President Obama’s speech at the U.N. last week was mostly a defense of the world’s economic and political status quo, especially that part of it that is led or held in place by the U.S. government and the global institutions that Washington controls or dominates. In doing so, he said some things that were exaggerated or wrong, or somewhat misleading. It is worth looking at some of the things that media reports on this speech missed.
{mosads}”Over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40 percent of humanity to under 10 percent.” This is roughly true, according to World Bank data, but the story of how it happened goes against his whole speech — which argues that this progress is a result of the “globalization” that Washington leads and supports wherever it has influence in the developing world. In fact, the majority of the reduction in extreme poverty during this period (more than 1.1 billion people worldwide) took place in China.
But during this period, China was really the counterexample to the “principles of open markets” with which Obama insists “we must go forward, not backward.”
China’s historically unprecedented economic growth in the past 25 years (or 35 years, or even more) was accomplished with state-owned enterprises and banks dominating the economy. State control over investment, technology transfer and foreign exchange was vastly greater than in other developing countries. China rejected the neoliberal policies of an “independent central bank,” indiscriminate opening to international trade and investment, and rapid privatization of state companies. Instead, it chose a gradual transition, over 35 years, from an overwhelmingly planned economy to a mixed economy in which the state still plays a leading role. Even today, China expanded the investment of state-owned enterprises by 23.5 percent in the first six months of 2016 (as compared to the same period in 2015), to help boost the economy.
If we go back a bit more and look at 1981–2012, China accounted for even more of the reduction of the world population in extreme poverty, about 70 percent. This would indicate that other parts of the developing world increased their economic and social progress during the 21st century, relative to China, and indeed many developing countries did (as compared to the last two decades of the 20th century).
But China played an increasingly large role in reducing poverty in other countries during this period. It was so successful in its economic growth and development — by far the fastest in world history — that it became the largest economy in the world, and pulled up many developing countries through its imports. Chinese imports went from a negligible 0.1 percent of other developing countries’ exports to 3 percent from 1980 to 2010. China also provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century. (In the last few years, Chinese growth has slowed, along with that of most countries, and that has contributed — although perhaps not as much as Europe has — to the global slowdown since 2011.)
Of course, the “principles of open markets” that Obama refers to is really code for “policies that Washington supports.” Some of them are the exact opposite of open markets, such as the lengthening and strengthening of patent and copyright protection included in the Trans-Pacific Partnership (TPP) agreement. Obama also made a plug for the TPP in his speech, asserting that “we’ve worked to reach trade agreements that raise labor standards and raise environmental standards, as we’ve done with the Trans-Pacific Partnership, so that the benefits [of globalization] are more broadly shared.”
But the labor and environmental standards in the TPP, as with those in previous U.S.-led commercial agreements, are not enforceable; whereas if a government approves laws or regulations that infringe on the future profit potential of a multinational corporation — even if such laws or regulations are to protect public health or safety — that government can be hit with billions of dollars in fines. And they must pay these fines, or be subject to trade sanctions.
In his defense of a world economic order ruled by Washington and its rich country allies, Obama also asserted that “we have made international institutions like the World Bank and the International Monetary Fund [IMF] more representative.” But that is a gross exaggeration: The most recent reform of IMF voting shares left the U.S. with an unchanged 16.7 percent share, enough to veto many important decisions (that require an 85 percent majority) by itself; and it left Washington and its traditional rich country allies with a solid majority of more than 60 percent of votes.
Of course, it is the developing countries, especially poorer ones, that are most subject to IMF decisions. But the IMF is — by a gentleman’s agreement among the rich-country governments — headed by a European, and the World Bank by an American. It should not be surprising if these institutions do not look out for the interests of the developing world.
“We can choose to press forward with a better model of cooperation and integration,” Obama told the world at the U.N. General Assembly. “Or we can retreat into a world sharply divided, and ultimately in conflict, along age-old lines of nation and tribe and race and religion.”
But the rich-country governments led by Washington are not offering the rest of the world any better model of cooperation and integration than the failed model they have been offering for the past 35 years. And that is a big part of the problem. But fortunately, their influence is diminishing.
Weisbrot is co-director of the Center for Economic and Policy Research in Washington and the president of Just Foreign Policy. He is also the author of the new book “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (Oxford University Press, 2015).
The views expressed by contributors are their own and not the views of The Hill.