(C) Kapok Tree Diplomacy. 2011. All rights reserved. Jeff Dwiggins<\/p>\n
FREE CONTENT<\/strong><\/em><\/span><\/p>\n Assuming that the \u2018developing world\u2019 includes the entire<\/i> developing world, not just states undergoing post-conflict reconstruction (PCR), I think we must first define what Western \u2018free market\u2019 auspices are, and how might they be cultivated under Western\/liberal principles.<\/p>\n Gilpin asserts that \u201cLiberalism may, in fact, be defined as a doctrine and set of principles for organizing and managing a market economy in order to achieve maximum efficiency, economic growth and individual welfare\u201d that is committed to \u201cfree markets and minimal state intervention,\u201d \u201cindividual equality and liberty,\u201d and the \u201cpremise \u2026 that the individual consumer, firm, or household is the basis for society\u201d (421-422). Does this type of economy promote the stability a developing state needs?<\/p>\n Liberalism has its own set of empirical economic laws geared towards stability to include: comparative advantage, marginal utility, a quantity theory of money and rational choice that lead a market economy towards a \u201cpowerful tendency towards equilibrium and inherent stability\u201d (Gilpin 422-423).<\/p>\n Thus, free market economics within liberalism produces growth, efficiency, stability, cooperation and even peace in the way that it brings people together with mutual interests. But what about people of different religions, cultures and ethnicities within the state? Do they have mutual interests? What about different political systems? Let\u2019s first look at democratic political systems where we do see free market principles functioning on a regular basis.<\/p>\n Ikenberry takes the free market principles one step further by tying them to democracy itself and stressing the \u201crole of human rights, multilateral institutions, and progressive political effects of economic interdependence\u201d (58), as well as \u201cpolitical reciprocity, and the management of conflicts in new multilateral institutions\u201d (59). He posits that democracies fight each other less and embrace free trade which in turn fosters economic growth (61).<\/p>\n Moreover, he reminds us that \u201cprosperous neighbors are the best neighbors\u201d (61). He points to trade\u2019s ability to \u201csocialize neighbors\u201d (62) like China and promote global stability. Finally, Ikenberry points to the ability of democracy and free trade to create norms that unite shared values and reduce opportunity for conflict (63-64). Again, do various ethnic and religious groups in developing states have enough shared values for democracy and free trade to work?<\/p>\n In the developing world there are numerous barriers to the promotion of liberalism, free market principles and democracy. We have the political <\/i>impediments of states with different economic ideologies such as communism or Marxism as in Russia. But even states like Russia and China with communist political ideologies have adopted some forms of \u201cstate capitalism\u201d that are partly Western in orientation. We also have the issue of corruption among government elites with no transparency that pocket economic aid and export revenues to prop up their regime and do little to invest in legitimate development projects or economic diversification.<\/p>\n There is also the issue of whether a developing state meets the strategic national interests of powerful donor states to attract economic attention (Rwanda and Somalia). Lastly, some political regimes cannot protect their citizens, let alone protect economic and financial institutions, so the prospect of a liberal economy seems dismal without better security.<\/p>\n Ethnic impediments have been a challenge in places like Afghanistan and Iraq where numerous tribes and ethnic groups compete for equitable treatment within economic and financial institutions. They may have different languages and be of different races, making communication challenging. Religious impediments seen in the examples of Bosnia (Catholics, Muslims, Christians) and Iraq (Sunni vs. Shia Muslims) may also impede economic growth if free market principles are seen to favor one group over another, conflict with religious principles, or symbolize some type of domination by Westerners.