Monitoring Policy Making at the United Nations |
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January 10 - 14, 2000Greetings from Global Policy Forum!
This week, Joseph Stiglitz was at it again. On Sunday, January 9, the departing World Bank Chief Economist gave a speech in Boston to the annual meeting of the American Economic Association, stepping up his criticism of the Bank, the Fund, the US Treasury Department, and the dominant neoliberal policy "consensus" in Washington. His remarks drew a standing ovation from a large audience, marking a deep change in the thinking of mainstream professional economists.
"Capital market liberalization has not only not brought people the prosperity they were promised," said Stiglitz, " but it has also brought these crises, with wages falling 20 or 30 percent and unemployment going up by a factor of two, three, four or 10."
The most surprising features of Stiglitz' speech was his repeated reference to "workers," a category that had all but disappeared in mainstream economics discourse. Further, he identified those he held responsible for the crisis and those who had been forced to bear the burden -- winners and losers in Washington-style economic globalization. This too is rare in professional economics discourse, given to abstractions about "markets" and inclined to assume comfortably that resources flow to those who work hardest or who are most efficient, thus "optimizing" the welfare of all. The picture Stiglitz drew was far from rosy.
"In East Asia, it was reckless lending by international banks and other financial institutions, combined with reckless borrowing by domestic financial institutions...which may have precipitated the crisis," said Stiglitz. "But the costs, in terms of soaring unemployment and plummeting wages, were borne by the workers."
When Asian governments were forced to accept financial relief coordinated by the IMF, Washington imposed conditions that clearly targeted ordinary workers, Stiglitz affirmed. "A standard message was to increase labor market 'flexibility,' and the not-so-subtle subtext was to lower wages and lay off workers," he said.
Ironically, Stiglitz made his remarks in a panel discussing the World Bank's most recent World Development Report -- a report that focuses on poverty. Bank President James Wolfensohn, who insists that his institution's main task is reducing poverty, could not be very pleased with this latest salvo by his Executive Vice President, whose remarks suggest that the Bank *creates* poverty and favors investors over ordinary workers.
As the applause for Stiglitz made clear, economists in the United States have been re-thinking the dogmas of neoliberalism since the outbreak of the Asian crisis (1997) and its extension into Russia and Latin America. Some of the profession's leading thinkers, notably Paul Krugman of MIT, have launched an attack on neoliberalism, calling for a return to Keynesian economic management. Krugman's latest book, The Return to Depression Economics (Norton, 1999), depicts Washington's approach to the Asian crisis as a crude bid to impoverish the region in order to increase control by US-based financial and corporate interests. Coming from such an established figure, this analysis is quite astonishing.
But Krugman is scarcely alone. Robert Wade of Brown University has been saying the same thing, and even Jeffrey Sachs of Harvard, former high priest of neoliberalism, appears to have had a sudden conversion to more critical views. Jerome Levinson of American University, former Chief Counsel and Staff Director of the U.S. Senate Subcommittee on Multinational Corporations and United States Foreign Policy is another senior economist who has been expressing unhappiness with official policy and its apologists. In an article in early 1999 in the Fletcher Forum on World Affairs, Levinson had this to say:
"The uncritical faith in the superiority of the unregulated market in efficiently allocating capital is unmatched by empirical evidence . . . The emerging market syndrome of the early 1990s, which resulted in the Tesobono fiasco and the Mexican financial rescur, is a tribute to the triumph of greed, ignorance, stupidity and arrogance over common sense."
Krugman's book is full of examples of how unregulated markets lead to irrational and politically-motivated results, reflecting power relations far more than resource optimization. One of the book's most gripping accounts tells how the hedge funds, including George Soros' Quantum Fund, mounted an attack on Hong Kong's currency and stock markets in mid-1998. The an attack ultimately failed, but only because Hong Kong authorities ignored the neoliberal mantras of the IMF and Wall Street, broke with their own traditions, and intervened forcefully instead.
But the economists' new understanding is not matched by policy changes in Washington. Indeed, the powers that have driven neoliberal policy are today stronger than ever. While Stiglitz was delivering his speech in Boston, negotiators in New York, Boston and MacLean, Virginia were winding up details on the biggest corporate merger deal in world history. Internet company AOL prepared to take over media giant Time Warner in a deal worth $165 billion. The new company, one of the world's largest, with investments on every continent, including major positions in Asia, will set a new scale for media enterprises and hasten further consolidation in the already highly-concentrated media business. We can be sure that its voice will be heard in favor of "open markets" and against new kinds of regulation.
The week saw two other huge corporate mergers, both in the pharmaceutical industry. First Pfizer announced a takeover bid for Warner-Lambert, in a move that would create the largest US-based drug company (Pfizer headquarters is just two blocks away from the GPF office, on the corner of 42nd Street and Second Avenue). Not to be outdone, the two largest pharmaceutical companies of the UK announced soon afterwards a merger of their own. SmithKline and Glaxo will merge to form a new company that will be the world's largest in the industry, with $80.7 billion in market capitalization and $17.9 billion in sales.
