Recovery with a Human Face
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Recovery with a Human Face

A discussion on alternatives for a socially-responsive crisis recovery
 

May 31st, 2013

5/31/2013

 
Dear friends,

My own analysis of the report of the High-Level Panel on the Post-2015 Development Agenda (and quoting Gabriele):

United Nations Goals for 2030 - putting business at the center

 
"Eradicating extreme poverty from the face of the earth by 2030" should be "central" to a new development agenda, recommends a High Level Panel (HLP) of eminent persons
co-chaired by UK Prime Minister David Cameron and presidents Ellen Johnson Sirleaf of Liberia and Susilo Bambang Yudhoyono of Indonesia.

The initial reactions from civil society organisations were not enthusiastic. "Uninspiring" was a term frequently heard and one of the first comments published (by German development economist Gabriele Koehler) is titled "more of the same, just prettier."

A commentator argued that "this is not business as usual, but rather putting business at the center."

Thus, for example, at the last hour, the second suggested anti-poverty indicator, which in the latest drafts read as "remove and prohibit all forms of discrimination related to tenure rights" was changed into "increase by x% the share of women and men, communities, and businesses with secure rights to land, property, and other assets".

Putting business as right holders at the same level with "women, men and communities" sounds pretty much like US presidential candidate Mitt Romney, when he stated that "business are people too", said an NGO activist.

The poverty eradication pledge adopts the very low $1.25/day benchmark and echoes a similar commitment endorsed by the World Bank in its Spring meeting last April.

The HLP acknowledges in its technical notes that "continuing on current growth trends, about 5% of people will be in extreme poverty by 2030."

Since the error margin of those estimates is much
higher than 5%, the "zero poverty in our generation" promise is not really a commitment but just a prediction of what is bound to happen anyhow. In itself, the HLP's poverty pledge does not require any action from governments or the international community.

The HLP report is structured in a main section and two annexes, one with 12 suggested goals and 58 targets to substitute the current 8 MDGs when they expire in 2015 and another one with technical notes and explanations about the proposed goals and objectives and the indicators that should measure them.

The HLP explains that those goals "similar to the MDGs are not binding in international law" and they would merely be "tools of communication, inspiration, policy formulation and resource mobilisation."

While the UN is required to provide regular unified reporting on progress, accountability and peer review should mainly happen at regional level.

The list of suggested goals echoes that of the present MDGs with some re-arrangements and editorial changes.

Food security and nutrition, currently merged with Goal 1 on poverty, is made into a separate goal. The current three health-related goals are merged into one.

Universal access to water and sanitation, currently part of the environmental goal, is made into a separate one, as well as "securing sustainable energy", while new goals are
incorporated on "good governance" and "ensuring stable and peaceful societies".

Old Goal 8, on "global partnership", which captured
responsibilities of developed countries, is now titled "creating a global enabling environment and catalyzing long-term finance."

The new formulation repeats the unmet (if not continually broken) promise of "an open, fair and development-friendly trading system" and adds one on "holding the increase in global average temperature below 2 degrees C above pre-industrial levels, in line with international agreements".

It repeats the UN agreed language on committing 0.7% of GNP as ODA but excludes all mention of least developed countries, small island states and landlocked countries.

It also drops the promise to "deal comprehensively with the debt problems of developing countries" and instead makes it into an objective to "implement reforms to ensure stability of the global financial system and encourage stable, long-term private foreign investment" and also to "reduce illicit flows and tax evasion and increase stolen-asset recovery by $x".

The use of ‘x' as a number to be negotiated appears 26 times in the 58 suggested goals and it indicates either a target to be defined nationally, as in "reduce violent deaths
per 100,000 by x", an area where further technical work is necessary to find appropriate indicators, as in "cover x% of people (...) with social protection systems" or an issue on which a minimum global standard needs to be negotiated
and agreed upon, such as in "decreas(ing) the maternal mortality ratio to no more than x per 100,000."