<\/p>\n Consistent economic growth may not be possible where military and political stability is lacking. The Democratic Republic of the Congo comes to mind. Panagriya notes that political stability is needed as much as free trade measures to grow faster (20-21).The CIA Fact Book reports that in Somalia, \u201cDue to armed attacks on and threats to humanitarian aid workers, the World Food Programme partially suspended its operations in southern Somalia in early January 2010 pending improvement in the security situation. Somalia’s arrears to the IMF have continued to grow.\u201d<\/p>\n Thus, Somalia cannot even feed itself due to a lack of a stable government and the inability to control its territory. It is doomed to anarchy, at least for now. To top it off, Somalia apparently owes the IMF a lot of money. I would hate to be the one holding that note. Such loans exacerbate the problem, not help economic development. The IMF loans were done out of sequence prior to stabilization of the security and political situation. The results were predictable.<\/p>\n Amy Chua takes this theme a bit farther, as does Samuel Huntington. Chua notes that the adjustment to free markets in developing nations can result in a \u00a0\u201cbacklash against markets that target the market-dominant minority\u2019s wealth\u201d (Zimbabwe), \u201can attack against democracy by forces favorable to the market-dominant minority\u201d (Philippines, Kenya), or \u201cmajority supported violence aimed at eliminating a market-dominant majority\u201d (Rwanda, Yugoslavia) (\u201cA World on the Edge\u201d).<\/p>\n Chua encourages us not to \u201coverlook the ethnic dimension of market disparities.\u201d She recommends wealth redistribution measures (I do not), development and implementation of civil, social and market institutions prior to full-blown democracy, additional foreign aid, and some forms of direct government intervention to correct ethnic maldistribution issues (\u201cA World on the Edge\u201d).<\/p>\n Huntington says, \u201cthe process of economic modernization and social change throughout the world are separating people from longstanding local identities\u201d (26), and explains that \u201ceconomic regionalism is increasing\u201d (27) to bolster his claims that cultural issues will increasingly impede economic development and drive conflict in the 21st<\/sup> century.<\/p>\n Beyond cultural, ethnic, religious, political, and security impediments, we also have institutional impediments. Sometimes developing states are simply not ready for full-blown economic liberalism. These states\u2019 internal economic infrastructure of governance, banking, regulation, financial markets, education, innovation, research and development, and domestic stability must be able to handle the greater levels of prosperity, investment and opportunity.<\/p>\n Ji Young Choi explains what can go wrong when capital account liberalization is done too prematurely in context to the Asian crisis of 1997. He says, \u201cExtemal pressures on the opening of the Korean financial market played a considerable role in bringing about premature, hasty, and unprepared financial liberalization in Korea, which was one of the main causes of the financial meltdown in 1997\u201d (10). He goes on to say, \u201cA transition from a state-led development system to a market-oriented one is surely not an easy task and requires a much longer period of time and learning” (16).<\/p>\n Developing countries who want to pursue industrial and agricultural development strategies basically have three choices: (1) Private funding, (2) international economic institutions like the IMF and World Bank (WB), or (3) alternative strategies such as the bilateral deals China signs with African nations outside of the international economic institutions.\u00a0A fourth choice might be the \u201cstate capitalism\u201d practiced by China.<\/p>\n Regarding international assistance, Easterly points put, \u201cSpending $2.3 trillion (measured in today’s dollars) in aid over the past five decades has left the most aid-intensive regions, like Africa, wallowing in continued stagnation; it’s fair to say this approach has not been a great success\u201d (2005), and adds, \u201cEconomists are reasonably confident that some combination of free markets and good institutions<\/i> has an excellent historical track record of achieving development\u201d<\/strong> (2007: 329). His argument posits that enhanced freedoms and liberties, as well as systems<\/i> that breed them, are the answer to increasing and sustaining growth rates in developing countries,<\/p>\n Despite the rather long laundry list of impediments listed above, I find Easterly\u2019s argument compelling. Strong political institutions and an emphasis on the rule of law, deterring corruption and respecting property rights should be established in developing countries in order for free market principles to be effectively cultivated. We need to stay away from large loans with no accountability mechanisms or emphasis on results. \u201cPiecemeal steps aimed at\u201d the provision of clean water, building and<\/i> maintaining roads, and creating education opportunities, as well as focusing on \u201cdivision of labor and gains from specialization \u2026 inflation stabilization, financial regulation, [and] elimination of red tape\u201d to start a business would help free markets develop (Easterly 2007: 331).