Symposium: How Should the Left Respond to Globalization?
Skinner, E. Benjamin
FROM SEATTLE to Washington and Prague, it has been a noisy year for those trying to democratize international financial institutions (IFIs). Critics of the World Bank, the International Monetary...
...When postwar West Germany embarked on its middleclassoriented development policy, per capita income was around $3,000 (1995 $U.S...
...The real challenge for the left is not uniting in criticism of the IFIs, but agreeing on workable alternatives...
...For a more complete discussion of this subject, see Walter Mead and Sherle Schwenninger, "A Financial Architecture for Middle-Class-Oriented Development" (Council on Foreign Relations, 2000...
...government's lending body, originally intended to support agriculture, industry, and commerce, but extended to give credit to solvent businesses that would otherwise be unable to obtain it...
...From 1932 to 1947, the RFC built a thriving middle class, financed a strong infrastructure, and thus strengthened the economic pillar of the American Century...
...The protesters who say that globalization today provides a disproportionate share of benefits to transnational elites are correct...
...But it will fit most of the world's emerging economies...
...Today, China and 132 other countries are more productive...
...Eventually, it was authorized to recapitalize the entire financial system by buying stocks in a broad variety of enterprises...
...Better alternative solutions are possible, however...
...Strategies should be sought that will make billions of people able to consume as well as just produce...
...But in order to fill that potential, they must first build a consensus around a new plan for growth...
...Fannie Mae and the Small Business Administration—two of the many surviving elements of the RFC program— continued to support home ownership, small business growth, and thus the development of a robust middle class.** The RFC worked, and similar credit pro*Furthermore, IFIs would do best to coordinate these strategies and their implementation with new regionally based programs and institutions...
...Much of the world is ready for middleclassoriented growth strategies...
...They are right to say that policies based on the Washington Consensus tend to reinforce existing economic orders within emerging economies...
...Often seen as controlled by Western policy makers, their calls for painful austerity measures are frequently met with suspicion or disregard...
...The report is available on-line at www.cfr.org . **For a more in-depth discussion of the Reconstruction Finance Corporation, see Jane D'Arista, "Building the Financial Infrastructure for Middle Class Emerging Economies" (Council on Foreign Relations, 2000...
...Most important, it should involve the construction of a global middle class by democratizing access to capital...
...16 n DISSENT / Winter 2001...
...The paper is available online at www.cfr.org . DISSENT / Winter 2001 n IS SYMPOSIUM grams will work for the developing world...
...IFIs have insufficient means for supervision or real regulation of the economies that they attempt to reform...
...The RFC was the U.S...
...During the 1940s, the RFC became a major source of funding for the war effort, and after victory, when it had largely accomplished its goal of a recapitalized, dynamic economy, Congress voted to break it up...
...In other words, if IFIs can come up with creative programs focused on increasing domestic living standards through democratized access to capital, much of the world can become more well-rounded—and more affluent—capitalists.* Economist Jane D'Arista very astutely uses the Reconstruction Finance Corporation (RFC) as a model for growth within emerging economies...
...In particular, by making access to loans cheaper and easier and capital markets more flexible, institutions can encourage greater capital flows to the international lower middle classes, thus increasing living standards for a huge swath of the world's population...
...Critics of the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO) have made their voices heard (and banners seen, and rocks felt) early and often in an effort to call attention to the problems of globalization...
...expanding debt and equity markets...
...To foster this, international institutions should work to make capital markets broader, deeper, and more liquid...
...It's time for emerging economies to receive a New Deal similar in nature to the one that made the U.S...
...Working to keep interest rates low...
...World Bank–sponsored microcredit programs are surely a step in the right direction, but they are too small and too narrowly focused on those in extreme poverty to effect large-scale growth...
...Today, the average per capita GDP for the world exceeds that by 30 percent...
...and increasing access to credit through mini- (rather than just micro-) lending for housing, education, and small businesses, IFIs will pave the way for the 2.7 billion people that the World Bank classifies as middle income to become one enormous global consumer class...
...Unfortunately, it will take more than sound and fury to reorient international economic strategies toward sustainable and equitable growth...
...Furthermore, they have too few instruments for encouraging new strategies, and those tools are often ineffective...
...This new vision for an international financial architecture won't fit on a banner...
...Middleclassoriented capitalism worked marvelously to raise living standards in Europe, Japan, and North America...
...E. BENJAMIN SKINNER is research associate for U.S...
...Though intelligently managed by well-intentioned professionals, they have been hamstrung in their ability to make real change and create lasting growth by their lack of leverage within the regions they most need and want to help, and by their limited capacity for innovative solutions...
...There are many problems with the Bretton Woods institutions (IMF, World Bank) and the WTO, but these problems stem more from their weaknesses than their strengths...
...This plan should include the development of new strategies for such reforms as stable currency regimes and debt relief and restructuring...
...foreign policy at the Council on Foreign Relations...
...A major part of the RFC was the Federal National Mortgage Association— known today as Fannie Mae—which was to make home ownership a reality for millions of Americans...
...Capitalism is a powerful and complex machine that—if fueled by the right mix of sound economics and innovative tactics—can create universal prosperity rather than stark stratification...
...The question now is how best to make popular capitalism work for the developing world as well...
...One-size-fits-all approaches are rarely successful...
...When the RFC was gearing up during the Great Depression, per capita GDP had bottomed out at $4,800 in the United States...
...Contrary to the many loud claims that the IFIs have outlived their usefulness, I argue that they have not yet filled their potential...
...In the first place, they are too large and centralized, and have little moral authority in developing countries...
...economy the largest in the history of the world...
Vol. 48 • January 2001 • No. 1
