A CRITIQUE OF THE WORLD DEVELOPMENT REPORT 1996

The Distance from 'Liberalism' to 'Liberalisation'

How the World Bank reads 'liberalisation' is a far cry from the broad, revolutionary attributed to the term 'liberalism' in the early days of capitalism. What the Bank itself means is nothing but the commodisation of society.

by Stephen L. Mikesell

The theme of the World Bank's World Development Report 1996: From Plan to Market, released on 27 June this year, addressed the transition that has been taking place over the last decade or so in China, Vietnam, and countries once part of the Soviet Union. Though the Report mentioned other industrialising countries only in passing, it strongly suggested that the experience of the post communist regimes could serve as a model for countries of the developing world. And though the omission of South Asia in the Report is almost complete, it did not stop the World Bank from energetically promoting the publication itself in the SAARC countries.

The Report, with 147 pages of dense text and nearly 100 additional pages of tables and notes, is somewhat heavy reading. Yet, through clever use of rhetoric and the attractively packaged promotional material distributed to the media, the World Bank was able to ensure that its viewpoint and agenda would be actively propagated. The regional newspapers, always hungry for stories and under deadline pressures as usual, duly published the Bank's line, and in Nepal at least, only one editor is actually known to have read through the main Report before editorialising, rather than relying on the World Bank's own promotional feeds.

It is strange that the World Bank should be so eager to promote in South Asia a document that deals almost exclusively with the transition from "communism" to market, a region which has, for the most part, long aligned itself with the capitalist bloc. Even stranger is that reports such as this, together with UNICEF's State of the World's Children and UNDP's Human Development Report, are accepted in these "developing countries" without any critical appraisal and allowed to influence development policy. This, despite the fact that the experiences and perceptions of the writers of these reports, sitting in Washington DC, New York City or Geneva and picking selectively on information provided from "the field", differ vastly from those living and working in the subject countries.

On the other hand, however, the World Bank's interest in actively circulating the Report in South Asia (and presumably in other "Third World" countries as well) fits in well with the Bank's scheme of things. For, although ostensibly dealing with the transition from plan to market in the post communist regimes, the Report supports the World Bank's wider agenda of promoting the universal spread of markets. Throughout South Asia, heavily indebted governments are now being forced, over domestic opposition, to bow to the Bank's and the International Monetary Fund's dictates on opening their societies to the free play of market forces. What better way to legitimise this process, disarm resistance, and undercut open debate, than with a comparative study of the experiences of the ex Soviet countries, China and Vietnam, which, after having failed in "opting out" of the market system, are now "returning" to it apparently amidst a tremendous wave of popular consent.

The Report's argument is that the "succession from the Market economy" by one-third of the world (specifically, Central and Eastern Europe, the Newly Independent States of the former USSR, Mongolia, China, Vietnam, Algeria, Cambodia, Laos, Nicaragua, Korea and Tanzania) and the attempt to "centralise control of production and allocate all resources through state planning" was a failure. As a result, a radical transformation and reintegration into the world has been "set in motion". Here, the authors' use of irony cannot be missed as they quote from the Communist Manifesto "... All fixed, fast frozen relations, with their train of ancient and venerable prejudices, and opinions, are swept away, all new formed ones become antiquated before they can ossify. All that is solid melts into air", while noting it is socialism giving way to capitalism rather than the other way around. Marx's pronounce-ments have been cleverly applied to justify the re-ascendence of the market in the very countries where his name had previously been invoked in the fight against capitalism.


Fat Follows Lean

A "successful" melting into air, "that is, transformation to the market", says the Report, is brought about by a series of reforms. And although there is the initial three year hiccup when old institutions will collapse and disintegrate, for those who heed the World Bank's advice in assiduously implementing the reforms, fat years will follow the lean. Therein the experience of more favourably placed countries is converted into universal law. That other countries have suffered famine, war, and so forth is merely held up as example of the necessary reforms being insufficiently pursued. The series of reforms, presented in a six step path to success, are: one, liberalisation and stabilisation; two, creation and allocation of property rights; three, encouragement of the entry of new firms and investments; four, institutional evolution and change to support the market; five, transformation in the role of the state; and, six, education and health reform. With an increasingly "integrated global market, integration will lock countries onto a path of more open trade, and membership in international institutions which will spur domestic institution building." The transformation will be complete when a country's "problems and further reforms come to resemble those of larger market economies with similar levels of income." Inability of countries to overcome their "initial" decline or satisfactorily restart growth is attributed not to flawed prophecy but to incomplete or improper application of these reforms.