Even when the panel "recommends that all these goals should be universal", such universality is understood as representing "a common aspiration for all countries" since almost all targets should be set at the national level.

A few targets are global, like, for example, "doubling the share of renewable energy in the global energy mix," which would mean 30% of renewable sources by 2030 and is below what would be required by the target of keeping global warming below 2 degrees C.

The document is titled "A New Global Partnership" and the panel claims that, in preparing it, "we heard voices (...) from over 5000 civil society organisations working in about 120 countries" and "we also consulted the chief executive officers of 250 companies in 30 countries, with annual revenues exceeding $8 trillion".

"Money certainly talked louder", commented an NGO representative, pointing to 30 occurrences of the terms "civil society" or "CSOs" in the text against 120 of the words "business", "corporations" or "companies", while "trade unions" and "workers" are mentioned only three times each and "goverments" 80 times.

Business is explicitly mentioned as holder of equal rights as people in terms of land property (which would require constitutional changes in many countries); and in the gender equality goal, the rights of women that are mentioned explicitly are the rights to inherit property, sign a contract, register a business and open a bank account.

Sexual and reproductive rights are mentioned, but under the health goal and this is the only mention of "rights" in relation to health or education.

Illicit tax flows and tax evasion are to be "reduced" with unspecified targets, but the only reforms envisaged in the
global financial system are those aimed at "ensure stability" and "encourage  stable, long-term private foreign investment."

The jobs goals includes an objective on "creating an enabling business environment and boosting entrepreneurship" but does not mention market failures, while the "good governance" goal includes "ensur(ing) officials can be held accountable" in order to reduce corruption and bribery.

It says nothing, however, about accountability of corporations paying bribes.

The HLP suggestions fall behind already agreed principles, such as the Guiding Principles on Human Rights and Extreme Poverty adopted by the UN General Assembly unanimously in September 2012, where "as part of international cooperation", States commit to "conducting
assessments of the extraterritorial impacts of laws, policies and practices" and establishes that "business enterprises, have, at the very minimum, (...) to avoid causing or contributing to adverse human rights impacts through their
activities, products or services, and to deal with such impacts when they occur."

In a moment when, in the words of IMF managing director
Christine Lagarde, "rising income inequality is a growing concern for policymakers around the world", the panel largely ignores the issue.

Recent IMF research, explained Madame Lagarde last May 15, "has shown that prolonged periods of steadily rising output are associated with more equality in income distribution. In other words, more equal societies are more likely to achieve lasting growth".

Yet, what the HLP suggests lags behind this new
Washington discourse and only talks about "equality of opportunity" but does not mention distribution or redistribution.

Formally, the report of the HLP is now on the desk of the Secretary-General of the UN, who can use its suggestions or not and merge it with other input to prepare his own report to the General Assembly, which is due next month.

Politically, it might set the tone and the agenda of the debate around the so-called "post-2015 development agenda", due to the high profile of the panel members and the intense mobilisations and debates that surrounded its preparations over the last ten months.

Roberto Bissio
Executive Director of the Third World Institute based in Uruguay and coordinator of Social Watch.

May 31st, 2013

5/31/2013

 
Dear friends,
Please see my initial reaction to the Report of the High-Level Panel on the Post-2015 Development Agenda - More of the same, just prettier.
http://www.gabrielekoehler.net/ 
 
Gabriele Koehler
Development economist
formerly UN

May 23rd, 2013

5/23/2013

 
Dear Jomo,
If you start from the original poverty definition of $1/day (1985 dollars) that was used in writing up MDG-1 and then correct for inflation in the US in the 1985-2005 period, you arrive at an equivalent poverty line of $1.815/day (2005 dollars), much higher than what you indicate (www.bls.gov/data/inflation_calculator.htm).
You can go to PovCalNet (http://iresearch.worldbank.org/PovcalNet/index.htm) to see what a difference this makes. If the poverty line is fixed where the World Bank now fixes it, at $1.25/day (2005)
= $38/month (2005), then the number of poor is 1908.45m in 1990 and 1214.98m in 2010 for a 36.34% reduction over twenty years -- enough to halve the proportion
of poor in the LDC population.

