Seminar hosted during the World Social Forum, 2004, Mumbai, India
20th January, 5-8 pm

International Development Economics Associates (IDEAs) hosted a series of seminars around the theme of 'Resisting Imperialism' during the World Social Forum. This series was meant to draw attention to the problems faced by different sections of our society, and the wide range of impact that the current neo-liberal policies are having on our world today.

The chair for the session was Galip Yalman from Turkey. The speakers at this session discussed the situation in a wide range of countries. The panel included Jimi Adesina from Rhodes University, South Africa, Alejandro Bendana from the Centre for International Studies, Managua, Nicaragua, Remy Herrera from Maison des Sciences économiques de l'Université de Paris, France, Nirmal Chandra from the Indian Institute of Management, Kolkata, India, Todd Tucker from the Centre for Economic and Policy Research, Washington, USA and Jayati Ghosh from Jawaharlal Nehru University, New Delhi, India.

The theme for this last session hosted by IDEAs during the forum, was the increasing reduction in the role of the nation state. The reduced ability of governments in different countries to meet their basic responsibilities for the provision of the socio-economic rights of citizens is seen as a typical feature of imperialist globalisation in the age of finance. The objective of the seminar was to deconstruct the elements of this enfeeblement, in terms of the reduced ability to raise tax revenues, the fear of deficits, and the sale of valuable public assets to private agents. The discussion also intended to consider the implications of these on different groups in society, and especially on women in peasant and working class households. The intent was also to show how these patterns are the result of political choices by governments, rather than inexorable economic laws, and how they can be reversed with sufficient social and political pressure.

The first speaker, Jimi Adesina spoke about the African experience in the wake of following the neo-liberal policy regime. He argued that the policies had failed completely in Africa, which is reflected in many indicators of economic well-being. These include the debt crisis that Africa is facing, as well as the economic-and social dis-equilibrium that the continent has been also experiencing, The elements of neo liberal policies were directly responsible for this, he argued. He also mentioned the need to go beyond market-based economics, and an economy of self-interest driven individuals. This limitation imposed by mainstream economics, which was universally accepted, needed to be challenged.

The neo liberal policies for Africa were completely wrong and were fundamental to the African crisis. The indicators for the Balance of Payments situation, and the structural aspects of Africa's integration into the global economy show this very clearly. In 20 years between 1980 and 2000, the economic policies of many of the African economies were directly taken over by the international economic institutions and were subject to detailed macro-management dictated by the World Bank and the IMF, who operated as carriers of the new imperialism. World Bank-IMF data itself showed that national debts rose sharply between 1980 and 2000. A country specific look also confirmed this pattern with the situation in some countries standing out sharply, for example, Mozambique's national debt increased by 5 fold over this period. Even in Ghana and Uganda this pattern was repeated.

Another interesting trend was the growing dominance of external debt. For example, in Nigeria for which detailed data was available, the debt situation overall was quite stable over this period but external debt experienced a very high rate of growth. Of the external debt of 31.95 billion US dollars, 76.95% was termed as bilateral. Of this, 99.44% was owed to the 'Paris Club' countries. In addition, 88.35% of the amount owed to the Paris Club was made up of arrears, penalties or consolidated moratorium, but consisted of no new debt. Debt service payments also reflected the increasing control of the Paris club, with its share going up significantly even between 1998 and 2002. In fact, in debt payments made by most African countries, interest payments took up the major share.

Even for countries apparently successfully committed to the reform programme, the reality had been very harsh. For countries like Uganda and Mozambique, there were increasing and sharply growing deficits. The suppressed redressal mechanisms such as the 'Poverty Reduction Growth Facility' of the IMF, and HIPC initiative of debt forgiveness were grossly inadequate in helping these countries. For example, the HIPC initiative could not help these countries since it was conceptually weak.

Some countries like Tanzania, Senegal, Zambia would emerge from the HIPC debt relief process in the perverse position of three more countries in debt service payments rather than three less. Debt payments would continue to take away large chunks of national revenues - more than 15% in some, and more than 40% in countries like Zambia, Cameroons and Malawi. Many of these countries were as a result, experiencing increasing donor dependence, which was rising sharply over the recent period. In Uganda, for example, in 1999, 54.4% of central government expenditure was accounted for by debts, in 2000, this rose to 76.83%. When Ghana was hailed as a success story, 70-98% of its central government expenditure was financed by debt.

