CRISES and CAPITALIST DEVELOPMENT

Transcription

1 CRISES and CAPITALIST DEVELOPMENT Course on: GLOBALIZATION AND CHALLENGES TO THIRD WORLD DEVELOPMENT Bonn Juego PhD Fellow Global Development Studies Aalborg University, Denmark Lecture for the Masters in Development and International Relations Programme Aalborg University, Denmark 23 February

2 CONTENTS I. How can we make sense of crises in capitalist development? Relationship between Crises and Neo-liberalism (constitutive and functional) II. Why financial crises keep on recurring? Mechanisms behind recurrent financial crises and the conflict between finance capital and real economy (structure-agency contradiction) III. How do the multilaterals, als, regional organisations,, states, and civil society respond to the current global crisis? Current responses to the global crises fundamentally the same IV. What are the general implications of the global crisis for political- economic development? Resurgent nationalism in US and Europe Emergent authoritarian liberalism in East and Southeast Asia 2

3 (1) THE CONSTITUTIVE ROLE AND FUNCTIONAL CHARACTER OF CRISES IN THE EVOLUTION OF NEO-LIBERALISM Relationship: Crisis and Neo-liberalism Dysfunctional or Functional (or both) Constitutive Role of Crisis and Neo-liberalism Born out of crises Evolved through crises Died of crises??? 3

4 The Global Political Economy of Development, 1960s (General ( Characteristics National Developmentalism 1960s (National Development) [post-wwii, Keynesianism, Golden Age] Washington Consensus 1980s - mid-1990s (Open Market Economy) [Structural Adjustment Programmes: privatisation, liberalisation, deregulaiton] Post-Washington Consensus mid-1990s - present (Global Competitiveness) [Deep institutional reforms; policies on labour market flexibility and human capital ] POLITICAL HISTORICAL TRAJECTORY State-led development and its crisis First wave neoliberal offensive Second generation reforms focus on institutional reform INDUSTRIAL RELATIONS AND LABOUR MARKET CONDITIONS State-controlled authoritarian systems Deregulation, low wage assembly and export zones Labour flexibility and high productivity POVERTY AND SOCIAL INEQUALITY Selective state action Market (trickle-down) effects Accumulation of human capital CAPITAL AND CURRENCY MOVEMENTS Control FDI Remove controls Attract investment through creation of attractive climate INDUSTRIAL TRANSFORMATION Protect local investment Remove protection and privatise Create globally competitive industries; allow exit and entry REGIONAL INTEGRATION Cooperative developmentalism Free trade and open borders Meta-governance to promote competitiveness THE DEVELOPMENT OF CIVIL SOCIETY State-dominated participation Individual civil rights; rule of law Good governance and independent civil society ( social capital ) ENVIRONMENTAL EFFECTS AND REGULATION Disregard for environmental concerns Measures to limit market-driven environmental degradation Sustainability as a principal objective TECHNO-ECONOMIC PARADIGM Maturity of the mass production paradigm Installation period of the Information and Communications Technology Turning point of ICT paradigm *Thanks to Professor Paul Cammack, Manchester Metropolitan University, UK. 4

5 NEO-LIBERALISM WAS BORN OUT OF CRISES Complex interaction of forces/events/phenomena......mutually reinforcing tendencies recession in the developed capitalist economies after 1973, the OPEC oil crisis, and the collapse of the Bretton Woods system de-linking from the gold standard internationalisation of financial markets as a result of the widespread abandonment of exchange controls the massive increase in foreign bank lending to the Third World as consequence of the recession in the major economies the growing stagnation of command economies the shift from import substitution in favour of export promotion in the Third World and the rise of the NICs in East Asia the imposition of structural adjustment programmes (SAPs) on the heavily-indebted Third World as conditionality attached to rolling over foreign debt MNCs the restructuring of global production towards post-fordism and the growth of the revolution in macroeconomic policy that resulted in the weakening of trade unions, the cutting of state budgets, deregulation, privatisation, etc. ( paradigm the advances in ICT (as the new techno-economic Etc... 5

