Last month, Defense Secretary Robert Gates embarked on a five-nation tour of Latin America. His stops included five Bush administration allies with poor human rights records: El Salvador, Colombia, Suriname, Peru and Chile. Gates, unsurprisingly, used his scheduled press conferences to take a few jabs at Hugo Chavez and Fidel Castro. From Agence-France-Press:
At a joint news conference with Salvadoran President Antonio Saca, Gates called El Salvador "one of the most faithful coalition partners" and praised its "important role in humanitarian and peacekeeping operations worldwide." Gates then warned that Venezuelan President Hugo Chavez's leftist government was a threat mainly "to the freedom and economic prosperity of the people of Venezuela." Chavez "has been very generous in offering(Venezuela's) resources to people around the world, when perhaps these resources could be better used to alleviate some of the economic problems facing the people of Venezuela," Gates said. Analysts said the goal of Gates's Latin American trip is both to bolster US allies and to counter Chavez's influence in Latin America.
Gates also criticized Venezuela’s arms purchases, but neglected to mention that Chile—his third stop on the trip, where he met with military officials—is undertaking the largest military build-up in Latin America at the moment. Chile has spent $2.8 billion on fighter jets, submarines, tanks and other weaponry since 2000. Although Chile has made the transition from military dictatorship to democracy since the 1980s, the disproportionate budgetary and political power of the military persist. Gates also touted the delivery of aid packages in rural Surinam by U.S. navy personnel, a competitive gesture vis-à-vis the delegations of Cuban and Venezuelan doctors currently working in Surinam.
All of this competition for influence invites a comparison of U.S. allies in the region with Washington’s tropical Axis of Evil: Castro, Chavez, Morales and perhaps Correa. If we undertake such a comparison (even using State Department human rights reports, let alone radical sources), it is obvious that human rights enter policy calculations mainly as public relations tools, and economic and strategic interests are primary. Because it is not merely that economic and strategic interests determine who is and is not supported by the U.S. government and major media outlets; they determine who is not scrutinized for human rights violations. The near-exclusive focus of U.S. government and media criticism on Castro, Chavez and Morales would be inexplicable if this were not the case, because those criticisms apply far more easily (measured by body counts, police/military brutality, corruption scandals) to U.S. allies like Alvaro Uribe, Elias Antonio Saca, Martin Torrijos, Oscar Berger, Alan Garcia, Manuel Zelaya and Nicanor Duarte.
If we rarely see criticisms (or indeed mentions) of these leaders in the U.S. media, this is not a reflection of their superior record, but of their acquiescence to demands from the U.S. and U.S firms and financial institutions.
Below, I will sketch the state of “human rights, democracy and corruption” in the countries of these rarely criticized U.S. allies, and discuss their economic policies. Then, I will compare them with Cuba under Castro, Venezuela under Chavez, and Bolivia under Morales, and consider the validity of criticisms of those leaders in the U.S. media.
El Salvador under Elias Antonio Saca
Elias Antonio Saca is a right-wing media mogul and member of the ARENA party, which “was linked to death-squad killings in the 1980's,” the New York Times notes. The founder of ARENA, Eduardo D’Aubuisson, was found by a United Nations commission to have orchestrated the killing of El Salvador’s Roman Catholic primate, Archbishop Óscar Arnulfo Romero, in 1980. Romero was guilty of denouncing the violent repression of the military government during his weekly radio sermons.
ARENA, whose colors are red, white and blue, has abandoned the national currency, the colon, and replaced it with the U.S. dollar. There is no property tax in El Salvador, but the sales tax is 13%, and banks take a large cut of the $3 billion in remittances sent home by the 2.5 million Salvadorans living in the United States. Poor Salvadorans and their relatives (mostly indigenous and mestizo) working as landscapers, janitors and dishwashers in the U.S. thus subsidize the primarily white elite in El Salvador with their purchases and remittances. 43% of Salvadorans live below the poverty line, while 1% of landowners control 40% of the arable land. Measures for democratization and redistribution are hampered by official corruption. According to a 2005 report by the University of Central America,
Salvadoran public administration is not transparent and has never tried to be, as proved by the deep-rooted nature of the most pernicious forms of corruption. The successive ARENA governments have tolerated this corruption, largely because the very structure of these governments is conceived to allow its proliferation.
This corruption, moreover, is not simply a matter of low-level graft. Links between ARENA, death squads and organized crime persist. According to Jaime Martinez of the Institute of Comparative Studies in Criminal and Social Science (INECIP), death squads in El Salvador today “are the visible face of organised crime,” and “criminal groups are embedded” in the government security forces. 622 possible cases of death squad killings were documented between January 2001 and August 2005 alone.
According to Human Rights Watch, the Salvadoran government also ignores widespread labor abuses. Abuses are particularly notorious on plantations and in factories that supply U.S. firms like Del Monte, Wal-Mart, J.C. Penney and Liz Claiborne, HRW notes.
But none of this is sufficient to warrant criticism of Saca by either U.S. officials or the U.S. media, because Saca has passed CAFTA, the southward extension of NAFTA; privatized water utilities; and provided a stable investment climate for mining and fruit companies, textile manufacturers, and commercial loggers. As in Guatemala and Honduras, CAFTA has produced a trade deficit with the U.S., as U.S. corn, beans and myriad manufactured goods imports have flooded the Salvadoran market, while Salvadoran exports to the U.S. have fallen. As CISPES reports:
All of this was predicted by Salvadoran activists, who had already seen the results of NAFTA in Mexico. They organized widespread protests against CAFTA, which were broken up by riot police.
The Harvard- and Oxford-educated Uribe is the son of wealthy cattle rancher Alberto Uribe, who was connected by marriage to the Ochoa family of the Medellin drug cartel. The elder Uribe was a personal friend of Pablo Escobar, and was wanted by the U.S. government for drug trafficking charges when he was killed in a kidnapping attempt by the FARC in 1983. Santiago Uribe, President Uribe’s brother, was investigated for organizing paramilitary death squads from the family hacienda.
