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LIBRARY
INDIAN SOCIAL INSTITUTE
24, BENSON COAD,
BENSON I OWN
BANGALOKE 560 046.
05181
INTERNATIONAL CONFERENCE
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COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
Myriad Encounters: Christianity and
Colonia! Rule in South Asia
Dr. Rowena Robinson
Lecturer, Indian Institute of Technology, Mumbai
h'
Community Health Cell
Library and Documentation Unit
367, "Srinivasa Nilaya"
Jakkasandra 1st Main,
1st Block, Koramangala,
BANGALORE-560 034.
Phone : 5531518
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Myriad Encounters: Christianity and
Colonial Rule in South Asia
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Rowena Robinson
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I was asked to speak on the role of religion in the colonial process and in the freedom
struggle in south Asia. I shall be focusing on Christianity and colonial rule and while looking
at the role ot Christianity in the establishment and maintenance of colonial rule 1 shall also
highlight the role that the colonial state played in supporting or promoting mission activity
he two are clearly very closely linked with each other, though they do not completely merge
and an understanding ot the one requires some elucidation of the other. Both also feed into
our comprehension of the role played by 'native' Christians in the freedom struggle in south
here is another aspect to the role of religion in colonial India. This turns around the
theme of communal Hindu-Muslim politics and its articulation or disarticulation with the
movement for Ind.an mdependence and the part (arguably) played by the colonial rulers in
nur uring such divisions. I shall not be entering into a discussion of these issues here because
ey constitute a quite distinct field and, indeed, one that has been much traversed already.
Part 1 I he Cross and the Sword or Crossed Swords? : The Relationshin
between Christian Mission and Colonial Rule in South Asia
P
I would like to argue in my discussion of Christian evangelical activity that
di fcrences in the kinds of support that missionaries and mission efforts received from the
co oma state are related to deferences in the perception of the place of religionT ihe
co omal agenda. 1 his, again, has linkages with the modes of conversion that can be discerned
■n any parucular regime. For the Portuguese, who came to south Asia in the sixteenth century
re I8'00 w“ crucial in the construction of the colonial political community. Conversion to^he
religion o the rulers was the basis for the social, economic and political recognition oJ
gioup. Religion legitimated colonial rule: the conqueror claimed his victory in the name of
ill 1 bI.
I he mihtary forces of the state often intervened to punish villages and villagers for
he r resistance to conversion. The sword backed the cross in the missionary effort As^
n la and other places, so in Sri Lanka the Catholic church entered as part of the ideological
baggage of the invaders from Portugal. Sri Lankan Catholics speak of their ancestors having
been converted with a sword in one hand and the Bible in the other' (Stirrat 1992:14).
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In the ideology of later colonial regimes, such as the British, religion was not directlv
inked to state purpose. Indeed the state, at least initially, ostensibly tried to keen
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apart. When the link was made it was usually mediated by the themes of educating
,hc
Hence. typioa,ly. we see ,ha, s.a.e
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extended to missionary schools as, for example, those started in tribal areas of the north-east
or eastern-central India.
It is possible to find many indications, though, that missionaries and administrators —
however strange their association or uneven their relationship - required each other. As we
shall see later, in the case of the Santals in the mid-nineteenth century, it W'as noted by the
concerned authority that Santals who had attended the missionary schools were not among
those who participated in the Santal rebellion. Not really surprisingly, therefore, the
government decided to render support to missionary schools in the area.
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Indeed, fairly often, missionaries could provide solutions to difficulties and disputes
because of their position in the local society. They remained much closer to and in greater
contact with ground realities than the somewhat aloof and distant authorities.. In Sri Lanka,
for example, missionaries often settled local dissensions not just between Catholics but also
between Catholics and non-Catholics.
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In some places and at some moments, the associations between the colonial
constructions of the Other and the missionary constructions of indigenous society could
become quite clear. In Chhattisgarh, for example, echoes of the colonial rulers' powerfully
patronising idea that the natives were dependent children requiring authoritative guidance and
protection could be found in the missionaries' construction of them. •
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For south Asia, in general, it needs to be said that the popular conception that colonial
rule and Christian mission have always been inextricably linked, is for the most part,
reductive of the reality and, in some cases at least, is plainly untrue. Again, the idea that
conversion in this region largely embraced the lowest socio-economic groups or caste
categories is also very much a simplification of the actual intricate details of history.
Historically, the relationships between missionaries and mission activity and the
colonial state in south Asia have been complex. For instance, there is the difference between
those areas and periods in which the state directly took upon itself the task of evangelization
and those where it did not but where it may have, nevertheless, had a generally supportive
attitude towards mission activity. The first was more typical of the early conquests, such as
that by the Portuguese.
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Again, there is no guarantee that colonial authorities had a similar relationship with
every Christian denomination involved in missionary work. For example, as Webster
(1976:235) points out for the northwest part of the subcontinent, the Anglican church had a
umque relationship uith the British Raj, shared by no other denomination. The Anglican
church was the established Church in undivided India. Unlike the religious of other ' P.
denominations, Anglican bishops and chaplains were paid by the government and many of its
mission stations saw their beginnings due to the financial assistance of local committees of
British officials. These councils could also be absorbed into diocesan committees. For
instance, in Lahore and Lucknow, such committees, close to British officialdom, were also
assimilated into the diocesan committees, dominated by ecclesiastical members. This
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intimacy with the colonial powers may have had implications for the response of Anglicans to
the nationalist movement.
Whatever the case, a direct association between church and state can never be
assumed, though more enduring ties of race or ideology could always persist. At all times, not
just under the British but even, for instance, under the Portuguese, dissensions between
missionaries and the political authorities were possible. If missionaries could help in settling
disputes and channelling local complaints, they could also be seen as an unwanted hindrance.
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In Travancore, converts used to lodge complaints about grievances with the
missionaries of the London Missionary Society which was active in the area. They, in turn
passed them on to the British Resident for redressal. In this way an effective system was set
up tor the remedy of problems of communities, which would otherwise have found it very
difficult to negotiate the official procedures of the courts of justice. But the system did not
find favour w.th the government, which viewed the emergence of this alternative judicial
machinery as unacceptable and, finally, put an effective end to it (Kooiman 1989:145-46)
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In fact, officials of the East India Company generally regarded the missionaries with '
great suspicion, viewing them as holding radical political ideas and being capable of sedition
oreoyer, it was feared by them, as we shall see later, that the idol breaking inclinations of
ie early missionaries' who often deliberately indulged in evangelical activities in front of
temples and mosques could stir up hostility among the people and upset the rather delicate
balance of power, thus threatening commercial interests (Kooiman 1989:28).
A complex set of factors - political, socio-cultural, economic or whatever - would
determine the relationship between the two - official authorities and the church - at any
?oVuld
mOmenL F°r;nstance- for Goa h has been ^gued that political considerations
could soften he convers.on drive (Pearson 1987:122). In the 1590s given the aggressive and
violent proselytism that had been set in motion by the missionaries, the then Viceroy of Goa
wrote to the King of Portugal that while he agreed that all the temples in Portuguese India
should be destroyed, this could not be done in Diu for the traders would lea^ and the
flourishing commerce at the fort would come to a halt.
Th
Thena^OC,atlon was’ thus> changeable and fluid, rather than given from the start
There was fluidity to this connection for another reason: it was possible for particular officers
to adopt an attHudc towards missionary activity that differed from the government's officials '
position. Several officials in south India encouraged the missionaries even at a time when the
Company regarded their activities negatively. There are other examples, as we will note later
°f assistance given the missionaries by particular British officers.
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missio„Li^?;X“hZ"X
limhed5. "“ r
s'.,v'r"m“' °mcials an<i lhcir
on the Soc^^XinS"C',0nS■
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'«« often these contacts were
,°'™'dS reli8i°"
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Further, the salaries of missionaries were modest in comparison’ with those of
government servants. However, there are limits to which these differences should be stressed.
ano the missionary the one in his residency and the other in his often huge mission house
had very similar styles of life.
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Missionaries in colonial south Asia did have considerable access to British officials
I hey were members of committees, particularly those relating to education, and were pastors
C?ngregatl°nS' They often had personal friendships with British officers Such
'hem wi,h ,he B0Ver“' ™S
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In Sri Lanka the laity recognized the parallel between the Government Agents and the
Priests treat,ng them both with the same respect and honour. Indeed,
as Stirrat (1992:18)
argues, I he paternalisms of church and state ireinforced
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each other’. Thus, a situation was
produced in which the laity were represented and perceived themselves
-------- j as dependants, both in
the spiritual and political domains.
long tar
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inK> ,he reliei0"S
-<ler-ied-lh"" -h
eioht
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m°re waverin8- Company officials, even at the end of the
eighteenth century, were against the missionary effort arguing that if the country was ’
hXoend17' f W°U'd be m°re diff,cult t0 g°vem
might be more inclined to clainring its
independence from Britian. Others argued differently, viewing the propagation of Christianity
Britithgovernmem.
Pr°mOte rebelli°n
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Charles
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ComPany's Board of Directors and Member of Parliament
Charles Grant rejected the argument that Indians converted to Christianity would demand
th -r freedom rom the British. He held the opinion that religion would be a binding factor
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thC rUled' The SUCCeSS °f the conversi- efforts would secure rathe
than threaten the Empire and would serve commercial interests as well (Kooiman 1989-29-
d , ..,
this section, we should mention Ute case, to be analysed in more
detail later, of a Chnst.an community being established, which was not of low status and had
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no relationship with colonial rule at all. Christianity in south Asia has often been popularly
associated with British rule and with the process of westernization. But its appearance on the
Indian subcontinent preceded the British by several hundred years. Indeed, one might say that
Christianity in India is as old as the faith itself.
Historians agree that there was a Christian community in Kerala in the first century
A.D. Though the community maintained ties with Chaldea or Persia, it remained relatively
isolated from Western Christianity at least till the sixteenth century. Christianity in Kerala
was linked to west Asia, not western Europe. Again, unlike the Christianity of other periods
and places,it was also, interestingly enough, not linked with colonial rule af all, at least until
Portuguese entry and interference in the area in the sixteenth century. •
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Part II: 1 he Chronology of Conversion
ChnsUamty came to die Indian subcontinent from different parts of the world, at
ifferent historical moments and out of different motives and impulses. While discussing
Christian mission and its role in the colonial process, the differing patterns of conversion or
the support lent the missionaries by the state, one finds it very important to distinguish
between the British and pre-British periods and within both there are found to be further
distinctions. In fact there might also be areas of overlap. The French acquired Pondicherry
only m the latter part of the seventeenth century, but unlike the British East India Company
the state-controlled French East India Company included both commerce and propagation of
the faith among its aims. Hence, like the Portuguese, the missionaries could use the law and
military powers, for instance, to prohibit the performance of Muslim and Hindu religious
ceremonies.
I he earliest known Christian community is that of the Syrian Christians of Kerala .'i
1 heir legends and traditions attribute the origin of the community to the evangelical efforts of
St Thomas, who is believed to have arrived on the Malabar coast in A.D.52. The Syrian or •
ptomas Christians consider themselves to be the descendants of the high caste Nambudiri I’
Brahman converts of St Thomas (Visvanathan 1993; Neill 1984).