If the poverty line were fixed at the inflation-adjusted equivalent of where it was initially fixed, at $1.815/day
(2005) = $55.18/month (2005), then the number of poor is
2698.42m in 1990 and 2146.68m in 2010 for a mere 20.45% reduction over twenty years -- nowhere near enough to halve the proportion of poor in the LDC population.

All the best,
Thomas Pogge
Leitner
Professor of Philosophy and International
  Affairs



    Yale University, PO Box
208306, New Haven, CT
06520-8306


May 23rd, 2013

5/23/2013

 
Dear Jomo,

Thanks for your extremely helpful analysis. I am attaching the English version of a column I wrote last week on this issue for "La Primera" of Lima, Peru (see  http://agendaglobal.redtercermundo.org.uy/2013/05/16/demasiado-importante-para-los-economistas/) , which echoes on Pogge's suggestion that the $1.25 line is too low and also comments on the debate between "absolute" and "relative" poverty. It seems that the historic evolution of the poverty line, even when conceptualized in absolute terms has
shown elasticity to accommodate to the evolution of income, thus making "theoretical" poverty match "perceived" poverty... Until the World Bank rigidly constrained that evolution. The result has been a lowering of the poverty line
in relation to income much bigger than in relation to inflation, and an increased dissociation, which thus allows for the "war on poverty" to be successful... but not in the eyes of public perception.

best regards,
Roberto Bissio
Executive Director of the Instituto del Tercer Mundo (Third World Institute), Uruguay.

May 19th, 2013

5/19/2013

 
Dear friends,

Several posts in this e-discussion have expressed concern on the way poverty reduction is being addressed including the way poverty is measured. 

In early 2012, outgoing World Bank President Robert Zoellick announced that the Millennium Development Goal of halving the global poverty rate relative to its 1990 level had been achieved in 2010 – five years ahead of schedule. But many analysts have challenged estimates that rely on the World Bank’s current poverty line, raised in 2008 from $1 to $1.25 per day, in purchasing power parity (PPP) terms.

While FAO is aware of the limitations of its hunger index
(see SOFI Technical Appendix), there appears to be less progress on this measure. As the poverty line is mainly defined in terms of what it takes to avoid being hungry, this
raises troubling questions for monitoring and estimation of both hunger and poverty.

Critics argue that, for methodological reasons, the PPP-based poverty line misrepresents the prevalence of poverty worldwide. For example, the three rounds of the International Comparison Programthat have been conducted so far have each defined the poverty line differently. In fact, inflation in the United States suggests that the poverty
line should have been raised to $1.45 per day by 2005.

Improving global poverty estimates – the World Bank’s begin in 1981 – requires overcoming three major problems: insufficient survey data, flawed survey execution, and faulty PPP conversions. Unfortunately, the current approach has inadequately addressed these issues. An improved poverty indicator is urgently needed.

An edited version of a recent discussion may be of
interest http://www.project-syndicate.org/commentary/the-weakness-of-global-poverty-estimates-by-jomo-kwame-sundaram#wpvzQ0JqzraCvcGS.99

Jomo Kwame Sundaram
Assistant Director General Economic and Social Development Department
Food and Agriculture Organization

May 08th, 2013

5/8/2013

1 Comment

 
Dear All
 
Protection of commons or public provisioning of social services is a crucial countervailing instrument for preventing the rise in inequality during the market-driven growth process. Thus, public provisioning of basic social services through progressive taxation is fundamental for inclusive development. 
 