Before being outlawed, the Convivirs displaced some 200,000 campesinos, mostly from the Uraba region.
Expropriation remains a practice of the "demobilized" paramilitaries, as lands belonging to campesinos, indigenous peoples and Afro-Colombians are taken by force for oil exploration, mining, palm oil plantations and logging. On the Pacific coast, where Afro-Colombians make up a majority of the population, they are being uprooted by paramilitaries in the pay of plantation companies looking to expand their acreage for palm oil cultivation. Colombian palm planters already sell 35% of their products as biofuels, benefiting from the increasing demand for petroleum alternatives in the U.S. But expanded production has been made possible by land theft, much of it done under the aegis of “resettling” the paramilitaries, for which the U.S. Congress has granted the Uribe government $21 million. In 1998, Afro-Colombian leader Francisco Hurtado was assassinated by the paras for protesting for land rights, and thousands of Afro-Colombians have been pushed into the slums of Colombian cities since then.
Finally, the Uribe government has enthusiastically followed the Washington Consensus recipe of privatization, most recently by selling off a slice of state-owned Ecopetrol to foreign investors. If the proposed Colombian-U.S. free trade agreement is passed, David Bacon of Dollars & Sense estimates that 80,000 small farmers will be forced off the land by competition with U.S. agribusiness. Their likely destination? The slums of Medellin, Cali, Bogota, and myriad smaller cities and towns.
Guatemala has the second-highest murder rate in Latin America, after Colombia. According to the New York Times:
This small country of 12.3 million people has more than 5,000 homicides a year, many of them vigilante killings or gangland murders, human rights advocates say. Arrests are made in only 2 percent of the cases.
This violence pales in comparison to Guatemala’s history of state violence against the indigenous population, stretching from the colonial era to the present. As the NY Times also notes,
Some 200,000 people were killed or went missing in Guatemala from 1960 to 1996, mostly Mayan Indian civilians. A United Nations-backed truth commission found that 90 percent of those deaths were caused by the military.
The U.S. was forced to officially suspend arms sales to the Guatemalan military in 1990, when “it was learned that soldiers were involved in the killing of an American named Michael Devine.” 1 American death was evidently worse for public-relations purposes than 200,000 Guatemalan ones, even if they were “mostly Maya Indian civilians.” According to the Arms Sales Monitoring Project of the Federation of American Scientists, the CIA continued to provide Guatemala with $5-7 million annually after 1990. Then, despite ongoing allegations of violence by security forces, the U.S. officially lifted its ban on military aid to Guatemala in 2005.
Adriana Beltrán, an expert on Guatemala with the Washington Office on Latin America, a research institution, said Mr. Berger's government had done very little to stop private groups of gunmen from intimidating and killing people who were working to uncover past and present human rights abuses in Guatemala. Rewarding the government with arms sends the wrong message, she said.
Guatemala is also one of the poorest countries in Latin America. Over 57% of Guatemalans live below the poverty line, and 3.2 million of the 8.2 million people in Guatemala of working age are unemployed. The richest fifth of the population receives 60% of the GNP, and the richest 10% possess about 46% of the wealth. The distribution of land in Guatemala is, also, staggeringly unequal. In 1998, .15% (yes, that’s 1.5%, not 15%!) of landowners had 70% of the arable land, while 96% of landowners had 20%. The distribution is similar to that in South Africa: the land is overwhelmingly concentrated in the hands of a white elite, while indigenous smallholders are relegated to marginal, inferior lands. The maintenance of this essentially colonial structure has, inevitably, led many smallholders to take matters into their own hands by squatting on landowners’ property. In 2004, when the businessman and landowner Oscar Berger came to power, he predictably entered the conflict on the side of landowners, using security forces to evict squatters by whatever means necessary, including the burning of homes. According to the UN Commission for Guatemala:
The change in Administrations [with the election of Berger] also brought with it a troubling increase in forced, sometimes violent, evictions of squatters, a trend that gave the impression of undue deference by the Government to the demands of landowners. Peasant groups mounted nationwide demonstrations and road blockades in June 2004 to demand land and rural development policies and to protest the evictions, which created a serious humanitarian problem for peasant families thrown off properties.
Berger, a wealthy landowner himself, further demonstrated his loyalties by using the military to crush protests against a World Bank mining project in Guatemala city. Troops killed one protestor and injured dozens more. According to the Vox Latina institute, 95% of the people surveyed in the northern towns of San Miguel Ixtahuacán and Sipacapa (which will be most affected by the mine) oppose the project, believing it will damage the local environment. The following video is worth watching in this regard.
What voters are left with for the Nov. 4 runoff is the tired choice between a military strongman and an oligarch, representing two segments of the population largely responsible for the continued destruction of the country.
Honduras under Manuel Zelaya
Honduras is one of the poorest countries in the hemisphere, with 65% of the population living on less than $2 a day. Even according to the Honduran government, 46% of Hondurans are “extremely poor.” Nevertheless, the Zelaya administration has cut the minimum wage in the south of Honduras (where most of the “free trade zones” are located) from 74 cents an hour to 57 cents an hour. The justification given has been competition with China, where workers in many export industries are making even less. As always, pursuing “comparative advantage” means racing to the bottom.
Despite some positive steps, government corruption, impunity for violators of the law, and virulent gang violence exacerbated serious human rights problems in the country. The following human rights problems were reported: unlawful killings by members of the police, arbitrary and summary executions committed by vigilantes and former members of the security forces, the disappearance of a former dissident, beatings and other abuse of detainees by security forces, harsh prison conditions, failure to provide due process of law, lengthy pretrial detention, political interference in the judicial system, judicial corruption and institutional weakness, illegal searches, erosion of press freedom, violence and discrimination against women, child prostitution and abuse, trafficking in persons, discrimination against indigenous people, discrimination against persons based on sexual orientation, ineffective enforcement of labor laws, and child labor.
