Global elites are confused, reactive, and sinking into a quagmire of their own making.
By William I. Robinson
William I. Robinson is a Professor of Sociology, Global Studies, and Latin American Studies, University of California at Santa Barbara. His latest book is Latin America and Global Capitalism.


-Global elites have managed to capture the financial system, managing it to their own benefit-

As the crisis of global capitalism spirals out of control, the powers that be in the global system appear to be adrift and unable to proposal viable solutions. From the slaughter of dozens of young protesters by the army in Egypt to the brutal repression of the Occupy movement in the United States, and the water cannons brandished by the militarised police in Chile against students and workers, states and ruling classes are unable are to hold back the tide of worldwide popular rebellion and must resort to ever more generalised repression.

Simply put, the immense structural inequalities of the global political economy can no longer be contained through consensual mechanisms of social control. The ruling classes have lost legitimacy; we are witnessing a breakdown of ruling-class hegemony on a world scale.

To understand what is happening in this second decade of the new century we need to see the big picture in historic and structural context. Global elites had hoped and expected that the "Great Depression" that began with the mortgage crisis and the collapse of the global financial system in 2008 would be a cyclical downturn that could be resolved through state-sponsored bailouts and stimulus packages. But it has become clear that this is a structural crisis. Cyclical crises are on-going episodes in the capitalist system, occurring and about once a decade and usually last 18 months to two years. There were world recessions in the early 1980s, the early 1990s, and the early 21st century.

Structural crises are deeper; their resolution requires a fundamental restructuring of the system. Earlier world structural crises of the 1890s, the 1930s and the 1970s were resolved through a reorganisation of the system that produced new models of capitalism. "Resolved" does not mean that the problems faced by a majority of humanity under capitalism were resolved but that the reorganisation of the capitalist system in each case overcame the constraints to a resumption of capital accumulation on a world scale. The crisis of the 1890s was resolved in the cores of world capitalism through the export of capital and a new round of imperialist expansion. The Great Depression of the 1930s was resolved through the turn to variants of social democracy in both the North and the South - welfare, populist, or developmentalist capitalism that involved redistribution, the creation of public sectors, and state regulation of the market.

Globalisation and the current structural crisis

To understand the current conjuncture we need to go back to the 1970s. The globalisation stage of world capitalism we are now in itself evolved out the response of distinct agents to these previous episodes of crisis, in particular, to the 1970s crisis of social democracy, or more technically stated, of Fordism-Keynesianism, or of redistributive capitalism. In the wake of that crisis capital went global as a strategy of the emergent Transnational Capitalist Class and its political representatives to reconstitute its class power by breaking free of nation-state constraints to accumulation. These constraints - the so-called "class compromise" - had been imposed on capital through decades of mass struggles around the world by nationally-contained popular and working classes. During the 1980s and 1990s, however, globally-oriented elites captured state power in most countries around the world and utilised that power to push capitalist globalisation through the neo-liberal model.

Globalisation and neo-liberal policies opened up vast new opportunities for transnational accumulation in the 1980s and 1990s. The revolution in computer and information technology and other technological advances helped emergent transnational capital to achieve major gains in productivity and to restructure, "flexibilise," and shed labour worldwide. This, in turn, undercut wages and the social wage and facilitated a transfer of income to capital and to high consumption sectors around the world that provided new market segments fuelling growth. In sum, globalisation made possible a major extensive and intensive expansion of the system and unleashed a frenzied new round of accumulation worldwide that offset the 1970s crisis of declining profits and investment opportunities.

However, the neo-liberal model has also resulted in an unprecedented worldwide social polarisation. Fierce social and class struggles worldwide were able in the 20th century to impose a measure of social control over capital. Popular classes, to varying degrees, were able to force the system to link what we call social reproduction to capital accumulation. What has taken place through globalisation is the severing of the logic of accumulation from that of social reproduction, resulting in an unprecedented growth of social inequality and intensified crises of survival for billions of people around the world.

The pauperising effects unleashed by globalisation have generated social conflicts and political crises that the system is now finding it more and more difficult to contain. The slogan "we are the 99 per cent" grows out of the reality that global inequalities and pauperisation have intensified enormously since capitalist globalisation took off in the 1980s. Broad swaths of humanity have experienced absolute downward mobility in recent decades. Even the IMF was forced to admit in a 2000 report that "in recent decades, nearly one-fifth of the world’s population has regressed. This is arguably one of the greatest economic failures of the 20th century".

Global social polarisation intensifies the chronic problem of over-accumulation. This refers to the concentration of wealth in fewer and fewer hands, so that the global market is unable to absorb world output and the system stagnates. Transnational capitalists find it more and more difficult to unload their bloated and expanding mass of surplus - they can’t find outlets to invest their money in order to generate new profits; hence the system enters into recession or worse. In recent years, the Transnational Capitalist Class has turned to militarised accumulation, to wild financial speculation, and to the raiding of sacking of public finance to sustain profit-making in the face of over-accumulation.

