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HEADLINE: There's Something Happening Here; WHAT'S THAT SOUND? A NOISY AND GROWING CHALLENGE TO THE GLOBALIST CONSENSUS. DESPITE WHAT SOME PUNDITS WOULD HAVE YOU BELIEVE, THESE PROTESTS AREN'T JUST FREAK SHOWS.
BYLINE: Jerry Useem
BODY: Around 1 P.M. on Monday, April 17, a woman with a foam evergreen tree on her head stood before a police barricade on Washington's Pennsylvania Avenue, picked up a bullhorn, and asked several hundred protesters to repeat after her. "We the people"--"We the people"--"are going to enter"--"are going to enter"--"the World Bank"--"the World Bank"--"and IMF meetings"--"and IMF meetings." The police, looking weird and foreboding with their riot gear, gas masks, and armored vehicle, politely demurred. "That isn't going to happen," said one.
A line of protesters advanced anyway, arms locked and chanting, "Nonviolence!" A few confusing moments later nightsticks were swinging and the protesters were falling back amid a cloud of pepper spray. A bullhorn nearby began blaring the Darth Vader theme from Star Wars.
That was just one moment of many during the rain-soaked festival of protest against the World Bank and International Monetary Fund--a festival of ragtag activists who arrived with a variety of beefs (hormone-free, of course) and got arrested and occasionally beaten for their trouble. But less remarked upon--and far more troubling, in the end--was the beating the protesters suffered at the hands of mainstream pundits.
Some of this was to be expected; as targets go, the protesters were about as fat as they come. Their economics were often mixed up. They attracted a fringe of anarchists and down-with-capitalism types. They used the word "evil" a lot. And, let's face it, a grown man dressed up as a sea turtle just looks funny.
Still, the intellectual pig pile that ensued was startling in its ferocity. GLOBAL VILLAGE IDIOTS, snarled the Wall Street Journal, which mocked the protesters for "bringing their bibs and bottles to the nation's capital this week." Newsweek contemptuously dismissed the event as a "parody of protest" staged by shiftless Deadheads "who have virtually no grasp of the issues."
The New York Times op-ed page, too, was a broth of invective, launching no fewer than three broadsides. David Frum, in a vacuous bit of redbaiting, argued that because socialism had failed, "people like the Washington protesters are left with nothing constructive to say about poverty and development." The influential foreign affairs columnist Thomas Friedman, last heard trashing Seattle's WTO protesters as "a Noah's ark of flat-earth advocates, protectionist trade unions, and yuppies looking for their 1960's fix," wasn't much kinder.
What these globalization troubadours seem to find especially galling are alarmist statements like "The current situation condemns hundreds of millions of people to unnecessary suffering and millions to premature death, and [the World Bank and IMF] are parties to the disaster." Or moralistic declarations like "It is high time that we take the IMF seriously--seriously enough to hold it accountable for its actions, its failed forecasts, and the details of the 'advice' that it imposes on the developing world."
But those aren't the words of some window-smashing crank. They're quotes from Jeffrey Sachs, the Harvard economist--the first from a speech he delivered to the World Bank a couple of days after the April protest, the second from a 1998 article he wrote for The American Prospect.
Lest we forget, Sachs is no foaming radical; he was closely associated with the "shock therapy" reforms administered to the former Soviet bloc. But he's willing to concede what the know-it-all commentators, in their rush to educate the masses, won't: The protesters have a point. A good point. A point that cuts to crucial questions about what the global economy will look like, how it will be governed, and whose interests it will serve. Their new breed of economic activism has appeared not only in Seattle but also in Davos, Switzerland; the City, London; and now Washington, D.C. It represents nothing less than a challenge to the "Washington Consensus"--the shorthand favored by global technocrats to describe the triumphalist mix of free markets and American-led turbocapitalism that has fueled policymaking for the past decade.
In short, the movement appears to have legs. The world's financial and corporate elites would do well to listen up.
But first, to address the question everyone is asking: Who are these people? To hear most pundits tell it, the average protester was a wild-eyed protectionist/Luddite in thrall to both Pat Buchanan and the vegan lobby. Paul Krugman, the MIT economist and Times op-ed contributor, even coined a name for this pathetic woodland creature: Seattle Man.