6 NEO-LIBERALISM HAS EVOLVED THROUGH CRISES From crisis to crisis in the last 353 years... National Developmentalism (postwar-1970s) Crisis of Fordism/Keynesianism (stagflation) Washington Consensus 1 st Generation Neoliberal reforms (1980s mid-1990s) Crisis of market fundamentalism of the Washington Consensus East Asian Miracle (8 HPAEs showing high growth and high equity with state intervention) Post-Washington Consensus 2 nd Generation reforms (mid-1990s ) Cacophony of crises: financial crises, overaccumulation, overproduction, over-/under-consumption, climate change, ecological degradation, political legitimacy, global governance crisis, oil crisis, food price crisis, subprime crisis 6

7 National Developmentalism: : post-world War II s Keynesian economic policy Active role of government in the economy (full employment; monetary policy, etc.) 'populist' import-substituting development (Latin America) 'developmental state' (East ( Asia 'Golden Age' ( ): productivity & real wage in harmony Fordism: mass production mass consumption paradigm 7

8 Crises of the 1970s gave way to Neo-liberal globalisation Crisis of 'national developmentalism' gave way to Global Neo-liberalism 8

9 From Statism to Market Fundamentalism ( 1949 ) March into Socialism ( state-led ) 1. state-managed stabilisation policies 2. principle of redistributive taxation 3. price regulation 4. public control over the labour and the money market 5. public enterprises that satisfy wants 6. all types of social security legislation March into Neo-liberalism (1980s-2009) (market-led) 1. internationally-managed restructuring 2. fiscal reforms that encourage entrepreneurship 3. deregulation of prices 4. labour and market affairs have been left to the market forces 5. 'the sphere of wants' is a task to be satisfied by the market 6. restructuring of social security legislation to work for the market *Socialism is understood as that organisation of society in which the means of production are controlled, and the decisions on how and what to produce and on who is to get what, are made by public authority instead of by privatelyowned and privately-managed firms (Schumpeter, 1949). 9

10 Neo-liberal Policies: 10 Reforms [Washington Consensus: SAPs] (John Williamson: for Latin America [ not all countries ] as of 1989 [ not at all times ]) 1. Fiscal Discipline 2. Reordering Public Expenditure Priorities 3. Tax Reform 4. Liberalizing Interest Rates 5. A Competitive Exchange Rate 6. Trade Liberalisation 7. Liberalisation of Inward FDI 8. Privatisation 9. Deregulation 10. Property Rights 10

11 East Asian growth amidst global crises... Growth Rate GDP Per Capita of World Selected Regions Regional Average Selected Period between Years (Annual Average com pound Grow th Rate) Africa Asia (Japan excluded) Latin America World Source: original data extracted from Angus Maddison, The World Economy, Historical Statistics, OECD, Paris, 2003, p

12 Two Periods of Neo-liberalism: Not simply state vs market,, but different in focus and goals Washington Consensus ( mid-1995 (1980s - Scope: Limited macroeconomic policies Goal: open market economy Approach: shock tactics; sound macroeconomic principles SAPs (privatisation, deregulation, liberalisation, ( etc Rollback of the state Post-Washington Consensus ( 2009 (mid Scope: broader, more extensive and intrusive policies Goal: global competitiveness Approach: deep institutional and behavioural change flexible labour, human capital social capital : non-market responses to market imperfections 12

13 Development Paradigm: State vs Market NEO-LIBERALISM (Washington Consensus, 1980s-present) DEVELOPMENTAL STATE (East Asian Miracle, ) Market-led Development Thru Privatisation, Liberalisation, Deregulation, Open Market Economy, Competitiveness Industrial Policy Industrial Policy and active role of state in development High growth, high equity with state intervention (8 HPAEs) 13

14 Is neo-liberalism dead? NEO-LIBERALISM HAS DIED OF CRISES (???) Multiple Crises: RIP Neo-liberalism (1980s-2008) Depends on what we mean by neo-liberalism... The neo-liberal form (i.e., market fundamentalism) is dead; But not the substance of capitalism as a: process of capital accumulation; relations in which labour is subordinated to capital 14