While transnational capital’s offensive against the global working and popular classes dates back to the crisis of the 1970s and has grown in intensity ever since, the Great Recession of 2008 was in several respects a major turning point. In particular, as the crisis spread it generated the conditions for new rounds of brutal austerity worldwide, greater flexibilisation of labour, steeply rising under and unemployment, and so on. Transnational finance capital and its political agents utilised the global crisis to impose brutal austerity and attempting to dismantle what is left of welfare systems and social states in Europe, North America, and elsewhere, to squeeze more value out of labour, directly through more intensified exploitation and indirectly through state finances. Social and political conflict has escalated around the world in the wake of 2008.

Nonetheless, the system has been unable to recover; it is sinking deeper into chaos. Global elites cannot manage the explosive contradictions. Is the neo-liberal model of capitalism entering a terminal stage? It is crucial to understand that neo-liberalism is but one model of global capitalism; to say that neo-liberalism may be in terminal crisis is not to say that global capitalism is in terminal crisis. Is it possible that the system will respond to crisis and mass rebellion through a new restructuring that leads to some different model of world capitalism - perhaps a global Keynesianism involving transnational redistribution and transnational regulation of finance capital? Will rebellious forces from below be co-opted into some new reformed capitalist order?

Or are we headed towards a systemic crisis? A systemic crisis is one in which the solution involves the end of the system itself, either through its supersession and the creation of an entirely new system, or more ominously the collapse of the system. Whether or not a structural crisis becomes systemic depends on how distinct social and class forces respond - to the political projects they put forward and as well as to factors of contingency that cannot be predicted in advance, and to objective conditions. It is impossible at this time to predict the outcome of the crisis. However, a few things are clear in the current world conjuncture.

Part II


The current moment

First, this crisis shares a number of aspects with earlier structural crises of the 1930s and the 1970s, but there are also several features unique to the present:

The system is fast reaching the ecological limits of its reproduction. We face the real spectre of resource depletion and environmental catastrophes that threaten a system collapse.

- The magnitude of the means of violence and social control is unprecedented. Computerised wars, drones, bunker-buster bombs, star wars, and so forth, have changed the face of warfare. Warfare has become normalised and sanitised for those not directly at the receiving end of armed aggression. Also unprecedented is the concentration of control over the mass media, the production of symbols, images and messages in the hands of transnational capital. We have arrived at the society of panoptical surveillance and Orwellian thought control.

- We are reaching the limits to the extensive expansion of capitalism, in the sense that there are no longer any new territories of significance that can be integrated into world capitalism. De-ruralisation is now well-advanced, and the commodification of the countryside and of pre- and non-capitalist spaces has intensified, that is, converted in hot-house fashion into spaces of capital, so that intensive expansion is reaching depths never before seen. Like riding a bicycle, the capitalist system needs to continuously expand or else it collapses. Where can the system now expand?

- There is the rise of a vast surplus population inhabiting a planet of slums, alienated from the productive economy, thrown into the margins, and subject to sophisticated systems of social control and to crises of survival - to a mortal cycle of dispossession-exploitation-exclusion. This raises in new ways the dangers of a 21st-century fascism and new episodes of genocide to contain the mass of surplus humanity and their real or potential rebellion.

- There is a disjuncture between a globalising economy and a nation-state based system of political authority. Transnational state apparatuses are incipient and have not been able to play the role of what social scientists refer to as a "hegemon", or a leading nation-state that has enough power and authority to organise and stabilise the system. Nation-states cannot control the howling gales of a runaway global economy; states face expanding crises of political legitimacy.

Second, global elites are unable to come up with solutions. They appear to be politically bankrupt and impotent to steer the course of events unfolding before them. They have exhibited bickering and division at the G-8, G-20 and other forums, seemingly paralysed, and certainly unwilling to challenge the power and prerogative of transnational finance capital, the hegemonic fraction of capital on a world scale, and the most rapacious and destabilising fraction. While national and transnational state apparatuses fail to intervene to impose regulations on global finance capital, they have intervened to impose the costs of the crisis on labour. The budgetary and fiscal crises that supposedly justify spending cuts and austerity are contrived. They are a consequence of the unwillingness or inability of states to challenge capital and their disposition to transfer the burden of the crisis to working and popular classes.

Third, there will be no quick outcome of the mounting global chaos. We are in for a period of major conflicts and great upheavals. As I mentioned above, one danger is a neo-fascist response to contain the crisis. We are facing a war of capital against all. Three sectors of transnational capital in particular stand out as the most aggressive and prone to seek neo-fascist political arrangements to force forward accumulation as this crisis continues: speculative financial capital, the military-industrial-security complex, and the extractive and energy sector. Capital accumulation in the military-industrial-security complex depends on endless conflicts and war, including the so-called wars on terrorism and on drugs, as well as on the militarisation of social control. Transnational finance capital depends on taking control of state finances and imposing debt and austerity on the masses, which in turn can only be achieved through escalating repression. And extractive industries depend on new rounds of violent dispossession and environmental degradation around the world.