Neo-liberal policies have directly affected these countries in many ways. For one, these policies also emphasized 'democracy' but not 'rights'. Democracy without a guarantee of rights was completely inadequate in tackling key issues like poverty, food security, and employment. In Malawi, the speaker pointed out, there had been no famine under 25 years of dictatorship because the regime had ensured a large enough buffer stock of food. But, under the later regime of the neo-liberal policies, the dismantling of the buffer stock led to a large-scale food crisis. Then the solution provided was to buy food stock from the European Union.

Prof. Adesina ended his speech by criticizing the view of the developed countries that a non-market society was a pre-society. He also emphasized that 20 years of neo-liberal policy regime in Africa had converted what was a 'development crisis' into a 'development tragedy'.

The second speaker was Alejandro Bendana from Nicaragua. He concentrated on the Nicaraguan experience, pointing out that this had been the testing ground for ideological schemes- both strategic, geo-political and economic in which we find tendencies that may have been replicated later by the rest of the world..

He argued that in Nicaragua, the position of the national government was one of 'prostitution' and not 'rape' as the government was ideologically aligned to the Washington consensus and had therefore, agreed to the policies willingly.

In Nicaragua there has been, historically, a significant impact of the state, both under the period of dictatorship and even after the revolution when the state became quite expanded. However, given a high inflation of around 35%, the economy was characterized by low exports and there was a significant outflow of oil. At this stage, the state could no longer subsidize the economy. The scenario changed with the emergence of a new world economic order and a drastic shift in Nicaragua's economic policies.

The 1990s was a period marked by the disappearance of oil, and the absence of soviet support. This also marked the emergence of a new business elite. This is the time when the new government called for increasing participation from donor agencies and NGOs, and as part of a major policy shift, also turned over the public health programme to them, cutting all state aid to this sector. State tutelage of traditional sectors was also withdrawn.

The last phase of this tumultuous historical past of Nicaragua, which manifested in 1996-97, was characterized by a massive Balance of Payments deficit, and exports that amounted only to half of Nicaragua imports. This massive deficit was on account of high remittances in terms of dollars, and massive external foreign assistance (Nicaragua received highest per capita aid in 1998). In the face of contraction of the state, drug money could also now occupy and set up structures of its own.

But, the Nicaraguan government and the Washington Consensus did not admit that the policies pursued by them were a failure. The pointed towards corruption as the root cause behind this failure of the economy. So now Nicaragua was undergoing political reform in place of the earlier economic reforms. Now there are new laws regarding public utilities, state employees, civil society. This new 'enablement' of civil society or in other words, of NGOs, was to encourage investors.

The speaker pointed out that attempts to co-opt the civil society is a new development. The Poverty Reduction Growth Strategy Papers (PRSPs), that were apparently the new standards for international assistance, were part of this attempt. That is reflected by the fact that the PRSPs are not a local product, are written in English, come from the US and reflect foreign interests. The donor agencies are now using NGOs to pressurize their own governments.

The events of September 11 marked a shift in strategy. The US and other developed countries realized that the so-called 'failed states' may be new grounds that breed terrorism. So now here is external direct tutelage for projects since governments are deemed to be corrupt. This undermines the role of the state eve further. The principal fight now, the speaker pointed out, had to be against this new phenomenon.

The next two speakers, Remy Herrera and Nirmal Chandra, discussed the developments in Cuba, which has stood as a symbol of resistance to the powers of the West.

Remy Herrera started his speech by saying that the Cuban revolution proves that there is an alternative to capitalism that can reduce inequality and build a better society. This is despite the fact that life in Cuba is not perfect or that its revolution had flaws, which made it an unlikely candidate for a model but Cuba has surpassed these lacunae and shown the alternative path.

During 1959-89, Cuba has surpassed many Central American countries in social indicators with Soviet help but more so by applying its own socialist projects. In addition, its' achievements has been its own. The Cuban population is made up of Cubans and not of foreigners as in the US. This was made possible partly with the Soviet aid. However, after Soviet help disappeared, Cuba faced a major crisis, more than the Latin American countries. After 1980, Its GDP fell by 34%, productivity fell sharply, and its currency depreciated. This period was one of extreme hardship for all Cubans.