The Syrian Christians subvert all the popular notions about native Christians beine
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rOt !°W Cute C°nVerlS dependent °n the SUPPort of the missionaries and
colonial rulers. Far from being a low-status group who owe their origin to European
missionanes and the colonial state, the Syrian Christians have a long history of patronage
prestige and pnvilege, enjoyed under different regional rulers. Neither conquest nor
colonization is a part of Syrian Christian social history. According to their legends, St
Thomas travelled through the Malabar country evangelizing and laying the foundation for
churches. It was when he moved east that he is supposed to have met with death (and
subsequent martyrdom) at Mylapore, near Madras.
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While the tradition of St Thomas is part of Syrian Christian lore, it merges with yet
another extant Thomas tradition, that of the merchant Thomas of Cana. Thomas of Cana, it is
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said, came to the Malabar coast in A.D.345 bringing along with a number of Christians from
Jerusalem, Baghdad and Nineveh. It appears that some amount of mercantile and spiritual
integration took place between the indigenous and immigrant peoples, though they remained
separate and distinct endogamous groups (Visvanathan 1993).
St I homas is believed to have founded a number of south Indian churches. Among the
churches that he is supposed to have established are those at Palayur, Quilon. Kotamangalam
Paravur, N.ranom, Kokkamangalam and the site at Cranganur-Malankara. It. is not without
significance that these sites include both Kerala's most important pre-colonial export nuclei as
well as its localities that were serving-centres for internal trade and transport. For centuries
Syrian Christians have been associated with maritime trade and commerce in southern India.’
989)
3 h'St0r7 °f Warr'Or SerV'Ce and clientage under the region's ru’ers (Bayly
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a rare occurrence.. Political authonty was legitimated in a quite different way: by endowing
sacred sites in the area over
which one wished to establish one’s political control.
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It 1S through their skills as warriors, their talent for trade and their tradition of
rendering service as pepper brokers and revenue officers in the Malabar, for which honour
and social privileges were bestowed upon them by the regional rulers, that the patrilineal
prosperous Synan Christians established themselves as a high status group Within the
indigenous hierarchy (Bayly 19S9). ney negotiated their socio-political position through
alliance with the local rulers and maintained their status by adhering strictly to the norms of
purity-pollution prevalent in regional Hindu society.
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Our next major encounter with Christianity
comes in the sixteenth century. At that „
time, the Portuguese <came to south Asia bearing Catholicism. Trade, conquest ■ and
Christianization went hand
~-d In hand for them. the sword accompanied the cross in the search
or spices. Goa, which the Portuguese first gained control of in 1510, formed the centre of
eir overseas activities in Asia. The Portuguese viewed their empire as an commercial and
maritime one, cast in a military and ecclesiastical mould (Boxer 1969). Religion and trade
were indistinguishable. The king was aligned with the Papacy in what was known as the
Padroado form of jurisdiction (Ram 1991). A series of Papal Bulls passed between 1452 and
56 gave the king the authority to conquer, subdue and convert all pagan territories.
The Portuguese required certain key posts in order to control Asian trade routes. Goa
was one of the main ones, where political and military rule was established, but there were
timer trading bases along the southern coastal belt. To establish themselves successfully in
these areas the Portuguese needed the support of the local people. Since they defined
themselves in religious terms, their mode of incorporating local populations into their
political body involved converting them to their own religion. Mass conversions were linked
to the need to create social allies (Houtart and Lemercinier 1981).
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Thus conversions took place between 1527-49 among castes with fishing and boat
handling skills such as the Mukkuvars and the Paravas along the southern coast, where trade
and proselytization were carried on in the shelter of the forts. For both these groups,
Christianity became a means of strengthening their jati or community identity. The Paravas
also had a grip on the profitable pearl fishing industry. Unlike the Mukkuvars, therefore, who
even today have a precarious material existence, the Paravas developed considerably in terms
of economic strength and occupational diversification (Ram 1991).
Whatever the Portuguese interests in conversion, for the Mukkuvars and the Paravas
association with Christianity facilitated the marking out of corporate identity. For these
castes, involved in occupations considered low and ritually defiling, conversion served not to
climb up the status ladder but to heighten a sense of distinctiveness and difference from the
agrarian caste world. For the Parava pearl fishers, moreover, alliance with the Portuguese
yielded a range of economic and political benefits. The Portuguese sought to cream off easily
the returns of the pearl trade by patronizing and consolidating the authority of the Parava
caste leaders (Ram 1991; Bayly 1989).
It was in Goa, though, that the interlock of religion and politics, of the state and the
church, was uniquely manifest. The state actively espoused mission: successive viceroys
communicated the progress of conversion efforts to the king. Not all the missionaries were
Portuguese, but they functioned under and by the orders of Portugal’s king. The missionaries
could access state forces to destroy temples, quell resistance to conversion and punish the
defiant. The operation of such a regime made mass conversions, of both the high and low
castes, almost inevitable (Robinson 1993).
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What characterized the regime was an intolerance, of the substance if not the form, of
indigenous culture and religion. This was typified by the Inquisition, established in 1560 to
prevent recourse by the converts to non-Christian customs. Its range of prohibitions covered a
wide variety of socio-cultural practices. It was also evident in the interaction between
Portuguese missionaries and the Syrian Christians in south India, an interaction which
culminated in the not uncontested establishment of Portuguese ecclesiastical dominance by
the Synod of Diamper of 1599. The Synod's decrees aimed both at the correction and
systematization of the Syrians' rites and doctrines and the weeding out of Hindu ritual
influences (Visvahathan 1993).
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A system of disprivilege and constraints was central-to the strategy of conversion in
Goa. Jobs and offices were reserved for those who converted and were denied to those who
did not.
Places
of •■■■■worship and
sacred ..............
images were
systematically
destroyed
andH-'-S
the publicfe?
..—
-........
.... ............
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------------practice of Hinduism was prohibited. The upper, landed castes were threatened with the loss ■
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of their property if they did not convert. Artisans who had not converted could not be
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employed by the landowning patrons, or to produce objects of Christian worship (Robinson
1993).
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Hemmed in by such compulsions, few options were available to the people. Fleeing
from the territory or resisting with violence were among the more drastic responses to the
intrusive regime, chosen by some. The majority perhaps accepted conversion out of different
motives. For the upper castes, conversion meant alignment with the rulers and hence the
protection of their economic and social privileges.
1 or the low-ranking, there may have been the expectation of social mobility; for
ins ance, through movement into non-traditional, pollution-neutral occupations opened up by
the new admimstration. In many cases, though, it is likely that things worked differentlypatron-client relations were employed to bring about conversion. The village leaders were
converted and they in turn influenced the other caste groups, which were bound to them by
ties of socio-economic dependence (Robinson 1993).
Mass conversions, as is evident, perpetuated caste and, whatever the expectations of •
gain of the lower social groups, the church did not attempt to radically alter existing
hierarchies. Indeed, in Goa, conversion protected the privileges of the upper landed groups
ere, caste itself came to be largely dissociated from notions of purity and pollution but ’
remamed as an .d.om of social differentiation, marking status distinctions and the deference
patterns associated with them.
aererence
In Goa as in areas of Tamil Nad, rights and honours centred around temple festivals
were replaced by those around church feasts, over which the superior social groups retained
on ro.
i age churches played a role in articulating and maintaining local patterns of
hierarchy. Their rituals and celebrations were .
P
ms or
occasions for the demonstration of rank?
Altemative'y rank could be contested through conflicts over control of church’rifrtal’
M™Pj m “and Tamil Nad
complex and intncate and not unequivocal. Though the English East India Company engaged
c aplains for its own employees, merchants and soldiers, it was at first hostile to missionary
activity. This hostility stemmed from the fact that, as a commercial enterprise, the Company
ou d only hope to succeed by accommodation to the indigenous social imd cultural
tions, including religion. It feared that brash evangelical efforts on the part of the
m.ssionanes might give rise to violent reactions, creating political instability and threatening
vital commercial interests (Kooiman 1989).
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1 he early nineteenth century brought about a shift in policy. Pressure began to be put
on the British government by missionaries and returned civil servants such as Charles Grant
who argued that the propagation of Christianity, far from endangering British interests in
Imha would produce obedient citizens and strengthen the foundations of the empire. The
motifs of civilization and moral improvement woven into the missionary enterprise thus
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potentially facilitated the forging of links with the project of colonialism. This also recalls the
role played by religion in colonial rule in Sri Lanka.
The Company itself had not rigidly followed the practice of complete neutrality in
religious affairs in British India. Accommodation to indigenous religion meant that large
sums of money were donated for the maintenance of temples and priests and Company
officials attended the more important sacred celebrations with a view to manifesting their
respect for native traditions (Kooiman 1989; Oddie 1991). It was partly this participation by
Company servants in Hindu rituals that provoked the missionaries to complain to the
government. Following the shift of policy, then, the Charter Act of 1813 directed that
missionary efforts be permitted, if not actively supported.
The result was a fairly cautious attitude towards the missionaries. In the decades ’
which followed, their work began to be viewed with increasing favour, though at no point
was a nussionary-cum-imperialist drift completely dominant (Kooiman 1989). In the case of
conversions in the tribal areas of central, east and northeast India, there is clear evidence of
official patromzation of the missionaries. Conversion in the northeast had begun to advance
while the British were in the process of shedding the role of traders to assume that of rulers
I hough the Bnush first entered Assam in 1826 after signing the treaty of Yandaboo with the
ata IM2tS 9S0)SUmed "SP°nSibili,y for 'h'
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"fta Brahmaputra valley
Annexation brought the British into contact with the tribal people of the hilly regions
who they considered unpredictable, primitive and difficult to deal with (Natarajan 1977)’
Stories of the tribals with their wicked spears', adorned with the hair of the innocent persons
killed by them, spread (Eaton 1984:6). In the light of this dread, it was hoped that
missionaries, through evangelization and education, would be able to civilize and domesticate
the unmanageable tribes in a terrain hard to administer and govern directly. Hence the!support
tor the mission project.
donated for this purpose, particularly in the latter half of the nineteenth century. Churches ’
were also built with viceregal support and that of the administration
------ 1 and the local converts.
For instance, in 1854 the Governor General Lord Dalhousie
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acttvities of the I resbyterian Mission in the region. He gave instructiohs for a donation of
i.ty rupees a month towards the mission's educational work. Thirteen years later the grant '
was increased tenfold on the condition that the schools would be inspected annually by^a
person appointed by the mission with the government’s approval (Natarajan 1977).
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Attempts at conversion of the Santals by the Baptists had commenced during the first ’ '
a f of the nineteenth century and a few schools had been opened. The Santal rebellion of
.18 5-6 drew attention to the problems of the tribe and increased conversion efforts The
Butish comm.ss.oner at Bhagalpur noted that the Santals who had attended the mLsionlry
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At any time, individual officers with an interest in the reform and civilization could "
lX™”? c“X T m51 "Sz1 Hal
Oorr Ev“8dicai;
Chotaagpur to preach among the Oraons (Sahay 1986). Again/fc Zk o’fXTlhr of5
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patrOnizcd by CoIonel Balmain’ Commissioner ; ' ! •?! .'1^
h.m to Sc
DlvISI°n- The latter invited Lohr to work among the Satnamis, advised ‘ , •
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him secure a s.te for a mission station and informed him of a stretch of wasteland that
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up for auction in the area (Dube 1995).