Fourth, popular forces worldwide have moved quicker than anyone could imagine from the defensive to the offensive. The initiative clearly passed this year, 2011, from the transnational elite to popular forces from below. The juggernaut of capitalist globalisation in the 1980s and 1990s had reverted the correlation of social and class forces worldwide in favour of transnational capital. Although resistance continued around the world, popular forces from below found themselves disoriented and fragmented in those decades, pushed on to the defensive in the heyday of neo-liberalism. Then the events of September 11, 2001, allowed the transnational elite, under the leadership of the US state, to sustain its offensive by militarising world politics and extending systems of repressive social control in the name of "combating terrorism".

Now all this has changed. The global revolt underway has shifted the whole political landscape and the terms of the discourse. Global elites are confused, reactive, and sinking into the quagmire of their own making. It is noteworthy that those struggling around the world have been shown a strong sense of solidarity and are in communications across whole continents. Just as the Egyptian uprising inspired the US Occupy movement, the latter has been an inspiration for a new round of mass struggle in Egypt. What remains is to extend transnational coordination and move towards transnationally-coordinated programmes. On the other hand, the "empire of global capital" is definitely not a "paper tiger". As global elites regroup and assess the new conjuncture and the threat of mass global revolution, they will - and have already begun to - organise coordinated mass repression, new wars and interventions, and mechanisms and projects of co-optation in their efforts to restore hegemony.

In my view, the only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward towards the poor majority of humanity along the lines of a 21st-century democratic socialism in which humanity is no longer at war with itself and with nature.

"Mi conversación con un estudiante chileno que participa en las protestas fue muy reveladora: "Mi familia siempre fue pobre y ahora somos clase media. Pero el Gobierno ya no hace nada por nosotros: se concentra en ayudar a los más pobres o a los más ricos, a los inversionistas. Nada para nosotros, los del medio".


Oye, era de familia pobre y ahora son de clase media, PERO ESO NO ES SUFICIENTE!!! Quieren mas! Y ahí esta la problemática: Como satisfacer una expresión de querer sin limites en muchos de la sociedad. Si bien se pudiera bajar la desigualdad a niveles como en Europa, tal ves llegaría Chile a un respiro? Y si todavía quieren mas?

Caballero, los humanos no somos fáciles!!!



MOISÉS NAÍM

La desigualdad tóxica

MOISÉS NAÍM 27/11/2011



Sería sorprendente que no hubiese protestas en las calles de Atenas, Madrid o Nueva York. El desempleo y la precariedad económica bastarían para convertir a millones de resignados en indignados. Pero, además, el constatar que algunos de los causantes de la crisis ahora se están lucrando de ella produce una reacción humana casi natural: apagar la televisión y salir a la calle a protestar. Esto es fácil de entender. Pero lo que no es fácil de entender es por qué esto también pasa en Chile. ¿Y que importa que en Chile las calles estén encendidas? Es un pequeño y remoto país sudamericano cuyas circunstancias afectan poco a los demás. Esto es verdad, pero entender lo que está pasando en Chile da pistas útiles para entender la ola de indignación y protestas que hoy vemos en otras partes.

Construir una escuela o un hospital es más fácil que mejorar la calidad de la educación o la sanidad

Los chilenos deberían estar celebrando, no protestando: este es uno de los países más exitosos del mundo. A finales de los ochenta, el 45% de su población era pobre, hoy es el 14%. Dos décadas de acelerado crecimiento económico, el aumento del empleo y los salarios han contribuido al progreso social. Además, la inflación, que siempre afecta más a los pobres, cayó del 27% anual en 1990 al 3%. Cualquier país europeo envidiaría las cifras de la economía chilena. Y, en casi cualquier ranking de países, Chile se sitúa entre los primeros lugares (y en todas las listas es el número uno de América Latina): baja corrupción, desarrollo humano, competitividad internacional, libertad económica, conectividad y muchos otros. Y sin embargo... desde hace meses hay protestas en las calles. Estallaron durante el Gobierno anterior, presidido por Michelle Bachelet, y después de las elecciones -ganadas por la oposición- continuaron con el nuevo Gobierno. Comenzaron con una protesta puntual por la construcción de una represa y escalaron a masivas manifestaciones contra la baja calidad y el alto costo de la educación.