This is confirmed by the findings in the recently published ESCAP’s flagship publication, Economic and Social Survey for Asia and the Pacific 2013. It finds negative associations between tax-GDP ratio and Gini and between public social expenditure and Gini.
http://www.unescap.org/pdd/publications/survey2013/download/index.asp

The theme of the ESCAP’s 2013 Survey is “Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development”. You may recall, world leaders have affirmed their commitment to “forward-looking”macroeconomic policies both at the Rio+20 conference (Outcome document, para 150) and at the 2010 MDGs Summit (Outcome
document, para 23b). The Secretary-General’s Report, “Keeping the Promise” for the 2010 MDGs Summit outlines “forward-looking” macroeconomic policies (para 50).

The ESCAP’s 2013 Survey outlines forward-looking macroeconomic policies by proposing a 6 point agenda to
enhance the region’s resilience and inclusiveness. These include the provision of an employment guarantee for a limited number of days (100 days) in a year, basic social services in education and health, income security to older persons and persons with disabilities and ensuring modern sources of energy for all by 2030.

The 2013 Survey also estimates, as illustrative examples, the public investment needs to deliver this package of
policies in ten Asia-Pacific countries: Bangladesh, China, Fiji, India, Indonesia, Malaysia, Philippines, Russian Federation, Thailand and Turkey, accounting for about 90 per cent of the population in the region.

Total investment for the above package of policies in China, for example, would amount to 2.6 per cent of GDP in 2013, increasing to 3.3 per cent in 2020 and 5.2 per cent in 2030. Estimates for Indonesia, Malaysia, the Russian Federation, Thailand and Turkey, range between 5 and 8 per cent of GDP.

While the amounts are not trivial, these could be self-financed by most governments by broadening tax bases, making tax regimes more progressive and tax administration more efficient, including tighter regulation on tax fraud, as well as reducing non-development expenditure. However, least developed countries and small island states would
require development partnership and cooperation, especially to prevent illicit  transfer of funds.

ESCAP analysis also shows that such investment would not jeopardize fiscal sustainability or price stability. In other words, people and planet-friendly growth is affordable and economically  sustainable, making this a win-win development agenda for our region. This is highly encouraging.

The 2013 Survey argues that the dominant macroeconomic policy paradigm since the early 1980s has been too restrictive and not geared towards a great leap forward to inclusive and  sustainable development. In light of the region’s high degree of economic insecurity, large development and infrastructure gaps and heightened
environmental fragility along with extreme exposure to climate change related  risks, it is necessary to better balance the stabilization and the developmental roles of macroeconomic policies. Macroeconomic policies could and
should be forward-looking in order to play a key role in the region’s next great  transition to inclusive, resilient, equitable and sustainable development.

The 2013 Survey also claims that the region’s structural impediments have added to the problems arising from
the travails of developed countries. The rise in inequality, especially in larger countries of the region, has not only significantly wiped away economic and social gains, is also holding back domestic effective demand. 
 
Most of these structural impediments are due to past policy failures. For too long macroeconomic policies focused on aggregate debt, deficit and inflation and neglected their developmental roles. It is assumed that managing aggregate public debt and keeping inflation at some predetermined low levels would deliver development. However, many countries have achieved them at the cost of development, for example, by cutting public investment in key areas and expenditures on education and health.

The 1997-98 Asian financial crisis and the on-going crisis in developed countries reveal that while the aggregate
debt and inflation are useful indicators, their stabilization does not necessarily produce desirable development outcomes. Rather excessive focus on these aggregate nominal targets made macroeconomic policies pro-cyclical and  exacerbated the crisis. 

Where such policies delivered economic growth, it has not been inclusive enough and has not translated into
increased security of jobs and livelihoods. Instead, growth has been mostly job-less, that is without a commensurate growth of decent and productive employment in the formal sector. As a result, livelihood insecurity and disparities of opportunities and outcomes, including income, assets and wealth, are on the rise and reinforcing one another, especially due to a lack of a decent social protection system in the midst of jobless growth.

Therefore, 2013 Survey argues for a shift in macroeconomic policy paradigm for bringing more balance between the
stabilization and the developmental roles of macroeconomic
policies.

Such balance could entail changing the way fiscal and monetary policies are designed and implemented and how issues of public debt or inflation are viewed. In particular, there has to be greater emphasis on the quality and composition of public expenditure, rather than on aggregate budget deficits and public debts, as argued in previous editions of  ESCAP’s Survey.

