An LDCinian Fairy Tale or How to Lose a Paradise

Once upon a time, there was a lovely little country far, far away called LDCinia. It was beautiful and full of touristic spots, verdant mountains, shady green valleys, wild flowers, untamed rivers and a meandering coastline, blessed with turquoise clear waters and talcum-white sandy beaches. The sea was rich with white fish, pearls and wild turtles; sweet mangoes and coconuts grew wild, while the sun shone generously on the Beach-Dwellers and less on the Mango People, who lived uphill. As the electricity cuts were frequent, more ”developed” means of entertainment were underdeveloped, the missionaries were influential, the population growth rate was high and, as someone had declared in a foreign language, poverty was rampant.

Despite this seemingly bounteous wealth, things were clearly not all well in LDCinia. In the absence of a reliable census, a foreign NGO staffed by misty-eyed and very kind blue eyed strangers reported that the Beach-Dwellers were having a much better time than the mango growers. Incomes were diverging. Typhoons were blowing with alarming frequency, earthquakes sometimes hit, killing far more Mango People than Beach-Dwellers, and “stop and go” cycles grew more frequent, so it was no longer possible to tell the difference between a bubble and a recovery. The triple crises multiplied and the Hysteresis effect set in some rather serious chronic vulnerabilities.

The plight of the LDCinians caught the attention of the distant tribe of SAPonians, who offered to help get things back to normal in exchange for LDCinian natural resources, cheap labour and rich lands, which would otherwise be wasted. While the forests were indeed luscious, the clever SAPonians realised that the root of the problem was that the law of the jungle was not being fully applied in poor LDCinia. The SAPonians generously offered free policy advice calling for more law of the jungle, explained it in simple terms referring to the free competition between the hare and the fox in colder climates, and rapidly filled in a template which would, magically, conjure an investment climate so inviting that the big corporations from all over the fair-skinned world would come to LDCinia and invest generously to help a paradigm shift from reproductive capacities to productive capacities. Take-off would soon follow, and the next stages of growth were but inevitable. In three hundred years or so, LDCinia would surely resemble the Midwest, or, at least, West Detroit. The LDCinians gladly took up the offer in the name of the Mango People. Of course the corporations would not have to pay any taxes to the government, since otherwise they would not come. Consequently, taxes were paid by the Mango People and the remainder was provided by ODA, but only if the government refrained from biting the hand that was feeding the Beach-Dwellers.

And so LDCinia grew more and more dependent on ODA and on the corporations. But over time, it became clear that only a very small minority of the beach growers were benefitting from the SAPonians advice to devalue their currency, liberalise, privatise and deregulate in exchange for loans and the distant promise of debt rebates in exchange for good behaviour. Easy money had flown into LDCinia and for a while, and it had seemed that things started to improve, at least at the top. The Beach-Dwellers strongly supported the SAPonians policies, because they could now afford Flat screen TVs, IPads, fast cars, foreign holidays and had even gained access to online gambling with their international credit cards, while the Mango People would surely come to benefit too, in due course. Fortunately, the missionaries were more successful instilling the virtues of patience. Of course, the big corporations did not care too much for mangoes or beaches, since they could always pick another spot next year, but they enjoyed the benefits of extracting precious minerals and reaped sound profits from the Free Trade Zones, which helped the promotion of those bright young things in the head office who had first spotted the new frontier, decamped to the new five-star hotel while it was still under construction, braved the local smells and bought the best tracts of land before local bribes rose to unsupportable levels. Surely democratic reforms in LDCinia would help to reduce transaction costs, thought the SAPonians and their local advisors. And their will was done.

In the meantime, the LDCinian current account deficit continued to rise, and a shift in external circumstances meant that the capital and financial account of their balance of payments was a bit on the low side, so the country was paralysed by a debt crisis. These crises had happened before, but now the LDCinian economy was fully open, and the corporations did not like it when they were told there was no money to send abroad, and the banks did not like it when they were told that LDCinia was broke and could not help pay the bonuses of young currency dealers based in distant lands. (This was so unfair, since the brokers were late paying the mortgages on their McMansions in Connecticut.) These tragic events showed that in a free market system hardship is blind, just like rain falls on everyone regardless of the propensity of their dwellings to be destroyed by the next mudslide. In fact, an economic model showed that, since the Mango People were statistically more frequent in the population, and had more children, it was simply fair that their share of misfortune should be higher too, and the rest could be explained by natural variations due to their stubborn, innate propensity to live in dangerous places.

Imminent Foreclosure of LDCinia 

After the debt crisis, things began to fall apart. One by one, the big corporations left LDCinia in search of lower wage frontiers and new bonuses elsewhere. Meanwhile, the LDCinian debt obligations stymied any possibility of recovery; the Mango People grew increasingly hungry, diseased, marginalised and desperate, but they could not voice their grievances in any of the official languages of the United Nations. Quickly the peoples of LDCinia lost faith in their government, run by the corrupt and greedy beach-dwellers who did not care for the Mango People. Instead, the Beach-Dwellers had made close alliances with the SAPonians and adopted their dress, drinks and way of life, including an obsessive regard for celebrity antics and tattoos written in funny languages. The beach-dwellers grew rich and tanned at the expense of the Mango People, who had stopped producing mangoes and, instead, dug themselves into the earth and dug out precious minerals that were used to pay for the Beach-Dwellers expensive habits. But despite the natural order of things, mother earth kept rebelling and frequent droughts, floods and tsunamis hit LDCinia, soaking the clothes of the Beach-Dwellers when their maids failed to collect them in time, as well as killing off the idle Mango People, yet this did not make the headlines at home or abroad. After the debt crisis, LDCinia even had to stop temporarily importing SAPonians food and flat-screen TVs, but a new government was soon elected and, with fresh external credits, it soon resolved these difficulties. Nevertheless, one crisis followed another so that it was no longer possible to tell which crisis was responsible for what misery and despair. Then one day, the LDCinians decided to kick out the SAPonians, since the only good thing they had brought them was the iPhone, which was nice, but their development policies had failed to deliver iPods, iPads and prosperity for all and guide the way to equitable and sustainable development.

