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Al-Ahram Weekly 20 - 26 May 1999 Issue No. 430 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 20 - 26 May 1999 Issue No. 430
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Supplement Travel Sports People Time Out Chronicles Cartoons Letters From miracle to mirage
By Ibrahim Fathi *With the fall of the "socialist" state system in the early '90s, a rosy optimism took hold. The world was at the threshold of a new economic era. Unified by the free market, the new order would ensure the uninhibited flow of capital world-wide, releasing untold economic energies and offering unprecedented opportunities for universal growth and prosperity.
The miracle appeared within reach. The stagnant economies of the former Soviet empire would be restructured and become dynamic. The newly industrialised nations of Asia (the "tigers" and "cubs") would continue their heady boom. The capital that would pour into the Third World countries, along with the intensification of privatisation programmes in these countries, would help close the gap between them and the industrialised world. It was taken for granted that a globalised economy in which free-flowing capital interacted directly with growing millions of consumers would boost production to greater levels, end unemployment and raise wages in both developed and developing countries.
Moreover, rising hopes were pinned on achieving not only a miracle, but a series of miracles, by the grace of God and the dynamism of capitalism in the age of the scientific and technological revolution. The east of unified Germany would catch up with the economic miracle of the west. The US, Western Europe and Japan would go on growing. In fact, speculations proliferated that the US would outstrip all economic marvels in history. It would put an end to that affliction capitalism has endured for centuries: the "business cycle" of alternating booms and slumps. Stagnation would be no more; instead, there would be infinite growth. There were also predictions that the Asian miracle -- praised for a variety of contradictory reasons (as testimony to the success of liberal economy, for its observance of national specificities, or for its adherence to indigenous spiritual values) -- would become the model to be emulated by all the nations of the South.
Such was the confidence in the future of global capitalism after the fall of bureaucratic socialism that rivaled it throughout the Cold War, that it was frequently described as the end of history. Visions abounded of the reiteration of the Swedish miracle, which brought higher standards of living to the majority of the population while preserving the freedom and advantages of private ownership, without class struggle or the need to create an alternative social system. It was "self-evident" that the capitalism of the 21st century was a far cry from the capitalism of Marx's day. Contemporary capitalism does not pit the accumulation of wealth against the survival of the poor, and the middle-classes (not the proletariat) have come to form the majority in capitalist societies. Indeed, the British Labour Party has modified its platform to state that a market economy is the best way to organise the economy because, provided the government does not intervene, it has the infinite and spontaneous ability to solve all humanity's problems.
We turn now from these alluring dreams, fed and embellished by the media and proponents of global capitalism, to reality. Now, at the end of the '90s, no one would dare talk about the flourishing capitalist economy in Russia, or any other country from the former socialist community. Under the "reforms", the performance of the Russian economy has plummeted by over 40 per cent from its 1991 level. Even the most pro-capitalist observers do not deny that the Russian economy today is dependent upon speculation and organised crime. Most of the foreign assistance that flowed into Russia in the '90s was re-exported by the fortunate for investment abroad. Because of the dynamics of capitalism, wage arrears, by the end of August 1998, amounted to a quarter of the GDP. On 15 March 1999, Time magazine wrote that the Czech Republic "has nothing to celebrate but the tattered remnants of the Velvet Revolution". Its prognosis of the Czech economy was dire: it was "grinding to a halt", unemployment was rife, investors had no confidence and banks were "moribund".
For Germany east, instead of catching up with the west, unification brought over a ten per cent rise in unemployment. For all the former socialist countries, it was not merely a case of unfulfilled dreams. The circumstances of the majority of their populations are now far worse than they were in the days of the iron curtain. Their growing disillusionment with capitalism is reflected in the votes cast for former communists and socialists in the electoral game that has, in reality, changed nothing.