The thoroughness of the documentation, the use of large amounts of comparative data, and the general clarity and reasonable tone of the arguments easily dissipate scepticism. But then, with every chapter returning to the refrain that—whatever goes wrong or however much experience has diverged from prophecy—speedy and thorough implementation of market reforms always is the key, one gets the feeling that one has heard it all before. After all, weren't people supposed to take it on faith that countries would "take off" (as opposed to "lock in") if only they would follow the latest programme for development?

South Asians have also experienced planned economies for decades now, with five year plans and state monopolisation of various sectors of the economy. At the same time, we also share the illusion that we are heading not towards communism but the same "radical integration" in the market economies which is now being held out to the "centrally planned" countries. We have experienced the same buildup of oppressive bureaucracies, the dismantling of civil society underwritten not only by an increasingly illegitimate and unaccountable state machinery but even more so by the equally unaccountable foreign aid and international financial apparatus. Furthermore, many of the woes attributed by the Report to central planning, such as environmental devastation, distortions, propaganda, suppression of individual initiative and responsibility, we also have experienced—at the hands of the market no less.


Commodisation of Society

This latest World Development Report would have us believe that, while the goal remains the same, the whole problem is in the way we have been going about it. It offers yet a new nostrum in the form of "liberalisation", thereby appropriating in a different form the now discredited word "revolution" from Marx's Communist Manifesto. Liberalism, as it appeared in early industrialisation, was indeed revolutionary in the sense given it by Marx. It meant a breaking of the material fetters and ideological limitations of feudalism and a bringing forth of fresh possibilities offered by new forces of production, organisation of labour, forms of property, and awakening ideas. In the late eighteenth and early nineteenth centuries, expansion of markets—at least from the perspective of colonisers—allowed the spread of nascent industrial capitalism and the growth and flowering of the institutions and ideas now taken for granted by it.

This Report, however, defines "liberal-isation" much more narrowly in terms of a freeing of prices, opening of trade, liberation of business from state control, and allowing entry of new businesses, that is, a commodisation of society. The meaning given to liberalism by the World Bank is a far cry from the broad, revolutionary sense attributed to it in the early days of capitalism. In the twilight of the twentieth century, what is being offered is a market characterised by rapid centralisation of an already monopolistic control of commerce, production and finance on a global level. And old terms reappear with constricted meanings.

No doubt Adam Smith's "invisible hand", which the Report once again hauls out, will process information better than central state planners, and competition will release "powerful forces", as the Report claims. But this will happen according to the needs of large corporations, not on behalf of the bulk of earth's citizens and the environment. Thus the "depolitisisation of resource allocation" means the shift of power from state bureaucratic machinery to the corporate arena, where political force takes the form of impersonal market mechanisms or is made to appear detached from corporate responsibility and liability through the use of national police forces, armies, bureaucracies, and the fluid shift of capital and resources across the globe. If "liberalisation" implies opening of possibilities and the freeing up of humans and resources, it is only within the limits imposed by a world of transnational corporations.

The same situation also frames the creation and allocation of private property rights ("privatisation") through the redistribution of state ownership, a key element in the World Bank's agenda. The Report refers to the previous situation in planned economies as a "property vacuum" characterised by an unclear definition in the allocation of property rights, although the reality was quite different. Distribution of labour and resources in those economies was executed through a bureaucratic machinery, favouring the growth of a new ruling class consisting of technocrats and apparatchiks, while the ideological flag of a classless workers' state and the millennial promise of an eventual communism facilitated increasingly arbitrary and unaccountable rule by this new class.

A similar growth of a bureaucratic ruling class permeates also the corporate world, propelled by the international aid machinery, with "experts" and business school graduates in place of the "technocrats", with benefits going to a growing cadre of national and international contractors and commission agents as well. A careful ambivalence in referring to class prevents the process in being identified as such, but all that the Report means by creating property rights is expropriation of the current appropriators and development of a private property class domestically, and ultimately, their subordination to transnational capital.

When the Report identifies the first feasible step as parcelling out the control over corporations and farms to the managers and families in the form of share vouchers, private plots of land, and so forth, it recognises that basically the same dominant interests already in control in the "centrally planned" countries will retain control over the society's resources. The key is that with the breakup of ownership into small parcels it can be reconsolidated more efficiently through market mechanisms. Given the delays in privatisation and divestment of most large state owned enterprises in the formerly Soviet countries, the Report sees entry of new firms as the quickest way to replace old ones, a process it calls "creative destruction". Again, the Report's indifference towards class allows it to avoid saying that, in the current context of multinational corporate control over the markets, ultimately a greater global centralisation of control over wealth and power, not decentralisation, is implied.


