Do Not Structurally Adjust Your Mindset

I notice that I've been averting my gaze for a while from the disaster that is political economy in 2012. I think perhaps I have just said everything I can say and become depressed at the supine nature of 'public opinion'. How can it be that the majority of populations in countries across the well-educated, sophisticated world of Western Europe are accepting the trashing of the public sectors their parents and grandparents fought so hard for? How have the financiers and their pet politicians managed to pull off this amazing coup? If you still have the energy for convince your austerity-loving friends about the Big Lie, then you will find the deficit-myth website a helpful ally.

I find something ironic in the fact that the leadership of the World Bank was contested between Nigerian finance expert Ngozi Okonjo-Iweala and Jim Yong Kim, who looks like he might be from some country other than the US but actually isn't, just at the time when the focus of the Bank's attention is shifting from the traditional majority-world victims, to a new range of suckers in the more temperate parts of the globe. With Obama's backing Kim was always going to be laughing all the way to the Bank.

The purpose of a structural adjustment programme and an austerity programme is essentially the same. Both grow out of debts taken on by governments without the conscious consent of their peoples for reasons that benefit a tiny minority. Both result in cuts to public services or social programmes that the vulnerable depend on. Both ensure that, through high levels of public debt, the wealth of nations is extracted by corporate financiers. The policy that was invented in Africa and tested in Latin America is now being imposed in Europe.

The Bretton Woods project reminds us that the BRICS are forging a new path to an economic future that rejects the elite, neoliberal, expropriative economy of the 20th century. The battle is taking place between the global institutions, with the IMF and World Bank sticking to the Washington consensus, while UNCTAD and UNESCO take the part of the poor. Obama may have kept control of the World Bank, but the world's peoples need to find solidarity in rejecting its destructive policies. The similarities between austerity for the rich and structural adjustment for the poor should help us to build this solidarity.
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Institutional Racism

The indifference of the Metropolitan Police to the murder of Stephen Lawrence rightly led to private soul-searching and public examination of procedures, and we have to hope that our country and particularly our police service is better as a result. But there is a more insidious form of racism that goes unquestioned and causes the death of far more people. This is the racism of an economic system that values the lives of the poor differently from the lives of the rich.

According to a recent blog post, such an attitude was subscribed to back in 1991 by Larry Summers, tipped to become the boss of the World Bank, and therefore one of the most powerful people in the global economy. According to the totally undemocratic procedures by which the global financial institutions are run, the Europeans choose the head of the IMF while the head of the World Bank is a position virtually in the gift of the US President, and the rumour is that he is thinking of giving the job to Summers.

US blogger Doug Henwood cites a memo issuing from Summers's office back in 1991, when he was the Bank's Chief Economist. The memo explains why Africa is seriously under-polluted and argues for the Bank to encourage highly polluting industries to move to Africa because this would be so much more efficient. The efficiency arises from the fact that paying compensation for the deaths of Africans is so much less costly than paying for the deaths of US citizens.

The author of the memo writes that 'I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.' The argument is that should there be a claim for damages, the costs would be based on the economic value of the people who died, that is to say their potential lifetime earnings. Since Africans earn so little their deaths would cost polluting companies relatively little.

In spite of the morally outrageous nature of this reasoning, and the blatant racism that lies behind it, this sort of costing of human lives is fairly routine amongst neoclassical economists. A seminal paper in the field cites that value of human lives, based on earnings potential, as ranging between nearly $10m. if you are Canadian to a mere $0.8m. if you are South Korean. The African countries favoured for pollution dumping by Summers and his ilk do not have enough money to invest to be part of these studies.

The estimates vary widely, suggesting that the methods as well as the morality lying behind these sorts of studies is grossly unreliable. Yet it is on this sort of basis that decisions are made about the siting of factories and the disposal of the noxious effluent of Western lifestyles. Those debating the future of capitalism should take note: the challenge to values needs to run much deeper than merely questioning relative wage differentials in the wealthy economies of the West.
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Diverting the Currency Wars

Robert Skidelsky joins the debate about the need for a neutral global trading currency, but this time in the Financial Times which is also available at his personal website. This is the Green Party's policy and was proposed by this blog for the last G20. Skidelsky, being an unreconstructed Keynsian, has not included the planetary limit in his thinking; the EBCU proposal would do this. China will be arguing for a neutral currency, issued by the World Bank, as it has been doing for some time. We should put our energies behind this call, but with the additional twist of a currency that keeps trade and production within environmental limits, as well as bringing balance and equity.


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