This makes for a wonderful straw adversary, but Seattle Man bears little resemblance to any of the people I met in the streets over four days. Most were young, most were moralistic, many were attached to "affinity groups" with goofball names like the Groucho Monarchs. Yet very few were peddling economic autarky as the solution to the world's problems.
Nevertheless, beneath the cavalcade of cliches--the Che Guevara flags, the "Times They Are a-Changin'" sing-alongs--there was a heady sense of their having found the common denominator, perhaps even a Grand Unified Theory of protest. "A lot of people think this might be the thing of our generation," gushed Russell Cote, a student at Seton Hall Law School.
That thing, of course, is "globalization," loosely defined as the system of worldwide integration by which goods, capital, and labor are free to move across national borders. Most of the protesters said they didn't object to this system per se; they seemed to have been sufficiently drilled in their economics classes on free trade's very substantial benefits. But they objected to the system's more deleterious effects, such as the widening income gaps among and within countries, which many studies have traced to globalization. (However, it's also true that most of those studies also link globalization to higher overall growth rates.) More controversially, the rabble said they stood for the right of "indigenous peoples" to balance the priorities of their local, if somewhat inefficient, economies against the relatively theoretical dictates of a hyperrational global marketplace. Their motto could well have been a flip-flop of the usual call to arms: THINK LOCALLY. ACT GLOBALLY.
The institutions at issue in D.C.--primarily the World Bank and IMF--struck many observers as odd targets. After all, a sign beside the entrance to the Bank reads, OUR DREAM IS A WORLD WITHOUT POVERTY. Hardly the stuff of mass unrest. But then few Americans understand what the Bank and the IMF actually do.
The two sister institutions, located across from each other on 19th Street, were created at the 1945 Bretton Woods conference--the Bank to lend money for development, the Fund to provide short-term liquidity loans to governments. The mission of the IMF, especially, has expanded greatly since then. It now oversees long-term reform in some 70-odd developing nations, assuming so instrumental a role in those countries' everyday affairs as to border on a shadow government. The comings and goings of IMF officials are frequently headline news.
The IMF's pitch to developing countries is basically this: We'll offer you x billion dollars, but only if you hew to a strict set of conditions--balanced budgets, low tariffs, free capital movements, deregulated labor markets, privatization, abolition of subsidies, and the rest of the neoliberal package that the Times' Friedman has aptly dubbed the "Golden Straitjacket." The theory: Reform yourselves to look like an open, Western economy, and GDP growth will follow in the long run. The short-term reality: austerity programs that often require deep cuts in health, education, and other basic spending.
Countries are nominally free to decline these loans, of course. But brush off the IMF, and private lenders and investors won't be knocking on your door anytime soon. "The IMF gets its way," writes Sachs, "because to disagree publicly with the IMF is viewed in the international community as rejecting financial rectitude itself."
So to whom does this immensely powerful institution answer? The IMF will tell you it's accountable to its 182 member governments, which is true. But voting is weighted by financial contribution, meaning the wealthy G-7 countries collectively control 45% of the voting power; India, home to one-sixth of the world's population, controls 2%. Not that the IMF holds many votes, anyway. Most of its deliberations, including the selection of its managing director, are conducted behind closed doors.
The protesters accuse the U.S. of using the IMF as a stalking-horse to foist its brand of unfettered capitalism on the rest of the world--a charge the cognoscenti dismiss as the rantings of economic illiterates and "one-world paranoids." But in March the Meltzer Commission, appointed by the Republican Congress to recommend IMF reforms, delivered the following assessment: "The G-7 governments, particularly the United States, use the IMF as a vehicle to achieve their political ends. This practice subverts democratic processes of creditor countries." If this statement raises a question, few in the press are asking it.
If the opacity of the IMF isn't enough to warrant closer inspection, its economic policies would seem to be. They have frequently proven ineffective, and occasionally disastrous. The Meltzer Commission could hardly have been blunter on this point: "Numerous studies of the effects of IMF lending have failed to find any significant link between IMF involvement and increases in wealth or income. IMF-assisted bailouts of creditors in recent crises have had especially harsh effects on developing countries. People who have worked hard to struggle out of poverty have seen their achievements destroyed, their wealth and savings lost, and their small businesses bankrupted." A Jamaican cabdriver in D.C. concurred: "The IMF holds the haft of the sword," he said, "while the rest of the world holds the blade."