Meanwhile, the Financial Post of Canada reports that some 5,000 street children have been killed by death squads in Honduras since the late 1990s:
Jose Daniel Villed, a senior editor at the leading national daily newspaper La Tribuna, figures police are involved in as many as 40% of the murders. At least 10 officers have been convicted of killing youths in recent years, but Jose Roberto Romero Luna, the national police director, dismisses any suggestions police routinely act as vigilantes. There appear to be several paramilitary units unofficially dedicated to killing gang members and organized crime figures, who control a thriving drug trade that has seen this nation of 7.3 million people become a key transit point for Colombian cocaine en route to North America and Europe. […] Corruption is rampant, more than half [the country’s] people live in poverty and the new government of Manuel Zelaya Rosales is wrestling with massive unemployment -- 28% last year.
Press freedom is a problem in Honduras as well. A small number of business magnates control the nation’s media, and earlier this year Zelaya ordered all radio and television stations to broadcast two hours of government propaganda a day.
Since taking office on Jan. 27, 2006, Zelaya's government has been the target of more than 10 allegations of corruption, including theft of electrical energy by high administration officials, irregularities in tenders for health supplies, the hiring of advisers for nonexistent jobs, waste of resources in the telephone company, influence peddling and the abuse of power in handing out road building and energy generation contracts. The latest scandal broke out in July, when an investigative commission appointed by the president confirmed irregularities in contracts approved by the head of the Road Fund, Ramiro Chaccentsn. But once the commission had reported its findings, Zelaya rewarded Chaccentsn by offering him the post of vice minister in the Secretariat of Public Works, Housing and Transport.
The Honduran Congress passed CAFTA in 2005. The lobbyist website freetradehonduras.org writes enthusiastically:
CAFTA is further harming the agricultural sector of Honduras, which was devastated by Hurricane Mitch.
The most striking physical manifestation is a real estate boom that is transforming the skyline of Panama City, where apartments are being built at twice the rate of those in Miami – to house foreign executives but also with an eye on the growing market of US baby boomers seeking a retirement home in the sun.
Meanwhile, 40% of Panamanians live below the (low) poverty line, and per capita income is $5,000. Wealth is overwhelmingly concentrated in the hands of a small, white elite. Torrijos approved CAFTA, which will force Panamanian farmers to compete with ADM, Tyson and Conagra. The beef and poultry sector, which is very important in Panama, will be particularly vulnerable to U.S. meat imports.
On the police:
On racism:
Mexico under Felipe Calderon
In a trip to Mexico August 2007, Amnesty International Secretary General Irene Khan criticized Felipe Calderon’s human rights record. She told a press conference:
The flaws in the public security and criminal justice system in Mexico currently allow for arbitrary detention, torture, ill-treatment, denial of due process, unfair trials, political interference in the administration of justice, and widespread impunity. The poorest and most vulnerable are often victims of these abuses. […] A lottery of human rights is unacceptable. Oaxaca is a prime example. Following a year of monitoring, extensive field visits to Oaxaca and meetings with officials at state and federal level, survivors of human rights violations and civil society, Amnesty International's report Oaxaca: clamour for justice documents a pattern of police abuse (including, arbitrary arrest, torture and ill-treatment and harassment) committed by state as well as federal officials.
In March 2007, Mexico’s National Human Rights Commission documented 1,600 cases of human rights abuse during the police and military repression of the seven-month-long teacher’s protest in Oaxaca. The pattern was repeated during protests in July. According to Amnesty International:
President Duarte is a member of the right-wing Colorado or Red Party, which has ruled Paraguay since 1947. Although the Colorado Party was originally moderate-liberal, it was driven to the extreme right by dictator Alfredo Stroessner, who ruled from 1954 until his removal in a 1989 military coup. Stroessner ordered the deaths of over 900 dissidents and the torture of thousands. His successor, Andres Rodriguez Pedotti, was accused of heroin trafficking; Pedotti’s successor, Juan Carlos Wasmosy, was in turn charged with fraud and sentenced to 4 years in prison. In 2006, when President Duarte announced his plans to alter the Paraguayan constitution in order to run for re-election, 40,000 people protested in the streets of the capital, Asunción.
Just 351 Paraguayan landowners possess 9.7 million hectares (24 million acres), while, according to civil society organizations, there are 350,000 campesina families with little land, or without land altogether. This situation is one of the central causes of starvation and malnutrition in the Paraguayan countryside, where 22.8 percent of the rural population lives in extreme poverty. These families’ average incomes only cover just over 58 percent of the average daily bread basket costs.
Paraguay has, meanwhile, become the largest U.S. military platform in Latin America. There is evidence that U.S. troops have been advising paramilitaries used by soy planters to crush campesino protests.
Peru under Alan Garcia
Alan Garcia’s re-entry into Peruvian politics is a bit remarkable, given the fact that he fled the country on corruption charges before the end of his first term in 1985-1990. He was accused of embezzling millions of dollars from the state. According to Human Rights Watch, under Garcia’s first term Peru had the largest number of forced disappearances of any country in the world. Considering the competition at the time, in Latin America alone, this was quite a grisly accomplishment.
Garcia won the 2006 elections on the strength of not being Ollanta Humala, a perceived Chavista and “loose cannon.” Garcia’s support of an FTA with the United States, moreover, has won him some powerful friends north of the Rio Grande. The trade lobbyist website “Business Roundtable” contains a promotional “issue brief” on the U.S.-Peru Trade Promotion Agreement (PTPA). Business Roundtable argues (how thoughtful of them!) that the PTPA will "level the playing field" for U.S. agribusiness in competition with Peruvian peasants:
In the USA, 25,000 cotton producers receive approximately $3.5 billion per year in subsidies. Of this amount, 80 per cent goes to 10 per cent of the farmers who receive subsidies. Production costs vary from $0.68 to $0.72 per pound. The 28,000 cotton producers of Peru receive no subsidies, but they have a tariff of 12 per cent as protection against sudden drops in international prices. The FTA would eliminate this tariff immediately (zero tariff), causing devastation to production and the livelihoods of farmers. The USA is currently the CAN’s main cotton supplier. Under the trade preference system (currently the ATPDEA), it allowed imports of Peruvian textiles to US markets provided they were manufactured using mainly US cotton. This meant that cotton imports to Peru increased significantly: 45,000 tonnes of subsidised US cotton were imported into the country in 2005 alone. This has led to a radical reduction in cotton production in Peru: 260,000 hectares of cotton were grown in Peru in 1960; in 2004 the figure was barely 89,000 hectares.