Such new firms represent gigantic economic and political power, power that will almost certainly be felt in the political process, shaping the way information is presented to the public and the way health care is provided. We can expect many more such mergers, as other firms scramble to catch up, worried that they will be crushed by the new giants.
At the UN, corporate power is rarely directly visible. Usually, it is expressed through national governments and filtered through their geopolitical concerns, military alliances, ideologies and multiple state interests. Power also works clandestinely, concealing itself behind diplomatic formalities and expressions of humanitarian concern. At times, one can only guess at maneuvers that can affect millions of ordinary citizens.
But last week, proved a partial exception. During a Security Council meeting on AIDs in Africa, presided by US Vice-President Al Gore, the gallery of the Council chamber was crowded with corporate executives, Democratic Party bigwigs, and other power brokers. Among them, we noticed Maurice Tempelsman, multi-millionaire diamond merchant and hefty donor to the Democratic Party, who has had mining deals with Angola rebel leader Jonas Savimbi.
Power that is prepared to devastate countries in order to extract diamond profits can, of course, also savage diplomatic careers. The disappearing Latin American ambassadors on the Security Council may possibly be a case in point. Twice during 1999, activist ambassadors from major Latin American states suddenly lost their posts midway through their two-year Council terms. In April 1999 Ambassador Celso Amorim of Brazil, a former foreign minister and very highly regarded diplomat, was removed by his ministry and left New York, barely into his second year on the Council. Nine months later, in December 1999, Ambassador Fernando Petrella of Argentina, another very effective and highly regarded diplomat, was suddenly removed just a month before Argentina was to assume the Council presidency.
Various explanations are possible. In the Argentine case, a change of government could have been a factor. But evidence points more strongly another way. Some believe that the world's superpower, unhappy with the activities on the Council of these two very effective and seasoned ambassadors, pressured their governments to withdraw them. It's hard otherwise to understand why governments would gravely weaken their own representation in the Council, obviously damaging their own national interests. We will probably never know the reality. But it is well-known that Mexico never seeks a seat in the Security Council precisely so as not to confront the unbearable pressures of its big neighbor to the north.
Fortunately, not all changes in the diplomatic line-up give cause for alarm. Our friend, Ambassador Danilo Türk, having finished his term as an elected member of the Security Council and a very long posting as Permanent Representative of Slovenia, was certain to move on shortly to a new post. It has just been announced that he will take up the post of UN Assistant Secretary General for Political Affairs. We wish him all the best in this important new position.
A story about Ambassador Türk is perhaps in order. The NGO Working Group on the Security Council presented him with a scroll at a luncheon in November, honoring his "contributions to human rights, transparency, and the rule of law in the Security Council." Since he was at that time the Council President, he had the scroll framed and hung it in the office of the President, adjacent to the Council chamber, for all members to see. In this way he affirmed a different set of values in a place usually the scene of power politics and Machiavellian deal-making. He is a consummate diplomat and professor of international law, scarcely naïve when it comes to power. But he knows how to leverage power for good purposes. This is precisely the kind of person we want to see in such a high UN post.
A few other brief items:
An important new report on diamonds in the civil war in Sierra Leone has just been published by Partnership Africa, a Canadian NGO (see a posting this week).
Another item, from the Washington Post, tells an interesting tale of how BP Amoco and George Soros, using the CIA and the National Security Council, worked to maneuver US government policy in their favor in a Russian oil deal.
US Ambassador Richard Holbrooke, this month's President of the Security Council, has held an unprecedented number of open meetings of the Council, all focused on Africa, a very welcome initiative.
Universal Studies held its East Coast premiere of the film Hurricane, starring Denzel Washington, at the United Nations on Monday, January 10. Among the speakers were the Secretary General, Amnesty International head Pierre Sané, Denzel Washington and Rubin "Hurricane" Carter. The screening and party that followed, sponsored by the UN Staff Committee, was part of Amnesty's campaign against the death penalty. Such a collaboration between the UN Staff Committee and NGOs was a very welcome new development, under an effective new staff president.
Human Rights Watch issued on January 4 an important letter and memorandum to the Security Council, calling for the lifting of general trade sanctions against Iraq, citing the humanitarian crisis caused by the current sanctions regime. The texts are on the HRW site and are linked to GPF. Bravo to HRW for this major human rights initiative on Iraq.
Finally, for those following the debt crisis, an important set of tables on country indebtedness has been posted since November jointly by four institutions -- the World Bank, the IMF, the OECD and the Bank for International Settlements. Many readers may find this data useful, comprehensive and well-presented. Congratulations this week to GPF associate, Rebecca Culley, who alone posted more than thirty items to the site while assuming many other responsibilities. The GPF office has been short-handed because of flu and temporary leave. Rebecca did great service. Thanks!