The IMF's biggest test case to date was the Asian financial crisis of 1997. The IMF points to Asia's subsequent rebound as proof of the efficacy of its intervention, blaming the crisis on "crony capitalism." And Friedman, in his best-selling book about globalization, The Lexus and the Olive Tree, takes that argument a step further: "I believe globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Indonesia, Mexico, Russia, and Brazil in the 1990s, because it laid bare a lot of rotten practices and institutions," he writes. "Exposing the crony capitalism in Korea was no crisis in my book."
But a very different story has emerged from such critics as Joseph Stiglitz, the former chief economist of the World Bank. As Stiglitz and others tell it, the roots of the crisis lay not in "crony capitalism" at all (indeed, Paul Volcker has noted that Asia grew quite handsomely for decades with its crony capitalism very much in place), but rather in a common result of economic liberalization: a flood of speculative, short-term capital that caused a real estate bubble in Thailand, then flooded out once the bubble burst. In other words, Stiglitz says the problem wasn't lack of openness but too much of it too soon. And who had pressured these countries to fling open their capital markets so precipitately? The U.S. Treasury and the IMF.
Though the point was often overlooked as capital rushed for the exits in Asia, it's worth remembering that countries like Taiwan and South Korea at the time still boasted sound fundamentals--budget surpluses, low inflation, high savings rates. No one disagrees that something had to be done to calm jittery creditors, but respected skeptics like Sachs maintain that the IMF's actions made a very bad situation worse. Its pronouncements that immediate surgery was needed, coupled with its Draconian prescriptions--bank closures, budget cuts, higher interest rates, and structural reforms intended to root out everything "wrong" with the Asian brand of capitalism--had an excessively deflationary effect, Sachs insists. "Instead of dousing the fire," he writes, "the IMF in effect screamed 'Fire!' in the theater." Stiglitz agrees that he, too, was "appalled."
The Asian economies recovered, but not before millions were reduced to the poverty many of them had so recently escaped. (And not before Malaysia flouted the IMF's advice by imposing capital controls that, shockingly, failed to bring about the predicted calamity.) More important, the critics complain that, in every crisis, whether in Africa or Latin America or Russia, the IMF deploys the same cookie-cutter policies. Stiglitz claims the economists who designed them "are more likely to have firsthand knowledge of [a country's] five-star hotels than of the villages that dot its countryside."
The World Bank has come in for similar abuse from a broad spectrum of opinion. What's under attack is a culture that rewards loan-making for its own sake, solicits little input from the local citizenry, favors huge infrastructure projects over direct poverty alleviation, and ignores the often devastating effects of its projects (the Sardar Sarovar Dam in India, to name but one horror story, threatens to displace a million or so people). But numbers speak loudest: By the Bank's own reckoning, nearly 60% of its projects are failures. In Africa, its track record is virtually unblemished by success.
Of course, everyone's record in Africa is abysmal, from the most earnest nongovernment organizations on up. And therein lies the dilemma. It's easy for Seattle Man or Stiglitz (or me, for that matter) to pile on and blame the World Bank and the IMF for holding out the sword blade-first. But how else to hold it? The issues here are fearsomely complex. But alternatives do exist. Take the fundamental question: Even granting the IMF's and World Bank's flaws, would the global economy really be better off if these institutions didn't exist? Well, at least one distinguished (and mainstream) group, the Meltzer Commission, has essentially said yes. In its reform proposals, the commission calls for getting the IMF out of the nanny business and limiting itself to emergency lending during currency crises. It would also shift the World Bank's focus away from lending toward development assistance.
Even if the Bank and IMF stayed exactly as they are, they could stand a little structural adjustment of their own. Unlike your average elitist CEO, for example, most of these officials have never had to answer to anyone, least of all to a posse of angry shareholders or boycotting consumers or Greenpeace activists. Their insularity has bred, if not contempt, a palpable measure of obliviousness.