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Kinod Evanrg"li71 ™ssi™es in Chhattisgarh described the converts as equal in the
Kingdom of God and invoked the principle of individual self-determination to assert the
converts religious freedom. But they also retamed a certain paternalistic attitude towards
certa
y WerC
Ch'ldren and h3d t0 be Cared for and discipHned as such In this Jd
c X.eri ed.hTZ8' ?' miSSiOnari'S PaniCipa'e<i b 'h'
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characterized the colonial constructton of the non-westem Other (Dube 1995) Within the
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f missl°naries did not have at their disposal the means to enforce conversion
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Particular benefits could, however, be had from association with them, which may have
served as incentives to convert. For the low castes, these included intercession wkh the
go ernment, protection against money-lenders or exploitation by the high castes and, perhaps
educational and employment opportunities. Mass conversions may then be viewed in part as
mov ments for movement in social and material conditions, but they were also moveme’nt
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for dignity and self-respect. It does not matter that the higher castes did not chTge
athtude to the converts or that, in the end, their situation did not significantly improve: the
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expectation o c ange would itself be a powerful catalyst (Forrester 1980; Oddie Y)T1)
Clearly rehgion played a role of some significance in the overall process !of '
nrod"^15"1’ ™h,ereVer We 100k- From creating a ^dy of social and political'allies 1 '
producing obedient citizens’ or educated persons to work at various levels in the ^
administration conversion and the spread of Christianity did much to aid the task of '
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where" rhOnf
Were dlfferences’ no doubt> and one must also not forget about casesH'
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where Christianity entered without any links with colonialism. In fact, as I have pointed out'
throughout th.s paper, the presence of associations between Christianity and cohnhlism
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could not be automatically assumed in any case. There were many mutations and variations
ever, as we have observed, there were also many similarities and correspondences.
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Part III: Christians and the Nationalist Movement
It is difficult to make a clear
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statement about the relationship between Christians and
the nationalist struggle. What is evident is that there was
-------- ....j no uniformity of response and no
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neat divisions. For instance, it might have been nice if we could argue that there was a distinct
relationship between denominational affiliation and participation in the freedom struggle.
Such a statement would, however, need to be seriously qualified. Some assertions could
perhaps be made. The nationalist movement certainly plunged many Indian Christians into a
certain crisis, of identity and of the potential loss of the protection of the regime in power.
Christians were everywhere more ambivalent about the freedom struggle. While the
elites of different communities were attempting to forge solidarities over and above the
distinctions of caste or religion in the'course of the nationalist movement, Christians were
always made aware of their separation and their 'foreigness* or alienness. They were often
accused of being 'de-nationalized'. With the turn of the century mass conversions to
Christianity, Christians were viewed as trying desperately to augment their numbers at the
cost of communal unity and service to the nation as a whole.
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It is true that Christians and other religious groups had been in competition with each
other. Conversion to Christianity was viewed as a threat by other communities. They often ;* ! • appealed to the government to curb the activities of missionaries, but this rarely achieved
results. The government tended to respond by defending individual liberties and pointing out
the expanded educational benefits made available and the like. In response to Christian <!
conversion efforts, groups began to enter the arena themselves through preaching, education, ’
shuddhi work and famine relief activities. This history of mutual distrust and competition U •;
rendered inter-communit} cooperation for the nationalist struggle difficult. The Christian
community in general, therefore, tended to proceed somewhat prudently on this front
(Webster 1976).
IP?
r
Even so, the signs of protest were visible. Christians objected to missionary'
domination in the church because they believed that this gave the church its alienness and
rendered it unattractive for Indians, who might otherwise have converted. It also isolated the
Christians from the rest of society. In the north, Anglicans such as Rudra and C.F. Andrews
called for the end of foreign rule in India. Rudra believed that Christ must be victorious in j
India without the mediation of Western civilization. Andrews felt that Christians should :
participate more fully in the freedom struggle and that the church should divest itself of its '
Western cultural baggage and notions of hierarchy. He sought to establish a link between the
idea of a great Indian church a. J a great Indian nation (Webster 1976).
.
H;
In Bengal, the Brahman Brahmobandhav Upadhyaya baptised into Anglicanism and,
not long after, rebaptised as a Roman Catholic was firmly committed to the aim of Swadeshi
and Indian Independence. Increasingly drawn by the nationalist movement, he felt the need to
identify himself socially with his Hindu brethren. He believed that once the foreign garb of
the Catholic faith was discarded, Indians would perceive its universal character. He saw the
i
Christian religion as relevant to the unrest of a struggling India (Bary 1958).
’
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Krishna .Mohan Banerjea and Lal Behari Day spoke out against the denominational :
divisions within Christianity and sought the equality of Indian Christians with the foreign I:
missionaries. With Rudra, Banerjea, Day and others, S.K. Dutta and K.T. Paul could be '
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spoken of as pioneers of Indian Christian nationalism. They sought to synthesize Christianity
with the best of Eastern and Western social traditions. While they appreciated the integrative
role of caste, they agreed that it had degenerated in recent times and proved a hindrance to the
nationalist movement. Again, while they felt that caste posed an obstacle to conversion, they
also cautioned against the replacing of caste with unrestrained individualism and ruthless
competition (Forrester 1980).
In south India other Christians such as Appasamy, Chakkarai and Chenchiah were
also outspoken critics of the Western spirit of the church. Added to these, men such as J.C.
Kumarappa and S.K. George plunged themselves enthusiastically into the Gandhian.
movement. Still others, such as P.O. Philip and V.S. Azariah, though they were more’’
theologically conservative, were fervent nationalists and supporters of indigenization
(I orrester 1980). In Goa, the movement for ending Portuguese domination was witness to the
rather visible and vocal participation of a number of highly placed Catholics. There was also a
distinct attempt to link the issue of Goa's freedom from Portuguese rule with the nationalist
struggle against the British.
Sri Lanka and even Burma got independence as a part and consequence of the larger
process of de-colonization and were not marked by struggles for freedom comparable to that
witnessed in India. But Christians in Sri Lanka also faced the charge of being creatures of
estem imperialism. Certainly, the church greeted the granting of independence in 1948 with
restraint. 1 he presence of the church was viewed as an awkward remnant of colonial rule and
the history of Sinhala-Catholic conflict on the island charts these controversies.
II
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Missionaries in general appear to have supported the Raj. Very few condemned it
openly and most viewed its coming to India as an act of divine providence. There were,
however, some signs of reconciliation. The most significant statement on the nationalist
movement by Indian and missionary leaders of the church was made at the Continuation
Committee of the World Missionary Conference in Allahabad in 1913. It said that:
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In view of the present isolation of Indian Christians from the Indian non-Christian
communities, we are of die opinion that every effort should be made to identify
ourselves with all that is good in the patriotic sentiments and aspirations of Indian
peoples (Webster 1976:246).
.
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Relatively speaking at least, different denominations were in structurally varying positions in
“'•i' “.'fc
their relationship to power. This might have determined the nature or extent of their
. I
engagement in the freedom struggle.
For instance, C.F.
Andrews, luiliovil
himself aa lllClHUVl
member VI
of that
,
K-z.i . ruiuivno,
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church, branded the Anglicans as 1'the least national of all the Christian denominations; ThisH
probably had much to do with the singular relationship of the Anglican Church with the
British Raj (Webster 1976).
■
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What is clear from the evidence available to us from the primary and, even more
extensively used, secondary sources is that everywhere it appears to have been the higher
caste, western-educated, urban (indeed, one might even say, urbane) elites who were involved
12
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in the freedom struggle and in redefining the role of Indian Christianity in the changing
circumstances.
I
Apart from some exceptional foreigners, the Indians prominent in the struggle tended
to be from the Brahman caste or the upper and middle-level non-Brahman castes. In some
cases, participation by elite non-Brahmans has been more enthusiastic than that by the
Brahmans: this is said to have been the case in Goa, where many Brahmans tended towards
political conservatism. But their participation cannot be denied, though the number of those
involved may have been few.
.
Total numerical strength was, in any case, slight. There do not seem to be any
indications of a mass interest in the freedom struggle among Christians. Goa is a special and a
later case, where some mass participation was visible. In general, the picture was otherwise.
The number of those committed was lamentably few. The charge of 'de-nationalization’ must
always be treated with caution, though, for some of the persons involved in the national
movement were deeply concerned about harmonizing Christianity with Indian culture andsociety and were thoroughly patriotic thinkers.
:
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Today, communal boundaries are sharply etched and the 'foreignness' of the origin of.
the Christians is often brought up by Hindu fundamentalists. The church, on the other hand, .
speaks of indigenization but, in practice, this often tends to be restricted to a fairly
circumspect tinkering with ritual forms (Angrosino 1994). The relationship between culture
and social action is not adequately theorized. Perhaps there is room here for a recollection and
recovery of the fuller dialogues of the past.
References
Angrosino, Michael V., 'The Culture Concept and the Mission of the Roman Catholic
Church', American Anthropologist, 96, 1994
Bayly, Susan, Saints, Goddesses and Kings, Cambridge University Press, Cambridge, 1989
Boxer, C.R., The Portuguese Seaborne Empire 1415-1825, Hutchinson, London, 1969
Dube, S., Paternalism and Freedom: The Evangelical Encounter in Colonial Chhattisgarh,
Central India1, Modern Asian Studies, 29, 1995
Forrester, Duncan B., Caste and Christianity, Curzon Press Ltd., London and Dublin and
Humanities Press Inc., Atlantic Highlands, New Jersey, 1980
Houtart, F. and G. Lemercinier, Genesis and Institutionalization of the Indian Catholicism,
University Catholique de Louvain, Louvain, 1981
Kooiman, Dick, Conversion and Social Equality in India, Manohar Publications, Delhi, 1989 t
. Misra, Bani Prasanna, 'The Spread of Christianity in North-East India: An Exchange Theory
of Conversion', in Sujata Miri, ed., Religion and Society ofNorth-East India, Vikas' ' [
Publishing House, Delhi, 1980
Mosse, C.D.F., Caste, Christianity and Hinduism: A Study of Social Organization and
Religion in Rural Ramnad', D.Phil thesis, University of Oxford, 1986
Natarajan, Nalini, The Missionary among the Khasis, Sterling Publishers, Delhi, 1977
■ siM
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I
I
; ■ ikl
1JL
Neill, Stephen, A History of Christianity in India: The Beginnings to AD 1707, Cambridge
University Press, Cambridge, 1984
6
Qddie. C "W;, and Christian in South-east India, Curzon Press, London, 1991
...... ’ 6 i’ Z 'l'0" 7
Re,‘8ious Conv^n and Revival Movements in South Asia
Medieval and Modern Times, Manohar Book Service, Delhi 1977
Pearson, M.N., 7he Portuguese in India, Cambridge University Press, Cambridge 1987
Ram, Kalpana Mukkuvar Women, Zed Books Limited, London and New Jersey8 1991
Robinson, R„ Some Neglected Aspects of the Coneetsion of Goa. A Soeio-liiJ
]
rtl
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ii
Perspective , Sociological Bulletin. 42(1-2), 1993
-I he Cross: Contestation and Transformation of a Religious Symbol in Southern Goa’
Economic and Political Weekly, 29(3), 1994
Sahoy, Keshari N. Chris,la„^
Culture Change i„ Mia, Imer.lndia Pub|ications> Delhi>
••I
1
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Sltn-at, R.L.. Power and Religiosity In a Post-Cokmlal Selling: Sinhala Cathdia in
Contemporary Sn Lanka, Cambridge University Press, Cambridge, 1992
ro,s
; ■' p :!.
ie Santals, Manohar
.'
