Sunday, March 18, 2012

Laissez-Faire Capitalism in the Real World: Africa

Neoliberalism has become dominant since the collapse of the Bretton-Woods financial framework, which now means free movement of capital. It's hard to find a region of the world that has more closely followed the neoliberal recommendations than Africa. African countries have been completely dominated by the World Bank and IMF. These groups work in tandem and impose what are called "Structural Adjustment Programs" for targeted countries. "Markets in everything" is a right wing slogan and that's the core of neoliberal thinking. Not just labor and resources. Health, education. Even voting.

In the early 80's the World Bank and IMF successfully imposed on African countries a reduction in government expenditures for health, introducing fee based systems. Life expectancy collapsed in Africa like nowhere else. AIDS proliferation is a direct consequence of these measures. Africa accounts for 14.5% of the world population, but 72% of the AIDS deaths. Neoliberalism has destroyed higher education. Neoliberal policies have consistently attacked subsidy for eduction, requiring instead fee based policies. This has been totally ruinous to education, which is now only a rich family's prerogative. The same trend exists in the US as the same policies are implemented here.

A short overview of how it works in Africa here and a more lengthy talk here.

5 comments:

HispanicPundit said...

Of course, in Jon's world Africa represents Laissez-faire capitalism. But the real world is quite different.

For Africa's ranking, see the IMF Ease of Doing Business here. You will see that African countries are anything but laissez-faire.

For reasons for some of Africa's failure, see ttis new blog. It's from two academic economists who have specialty in Africa in particular.

Lastly, much of Africa is actually on the upswing. See here, here and here.

Jon said...

You just said in this thread that the private property measures in the IMF study apply both to Socialist property relations and Capitalist property relations. After first saying that they did not apply to both. Now you are once again claiming that the IMF is some sort of measure of whether or not a state is Laissez-Faire Capitalist. Seriously man, you're all over the map.

HispanicPundit said...

Were talking past each other. The IMF private property measure is intrinsically capitalist: just like capitalism, it allows for BOTH ownership by the workers AND ownership by the investors. Again, capitalism does the same thing.

However, socialism does NOT (according to you) allow ownership by the investors. So no, I would not say that the IMF is, strictly speaking, associated with private property defined via socialism.

That was my point.

But that was a separate issue. My other point here, is that if the term "capitalism" is causing you to get hung up, we can use another word. When I use the word capitalism, I mean all that comes with it: little to no trade restrictions, low regulations, low taxes, STRONG property rights, etc. Basically, the Ease Of Doing Business index. The FULL market, in Free Market.

So on THAT definition, Africa ranks very low on the "capitalist" ranking.

Jon said...

Show me how the IMF measures lead to high rankings for countries that permit socialist and capitalist property relations but not strictly socialist.

I guess I am hung up on definitions. I think clearly understood definitions are vital to a meaningful discussion. Good definitions are what prevent people from talking past one another.

So let's try to lay out the argument here without using terms like capitalist and socialist. My claim is that Africa follows your preferred economic model more than it does mine. I point to the various neoliberal programs, and I think we can agree you do think neoliberal perscriptions are for the best.

But you say they don't in fact follow neoliberal prescriptions and the proof is this IMF report. My claim is that is not what this report is measuring by and large.

Take the property rights measure. A country gets a high ranking for having an online database that tracks ownership and facilitates exchange of property. There's nothing there that suggests neoliberal or non-neoliberal. That's just means information is more easily accessible and exchanges can happen more easily.

So the key is I reject your claim that this index correlates to the argument we are having. It's a good measure of ease of doing business maybe. But what about whether a state follows your economic advise vs my economic advise? It's not telling us that.

So I look at the policies implemented. I look at the influence of the IMF and World Bank, which have as their credo the very policy prescriptions you suggest. They have implemented these in Africa to a very powerful degree. Reduction in trade barriers, privatization, reduction of government expenditures and influence, liberal currency controls, free capital movement. And so they are following what you think is for the best.

HispanicPundit said...

So the key is I reject your claim that this index correlates to the argument we are having. It's a good measure of ease of doing business maybe. But what about whether a state follows your economic advise vs my economic advise? It's not telling us that.


The Ease Of Doing Business ranking measures:

The ease of starting a business
The ease of registering property rights
The tax rates
The level of free trade
The rule of law

These are the things that come to mind when I think of capitalism. It's not just the ability for investors, workers, and so forth to own the means of production. It's the level of property rights more generally, free trade, tax rates, rule of law, regulation, etc. This is what the IMF is measuring.

And I argue that the higher the ranking, the better the economy. And that is exactly what you see.

You write:So I look at the policies implemented. I look at the influence of the IMF and World Bank, which have as their credo the very policy prescriptions you suggest. They have implemented these in Africa to a very powerful degree. Reduction in trade barriers, privatization, reduction of government expenditures and influence, liberal currency controls, free capital movement. And so they are following what you think is for the best.

I'm curious Jon, have you ever read Ken Rogoff's (highly respected economist, even Krugman admits so) response to Joe Stiglitz critique of the IMF and World Bank? You should. It's here.

My favorite part of Rogoff's response is this one: Joe, throughout your book, you condemn the IMF because everywhere it seems to be, countries are in trouble. Isn't this a little like observing that where there are epidemics, one tends to find more doctors?

It's kinda like arguing, "I see so many people with headaches taking Tylenol. Yet even after taking Tylenol, many continue to have headaches! Therefore, taking Tylenol does nothing or at worst, causes headaches!". Have you ever stopped and considered the fact that maybe, just maybe, the headache was already too strong for even tylenol to do much good?

With that said, as I argued above, much of Africa is actually on the upswing. See here, here and here. Maybe the Tylenol works more than you give it credit for!