So “reciprocal access to U.S. markets” requires the importation of raw or semi-finished U.S. cotton, rather than Peruvian cotton, but U.S. textile producers are not required to import cotton from non-subsidized Peruvian producers. The class of Peruvian investors who Garcia represents, however, will benefit from domestic manufacturers using cheaper U.S. cotton. They don’t care what happens to Indios in the southern highlands.
As Amnesty International points out, part of the official rationale for the U.S. trade embargo on Cuba (like the U.S.-Euro sanctions on Iraq in the 1990s) is that it will increase state repression and, as a result, the likelihood of popular upheaval. As in Iraq, the effect in practice is to punish the population for the refusal of their government to revert to U.S. client status.
Venezuela under Chavez
The most serious human rights violations in Venezuela under Chavez have been committed by rogue elements of the military and police, and contract killers in the pay of large landowners. Human Rights Watch reports that "In April 2006 Attorney General Isaías Rodríguez reported that 6,110 officials were implicated in alleged killings between 2000 and 2005, yet only 760 had been charged, and only 113 convicted." This negligence may be related to the tenuous hold of the Chavez government on the police and military, which contain substantial anti-Chavez elements which supported the 2002 coup attempt, and have clashed with government supporters in street battles on several occasions. In 2005, known arms and drug trafficker Oliver North fumed in an article at the right-wing website Freedom Alliance:
Last week, Mr. Chavez ousted the last five U.S. military advisors from a program that had been in place for 35 years – claiming that the Americans were “waging a campaign in the Venezuelan military…criticizing the president.”
Conversely, the Venezuelan opposition has accused pro-Chavez security forces of violating the rights of anti-government protestors. Reviewing the charges, Amnesty International concludes:
While many opposition supporters took part in legitimate peaceful demonstrations, a significant number of these protests were violent with the use of barricades, stones, Molotov cocktails, and fireworks and, in some cases, firearms. It is the duty of the state to guarantee public order, respecting the rule of law in accordance with international standards. However, the response of the Guardia Nacional and other branches of the security forces frequently involved excessive use of force, apparently contributing to spiralling violence rather than preventing or controlling it.
It might be noted that anti-government protestors using “barricades, stones, Molotov cocktails, and fireworks and, in some cases, firearms” in the streets of Colombia, El Salvador, Guatemala or Paraguay (etc.) would probably be shot dead by security forces on the spot. Still, no one doubts that the Venezuelan police and military continue to commit human rights abuses, largely because they retain a degree of vigalantist autonomy from the administration. Poor barrio residents and peasants are far more vulnerable to their depredations than middle-class anti-Chavistas.
In 1998 there were 1,628 primary care physicians for a population of 23.4 million. Today, there are 19,571 for a population of 27 million. […] In 1999, there were 335 HIV patients receiving antiretroviral treatment from the government, compared to 18,538 in 2006.
The coup attempt caps a crescendo of anger and frustration over the economic reforms that have written such a macroeconomic success story but have failed to benefit the lives of most Venezuelans and have embittered many. The rebel troops who for several hours seized the Miraflores government palace and the La Casona presidential residence early yesterday were apparently seeking to take advantage of mounting unrest over price rises and poor public services. The rebels were no doubt emboldened by a poll published last week suggesting 81 per cent of Venezuelans had little or no confidence left in 69-year-old President Carlos Andres Perez.
Although the coup was unsuccessful, Perez was suspended from office in 1993 after being indicted for the misappropriation of $17.2 million. His successor, Rafael Calfera, was elected on an anti-neoliberal platform, but nonetheless followed in Perez’s footsteps. In 1997, Caldera agreed to an IMF agreement to cut federal spending, deregulate the entry of foreign capital, and privatize more public assets. A massive strike was carried out to protest the policies. Deutsche Press-Agentur reported on November 20th, 1997:
Further privatizations of utilities, telecommunications and oil contributed to increasing unrest. The outcome of all of this was the election of Chavez in 1998.
U.S. critics of Morales have not yet been able to find human rights violations committed by his government. They have focussed on his status as an advocate for cocaleros (conflating, falsely, coca growing with cocaine production), and nationalization. It goes without saying that the latter is the issue that matters to the Wall Street Journal.
Like Chavez, Morales has nationalized assets that formerly belonged to the state. Bolivian natural gas had been nationalized in the 1920s, and was only privatized in 1996 by President Gonzalo Sanchez de Lozada. Under the privatization (which Lozada had pursued on the recommendation of the IMF and World Bank), royalties owed by oil multinationals to the state were reduced from 50% to 18%. The loss was made particularly significant by a pending deal with Brazil. Prior to the privatization, writes Benjamin Kohl, the Bolivian state oil company (Yacimientos Petrolíferos Fiscales de Bolivia, or YPFB) was “on the verge of completing a contract to build a pipeline to connect Bolivian gasfields to Brazilian markets,” which would have increased profits “by at least $50 million a year for 40 years. These earnings, instead, were largely transferred to private firms that borrowed capital from the same international institutions that had previously offered loans to YPFB.” This amounted to “a giveaway that could cost the nation hundreds of millions, if not billions, of dollars over the next 40 years.”
[...] the price of gas of $5 usd per million cubic feet to Argentina was 40% below the world price –and Brazil’s payment, one year after ‘nationalization’ was still the same $4 dollar—in some instances as low as 1.9 usd—as during the Sanchez de Losado-Mesa period.
Then, in February 2007, Morales announced the re-nationalization of a mineral processing plant owned by the Swiss company Glencore International AG. An Associated Press article at the time noted:
At the same time, Morales has accepted tight budgetary policies, modest social spending and new joint agreements with foreign multinationals in banking, agribusiness, mining and natural gas. In other words, while his speeches have been radical, his policies have been center-left. As a result, he is being criticized from the left as a closet neoliberal and from the right as a puppet of Chavez.