WebsTr'j“’ b“Th'e n ^'r"' Ker‘‘'a’
1 ”3
The M ’ ft
Community and Change in Nineteenth Century North India i
I he Macmillan Company of India Limited, Delhi 1976
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INTERNATIONAL CONFERENCE
■ Vi
on
COLONIALISM and GLOBALIZATION
‘Bit V ;
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
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PATHWAYS OF POLITICAL LEADERSHIP IN
SOUTH ASIA: LIMITS AND POSSIBILITIES
i
by
I!
Prof. Mushirul Hasan
Ilf
Institute of Advanced Study
Berlin
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Pathways of Political Leadership in South Asia: Limits and Possiblities.
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Mushinil Hasan
Wissenschaftskolleg, Berlin
TIn recent months there has been much ranting and raving against politicians and political
parties Newspaper editorials condemn members of Parliament as a matter of routine/and echo
the demand to either chanye or modify' the existing democratic system
Althoutth there is
some substance in their critique, the wholesale condemnation of parties and politicians derives
from an inadequate understanding of the role of leadership in shaping the history of modern
India
It is not uncommon to reflect on the nationalist movement and the constraints of
leaders in co ping with the harsh realities of governance and nation-building Some point to the
failure to assure ’substantive’ democracy and equitable development for significant segments
of civil
society resulting
in
the discrediting and
delegitimization
of state-sponsored
nationalism (Jalal & Bose. 1097. 2) Others attribute the present-day 'crises’ to major political
actors, their lack of vision and their failure to accelerate socio-economic development
Increasingly, the absence of a strong and unified leadership is bemoaned, while Gandhi,
Jawaharlal Nehru, Vallabhbhai Patel, B R Ambedkar. Mohammad Ali Jinnah, Bandaranaike
and Mujibur Rahman are invoked to comment on declining public standards, weak institutions
•
and inept leadership ’The crisis of democracy in India today’, comments Rajeev Bhargava, a
political theorist, 'is undeniable
Many institutions associated with liberal democracy look
''
messv worn out and fraved at the edges' Some years ago. Atul Kohli talked of the 'crisis of
i ■
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governability' and located its roots mainly in political structures (Kohli 1990)
leadership, howsoever differently understood and interpreted, continues to mould public
opinion and. in some cases, influence decision-making processes Indian nationalism before
Independence, comments Sunil Khilnani, 'was plural at the top, a dhoti with endless folds Its
diversity was emblematically incarnated in the gallery of characters who constituted the
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I he faith m and the rising expectations from a 'stable' and 'powerful' leadership is
understandable in South Asia where the political and intellectual legacy of the nationalist
'
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nationalist pantheon, a pantheon whose unageing, cherub-like faces are still on display,
painted with garish affection on calendars and posters or moulded into just recognisable
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statues and figures, in tea-shops and at cross-roads across the country’ (Khilnani: 1997, 6)
! I
Indeed, it is increasingly clear that the Congress leadership represented a much wider
range of interests and
its
social
composition
and
political
aims were much
more
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heterogeneous than either the British or some historians dominated by the official mind have
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argued The limited repertoire of the early Congress was vastly enlarged with the coming of
the Mahatma
It soon developed into a mass party with a well-developed organisational
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structure starting with village and taluqa units at the bottom and then, in ascending order,
’. A
district provincial and all-India committees, each elected by the lower units From the time of
1
the Rowlatt Satvagraha in 1910. the Congress did not ask for dominion status but demanded,
as in 1921. complete independence
It did not seek concessions for only the elites, but
developed an agenda with national aspirations The Congress Ministry's from 1937 to 1939
adopt- d radical political and ecor -mic measures even at the risk of alienating its powerful
allies
Doubtless, policies and programmes were frequently diluted or tailored to meet
political exigencies but this was not unexpected in the case of a party that had no pretensions
of being rexolutionary or socialistic The critical issue is that the Congress, though plagued ‘
with internal contradictions, could build a consensual base for itself, a fact that has been
crucial for its own success as well that of Indian democracy It brought together a cross
*
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section of intellectuals, all of whom contributed in varying degrees to the formulation of its
agenda Thus, the socialists drafted the Fundamental Rights Resolution as well as the party's
1936 agrarian programme
The efforts of the Communist party resulted in the wider
!>
participation of the trade union, peasant and other organisations
I he unfinished agenda of the Ministry'^ was pursued after independence, though not
’’
without considerable internal squabbles within the Congress hierarchy. A democratic and
secular constitution, the hallmark of India's tryst with destiny, was adopted after Partition. •
Whether it was 'formal', 'substantive' or not (Jalal
. •j
1995). democracy bestowed an aura of
legitimacy on modern political life laws, rules and policies appeared justified when they were
democratic The leaders differed in intellectual outlook and leadership style, and yet they
shared a single vision of the system of rule that was to guide the new nation
It u'as a
parliamentary svstem. its leaders answerable to the people through elections (hart
1990, pp
18-9) In the early 1950s, Nehru was able to push through a number of significant measures.
11
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including the abolition of zaniindari in Uttar Pradesh Guided by his socialist vision, the state
took on itself the responsibility for transforming the economy Even more ambitious, it sought
to deliver new services-education, public health, sophisticated agricultural technology, co
operative marketing-to half a million villages The very structure of power in these isolated
communities was to be remade by reforms of land tenure and credit
(Hart
1990, 21)
Although the basic apparatus of governmental administration in independent India, as also the
basic structure of civil and criminal law, was inherited from the colonial period, a number of
significant changes were set in motion to transform society and
promote economic
development through what Rajni Kothari called the ’Congress system' (Kothari 1970)
There were many contested visions of nationhood and alternative frameworks for its
realisation But Nehru, the natural successor of Gandhi, was better placed and more suited to
cope with the changes ushered in by independence and the upheaval caused by Partition He
was the only one among his contemporaries to harness his intellectual energies and
commitments to lead a tnmcated nation through an extremely difficult phase of nation
building He was able to steer the Indian ship through the rough currents of history by keeping
regional, linguistic and religious/communal cleavage in check At first, his handling of the
language issues appears to be tentative, ineffective, overcautious and dilatory. But like
Arjuna, the central actor in the Bhagavadgita who fought through his vacillation and
indecision to lead his brothers to victory, Nehru emerged triumphant in India’s linguistic wars
(King 1997, p xv) Indeed, the reorganisation of states in 1955 along linguistic lines was a
masterstroke in the annals of modem political history In the opinion of a linguistic historian,
'if the first prime minister of India had been a linguistic naive rather than a linguistic
sophisticate like Nehru, then we should have today not a unified India with a strong
government at the centre but an India weakly divided along linguistic and cultural lines into
two or three semi-autonomous regions The unity of India would be as a faded dream' (King:
p xvi)
Nehru’s adversaries in the party's higher echelon did not approve of his sledgehammer
efforts to change the fabric of Hindu society, his lenient policy towards Pakistan, and his
undue tenderness for the Muslims But Nehru repudiated such criticism, as he had done time
and again Tor all of us in India’, he told the chief ministers in May 1950, 'the issue of
communal unity and a secular state must be made perfectly clear We have played about with
this idea sufficiently long and moved away from it far enough we must go back and go back
not secretly or apologetically, but openly and rather aggressively' He invoked the Congress
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record to legitimise its secular discourse after Partition In this context he pointedly referred
to the Mahatma's message of communal peace and his exemplary courage in extinguishing the
flames of religious hatred In so doing, Nehru tried to settle the issue whether the government
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and the party were going to adhere to 'old Congress principles in regard to communalism’ or
whether the country as a whole was going to drift away from them
Finallv, Nehru's greatest asset was his commitment to national unity He did not waver
in his belief that religious and class or caste strife must be fought tooth and nail no matter
what the cost or how daunting the opposition And his principal contribution, one that is so
often contested nowadays, was his blueprint of a nation that would not be burdened by the
colonial experience but surge ahead as a modem, liberal, rational and technologically
advanced societv In the words of his most distinguished biographer, Sarvepalli Gopal: ’To a
whole generation of Indians he was not so much a leader as a companion who expressed and
made clearer a particular view of the present and vision of the future' Not surprisingly, he
enjoyed widely perceived legitimacy When U N Dhebar was elected Congress president in
1954, he said quite clearly: ‘There is only one leader in India today and that is Pandit
Jawaharal Nehru Whether he carries the mantle of the Congress Presidentship or his
shoulders or not. ultimately, the whole country looks to him for support and guidance'.
Although some of Nehru's colleagues felt uneasy with his ideas and uncomfortable with his
missionary zeal, they could neither repudiate the nationalist legacy they had inherited nor
ignore the spirit that had guided the architects of the constitution After the death of
4
Vallabhbhai Patel in 1950, Nehru was virtually the sole arbiter of India's destiny
II
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The first decade of Nehru’s government stands in contrast to developments in neighbouring
Pakistan In 1947 India went on to consolidate itself as a democracy, the Constituent
Assembly adopted a constitution on 26 November 1949 which came into force on 26 January
1950 On the other hand, it took nine years for the Pakistan Constituent Assembly to agree to
a constitution that satisfied the requirements of being Islamic, federal and a parliamentary
democracy No national elections were held under the 1956 constitution, however Two years
later. Pakistan fell prev to militarv rule The Congress, a major catalyst for political and social
change, survived as a powerful organisation while the Muslim League, tom b\ dissent, lacking
an articulate agenda and an effective organisational structure, failed to institutionalise itself or
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provide the leadership essential for underwriting stability or democracy in Pakistan
The
ideological cement that held it together dissolved once Pakistan was achieved The Muslim
League, the pome casualty of Partition, declined afler Jinnah's death on 11 September 1948
(Barias 1995, 189. Ahmed 1996, 173-4)
The Congress leaders took the lead, howsoever grudgingly, in creating a democratic
and secular polity and accommodating diverse social and political forces in its own ranks But
the ruling classes in Pakistan, who had no clear blueprint or a shared vision of a modem
nation, failed to sustain the institutions inherited from the Raj
i
From the very beginning,
elected governments held power at the discretion of what Hamza Alavi has described as the
all-powerful 'military-bureaucratic oligarchy' In an area where religious passions had been
heightened during the previous decade to create a Muslim homeland, Mohammad Ali Jinnah's
belated plea for a secular society failed to strike a favourable chord The Jamaat-i Islam!, a
i
narty wedded to Islamic theocracy, was out in the open ready to seize power in order to
enforce the Shariat
The historian Ayesha Jalal begins her book (Jalal
1995) with an important
comparative question-why have the experiences of India, Pakistan and Bangladesh been so
different since their independence9 Various explanations already exist Some ascribe Indian
J
cemocracy to a developed political culture, viable institutions, dedicated elites, unique
organisational skills on the part of the Indians, a tradition of compromise and accommodation,
the success of the Congress in having institutionalised itself in state and society, and the
British role in having bequeathed 'tutelary democracy' to India Conversely, the breakdown of
democracy in Pakistan is attributed to a backward political culture, unseasoned or corrupt
leaders, ethnic and group friction's, weak institutions debilitated further by stresses arising
from the exigencies of nation building in a new state, and the incompatibility of Islam and
democracy (Barias
1995, 8)
The Marxists theorists are grounded in an analysis of the
colonial political economy, while the subaltern historians argue that Indian democracy was not
the outcome of a 'national-popular revolution' but a passive one carried out by the Gandhianled Congress that enabled the bourgeoisie to institute its hegemony over the subaltern groups,
but without a formal confrontation with them
What these theories sometimes ignore is how the difference in the social base,
ideological orientation and contrasting styles of leadership in India and Pakistan left their
imprint on (he course of events after independence There can be no doubt that the structures
and social composition of formal political parties mattered substantially, more so in post-
6
colonial societies But the striking contrast between India and Pakistan, as also between the
military rulers in West Pakistan and the Awami League leaders in East Pakistan (later
Bangladesh), was the charisma, popular appeal and moral authority of individual Congress
leaders and their extraordinary legitimacy in many parts of the country and among different
sections of society That is why even in so divided and fragmented a society as India, people
turned to Gandhi, Nehru and Ambedkar for inspiration, guidance and leadership and sought a
resolution of their dilemmas and predicaments in their policies ftnd pronouncements Unlike
Pakistan, Congress leaders in various states too, had a mass base and the experience and
resourcefulness to mobilise public opinion
The man who probably made the greatest difference of all was Mohandas Karamchand
Gandhi Although assassinated by a Hindu fanatic just when the country had tasted the fruits
of freedom, his legacy lived on in the hearts and the minds of people whom he had served
with such singular dedication True, his moral and political philosophy had severe limitations.