<\/p>\n This will also help legitimize governments. \u2018In the context of poverty and decline it is hard for governments to gain popular allegiance\u201d (Collier 2004: 3). If the government is unable to suppress dissent chaos can follow, and dissent is tough to suppress in the absence of consistent and widespread economic success.<\/p>\n The articles by Lewis, Inglehart and Norris support the idea that even in places like the Middle East, democracy and free markets are compatible with Islamic religion, Arab culture, and diverse tribal entities. Yes, there are enough shared values. The issue is not values but one of equity in regards to financial benefits, representation, administration and leadership\u00a0of the institutions – both political and economic. Practical steps can be\u00a0taken to diminish these issues.\u00a0Economic success in places like India, China, South Korea, and Brazil demonstrate the power of free market principles, though democracy is not a reality in China. If prosperity promotes the hunger for democracy, China may eventually succumb to democratic revolution.<\/p>\n Cultivating economic growth under Western \u2018free market\u2019 auspices is completely feasible in the developing world \u2026 with decent institutions embedded in the right values, political and security conditions. Democratic values can even be cultivated without full-blown democratic institutions. These values may enhance economic growth. Reinforcement of the norms and rules of the global economic system, free markets, the rule of law, state sovereignty, nondiscrimination\u00a0and financial transparency as conditions of an aid package is one example.\u00a0Of course, no method will work the same in every state.<\/p>\n Choi, J. Y. (2009). Rethinking Economic Development and the Financial Crisis in South Korea and the State in an Era of Globalization. Journal of Third World Studies<\/i> , 26<\/i> (2), 203-226. Web. Academic Search Premier. Retrieved from Norwich University Library.<\/p>\n Chua, A. (2002). Two Faces of Globalization: A World on the Edge. Wilson Quarterly<\/i> , 26<\/i> (4), 62-77. Web. 04 Apr 2010. Academic Search Premier. Retrieved at Norwich University Library.<\/p>\n Collier, P. (2004, October 1). Development and Conflict.<\/i> Retrieved February 8, 2011, from The United Nations | Published by, The Centre for the Study of African Economies, Department of Economics, Oxford University: http:\/\/www.un.org\/esa\/documents\/Development.and.Conflict2.pdf<\/p>\n Easterly, W. (2005, March 13). A Modest Proposal. The Washington Post<\/i> , BW03. Web.JSTOR. Retrieved from Norwich University Library.<\/p>\n Easterly, W. (2007). Was Development Assistance a Mistake? The American Economic Review<\/i> , 97<\/i> (2), 328-332. Web. JSTOR. Retrieved from Norwich University Library.<\/p>\n Gilpin, R. (1987). Three Ideologies of Political Economy. In D. J. Kaufman, J. M. Parker, P. V. Howell, G. R. Doty, & A. Jenson (Ed.), Understanding International Relations: The Value of Alternative Lenses<\/i> (5th ed., pp. 419-449). West Point, NY, USA: McGraw Hill Custom Publishing.<\/p>\n Huntington, S. P. (1993). The Clash of Civilizations. Foreign Affairs<\/i> , 72<\/i> (3), 22-49. Web. Academic Search Premier. Retrieved from Norwich University Library.<\/p>\n Ikenberry, J. G. (1999). Why Export Democracy? Wilson Quarterly<\/i> , 23<\/i> (2), 56-65. Web. 18 Apr 2010. Academic Search Premier. Retrieved at Norwich University Library.<\/p>\n Inglehart, R., & Norris, P. (2003, March\/April). The True Clash of Civilizations. Foreign Affairs<\/i> , 62-67. Web. Academic Search Premier. Retrieved from Norwich University Library.<\/p>\n Lewis, B. (2009). Free at Last? Foreign Affairs<\/i> , 88<\/i> (2), 77-88. Web. Academic Search Premier. Retrieved from Norwich University Library.<\/p>\n Panagariya, A. (2003). Think Again: International Trade. Foreign Policy<\/i> (139), 20-28. Web. 20 Mar 2010. Business Source Premier. Retrieved at Norwich University Library.<\/p>\n