15 Neo-liberalism: A strategy for market-led development, A blueprint for crisis management Neo-liberal values: well-being of the financial institutions over wellbeing of the people Debt crisis in Latin America (1982) Crisis Response: SAPs Financial Crises: Scandinavia (early 1990s); Mexico (1994); East and Southeast Asia (1997); Russia (1998); Argentina (2001); Turkey ( ); US Subprime mortgage ( ) Crisis response: open international financial architecture US subprime crisis ( ) Crisis response: Bush-Paulson-Bernanke-Obama Bailout Programme (restore power of corporations; assure ascendancy of finance capital) 15

16 In times of crisis, assets return to their rightful owners! Financial crises have always caused transfers of ownership and power to those who keep their own assets intact and who are in a position to create credit, and the Asian crisis is no exception...there is no doubt that Western and Japanese corporations are the big winners...the combination of massive devaluations, IMF-pushed financial liberalization, and IMF facilitated recovery may even precipitate the biggest peacetime transfer of assets from domestic to foreign owners in the past fifty years anywhere in the world, dwarfing the transfers from domestic to US owners in Latin America in the 1980s or in Mexico after One recalls the statement attributed to Andrew Mellon: : "In a depression assets return to their rightful owners. R. Wade and F. Veneroso (1998), The Asian Crisis: The High Debt Model versus the Wall Street-Treasury-IMF Complex, in The New Left Review, 228 (1998),

17 The Multiple Crises Today Overproduction Finance (securitisation, speculative investments, Ponzi scheme) Environment Climate (global warming/cooling) Oil Food (post-green Revolution, the Great Hunger of 2008) Governance (WB, IMF, WTO, states) Etc. 17

18 Marx s s Theory of Crisis Crisis of OVERPRODUCTION Crises in realising surplus value (overcapacity) Too much is produced for the capitalists to sell at a profit Capitalism: production for profit, not for needs Tendency of the rate of profit to fall Crises in extracting surplus value The real barrier of capitalist production is capital itself (Marx s Capital, Vol. III) The amount of total capital invested has increased, without changing the amount of surplus value generated 18

19 Capitalism emerging from crisis......capitalism does live by crises and booms, just as a human being lives by inhaling and exhaling. First there is a boom in industry, then a stoppage, next a crisis, followed by a stoppage in the crisis, then an improvement, another boom, another stoppage, and so on... The fact that capitalism continues to oscillate cyclically...merely signifies that capitalism is not yet dead, that we are not dealing with a corpse. So long as capitalism is not overthrown by proletarian revolution, it will continue to live in cycles, swinging up and down. Crises and booms were inherent in capitalism at its very birth; they will accompany it to its grave. Leon Trotsky (1973) 19

20 (2) DYNAMICS OF RECURRENT FINANCIAL CRISES: STRUCTURAL INSTABILITY AND AGENTIAL GREED Mechanisms of Financial Crises and their Effects on the Real Economy The real economy Güterwelt Financial economy Rechenpfennige Black Box Production of goods and services Money/capital THE CIRCULAR FLOW OF ECONOMICS 20

21 COMPLEMENTARY FUNCTIONS, DIVERGENT NATURE Assets Mobility Financial capital Money and paper wealth Static property Investible capital Essentially mobile Knowledge indifferent Production capital Wealth-producing wealth Fixed capital, technical capital, human capital, good will Tied to fixed assets, to knowledge of products, processes, capabilities, clients and markets Bias Quasi-liquid assets, SHORT-TERM GAINS Wealth-creating assets, LONG-TERM GAINS Socio-economic results will differ depending on the criteria that lead investment 21

22 SHIFTING ROLES OF MONEY ON THE REAL ECONOMY In the years preceding the First World War there were in common use among economists a number of metaphors... 'Money is a wrapper in which goods come ; 'Money is the garment draped round the body of economic life ; 'money is a veil behind which the action of real economic forces is concealed... During the 1920s and 1930s... money, the passive veil, took on the appearance of an evil genius; the garment became a Nessus shirt; the wrapper a thing liable to explode. Money, in short, after being little or nothing, was now everything... Then with the Second World War, the tune changed again. Manpower, equipment and organization once more came into their own. The role of money dwindled to insignificance... Arthur Cecil Pigou (1949) The Veil of Money, Macmillan pp

