Neoliberalism and Colonialism

Fast forward a few centuries, and this colonizing mindset and racist contempt still underpins contemporary forms of subjugation, exploitation and dispossession against peoples of the Third World as well as Indigenous Peoples and racialized communities in the global North. It lives on at the G8, in the neoliberal policies of the Bretton Woods institutions, and powerful Northern governments like the US and the European Union, in aid arrangements and debt, in free trade and investment agreements, multilateral, regional and bilateral, and the activities of transnational corporations. 21^st century imperialism is frequently masked in the language of development, ‘good governance’, ‘working for a world free of poverty’[ii], ‘fighting poverty in Asia and the Pacific’[iii] ‘countering terror with trade’[iv] and ‘building freedom through trade’[v]. They might call it market capitalism, economic reforms and free trade instead of Manifest Destiny (though this may be news to the Bush Administration as it wages its wars and occupations), but the song remains the same.

”Colonialism is a big event that economists have not talked about,[vi]" MIT professor of economics and current winner of the John Bates Clark Medal, awarded by the American Economic Association to the US’s top economist under 40, Daron Acemoglu told the Boston Globe last month. ”Historians talk about it. Political scientists talk about it. But economists just focus on the last 50 years."

When we discuss ‘policy coherence’ in the era of global neoliberal economics we should acknowledge the colonial roots of neoliberalism. In this supposedly ‘post-colonial’ world, colonial relations and geohistorical location continue to shape the reality of who eats, and who doesn’t, who has freedom, and who doesn’t, who has access to land and water, and who doesn’t, who can work in dignity and justice, and who doesn’t, who carries the burden of crippling debt, and who doesn’t, who has the right to determine their own futures, and who doesn’t.

When we hear ‘policy coherence’ talk, we should ask: coherent for whom and with what? The programmes of the IMF, World Bank and WTO fundamentally fail to cohere with development options which carve a different path than market capitalism. Indeed, they work to crush them, to shrink policy space and to prevent future governments from even thinking about alternatives. They are incoherent with peoples’ struggles for justice, dignity and self-determination. Behind sustainable development and pro-poor rhetoric, these institutions’ policies are utterly incoherent with socially and ecologically just development. ‘Policy coherence’ is a euphemism for imperialist globalization and expanded opportunities for domination by Northern governments and corporations.

There is definitely ‘policy coherence’ between colonization and neoliberalism. As activists, social movements and NGOs, we must name and confront the systems of capitalism and colonialism in our analyses and actions, if we are to put forward coherent agendas of resistance, and effectively struggle for justice, locally and globally. 

Policy coherence: Singing from the same neoliberal songbook

Almost every few weeks, another high-level statement calls for greater coherence between the Bretton Woods institutions, the WTO, the UN, the baby banks, bilateral donors and so on. This coherence agenda means support for the Doha work programme of the WTO – liberalization in goods, services, investment, trade-related capacity-building, improving global financial stability through capital account liberalization (didn’t that work well in Thailand and Korea in the 1990s![1]) and channelling increased investment to developing countries and assisting borrower countries to improve coherence in their national policies.

In 2001, L. Alan Winters, (Director of the World Bank’s Development Research Group, Economic Professor at University of Sussex, and advisor to numerous international organizations on trade and development including the WTO, Organization for Economic Cooperation and Development (OECD), the InterAmerican Development Bank (IADB), the European Commission and UN Conference on Trade and Development (UNCTAD) wrote[vii]: “The WTO and the BWOs are already rather highly coherent. All subscribe to basically the same model of society and the economy, favouring markets over direction, advocating transparency and predictability, seeing international trade and investment as routes to prosperity and peace, accepting the importance of development and poverty alleviation, and recognizing the possibility that adjustment is painful. Hence much of what the three bodies do is mutually supportive, and incoherence is mostly just a matter of detail. This is not the impression one would get from some of the rhetoric behind calls for coherence.” This does not mean that there are not differences among these  organizations in areas where they have jurisdictional overlap, especially in relation to financial liberalization. 

Besides shared commitment to neoliberalism, the WTO, IMF and World Bank have formal relationships to achieve ‘policy coherence’. The Ministerial Declaration on the Contribution of the [World] Trade Organization to Achieving Greater Coherence in Global Economic Policymaking, in the Uruguay Round Act 1994, Part III.2[viii] urged the IMF, the World Bank and the WTO to follow “consistent and mutually supportive policies…with a view to achieving greater coherence in global economic policymaking.” This is expressed in various agreements, ministerial declarations and decisions between the institutions. In May 2003, senior officials of the three institutions, including IMF Managing Director Horst Koehler, WTO Director General Supachai Panitchpakdi and World Bank President James Wolfensohn met in Geneva under the umbrella of the WTO General Council to develop a common approach to global economic policies – the “coherence agenda.”[ix]. 