Wednesday, October 31, 2007
What Guides U.S. Latin America Policy
Tuesday, October 30, 2007
Gender, Race and the Logic of Extraterritoriality
In July 2006, the Paraguayan National Congress granted U.S. soldiers immunity from prosecution until December 2006, despite claims that they are engaged in legitimate “anti-terrorism operations.” In 2004, the U.S. demanded that the U.N. Security Council pass a resulting granting war crimes immunity for U.S. peacekeepers on U.N. missions.
The expression of this patriarchal/white supremacist power is often blatant. As Katharine H.S. Moon notes in her study Sex Among Allies, since the Korean War “over one million Korean women have served as sex providers for the U.S. military.” And as Cynthia McEnloe (I am indebted to Moon’s study for the citation) writes in her book Bananas, Beaches and Bases:
Monday, October 29, 2007
State of the Future 2007; Cartel Capitalism
The UN has released its “State of the Future 2007” report. Some highlights:
On corruption:
-Annual worldwide income from organized crime “could be well over $2 trillion,” of which counterfeiting accounts for about $520 billion and the drug trade another $320 billion.
-Contrary to self-congratulation about “transparency” in “the industrial democracies,” the report finds that “the vast majority of bribes are paid to people in richer countries,” where the political process is “vulnerable to vast amounts of money.” Hunt Oil, anyone? How about the EU Parliament and the U.S. Congress in general?
On inequality:
-Of the 6.6 billion people on earth, the richest 2% have over 50% of the wealth, while the poorest 50% have 1% of the wealth. The income of the richest 225 billionaires is equal to that of 40% of the world’s population, or 2.7 billion people.
On climate change and natural disasters:
-The number of people affected by natural disasters has tripled over the past decade to 2 billion, with an average of 211 million people being affected each year. “This is approximately five times the number of people thought to have been affected by conflict over the past decade.”
-The number of environmental refugees is “estimated to reach 50 million by 2010 and 200 million by 2050.”
In other news, the Brazilian mining monopoly CVRD has been forced to slow production by protests from the Movement of Landless Rural Workers, increasing word iron ore prices. Two statistics are relevant to this story. One: 5% of Brazilian landowners hold 70% of the arable land in the country. Two: CVRD and Australian behemoths BHP Billiton and Rio Tinto dominate the world iron industry, accounting for no less than 70% of global iron ore exports between the three of them. This kind of wealth concentration, in land and in mineral resources, creates all kinds of contradictions, in this case an ironic one. According to the following article from the Australian corporate press, the supply disruption has only served to “stoke an already hot spot market for iron ore and strengthen the hand of producers at upcoming pricing talks with Chinese and Japanese steelmills.” The article is worth reading, because it shows how the mythical “free market” actually works in practice: oligopolies form cartels and generate artificial “supply shocks” to jack up prices when it serves their interest, or glut markets to slash prices when that does the trick.
The Australian Business
Iron giants face shortages, derailments and peasant riots
Andrew Trounson October 19, 2007
Iron ore giants Rio Tinto and BHP Billiton might be battling infrastructure bottlenecks and train derailments as they race to ramp up production, but at least their trains aren't being stopped by angry, landless peasants. In Brazil, rival iron ore giant CVRD has had its major Carajas railroad cut by about 200 peasants who have invaded the tracks and thrown stones at trains as they agitate for agrarian reforms. The protesters are part of the Movement of Landless Rural Workers whose slogan is “in defence of agrarian reform and against imperialism.” CVRD is now seeking to have police remove the protesters as soon as possible. But on the flipside, any production delays will only stoke an already hot spot market for iron ore and strengthen the hand of producers at upcoming pricing talks with Chinese and Japanese steelmills. Price negotiators will be circling each other at the Japan-Australia business conference in Tokyo with BHP Iron Ore boss Ian Ashby and Rio's head of iron ore marketing, Sam Walsh, both expected to be in attendance. Macquarie Equities is forecasting a global shortfall in seaborne iron ore exports this year of about 30 million tonnes, compared with the industry's original expectations. It noted CVRD's operations had already been hit by rain delays and maintenance shutdowns that will likely see it ship, at the most, 287 million tonnes in 2007 -- down from CVRD's target of 300 million tonnes. Rio has stockpiled about 4.6 million tonnes of iron ore at its West Australian operations as it battles bottlenecks. ``This represents some $US230 million ($257 million) of iron ore that is currently not in the market, which can only strengthen the market tightness, and bodes well for a strong contract price increase, particularly as we are on the eve of the contract negotiation season,'' JP Morgan said in a research note yesterday. The stock build is the result of a car dumper at Cape Lambert port being shut for maintenance for 14 days, and Rio's move to restructure its stockpiles for its new Pilbara blend iron ore. Rio disappointed the market on Wednesday with lower-than-expected production numbers in the wake of two train derailments, and the market focus is now on BHP Billiton's quarterly numbers, due out on Tuesday. But earnings downgrades on Rio were minimal at around just 1 to 2 per cent, given continued strength in commodity prices. A key positive was that Rio remained on track with its planned iron ore expansions. ``This puts Rio in a good position to benefit from a buoyant iron ore market, although the cost pressures look set to continue,'' ABN AMRO said. Rio shares yesterday bounced back, gaining $2.83, or 2.6 per cent, to $112.83. Macquarie Bank is forecasting a massive 50 per cent rise in benchmark iron ore prices for the coming year, compared with consensus expectations for a still hefty 25-35 per cent rise.
Read more!
Excellent essay by Ha-Joon Chang
This essay summarizes his argument in the book "Bad Samaritans." Looking at the economic history of Western Europe, the U.S., Japan and the so-called "tiger economies," Chang demolishes the neoliberal argument that liberalization, privatization and strict patenting/"intellectual property" laws lead to prosperity. Following the "golden age" of post-colonial developmentalism in the 1960s-1970s, the former colonial powers and their financial (and sometimes intelligence/military) institutions effectively dismantled the developmentalist state in Africa, Latin America and parts of South and Southeast Asia. These developmentalist states had widely adopted the very same policies that allowed the "developed" countries to industrialize (high tariffs, capital controls, import subsistitution). Developmentalist states that were not dismantled, and disregarded the "Washington Consensus"--Japan, South Korea, Taiwan, Singapore and, in a qualified sense, China--continued to grow, while those that followed the imposed orthodoxy (practically all the rest of the "Third World" and the former U.S.S.R.) stagnated or declined.
