Just a Few More Words on the Washington Post's Newly Discovered Form of "Protectionism"

Posted by Joshua Holland, AlterNet at 3:38 PM on March 28, 2009.

Adding to my earlier post, I just want to make two more quick points about that WaPo piece which characterized the UK's insistence that a bank it owns make loans to the citizens who bought it as a form of back-door "protectionism."

Let's look at some of the claims that staff writers Anthony Faiola and Mary Jordan make in the article.

In exchange for billions in taxpayer dollars to save major banks, some governments are requiring banks to boost lending at home.

Some experts say such political responses to public fury at financial institutions could hurt developing countries and roll back the globalization of finance that helped propel world growth over the past decade.

Citing "some experts" -- unnamed experts -- is, of course, the hallmark of really good journalism. But that aside, I find this a pretty stunning statement, given that the "globalization of finance" has everything to do with the mess in which we find ourselves today (see this piece for an explanation).

But that kind of uncritical statement is part of a broader trend. It's common in mainstream economic reporting to take it as a given that globalization has led to (or at least is correlated with) greater economic growth in recent decades.

The opposite is true. As a study by economists Mark Weisbrot, Robert Naiman and Joyce Kim (PDF) found:

It has generally been assumed that globalization has helped spur economic growth throughout most of the world. Even critics of globalization, and of the IMF and World Bank, have generally accepted this assumption. They have argued that these institutions have focused too much on promoting growth and not enough on other goals such as alleviating poverty and protecting the environment.

The official data for the last two decades (1980-2000) tell a different story. Economic growth has slowed dramatically, especially in the less developed countries, as compared with the previous two decades (1960-1980).

Correlation isn't causation, but what we (erroneously) call the "globalization era" is in fact correlated with slower economic growth than the period that preceded it.

Overall, in addition to slower growth, the most recent phase of corporate-led globalization has been marked by the following:

• A dramatic increase in international trade. The "but" here is a significant one -- a good chunk of that increase is simply a result of multinationals based in wealthy countries trading with their own overseas subsidiaries to take advantage of cheaper labor and more lenient public interest regulations
• An uneven record of poverty reduction, with some countries seeing both trade flows and poverty rates increase
• A marked increase in economic inequality, both between wealthy and poorer countries and within domestic economies

It would be nice to acknowledge the record once in a while.

The second claim that I want to highlight in the WaPo piece is this:

Government pressure to lend domestically, analysts say, is contributing to a broader withdrawal of credit and capital out of emerging markets.

Large Western banks desperate to boost their balance sheets, in part to respond to government edicts that they do so, increasingly are avoiding making loans that carry even the slightest risk.

That is leaving a void in some emerging markets where lending has come to a virtual standstill. And that void is making it harder for millions of people in the developing world to run businesses, buy homes and pay for education.

Here, again, the Washington Post, after quoting only a single IMF official by name, tells us that unnamed "analysts say" that this terrible result is occurring. But what evidence do they offer to support the claim that banks are "avoiding making loans that carry even the slightest risk"? None that I can see.

It might be true, but I'm unconvinced based on nothing more than "analysts say" and an IMF flack.

Tagged as: trade, protectionism

Joshua Holland is an editor and senior writer at AlterNet.