A Wake-Up Call for the G-8

News & Politics

The G-8 leaders (the Group of Seven high-income countries plus Russia) are convening in Kananaskis, Alberta this week, and the question of global economic growth is once again high on their agenda.

They should break with tradition and take an honest look at what has happened to the vast majority of low and middle-income countries over the past 20 years.

For these countries, the last two decades of the 20th century were witness to the worst economic failure since the Great Depression. Consider this: Income per person in Latin America grew by 75 percent from 1960-1980; from 1980-2000 it grew by 7 percent, or hardly at all.

Africa fared even worse, with an absolute decline -- some 15 percent -- in income per person over the last two decades. Of course there are a handful of very important exceptions: China registered the fastest growth in world history over the last 20 years. But even including China, weighted by its enormous population of 1.3 billion, the developing economies as a group have grown at half the rate that they had achieved over the previous two decades.

It is really just a historical coincidence that the leaders of the G-7 countries have not had to acknowledge this drastic economic failure, let alone account for it. The movement that burst onto the world stage in Seattle two and a half years ago had other priorities. The protesters and their organizations have focused on the usurpation of governmental authority by undemocratic, unaccountable organizations such as the WTO, the IMF, and the World Bank. They have rallied against the environmental damage caused by the reckless globalization that these institutions and their corporate allies have led. And they have called attention to the worsening distribution of income, at home and abroad.

Worthy causes, all. But economic growth also matters. For example, if we look at the countries where poverty has increased over the last 20 years, or where progress toward reducing poverty has slowed, the main cause is not a change in the distribution of income or wealth. It is the slowdown in growth.

In fact, the last two decades have also seen significantly reduced progress on major social indicators such as life expectancy, infant and child mortality, literacy and education. This is exactly what we would expect in a period of sharply reduced economic growth. So we are not just talking about dry economic statistics here: It is the lives and health of hundreds of millions of people that have been stunted.

It is of course difficult to isolate the causes of such a protracted, geographically widespread economic failure, but there are some prime suspects. Higher interest rates, often enforced by the International Monetary Fund, have slowed growth through much of the developing world. This trend was reinforced by the central banks of the developed countries, further slowing the developing economies by reducing world-wide growth.

Prior to the 1980s, it was common for low- and middle-income countries to pursue a country-specific development strategy. This has been replaced, in most cases, with a formulaic set of principles involving opening to international trade and financial flows, privatization of state-owned industries, and other de-regulatory measures.

This "Washington Consensus" has not fared well in practice, and has led to a number of economic disasters in recent years. The Asian economic crisis of 1998, for example, was brought on by reckless opening to "hot money" from abroad. Financial and economic crises in Mexico, Russia, Brazil, and Argentina have also taken their toll on global economic growth.

Searching for good news, partisans of the Washington Consensus (such as the World Bank) now point to countries such as China and Vietnam as successful "globalizers." But China's banking system is mostly state-owned, its domestic markets highly protected, and its capital flows strictly controlled. Most of Vietnam's investment is undertaken by the state. These Washington economists do not seem to notice the irony in their argument: "Our brand of neoliberalism seems to have failed, but the Commies are doing great!"

The G-7 leaders control the most powerful institutions that enforce the rules of the Washington Consensus: the IMF, the World Bank, and the WTO. They are practicing a strategy of denial: This prolonged economic malfunctioning is the elephant sitting in the middle of their conference room, and they will try their best to ignore it. But an honest debate over the causes of this failure is long overdue.

Mark Weisbrot is co-author, with Dean Baker, of "The Scorecard on Globalization: Twenty Years of Diminished Progress" and "Social Security: The Phony Crisis" (University of Chicago Press, 2000). He is currently Co-Director of the Center for Economic and Policy Research, in Washington, D.C.

Understand the importance of honest news ?

So do we.

The past year has been the most arduous of our lives. The Covid-19 pandemic continues to be catastrophic not only to our health - mental and physical - but also to the stability of millions of people. For all of us independent news organizations, it’s no exception.

We’ve covered everything thrown at us this past year and will continue to do so with your support. We’ve always understood the importance of calling out corruption, regardless of political affiliation.

We need your support in this difficult time. Every reader contribution, no matter the amount, makes a difference in allowing our newsroom to bring you the stories that matter, at a time when being informed is more important than ever. Invest with us.

Make a one-time contribution to Alternet All Access, or click here to become a subscriber. Thank you.

Click to donate by check.

DonateDonate by credit card
Donate by Paypal
{{ post.roar_specific_data.api_data.analytics }}
@2022 - AlterNet Media Inc. All Rights Reserved. - "Poynter" fonts provided by fontsempire.com.