Anisuzzaman Chowdhury
Director
Macroeconomic Policy and Development Division (MPDD) United Nations ESCAP Rajdamnern Nok Avenue
Bangkok 10200, Thailand
Email: chowdhury4@un.org
1 Comment

May 08th, 2013

5/8/2013

 
Dear All

There is a growing move towards "Inclusive growth" rather than "Inclusive development". The two are distinct - while inclusive development is about equitable distribution of resources and includes access to and sustainable
distribution of  resources; growth is much more economy and market driven. It is in this mould that states are taking control over/ appropriating  land and natural resources that people have been traditionally dependent upon
and  are expected to sacrifice at the alter of "larger growth".As long as there is economic growth there is little attention given to the growing divide that is also taking place. This is at the root of unrest and people's movements 
Economic gains from ventures overide the social costs.

There is need to go back to terminologies and concepts of the eighties  that laid stress  sustainable and inclusive development rather than market driven economic growth
where in all social services are increasingly being privatised and getting out of the reach of the poor. So countries such as India may have the best health care facility, but it is in accessible to those who need them most. The same is
true of ' world class educational institutions'. One has to only watch the "war" that takes place when a water tanker arrives or at the community tap to see how out of reach even a 'free' resource like water is becoming, even as rivers are being harnessed for industry and cash crops.

Best
Enakshi Ganguly
Co-Director HAQ Centre for Child Rights
B-1/2, Ground Floor
Malviya Nagar, New Delhi 110017
http://www.haqcrc.org/
http://www.haqcrc.org/blogs
http://enakshiganguly.wordpress.com/

May 08th, 2013

5/8/2013

 
I agree strongly with Alessandro (and should say I am a former colleague of David's).

For those interested, I recently published a synthesis of work on growth (its limits), inequality, well-being and new approaches to development. Its conclusion might be described as 'paradigm shift of bust.'

Here's a 'vigorous' review from the UK newspaper, The Guardian. 
http://www.guardian.co.uk/books/2013/feb/28/cancel-apocalypse-andrew-simms-review

There are several chapters in the book not mentioned here which deal specifically with the subjects of this current strand of conversation.

Best,
Andrew Simms
NEF Fellow 
New Economics Foundation)
www.neweconomics.org
3 Jonathan St, London, SE11 5NH

May 08th, 2013

5/8/2013

 
Dear all,

I also like to add that the issue  is not just about (inclusive) broad-based growth nor of redistribution. It is  also about people's rights over resources, especially to so called commons. A whole new paradigm is required now as our entire life system is at stake. There is a growing sense - particularly among the civil society - that we need a
stronger common goods system accompanied with property rights to safeguard them. 

Commons do not belong to  the private sector nor to the government but to all of us.  There is  a role for the private sector in producing goods  and services on the sectors on which people's lives do not depend. However, water, air, seeds etc. belong to all of us and should not be monopolised by a few wealthy owners. Corporations have also no in-built capability to say "enough!". The government has a role in establishing  boundaries and rules for governing access and use of  commons. Much more attention needs to be paid to still existing practices related to  commons (many indigenous land-use practices and sustainable fishing-systems, Spanish 'huerta' irrigation system, Swiss grazing systems, Nordic everybody's rights etc etc)   in use in many countries and how to expand and modernise them. 

Global commons require also a special attention and analysis which dealing just with economic growth and (re)distribution is not able to provide.
Best

Anita Kelles-Viitanen,
Chair AEPF Finland, former Manager of Social Development
of the Asian Development Bank

May 02nd, 2013

5/2/2013

 
Dear All,
 
I wanted to share with you a link to a new publication of mine exploring the prospects for eliminating extreme poverty over the next generation.  Accompanying the paper is an interactive visualization tool allowing users to explore some of our key findings. Both can be found here:
www.brookings.edu/endingpoverty
 
The conclusions from our work are quite emphatic when it comes to issues of inequality: Bringing the global rate of extreme poverty down to under 3 percent by 2030 (as per the World Bank’s new target) cannot realistically be
achieved through a strong performance on economic growth alone. (That is, if growth exceeds expectations in every developing country by 2 percentage points a year between now and 2030, and the distribution of income in each country remains unchanged.) Strong growth and distribution changes that favor the poor are required simultaneously to meet the target. 

