The push toward globalization met its strongest opposition yet when protesters turned a November summit of the World Trade Organization into a violent, anarchist scene. Unprepared, reactive police responded to broken glass and looting with a spray of tear gas and rubber bullets. The famed youthful apathy of the '90s, it seemed, had passed.
The protests sent the already tenuous ministerial meeting into a tailspin, energizing developing nations that felt embattled by the West and essentially derailing the confab. To be fair, not all demonstrators were like Jackal who, along with 100 followers, smashed the windows of Starbucks, McDonald's or any other symbol of rampant capitalism that lay in his path. More demonstrators in Seattle drew their influences from Gandhi than the "Anarchist's Cookbook." The single unifying theme seemed to be contempt for the current trend in globalization; call it the anti-Coca Cola Zeitgeist.
Following their success in Seattle, organizers made the April 16-17 semi-annual meetings of the World Bank and the International Monetary Fund their next target. Collectively called A16, for the date of the meeting, the organizations are protesting what they view as a lack of public accountability, a dubious environmental record, loan agreements that can devastate economies and policies that favor Western nations and contribute to the growing gap between the rich and poor at the two Bretton Woods institutions.
On the eve of the A16 protests and IMF and World Bank meetings, Salon brought together a round table of experts to discuss the past, present and future roles of the global organizations.
How did once-obscure issues like globalization, Western loan policies and debt relief mobilize a new generation of protest when domestic issues like urban poverty or abominable public schools have not?
Merrill Goozner is chief economics correspondent in the Chicago Tribune's Washington bureau: As in the '60s, many of the protesters come from elite universities. For many, their first idealistic brush with the less fortunate came when they realized that their school apparel and sneakers were manufactured in global sweatshops run by or for the Nikes and Gaps of the retailing world. The sweatshop issue had existing "protest" constituencies that could serve to guide and mobilize this new generation of protesters: Naderite anti-globalism campaigns like Global Trade Watch and the anti-free trade wing of organized labor.
That still doesn't explain why domestic issues of poverty, inequality and education have not motivated young people in recent years. Perhaps it is because they appear as residual questions. Urban poverty concerns a physical place in our society that quite literally has been left behind. Abominable schools? Some are, yes, but the kids who go to the University of Michigan, Berkeley and Harvard did not attend abominable schools. And for products of the suburbs who inherited (and perhaps rejected) the keys to the SUV, inequality in America may seem as distant, or as close, as inequality between Chad and the U.S.
Daphne Wysham is network director for the Sustainable Energy and Economy Network: This generalization about those who are participating in the protests against the World Bank and IMF is a bit too dismissive. Yes, it's true, many protesters sport pierced noses and other hallmarks of the discontented white middle class. But just because they are the most colorful does not mean they are the majority. There are religious groups by the thousands around the world who have joined this movement for greater accountability and debt relief on the part of the World Bank and IMF; there are labor groups, scholars and a wide array of grass-roots activists.
There are those who may not have degrees from the finest universities in the country, but understand just how close to the bone they are living thanks to the "new prosperity" that globalization has brought to their lives. Most importantly, there are the poor and their allies in developing countries, who are rising up by the thousands, putting their lives on the line to resist the dehumanizing programs that result in their resettlement, social upheaval and impoverishment to make way for World Bank development projects. And there are those such as [former World Bank economists] Herman Daly and Joseph Stiglitz, who have worked inside the bank and know its failings, who agree with many of these criticisms. All of these people understand something is seriously wrong with the growing concentration of wealth, power and decision-making in the hands of the few.
Pete Leyden is the co-author of "The Long Boom" and former managing editor of Wired: I don't think the policies, per se, are what mobilized the protests. Globalization itself is driving the reaction, and people are looking for anything they can to blame. Those two global organizations are among the few out there that can be used to vent people's frustration. They symbolize globalization. They put a face on this very amorphous issue.
In fact, they are creatures of the past and are having a hard enough time keeping up with the realities of modern globalization. Far from being in control of this global economy, they are struggling as much as anyone. That's why it's rather ironic that the protesters are framing them as those in control.
I'll come clean here right from the start: I think globalization is a good thing. It's virtually inevitable and with time it will be seen as overwhelmingly positive. People at the end of this century will look back on the beginning of the century and see this phenomenon of everything going global as the most significant development of our era. We're obsessed with the technological developments right now, which are essentially enabling this globalization. We're being overwhelmed by the economic restructuring that's taking place, but that's just the first of a long continuum of increasing interconnection and interdependence that will also restructure our politics, our culture, our society at large.
