How have economic institutions and transnational corporations influenced development?
The 1980s saw recession in the industrialized world, high interest rates, debt and balance of payment crises rain down on poor countries with disastrous consequences. Social expenditures were dumped and instead came the stabilization and painful structural adjustment. The use of aid was subjugated unashamedly to donor agendas, to expanding the global economy and protecting it from financial risk. The World Bank and IMF pushed a macroeconomic agenda known as the Washington Consensus which was all about prudent fiscal and monetary policies, control of inflation and leaving things to the market. Their loan packages required countries to cut services, depress wages and as a consequence throw millions of people out of work. There was a new emphasis on private flows of capital and on opening up private-public partnerships – often a recipe for private profit by corporations and their allies, and public theft of people’s resource base and livelihoods. Structural adjustment brought new orthodoxies of deregulated markets, dismantling of trade barriers, privatization, the shrinking of government, and cutbacks of social expenditure to indebted developing nations. There were massive lay-offs in the public sector, unemployment spiraled and budgets for health, education and social safety nets reduced. Structural adjustment may have helped salvage the international banking system but it hindered struggling local economies.
Developing nations became incredibly vulnerable and transnational corporations took full advantage. By the end of the 20th century, corporations had become the principle designers and controllers of the world economy and conducted two thirds of the world’s trade. Many are richer and more powerful than nation states. The giant logo-land they produce is the familiar face of globalization and the part that has been most heralded as improving the economic prospects of the developing world by creating jobs and purchasing power. Governments compete for their business by lowering taxes and labour regulations, creating inhumane ‘export processing zones’. The purpose of these companies is devoid of moral purpose and their only legal obligation is to act to ensure maximum profits for their stakeholders, not for the advancement of the human condition. Poverty in the form of rock-bottom wages is the comparative advantage these environments offer. However, if labour is cheaper and more malleable elsewhere, if better deals can be cut for tax holidays and the political environment is more secure, workers will loose their jobs tomorrow. When these people are asked what they find most difficult about this regime, the most frequent response is insecurity and powerlessness. There is no growth here of a kind in which people with fraying livelihoods can share. On the contrary, where they look like potential competitors, the poor are systematically cut out. Because capitalism has come into the periphery from the centre, rather than nurtured from within, it has served to constrict, not to advance development.
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| World Bank/IMF Development Committee 2009 |
Finally, people in the South are not the only ones to have suffered in consequence of deregulated markets. When, in the 1990s, the World Bank and IMF ordered developing nations to open up their financial markets under the pretence of development, there was an explosion of electronic financial transactions. Money chased money on short-term speculation rather than real goals and services. The effect was artificial confidence, volatility, debt and global recession. Millions in the developed world face unemployment, insecurity and hardship, and the poor and vulnerable have once again been hardest hit. Counties who have been unable to keep their financial institutions afloat have borrowed heavily and face the same burdensome IMF and World Bank policies designed to stabilize global markets at the expense of people’s livelihoods. Those who were not responsible have been heavily punished whilst responsible but unaccountable institutions have been bailed out with public funds. There is growing public discontent with these institutions, their lack of ethics and the social injustice on which they seem to thrive. When democratic institutions, responsible for protecting citizens from exploitation, bow to the wishes of corporations, relinquish power and become unable to regulate and control them to the effect of becoming inferior, they are no longer able protect its citizens from corporate policies and greed. Citizens in the North and South have responded with social cooperation and are demonstrating their unwillingness to accept a society whose institutions are governed by unaccountable, for-profit corporations. Until global financial institutions and transnational corporations become accountable to the public and the imbalance of power and wealth is addressed, inequalities between rich and poor seem likely to increase. Economic and social injustices provoked by the policies of a money-centered, rather than person-centered global system, will continue to negatively affect poor people’s standard of living in the name of development.
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| Activists protest outside IMF/World Bank Meeting |
Most of this is lifted straight from the New Internationalist's author Maggie Black's and her excellent pocket size book 'International Devlopment' http://www.newint.org/books/no-nonsense-guides/international-development/
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