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Michael Kuelker:
As an economist and professor of economics, how do you view the
documentary?
Bruce Welz:
I thought it was extremely one-sided. What they did is they interviewed a
lot of different people, and they're talking about the effects of
globalization. If I recall correctly, there's a lot of criticism of the
World Bank and International Monetary Fund.
In economics, we recognize that
anytime you make a choice—and that's what we do in economics, we model
choice problems—you incur a cost, the idea being that the true cost of
doing anything is the loss opportunity to have done something else. So
there's always a cost involved.
With the World Bank, their approach
is very much a market-based solution to things. So you're going to have
this transition from more traditional economies to a market economy. And
there are clearly costs involved. In fact, what usually happens is the
loss of these traditional economies.
In that video, they're interviewing a
lot of these people who were part of the traditional economy, and yes, you
would expect that they're the ones who are going to suffer from the
change, the transition from traditional to market economy. But what you
want to be doing is weighing the benefits of doing that against the cost.
I recall at one point in the video, they were saying, 'now people in
Jamaica can buy crops at a price less than what we can produce them at.'
Well yeah, that's one of the things about a market economy: you'll get
this one price regardless of currencies, and a better price if you have
free trade. The whole idea of free trade is that you'll get more output of
goods and services at more attractive prices. Restraints of trade result
in less output and higher prices.
And so I thought it was extremely
biased. First of all, I have been familiar with the World Bank for some 30
years. It was borne out of Bretton Woods, and the financial arm of that,
the International Monetary Fund. After World War II, the purpose, as they
mentioned in the video, was to rebuild Europe. They did that with some
success, and once this was done, their attention was turned to developing
countries. In fact, their purpose today is very, very different from their
historical purpose. Today it's a source of development assistance for
developing countries, with the goal of reducing poverty and promoting
economic opportunity and growth. How do they see the best way of doing
this is through markets – a market-based approach of addressing poverty.
Kuelker:
So we see the Jamaican farmer and the imported rice and vegetables.
The imported foodstuff comes in cheaper than locally produced food. It has
a destabilizing effect.
Welz:
But at the same time, remember that they mentioned in the film that the
prices in the market were lower than what they could produce the good at.
I wasn't surprised by that. Yes, that's hurting the farmer, but the
general welfare of the people is enhanced because now they can get the
rice, the beans at a price lower than before.
The language they use today is
‘transitional economies.’ They applied it to the old Soviet bloc countries
that were planned economies. But you can talk about any of these economies
that are moving toward a market economy away from the traditional and
still put them in the category of transitional economies. There are always
going to be costs involved. In a market economy what price does is it
broadcasts information on opportunity costs and relative scarcity. And
what it suggests then, or ought to suggest, is maybe these farmers ought
to be doing something else, that farming isn't what they have the
comparative advantage in.
A lot of people will think, well,
wait a minute. What if the United States can do everything better in terms
of less inputs than a country like Jamaica? There's still a basis for
trade. What matters is not absolute advantage but comparative advantage.
As long as Jamaica is not equally less productive in everything, there's a
basis for specialization on their part and trade with others.
Kuelker:
In Jamaica's case, they've had more of their economy turn toward
the tourist market. And so the nationalists are saying that we're seeing
less self-determination on the part of Jamaica and that orienting the
nation toward tourism isn't in Jamaica's best interests. Especially when
the tourism market is so glutted with the all-inclusive model of resort
tourism, a tourism oligarchy, as opposed to other models such as community
tourism.
Welz:
I guess the question is, who makes this decision that we ought to commit
our resources to tourism and not agriculture. That's being done at some
level. I pulled up the country—I'm not really familiar with it—and I was
disturbed by the poverty. I wasn't aware just how poor. It's only since
1962 that they've had their full independence. Really, that's a short
amount of time in the larger scheme of things. Somebody's making this
decision. I was looking for what percentage of aggregate output is
accounted for by tourism. A lot of countries like Jamaica have decided
that tourism is a good source of revenue for them.
Kuelker:
Development, in other words, is defined in terms set by powerful
western nations, who take the lead and say 'Globalization is good' and
'We're sorry you feel that way.' This is the message Jamaicans are
getting. They’re subject to economic forces larger than they control, and
so much money is flowing out through debt servicing as a result of the
stringent terms imposed by the IMF for these loans.
Welz:
Some of the rates of interest that were quoted cannot be the case at
all. I know there's an international development agency of the World Bank,
that provide loans at no interest. One of the things that people need to
keep in mind is that World Bank and the International Monetary Fund
provide loans to countries where nobody else would lend to them. So the
idea behind a loan is repayment. We can talk about transfer payments,
where there's no repayment, or gifts, but most loans are on a contractual
basis. Part of the reason for doing them on a contractual basis is to
secure repayment.
The first criterion you should ask
yourself in making any loan is ability to repay. Because it would be
irresponsible, actually, to make a loan to someone if they don't have the
ability to repay. At that point you should either decide, do I make a gift
of this money to them or do I just not make the loan? There are certain
contractual arrangements that you enter into when you make these loans,
and a lot of them have to do with setting things up so there is a means of
repayment. In a lot of these developing countries, often there's a lot of
corruption in the government. There's the problem.
So there are restrictions, always,
but they're usually done in a way that's feasible if people adhere to the
contract. The problem is, you get a lot of corruption. I think it's very
unfair to paint the World Bank and the International Monetary Fund as the
bad guys. These are well meaning people. That doesn't mean their policies
have always been necessarily sound, and sometimes the consequences were
quite unlike what they intended. So you've got these undesirable,
unintended consequences. But you've got a really highly educated well
meaning group of people. I don't know any other groups that are willing to
commit the kind of resources that these institutions commit to developing
countries. They're not the bad guys.