En una reciente visita a Chile tuve la oportunidad de preguntarle al presidente Sebastián Piñera su opinión sobre la paradoja del éxito económico y la desazón social. "Comprendo las motivaciones de los estudiantes que protestan por la situación", me dijo. "Chile se concentró en aumentar a gran velocidad el acceso a la educación y descuidamos la calidad. También hay un problema con los costos de la educación y en qué proporción deben ser cubiertos por el Estado". Piñera ha aumentado sustancialmente el presupuesto para la educación y está intentado reformar el sistema educativo. Pero el presidente es consciente de que el malestar de los chilenos va mas allá de la educación. Y tiene razón: según el Latinobarómetro Chile, es el país latinoamericano donde la percepción del progreso que tiene la gente ha sufrido la mayor disminución. También es el país donde más ha caído la satisfacción con la manera como está funcionando la democracia y hay una fuerte caída del apoyo de los chilenos a su modelo económico. ¿Cómo se explica todo esto?

Obviamente la historia, las luchas políticas y las personalidades de los protagonistas moldean la situación. Pero hay dos factores que resultan evidentes: el crecimiento de la clase media y la desigualdad económica. La expansión de la clase media produce exigencias a las cuales pocos gobiernos pueden responder con la velocidad o la agilidad requerida. Construir una escuela o un hospital es más fácil que lograr que la calidad de la educación o la salud mejoren. Y la nueva clase media tiene, justificadamente, estas expectativas de mejora. Y rápido. Mi conversación con un estudiante chileno que participa en las protestas fue muy reveladora: "Mi familia siempre fue pobre y ahora somos clase media. Pero el Gobierno ya no hace nada por nosotros: se concentra en ayudar a los más pobres o a los más ricos, a los inversionistas. Nada para nosotros, los del medio".

Y esto tiene también que ver con la inequidad. Si bien ha venido declinando, Chile tiene un altísimo índice de desigualdad económica. Y este tema apareció en todas las conversaciones que tuve durante mi visita. Es obvio que en Chile y en otras partes del mundo la coexistencia pacífica con la desigualdad se acabó. Disminuir más aceleradamente la desigualdad es ahora una prioridad que los estudiantes trajeron a la conversación nacional. El país les está en deuda por eso.

Queda por ver si el Gobierno, los estudiantes y el resto de la sociedad chilena logran hacer cambios que ataquen la desigualdad económica sin afectar a los demás logros del país. Otras naciones tienen este mismo reto. Y quizás, también en esto, de Chile saldrán algunas lecciones útiles para el resto del mundo.

To some degree the massive re-distribution of wealth has begun. China has made progress and also countries such as UK.

Hu loves ya, rural masses
President Hu Jintao summed up the campaign's mission, stating:
"By 2020, our general target is to ensure that the nation's impoverished will no longer need to worry about food and clothing. Their access to compulsory education, basic medical care and housing will also be ensured."
The Chinese government has already made great strides in its war on poverty, as the poverty threshold was upped several times in recent history, from a lowly 206RMB in 1986, to 1,067RMB in 2008, 1,196RMB in 2009, and 1,274RMB in 2010.
In response to the ever-increasing numbers of yuan-strapped rural residents, the government almost tripled its anti-poverty funding during in the course of only one decade, boosting it from a sallow 12.75 billion RMB in 2001 to a robust 34.93 billion RMB in 2010.
And the cash flow's productiveness clearly shows. Fewer than 12 years ago the country was reportedly home to 94 million poverty-stricken country dwellers when the poverty threshold was established at a measly 865 yuan.
Now, although the current number of the technically poor hovers around the 100 million mark, we're rating it according to the 2011 poverty standard, which if applied to the year 2000, would undoubtedly expose calculator-imploding numbers of impoverished rural residents.

http://shanghaiist.com/2011/11/30/china_redefines_poverty_standard_fo.php

I guess leaders in China qualify as members of the global elite? Is this a confused reaction - I rather think not - huge projects aimed at improving life for the poor are taking place in China.

Brazil and South Africa have also made significant progress in wealth re-distribution.

Countries such as the UK are increasing the amount given in aid significantly although the middle classes in particular are forecast to have declining real incomes. However there is state guarantee of housing, healthcare, sickness benefit, unemployment benefit, social security, extended education and ever rising minimum pensions. All of this was not in place say 60 or so years ago and has steadily been put in place despite periodic near crisis situations.

Also many other free services. Recent demonstrations have been against increasing funding from individuals for pensions.

The US is unfortunate in having a large middle class hooked on wanton waste, aggressive consumerist behavior and huge energy consumption and a government that has stepped back from basic welfare provision. Also the government has lost control of the corporations. One must question if the so called 99% in the US really want social progress or just a fatter wad of greenbacks so they can fight more often in queues to acquire transient consumerist goodies driven spurred on by other members of the 99 percent also greedy devising advertising, media etc. to promote this behavior.

However in many countries neo-liberal policies are being questioned and I agree that a move towards Keynesian economics is long overdue. Also towards social responsibility being associated with wealth.

S.



S.

Here's an interesting take on matters. Written by two scholars, the views expressed add to our understanding of the issues. Note that both China and Russia, two former non-capitalist states have not considered moving away from the capitalist system.