Dollar and Kraay famously argued that growth is good for the poor. And they were right. But their paper made a stronger claim that growth benefits all parts of the income distribution proportionately, including those below the poverty line. Our paper shows that over the past 20 years, this has  rarely been the case, on aggregate. In most years, the amount of poverty reduction recorded fell short of what would have been expected had those individuals living just below the poverty line shared equitably in their economy’s growth. The difference can be counted in millions or tens of millions  of people a year. 

At first glance, all that is required to eliminate poverty over
the next 20 years is a continuation of whatever transpired in the previous 20. Yet if each country matches its trend performance on economic growth and distribution change, the rate of global poverty reduction would sharply decelerate by the end of this decade. Reaching zero by 2030 demands a different course that focuses on those most at risk of being left behind.

Laurence
------------------------------------
Laurence Chandy
Fellow Global Economy and Development Program, Brookings Institution

May 02nd, 2013

5/2/2013

 
Dear Janine
Very apposite points!  As a NZer, I’d add that NZ’s Big Bang liberalization of 1984 and beyond was also taken to affirm WC agenda.

Worked wonders for employment of NZers at World Bank, whose numbers jumped from a steady 15 or so to 50-70, once NZers were taken to be experts in how to do the WC agenda (esp privatization).   (I worked at WB in 84-88, quite independently of all this.)

WB sent planeloads of LAC officials& pols to NZ on “fact
finding tours”, and brought NZers of same categories on lecture tours of LAC.  My (now) friend Luis Carlos Bresser Pereira, then minister for public admin reforms in Brazil, was completely taken in, urging Brazil to follow the NZ model, esp of New Public Management.   

The whole WC promotion – Chile, NZ, etc– illustrates that
“rationality of action” as distinct from “rationality of decision making”. The former requires that everyone be convinced “there is no alternative” – either the WC or “doing nothing”.

Robert
Professor Robert H. Wade
Department of International Development
London School of Economics WC2A 2AE 
Leontief Prize in Economics 2008

May 02nd, 2013

5/2/2013

 
Dear Duncan,

Any time‘reforms’ are carried out in a sweeping manner, with the same policies applied to very different countries, ignoring the historical and institutional make-up of the individual countries, there are going to be problems.  The
Washington Consensus lumped all countries together—not just the 20 very distinct countries within Latin America –but Asia, Africa (and now in its somewhat modified approach, Europe).

The“Consensus” was an ideological pursuit based on shaky theoretical grounds.  The empirical evidence revealed quite clearly that the ‘reforms’ were not for the common good, as unemployment, informality and poverty skyrocketed.  
But when these inconveniences  were pointed out, the common response of the supporters of the Washington
Consensus was to argue that the reforms hadn’t been instituted fully – that labour market “rigidities” were keeping the economy from adjusting, thus leading to unemployment. 

Chile is the emblematic case because its reforms were undertaken more than a decade before liberalization in many other Latin American countries and the post-1984 recovery and robust growth of the 1990s was taken as evidence of success.  The severe crises of the mid-1970s and early 1980s were glossed over as were the important lessons that could have been learned from when hasty, and
ideologically driven, liberalization are put in place.  But rather than noting that privatization led to emergence of large industrial conglomerates (the“grupos”), that the privatized pension system had sky-high administrative costs, that workers had no voice or bargaining power, that unemployment averaged 15% in Greater Santiago during the 1980s, that real wages did not recover their 1970 level until 1992, or that there was (and still is) a proliferation of short-term and precarious contracts in the labour market,
the IFIs stood silent – selling instead a slate of reforms.  

