Commentary: Know Nothings At The Barricades

For a while there in a crowded Washington, D.C., lecture hall on Apr. 15, the global economy sure seemed simple to grasp. "This is all the international trade theory you need," bellowed Kevin Danaher, the muscle-bound, 49-year-old co-founder of the activist group Global Exchange. He unfurled a huge sheet of paper showing two triangles--one symbolizing the industrialized West, the other the developing nations. Dots at the tips of the triangles stood for the elites of both worlds, linked by three lines respresenting the powers that rule the globe: the World Bank, International Monetary Fund, and their ultimate masters--transnational corporations.

The analysis explains a lot. Why is there poverty in the world? Because exploitative multinationals and elites keep all the benefits of world trade for themselves. To keep wages low, they stifle unions and ruin indigenous industries so that developing nations can't support themselves. Why are so many developing nations deep in debt? Because the IMF and World Bank forced them to open their capital markets to foreign lenders and to slash import tariffs. Why do that? "They want governments to be bankrupt," declared Danaher.

FREE-FOR-ALL. To those who know a bit about economics, hardly any of the above statements make a lick of sense. The reality is that today's global markets are a chaotic free-for-all. But to hundreds of young activists in attendance, it was all the intellectual ammo they seemed to need to converge in the streets to forcibly halt the biannual meeting of the World Bank and IMF. The action was a mixed success: They failed to disrupt the meetings. But the protests did generate global publicity for issues such as debt burdens, AIDS, and environmental destruction in developing nations--and forced the two bodies to put such worthy issues higher on their agendas.

But as the protesters return home to gear up for the next "convergence" at this fall's World Bank and IMF meeting in Prague, they should rethink their stated objective of abolishing these institutions. Like it or not, the pace of economic globalization is only speeding up. To be taken seriously, they also need to offer more constructive solutions to real-world problems. Global Exchange, for example, wants a "bottom up" global economy where gains go directly to the people. As they wait for this utopia to dawn, they want to tear down the existing global financial order. But flawed as they are, the World Bank and IMF are the only major institutions now wielding enough clout with both governments and business to make a serious dent in poverty and find ways to keep the adverse effects of globalization from being even more disruptive.

Organizers also voiced--with passionate conviction--a baffling rationale for curtailing globalization. It went like this: Not only does import competition displace industrial workers and benefit big corporations, but greater exports, foreign direct investment, and economic growth themselves actually make developing nations more impoverished. "We all know that the people of China have only gotten poorer since they began exporting," explained one earnest thirtysomething environmentalist.

What to say, except that this is patent nonsense? By any measure--the percentage of people living below the poverty line, life span, infant mortality rates, education levels--the standard of East Asian nations has improved astoundingly since they began entering the global economy by adopting export strategies, inviting foreign capital, and lowering tariff barriers in the 1960s. The financial collapse of 1997 set back many of those gains, but the net improvement is still breathtaking. What's more, the rise of the middle class that resulted from decades of 8% to 9% annual growth directly led to the downfall of repressive regimes in South Korea, Taiwan, Thailand, and Indonesia.

Certainly, many activists concede it is better to reform, rather than shut down, the World Bank and IMF. Some will even grant that officials like World Bank President John Wolfensohn have worked to achieve many of the same things they demand. The bank's focus is steadily being redirected from the environmentally ruinous dams and megaprojects favored by dictators toward social services, small-scale businesses, and the institutions needed for a civil society.

True, the World Bank still funds lots of questionable projects. And the IMF surely made plenty of serious errors by failing to foresee the Asia crisis and managing the fallout. Activists are right that the institution should be changing more quickly than it is. But before the antiglobalization forces rally to abolish these bodies, they should do some environmental impact studies. Assess what would have happened to Thailand, Mexico, or South Korea had there been no IMF to bail them out. Would halting World Bank funds for health care, village banks, or education really reduce poverty in Indonesia, Brazil, and Nigeria?

PEACE CORPS DIVIDEND. Meanwhile, protesters would do well to spend time touring China and any other Asian country that was an economic basket case just three decades ago. Ask people on the street if we really would be doing their families a favor by shutting their countries out of the global trading system. Better yet, do a stint in the Peace Corps. They might then understand why it is so tough to eliminate entrenched poverty in countries that lack private investment, clean government, and civil society. These are the problems that most staffers at the World Bank have devoted their academic and professional careers to resolving. They have learned through experience what the protesters have not: There are no simple solutions.

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