We can only solve global warming and global environmental problems when we deal with them as a global community. We can only take on the obscene poverty that half the planet is trapped in if we think of the world as one community. We can only lower the chances of large-scale war if we see our interdependence as more important than our differences. Globalization is pushing us to a point where we can finally fully solve these problems -- the very problems that most of the protesters claim to be concerned with. Globalization is not the problem, but potentially the answer. This perspective completely flips the issue on its head.
Mark Hertsgaard is the author of "Earth Odyssey," a book about the human toll of environmental devastation: Why is it that environmentalists are so riled up about the [World] Bank? After all, the bank's mission is to alleviate poverty and promote sustainable development: Surely that's the kind of work the activists and social justice types should applaud. The problem is, the bank often has not lived up to its lofty rhetoric. Time and again, it has financed gargantuan, ill-conceived projects whose anti-poverty effects are indirect at best and whose environmental consequences are downright disastrous. Bank-funded projects often do more to subsidize Northern corporations than to fight Southern poverty.
Right now, in the western African nation of Chad, the Bank is trying to fund the development of a vast oil field and pipeline that will extend 650 miles through Cameroon to the Atlantic Ocean, ravaging the ecosystems and human settlements in one of Africa's great remaining rainforests. The Bank is loaning or guaranteeing some $540 million of the project's $3.5 billion total cost, but the profits will go to its private partner, Exxon-Mobil, and the notoriously corrupt governments of Chad and Cameroon. The Bank claims that the project's environmental impact will be minimal and the wealth generated will lift living standards of the local poor. But the Dutch government has twice rejected the bank's environmental impact assessment as unconvincing. The bank's "revenue management plan" to keep the kleptocrats in Chad and Cameroon from pocketing its loan money has been ridiculed as naive and unworkable by Harvard Law School's Human Rights Project.
The Chad project is, in short, corporate welfare at its most naked, and it makes about as much environmental sense as incinerating nuclear waste. This is all the more true considering that the project's purpose is to bring to market more oil that humanity can't afford to burn anyway -- not because of prices at the pump, but because of rising temperatures and fiercer weather around the world. Our longstanding fossil fuel use has already begun changing the global climate, so doesn't environmental prudence suggest that the bank should be leading the transition away from fossil fuels and toward solar and other non-carbon energy sources?
Imagine what the Bank could accomplish if it diverted the $540 million it wants to spend subsidizing Exxon in Chad to genuinely sustainable development initiatives. It could provide solar panels and cookers to villages throughout the region. Or, in keeping with the bank's preference for macro-solutions, it could provide the financing needed to bring industrial-scale solar power to market. A recent study -- led by British Petroleum experts, no less -- found that photovoltaic solar power would be competitive with coal and oil-fired electricity tomorrow, if only someone built a PVC solar factory large enough to capture the economies of scale that come with mass production. BP likes to talk green, but it has declined to build that factory, presumably because it prefers to keep solar off the market in deference to its core business of oil production. But the World Bank could finance that factory, whose projected cost just happens to be approximately $540 million.
Gerald Meier is a professor of economics at Stanford University: Protesters are a mixed lot -- and not consistent. Some protest the environmental policies of the World Bank. Others protest the debt repayment policies of the World Bank. Others protest IMF conditionality. Others protest any "bailing out" of foreign investors. But most use the World Bank and IMF as scapegoats and symbols for their concerns that are loosely linked to vague ideas of "globalization."
Critics of the IMF and World Bank say that the organizations' free-market based policies help widen the income gap between developed and developing nations. Is this a fair assessment?
Wysham: As the Meltzer Report submitted to Congress recently pointed out, the Word Bank cherry-picks the countries it provides loans to, targeting those countries that are already awash in private capital. Furthermore, the bank is fixated on adjusting national economies -- some 63 percent of World Bank loans last year went to structural adjustment -- while failing to look at the social or environmental impacts of these loans.
A good percentage of the remaining loans from the World Bank went to industries like telecommunications, oil and mining -- sectors that are hardly in need of government-backed, low-interest loans. Investment in these sectors -- particularly the natural resource extraction -- tends to result in dislocation of the poorest, resettlement under far worse conditions and greater impoverishment. Our own Treasury secretary, Larry Summers, suggests it is time for the World Bank to get out of these sectors.
