chance of surviving your first year was less than the chance of surviving to retirement today.

[August1991]

Globalization and free trade have increased incomes in the developing countries.

<{POST_SNAPBACK}>

Of course it has, and quite predictably.

Many of these countries serve as sources of cheap labour for large-scale manufacturing and many other businesses.

The labour costs, although seeming very low by our standards, is still a boon to many/most of these countries and their inhabitants, effectively providing a living for people who may otherwise have little or no income at all.

Additionally, a lot of these countries have previously un-exploited resources.

Globalization effectively spreads the wealth around.

But there is a downside, which we already are feeling here in Canada and the USA.

Outsourcing of jobs has been a hot issue for quite some time now, and will likely continue to be for a while yet.

As long as a major corporation can get labour provided overseas for a fraction of what they pay employees here, outsourcing will continue to be a problem here at home.

Globalization, in this regard, is a two-edged sword.

<{POST_SNAPBACK}>

PocketRocket, your argument may seem to make common sense but it's wrong, and here's why:

Labour saving technology, for example telephone-switching devices, have made numerous jobs obsolete. In the past, many people were employed routing or connecting phone calls. These tasks are all done more cheaply now with computers. (Telephones are one obvious example; there are many others.)

When we "outsource" tasks to a foreign country, this is no different from finding a new technology which allows us to accomplish a task more easily. True, it means some people lose their jobs in the short run, but that's true of any new labour-saving technology. In fact, the job loss is critical because that is where we will get the extra economic growth. Those workers made redundant will do something else, and that something else is something we didn't have before. Our economy grows. (Indeed, I could argue that this is the only way our economy grows.)

To argue against free trade is to argue against new technology. Without new technology, we would still be living in caves without means to start a fire.

[RB]

Globalization will only help keep a few folks pocket filled in the third world.

Do you like exploitation? Then it might be necessary and good for big capitalistic economies to continue looting these poor countries as they did in the past.

It strange that you quoted the IMF report and highlighted the parts that we should read.

Note that IMF is part of the third world problems to provide short-term loans and set strict terms that the economies must follow e.g.

1) must lower imports

2) increase exports

3) value or devalue their currency

4) exercise control on money spend on health and education (critical social structures for countries)

Result

1) dependent on agriculture trying to export

2) short-term - high interest rates/loans

3) restrictions how to spend money borrowed

4) vulnerable to prices and market fluctuations

Result

1) rising debts

2) competition with cheap way to produce goods via machines in rich countries

3) competition with countries rich enough to subsidize products

As industrialized nations, we want to globalize and promote "American way of life". You are with us? I want to let you know in simple words that those who suppress and exploit others have lots of power and in greater than one ways is a pain to confront.

What I mean, currently notice how capital is allowed to free flow around the globe while poor people are severely restricted to travel. The follow up question is: Or are you a terrorist?

Globalisation is a fancy word in my opinion that we use to say we are all free societies. An ideal, really, because it only belongs to those who can make profit.

Greed, capitalism and globalization will only continue to demise poor countries, rich countries will acquire more wealth and make the poor countries more impoverish. The discrepancies between the rich and poor in third world are corrupted and unfathomable between first and third world.

Look, economic growth does not necessarily come with political freedom. The reason why China is doing well is their masses of population, and lack of transparent law. India also has masses of people but they do well only when the trade is favorable, there is political buoyancy. The average life rate in Botswana is 40 years old – come do you compare this economy to folks who are living beyond 80 years. The Russians have slip from 2% to 29% into proverty

Globalization will restructure economies in poor countries to their own demise in complicated ways. There are still not over poverty, and the rape of their economies made you the rich countries you are today. Now you wish to repeat history only using different tactics.

I have visited lots of third world countries and you can still see the death of train line, that you can still use, but alas, would serve no purpose, as these lines were only set up to transport raw materials to sea.

If these poor countries are agricultural economies - firstly subsidies need to go from bigger economies, then those gene modifications – most of the modern advances that the rich countries have capitalized on. I did not believe you would favor retreating into the past - as we have come a far way.