The Post-Washington Consensus: Development after the Crisis

http://www.cgdev.org/content/publications/detail/1424882

Nancy Birdsall and Francis Fukuyama

03/03/2011

A clear shift in the development agenda is underway. Traditionally, an agenda generated in the developed world was implemented in—and, indeed, often imposed on—the developing world. The United States, Europe, and Japan will continue to be significant sources of economic resources and ideas, but the emerging markets will become significant players. Countries such as Brazil, China, India, and South Africa will be both donors and recipients of resources for development and of best practices for how to use them. In fact, development has never been something that the rich bestowed on the poor but rather something the poor achieved for themselves. It appears that the Western powers are finally waking up to this truth in light of a financial crisis that, for them, is by no means over.

Nancy Birdsall and Francis Fukuyama

The last time a global depression originated in the United States, the impact was devastating not only for the world economy but for world politics as well. The Great Depression set the stage for a shift away from strict monetarism and laissez-faire policies toward Keynesian demand management. More important, for many it delegitimized the capitalist system itself, paving the way for the rise of radical and antiliberal movements around the world.

This time around, there has been no violent rejection of capitalism, even in the developing world. In early 2009, at the height of the global financial panic, China and Russia, two formerly noncapitalist states, made it clear to their domestic and foreign investors that they had no intention of abandoning the capitalist model. No leader of a major developing country has backed away from his or her commitment to free trade or the global capitalist system. Instead, the established Western democracies are the ones that have highlighted the risks of relying too much on market-led globalization and called for greater regulation of global finance.

Why has the reaction in developing countries been so much less extreme after this crisis than it was after the Great Depression? For one, they blame the United States for it. Many in the developing world agreed with Brazilian President Luiz Inácio Lula da Silva when he said, "This is a crisis caused by people, white with blue eyes." If the global financial crisis put any development model on trial, it was the free-market or neoliberal model, which emphasizes a small state, deregulation, private ownership, and low taxes. Few developing countries consider themselves to have fully adopted that model.

Indeed, for years before the crisis, they had been distancing themselves from it. The financial crises of the late 1990s in East Asia and Latin America discredited many of the ideas associated with the so-called Washington consensus, particularly that of unalloyed reliance on foreign capital. By 2008, most emerging-market countries had reduced their exposure to the foreign financial markets by accumulating large foreign currency reserves and maintaining regulatory control of their banking systems. These policies provided insulation from global economic volatility and were vindicated by the impressive rebounds in the wake of the recent crisis: the emerging markets have posted much better economic growth numbers than their counterparts in the developed world.

Thus, the American version of capitalism is, if not in full disrepute, then at least no longer dominant. In the next decade, emerging-market and low-income countries are likely to modify their approach to economic policy further, trading the flexibility and efficiency associated with the free-market model for domestic policies meant to ensure greater resilience in the face of competitive pressures and global economic trauma. They will become less focused on the free flow of capital, more concerned with minimizing social disruption through social safety net programs, and more active in supporting domestic industries. And they will be even less inclined than before to defer to the supposed expertise of the more developed countries, believing — correctly — that not only economic but also intellectual power are becoming increasingly evenly distributed.

The Foreign Finance Fetish

One of the central features of the old, pre-crisis economic consensus was the assumption that developing countries could benefit substantially from greater inflows of foreign capital — what the economist Arvind Subramanian has labeled "the foreign finance fetish." The idea that the unimpeded flow of capital around the globe, like the free flow of goods and services, makes markets more efficient was more or less taken for granted in policy circles. In the 1990s, the United States and international financial institutions such as the International Monetary Fund (IMF) pushed developing-country borrowers to open up their capital markets to foreign banks and dismantle exchange-rate controls.

Although the benefits of free trade have been well documented, the advantages of full capital mobility are much less clear. The reasons for this have to do with the fundamental differences between the financial sector and the "real" economy. Free capital markets can indeed allocate capital efficiently. But large interconnected financial institutions can also take risks that impose huge negative externalities on the rest of the economy in a way that large manufacturing firms cannot.

One of the paradoxical consequences of the 2008-9 financial crisis may thus be that Americans and Britons will finally learn what the East Asians figured out over a decade ago, namely, that open capital markets combined with unregulated financial sectors is a disaster in the waiting. At the conclusion of the Asian financial crisis, many U.S. policymakers and economists walked back their previous stress on quick liberalization and started promoting "sequencing," that is, liberalization only after a strong regulatory system with adequate supervision of banks has been put in place. But they devoted little thought to whether certain developing countries were capable of enacting such regulation quickly or what an appropriate regulatory regime would look like. And they overlooked the relevance of their new message to their own case, failing to warn against the danger of the huge, unregulated, and overleveraged shadow financial sector that had emerged in the United States.