The IMF and World Bank offer “technical assistance” and loans for adjusting debtor countries’ economies to full trade and investment liberalization. “Technical assistance” sounds benign enough. In reality it means coercing countries of the South to swallow more neoliberal medicine, sometimes in sectors over which they have been disputing further liberalization at the WTO. World Bank and IMF loan conditionalities generally insist that governments lower or eliminate tariffs, remove restrictions on foreign investment, modify customs procedures, fiscal and labour regulations and procurement policies, and promote private sector ownership. Privatization, deregulation and trade and investment liberalization have been core to Structural Adjustment Programmes (SAPs) and the so-called Poverty Reduction Strategy Papers (PRSPs) which the World Bank and IMF now insist countries adopt in order to receive continued loans. Former World Bank chief economist and US Treasury Secretary Larry Summers claimed in 1998: “IMF and…World Bank programs not just in East Asia but in India, Latin America, Central Europe and Africa, have led to more systematic trade liberalization than…bilateral or multilateral negotiations have ever achieved.”[x] 

Amid much official rhetoric about trade replacing aid to move people out of poverty comes more explicit aid-for-trade liberalization, (and, as we have seen with the recent G8 finance ministers’ debt reduction package, ‘debt relief’ for enforced liberalization and privatization) deals. The World Bank is increasingly concentrating its resources on trade-related operations, particularly towards least-developed countries (LDCs), transition economies and those in the process of WTO accession. The Bank is allocating more funds to trade-related activities in 2004-2006 than it did during the eight years from 1996-2003. Total trade lending over the next three years is nearly US $4 billion compared with just over $2 billion in the past 8 years[xi]. Lending for trade facilitation is increasing from $300 million over the past 8 years to a projected $1 billion over the next 3 years[xii]. Meanwhile the Bank leads the joint agency Integrated Framework for Trade-related Technical Assistance for Least Developed Countries (IF). The other agencies involved are the IMF, WTO, the UN Development Programme (UNDP), UNCTAD, and the ITC (International Trade Centre – the technical cooperation agency of UNCTAD and the WTO for operational, enterprise-oriented aspects of trade development). According to its website[xiii], the IF’s objectives are to “"mainstream" (integrated) trade into the national development plans such as the Poverty Reduction Strategy Papers (PRSPs) of least-developed countries; and to assist in the co-ordinated delivery of trade-related technical assistance in response to needs identified by the LDC”. 

The spread of World Bank-led diagnostic trade studies is forcing rapid unilateral trade liberalisation into national development plans through the back door.

The IMF, meanwhile, remains the global gatekeeper for aid, the most important single agency in signalling the quality of a country’s macro-economic environment and creditworthiness to other donors. The IMF’s Poverty Reduction and Growth Facility (PRGF) complements and interlocks with the World Bank’s PRSP and the work of the WTO. Its platform is trade liberalisation, privatisation and a reduced role for the state. In April 2004, the IMF launched its Trade Integrated Mechanism (TIM)[xiv] to assist member countries meet balance of payment shortfalls resulting from multilateral trade liberalization (like reduction in export revenues, and increased import bills). Its first recipients were Bangladesh and the Dominican Republic. The IMF has also boosted technical assistance and research on trade.

A 10 December 1999 World Bank-IMF operational document on PRGF-PRSP argues: "The impediments to faster sustainable growth should be identified and policies agreed to promote more rapid growth: such as structural reforms to create free and more open markets, including trade liberalisation, privatisation and tax reform and policies that create a stable and predictable environment for private sector activity."[xv] 

IFIs, the Basel Committee on Banking Supervision, comprised of the world’s thirteen most powerful Central Bankers[xvi], the WTO and the baby banks essentially form much of the framework for global economic policymaking. The IFIs set parameters for all donors of the accepted creed of policy discourse with developing countries and ‘effective’ aid delivery strategies. Calls for greater coherence of donor countries to harmonize their aid, investment, export credit insurance and trade policies are cold comfort when coherence means conformity to a neoliberal model of development. Trade-related conditionalities of the IMF-WB (and regional banks like the ADB) weaken negotiating positions and possibilities for formation of alliances of countries to stand against US-EU bullying in multilateral or regional trade negotiations or aggressive bilateral deal-making.

The ‘Baby Banks’

Trade-related technical assistance has also become an increased focus of ADB and IADB lending policy. The IADB has a close formal relationship with the WTO. In February 2002 it signed a memorandum of understanding to deepen cooperation on providing technical assistance like training courses and workshops on trade negotiations and capacity-building to Latin American and Caribbean countries “to participate fully in the multilateral trading system.” The IDB’s central policy goal is economic integration of Latin American countries with the global market. Since 1994 the IADB has contributed over US $10 million to support the Free Trade Area of the Americas (FTAA) process[xvii]. In May 2002 WTO and ADB officials signed a memorandum of understanding under which their institutions agreed to cooperate on joint technical assistance programmes for participants from the ADB’s developing member governments in Asia and the Pacific[xviii].