But, I reject globalisation for poor countries. I believe for now trading blocs for the poorer nations is a better solution for competition of trade.

[Toro]

Yet those countries that have not opened up their economies much have lagged those that have participated more so in the global economy. And the poorest of the poor in those globalizing countries have seen standards of living increase more than those that have not.

The poorest countries were always poor by today's standards. That may not have been the case 200 years ago. Maybe they were the richest societies. But the difference is that the rich countries developed while they did not.

Your analysis of the IMF is incorrect, BTW.

[Toro]

More on Globalization

http://www.cis.org.au/Events/JBL/JBL05.htm

Karl Marx explained that capitalism would make the rich richer and the poor poorer. If someone was to gain, someone else had to lose in the free market. The middle class would become proletarians, and the proletarians would starve. What an unlucky time to make such a prediction. The industrial revolution gave freedom to innovate, produce and trade, and created wealth on an enormous scale. It reached the working class, since technology made them more productive, and more valuable to employers. Their incomes shot through the roof.

What happened was that the proletarians became middle class, and the middle class began to live like the upper class. And the most liberal country, England , led the way. According to the trends of mankind until then, it would take 2 000 years to double the average income. In the mid-19th century, the British did it in 30 years. When Marx died in 1883, the average Englishman was three times richer than he was when Marx was born in 1818.

The poor in Western societies today live longer lives, with better access to goods and technologies, and with bigger opportunities than the kings in Marx’ days.

Ok, said Marx’s evil apprentice Lenin. We might have been wrong about that. But the working class in the West could only become richer because they are bribed by the capitalists. Someone else would have to pay the price for that bribe – the poor countries. Lenin meant that imperialism was the next natural step of capitalism, whereby poor countries had to give up their work and resources to feed the West.

The problem with this argument is that all continents became wealthier, albeit at different speeds. Sure, the average Western European or American is 19 times richer than in 1820, but a Latin American is 9 times richer, an Asian 6 times richer, and an African about 3 times richer. So from whom was the wealth stolen? The only way to save this zero-sum theory would be to find the wreckage of some incredibly advanced spacecraft that we emptied 200 years ago. But not even that would save the theory. Because we would still have to explain from whom the aliens had stolen their resources.

It is correct that colonialism often was a crime, and in some instances led to horrible acts. But globalisation in the last decades shows that the existence of wealthy, capitalist countries facilitates development for poor countries if they participate in a free and voluntary exchange of ideas and goods. Globalisation means that technologies that it took wealthy nations billions of dollars and generations to develop can be used straight away in poorer countries. They can sell to wealthier markets and borrow capital for investments. If you work for an American company in a low-income country, you receive about 8 times the average income in that country. Not because multinational companies are more generous, but because they are globalised, and bring machines and management that raise the productivity of the workers, and consequently also their wages.

Therefore, opportunities for a poor country with open, market-friendly institutions increase as the rest of the world becomes more developed. It took England 60 years to double its income from 1780. 100 years later, Sweden did the same in just 40 years. Another 100 years later, countries like Taiwan , South Korea , China and Vietnam did it in no more than 10 years.

During the 1990s, poor countries with about 3 billion inhabitants have integrated into the global economy, and they have also seen their annual growth rates increase to almost 5 percent per capita. It means that average income doubles in less than 15 years. Compare this to the much slower growth in rich countries, and the negative growth in developing countries where 1 billion people live. These countries, especially in sub-Saharan Africa , are the least liberal, the least capitalist and the least globalised. It seems Lenin had it upside down – poor countries that are connected with the capitalist countries with trade and investment grow faster than those countries, those that don’t become poorer. ...

Let’s have a short look at the statistics to see the greatest untold story ever. The proportion in absolute poverty in developing countries has been reduced from 40 to 21 percent since 1981. Almost 400 million people have left poverty – the biggest poverty reduction in mankind’s history. In the last 30 years chronic hunger has been halved, and so has the extent of child labour. Since 1950 illiteracy has been reduced from 70 to 23 percent and infant mortality has been reduced by two-thirds. ...