It is also true that he lost the magic touch after having led the civil disobedience campaign in
1930-32 His concern for the Dalits was genuine but their empowerment, which would have
caused a massive upper caste backlash, was not translated into any formal arrangement.
Likewise, his method of dealing with Muslims was based on mistaken suppositions
He
treated them as a distinct pan-Indian entity and not as differentiated cultural, linguistic and
economic units He spent years in the company of liberal and secular-minded Muslims without
being recepti\e to their modernist interpretation of Islam He regarded, quite wTonsdy, the
traditionalist view of Islam as the more authentic voice of India's Muslims
On balance, however. Gandhi's engagements developed out of his concern to
articulate the interests of different castes, communities and regions He was a devout Hindu
but not a Hindu leader The Hinduised symbols he deployed were designed to unite and not to
divide his constituency among the Hindus and Muslims alike He turned to legends and stories
from India s popular religious traditions, preferring their lessons to the supposed ones in
The fact that so many on the subcontinent found these fables accessible, and
history
recognised their predicaments and symbols, itself testified to a shared civilizational bond
(Khilnani
1920s
1997
165) No wonder, the pan-Islamic leader Mohamed Ali stated in the early
It is Gandhi. Gandhi. Gandhi that has got to be dinned into the people's ears, because
I
he means Hindu-Muslim unity, non-co-operation, dharma and Swaraf.
Gandhi s conception of state and society, with its emphasis on morality and non
violence, may not stand the scrutiny of contemporary analysts But there is no denying that he
I
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possessed a sharp and intuitive mind and had the ability to marshal his resources towards ends
clearly discerned and goals clearly defined He was an innovator and synthesiser of diverse
political and philosophical traditions He was therefore able to develop a political theory
grounded in the unique experiences and articulated in terms of the indigenous philosophical
vocabulary In the words of Nehru, ’he was like a powerful current of fresh air that made us
stretch ourselves and take deep breaths, like a beam of light that pierced the darkness and
removed the scales from our eyes He did not descend from the top; he seemed to emerge
from the millions of India'
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Jinnah's role, by contrast, should not be interpreted from the lofty heights of Indian
nationalism Nor should he be belittled for rejecting the Congress creed or singled out as the
’villain', the sole leader responsible for the vivisection of India. The nationalist rhetoric can no
longer obscure the role of certain key Congress and Hindu Mahasabha players in signing
united India's death warrant What is undeniable, however, is that Jinnah was quite out of
place in the Gandhian-led movements and quite out of tune with Nehru’s socialist rhetoric He
was a constitutionalist par excellence who relished debating, in the traditions of British
parliamentary democracy, finer points of law and legal processes He was comfortable in the
Home Rule Leagues and the cosy chambers of the Central Legislative Assembly where he
performed with his characteristic elan He stayed clear of the dusty roads, the villages
inhabited by millions of hungry, oppressed and physically emaciated peasants, as also the
i
British prisons where thousands of his countrymen were incarcerated for defying the colonial
government He enjoyed the trappings of power but was seemingly ill-equipped, at least until
the late-1930, to lead the masses from the front He aired his aversion to the mixing of
religion in politics during the Khilafat movement, but his real problem was to make sense of
Gandhi's political strategies One would have thought that the two men, sharing a Gujerati
background and educated in British legal schools, would have understood each other better
and created spaces for acting in unison on certain matters. In reality, they were far removed
from each other long before their acerbic exchanges started in the late-1930s In the end, their
'parting of ways' had far-reaching consequences on inter-community relations in the
subcontinent
f
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.linnah was not a devout Muslim
and torment the 'nationalists' who
were striving to project the image of a secular India united
in its mission to free the
fundamentalist
c„ ,
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read" "P°7-
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or a religious bigot waving the Islamic flag to tease
''m"’ Co10™11 rul=
Ye. he. more ,l,a„ .he religio™;,v among M„slims md
C'PO"n'le'1 "" ide" °r '
'"’d
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His
on ra.se premises, ho. ,h„
"
r ■
... linna.rs Z X X’’’'"’''"”
e® ee
“
**•
n!“i0"
»" «•*-
lhO“8h *
™ ««<• «»
-.......... ..........
jimc.ure in their histories For
«»ges.
„,e „nlv „„
h
r
Moshm p. “Xme™"' ,h<’“8''
" ""
’
compulsorv reading f„r ,he TOUna nri ,
"«
««"'™.edXv,„ogZZ’zxxa'd r ‘T" desi8"s'
... ..
"
68 SePara'e (les"nes aI a Cn.ical
■
•
easy
sp.i, peop,e ,nd
challenging task was to
erucj/e a nation on. of highly disparale and unesen.v deve.oped edmm.mi.ies
.
was
.he rea. . TT
ea>
“ 'he Ceme"'i"S' bO"d ”
h'i«hl »f"" Pa''-<a"
a. hand for ,he „eu. nilers was ,o
con,end,ng rdenrh.es
movement, but
conflicting interests and
„,rraMd „„„
ursen.ly required was .he laying down or cenain ground
divorced l-rom ihg rhetoric of lhe
in Pakistan It.
new nation Indeed, what was
rules for building a state system
a system that would be flexible enough to
accommodate a wide variety of interests in
the bureaucratic and institutional structures
The creation of such
■' a system and its long-term effectiveness
depended on
.
on the
the canacitv
capacity of
of tho
the elites to j- ,
drsfance themselves from the theologians, devise an
economic strategy to curb the
power of the landowning place nnj
i
.
g c ass, and evolve mechanisms to
inherited from the Raj
t
<)
dilfuse mounting lintiuislic, sectarian and 'ethnic' tensions
In other words, instead of
attempting to homogenise Pakistan society on the basis of ill-founded theories, the need of the
hour so to speak was to lav bare the outlines of a pluralist society That was one way of
meetinu the various demands of the Bengalis in East Pakistan, the Baluchs and Pathans in the
North-West Frontier, the Sindhis in Sind and the nuihajirs in Karachi, capital of the same
1
province
Sadly, the rulers of Pakistan had no intellectual resources to draw upon, no cadres to
translate their nebulous plans into action As the historian D A Low notes, in spite of the
'commitment and enthusiasm which the movement for Pakistan generated, it left little of any
substantial political value behind which the post-Jinnah political leadership could rely for
support' (Low 1991, 6) The ailing and beleaguered founder of Pakistan had neither the time
nor the intellectual reserves to define his long-term agenda He led, organised and conducted
powerful mobilisation campaigns under the aegis of the Muslim League, but he made no
attempt to deepen his popular support on the strength of any clear-cut economic programme
In fact, as Nehru noted in 1938 Jinnah did not show much interest in 'the economic demands
of the masses [and the] all important question of poverty and unemployment'
Efforts to mobilise the peasants brought some rewards., though without producing the
i
same type of changes as had occurred in the Congress after its involvement in the kisan
I
movements in the early 1920s (Barias, 182) Similarly, even feeble attempts to propose
democratic reforms and economic policies were thwarted by the Muslim League leadership
In a nutshell, the broad strategy, one that paid off for the time being but was
counterproductive in the long run, was to take cognisance of the sensibilities of powerful and
influential social classes, stifle internal debate and gloss over class contradictions New ideas
1
breaking out among fiery young idealists, in spite of being confined to only a few, were
prompt I v nipped in the bid (Hasan 1997, 81)
IV
Given the historical role of individual Congress and Muslim League leaders in their respective
spheres and the contrasting legacies of the two parties, Pakistan would have probably plotted
a predictable course with or without Jinnah and his party Its fate or destiny was not,
however, predetermined Nor was its survival as a national entity at stake The more pressing
is.Aie was the readiness of Pakistan's ruling classes to negotiate the terms of a post-1947
10
contract with those groups who had migrated to their newly-discovered homeland in search of
better opportunities
Given the ideological
underpinnings of Muslim nationalism
and
i
t
Pakistan's ra.son d'etre, this arrangement was, ideally speaking, workable and desirable. But
the dynamics of power politics belied the expectations raised by the Pakistan movement The
powerful landlords in Sind and Punjab, having helped the Oaid realise the dream of a Muslim
homeland, showed no inclination to share power with the competing elites or agree to the
redtstribution of land There was no Nehru or his socialist comrades to push through land
reforms
Similarly, the nascent bourgeoisie, drawn mainly from the migrant entrepreneurs
belonging to the ethnic minorities (Memons, Khojas and Brahmans), had no interest in
democracy Rather, it relied on the authoritarian state structures to expand and consolidate its
position (Ahmed
!
1995. 175-6) Finally, the .dattta, acting in unison with the military and
bureaucratic establishment, could not be reined in by a leadership that had catapulted them
into prominence No wonder, the ideal of an Islamic state and society, consummated years
'i
later during the inglorious regime of Ziaul Haq, was thoughtlessly pursued soon after the
creation of Pakistan The contestation between the 'modernist' and 'traditionalist' world-views
imposed severe strains on a nation that was still trying to traverse a rough terrain after the
untimely death of its founder
11
\’
ir.be Cndhi.n and Nehn>™„ legacies are
.he Congress pilr,v „„ich
from
ed ,„day. rhe responsibililv reals prinrarilv
$
abdrea.ed .Is historic rale when the Bahn masjid was deslroyed on 6 necember 1992 II has
since failed ,o harness i,s own ideological resources Io mobilise the minorities, the backward
cades and rhe Dalils The leadership, despile i,s rhetoric, is fragmenled. berefi of new ideas
and dl-enuipped ,o cope whh rhe changing p„,i,iea| landscape
Slowly but steadily. ,he
Congress has Ins, ,he initialise in areas where it enjoyed power and l.girim.e, r„. decades
The elecrion results may hare a few surprises in store, ye. Ibc marginalisation of a
I
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national pans mac
be ideally compatible with ,he country’s s.rong secular and democratic '
tradilions For one the need of Ute hour is ,he reciyal of the Congress in its traditional
s.ronghohls and a more enduring realignment of liberal and left elements Io thwart il,e ami-
liberal and non-secular ideologies
1
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India's liistorv. Sunil Khilnani points out, has shown two broad possibilities of dealing
with diversities a pluralist or an exclusivist approach The voters have the responsibility to
choose between them They must decide what they wish to build out of the wreckage at
Ayodhya's Fiabri Masjid But, first, they must understand the significance and consequences of
the Gandhian and the Nehruvian legacies, as also the post-cojonial predicaments of creating a
secular polity and society
.
INTERNATIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
1r
ll :
t
THE PROCESSES OF GLOBALIZATION IN
BANGLADESH
DR. M. BADIUL ALAM
Professor of Political Science
University of Chittagong
Chittagong, Bangladesh
I
f
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t
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rhe Processes of Globalization in Bangladesh
Dr. M. Badiul Alam
Professor of Political Science
University of Chittagong
Chittagong, Bangladesh
e
I
Globalization: Meanings, Trends and Challenges
Since the collapse of the Soviet Union and disintegration of the bipolar cold war, there have,
been significant changes in the international, system and dramatic change in the global situation,
fhe international system is now more open, more interdependent and definitely less Eurocentric.
Multiculturalism, multiple identities and anti- foundationalism have become fashionable themes,
not only in academic discourse, but in international politics.1 The experience of two horrible world
wars and the growing global complex ’'interdependence" in virtually all spheres of social, political,
economic and cultural life have dramatically changed the basic characteristics of the international
system. The bipolar world has been transformed into a unipolar world under the domination of the
United States which embraces within its fold all facets of human life all over the world. Thus the
trend indicates clearly that globalization is both unavoidable and inevitable no matter how
forcefully isolationist feelings and attitudes influence the politics oi some states.2
The present trend is to create a new international system - a "New World Order". The
demise of the bipolar system in Europe only accelerated and strengthened this development. The
collapse of the communist regimes and of many repressive military dictatorships in Latin America
and Asia, combined with the crisis of the welfare state in the North and of state-promoted
development in the South, has given rise to a much more open and complex political environment?
Given the global interconnectedness of contemporary civilization, the prevailing movement
toward poverty, ecological imbalance and exclusion can not be reversed by actions taken only at the
local and national level..4 These problems need to be addressed and solved globally.
Regional coalitions and sectoral networks have recently been formed in many parts of the
globe to address specific themes and concerns such as international economic integration; human
Martin Palons, ’’Democracy and dynamics of Globalization”, Democracy is a discussion
Handbook (New London: Connecticut College Connecticut,. USA,. 1997),
p.36.
?Tbid.
’Miguel Darcy de Oliveira and Rajesh Tandon, "An Emerging Global civil Society" in Ibid, p.43
‘Ibid.
1
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rights; adult nonformal and popular education; the rights of women, children, and indigenous
Cooperation), ASLAN (Association of South-East Asian Nations), NAFTA (North American Free
Counmh TrcVi'’’ RCD Z^810”31 CooPeration
Development). GCC (Gulf Cooperation
Conned), EEC (European Economic Community), APEC (Asia-Pacific, Economic Cooperation)
Econom.c Cooperation Organization (ECO).5 They are making attempts in resoMng their
problems mutua ly and regn tlly and fostermg the goal of economic integration internationally
Networking has become the key word for the emerging global civil society.
The global networking and advocacy efforts of NGOs (Non-Govemment Organizations) to
evem^'1 Tt
T
and1Ol,tCOmC '’rm3j°r lJN g'obal conferences have produced some landmark
events^ lhe most comprehenstve and best planned of these processes was developed in preparation
for and during Rio Global Forum and Earth Summit in June 1992. Similar mobilization drives were
carried out for the Vienna Human Rights conference and the Cairo population and Development
conference, and were implemented in 1995 for the world Summit on Social Development in
Copenhagen and the Beijing Women's conference held in 1996.
of the nurke^The
"'‘T*5 * als° °CCUrrin£ in relation to the institutions
o om ss n t ,
Ly0" Synim1' Com'numque emphatically declared that economic growth and
proMuss m todays mterdependent world is bound up with the process of globalization
Globalization provides great opportunities for the future, not only for the developed countries but
trade
h’T t0°'
"K‘ny P°Slt'Ve
'nClude “ dnPrecedenleci expansion of investment L
trade (vGnch aims at promoting strong and mutually beneficial growth of trade and investment) the
opening up to mternat.onal trade of the world's most populous regions and opportu^ties fm mom
developing countries to improve their standards of living; the increasingly rapid dissemination of
information; technological mnovation and the proliferation of skilled jobs. Thus the main spirit of
g obahzation is to serve the interest of people, ensure their jobs and enhance their quality of life.
The growing international economic interdependence requires increased international
cooperation, adaptation of international institutional structures, liberalization of markets fair rules
aiKl sound economic policies for prudential regulation and supervision in the financial markets
These are the essential elements which will contribute to investment, growth and job creation on
the one hand reducing external imbalances and bringing down unemployment on the other thereby
preserving the stability of the international monetary and financial system and maintaining the
conditions for harmonious growth in global trade and business.
I
The international financial institutions created at the Bretton Woods conference -the World
T
5 Economic Cooperation Organization (ECO), a central Asian trading bloc was
expanded in 1992
to include six former Soviet republics.
‘The Heads of State and Government of Seven and major industrialized democracies and the
1 restdent of the European commission, met in Lyon for 22nd Annual Summit. They discussed
matters re atmg to economic globalization for the benefit of all. The Lyon Summit Communique
was issued at Lyon, France in June 28, 1996.
2
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Bank and the IMF - can play important role in shaping the new global economy. They will need tp .
continue providing guidance and assistance to developing and transitional countries seeking to
reform their economies and follow a market-led strategy of development. They also will become
increasingly involved in assisting environmentally sustainable development, alleviating poverty,
promoting good governance, and encouraging private capital flows. From an institutional stand
point, the World Trade Organization (WTO) created by the Uruguay Round and Organization for
Economic Cooperation and Development (OECD) are. the important accomplishments for ,
international economic integration.
Challenges of Globalization
Globalization poses challenges to societies and economies. Its benefits will not materialize
unless countries adjust to increased competition. In the poorer countries, it may accentuate
inequality and certain posts of the world could become marginalized. Globalization of the financial
markets can generate new risks of instability, which requires all countries to pursue sound
economic policies and structural reform. Better prudential regulation and supervision in the
financial markets are essential elements in promoting the stability of the international monetary and
financial system. Cooperation among regulatory and supervisory authorities should continue to
adapt to financial innovations, and to the growth in cross-border capital movements and
internationally active financial institutions.
Globalization is also creating new challenges in the field of tax policy. Tax schemes aimed
at attracting financial and other geographically mobile activities can create harmful tax competition
between states, carrying risks of distorting trade and investment and could lead to the erosion of
national tax bases.
from all these discussions it is clear that there are strong arguments in favour of
globalization. At the same time it poses formidable challenges too. Evidently, the success of
globalization is contingent upon the containment of these challenges. With these ideas about
globalization let us see how the processes of globalization started in Bangladesh and what are its
implications on the Bangladesh society and economy.
The Case of Bangladesh
The Mujib Regime (1972-1975)
Bangladesh achieved independence from the internal colonialism of Pakistan in 1971
through a bloody revolution. She inherited a capitalist economy from erstwhile Pakistan. Soon
after the liberation, the Awami League (AL) government *led by Sheikh Mujibur Rahman
abandoned the policy of capitalist economy which was held responsible for economic exploitation
of the Bengalis in the former East Pakistan and adopted a policy of socialist economy in pursuance
of the one of the Four Principles of state policy.7 It envisaged a society in which rule of law,
7 The constitution of the People’s Republic of Bangladesh enacted in 1972 proclaimed four
principles of State policy such as, nationalism, socialism, democracy and secularism. For details
3
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fundamental human rights and freedom, equality and justice-political, economic and social would
be secured for all the citizens. It further envisaged that the Republic would be a democracy in
which fundamental human rights and freedom and respect for the dignity and worth of the human
person shall be guaranteed, and in which effective participation by the people through their elective
representatives in administration at all levels would be ensured.8
This attempt of the Awami League government seemed to be a serious contradiction as far
as the blending of socialist principles with democratic ideals was concerned. If we look at this
issue from the stand-point that socialism implies "state ownership of the means of production" and
democracy means "granting of fundamental rights like freedom of movement, freedom of assembly,
speech, expression, press and above all, freedom of private ownership" the attempt seemed to be a
contradictory' one. But if socialism implies "equitable distribution of wealth or the sharing of
economic benefits equally by all the citizens of the country" and democracy-means enjoyment of
civil liberties; Awami League's effort to reconcile socialism (equality) with democracy (liberty) was
not contradictory. It was however, not the problem of meaning of socialism and democracy rather it
was the problem of AL government's honesty of purpose and commitment for policy
implementation. That the government lacked sincerity, honesty and commitment was crystal clear
from its misperformance in economic and political spheres of the country.
The AL government, soon after the liberation, hastily took ovc. the control and management
of all industrial and commercial concerns left by the west Pakistani entrepreneurs and also
operation of bank accounts of them by promulgating Bangladesh Abandoned property (control,
management and disposal) order, 1972.
But the implementation of this law had a serious
corroding effect on the socio-economic life of the country. It provided a scope for massive loot and
plunder of these abandoned properties mainly by the AL proteges under a legal cover. No matter the
West Pakistani entrepreneurs left the country or not, their properties were randomly taken over as
abandoned by the leaders and workers of the ruling AL government and under their patronage,
some government functionaries also managed to share the booty.
Besides, the members of Management Boards, Administrators, Managers and persons
appointed by the government to control and administer the different classes of abandoned
properties (Textile Mills and Factories) were mostly inexperienced and unskilled men drawing from
AL party members and workers or the officers enjoying their patronage. The result was tremendous
chaos, rampant corruption, large scale mismanagement and widespread plunder and the production
obviously plummeted. It was also reported that the Management Boards sometimes smuggled out
the machineries and new materials with handsome amount of money. Soon most of the industries
and other units either went into the red or closed down or sold out.10
The promulgation of 'Abandoned Property Order' was soon followed by the enactment of
see. The constitution of the People's Republic of Bangladesh (Dhaka: Ministry of Law and
parliamentary Affairs, Government of Bangladesh, 1972) Articles 8-12.
g Ibid, Article 1 1, p.5.
9M. Ahmed, Bangladesh: Era of Sheikh Mujibur Rahman (Dhaka, 1983), pp.12-19.
10 Ibid, p.19
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laws for nationalization of Jute, Textile and sugar Industries and the Banks and Insurance
companies for establishing socialist economic order in the country. Unfortunately, the abrupt and
hasty nationalization policy of the government brought failure for the AL and miseries to the nation
for a number of reasons. First, the AL as a political party had no ideological commitment and no
socialist orientation. It had no cadre who could carry out its policy to success; second, Mujib's inner
contradiction between public morality and private life and between public commitment and private
belief and habits had made the establishment of a socialist order all the more difficult; third, the
Bengali owners of these industries had no experience, skill and even interest in developing them.