23 Three basic and complementary mechanisms behind the conflicts between the real economy and the financial economy (Financial Crises) 1. EFFECT OF COMPOUND INTEREST 2. TECHNOLOGICAL REVOLUTIONS CREATE FINANCIAL BUBBLES 3. THE MINSKY EFFECT (Ponzi scheme, endogenous instability, greedy economic agents) 23

24 The Effect of Compound Interest A shilling put out at 6% compound interest at our Saviour s birth would... have increased to a greater sum than the whole solar system could hold, supposing it a sphere equal in diameter to the diameter of Saturn s orbit. MONEY is LIMITLESS! Richard Price English Economist,

25 Technological Revolutions and Finance Capital (A love affair ) Approximate dates of the installation and deployment periods of the great surges of development to the present GREAT SURGE Technological Revolution Core country Turning INSTALLATION DEPLOYMENT Point IRRUPTION FRENZY SYNERGY MATURITY 1 st The Industrial Revolution Britain s and early 1780s late 1780s early 1790s nd Age of Steam and Railways Britain (spreading to continent and US) s 1840s rd Age of Steel, Electricity and Heavy Engineering USA and Germany overtaking Britain * 4 th Age of Oil, Automobiles and Mass Production * USA (spreading to Europe) Europe USA * 5 th Age of Information and Telecomunications USA (spreading to Europe and Asia) * ?? 20?? big-bang Crash Institutional recomposition Note: * Observe phase overlaps between successive surges. 25

26 A PANORAMA OF THE CHANGING CONTEXT OF THE TWENTIETH CENTURY The Age of Steel and Heavy Engineering The Age of Oil, Automobiles and Mass Production The Age of Information Technology and Global Telecommunications 1900 EUROPE The Belle Époque Early development oil and automobiles US Progressive Era EUROPE World War I IRRUPTION Mass production (USA) Roaring Twenties FRENZY 1930 s Depression and WWII 1930s Post war Golden Age & Cold War SYNERGY MATURITY,Social unrest Viet Nam war Early development Transistors; computers; analog instruments; numerical control Redeployment to Third World; Brasil, Korea miracles Stagflation IRRUPTION ICT Breakdown of Soviet system Rejuvenation of mass production industries the roaring Twenties FRENZY 2000 Corporate scandals Recession 1908 Ford Model-T Crash 1929 Bretton Woods Welfare State Marshall Plan 1971 Intel Micro-processor??? Collapses Asia Nasdaq; draining of stock markets 26

27 THE MINSKY EFFECT (Endogenous instability, Ponzi schemes, Corrupt economic elites) destabilizing stability : long periods of stability lead to instability 1. HEDGE financing Types of financing Low risk - can fulfill contractual payment obligation 2. SPECULATIVE financing involves future renegotiating of the debt (rollover) A typical speculative position consists on financing long term assets with short term liabilities. 3. PONZI financing expected revenues can not afford even interest payments, and agents are submitted to increasing debt 27

28 Ponzi Schemes Ponzi schemes (such as subprime loans) cause financial institutions to redefine the game they no longer compete for market share but instead pull out in order to be more liquid In this way also, SOUND PROJECTS ARE REFUSED CREDIT, AND A DOWNWARD SPIRAL STARTS. Third World debt/lending was also a Ponzi scheme. (Charles Ponzi - police mugshot, 1910) Myrdalian perverse backwashes Funds tend to flow from poor to rich countries! 28