The first clear consequence of the crisis has thus been the end of the foreign finance fetish. The countries that pursued it the most enthusiastically, such as Iceland, Ireland, and those in eastern Europe, were the hardest hit and face the toughest recoveries. Just as for Wall Street, the strong growth records these countries amassed from 2002 to 2007 proved to be partly a mirage, reflecting the easy availability of credit and high leverage ratios rather than strong fundamentals.

[B]Caring about Caring[/B]

The second consequence is a new respect among developing countries for the political and social benefits of a sensible social policy. Before the crisis, policymakers tended to downplay social insurance and safety net programs in favor of strategies that emphasized economic efficiency. U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher had come to power in the late 1970s and 1980s attacking the modern welfare state, and many of their critiques were well taken: state bureaucracies had become bloated and inefficient in many countries, and an entitlement mentality had taken hold. The Washington consensus did not necessarily reject the use of social policy, but its focus on efficiency and fiscal discipline often led to cuts in social spending.

What the crisis did, however, was to underscore the instability inherent in capitalist systems — even ones as developed and sophisticated as the United States. Capitalism is a dynamic process that regularly produces faultless victims who lose their jobs or see their livelihoods threatened. Throughout the crisis and its aftermath, citizens have expected their governments to provide some level of stability in the face of economic uncertainty. This is a lesson that politicians in developing-country democracies are not likely to forget; the consolidation and legitimacy of their fragile democratic systems will depend on their ability to deliver a greater measure of social protection.

Consider how continental Europe has reacted in comparison to the United States. Until now, with the eurozone crisis, western Europe experienced a far less painful recovery, thanks to its more developed system of automatic countercyclical social spending, including for unemployment insurance. In contrast, the jobless recovery in the United States makes the U.S. model even less attractive to policymakers in the developing world, particularly those who are increasingly subject to political pressure to attend to the needs of the middle class.

A good example of the new stress on social policy can be found in China. Reacting to the country's rapidly aging population, its leadership is struggling behind the scenes to build a modern pension system, something that represents a shift from the traditional tactic of concentrating solely on generating new jobs to maintain social and political stability. In Latin America, the same pressures are playing out differently. After experiencing fatigue in the wake of liberalizing reforms in the 1990s that did not seem to produce the growth that was expected, the region has moved to the left in this century, and the new governments have increased social spending to reduce poverty and inequality. Many countries have followed the successful example of Brazil and Mexico and instituted cash transfer schemes targeted to poor households (which require beneficiaries to keep their children in school or meet other conditions). In Brazil and Mexico, the approach has contributed to the first visible declines in income inequality in many years and helped shelter the poorest households from the recent crisis.[Brazil yes, Mexico no]

The question, of course, is whether programs like these that target the poor (and thus keep fiscal outlays surprisingly low) will have difficulty attracting long-term support from the region's growing middle class, and how these and other emerging economies, including China, will manage the fiscal costs of more universal health, pension, and other social insurance programs. Will they be better at handling the problems associated with these unfunded universal entitlement programs, the kinds of problems now facing Europe and the United States as their populations age?

[B]The Visible Hand[/B]

The third consequence of the crisis has been the rise of a new round of discussions about industrial policy — a country's strategy to develop specific industrial sectors, traditionally through such support as cheap credit or outright subsidies or through state management of development banks. Such policies were written off as dangerous failures in the 1980s and 1990s for sustaining inefficient insider industries at high fiscal cost. But the crisis and the effective response to it by some countries are likely to bolster the notion that competent technocrats in developing countries are capable of efficiently managing state involvement in the productive sectors. Brazil, for example, used its government-sponsored development bank to direct credit to certain sectors quickly as part of its initial crisis-driven stimulus program, and China did the same thing with its state-run banks.

However, this new industrial policy is not about picking winners or bringing about large sectoral shifts in production. It is about addressing coordination problems and other barriers that discourage private investment in new industries and technologies, difficulties that market forces alone are unlikely to overcome. To promote an innovative clothing industry in West Africa, for example, governments might ensure a constant supply of textiles or subsidize the construction of ports to avoid export bottlenecks. The idea is that by bearing some of the initial financial or other risks and more systematically targeting public infrastructure, governments can help private investors overcome the high costs of being the first movers and innovators in incipient sectors.

For the last three decades, Washington-based development institutions have taken the view that growth is threatened more by government incompetence and corruption than by market failures. Now that American-style capitalism has fallen from its pedestal, might this view begin to shift? Might the idea that the state can take a more active role get far more traction? The answer depends, for any single developing country, on an assessment of its state capacity and overall governance.

This is because the most significant critique of industrial policy was never economic but political, contending that economic decision-making in developing countries could not be shielded from political pressure. Critics argued that policymakers would retain protectionist measures long after they had fulfilled their original purpose of jump-starting domestic industries. Industrial policies such as reducing dependency on imports and promoting infant industries, although later derided in Washington, did in fact produce impressive rates of economic growth in the 1950s and 1960s in East Asia and Latin America.[B] The problem, however, was that governments in the latter region were politically unable to unwind that protection, and so their domestic industries failed to become globally competitive. [/B]


Therefore, technocrats in developing countries contemplating the use of industrial policies must consider the politics of doing so.