When even the iPhones disappeared from the shops altogether, it was decided that the peoples of LDCinia would convene a public dialogue launched by the coordinating council, in order to mobilise their limited domestic resources and address their long term, externally-generated, structural and endemic vulnerabilities through a national development plan called the PISPs or Poverty Increase Strategy Papers. So they convened a big meeting and invited all the stakeholders, civil society, international experts from two Cambridges and from SOAS too, and even invited some SAPonians to the spanking-new Canadian-owned hotel at the beautiful (but very dangerous at night) beach that was to be the venue of the PISP consultations. The deliberations were held through the night; yet no agreed conclusions could be reached, there were too many groups fighting and the stalemate could not be resolved. It was decided to ask the UN to help resolve this quandary.

The UN, with its uniquely depleted core competencies in policy advice and technical assistance was called upon to help provide the missing iPods and iPads to all. The UN recommended the adoption of an integrated framework approach to deal with commodities, trade, customs clearance, port facilities, technology, finance, investment, exchange rates and capital flows (largely drawing upon somebody else’s expertise and financial support, since the UN itself was a bit skint). It offered a myriad of capacity building micro projects, especially in the area of gender and entrepreneurship to fill the gaping gap in development financing left by diminished state capacities following 30 years of SAPonians rule. It also recommended that the LDCinians immediately start to build up their capital goods sector and set up a lively intra-industry trade, for all to be well.

Despite these generous offerings the LDCinians were fascinated by the lure of South-South solutions, so they called upon the Confucians to help build their country through ancient wisdom and American dollars obtained in exchange for iPods and iPads. No shorter route to bliss could be found, and multitudes of Confucians soon descended upon LDCinia, much to the chagrin of the SAPonians who preferred to do things their own way.

LDCinian women were instantaneously attracted by the hardworking, wise and vivacious Confucians, regardless of their inability to say anything that the women could understand. But they were sweet and always brought cookies, and this seemed enough, at least for a while. Unfortunately, the Confucians had some nasty habits, like beating their women when they were drunk, which sadly reminded the women of their old partners. Nor was there much enthusiasm for a big development drive of the Confucian type. The Confucians it seemed, worked too hard, and had too little fun. Therefore, the East Asian model held little interest for LDCinia, and no matter how bad, it was deemed preferable to rely on external aid and traditional donors. The problem was that this aid was shrinking as their economies stopped growing and aid dried up. So what’s a country what to do?

Thus, LDCinia again found itself in a bind, having rejected the SAPonians and suffered repeated disappointments at the hands of the Confucians, who were just as interested in precious metals, timber and virgin land as their economic predecessors. They decided, then, to turn to the Samba People, who had rhythm and were fronted, first, by a sage statesman sporting a beard, and then by a woman who was said to be firm when firmness was required. Unfortunately the Samba People had little money and even less vision, and all they could come up with was the idea for some minor road works which they could fund in generous conditions and a couple of bikini shacks, which the Beach-Dwellers strongly supported because they were as pretty as they were revealing. Although they could give a marginal contribution to social harmony, the Samba People were clearly unfit for global leadership, and that same year they were denied, again, their dream of a permanent seat in the UN Security Council.

That left two alternatives, the People from the Tip of the Darkest Continent, which sounds far more ominous than it should, and the Gentle People From Below the Mightiest Mountains. But neither would serve the LDCinian in the way they expected; they would bring little money, create few jobs, mumble a few embarrassed words when asked for policy advice, and run for cover when challenged by the SAPonian Resident Commissioner, even though he lived off borrowed money while the newcomers had sound bank balances.

At the end of the day, the LDCinian preferred south-south based solutions, so they went back to the wise Confucians to help build their country through ancient wisdom and new Friendship bridges and railroads. Over time, the mango people and the beach dwellers grew further and further apart, especially in incomes and IPads, leading to a revolution and eventually a civil war. Then the mango peoples kicked out the beach dwellers and their SAPonians advisors. They looked for alternative development strategies, based on human rights AND IPads for all. They decided to upgrade their natural resources, increase value added domestically and hence tried to integrate into the global economy in other ways than trade. For example, they tried to participate in the more dynamic IPNs (international production networks) but that did not really work either as there was nothing to link up to other than cheap labour and land.

Over time, the LDCinians grew fatigued and disillusioned, leaving the running of the LDCinian economy in the able hands of the rich investors from Confucia, and went back to creative activities and cultural expressions in which they excelled. But like commodities, the big entertainment companies harvested the best fruits from the local pickings and appropriated most of the benefits. Yet even limited labour mobility did help to increase remittances, feed the hungriest and somehow get through another night. After all, tomorrow is another day.

Meanwhile, the UN was very busily preparing yet another international conference on the imminent LDCinian graduation, spearheaded by the earnest civil society, and soon to be celebrated by the entire international community. Consensus ruled that minor every day contradictions were not of importance. What was of importance was keeping one’s eyes on the prize.