US swings to the Right

Indian leftists who have long wanted to cripple GATT and the World Bank now have improbable allies in right-wing Republicans who have swept into power in both houses of the US Congress. The Indian left sees these two organisations as agents of US imperialism, no less than the Republicans. They may be surprised to learn that the Republicans fear that the World Trade Organisation (WTO), the new incarnation of GATT, will be dominated by Third Worlders who will erode the sovereignty of the US. The Republican right views the World Bank as an inefficient institution that drains the American taxpayer to finance Third World socialism. So the WTO and Bank face a threat from the American right that is far more potent than from the global left.

The Senate Foreign Relations Committee is going to be taken over by Mr Jesse Helms of the ultra-right, who has sworn to slash foreign aid ‘going down foreign rat-holes’. Mr Pat Bu-chanan, who plans to run as a Republican candidate in the next Presidential election, said in a TV interview recently that the US should resign from the World Bank.

The US right wing has long argued that the World Bank funds inefficient Third World governments and should be wound up. The articles of the Bank say it should lend only where private capital is not available. With the rise of globalised financial markets, private capital flows to the Third World now approach $ 130 billion per year, much larger than the $ 20 billion per year lent by the Bank. Last year, India signed up for only $ 96 million of World Bank loans, but received $ 4, 700 million of private capital flows. Ironically, globalisation has eroded the original rationale for having a World Bank.

The Bank accepts that it has a diminished role in funding creditworthy countries, but feels it still has an important role in alleviating poverty, especially in Africa. However, the mood in the US is against hand-outs for its own poor, and this surely means cuts in hand-outs for the global poor. After three decades of rising welfare payments, the US finds itself plagued more than ever by a growing underclass, long-term unemployment, and a drift from high-wage to low-wage jobs. Republicans see their sweeping victory as a mandate for radical right-wing change, for attacking the welfare state. The new Republican leader in the House of Representatives, Mr Newt Gingrich, is said (tongue in cheek, of course) by ‘The Economist’ to regard even Mrs Margaret Thatcher as a bleeding-heart liberal.

The World Bank’s anti-poverty lending is done by its soft-loan affiliate, the IDA, whose coffers need replenishment every three years. IDA currently gives India around $ 1 billion a year, and almost seven times that much world-wide. But the new US mood is anti-charity, and Germany is becoming anti-aid too. If these countries refuse to replenish IDA when its coffers run out in 1996, IDA will collapse. So the World Bank looks like withering away in a manner unanticipated by Marx or Marxists, caught between the pincers of globalised finance and aid-weariness.

The Indian left has opposed the new World Trade Organisation on the ground that it will erode India’s sovereignty. The US right opposes it for the very same reason — WTO will have more teeth than GATT and hence crack its whip harder on violators of trade rules. The US right fears Third World domination of WTO, which has a one-country one-vote principle. The Indian left, amazingly, believes that the arrangement will somehow perpetuate dominance by industrialised countries. President Clinton has struck a deal with the Republicans to let the US join WTO subject to a major condition — a panel of three retired judges will review decisions of the WTO, and if this panel finds that the decisions are against US interests, the US will pull out of WTO.

This reflects US fear of the globalisation of production and finance that it once encouraged. Far from impoverishing poor countries, globalisation has led to the transfer of jobs, incomes and exports from industrialised countries to poor ones. Earlier, rich countries had abundant capital and technology, which mattered more than the abundant labour of poor countries. But globalisation has moved cheap finance and technology into low-wage countries with market-friendly policies, and this combination has proved a world-beater. China alone has a trade surplus exceeding $ 13 billion with the US. So the US now fears that globalisation is hiting its interests, and is demanding reciprocal concessions (on intellectual property rights and trade access) from Third Worlders.

In the next two decades, the Cold War regime of one-way concessions to developing countries will give way gradually to a level playing field for both rich and poor countries. The left will denounce this as an unfair contest between giants and pygmies. In fact, as East Asian miracle economies have shown, globalisation moves investment and jobs from richer to poorer areas. Provided a developing country is market-friendly and creates a literate, skilled workforce, poverty becomes a competitive advantage, not a disadvantage. The poor can inherit the earth, provided it is globalised.

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