A Global Tendency

In these basic reforms which take the form of commodisation ("liberalisation"), redistribution of property, and stabilisation, lie the way to changing the institutional bases of society and transforming the nature of the state. The state is to be transformed from involvement in production to promoting macroeconomic stability and providing a legal and institutional environment for supporting the private sector and competition. Eventually, an ideal framework for market exchange will have been created, a process which the Report identifies as a "global tendency". Just because it is a "global tendency", however, one wonders what a report that formalises the process as it is already happening in terms of economic theory or, more correctly, a policy agenda, will actually accomplish. The authors' criticism of central planning is valid, although it is by no means new. A whole line of figures, including Kautsky, H.G. Wells, Raya Dunayevskaya and Paul Baran, among others, have criticised the "actually existing socialism" in the USSR for having betrayed the socialist project. These people, who unlike the writers of the report were committed to socialist ideals and believed that there exists an alternative possibility for humanity, characterised socialism's distorted development as "state capitalism" and attributed it to a persistence of market elements.

The bureaucratisation and central-isation in the Soviet state was demonstrated as early as 1920 by the liberal German sociologist Max Weber to be a tendency of party based politics wherever there is lack of mechanisms of direct popular control over party machinery. Even where elections and multiparty democracy exists, as in the United States or in Europe, he refers to elections as a choice between chosen masters providing only an illusion of democracy if such mechanisms do not exist. The Report's critique is not only nothing new but it actually makes virtue of the tendencies that subverted socialism internally from the start. Much of the agenda of the Report refers to privatisation, liberalisation, and stabilisation policies that are already being adopted in South Asia. Formalising the various groping alternatives taken by China, Vietnam and the different successor governments of the Soviet Union as various stages on a continuum from planning to market, depending upon how successfully these countries have subordinated social, economic, and political life to commodity relations, imparts a scientific mystique and inscribes an unjustifiable sense of necessity and inevitability to something that remains highly contested and should by no means be thought of as final.


Backward Perspective

The World Development Report 1996 offers a prescription that presents the process in terms of a bipolar proposition of either planning or the market. Thereby it deletes, or more correctly removes itself from, the search for other alternatives. No doubt, for planners (of whatever nationality) sitting in climate-controlled high-rises within a stone's throw of the White House, driving comfortable cars to and from work, and reading the lists of agency reports given in the bibliography—which for the most part start from a narrow set of shared assumptions (and thus promote the envisioning of self fulfilling prophecy)—the market economy seems to consummate human development and indeed represent the "end of history".

But those of us differently placed see that many of the criticisms levelled by the Report at central planning are no less alien to the market, and one need not go too deep to see how intimately linked the paths of the two "systems" have actually been. Environmental destruction, for example, has followed the market economy in its wake no less than the merchant has followed the sword and the Bible, bringing us to question at the turn of the millennium whether humanity will live out even the next few decades. The authors criticise the planned economies for being inefficient, but the efficiency the market offers in return is the extremely narrow one of making sure resources and labour turn a profit; it has little to do with meeting the needs of an embattled humanity and natural environment. And all the time capitalism tries to distance itself from its history and responsibility, it can hardly be forgotten that gulags were by no means a Soviet invention nor genocide a Khmer Rouge one.

Though the required changes are not going to come from Lenin or his successors, neither are they to be found in the backward looking perspective of the World Bank report. An outlook that looks to the future would have sought new paths for the world, not legitimisation of a new status quo reflecting paths already trodden. A very few of the myriad of severe, globally life threatening problems crying to be faced include the nearly universal dependence upon fossil fuels and the private automobile, nuclear proliferation, uncontrolled production and consumption as the purpose of social life, the poisoning of earth through agribusiness, the proliferation of the arms industry, the homogenisation of thought and ideas through an increasingly centrally controlled mass media, and the global rule of finance capital over human life. These are all problems being proliferated and spread by the market economy, requiring not just societal changes that are global in scope, but personal changes of lifestyles and values intimate in impact. As Voltaire put it: "First tend your own garden"—advice that neither the authors nor the purveyors of the World Development Report are about to take.

S. Mikesell, an anthropologist involved in grassroots issues and globalisation, was till recently with the Everest Herald, Kathmandu.


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