WTO

As the WTO broadens its scope it opens up a greater interface with the IMF and World Bank, which have also broadened their roles beyond their original core activities in recent years. A key area for jurisdictional overlap between the institutions concerns capital liberalization, especially in relation to the General Agreement on Trade in Services (GATS), Trade-Related Investment Measures (TRIMs), and the plurilateral Financial Services Agreement. Continuing pressure from Northern governments and corporations in the GATS negotiations aims to achieve, by the backdoor, the liberalization and convertibility of capital accounts of developing countries. Meanwhile any future Multilateral Agreement on Investment (MAI)-style deal on investments at the WTO would inevitably create other areas of overlap with the IMF-World Bank. 

Potential for inter-institutional tensions certainly exists, and there already are examples. As Korean academic Dukgeun Ahn has noted[xix], measures adopted under South Korea‘s December 1997 agreement with the IMF during the financial crisis became the focal point for WTO trade disputes with the USA and the EU. Here, IMF-prescribed and temporary increased roles of the government in the financial restructuring of the Korean corporate sector were challenged under the WTO Agreement on Subsidies and Countervailing Measures. Ahn observes: “There is no exception to WTO obligations for policy measures regardless of whether they are employed as parts of adjustment measures or IMF conditionality.” Perhaps the moral of this story is that when there is apparently full coherence and congruence between IMF, World Bank and WTO measures, you stand to get screwed for not being neoliberal enough, and if there is inconsistency, you also get screwed for not being neoliberal enough!

The UN, Neoliberal Globalization and the Millennium Development Goals

The Monterrey Consensus declaration from the UN Conference on Financing for Development (FfD), attended by representatives of the IMF, World Bank, WTO and many corporations was aptly dubbed the “Washington Consensus wearing a sombrero”[xx] by John Foster of the Ottawa-based North-South Institute. With its advocacy of trade and investment liberalization, privatization and the marketization of land and resources, it highlights again the neoliberal capture of the United Nations. It comes on top of increasingly entrenched corporate involvement at UN agencies, its 1993 dissolution of the UN Centre on Transnational Corporations, and the UN Global Compact with 50 of the world’s largest corporations, an initiative which Kofi Annan promised would “safeguard open markets while at the same time creating a human face for the global economy" among other things[xxi]. Arguments for more policy space must be seen in the context of an overall push to get UN members to ultimately move towards the same goal – free market economies.

On April 15 2005, a special high-level meeting of the UN ECOSOC[2] with the Bretton Woods institutions, the WTO and UNCTAD (WTO Director-General Supachai Panitchpakdi’s new employer) discussed ‘Coherence, coordination and cooperation in the context of the implementation of the Monterrey Consensus: achieving the internationally agreed development goals, including those contained in the Millennium Declaration.”[xxii] The President of ECOSOC’s summary noted that “the increasing interdependence of national economies in a globalizing world and the emergence of rule-based regimes for international economic relations meant that the space for national economic policy was now framed by international discipline, commitments and global market considerations”.[xxiii] Most sought “decisive progress” in the Hong Kong WTO Ministerial Conference towards “a successful conclusion of WTO negotiations in 2006 on the basis of a truly development-oriented Doha agenda”. Indeed, this is the UN Secretary-General’s request. A June 1 2005 Secretary-General’s report to the UN General Assembly reiterated support for “addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development.”[xxiv]

The MDGs ignore structural issues at the root of poverty such as debt, unfair trade and economic policies. Perhaps that is unsurprising. They were essentially drawn up by ministers from OECD countries, with no participation by governments from the South let alone those most directly affected. How exactly will governments finance primary health care and education while they are being forced to cut public expenditure and privatize services under neoliberal conditionalities of IFIs? How can the poor afford commercialized healthcare, water, education? How can even the rather modest goals of the MDGs be achieved by any country in the grip of neoliberalism, privatisation, and debt slavery? The social development goals are little more than a whitewash of the continuing policies of structural adjustment and liberalization – policies which worsen poverty and stunt genuine development.