And the Asian miracle? No doubt, as a left-wing journal such as International Socialism admits, the "tigers" and "cubs" attained very high growth rates as the result of the convergence of internal and external factors. The most important of these was the influx of Western capital into the Asian showcases of contemporary capitalism before the end of the Cold War, a process made possible by the growing integration of financial markets and deregulation policies which enabled the freer flow of capital. But economic growth in these countries was steered by export trade and commandeered by the government and protectionist policies.
The Western media, of course, glossed over that detail in order to portray the economies of these countries, before the crisis struck in 1997, as the models of the vitality of free capitalism. The crisis that rocked these countries in 1997 necessitated a reanalysis. Now these countries were examples of an anomaly in capitalism -- crony capitalism, in which economic advantages are granted according to family or political ties rather than won through free and fair competition.
According to left-wing writers, the crisis was precipitated by unrestrained, very short-term speculative investment, financed to a large extent by foreign loans and with a growing emphasis on real estate speculation. This type of speculative investment rose to three times the growth rate of the GDP. The Asian economic miracle thus carried the seed of its own crash: the money that flowed in from abroad to create the "bubble" economy left as quickly as it came. When the volume of stock market speculation begins to greatly outstrip productive capital, a crash must be in the offing, according to such economic analysts.
In the days of the boom, amidst the onslaught of the heady growth statistics testifying to the economic marvel taking place in Southeast Asia, little attention was paid to the World Bank's observation that a billion inhabitants in these countries lived below the poverty line or to UNICEF's warning that the levels of malnutrition in some of these countries (Thailand, Indonesia and Malaysia) approached those of Africa. Nor did the panegyrics make mention of the fact that the economic boom required the exploitation of workers, including women and children deprived of trade union and political rights. The actual purchasing power of the average wage in some of these countries stood at less than 1/8 of its European counterpart. In Indonesia, half the work force earned less than three dollars a day, and migrant labour earned even less due to systematic discrimination. In the wake of the crisis, the human catastrophe in terms of unemployment and poverty levels has augmented in proportion to the shrinking economies in these countries.
The Asian economic crisis is also related to the stagnation in the Japanese economy, where bad debt accumulation has made it difficult for entrepreneurs to obtain cheap loans. The crisis in Southeast Asia has sapped the Japanese economy of the profits of investments and the returns from exports. The situation is exacerbated by rising unemployment and the consequent decline in domestic consumer demand. Most analysts agree that the Japanese economy in 1998 has shown the worst level of performance since 1955.
With Japan and Southeast Asia mired in deep depression, we turn now to that other promise touted by the proponents of the new capitalist order: the closing of the gap between the developing and industrialised worlds, once the former relinquishes such objectives as national independence and autonomous development.
Contrary to the buoyant forecast, statistics show that international capital mobility has produced a high concentration of foreign direct investment (FDI) within the major industrial countries, while the developing countries remain marginal. The US, Europe and Japan, representing 28 per cent of the world's population, receive 91.5 per cent of all FDI. Twenty per cent of the world's countries account for 84.7 per cent of the world's gross production and operate 84.2 per cent of international trade. Their populations own 85.5 per cent of the total savings in the world (from Hirst and Thompson, Globalisation in Question).
In other words, the gap is growing, not shrinking. According to the UNDP Human Development Report of 1997, the richest fifth of the world's population obtains 86 per cent of world income, while the poorest fifth receives less than 6.3 per cent. Life, for the 4.4 billion people in Africa, Asia and Latin America, has become, literally, not worth living. According to the UNDP report, 1.3 billion people in the world live on less than a dollar a day. The number of poor in Latin America has increased by 48 per cent between 1990 and 1995, from 182 million to 230 million -- and the general standards of living in that continent are better than in Africa and Asia.
The polarisation of wealth and poverty under the current form of global capitalism, therefore, is not greatly different -- and is perhaps worse -- than it was under the capitalism of the 19th century.
*The writer is a member of the Supreme Council for Culture and a distinguished critic.