The Meltzer Report pointed out the fact that middle-income countries get the lion's share of lending, and recommended that the bank phase out loans to countries where the per-capita income was above $4,000 in the next five years, and limit loans to countries where the per capita income was above $2,500.
Were these two recommendations to be enacted, and were there to be a drastic curtailment in strategic adjustment loans, coupled with a clear emphasis on education, health care and other basic services desperately needed by the poor, and were we to see a reformed World Trade Organization process that placed environmental, labor and social protections in the same league as economic growth, we might see the income gap shrink rather than widen as it is, rapidly, now.
Meier: Free-market based policies also mean uniformity of treatment and not special and differential treatment for less-developed countries. Those who want preferential treatment and special discrimination in favor of the LDCs are really criticizing the free market. But the IMF was originally based on non-discrimination and uniformity so as to avoid discrimination against LDCs. It's not free markets, but other causes that can explain the so-called widening gap or lack of convergence among more-developed countries and LDCs. Moreover, it can be noted that it is free market ideologues who want the IMF and World Bank abolished, not those who believe in government policies and public policy to correct market failures.
Leyden: I agree that maintaining and expanding the presence of global institutions is more in the interests of the protesters than abolishing or severely limiting those organizations. Globalization is making transnational transactions increasingly the norm. We're migrating many previously national functions to the global level. However, there are very few government or political institutions that operate on that plane.
Frankly, I think the IMF and World Bank, and even the WTO, are not particularly well-suited for this new brand of 21st century capitalism. After all, the first two were created in the much more placid world of the middle of the 20th century.
That said, the new 21st century global institutions have not emerged, and we're not even sure how they might look at this point. They probably will be more like the networks of organizations that are characteristic of the New Economy. However, we're a long way from inaugurating brand new institutions. That means that morphing or evolving the current global institutions will have to suffice at this point. The last thing you want to do is wipe them out.
Goozner: Is Indonesia poorer today than it was 30 years ago, when it embarked on an oil-and-gas exploitation and export-oriented strategy for economic development? Absolutely not. Is it poorer today than it was three years ago, when its economy crashed and burned because of Western demands for capital mobility? Absolutely. Based on my direct experience of LDC economic development, which is drawn for the most part from Asia, I would say that "free trade" has generally benefited the LDCs, including their poorer residents. But it is important to point out that "free trade" generally entailed their access to developed world markets and free flow of capital into the LDCs. The losers in this game are the poorest and least-skilled workers of the developed world, who are the ones who are forced to compete with their counterparts in the LDCs.
Hertsgaard: I think it is a fair assessment [to say the World Bank and IMF are widening the poverty gap]. Think back to the Chad project. The benefits of that project are not going to be felt by the impoverished majority in Chad and Cameroon but rather by their kleptocratic leaders and the officers and shareholders of Exxon-Mobil and Chevron. Multiply that example by all the individual projects the bank has financed over the years and it's not hard to see why inequality is likely to be increased, not decreased, by bank activities.
Also, a response to the notion that Indonesia is "absolutely not" poorer today than it was 30 years ago: Well, it depends how you measure these things. Average income levels may be higher, but the nation's "natural capital" -- that is, the amount of forest cover, clean air and water and other natural resources that are the necessary precondition for any functioning society -- has surely been depleted in shocking amounts. Clear-cutting the forests of Indonesia, or any other country, may boost income in the short run but as a long-term economic strategy, it is bankrupt.
How does the specter of mass protests, the shadow of Seattle, affect what is going to happen inside the IMF-World Bank meetings?
Meier: The effect remains to be seen, but it probably won't amount to much more than Seattle. In the future, it may, but Washington meetings are not the appropriate venue for reform discussions and certainly not for immediate action.
Goozner: These spring meetings are rather mundane affairs where few decisions are made. Unlike Seattle, where there was supposed to be a new global round of trade negotiations launched, there is very little at stake in Washington this weekend. Besides, it would be a mistake to give the Seattle protesters too much credit for the collapse of the WTO talks last December. That had just as much to do with the U.S. and Europe's unwillingness to cater to LDC concerns about issues like textile tariffs and intellectual property rights, and virtually everyone's unwillingness to put agricultural subsidies on the table.