In his “In Larger Freedom” report, Kofi Annan says that “development, security and human rights go hand in hand”.[xxv] But what little the MDGs appear to give with one hand is taken away with the other. Goal 8 of the MDGs is: ‘Develop a global partnership for development …. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system (includes a commitment to good governance, development and poverty reduction – both nationally and internationally)”[xxvi]

IBON’s Joseph Yu points out: “The pessimism towards meeting the MDGs is not meant to spur rich donor countries to increase development assistance to underdeveloped countries, but to set the stage for the prescription of further neoliberal reforms as the means to achieve rapid economic growth and consequently, poverty reduction…Promoting an “open, rule-based trading and financial system”, cooperation with the private sector and competition in the global economy risks poverty alleviation goals being overwhelmed by corporate and donor interests.”[xxvii]

Finance Liberalization and FTAs

The 1998 UNCTAD Trade and Development Report noted: “the ascendancy of finance over industry together with the globalization of finance have become underlying sources of instability and unpredictability in the world economy. (…) In particular, financial deregulation and capital account liberalization appear to be the best predictor of crises in developing countries.”[xxviii] Capital account liberalization, the removal of controls, taxes, subsidies and quantitative restrictions that affect capital account transactions – whether promoted through IMF loan conditionalities, the WTO Agreement on Financial Services, or now, in bilateral free trade and investment agreements – has already devastated domestic economies, particularly in South East Asia and Mexico in the 1990s. 

The Chile and Singapore FTAs with the USA have “NAFTA[3]-plus” broad definitions of investment, which throw the door wide open for disgruntled investors to take a case to a dispute tribunal. Both agreements impose alarming new limits on the use of capital controls.[xxix] Indian policy analyst and researcher Kavaljit Singh argues that Chile‘s controls on capital inflows have helped insulate it against financial crises. He writes that it “stands to reason that the probability of occurrence of a financial crisis in Chile and Singapore would increase manifold with the removal of capital controls as envisaged in the bilateral trade agreements with the U.S.“[xxx] 

Even free traders have slammed this aspect of these FTAs. In a March 2003 Financial Times article, Jagdish Bhagwati and Daniel Tarullo wrote, “The intention of the Bush administration to use these two agreements as ‘templates’ for other trade agreements, possibly including the Doha round, means that acceptance of the capital control provisions could engender a trade policy that causes far-reaching damage. The prohibition on capital controls has the makings of a U.S. foreign policy debacle. Imagine that a government imposes short-term capital controls in order to manage financial problems. Compensation will ensue, but only for American investors. The citizens of the developing country will then see a rich U.S. corporation or individual being indemnified while everyone else in the country suffers from the crisis. One would be hard-pressed to think of a better prescription for anti-American outrage.”[xxxi] 

Fighting Back

While some people say “make poverty history”, some of us say “make capitalism history”. Capitalism and colonialism are all too often the elephants in the room in NGO activities on debt, trade economic, social and political justice – and war.

If our analysis of neoliberalism takes an explicitly anti-colonial and anti-capitalist standpoint, we may question strategies which aim to move these predatory, carnivorous institutions and companies towards a vegetarian diet by polite petitioning and ‘civil society dialogue’, and instead work together to delegitimize them. We must go beyond a compartmentalized campaign approach to individual institutions and their policies and name and confront the values and ideology that lie behind and link them. 

Both critics and supporters of policy coherence argue that coherence at an international level between institutions has to be based on coherence within national governments and their different ministries, agencies and departments. Strategically and practically, I think that it is primarily the domestic pressure points of intervention – conflicts, contradictions, tensions between officials, government ministries and departments – which are important to identify and campaign around, rather than the potential or apparent tensions between the IFIs and the WTO. 

As labour researcher Gerard Greenfield warns, calls for transparency, openness and more democracy within institutions like the WTO ignore “the fact that we need to have the ability to do something about what we see, otherwise we’ll just be spectators in a transparent process… Aggressively cutting back our ability to impose democratic priorities on capital is not an afterthought – it lies at the very heart of the globalization project.[xxxii] 

For those in power, an opposition that prioritizes dialogue and a contest of ideas with elites is far less dangerous and more controllable than one that understands power and builds counter-power through community organizing and movement-building.

“Many of the biggest and strongest civil society organizations orient upwards, justifying and elaborating the actions and ideologies of the dominant power. Others orient to the grassroots, and within this there are two different types: those that organize and mobilize to fit into programmes constructed by dominant power, and those that organize and mobilize to confront the dominant power” write South African activists and researchers Stephen Greenberg and Nhlanhla Ndlovu.[xxxiii] 

Perhaps we need to reclaim the roots of the word monkey-wrenching – it is a term from Ed Abbey’s book about a fictional band of militant environmental activists, The Monkey Wrench Gang[xxxiv] referring to direct action against the powerful. The biggest and strongest kinds of monkey-wrench are strong and sustained communities of resistance and social movements. For those of us that do research and policy analysis, our challenge is to redouble our efforts to orient our work in ways that strengthen and support those popular struggles against neoliberalism, in our communities, and internationally.