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April 10, 2007

Rag-Tag Arguments over at the Forbes Business Bash

Journalists are an interesting bunch. We got a call from a reporter writing this piece for Forbes last week, who claimed to not really know the focus of the piece. Little did we know or she indicate that we would become the straw men in the standard claptrap argument about China's supposed "neo-liberal" success story.

But, hey, that's ok. While we don't speak up every time someone characterizes us as "business-bashing" or "rag-tag," this time it seemed important to correct a few matters for the record.

Authors Robyn Meredith and Suzanne Hoppough rattle off an impressive array of statistics:

The protesters and do-gooders are just plain wrong. It turns out globalization is good--and not just for the rich, but  especially for the poor. The booming economies of India and China--the Elephant and the Dragon--have lifted 200 million people out of abject poverty in the 1990s as globalization took off, the International Monetary Fund says. Tens of millions more have catapulted themselves far ahead into the middle class.

It's remarkable what a few container ships can do to make poor people better off. Certainly more than $2 trillion of foreign aid, which is roughly the amount (with an inflation adjustment) that the U.S. and Europe have poured into Africa and Asia over the past half-century.

Hey, to the contrary of what you'll read in Meredith's piece, you're not going to see us bashing foreign direct investment or exports, or defending foreign aid, which often does more harm than good.

There's just one little problem with their argument: China and India (and Vietnam, which is also celebrated) are anything but model pupils of "globalization". First of all, there's the tiny matter of China and Vietnam being run by the COMMUNIST PARTY, which still controls wide swaths of the economy and still fails to recognize basic property rights claims, as the New York Times' Howard French documented in this story on a middle class woman's struggle to keep her house amidst state-driven development.

All three countries have currency and capital controls that would make the IMF's directors have a heart attack if they were followed in Africa or other regions.

And the poverty reductions are indeed impressive - but have occurred against the backdrop of very very selective implementation of neo-liberal policies. Compare this with the majority of developing countries that have followed IMF, World Bank or WTO mandates to the letter - and where income has stagnated while poverty has increased - and you have your conclusion.

Now, unlike Meredith, we're not saying the Chinese model is "the way" for every country to develop. We just think people that take that position need to be clear on what they are defending: i.e. not "globalization," or an "unleashing of the economy," but state-led, authoritarian development.

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