The Washington Consensus was doctrine and it was
doctrinaire, but unfortunately, in this current crisis, I don’t see that we have moved much past it.

Janine Berg
ILO (also writing in her personal capacity)
Sr. Development Economist Policy Integration Department
International Labour Office
4, route des Morillons
1211 Geneva Switzerland

May 02nd, 2013

5/2/2013

 
I am, and have been for many years now, a welcome recipient of Walden Bello's wisdom.  I feel, however, that we are being a bit less nuanced than we ought to be in this discussion.  in fact, i feel we are being ahistorical. there was a time in many countries when a bloated public sector, an inefficient one, when constraints on private initiative, when
a disconnect between preparing a supply of labour for its inefficient demand were real issues.  Williamson's 1989 arguments, known thereafter as the  "Washington Consensus",  were an assessment of what was going wrong in Latin America - at the time, and in that context.  i feel it was right-headed.  One cannot, in an article that improbably twins Thatcher and Pinochet, offer numbers without a counter-factual argument.  I feel that the "consensus" (and Thatcher, by the way, was on her way out, Reagan  having already exited)  was not doctrine, but became doctrinaire through its misuse in political channels.  the core of the consensus, however, was economic wisdom, time- and context-specifiic,  and the effort, I think, was for the common good.

Duncan Campbell
Director, Labour Organizationwriting in his own capacity and not necessarily reflecting the views of the ILO

May 02nd, 2013

5/2/2013

 
Dear friends,

Chile's assistance to British forces during the 1982 Falklands war is said to have indebted Margaret Thatcher to the
Chilean dictator Augusto  Pinochet. However, Pinochet was probably a greater inspiration to Thatcher as the pioneer of
radical free-market policies in the mid-1970s, a period when Keynesian policies still reigned in Britain and much of the rest of the world. At a fringe meeting during the Conservative party's annual conference in 1999, Thatcher implicitly acknowledged her debt to Pinochet, saying his enemies hated him because of his "success" in transforming Chile's economy from 1973 to 1990. 
 
The Chilean strongman's free-market policies that the Iron Lady admired indeed transformed his country's economy, but in ways that could hardly be considered a success except among doctrinaire followers of the University of Chicago economist Milton Friedman. Pinochet's
programme subjected his country to two major depressions in one decade, first in 1974-75, when GDP fell by 12%, then again in 1982-83, when it dropped by 15%. Contrary to ideological expectations about a positive correlation between free markets and robust growth, average GDP growth in 1974-89 – the radical phase of the Pinochet revolution – was only 2.6%. By comparison, with a much greater role
for the state in the economy during 1951-71, Chile's economy grew by an average of 4% a year.

By the end of the radical free-market phase, both poverty and inequality had increased significantly. The proportion of families living below the "line of destitution" had risen from 12% to 15% between 1980 and 1990, and the percentage living below the poverty line, but above the line of destitution, had increased from 24% to 26%. By the end of Pinochet's regime, about 40% of Chile's population, or 5.2
million in a population of 13 million, was poor.

In terms of income distribution, the share of national income going to the poorest half of the population declined from 20.4% to 16.8%, while the share going to the richest
10% rose dramatically from 36.5% to 46.8%.

The combination of erratic growth and radical trade liberalisation resulted in "deindustrialisation in the name of efficiency and avoiding inflation", as one economist described it. Manufacturing's share of GDP declined from an average of 26% in the late 1960s to 20% in the late 1980s. Many metalworking and related industries went under in an export-oriented economy that favoured agricultural production and resource extraction.

Pinochet's neoliberal policies came to be codified as
"structural adjustment", and Thatcher became one of structural adjustment's most enthusiastic promoters, not only for Britain but the world, popularising her approach with the slogan "There is no alternative". With Thatcher and the US president Ronald Reagan as its main boosters, and the World Bank and IMF as its executors, structural adjustment or the Washington consensus was generalised throughout the developing world.