For a while, nationalization took the form of expropriation by the gunboats of the ruling party. The
result was that the production went down, the volume of black money not only increased but also
multiplied and a soaring inflation affected every sphere of the economic life. The performance of
the government was undoubtedly poor and the behaviour of the AL party and members did not
match the ideology they preached.1
This, in brief, was the scenario of AL regime which was eventually become isolated from
the masses and amidst mass discontentment it was overthrown by a coup de'tat in August 1975. The
entire period of AL regime was the period of economic mismanagement of the government. They
failed to evaluate the prevailing situations, domestic and international, and take appropriate policydecision. There was no scope for private investment or privatization under the so-called socialist
policy of the government for which the economic situation lost its momentum and became stagnant.
Though historically Bangladesh inherited capitalist or privatization policy which was very akin to
international market economy, the AL government could not realize the reality of this situation and
did blunder in making a swift shift from capitalist to socialist economy.
’ ’
1
The Zia Regime (1976-1981)
ii)
General Ziaur Rahman assumed political power as chief Martial Law Administrator
(CMLA) on November 30, 1976 and subsequently as president of the People's Republic of
Bangladesh on April 21, 1977. He carefully evaluated the prevailing socio-economic and political
situation of the country and cautiously overviewed the reasons for the fall of Mujib regime. He
readily identified three main causes: first, shift from privatization policy to state-controlled
nationalization policy; second, rampant corruption through politicization and family patronage; and
third, abolishment of parliamentary democratic system and establishment of a single party
presidential rule of the Bangladesh Krishak Sramik Awami League (BAKSAL).12 So he make
necessary amendment of the "Forth Amendment" in the Fifth constitutional Amendment in which
the principle of socialism was replaced by the incorporation of the principle of economic and social
11 Ibid, p.26
12 Sheikh Mujibur Rahman abandoned parliamentary system of government and introduced oneparty presidential system on 25 January 1975. For this purpose, he made a constitutional
amendment (Fourth Amendment) giving no scope for discussion about it in the Parliament (Jatiya
Sangsad). I he authoritarian move of Sheikh Mujib was severely condemned by every quarter of the'
country. For details, see, Constitutions of Bangladesh, Appendix IV, The Constitution (Fourth
I
5
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V,
justice.13 He also made constitutional amendment which provided for a multi-party system with an
overpowering emphasis on the Presidency.14 Thus, Zia removed serious contradiction of Mujib
regime( blending of socialism with democracy) ’ and brought uniformity in the fundamental
principles of state policy( blending of privatization policy with democracy).
Zia expressed strong pledge to work for the socio-economic development and
modernization of the country. He brought into consideration the prevailing domestic and
international situations while 1formulating his development policy and strategy. He expressed his
determination to make Bangladesh "Swanirvar" or self- reliant and to this end, adopted pragmatic
policies and strategies of development. These included encouragement of private enterprise,
emphasis on export-oriented industries within the private sector and boosting of exports through
private foreign trade. It also included emphasis on agricultural production through large-scale
government subsidies and heavily village- oriented self- help development programmes. He had
denationalized many industries nationalized by Mujib government earlier and some of these
industries were given to their original owners or private entrepreneurs. Private foreign and
indigenous trades also entered into the formerly nationalized jute trade. The ceiling of Taka 30
million fixed by the Mujib government for private investment was raised to Taka 100 million.15
Further, Zia had also provided for liberal financial backing to new enterprises by government banks
and credit institutions and had granted tax incentives to both new and old business.
J
.
_ 1
II O
•
II
ir»
a*
a
a
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Zia was also convinced that the major assistance for industrial development had to come
from private enterprise, particularly from the foreign multi-nationals. Therefore, Zia government
had announced a policy of non- nationalization and offered liberal terms for repatriation of profits
and salaries in order to attract foreign investment. Bangladesh businessmen assured the cheap and
plentiful labour supply and expressed their eagerness to collaborate as further incentives for foreign
investors. I hey preferred joint ventures in which the foreign partner provided the foreign exchange,
but were willing to undertake management contracts, licensing, and third party arrangements.
1
The effect of all these policies was a significant improvement in private
private sector.
sector. As
As against
against
the total investment of Taka 200.9 million in the two financial years of 1973-74 and 1974-75 there
was a total private investment of Taka 850.9 million in 1975-76.16 Foreign investors from Japan,
South Korea, Ihailand, USA, UK, India and Pakistan began to show considerable interest in
Bangladesh.
Pharmaceuticals was the fastest growing area for foreign imestment, but there had also been
some activity in export industries like sea food, electronics, garments/ textiles, processed foods and
other labour incentive products. A number of foreign firms had been successful in discovering vast
” Constitution of the Peoples Republic of Bangladesh (Modified version), The Proclamations
(Amendment) order 1977. Appendix XVII, pp. 153-1-86.
Tor details, see the Second Proclamation order No. 14 of 1978 in Ibid, pp. 180-186.
i’ T. Maniruzzaman, The Bangladesh Revolution and its Aftermath, (Dhaka, 1980), p. 212.
6
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reserves of high quality natural gas and had been granted lucrative production sharing contracts by
Zia government.
Thus the era of the process of privatization and market economy started in Bangladesh with
a firm commitment to achieve the goal of self-reliant Bangladesh. Besides, Zia strongly felt the
necessity of regional cooperation among the countries of South Asia for promoting a climate of
trust and confidence for greater political understanding, for resolving their problems on the regional
basis for the common good of the people of the region and for their respective development, in
particular, and for competing with other countries of the world in order to safeguard their own
interest., in general. For this purpose, he formally proposed the formation of an Association for
South Asian Regional Cooperation (SAARC) toward institutionalizing regional cooperation in May
1980 to Six heads of State (India, Pakistan, Sri Lanka , Nepal, Bhutan and Maldives). The proposal
was accepted by the member countries after many deliberations. Zia was aware of the impact of the
process of globalization and felt that Bangladesh, being a poor country, can not survive in isolation.
She had to survive through cooperation and competition. The Seven- nation Forum (SAARC) in
South Asia is the brain-child of Ziaur Rahman and laid the institutional foundation of the process of
globalization in this region, in general and in Bangladesh, in particular.
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The Ershad Regime (1982-1990)
President Ziaur Rahman was assassinated in an abortive coup on 30 May 1981 and Vicepresident Justice Abdus Sattar assumed the presidency. Later, Justice Sattar was popularly elected
President of Bangladesh. But he was suddenly overthrown by General H. M. Ershad, the then
commander in chief of Bangladesh Armed Forces on Marclr 24, 1982 and forced to resign as
President in a radio/ television broadcast to the nation on the plea that he was "incapable of
managing the affairs of the country properly". By staging this drama, H. M. Ershad usurped
political power and proclaimed himself the President of Bangladesh.
After taking over, Ershad din not bring about any fundamental change in the socio-^
economic and political system of the country. He continued to pursue the policies undertaken by
Zia regime to a great extent. He took certain steps for more denationalization and private enterprise
and sought to build Bangladesh economy on western capitalism. The government denationalized ' ‘
some important industries, including 31 jute and textile mills and returned these industries to
Bangladeshi private owners. Simultaneously the government also limited the role of the public I
sector to the establishment of basic and heavy industries, steel mills, fertilizers and public utilities,
rhe decisions were made by the government after an evaluation showed that most of the
nationalized industries and mills were incurring heavy losses of upto more than $250 million per
year. Additional considerations were to accelerate the growth rate of the economy, to encourage
private investment particularly from foreign countries, and to check widespread loss of confidence
in an increasingly corrupt and mismanaged public sector.
;;
1 he later period of the Ershad regime 1was, however, overshadowed by the widespread
• - political turbulence centering on the demand: "Down with
Dictatorship"
and "Restore Democracy^
All the opposition parties took united stand on this demand and launched tremendous political
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movement against the Ershad regime. The movement was transformed into an unprecedented mass 1
broueht t0 an end of 1116 nine- ycar 11116 of Ershad government on 6 December
■ 1990. With the fall of Ershad the triumph of democracy and people’s will was reasserted after the
freedom movement of Bangladesh in 1971.
j
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of imported petroleum, the loss of remittances and the relocation of workers displaced fmi ihe
region- the World Bank and other donors complained about poor macroeconomic manager™•„ nd
a weak capacity to absorb the aid that was granted. The budgetary deficit had soared,
mx
revenues had not come close to keeping pace with increased expenditures. The development bmlget
was almost entirely funded through cv'ernal resources. Donors also complained that the miliimy
budget had been
!irig nnich t00 rapi(j|y Such expenditures, it was alleged, were made to keep
the military happy, lhere was widespread resentment on these military expenditures at home and
abroad.
i I
However, though Ershad pursued the policies undertaken by President Zia and made
attempt to extend those policies in global perspective, he could not make any remarkable headway
rather presented a dismal picture of Bangladesh economy.
Tht Khaleda Zia regime (1991-1995)
. i
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: II
Khaleda Zia, the chairperson of Bangladesh Nationalist Party (BNP), was sworn in as prime
minister of Bangladesh on March 20, 1991 after the splendid victory of her party in the
unprecedented parliamentary election of 1991. Soon she expressed her pledge to continue the
policies undertaken by President Zia aiming at economic liberalization and privatization. Moreover,
under the changed global and national perspectives, liberalization of economies is now a necessary
condition for competing successfully in global markets. New configurations in the areas of
international business, trade and industrial relations have constantly been redefining the dynamics
of global interactions. Goods, services, human as well as other resources have now far better global
mobility than any time before. Together, they have not only quickened the pace of economic
advance, but also opened new vistas of trade, investment, and ideas that demand reappraisal and
redefining of the roles of public and private sectors in the global environment of the cut- throat
competition.18
1»'
Khaleda Zia aptly realized the magnitude of this global challenge and attempted to adopt
17Craig Baxter, Bangladesh in 1990”, ASIAN SURVEY Vol. XXXI, No. 2, February 1991
(California), p. 151/
18CAF Dowlah, "Appropriate roles of the state and the Market: Creating an Enabling Environment
for Private Sector-led Economic growth in Bangladesh", ASIAN AFFAIRS, Vol. 16, No. 4. Oct
Dec. 1994. (Dhaka: Centre for Development Research, Bangladesh), p. 44.
<
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such policies as to attain rapid industrialization and economic growth through greater economic ■
liberalization and privatization. At the same time, she sought to create an environment conducive to
both domestic and foreign investment in Bangladesh.
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For this purpose, the Khaleda government put greater emphasis on the stabilization of law
and order situation of the country. In order to achieve 6-7 percept growth target as proposed in the
FY 1994-95, the rate of investment was to be raised to 18 percent from the level of 13 percent. But
unstable policies (in some cases), bureaucratic bungles, obsolete laws and regulations, unrest in
political front, inadequate infrastructural facilities, and piece-meal rather than comprehensive
incentive package were some of the problems that hindered investment climate in Bangladesh.
Despite this, there was tremendous enthusiasm generated in the minds of domestic and foreign
investors for capital investment in Bangladesh during the period 1991-94. A large number of new
garment, factories (about 600), textile mills (over 100) and new spinning mills (about 17) were
established during Khaleda regime. Further the establishment of Dhaka Stock Exchange (DSE) and
Chittagong Stock Exchange (CSE) were remarkable contributions to the creation of an environment
conducive to capital investment and to build sound capital markets. The Security and Exchange
Commission (SEC) as government watchdog were responsible for regulating stock exchange.