29 Greedy, corrupt, inept economic elites reinforcing financial market s s endogenous instability... The poor decisions of holding company executives are the primary cause for the bond insurers problems, but the rating agencies also share responsibility. The rating agencies encouraged the bond insurers to diversify into structured finance risks and gave them additional rating credit for doing so. The rating agencies understated the risks of the new strategy while earning much higher fees for rating these structures. s The rating agencies profits soared along with the growth in structured finance issuance. Insurance regulators relied on the rating agencies and management teams to assess the risk of these new structures. The rating agencies were paid by the issuers of these securities and helped in structuring these exotic instruments to meet the ratings agencies insufficient standards for Triple A ratings. The rating agencies only received their full fees if they approved the Triple A ratings for these transactions. The combination of aggressive risk taking by management, poor judgment by conflicted rating agencies, and over-reliance by regulatory authorities on rating agency judgment led to the current situation. William Ackman (14 Feb 2008), The State of the Bond Insurance Industry, Statement before a hearing of the US House of Financial Services Committee 29

30 THE GLOBAL CRISIS AND THIRD WORLD DEVELOPMENT: INFORMAL ECONOMY Mainstream analyses of crises: not so applicable to the Third World A big majority of economic activities: informal sector (including in China and India) THE NEOLIBERAL EFFECTS SAPs: de-industrialisation WTO/GATT: de-agriculturalisation Crises: de-skilling / de-servicing What is left?: Informal economy!!! 30

31 (3) FUNDAMENTALLY THE SAME RESPONSES TO THE GLOBAL CRISIS SCHUMPETERIAN: IT HAS TO BURN OUT ALONE KEYNESIAN: REPAIR IT, but without encouraging the very behaviour that caused the problem in the first place. MARXIST: REPLACE IT overthrow crisis-ridden capitalist system; establish socialism, a democratic economic planning 31

32 Times of innovation... are times of effort and sacrifice, of work for the future, while the harvest comes after... The harvest is gathered under recessive symptoms and with more anxiety than rejoicing... [During] recession... much dead wood disappears. Joseph Schumpeter (1939) Business Cycles 32

33 I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction. For these strong reasons, therefore, I am inclined to the belief that, after the transition is accomplished, a greater measure of national self- sufficiency and economic isolation among countries than existed in 1914 may tend to serve the cause of peace, rather than otherwise. At any rate, the age of economic internationalism was not particularly successful in avoiding war; and if its friends retort, that the imperfection of its success never gave it a fair chance, it is reasonable to point out that a greater success is scarcely probable in the coming years. John Maynard Keynes (1933 [1972]), National Self-sufficiency 33

34 Modern bourgeois society with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like a sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells. Karl Marx and Frederick Engels (1848) Communist Manifesto These are signs of the times, not to be hidden by purple mantles or black cassocks. They do not signify that tomorrow a miracle will occur. They do show that, within the ruling classes themselves, the foreboding is emerging that the present society is no solid crystal, but an organism capable of change, and constantly engaged in the process of change. Karl Marx (1867) Capital, Vol

35 Demise of the Multilaterals?!? Never again became the slogan of a number of the affected governments. The Thaksin government in Thailand declared ist financial independence from the IMF after paying off its debts in 2003, vowing never to return to the Fund. Indonesia has said it will pay off all its debts to the IMF by The Philippines has refrained from contracting new loans from the Fund, while Malaysia defied it by imposing capital controls at the height of the crisis. Ironically, then, the IMF has become one of the key victims of the 1997 debacle. This arrogant institution of some 1,000 elite economists never recovered from the severe crisis of legitimacy and credibility that overtook it a a crisis that was deepened by the bankruptcy of its star pupil Argentina in In 2006, Brazil and Argentina, following Thailand s s example, paid off all their debts to the Fund in order to achieve financial independence. Then Hugo Chavez let the other shoe drop by announcing that Venezuela would leave the IMF and the World Bank. This boycott by its biggest borrowers has translated into i a budget crisis for the IMF. Walden Bello (30 July 2007), All Fall Down, in Foreign Policy In Focus 35

36 The World Bank, IMF and their G-20 allies: Using the global crisis to their advantage... G-20: IMF is back! Dominique Strauss-Kahn, Managing Director of the IMF, G-20 Press Conference, 2 April 2009 Maybe some of you were in the IMF press conference at the end of the Annual Meeting last October. And if some of you were there, then you may remember that what I said at that time is that IMF is back. Today you get the proof when you read the communiqué, each paragraph, or almost each paragraph let's say the important ones are in one way or another related to IMF work. 36