Just 200 years ago ... By our standards even the richest countries were extremely poor. The average chance of surviving your first year was less than the chance of surviving to retirement today.

[PocketRocket]

PocketRocket, your argument may seem to make common sense but it's wrong, and here's why:

'Mornin', AUGUST.

I hope you don't mind if I reply to your reply.

Labour saving technology, for example telephone-switching devices, have made numerous jobs obsolete.  In the past, many people were employed routing or connecting phone calls.  These tasks are all done more cheaply now with computers.  (Telephones are one obvious example; there are many others.)

Absolutely correct.

When we "outsource" tasks to a foreign country, this is no different from finding a new technology which allows us to accomplish a task more easily.  True, it means some people lose their jobs in the short run, but that's true of any new labour-saving technology. In fact, the job loss is critical because that is where we will get the extra economic growth.  Those workers made redundant will do something else, and that something else is something we didn't have before. Our economy grows. (Indeed, I could argue that this is the only way our economy grows.)

I'm not sure I agree with the reasoning here. It may be the way you worded this statement.

However.....

To argue against free trade is to argue against new technology.  Without new technology, we would still be living in caves without means to start a fire.

<{POST_SNAPBACK}>

I don't think you'll find anywhere that I argued against free trade.

Outsourcing is inevitable in a global market.

I simply pointed out that while it can help the country getting the jobs, it does indeed cause some hardship for those LOSING the jobs.

I agree that many of these will move on to "something else". But quite often, that something else is not as lucrative as the job they have grown accustomed to doing, is some cases over many years.

But it happens, and will continue to happen.

The global market landscape is rapidly changing, and this is a considerable threat to what we have come to know as "job security" over the past several decades.

I would argue not against free trade, but against the idea that "job security" ever truly existed in the first place.

The same unions which fought to gain job security often threaten it by being too rigid in their demands when their employer-company is in poor financial straits.

Other issues come into play as well, but for sake of brevity, I'll leave it at that.

Outsourcing is simply, as I said, a two-edged sword.

[RB]

Your analysis of the IMF is incorrect, BTW.

<{POST_SNAPBACK}>

IMF are pawns of US diplomatic and economic interests.

The IMF has put poor countries into precautious positions leaving them indebted thru their good bleeding hearts bail-outs

http://www.nadir.org/nadir/initiativ/agp/free/imf/unrest.htm

http://www.nadir.org/nadir/initiativ/agp/f...imf/protest.htm

I mean what is the IMF doing in countries such as Afghanistan and Iraq – helping them to purchase weapons I suppose or creating environments necessary for war?

[RB]

The only countries you can point to who have achieved success under globalization is China and India and that is because of their population and weight of export - the disparities of the poor within those countries are even greater though

Three countries Brazil, China, and Mexico accounts for 50% of foreign investment flows out of their countries within this globalisation context.

Countries in Africa are a failure, Russia a failure with aids, mortality and old diseases and the worst effect of globalization is seen within the poor of the poor countries

There are winners and losers in globalization and for the winners you have enough fingers to count them.

One of the backlash of globalization is fanatical rise of Islam and international terror

[Toro]

Oh right. The IMF is "lying". Those couple hundred PhDs in economics, mathematics and statistics are pawns doing false statistical analysis to keep the poor down.

So the "only" countries that globalization has helped are the two with "only" 2.5 billion people. Quite the failure that. Of course, Korea, Taiwan, Thailand, Indonesia, Malaysia, Chile, etc. are all failures, since they don't make your list of two.

Africa is a failure not because it hasn't gotten wealthier - it has as I pointed out. Rather, its because they haven't grown as fast as everywhere else.

Here are the 24 countries that the IMF defined as "globalizing" I posted earlier. Of these, 18 of them saw standards of living rise faster than the developed world from 1980-2000.