"Almost all rich countries got wealthy by protecting infant industries and limiting foreign investment. But these countries are now denying poor ones the same chance to grow by forcing free-trade rules on them before they are strong enough."
Protecting the Global Poor
by Ha-Joon Chang
Once upon a time, the leading car-maker of a developing country exported its first passenger cars to the US. Until then, the company had only made poor copies of cars made by richer countries. The car was just a cheap subcompact ("four wheels and an ashtray") but it was a big moment for the country and its exporters felt proud.
Unfortunately, the car failed. Most people thought it looked lousy, and were reluctant to spend serious money on a family car that came from a place where only second-rate products were made. The car had to be withdrawn from the US. This disaster led to a major debate among the country's citizens. Many argued that the company should have stuck to its original business of making simple textile machinery. After all, the country's biggest export item was silk. If the company could not make decent cars after 25 years of trying, there was no future for it. The government had given the car-maker every chance. It had ensured high profits for it through high tariffs and tough controls on foreign investment. Less than ten years earlier, it had even given public money to save the company from bankruptcy. So, the critics argued, foreign cars should now be let in freely and foreign car-makers, who had been kicked out 20 years before, allowed back again. Others disagreed. They argued that no country had ever got anywhere without developing "serious" industries like car production. They just needed more time.
The year was 1958 and the country was Japan. The company was Toyota, and the car was called the Toyopet. Toyota started out as a manufacturer of textile machinery and moved into car production in 1933. The Japanese government kicked out General Motors and Ford in 1939, and bailed out Toyota with money from the central bank in 1949. Today, Japanese cars are considered as "natural" as Scottish salmon or French wine, but less than 50 years ago, most people, including many Japanese, thought the Japanese car industry simply should not exist.
Half a century after the Toyopet debacle, Toyota's luxury brand Lexus has become an icon of globalisation, thanks to the American journalist Thomas Friedman's book The Lexus and the Olive Tree. The book owes its title to an epiphany that Friedman had in Japan in 1992. He had paid a visit to a Lexus factory, which deeply impressed him. On the bullet train back to Tokyo, he read yet another newspaper article about the troubles in the middle east, where he had been a correspondent. Then it hit him. He realised that "half the world seemed to be… intent on building a better Lexus, dedicated to modernising, streamlining and privatising their economies in order to thrive in the system of globalisation. And half of the world—sometimes half the same country, sometimes half the same person—was still caught up in the fight over who owns which olive tree."
According to Friedman, countries in the olive-tree world will not be able to join the Lexus world unless they fit themselves into a particular set of economic policies he calls "the golden straitjacket." In describing the golden straitjacket, Friedman pretty much sums up today's neoliberal orthodoxy: countries should privatise state-owned enterprises, maintain low inflation, reduce the size of government, balance the budget, liberalise trade, deregulate foreign investment and capital markets, make the currency convertible, reduce corruption and privatise pensions. The golden straitjacket, Friedman argues, is the only clothing suitable for the harsh but exhilarating game of globalisation.
However, had the Japanese government followed the free-trade economists back in the early 1960s, there would have been no Lexus. Toyota today would at best be a junior partner to a western car manufacturer and Japan would have remained the third-rate industrial power it was in the 1960s—on the same level as Chile, Argentina and South Africa.
Had it just been Japan that became rich through the heretical policies of protection, subsidies and the restriction of foreign investment, the free-market champions might be able to dismiss it as the exception that proves the rule. But Japan is no exception. Practically all of today's developed countries, including Britain and the US, the supposed homes of the free market and free trade, have become rich on the basis of policy recipes that contradict today's orthodoxy.
In 1721, Robert Walpole, the first British prime minister, launched an industrial programme that protected and nurtured British manufacturers against superior competitors in the Low Countries, then the centre of European manufacturing. Walpole declared that "nothing so much contributes to promote the public wellbeing as the exportation of manufactured goods and the importation of foreign raw material." Between Walpole's time and the 1840s, when Britain started to reduce its tariffs (although it did not move to free trade until the 1860s), Britain's average industrial tariff rate was in the region of 40-50 per cent, compared with 20 per cent and 10 per cent in France and Germany respectively.
The US followed the British example. In fact, the first systematic argument that new industries in relatively backward economies need protection before they can compete with their foreign rivals—known as the "infant industry" argument—was developed by the first US treasury secretary, Alexander Hamilton. In 1789, Hamilton proposed a series of measures to achieve the industrialisation of his country, including protective tariffs, subsidies, import liberalisation of industrial inputs (so it wasn't blanket protection for everything), patents for inventions and the development of the banking system.
Hamilton was perfectly aware of the potential pitfalls of infant industry protection, and cautioned against taking these policies too far. He knew that just as some parents are overprotective, governments can cosset infant industries too much. And in the way that some children manipulate their parents into supporting them beyond childhood, there are industries that prolong government protection through clever lobbying. But the existence of dysfunctional families is hardly an argument against parenting itself. Likewise, the examples of bad protectionism merely tell us that the policy needs to be used wisely.
In recommending an infant industry programme for his young country, Hamilton, an impudent 35-year-old finance minister with only a liberal arts degree from a then second-rate college (King's College of New York, now Columbia University) was openly ignoring the advice of the world's most famous economist, Adam Smith. Like most European economists at the time, Smith advised the Americans not to develop manufacturing. He argued that any attempt to "stop the importation of European manufactures" would "obstruct… the progress of their country towards real wealth and greatness."