37 WORLD BANK: Exactly the same global neo-liberal project! World Bank, Global Monitoring Report 2009: A Development Emergency, p. xii. The report sets out six priority areas for action to confront the development emergency that now faces many of these countries. First, we must ensure an adequate fiscal response in developing countries to protect the poor and vulnerable groups and to support economic growth. Priority areas must be strengthening social safety nets and protecting infrastructure programs that can create jobs while building a foundation for future productivity and growth. The precise fiscal response needs to be tailored to individual country circumstances, consistent with maintenance of macroeconomic stability. Second, we must provide support for the private sector and improve the climate for recovery and growth in private investment, including paying special attention to strengthening financial systems. Helping small and medium enterprises get access to finance for trade and investment is vital for job creation. But the crisis has also underscored the importance of broader reforms to improve the stability and soundness of the financial system. Third, we must redouble efforts in human development and recover lost ground in progress toward the MDGs. We can do this not only by strengthening key public programs for health and education, but also by better leveraging the private sector s role in the financing and delivery of services. In support of these efforts to help developing countries, the report emphasizes three key global priorities. Donors must deliver on their commitments to increase aid. Indeed, the increased needs of poor countries hit hard by the crisis call for going beyond existing commitments. National governments must hold firm against rising protectionist pressures and maintain an open international trade and finance system. Completing the Doha negotiations expeditiously would provide a much-needed boost in confidence to the global economy at a time of high stress and uncertainty. Finally, multilateral institutions must have the mandate, resources, and instruments to support an effective global response to the global crisis. The international financial institutions will need to play a key role in bridging the large financing gap for developing countries resulting from the slump in private capital flows, including using their leverage ability to help revive private flows. Source: World Bank, Global Monitoring Report 2009: A Development Emergency, p. xii. 37

38 World Bank President Robert Zoellick (31 March 2009, prior to the G-20 Meeting): New Powers for the Multilaterals! a WTO monitoring system to advance trade and resist economic isolationism, while working to complete the Doha negotiations to open markets, cut subsidies, and resist backsliding ; a monitoring role for the IMF, to review the execution of.. stimulus packages and assess results, calling for further action if necessary ; IMF and World Bank Group monitoring of actions and results in the banking sector, with financial sector assessments to be extended to developed countries, with the results published, taken seriously, and followed up ; an overhaul of the financial regulatory and supervisory system in which most of the actual authority over regulation will rest with national governments, but within which an expanded FSF [Financial Stability Forum] could become another important institution of a stronger multilateral system, working with the IMF and the World Bank group on implementation 38

39 IMF: An opportunity to make progress on seemingly intractable issues IMF (February 2009), Initial Lessons of the Crisis for the Global Architecture and the IMF Bottom line. The crisis has revealed flaws in key dimensions of the current global architecture, but also provides a unique opportunity to fix them. On the flaws, surveillance needs to be reoriented to ensure warnings are clear, successfully connect the dots, and provide practical advice to policy makers. An effective forum for policy makers with the ability and mandate to take leadership in responding to systemic concerns about the international economy is key. Ground rules for cross-border finance need to be strengthened. And, given the growing size of international transactions, resources available for liquidity support and easing external adjustment should augmented and processes for using them better defined so they are more readily available when needed. These are all ambitious undertakings. But the damage wrought by the crisis provides an opportunity to make progress on seemingly intractable issues. The moment should not be missed. 39

40 ADB and ASEAN: Banking-as-usual for the private sector and for free flow of capital, goods, services and investment Loans under LIBOR for economic recovery, private sector development, and open market (less on social protection) Towards a competitive ASEAN single market by

41 UN Commission of Experts on Reforms of the International Monetary and Financial Systems: Heterodoxy Rearticulated Joseph Stiglitz (Keynesian) Jomo KS (critical political economist) José Antonio Ocampo (Hirschmanesque) Jan Kregel (post-keynesian, Minskyian) François Houtart (WSF activist) Global Economic Coordination Council and International Panel of Expert New Credit Facility system of risk management reform new global reserve system exit strategy from stimulus policies etc... 41