Argentina

Bangladesh

Brazil

China

Colombia

Costa Rica

Côte d'Ivoire

Dominican Republic

Haiti

Hungary

India

Jamaica

Jordan

Malaysia

Mali

Mexico

Nepal

Nicaragua

Paraguay

Philippines

Rwanda

Thailand

Uruguay

Zimbabwe

[Toro]

Your analysis of the IMF is incorrect, BTW.

<{POST_SNAPBACK}>

IMF are pawns of US diplomatic and economic interests.

The IMF has put poor countries into precautious positions leaving them indebted thru their good bleeding hearts bail-outs

http://www.nadir.org/nadir/initiativ/agp/free/imf/unrest.htm

http://www.nadir.org/nadir/initiativ/agp/f...imf/protest.htm

I mean what is the IMF doing in countries such as Afghanistan and Iraq – helping them to purchase weapons I suppose or creating environments necessary for war?

<{POST_SNAPBACK}>

Sure, that's what the IMF is doing. Weaponizing everyone.

Here's a good article in reply to the World Development Movement

http://www.globalizationinstitute.org/publ...radejustice.pdf

The fact that economists overwhelmingly support free trade does not seem to stop the World Development Movement from making the truly remarkable argument that free trade is “discredited”:

"On international trade they [the Conservatives] remain wedded to a failed and discredited free trade agenda for Africa. Unfortunately this too they share with the Government.  Overall there is very little to set the Tories and Labour apart on these key issues."  (quote from the critics of free trade - ed.)

Members of the public who support the Trade Justice Movement must find it difficult to understand how something that is so discredited can be so widely accepted in Whitehall and Westminster. (Hahaha. Ain't that the truth! - ed.) Yet the truth is that free trade is only “discredited” among ideological campaigners and those who listen to them. Out in the global economy, free trade is the only trade policy that works.

The price mechanism is an important part of trade. It provides a signal to producers about what to produce. In the pursuit of profits, it provides an incentive to enter markets where they can make the most, and strive for efficiency and innovation. The Trade Justice Movement does not seem to care much for efficiency. They think efficiency causes poverty. This is unfortunate.

The constant desire by producers – in a free trade environment – to win customers encourages them to invest in new machinery and increase productivity. By increasing productivity and efficiency, prices are cut. As a result, consumers – including those in the poorest countries – are made better off. Moreover, increased efficiency enables wages to rise. The result is that during the 1990s, 81% of American companies’ foreign investment went to Western Europe, Japan and Canada. These countries have high wages, but because their workforces are highly productive, they win hands down over workers from sub-Saharan Africa. This contradicts all the claims being made by anti-capitalist campaigners about how Western firms only want to invest where they can pay ‘sweatshop’ wages. Africa’s share of world trade halved between 1980 and 2000. Despite having 10% of the world’s population, it now only accounts for 1% of world trade. This shows that trade is not a race to where wages and conditions are lowest.

Anti-free traders rarely celebrate on the winners. We hear a great deal about how certain coffee farmers are unable to compete, but we are never told to celebratethe success stories in Brazil (where farmers have mechanized) or in Vietnam where producers are very efficient. Both countries are catching up with the West. Nor do we hear much celebration of countries like Hong Kong or South Korea or the other Asian Tiger economies.

The fact is that free trade – through an invisible hand – encourages production towards the countries that are best at producing. I am not aware of any mobile phones being manufactured in Britain, because other countries are better at that. On the other hand, the intellectual design of the microprocessor in three-quarters of the world’s mobile phones comes from a company based in Cambridge, England. Traditional manufacturers in Britain have been decimated – and yet, we are a richer country that at any point in our past, and there are more jobs in Britain than ever

before.

It is a mistake for governments to assume that trying to keep everyone in traditional jobs is good for a country. While the Trade Justice Movement likes the idea of a static world where everyone stays producing the same things, those countries that do well are those that are continually changing and adapting to market signals. This is what increasingly China is doing and that is why it is growing.