Kuelker:
Well, they impose austerity measures which cut into education and other
social services, right?
Welz:
That emphasis is misplaced. There is an organization within the World Bank
that provides a lot of aid to a lot of counties. Take the continent of
Africa, look at all the countries there. You can't judge them by looking
at one country. Policies that may not have worked in one country are
working very well in another country, like in China.
I have the growth rate in Jamaica—not
good. It's not even the growth rate of an industrialized state. Usually
when we look at growth rates of developing countries, the growth rates in
developing countries are more attractive than in industrialized countries.
Industrialized countries are already big, so it's hard to have a high rate
of growth, like in the United States where you have a ten trillion dollar
economy. When you have a small, billion-dollar economy, you would expect a
higher rate of growth. I did notice that in Jamaica, they don't have a
growth rate equivalent to an industrialized state. We looked for a growth
rate historically of between two and three percent in real terms. I read
here that it's a fraction of a percent, like two-tenths rate of growth.
Obviously, things aren't working in Jamaica. These countries enter into
agreements, they're contractual, binding legal agreements. In a lot of
these agreements what you look for is a uniform application of the law,
and if we have a uniform application of law, then we say to ourselves,
we're being fair and equitable because we're applying the law in a uniform
manner. When you get into agreements on trade and tariff, it's reasonable
that when one industrialized state gets into an agreement with another, we
expect things to be done in a uniform manner. That's fine when parties are
similarly placed. But what you get into, if you're going to insist on a
uniform application of an agreement, and one group is so much better
positioned than another group, is usually the agreement is going to favor
the group that's better positioned than the group who is less favorably
positioned. So that's a problem.
In economics we talk about horizontal
equity. A lot of time this distinction isn't made. They just talk about,
‘Is it fair?’ Horizontal equity is treating similarly placed people
similarly. So you treat all your students the same; they're all similarly
placed, so similarly treated. If people are dissimilarly placed, then if
you're going to have vertical equity, you treat dissimilarly placed people
dissimilarly. Because if you treated dissimilarly placed people similarly,
you're actually violating vertical equity. That is in part some of the
problems that you run into with these agreements where it's understood
that we're going to have a uniform application of the law. Well, these
agreements aren't going to work for less advantaged people.
You've got these poor countries
engaging in contractual arrangements that are really quite sophisticated.
And I don't want to sound condescending here, but often I am not sure if
they really realize the full measure of what it is they're agreeing to.
And that's where the World Bank and International Monetary Fund need to
step up to the plate a little more. They should represent them in these
agreement with other states to make sure that their interests will be met
as well. Maybe there has been some failure along those lines. But I think
that the failure is borne out of not recognizing what it is you need to be
doing. I don't think it's deliberate.
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This interview was conducted with SCC economics professor
Bruce Welz,
who discusses some of the contexts to this vast umbrella subject called
globalization. He was interviewed in Spring 2003 by
Michael Kuelker
(SCC-English), who has
been doing field research in Jamaica since 1992.
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Life and Debt
– Clips from reviews around the world
From The Guardian [Feb. 28, 2003]:
‘The issue is to make
globalisation work for all. There will be no good future for the rich if
there is no prospect for a better future for the poor.’
That glib, cynical
statement from International Monetary Fund director Horst Köhler is
brilliantly exposed for the platitude it is in Stephanie Black's engaging
documentary Life and Debt. Black's film is incisive in its examination of
how IMF and World Bank policies, determined by the G7 countries, led by
the US, impact on poor developing countries.
From The New
York Times [June 15, 2001]:
The term ‘globalization’
is so tinged with rosy one-world optimism that it's easy to assume the
essential benignity of an economic philosophy whose name vaguely connotes
unity, equality and freedom. But as Stephanie Black's powerful documentary
Life and Debt illustrates with an impressive (and depressing)
acuity, globalization can have a devastating impact on third world
countries. The movie offers the clearest analysis of globalization and its
negative effects that I've ever seen on a movie or television screen. […]
[T]he overall impression
left by this devastating film is of the global economy as a dog-eat-dog
world where the usual culprits, the United States and its multinational
corporate clients, have the advantage.
From The [Jamaica] Daily Gleaner [August 23, 2001]:
I think the film is best
viewed not as documentary but as polemic. It sets forth a counter-position
to the currently orthodox one on globalisation.
Admittedly, it does so
with little subtlety. […] there was an unintended irony in Life and
Debt's extensive use of interviews with Michael Manley to build a case
against globalisation. After all, many argue that it was the policies of
Michael Manley's governments in the 1970s which first led Jamaica into the
hands of the IMF. Thus, several commentators have contended that Life
and Debt places all blame for Jamaica's, and by extension the Third
World's, woes on the First World and its international financial agencies.
In so doing, it absolves Jamaicans of responsibility.
Again,
this is a fair criticism, targeting as it does a dated conceptualisation
of Third World countries as passive actors in the global political
economy. However, I would hasten to add that Life and Debt is made
primarily for First World audiences. Given that those audiences have had
their opinions shaped by people like Bill Clinton, whose speeches have
assured them they are doing all they can for poor countries when in fact
their government's policies are frequently hammering them, the possibility
that the rich may share some guilt for the woes of the poor is beyond
them. This point needs to be put back on the agenda of international
discussions. In exposing half-truths and outright lies, therefore, Life
and Debt does us all a service.
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