From Ghana to Argentina, state participation in the economy was drastically curtailed, government enterprises passed to private hands in the name of efficiency, protectionist barriers on imports were eliminated wholesale, restrictions on foreign investment were lifted, and, through export-first policies, domestic economies were more tightly integrated into the capitalist world market.

Structural adjustment programmes (SAPs), which set the stage for the accelerated globalisation of developing economies during the 1990s, created the same poverty, inequality and environmental crisis in most countries that free-market policies did in Chile. As the World Bank chief economist for Africa admitted: "We did not think the human costs of these programmes could be so great, and the economic gains so slow in coming." So discredited were SAPs that the World Bank and IMF changed their name to poverty reduction strategy programmes in the late 1990s.

But the harm had been done. Two researchers from the
Brookings Institution, Laurence Chandyand Geoffrey Gertz,
described the wreckage
: "Excluding China, the 500 million decrease in global poverty becomes an increase of 100 million. In the world's poorest region, sub-Saharan Africa, the poverty rate remained above 50% throughout the period, which, given the region's rapid population growth, translated into a near doubling in the number of its poor.
Similarly in south Asia, Latin America and Europe-central Asia there were more poor people in 2005 than there were a quarter of a century earlier."

By the early 2000s, however, governments throughout the developing world were reversing course, with most turning towards pragmatism and abandoning the most damaging doctrinaire policies. The anti-neoliberal trend was most pronounced in Latin America, where elites had embraced neoliberalism most fervently in the 1980s and 1990s.
Throughout the continent during the first decade of the 21st century, the combination of government intervention, economic nationalism, redistributive populist policies that promoted both equity and expanded internal markets, and
the commodities boom triggered by China's development made up a potent combination that reversed trends in
poverty.

This was the decade when Hugo Chávez in Venezuela, Néstor Kirchner in Argentina, Rafael Correa in Ecuador and Evo Morales in Bolivia boldly took their countries of structural adjustment, while others, such as Luiz Inácio Lula da Silva in Brazil, did it in less dramatic fashion. The title
of a book by Financial Times correspondent Hal Weitzman says it all: Latin Lessons: How South America Stopped Listening to the United States and Started Prospering.

Globally, the results of the turn from neoliberalism were
dramatic. The New York Times reported World Bank
research
(pdf) showing that "for the first time the proportion of people living in extreme poverty – on less than $1.25 a day – fell in every developing region from 2005 to 2008. And the biggest recession since the Great Depression seems not to have thrown that trend off course, preliminary data from 2010 indicates. According to the bank: "The progress is so drastic that the world has met the UN's millennium
development goals to cut extreme poverty in half, five years before its 2015  deadline."

By the time of Thatcher's passing, the global south had largely moved away from her "neoliberal revolution." In the global north, however, people and governments were still
saddled with the massive task of extricating themselves from the wreckage her perspective and policies had wrought.

Walden Bello is a member of the House of the Representatives of  the Philippines and author of Capitalism's Last Stand? and Food Wars

May 02nd, 2013

5/2/2013

 
Thank you all for this most interesting exchange on growth,
distribution and well-being. I'd like to add a small comment to signal that parliamentarians from around the world are increasingly aware of the limits of growth as a development model, especially in developed countries, and of the
need to focus policy on well-being. At a recent debate held in Quito, where some 600 members of parliament participated, this awareness came through quite clearly. You can find the official summary of the discussion here: http://www.ipu.org/conf-e/128/quito-comm.htm

Personally, I dare say that concepts like "green growth",
"pro-poor growth" and the like tend to provide a false sense of security and detract from the harder questions about the limits of growth and also on the growth model that developing countries are currently following. I certainly
agree with Woodward that not enough attention is paid to global inequality between countries.
 
Best,
Alessandro Motter
Senior Advisor (economic and social affairs) Inter-Parliamentary Union, Permanent Observer Office at the United Nations, 336 East 45th Street, 10th Floor
New York, NY 10017

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