1. Does a bureaucracy exist that is sufficiently capable and autonomous from political pressure?

2. Is there enough money to sustain such an agenda?

3. Will it be possible to make hard political decisions, such as eliminating the policies when they are no longer needed?
[B]
Most of the successful uses of industrial policy have been in East Asia, which has a long tradition of strong technocratic bureaucracies. Countries without such a legacy need to be more careful. [/B]

[B]Making Bureaucracy Work[/B]

If countries are to promote industrial development and provide a social safety net, they will need to reform their public sectors; indeed, the fourth consequence of the crisis has been a painful reminder of the costs of not doing so. In the United States, regulatory agencies were underfunded, had difficulty attracting high-quality personnel, and faced political opposition. This was not surprising: implicit in the Reagan-Thatcher doctrine was the belief that markets were an acceptable substitute for efficient government. The crisis demonstrated that unregulated or poorly regulated markets can produce extraordinary costs.

Leaders in both the developing world and the developed world have marveled at China's remarkable ability to bounce back after the crisis, a result of a tightly managed, top-down policymaking machine that could avoid the delays of a messy democratic process. In response, political leaders in the developing world now associate efficiency and capability with autocratic political systems. But there are plenty of incompetent autocratic regimes. What sets China apart is a bureaucracy that, at its upper levels at least, is capable of managing and coordinating sophisticated policies. Among low-income countries, that makes China an exception.

Promoting effective public sectors is one of the most daunting development challenges that the world faces. Development institutions such as the World Bank and the United Kingdom's Department for International Development have supported programs that strengthen public sectors, promote good governance, and combat corruption for the last 15 years with little to show for it. The fact that even financial regulators in the United States and the United Kingdom failed to use their existing powers or to keep pace with rapidly evolving markets is a humbling reminder that effective public sectors are a challenge to maintain in even the most developed countries.

Why has so little progress been made in improving developing countries' public sectors? The first problem is that their bureaucracies often serve governments that are rent-seeking coalitions acting according to self-interest,[PRD, PLD in the case of DR] instead of an ideal of impersonal public service. Outside donors typically do not have the leverage to force them to change, with the partial exception of mechanisms such as the European Union's accession process. Second, effective institutions have to evolve indigenously, reflecting a country's own political, social, and cultural realities. The development of impersonal bureaucracies in the West was the product of a long and painful process, with factors exogenous to the economy (such as the need to mobilize for war) playing a large part in creating strong state institutions (such as Prussia's famously efficient bureaucracy). Institutions such as the rule of law will rarely work if they are simply copied from abroad; societies must buy into their content. Finally, public-sector reform requires a parallel process of nation building. Unless a society has a clear sense of national identity and a shared public interest, individuals will show less loyalty to it than to their ethnic group, tribe, or patronage network. [This paragraph speaks volume about our nation's current state of affairs]

[B]Moving to Multipolarity[/B]

Years from now, historians may well point to the financial crisis as the end of American economic dominance in global affairs. But the trend toward a multipolar world began much earlier, and the implosion of Western financial markets and their weak recoveries have merely accelerated the process. Even before the crisis, the international institutions created after World War II to manage economic and security challenges were under strain and in need of reform. The IMF and the World Bank suffered from governance structures that reflected outdated economic realities. Starting in the 1990s and continuing into the new century, the Bretton Woods institutions have come under increasing pressure to grant more voting power to emerging-market countries such as Brazil and China. Meanwhile, the G-7, the elite group of the six most economically important Western democracies plus Japan, remained the world's informal steering committee when it came to issues of global economic coordination, even as other power centers emerged.

The financial crisis finally led to the demise of the G-7 as the primary locus of global economic policy coordination and its replacement by the G-20. In November 2008, heads of state from the G-20 gathered in Washington, D.C., to coordinate a global stimulus program — a meeting that has since grown into an established international institution. Since the G-20, unlike the G-7, includes emerging countries such as Brazil, China, and India, the expansion of economic coordination represents an overdue recognition of a new group of global economic players.

The crisis also breathed new life and legitimacy into the IMF and the World Bank. Beforehand, the IMF had looked like it was rapidly becoming obsolete. Private capital markets provided countries with financing on favorable terms without the conditions often attached to IMF loans. The organization was having trouble funding its own activities and was in the process of reducing its staff.

But the outlook changed in 2009, when the G-20 leaders agreed to ensure that the Bretton Woods institutions would have as much as $1 trillion in additional resources to help countries better weather future financing shortfalls. Countries such as Brazil and China were among the contributors to the special funds, which have ended up supporting Greece, Hungary, Iceland, Ireland, Latvia, Pakistan, and Ukraine.