Many Americans—notably Thomas Jefferson, secretary of state at the time and Hamilton's arch-enemy—disagreed with Hamilton. They argued that it was better to import high-quality manufactured products from Europe with the proceeds that the country earned from agricultural exports than to try to produce second-rate manufactured goods. As a result, congress only half-heartedly accepted Hamilton's recommendations—raising the average tariff rate from 5 per cent to 12.5 per cent.
In 1804, Hamilton was killed in a duel by the then vice-president Aaron Burr. Had he lived for another decade or so, he would have seen his programme adopted in full. Following the Anglo-American war in 1812, the US started shifting to a protectionist policy; by the 1820s, its average industrial tariff had risen to 40 per cent. By the 1830s, America's average industrial tariff rate was the highest in the world and, except for a few brief periods, remained so until the second world war, at which point its manufacturing supremacy was absolute.
Britain and the US were not the only practitioners of infant industry protection. Virtually all of today's rich countries used policy measures to protect and nurture their infant industries. Even when the overall level of protection was relatively low, some strategic sectors could get very high protection. For example, in the late 19th and early 20th centuries, Germany, while maintaining a relatively moderate average industrial tariff rate (5-15 per cent), accorded strong protection to industries like iron and steel. During the same period, Sweden provided high protection to its emerging engineering industries, although its average tariff rate was 15-20 per cent. In the first half of the 20th century, Belgium maintained moderate levels of overall protection but heavily protected key textile sectors and the iron industry.
Tariffs were not the only tool of trade policy used by rich countries. When deemed necessary for the protection of infant industries, they banned imports or imposed import quotas. They also gave export subsidies—sometimes to all exports (Japan and Korea) but often to specific items (in the 18th century, Britain gave export subsidies to gunpowder, sailcloth, refined sugar and silk). Some of them also gave a rebate on the tariffs paid on the imported industrial inputs used for manufacturing export goods, in order to encourage such exports. Many believe that this measure was invented in Japan in the 1950s, but it was in fact invented in Britain in the 17th century.
It is not just in the realm of trade that the historical records of today's rich countries burst the bindings of Friedman's golden straitjacket. The history of controls on foreign investment tells a similar story. In the 19th century, the US placed restrictions on foreign investment in banking, shipping, mining and logging. The restrictions were particularly severe in banking; throughout the 19th century, non-resident shareholders could not even vote in a shareholders' meeting and only American citizens could become directors in a national (as opposed to state) bank.
Some countries went further than the US. Japan closed off most industries to foreign investment and imposed 49 per cent ownership ceilings on the others until the 1970s. Korea basically followed this model until it was forced to liberalise after the 1997 financial crisis. Between the 1930s and the 1980s, Finland officially classified all firms with more than 20 per cent foreign ownership as "dangerous enterprises." It was not that these countries were against foreign companies per se—after all, Korea actively courted foreign investment in export processing zones. They restricted foreign investors because they believed—rightly in my view—that there is nothing like learning how to do something yourself, even if it takes more time and effort.
The wealthy nations of today may support the privatisation of state-owned enterprises in developing countries, but many of them built their industries through state ownership. At the beginning of their industrialisation, Germany and Japan set up state-owned enterprises in key industries—textiles, steel and shipbuilding. In France, the reader may be surprised to learn that many household names—like Renault (cars), Alcatel (telecoms equipment), Thomson (electronics) and Elf Aquitaine (oil and gas)—have been state-owned enterprises. Finland, Austria and Norway also developed their industries through extensive state ownership after the second world war. Taiwan has achieved its economic "miracle" with a state sector more than one-and-a-half times the size of the international average, while Singapore's state sector is one of the largest in the world, and includes world-class companies like Singapore Airlines.
Of course, there were exceptions. The Netherlands and pre-first world war Switzerland did not adopt many tariffs or subsidies. But they did deviate from today's free-market orthodoxy in another, very important way—they refused to protect patents. Switzerland did not have patents until 1888 and did not protect chemical inventions until 1907. The Netherlands abolished its 1817 patent law in 1869, on the grounds that patents created artificial monopolies that went against the principle of free competition. It did not reintroduce a patent law until 1912, by which time Philips was firmly established as a leading producer of lightbulbs, whose production technology it "borrowed" from Thomas Edison.
Even countries that did have patent laws were lax about protecting intellectual property (IP) rights—especially those of foreigners. In most countries, including Britain, Austria, France and the US, patenting of imported inventions was explicitly allowed in the 19th century.
Despite this history of protection, subsidy and state ownership, the rich countries have been recommending to, or even forcing upon, developing countries policies that go directly against their own historical experience. For the past 25 years, rich countries have imposed trade liberalisation on many developing countries through IMF and World Bank loan conditions, as well as the conditions attached to their direct aid. The World Trade Organisation (WTO) does allow some tariff protection, especially for the poorest developing countries, but most developing countries have had to significantly reduce tariffs and other trade restrictions. Most subsidies have been banned by the WTO—except, of course, the ones that rich countries still use, such as on agriculture, and research and development. And while, of course, no poor country is obliged to accept foreign inward investment (and most receive none or very little) the IMF and the World Bank are always lobbying for more liberal foreign investment rules. The WTO has also tightened IP laws, asking all but the poorest developing countries to comply with US standards—which even many Americans consider excessive.
Why are they doing this? In 1841, Friedrich List, a German economist, criticised Britain for preaching free trade to other countries when she had achieved her economic supremacy through tariffs and subsidies. He accused the British of "kicking away the ladder" that they had climbed to reach the world's top economic position. Today, there are certainly some people in rich countries who preach free trade to poor countries in order to capture larger shares of the latter's markets and to pre-empt the emergence of possible competitors. They are saying, "Do as we say, not as we did," and act as bad samaritans, taking advantage of others in trouble. But what is more worrying is that many of today's free traders do not realise that they are hurting the developing countries with their policies. History is written by the victors, and it is human nature to reinterpret the past from the point of view of the present. As a result, the rich countries have gradually, if often sub-consciously, rewritten their own histories to make them more consistent with how they see themselves today, rather than as they really were.