However this period was also distinguished by increased Cuban resistance. A special characteristic of this resistance was the upholding of the social system in the face of adversity. No schools were closed, no research project was cancelled, and no hospital was shut down. In fact, the component of social spending in the budget increased. Expenditure on food, housing, electricity and housing, all funded by the state at low costs, increased. This is spectacular because it runs directly contrary to the IMF suggested structural programme. This unabated emphasis on social spending was possible because of the political will that was coupled with massive support of the people for the state. The unification of political will with workers' participation has made this a reality.

However, there was an urgent need for a new set of macroeconomic policies. In determining its macroeconomic policy, the government sought to maintain the socialist core. So it adopted a set of reforms that were quite deep but which, at the same time, maintained a high degree of control on the economy. The most important of these was a partial dollarisation of the economy and allowing FDI, capital inflows and remittances. However, along with strict control of these new engines, intersectoral transfers were made to get maximum advantage of a dual system and foreign capital inflow was kept out of core areas like food and social infrastructure.

Remittances from abroad now became the new engine of growth after 1993. This dollarisation contributed significantly to a recovery that saw Cuba's GDP level rise up close to its 1980 level. Since 1994, Cuba's growth has been positive and rather fast. Cuba thus successfully ushered in a sharp and deep penetration of the market mechanism that is at the same time quite limited, much more so compared to Vietnam and China. This process also remains controllable and has been used well by the government as a necessary tool for growth without having to resort to capitalism. There is still no private accumulation, no salaried employment in Cuba and planning continues with more decentralization. Dollarisation is also reversible since there is no financial market in Cuba. The Cuban state has approximated to a welfare state. There is rising inequality because of the new policy but nobody has to starve.

At present, the political position of the Cuban government is that there is no solution in undertaking deeper liberalization. The speaker strongly agreed with this view since, he suggested, neo-liberalism is not a model of development but rather a model of underdevelopment.

Prof. Herrera ended his speech by emphasizing that the unilateral blockade imposed by the US on Cuba remains an act of terrorism, it represents a crime against women and children and a crime against humanity. It was therefore the duty of the people around the world to oppose this oppression, this act of terror that was perpetrated single handedly by the US.

The second speaker to talk on the Cuban experience was Nirmal Chandra. He focused on the lessons that one can draw from Cuba. He suggested that the cuba case also throws up important questions which any developing country may need to face.

The first of these was that was it possible for a country like Cuba, or any other country for that matter, to resist powers like the US, if faced with strong measures like a blockade? Second, the earlier model followed by Cuba between 1959-89, was flawed because of too much dependence on Soviet aid that helped labourers forget what the revolution had started with. But at present there is obviously no situation of crisis any more in Cuba, Third, the notion of a socialist economic system was important here. Was it to mean a complete denunciation of the market that Che Guevara had advocated at one time? Cuba had actually followed the more rigid Soviet model.

Cuba still does not represent ideal model of sustainable development. Cuban history shows major problems especially during the period of Soviet aided development. The Soviets contributed 12% of the GDP, and part of this was given in terms of excess payments on sugar exports to the Soviet Union since they offered higher prices. The rest of Soviet aid came in many other forms of concession. This however created several weaknesses within the economy. First, Cuba could increase levels of food and even capital stock, but without any increase in productivity. Second, it generated a monoculture where the sugar economy got the maximum attention and other sectors were neglected. Third, Cuba also placed excessive stress on oil intensive mechanization, which was to prove very costly later. Last, budgetary problems were covered because of the aid. Consumer goods were made available in ration shops and by 1990, per capital calorie consumption in Cuba was quite high.

However, this period was followed by the severe crash. GDP fell by 35%, and savings fell by 28%. Exports fell from 5.9 to 2.5 million US dollars while imports fell from 5 to 2 million US dollars. At a free-market dollar-peso rate, the per capita GDP was 2300 US dollars. However, since that rate is applicable only for a narrow range of goods being sold in the market sector, this undervalues Cuban per capita GDP. Cubans have access to state food and basic industrial products, and if this is incorporated, Cuba per capita GDP calculated by the UN Human Development Report comes out to be 5260 US dollars which actually was not too low.