Why is Africa Poor?

Western protectionism is not a principal reason why Africa is poor. Nor is Africa poor

because of colonialism. After all, many former colonies have prospered (e.g. Hong Kong,Singapore, New Zealand, Australia and Canada). Meanwhile, Ethiopia (except for six years) has been independent for forty centuries. ...

Africa is poor because of bad government. Key is that fact that Africa is undercapitalized: there is not much investment occurring. This is because most people do not have legal title over their property. Thus, in many African countries it is impossible to mortgage a home to gain the capital to create a business. For markets to operate, legal structures are necessary and many African countries are lacking these. Corruption and bureaucracy literally robs the poorest in Africa. Land reform – whether in Ethiopia in the 1970s or in Zimbabwe more recently – has caused starvation. Wars kill off a valuable economic input – labour – and create massive instability.

Tribal politics prevents the best from succeeding in life. But Botswana has shown the way. Through good governance, over the past 35 years it has grown faster than any other country in the world. “Yet,” says Robert Guest of The Economist, “cabinet ministers have not awarded themselves mansions and helicopters, and even the president has been seen doing his own shopping. Exchange controls were abolished in 1999, the budget has usually been in surplus (though this has slipped recently), and GDP per head tops $3,000.” That is not bad for a country that was one of the world’s poorest when granted independence in 1966.

[theloniusfleabag]

Dear Toro,

The IMF and the World Bank are tools of the far-right in the USA to keep the third world in debt. Paul Wolfowitz is head of the World Bank for pete's sake.

Africa is poor because of bad government.

This is true, but countries such as the USA (and others) have no desire to change this, because they are just after the resources. That is why the US supported brutal dictatorships such as Charles Taylor of Liberia, and fund and support UNITA in Angola. Angola is tremendously 'resource rich', with oil, uranium, diamonds, etc. but the poltical philosophy is to keep the profits from being 'shared' by the residents, and have them flow to the US and elsewhere. (Incidentally, almost all diamond processing is done in Israel). As a result, there is no 'trickle down' economic opportunity, only 'funnel away' and pay the 'dictatorship de jour' to keep the peasants out of the way.

Sudan is another example of this happening, and Talisman Energy sought to unload their business interests there after the public scorn became too much. (Mind you, China has stepped in to fill the void as they have a different view of 'human rights')

Botswana has shown the way. Through good governance, over the past 35 years it has grown faster than any other country in the world. “

My brother worked in Botswana for about 3 years as a 'land use officer', teaching commercial farming methods and land management.

He loved it there, but came back with a warning. He told me, "Don't ever send aid monies or goods to those ads for 'Poor African Countries'. The local and government troops skim as much as they can, almost always over 50%, and since they are generally the cause of most of the problems, you are only making things worse."

[Toro]

Dear Toro,

The IMF and the World Bank are tools of the far-right in the USA to keep the third world in debt. Paul Wolfowitz is head of the World Bank for pete's sake.

For all you critics of the IMF and the World Bank who think like this, do you know anyone who works are these institutions? Do you know anyone has in the past? Have you ever had a conversation with any of these people about what they actually do?

There is a lot to be critical about these two institutions for a variety of reasons, but "the far-right" is not, and has never been a fan of the IMF and the World Bank.

[theloniusfleabag]

Dear Toro,

For all you critics of the IMF and the World Bank who think like this, do you know anyone who works are these institutions? Do you know anyone has in the past?

No, but I did meet a couple of guys who served in the Wehrmacht. Nice guys, loved beer. Your point?

[Toro]

Dear Toro,

For all you critics of the IMF and the World Bank who think like this, do you know anyone who works are these institutions? Do you know anyone has in the past?

No, but I did meet a couple of guys who served in the Wehrmacht. Nice guys, loved beer. Your point?

<{POST_SNAPBACK}>

My point is that people make broad-based statements about institutions, i.e. serving a "far right-wing agenda" without actually knowing what the people who work at these institutions actually do.