But the truth is that free traders make the lives of those whom they are trying to help more difficult. The evidence for this is everywhere. Despite adopting supposedly "good" policies, like liberal foreign trade and investment and strong patent protection, many developing countries have actually been performing rather badly over the last two and a half decades. The annual per capita growth rate of the developing world has halved in this period, compared to the "bad old days" of protectionism and government intervention in the 1960s and the 1970s. Even this modest rate has been achieved only because the average includes China and India—two fast-growing giants, which have gradually liberalised their economies but have resolutely refused to put on Thomas Friedman's golden straitjacket.
Growth failure has been particularly noticeable in Latin America and Africa, where orthodox neoliberal programmes were implemented more thoroughly than in Asia. In the 1960s and the 1970s, per capita income in Latin America grew at 3.1 per cent a year, slightly faster than the developing-country average. Brazil especially was growing almost as fast as the east Asian "miracle" economies. Since the 1980s, however, when the continent embraced neoliberalism, Latin America has been growing at less than a third of this rate. Even if we discount the 1980s as a decade of adjustment and look at the 1990s, we find that per capita income in the region grew at around half the rate of the "bad old days" (3.1 per cent vs 1.7 per cent). Between 2000 and 2005, the region has done even worse; it virtually stood still, with per capita income growing at only 0.6 per cent a year. As for Africa, its per capita income grew relatively slowly even in the 1960s and the 1970s (1-2 per cent a year). But since the 1980s, the region has seen a fall in living standards. There are, of course, many reasons for this failure, but it is nonetheless a damning indictment of the neoliberal orthodoxy, because most of the African economies have been practically run by the IMF and the World Bank over the past quarter of a century.
In pushing for free-market policies that make life more difficult for poor countries, the bad samaritans frequently deploy the rhetoric of the "level playing field." They argue that developing countries should not be allowed to use extra policy tools for protection, subsidies and regulation, as these constitute unfair competition. Who can disagree?
Well, we all should, if we want to build an international system that promotes economic development. A level playing field leads to unfair competition when the players are unequal. Most sports have strict separation by age and gender, while boxing, wrestling and weightlifting have weight classes, which are often divided very finely. How is it that we think a bout between people with more than a couple of kilos' weight difference is unfair, and yet we accept that the US and Honduras should compete economically on equal terms?
Global economic competition is a game of unequal players. It pits against each other countries that range from Switzerland to Swaziland. Consequently, it is only fair that we "tilt the playing field" in favour of the weaker countries. In practice, this means allowing them to protect and subsidise their producers more vigorously, and to put stricter regulations on foreign investment. These countries should also be allowed to protect IP rights less stringently, so that they can "borrow" ideas from richer countries. This will have the added benefit of making economic growth in poor countries more compatible with the need to fight global warming, as rich-country technologies tend to be far more energy-efficient.
I am not against markets, international trade or globalisation. And I acknowledge that WTO agreements contain "special and differential treatment" provisions which give poor country members certain rights, and which permit rich countries to treat developing countries more favourably than other rich WTO members. But these provisions are limited and generally just give poor countries longer time periods to liberalise their economic rules. The default position remains blind faith in indiscriminate free trade.
The best way to illustrate my general point is to look at my own native Korea—or, rather, to contrast the two bits that used to be one country until 1948. It is hard to believe today, but northern Korea used to be richer than the south. Japan developed the north industrially when it ruled the country from 1910-45. Even after the Japanese left, North Korea's industrial legacy enabled it to maintain its economic lead over South Korea well into the 1960s.
Today, South Korea is one of the world's industrial powerhouses while North Korea languishes in poverty. Much of this is thanks to the fact that South Korea aggressively traded with the outside world and actively absorbed foreign technologies while North Korea pursued its doctrine of self-sufficiency. Through trade, South Korea learned about the existence of better technologies and earned the foreign currency to buy them. In its own way, North Korea has managed some technological feats. For example, it figured out a way to mass-produce vinalon, a synthetic fibre made out of limestone and anthracite, which has allowed it to be self-sufficient in clothing. But, overall, North Korea is technologically stuck in the past, with 1940s Japanese and 1950s Soviet technologies, while South Korea is one of the most technologically dynamic economies in the world.
In the end, economic development is about mastering advanced technologies. In theory, a country can develop such technologies on its own, but technological self-sufficiency quickly hits the wall, as seen in the North Korean case. This is why all successful cases of economic development have involved serious attempts to get hold of advanced foreign technologies. But in order to be able to import technologies from developed countries, developing nations need foreign currency to pay for them. Some of this foreign currency may be provided through foreign aid, but most has to be earned through exports. Without trade, therefore, there will be little technological progress and thus little economic development.
But there is a huge difference between saying that trade is essential for economic development and saying that free trade is best. It is this sleight of hand that free-trade economists have so effectively deployed against their opponents—if you are against free trade, they imply, you must be against trade itself, and so against economic progress.
As South Korea—together with Britain, the US, Japan, Taiwan and many others—shows, active participation in international trade does not require free trade. In the early stages of their development, these countries typically had tariff rates in the region of 30-50 per cent. Likewise, the Korean experience shows that actively absorbing foreign technologies does not require a liberal foreign investment policy.
Indeed, had South Korea donned Friedman's golden straitjacket in the 1960s, it would still be exporting raw materials like tungsten ore and seaweed. The secret of its success lay in a mix of protection and open trade, of government regulation and free(ish) market, of active courting of foreign investment and draconian regulation of it, and of private enterprise and state control—with the areas of protection constantly changing as new infant industries were developed and old ones became internationally competitive. This is how almost all of today's rich countries became rich, and it is at the root of almost all recent success stories in the developing world.
Therefore, if they are genuinely to help developing countries develop through trade, wealthy countries need to accept asymmetric protectionism, as they used to between the 1950s and the 1970s. The global economic system should support the efforts of developing countries by allowing them to use more freely the tools of infant industry promotion—such as tariff protection, subsidies, foreign investment regulation and weak IP rights.
There are huge benefits from global integration if it is done in the right way, at the right speed. But if poor countries open up prematurely, the result will be negative. Globalisation is too important to be left to free-trade economists, whose policy advice has so ill served the developing world in the past 25 years.
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