42 Global Civil Society: We told you so! Another World Is Possible 42

43 Challenge to Global Justice Movements Another World Is Possible, Necessary GRAMSCIAN realpolitik The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear. Antonio Gramsci (1971) Prison Notebooks MARXIST realpolitik (People) make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service, borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language. Karl Marx (1852) The Eighteenth Brumaire of Louis Bonaparte 43

44 States Bailouts and Resiliency Plans (Bailouts for the poor???) Malaysia First stimulus measure: increase capitalisation of a government investment company by USD 5 billion (also to stabilise stock exchange) Philippines Economic Resiliency Plan (ERP): PhP 330 billion 44

45 Crisis as a Turning Point CRISIS from Greek krisis the turning point of a disease when an important change takes place, indicating either recovery or death People from left, right, centre look at the crisis the Chinese way i.e., an opportunity to advance their respective interests! 45

46 UN Commission of Experts on Reforms of the International Monetary and Financial Systems: Crisis as opportunity and danger This crisis should be seen as an opportunity to engage in necessary reforms. Historically, moments of crises often provide a rare chance for fundamental reforms that would otherwise be impossible. But there is also a danger: existing power structures can seizes hold of these moments of crisis and use them for their own benefit, reinforcing inequalities and inequities. There may be a greater concentration of economic and political power after the crisis than before. This has happened in the past and seems to be happening in this crisis in certain countries, as the share of the too-big-to-fail banks has increased even further 46

47 (4) RESURGENT NATIONALISM IN US AND EUROPE Buy American Buy European Imperialism (continuous dependency, intensifying war on terror ) Protectionism (against free market ideology) Bailouts (of corporations and financial institutions, not of the workers) Xenophobia (anti-foreign/migrant/refugee sentiments) 47

48 (4) EMERGENT AUTHORITARIAN LIBERALISM IN ASIA (Authoritarian Polity, Market Economy) Democratic Peace PEACEFUL CO- EXISTENCE AMONG AUTHORITARIANISM Modernisation Theory NEO-LIBERAL ECONOMIES EMBEDDED IN AUTHORITARIAN POLITIES 48

49 Lessons of the 1997 Asia Crisis Democratisation may be stalled. Justification for authoritarian rule (e.g. Asian Values ) Human Rights compromised. Human rights obligations sidelined in the name of surveillance and internal security (Malaysia, Singapore) The poor severely neglected. The poor severely neglected. e.g., ASEM Trust Fund failed to target the poor, workers, and the vulnerable, adversely affected groups. 49

50 CONCLUDING REMARKS 1. The Constitutive Role of Crises in the Evolution of Neo-liberalism i. was born out of the crises of the 1970s ii. has evolved through a series of crises over the last 30 years iii. died of the cacophony of crises culminating in the current global economic crisis. 50

51 As it shows, crises have so far been functional, rather than dysfunctional, to neo-liberalism: Crises reshape class and social relations but in ways that perpetuate the hegemony of capital over labour and the preservation of elite rule. Crises restrategize development plans of institutions from international organizations to states to further advance, not retreat from, market-led development. Crises restructure states and societies in which social institutions are oriented towards the logic, requirements, and imperatives of neoliberalism. 51

52 2. The structure of financial markets is endogenously fragile, and the greedy economic agents exacerbate it. Mainstream analyses of the global crisis, however, do not capture the reality of the overwhelming economic activity in the informal economy/sector in the Third World!!! 52

53 3. The respective responses to the global crisis from the multilaterals, to regional organisations, to states to activists are fundamentally the same through the years, with or without crisis. But the catastrophic impacts of the crisis differ across social classes, among the poor, marginalised, vulnerable sectors. 53

54 4. There is a movement towards the strengthening of practices and institutions of: nationalism in US and the EU, and of authoritarian liberalism in East and Southeast Asia. (Market economies embedded in authoritarian political framework) 54

55 Thank you... (,)( Bonn Juego 55