Which brings us to the third leg of what the protesters insist on calling the Iron Triangle of globalization: the World Trade Organization, object of last fall's Seattle ruckus. Based in Geneva, the WTO wields far less power than the World Bank or the IMF. Yet its single-minded focus on flattening trade barriers obscures the fact that some basic economic differences are rooted in national choices about how to organize a society or a culture--and are driven by local politics. Who makes the decision when those choices don't square with the appetites of the global technocracy? Indeed many of the strategies pursued by the U.S. and Japan early in their own developments--selective tariffs, a bit of industrial policy here and there--wouldn't be permitted under today's WTO regime, which tends to see just about everything as an impediment to trade. Nor are the rich nations above occasionally rigging the game in their own favor. A tax holiday for America's fledgling e-commerce industry is all fine and good, but an African nation looking to protect its fledgling manufacturers--now that's antitrade, isn't it?
Taken together, these problems point to a looming democratic crisis of sorts. As Friedman argues in his book, decision-making is migrating to the international level, effectively stripping nation-states of some of their sovereignty. That in itself may not be a bad thing, but unlike national governments, these global institutions aren't bound by a broader system of checks and balances. In the meantime, there is literally no forum where representatives for workers, communities, human rights, or the environment can make their case at the global level with any hope of being heard. Except, of course, the streets.
Out in said streets, I ran into a business student from George Washington University named Paul Paftinos. We were watching 600 protesters being rounded up, bound with yellow plastic cuffs, and shepherded onto a fleet of school buses. Paftinos noted disapprovingly that some of his fellow students might have been among them. "Aspiring business people shouldn't be protesting against imperialism," he said, with all apparent sincerity. "It's a conflict of interest."
Vivek Maru, a protester and second-year student at Yale Law School, seemed untroubled by such conflicts. He was wearing a Salomon Brothers jacket, the relic of a summer internship. "We're trying with voices and bodies to narrow this disjunct between abstract economic theories and real people on the ground. We're here standing against Fukuyama's "End of History,'" he said, invoking the 1989 article that famously announced the world's convergence on a single model of democratic capitalism. "Alternatives are being extinguished. But this is not the end."
Many doubt that such pleadings--or less reasoned ones, like the words SUCK IT, IMF! scrawled on 19th Street--can make much of a difference. The response to the spectacle of Gordon Brown, Britain's Chancellor of the Exchequer and thus a major player in the IMF, wasn't exactly encouraging: "Well, we didn't hear the protesters, and the meeting went on as normal; it started on time, and it was completed in the normal way."
And the sit-down-and-shut-up crowd does hold one final trump card. It's a cry that has become the 21st century's equivalent of waving the bloody shirt: "Protectionism!" There's not much to say to this, other than to observe that globalization's boosters seem to have become so besotted by its benefits, so forgetful that it creates both winners and losers, so intent on speechifying about the "power of the American idea," that they're at risk of becoming every bit as knee-jerk and blinkered as the most rabid protectionist. As Edward Luttwak, a senior fellow at the Center for Strategic and International Studies in Washington, quips: "The last time there was a group on the world scene who were this convinced they were completely right, it was the Bolsheviks."
The point is not that global integration is a bad thing. The point is that there is, or should be, a discussion here. It's not about free trade vs. protectionism, or capitalism vs. socialism, or anything easily reducible to a bumper sticker. Rather, the new debates will be about different variants of capitalism; about how much power nations should cede to the global marketplace; about the extent to which an economy should sustain a society, as opposed to the reverse. They'll be about the tradeoffs between economic security and economic efficiency, between growth and equality. And let's not forget: We do have a choice in these matters. New technologies will continue to make the world a smaller place no matter what, but economic integration is still very much driven by discrete political decisions. "The rules are not predetermined," says Harvard economist Dani Rodrik. "Globalization is not something that's just falling into our laps from another planet."
The wackos in the streets in Seattle and D.C. have caught on to this. Yes, their kind of protest is an ugly, untidy form of social change. It forces us to deal with women with foam trees on their heads. Many will find this lamentable. As Jesse Helms is supposed to have said once, "Democracy used to be a good thing, but now it has gotten into the hands of the wrong people." But it's time the empty cheerleading stopped. Else we might wake up one day to find that the cherished Washington Consensus has become a consensus of one.
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