The IMF and the World Bank employee hundreds of PhDs from all around the world, trained at the best universities all around the world. They are incredibly bright, highly competent people. Saying they are enforcing some nefarious right-wing agenda is tantamount to saying that all liberal arts professors in all universities are promoting a communist agenda.

That doesn't mean the institutions are above criticism - you might be surprised that there are a lot on the right who are critics as well. Nor does it mean they don't make mistakes. And its fair to ask whether or not they should even exist at all. But to say that they're tools for a far right-agenda is just silly. Its hard to take these critics seriously.

[August1991]

Note that IMF is part of the third world problems to provide short-term loans and set strict terms that the economies must follow e.g....

RB and Thelonious, the IMF only gets involved when a country's government has already made a mess of things. It is tantamount to blaming a bankruptcy lawyer for the bad financial position of a bankrupt firm.

That is why the US supported brutal dictatorships such as Charles Taylor of Liberia, and fund and support UNITA in Angola. Angola is tremendously 'resource rich', with oil, uranium, diamonds, etc. but the poltical philosophy is to keep the profits from being 'shared' by the residents, and have them flow to the US and elsewhere.

Liberia, Sierra Leone, Somalia, Rwanda - great pieces of real estate the US Defense Department just wants to get its hands on.

Angola does have natural resources. And the ongoing war between Angolans to gain control of those resources is a major problem.

African government doesn't work. Take the example of Zaire and Mobutu. But then consider Nelson Mandela. Knowledgeable Africans know not to blame the US (or France or the UK) for their problems.

[Toro]

Angola is tremendously 'resource rich', with oil, uranium, diamonds, etc. but the poltical philosophy is to keep the profits from being 'shared' by the residents, and have them flow to the US and elsewhere. (Incidentally, almost all diamond processing is done in Israel). As a result, there is no 'trickle down' economic opportunity, only 'funnel away' and pay the 'dictatorship de jour' to keep the peasants out of the way.

Yet deBeers is considered by law a monopolist in the United States and its executives cannot set foot in the country. However, America is conspiring to keep the prices of diamonds high, which aids the monopolists who are deemed illegal in the United States.

[Guest eureka]

The IMF and the World Bank are both instruments of American economic policy. Whether that is "far right" or not does not much matter. All that matters is whether there is benefit for their decisions and benefit for whom.

Both institutions have served to keep much of the world poor: both are responsible for the near bankruptcy of, for one example, Argentina which, since throwing off the mandated measures, made a substanrial recovery.

It would be interesting to know how that decision as to who are "Globalizing" countries is made: what measures are used. I doubt that Brazil, for one, should be there since it is leaning to Chavez's opposition to the Free Trade Area of the Americas. China, too, does not meet any criteria for "Globalizing. It is following strictly a national interest and policy. Read John Ralston Saul for some quite effective arguments on that - and against the whole notion of Globalization.

I also would argue that "poor" African states are not "poor because they have bad governments," but have bad governments because they are poor. Most of them are poor because the developed world made them poor and kept them that way. If agricultural subsides are removed, they may have a chance. I I would as soon bet on finding evidence that George Bush actually did fulfill his military obligation as that he will end the subsidies to American farmers.

Even then, the larger question will become one of who owns the economies of the liberated countries.

[Toro]

The IMF and the World Bank are both instruments of American economic policy. Whether that is "far right" or not does not much matter. All that matters is whether there is benefit for their decisions and benefit for whom.

Both institutions have served to keep much of the world poor: both are responsible for the near bankruptcy of, for one example, Argentina which, since throwing off the mandated measures, made a substanrial recovery.

It would be interesting to know how that decision as to who are "Globalizing" countries is made: what measures are used. I doubt that Brazil, for one, should be there since it is leaning to Chavez's opposition to the Free Trade Area of the Americas. China, too, does not meet any criteria for "Globalizing. It is following strictly a national interest and policy. Read John Ralston Saul for some quite effective arguments on that - and against  the whole notion of Globalization.