By requesting that emerging markets take on a bigger leadership role in global affairs, the Western democracies are implicitly admitting that they are no longer able to manage global economic affairs on their own. But what has been called "the rise of the rest" is not just about economic and political power; it also has to do with the global competition of ideas and models. The West, and in particular the United States, is no longer seen as the only center for innovative thinking about social policy. Conditional cash transfer schemes, for example, were first developed and implemented in Latin America. As for industrial policy, the West has contributed little innovative thinking in that realm in the last 30 years. One has to turn to emerging-market countries, rather than the developed world, to see successful models in practice. And when it comes to international organizations, the voices and ideas of the United States and Europe are becoming less dominant. Those of emerging-market countries — states that have become significant funders of the international financial institutions — are being given greater weight.

All this signals a clear shift in the development agenda. Traditionally, this was an agenda generated in the developed world that was implemented in — and, indeed, often imposed on — the developing world. The United States, Europe, and Japan will continue to be significant sources of economic resources and ideas, but the emerging markets are now entering this arena and will become significant players. Countries such as Brazil, China, India, and South Africa will be both donors and recipients of resources for development and of best practices for how to use them. A large portion of the world's poor live within their borders, yet they have achieved new respect on the global scene in economic, political, and intellectual terms. In fact, development has never been something that the rich bestowed on the poor but rather something the poor achieved for themselves. It appears that the Western powers are finally waking up to this truth in light of a financial crisis that, for them, is by no means over.

Interesting contributions, thanks, I am taking notes from reading them all, meditating on how it will affect us, and later forming an opinion.
Change is in the air, and we ain't seen nothing yet!
2012 will be most likely the START of a new social and economic era for the whole world.
(Which of course includes the DR, regardless of what new clowns are elected to office. )

[QUOTE=generoso]
Interesting contributions, thanks, I am taking notes from reading them all, meditating on how it will affect us, and later forming an opinion.

Change is in the air, and we ain't seen nothing yet!

2012 will be most likely the START of a new social and economic era for the whole world.
(Which of course includes the DR, regardless of what new clowns are elected to office. )
[/QUOTE]

[These paragraphs speak volumes about DR's current state of affairs]

"Promoting effective public sectors is one of the most daunting development challenges that the world faces. Development institutions such as the World Bank and the United Kingdom's Department for International Development have supported programs that strengthen public sectors, promote good governance, and combat corruption for the last 15 years with little to show for it. The fact that even financial regulators in the United States and the United Kingdom failed to use their existing powers or to keep pace with rapidly evolving markets is a humbling reminder that effective public sectors are a challenge to maintain in even the most developed countries.

Why has so little progress been made in improving developing countries' public sectors? The first problem is that their bureaucracies often serve governments that are rent-seeking coalitions acting according to self-interest,[PRD, PLD in the case of DR] instead of an ideal of impersonal public service. Outside donors typically do not have the leverage to force them to change, with the partial exception of mechanisms such as the European Union's accession process. Second, effective institutions have to evolve indigenously, reflecting a country's own political, social, and cultural realities. The development of impersonal bureaucracies in the West was the product of a long and painful process, with factors exogenous to the economy (such as the need to mobilize for war) playing a large part in creating strong state institutions (such as Prussia's famously efficient bureaucracy). Institutions such as the rule of law will rarely work if they are simply copied from abroad; societies must buy into their content. Finally, public-sector reform requires a parallel process of nation building. Unless a society has a clear sense of national identity and a shared public interest, individuals will show less loyalty to it than to their ethnic group, tribe, or patronage network."

What's plain is that great upheavals have played an important part in developing the relatively better public services found in developed countries the world over. World Wars and large wars, Prussian wars against France, Japan against China and Russia, etc., being among the most stimulating and innovating.

Atabey:

Our DR public sector is so inefficient and improvised that it is funny, but it will be very PC incorrect to make fun of it, but there has been great improvement in many areas, such as in customs, tax collections, and lately the electric sector has run pretty smoothly because of the private sector manager.
But let me provide an example of how our military just functions like a scarecrow, with doubtful capabilities:

During the government of short duration of Juán Bosch, the DR embassy in Port Au Prince, Haiti, was attacked by vandals sponsored by the Duvalier regime, who was in Washington's shit list. Juán Bosch had refused to let the US train rebels in DR soil, to depose the Duvalier regime, but the US could encourage a military Dominican invasion of Haiti, using the embassy ground violation as an excuse.
Knowing this, and hoping to elevate his decreasing popularity, Bosch actually ordered the CEFA or Dominican tanks battalion to head to the border, to which Coronel Elias Wessin, who was the commander at the time, (later general), replied that there was not sufficient trucks, fuel or assets, to drive the tanks to the Haitian border, and he could not obey that command.
So the the end of story was that Juán Bosch leadership continued to be eroded, and questioned, by the military and civilian alike, and he was deposed with NO opposition a few months later.