However, Cuba had followed up new policies that imposed significant hardship on the population but still had widespread support. These were also discussed widely within the country before being implemented. As part of these new policies, subsidies were cut. Producer subsidies were cut significantly while subsidies towards charge for services or user fees were cut, though not to a very large extent. These still implied a significant reduction in income per person. Second, taxes were raised and even state enterprises were taxed once they started making profits. There was also partial capital market liberalization, which the earlier speaker had discussed. These showed that Cuba had the courage to correct its mistakes of the past and cope with the new situation.

However, Prof. Chandra pointed out that Cuba did have many problems to cope with even in the future. Cuba is an island economy, which was also dependent on imports. Its growth was very much circumscribed by an increase in exports. It had to increase domestic production for meeting domestic market needs as well as increase export alternatives.

Despite these pressures, Cuba had ensured that foreign investment did not exceed foreign income so that there was no fear of foreign capital taking over the economy. There was news that Cuba had some secret negotiations with IMF officials but since the latter suggested a change of policy, the government had rejected the deal. It had therefore managed to maintain its independence and guide its own development path.

The next speaker was Todd Tucker from the United States. He spoke of the Venezuelan experience where in some way, the first post neo liberal revolution had taken place. What has been going on in Venezuela has been about increasing civil society participation but it is also about honing in the rights and re-establishing the right of the state.

Venezuela, rich in oil, has always faced major oil related politics. Oil is a key natural resource that accounts for about 80 percent of Venezuela's total exports, roughly half of government revenues, and around 20 percent of GDP. It is also the fourth largest source of oil for the US market. There is no doubt that Venezuelan development has been closely linked to its oil industry. It is also a reason for the US's great interest in this country.

At the beginning of the century, this industry was nor very well controlled so US companies were free to go in and set up industries in this sector as oil exploration and extraction was leased out in the form of international oil concessions. There was little in the form of taxes or royalties accruing to the state. However, in the first part of the century, attempts were made by the Gomez dictatorship to regulate the industry. By 1943, most of the industry was under the tax and rent payment network. Domestically, by 1976, the industry was nationalized. The industry was expected to contribute more revenue and finance the spending priorities of the emerging developmentalist state. Over this period, the oil industry was also getting organized on a bigger scale internationally. Venezuela took a leading role in the establishment and development of OPEC.

Paradoxically, contrary to policy-makers' expectations and plans, the state oil company, PDVSA, reduced gradually its share in government revenues and the state lost much of its control over the industry. This happened because now PDVSA represented no longer a foreign but a national interest, and could argue its case for more concessions from the government with active support from the media and the political parties. It also used specific strategies to deny the government revenues. While Venezuelan oil exports rose, its governments debt increased.

The oil boom with its subsequent collapse, coupled with high social spending and structural and post-debt crisis made Venezuela adopt structural adjustment policies. The period between 1980 and 2000 was a period of severe contraction for the economy (by 18%). There was a major fall in national GDP. This period also experienced a great undermining of anti-imperialist development projects in the country. Within the economy, the structural adjustment policies followed by the new government were creating major unrest. Its policies, especially in the oil sector, met with severe protests. The new Perez-government imposed an IMF-mandated 100 percent price hike in downstream, domestic oil prices. Though it tried to limit the hike to only 30% for commuters, it could not control the full transfer of the impact to the population at large. This period saw the first IMF riots within Venezuela. A reluctant military guard was largely ineffective and 2 coups later Hugo Chavez was established as the new President of Venezuela as the leader of the political party Movimiento Quinta República (MVR, or Fifth Republic Movement), in 1998.

The Chavez government presented a unified front to oppose neo liberalism. Social spending has remained constant at 15% of the GDP despite a severe recession and includes spending on sectors like education, health, food and social security. The health programme has been extended to all Venezuelans. The Urban Land Committee handed over land to many. Tax avoidance has been strictly controlled. The government has conferred many more rights and social security to women including for domestic unpaid services.