I also would argue that "poor" African states are not "poor because they have bad governments," but have bad governments because they are poor. Most of them are poor because the developed world made them poor and kept them that way. If agricultural subsides are removed, they may have a chance. I I would as soon bet on finding evidence that George Bush actually did fulfill his military obligation as that he will end the subsidies to American farmers.

Even then, the larger question will become one of who owns the economies of the liberated countries.

<{POST_SNAPBACK}>

First, Lulu is running what could best be described as a centre-right government. For God's sakes, Brazil is running a better fiscal policy than the United States! Brazillian bonds yielding 19% and paying off debt look mightily intriguing! Here's a paragraph from Thursday's Wall Street Journal, which best describes what is happening in Latin America (pA10)

In the absence of strong U.S. leadership, a highly uneven pattern of policy-making has emerged. Some countries, such as Chile and Brazil, are adhering to the free-market model. Others, like Venezuela and Bolivia, are turning to old-style populism. And still others, like Argentina, are developing hybrid economic models.

The fact that Brazil is shying away from FTAA does not necessarily mean that they are against it. The US Congress was shying away from CAFTA until they (ridiculously) won concessions for agricultural lobbies.

On Argentina, the problems with Argentina weren't with the IMF, with the exception that the IMF kept lending the country money long past when it looked they were insolvent and were about to bust anyways. The problems in Argentina were due to large borrowings by the provinces and to an inflexible exchange rate regime. The IMF backed Argentina's convertability scheme and the policies that caused Argentina to take off in the first place. The IMF's biggest sin was that they should have cut Argentina off sooner than they did. In fact, a consortium of private lenders met with Argentina and told the country to default - in effect, the lenders were telling the Argentine government to not pay them back - but the country didn't listen and kept going back to the IMF to fund their spending that they couldn't get under control. And because of political pressure to not allow Argentina to default, which they did anyways, the US government kept pressing the IMF to give Argentina more money. Trying to avoid a default is hardly a recipe for nefarious economic imperalism.

If you are interested in knowing the exact criteria how countries were defined as globalizing in the study, go to the IMF web page and find the paper. Or call the authors. They'll tell you. Here's the phone number for the IMF

(202) 623-7000

Ask for David Dollar or Aart Kraay.

But the Readers Digest version is that these were the countries that liberalized trade and capital flows.

As for Saul, he's an utter fraud concerning economics. I read Voltaires Bastards, and he kept making all these nonsensical statements about how the West has been in a Depression since the late 1960s, with nary a number to back him up. He also wrote that inflation is caused by mergers. This man is not a serious person on this subject.

[theloniusfleabag]

Dear Toro,

The IMF and the World Bank employee hundreds of PhDs from all around the world, trained at the best universities all around the world. They are incredibly bright, highly competent people.

Many organizations 'hive off' the best that they can to suit their needs, including gov't think-tanks, the CIA, international law firms and banks, etc. Some of these people could rightly be called (as eureka has been so accused) 'bibliobibuli', with tons of 'book smarts' to the detriment of awareness of the world around them. That doesn't mean that they take an equal spread of personal beliefs across the political spectrum to formulate and enact their policies, though.

If the World Bank was a proponent of socialism, I'm sure they would appear so.

And because of political pressure to not allow Argentina to default, which they did anyways, the US government kept pressing the IMF to give Argentina more money.

Indeed, many in the US tried to warn of 'the debt bomb' in central and south america.

Trying to avoid a default is hardly a recipe for nefarious economic imperalism.

No credit company wishes to see anyone go bankrupt either. However, no credit company wishes you to strike it rich and never need their services again, either. They like it best when you credit is near maximum, and the interest payments are nearest the usury maximum.

August1991,

RB and Thelonious, the IMF only gets involved when a country's government has already made a mess of things. It is tantamount to blaming a bankruptcy lawyer for the bad financial position of a bankrupt firm.