Wysham: An interesting interpretation of the events in Seattle. Your comments suggest that the WTO's insularity is acceptable, and that negotiators should continue dotting i's and crossing t's, with or without public support for their actions. What would it take to suggest this autocratic approach was wrong? What would it take other than mass protests by thousands of citizens from around the world? If this doesn't have an impact, then the WTO has proved itself to be the truly undemocratic, unaccountable institution its critics charge it to be.
I agree that the spring meetings are relatively insignificant. However, the protesters are sending a message, regardless of whether this time around we will have limousine gridlock, as we usually do here in Washington when those finance ministers and their business cronies so concerned with poverty alleviation settle in for a week of caviar, champagne and conversation with the likes of Exxon-Mobil and Chevron. The message is a clear continuation of the message that has been articulated in the efforts to halt NAFTA fast-track legislation, to derail the MAI and to shut down the WTO, namely: Democratize these institutions and processes; make them transparent and give us a voice that ensures that our needs, not those of the wealthiest, most powerful corporations, are heard when decisions about trade and finance are made that effect our rights and laws and the issues we care about.
Hertsgaard: The most important effect is to make bank officials aware that they are not operating in a vacuum, that their decisions are being watched, that these once-arcane issues of global finance and development will never again be decided completely in secret without outsiders demanding to take part in and influence the decisions. That's good, I think, even if the immediate response of some of the officials, including bank president James Wolfensohn, is simply to reassure themselves and their colleagues that, contrary to the activists, the bank's work is objectively valuable to poor people.
Critics charge that, like the WTO, the World Bank and IMF are "democratically deficient" -- decisions are made behind closed doors and programs lack public accountability. In an essay in the New Republic this week, former World Bank chief economist Joseph Stiglitz describes the IMF as "secretive and insulated from Democratic accountability." Are these criticisms legitimate? If so, what steps should they take to open themselves up?
Wysham: There are those of us who have been slaving away in Washington for years trying to reform these institutions. It's not just the non-government organizations who are working on reform. There are also a few lone government officials who take up the thankless jobs of trying to review, for example, environmental impact assessments on World Bank projects that pile up on their desks by the dozens each month, with only 60 days (if that) for review before they proceed to the World Bank's board for approval. No World Bank project has ever been rejected by the board once it gets this far. It's a Sisyphean task, one we take on knowing full well that the most we will get out of the board, if we are lucky, is a slight modification in the project. There have been times when Wolfensohn has intervened, withdrawing a project from the board before it can decide on it -- as in the Arun II Dam in Nepal. But these are rare exceptions to the "culture of approval" that is the dominant one within the bank.
If those of us who work most closely with these institutions, who know bank officials by their first names, cannot succeed in politely requesting reforms, then I politely suggest that this is a rogue institution, one that desperately needs to be called to heel.
Goozner: Voting shares at the IMF and World Bank are based on contributions, where the developed world in general and the U.S. in particular have the largest share. In theory, the U.S. administration (perhaps under legislative guidance from Congress) could use its voice within the councils of both bodies for more openness. It has been encouraged to do that many times in "sense of the Congress" resolutions. And in recent years, the IMF and World Bank have substantially increased the public's access to final decisions and reports, if not internal deliberations (the subject of Stiglitz's most pointed criticisms). But openness and public accountability aren't the crucial issues. After all, we don't expect the loan committee at the local bank to hold public meetings. The real problem is both institutions' operating philosophy. They are still wedded to imposing macroeconomic stabilization policies on developing countries that have failed miserably. Stringent debt service rules, balanced budgets, stable currencies and open trade and capital regimes have destabilized far too many developing nations. And while there have been some minor mea culpas emanating from the IMF, some basic operating philosophies need revisiting in a systematic way.
Wysham: The local bank is not using taxpayer money in the name of poverty alleviation and sustainable development. It's a private institution. These institutions are public, but act indistinguishable, for the most part, from the private ones. How can we say openness and accountability aren't critical issues and expect corrupt third world governments to reform?
Meier: I like Stiglitz's report from the "inside." I'm not privy to how decisions are made at the IMF. The nature of policies to affect exchange rates and monetary policy are such that the lack of public announcements are necessary. All central banks proceed with caution on publicity and on negotiations with treasuries. The IMF, however, could be subject to more outside thinking. In fact, there is now a proposal before the executive directors to establish some outside auditing or review.