It has also prevented privatization of many sectors, especially of key units like the PDVSA. In an important stride, the new Constitution has 'paved the way for greater civic participation in everyday affairs. Several states in Venezuela now make use of a Participatory Budget Committee, 51 percent of which is comprised of civil society representatives'. In addition, the strong left slant of the government has been reflected in trade talks, rejecting any new commitments and strongly opposing the Free Trade Area of the Americas (FTAA).

The external reaction to this process has been an imperialist one, pointed out the speaker. 'US policy towards the country has centered on securing a steady flow of oil -- by pushing for increased US corporate investment in the sector, and by cultivating a class of elite Venezuelans in both government and civil society'. To be able to continue doing this, and protect its massive economic interests in the country, the US has gone on the offensive. The number of US operatives, working through CIA, has been increased 3 times. There has been large-scale funding of the opposition by the US, and it continues to interfere directly in Venezuelan politics and economy. Now, a massive campaign has been launched to discredit and oust Chavez.

In the light of this massive offensive, the movement for anti-neo liberal policies led by Hugo Chavez needs international support, suggested the speaker. He strongly argued that international solidarity and help was a must if progressive forces were to succeed in Venezuela. Technical support was also needed to help to control capital flows.

As the last speaker of the session, Jayati Ghosh, who is also the Executive Secretary of IDEAs, did not discuss any particular country experience but rather focused the debate on the issue in question, i.e. the role of nation states in the face of new imperialism.

Specifically, she first raised the question as to why large states were particularly vulnerable to the machinations of the new imperialism and why this new imperialism was hostile to large states. This was a new development, she pointed out, since imperialism earlier was quite happy with large nation states and used them to its own advantage as in the case of Indonesia, Africa. Now the opposite had happened, alongside global keynesianism. Today's imperialism is also destroying the notion of the developmental state.

This was puzzling in the light of the counterproductive effects this process created. Large economies operating under underemployment conditions clearly gave rise to instability, terrorism and produced huge reserves of unemployed labour force.

There is a political economy behind this phenomenon, the speaker argued, a much deeper mechanism going on under capitalism. Here, she provided certain speculative, as she called it, explanations or ideas that she felt was behind this new process.

First, the economic position of nation states has been considerably weakened by open capital markets. The sheer mobility of international finance has put pressure on governments by reducing their ability to raise taxes and spend. This phenomenon has been largely behind the economic decline of the nation state.

Now, this automatically raises the question why finance capital is so important now, and so much more powerful. This has happened, the speaker argued, because peoples' interests at large are now much more linked to financial markets than ever witnessed before. The reduction of state protection in the form of pensions, unemployment benefits and social insurance has forced ordinary people into saving through market-based instruments. So pension funds, savings and many other forms of financial assets are now held by more of the population at large. Therefore, people care much more about what happens to financial markets. And this is more so because the state has been withdrawing. This has made finance, and global finance, very powerful in the modern world.

This becomes then something like the chicken and the egg story, with the state and international finance pushing each other, both acting as a cause and the effect on each other. Because the state withdraws, finance becomes more powerful, and because that happens, the state in turn is forced to follow deflationary policies and withdraw further. Therefore, it gets weakened even further.

In a world where deflationary policies are now ruling, people are forced to go along because individually people's interests are enmeshed with financial markets. Because of this large pressure working on the people, there is the tendency to think that there is no alternative.

In this scenario, deflation has reigned and the size of the aggregate pie has become much smaller. So now the struggle on the part of imperialist powers is one to ensure a larger part of that smaller pie. This has necessitated a search for newer markets, forced privatization of public services including even that of personal security. It has become imperative to also look for new technology and new sources of profits.

This is what the speaker described as 'the anarchy of capitalism' that leads to the impoverishment of the nation state. This also represents an undermining of democratic possibilities. Here the world economy is in a crisis, defined as a situation that cannot persist and has to be changed. This situation causes instabilities within the capitalist core as well as in the periphery.

Many get confused by the fact that the nation states themselves can be oppressive and anti-democratic. There is a need to recognise here the pressures that work beyond those within particular societies. The new imperialism has a definite role to play in shaping and building these tendencies to use to their own advantage. The speaker finished her speech by strongly arguing for an increase in the role of democratically accountable nation states. In a situation where the reduction in its role creates a situation of crisis, rebuilding the nation state becomes a survival project.

February 23, 2004.