A lot of times (especially in central america) the US is the largest creditor (often because of arms sales) and then have the IMF and WB lend monies to the gov'ts to cover these costs. Then, they have some control over that country in two ways, both physically and finacially. Then they use that influence as a trump card to ensure ongoing 'American-friendliness' when it comes to trade, nationalization (or not) of resources or industries, or getting countries to sign things such as memberships of 'the coalition of the willing' (or coerced).

Indeed, the US played hradball with many countries to sign up in that coalition, using World Bank loans as both 'the carrot and the stick', promising more loans or suggesting existing ones were in jeopardy for countries they wanted signatures from.

[Toro]

And yet, the Argies are back for more! Don't they learn their lesson? Don't they listen to the anti-globalization types? Don't they know what's good for them?

http://www.cnn.com/2005/WORLD/americas/11/...mmit/index.html

Economics on the agenda

Bush wants to create a free trade zone throughout the Americas, from Canada to Argentina. He has argued that all nations involved will benefit economically.

But leaders of several nations reject the notion, saying the United States would take advantage of smaller nations. Chavez is one of the most prominent critics.

The International Monetary Fund is one of the top economic issues on Argentina's agenda. Argentina is seeking a new IMF loan agreement such as the one that helped the country out of a major economic crisis in 2002. Argentine leaders have complained that they're not getting the kind of deal they need now.

"The president was quite firm in his belief that the IMF ought to have a different attitude toward Argentina," Bush said after his meeting with Kirchner.

He did not express support for Argentina's position, instead sticking by previous assertions that he would leave that between Argentina and the IMF.

Bush said Kirchner has made "wise decisions" that helped Argentina's economy change "in quite dramatic fashions." He added that the Argentine leader's economic track record makes it possible for him to "take his case to the IMF with a much stronger hand."

[Toro]

Many organizations 'hive off' the best that they can to suit their needs, including gov't think-tanks, the CIA, international law firms and banks, etc. Some of these people could rightly be called (as eureka has been so accused) 'bibliobibuli', with tons of 'book smarts' to the detriment of awareness of the world around them. That doesn't mean that they take an equal spread of personal beliefs across the political spectrum to formulate and enact their policies, though.

It may be true that some of the people who work there are more book smart. And it is probably a valid criticism that the IMF should have more staff on the ground in the countries to which they lend. But they aren't supposed to have an equal spread of personal beliefs across the political spectrum. They are supposed to be highly trained economists and financiers. Most economists are not on the left-wing part of the spectrum. You don't see many economists coming out and supporting the NDP for example.

Now, that doesn't mean that the IMF should be dogmatically right-wing either. What they are supposed to be are highly competent professionals. And if there are "left-wing" ideas that can be incorporated into whatever rescue-program the IMF is proposing that are helpful, then those ideas should go into the package. For example, when the IMF was putting together a loan deal for Argentina in 2002, one of the proposals was to cut government spending dramatically. However, the bond market saw that as driving a recessionary economy even deeper into recession and bid the bonds down, not up as the IMF thought the bond market would respond since the government cuts would not bring growth up to the levels required to get Argentina out of its debt spiral.

[Toro]

No credit company wishes to see anyone go bankrupt either. However, no credit company wishes you to strike it rich and never need their services again, either. They like it best when you credit is near maximum, and the interest payments are nearest the usury maximum.

Yet the highest rated companies and countries in the world are those with the lowest debt. They lenders are most interested in lending to the rich! Investment banks trip over these borrowers to lend to them because they know their capital is secure.

Your example of the usurious lender is not quite that simple. Rates are priced up and down the risk curve. The higher the risk, the higher the rate and vice-versa. Most capital is not lended out to the riskiest tranches of the market.

[Guest eureka]

Your facts on Argentina are simply wrong, Toro. From someone who has connections in Argentina, I can assure you that even American Embassy officials there were uneasy about the IMF mandated terms for the loans that caused the debt bomb to explode.

It was after Argentins defied the terms amd unpegged the currency that it began to recover,

As for your comments about Saul, I will take it that he just does not conform to your preferred views.