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The success of the Khaleda government's economic policies demonstrate the fact that the
rate of inflation was lowered down at less than 2% from 9.3% of 1990. The per capita income
grows to US $220 from US $170. The rate of GDP also increased from 2% to 5%. Bangladesh,
with a GDP of more than US $24 billion, four times larger than that of early seventies was at the
threshold of a major economic breakthrough. The industrial growth rate also increased from 7.2 to
12. The foreign exchange reserve in the Bangladesh Bank was the highest in the history of
Bangladesh during this period. The export earnings also increased from US $1.71 billion to US
$2.38 billion .19
The Khaleda government also carried through sweeping import liberalization. Given the
global context of free trade and dismantling of trade- barriers, budgetary and policy framework for
import liberalization was underway. By opening up all our industries to global competition at this
level over industrial development, the nation was almost turn into a nation of consumers. The
government seemed to have adopted an unthinkably unimaginative policy in this regard.
, However, the country enjoyed remarkable macroeconomic stability. High levels of foreign
exchange reserves and tax revenues, funding fiscal and current account imbalances and low
inflation rate succeeded in creating some of the necessary conditions for economic take-off. This
macroeconomic stability contributed a conducive environment to accelerate economic growth,
increase saving and investment, and develop private sector. Banking and financial sector, overall
capital market, trade and tariff policies and administration, export-promotion activities etc. kept the
economy from moving at a desired speed. The achievement in the private sector was remarkable.
The success of agriculture that already attained self-sufficiency, the ready made garments industry
that brought in more than 60% of the nation's earnings, the wage-earners scheme that emerged as
‘'Three years of the Democratic Govcimnent, 30 March, 1994 (Dhaka: Film Publication Bureau,
Government of Bangladesh) pp. 12-17.
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second largest export earner can be attributed to the private sector whose potential to emerge as the
dominant player in the economy, therefore, can not be challenged.
The Sheikh Hasina Regime (1996 - )
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frustrations w,th the state dominated economic system. Over the years, the country lost in average
losses f th
h
$5002omilli0n) annUally due t0
to inefficiency,
inefficiency, wastage,
wastage, corruption
corruption and
and system
system
losses of the public sector.
1
In vmw of hts, Sheikh Hasina abandoned the state-controlled economic policies undertaken
bj her father and has pledged to continue the policy of economic liberalization and privatization
and market- oriented economic system adopted by the Khaleda Zia government.
Evidently, the Hasina government inherited a conducive investment environment Since
nriv-J^ /’"h 'Za'IOn ,and Priva,lzation efforts have been made, and stock market reemerged, and
of Shi U n ' bankS’ induStneS and other enterprises began to grow. But the one and half year rule
heikh Hasina presents us a very pessimistic view of the economic situation of the country. The
rade imbalance between Bangladesh and India has made an adverse impact on Bangladesh market
llndlTld nd,an tB°OdS HaVe alm°St 0CCUPied the Bangladesh market. On the contrary, Bangladesh
defic t of Bonn
J” enter int° Indian market As a result, there is trZmdous trade
deficit of Bangladesh wKh India amounting taka 6000 crores.21 This alarms Bangladeshi
entrepreneurs very much and expresses their deep concern about the dire consequences of this trade
imba.ance on the growth of indigenous industries in Bangladesh.
Another serious debacle occurred in Bangladesh share market. With the sudden and
unplanned abohshmg of Lock-in system, Bangladesh share market was made open for competition
of
77 13 mafla group' The unimaginative rise in the share prices attracted large number
' 7 PJe , piirchase Shares' The mternational 'mafia' group through their local agents deeply
involved in this artificial sharp price-hike and smuggled out crores of taka by purchasing almost ah
shares from the stock market. I he Bangladeshi shareholders could not coinpete with this 'mafia'
group and incurred heavy losses with the sudden fall of prices in the shafe market Now the
< gladcsh share market business has lost momentum and the prospect for its reinvigoration is’very
fiuts^Uerf I
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has been severe|y criticized both at home and abroad
financial mrkets
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prudential regulation and supervision in the
t
Similar is the situation preva.lmg in the industrial sector. The process of denationalization
or privatization o industries has been very slow and discouraging. The government has SO far
(during the last four years) denationalized 13 industries only and 350 industries are still left with
211CAF Dowlah, op.cit. p. 51.
;' l he Daily J.anakantha, Dhaka, 24 November 1997. p. 8.
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public sector. The state-controlled industries have continuously been incurring heavy losses of ■
about taka 2500 crores annually. The government has failed to take quick and appropriate steps in
this regard. Indecision and negligence at the top-decision making level causes concern about the
real intention or capacity of the government.
Recently, Bangladesh's political stability and conducive investment environment have been
threatened by opposition movements on a number of issues. The street agitations, strikes and
hartals have been gaining momentum, lhe authoritarian behaviour of the government and their
coercive method of settling disputes with their opponents aggravated the situation. The opposition
parties also sometimes failed to demonstrate their rational thinking on the resolution of political
cleavages. Both the government and the opposition tend to take a position of 'no-compromise*.
Even sometimes their political interest supersedes national interest. More particularly, the
government’s stubbornness and snobbishness push the opposition away creating a conflicting
relationship between them. This situation is neither complementary with democratic political
system nor desirable for investment in the private sector.
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Concluding Observations
Experience show that decades of public sector domination has failed to attain sustainable
development, alleviate poverty, ensure equitable distribution, create congenial atmosphere, raise !
productivity, enhance investment and expedite economic growth in Bangladesh. With the beginning
of the process of globalization, Bangladesh has now been attempting to have a market-oriented
economic system together with a democratic political system. Unfortunately, Bangladesh has been
constrained to attain success in fulfilling its desired goal. Government's desire to attain private
sector-led economic growth has not yet been achieved, and the process of globalization poses some
challenges in this regard.
In the context of liberalized environment of investment, trade and commerce, Bangladesh
must work out well-thought-out, long run and dependable strategies for rapid industrialization and
high-track economic growth. Over the years it has been decisively proven that the public sector has
been a continuous drain on national exchequer and has also been associated with failures, losses/
corruption, wastage and promotion of vested interests.
So, the private sector is entrusted with the onerous responsibility of moving the economy to
a path of higher growth. They must show their superior performance and effectiveness in making
the country rapidly industrialized and economically developed.
What Bangladesh needs to-day is a sound economic policy ensuring better prudential
regulation and supervision in the financial markets, realistic trade and tariff policy administration,
reinvigoration of export promotion activities and overhauling current banking services. What is
more important is the government's commitment to what it adheres to translate into practice. There
should never be a gap between policies and their implementations. The government should pursue
liberalization policy with firm determination to stop wastage, clean up corruption and resist losses.
Labour militancy is one of the factors. which jeopardize the pace of industrial growth in
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Bangladesh. Labour issues must not be politicized rather should be taken into consideration with
the spirit of bridging the gap between the entrepreneurs and the workers so that normal functioning
of the industrial activities are not hampered even for a single hour. Investors at home and abroad
must not fee! insecure to invest resources in the country due to labour unrest. The government has
the responsibility to ensure it by maintaining law and order situation in the industrial area
particularly.
Building sound capital market is a prime need for creation of a conducive environment for
private sector-led economic growth. A robust capital market is needed to encourage savings
channelize that to productive investments, and to distribute risks and gains on the.basis of financial
investments. ( urrently, the capital market in Bangladesh is at a rudimentary stage. Bangladesh
needs to develop capital market by establishing financial institutions on sound footing. The stock
market should be developed by upholding the interest of the investors, .the stock exchange
members, and the government. The stock exchange commission (SEC) needs to frame market
friendly rules and regulations for monitoring, coordinating or regulating activities of different
players in the capital market. If rules of game are fixed, watch-dog institutions are in place and
conduc e environment for security and profitability are given, stock markets can grow’ and
Bangladesh will be able to capture its share in the booming stock market in Asia.
Last but not the least, Bangladesh being the poor or low-income country is susceptible to
global challenges. Although she is making efforts to attain economic development through
economic liberalization and privatization, she is facing with all the challenges of globalization at
the same time. At tins moment, Bangladesh has no other alternative than to pursue the policies of
market-oriented economy vis-a-vis global economy. But she has to remember that it would be a
Herculean task to derive benefits of globalization from the new global partnership between
developing countries, developed countries and multi-lateral institutions. She should take the
achievement of sustainable development as its fundamental objective. Goals should include the
alleviation of poverty and reduction of social inequities, a strengthened civil society, promotion of
the political and legal environment, iimproved....
health and education, and building of basic
infrastructures. „Democracy,
human
rights
and
good
. .
„gowernance are indispensable components of
development. So, it is the government's fundamental responsibility to be UrVCUV
aware of dll
all the
U1C
implications of the globalization in <order
‘ to achieve the desired goal of sustainable development of
the country.
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INTERNATIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6,1998
New Delhi, India
The South Asian Model
?
H-t
by
Dr. Vinod Vyasulu
Consulting Economist
S.V. Complex, 55 K.R. Road
Basavangudi, Bangalore - 560 004
e-mail: vinod@praxjs.dabang.ernet.in
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The South Asian Model
Dr. Vinod Vyasulu
‘7 was a donkey", Tattles cried,
To choose your daughter for my^ bride!
Twas you theft bid us cut a dash!
‘Tis you have brought us to this smash!
You don't suggest one single thing
That can in any way prevent it------"Then what’s the use of arguing? ”
"Shut up!" cried Tottles (and he meant it).
Lewis Carroll
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It is ambitious to speak in terms of a “South Asian” Model of Development. I will
therefore limit my effort at the beginning. To me, South Asia will refer to Naipaul’s Area
of Darkness1: India. T his is the country in South Asia of which I am least ignorant; and in
this way I may avoid rash generalisations. In fact, even this may be too ambitious!
India is now fifty years old. This vast sub-continent has had a turbulent history.
Hut when the British left fifty years ago, the land suffered the trauma of Partition, as two
nations, India and Pakistan, were bom. India was then created out a large number of
differing kinds of kingdoms and territories. This process was not free of strife - witness
the “police” action in Hyderabad or the Army’s move into Goa. The Kashmir problem,
which renders peaceful relations between India and Pakistan so difficult, has its roots in
this history. South Asia has yet to fully recover from its stormy birth. Subsequent events
must be understood in the Iight of this dark beginning.
We may note some points of similarity in passing. All of South Asia was under
colonial rule not very long ago. This is a reality that all have to take into account today.
All of them had some form of “modernisation” imposed on an ancient existing culture.
What was familiar began to disappear; what was new was often beyond grasp. Each of
these countries is coping with the consequences of this reality in some way. There are
immense possibilities of mutual benefit from co-operation, but it has not been possible to
operationalise these.
All of the South Asian countries are densely populated, in comparison with other
parts of the world. If one sees the land available per person, it is smaller in South Asia
than in Latin America or Africa. This relative scarcity of land, if we can call it that, will
have its own impact on the development experience of this region. There may be other
’ This is a reference to V S Naipaul’s book written more than 30 years ago
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Vyasulu: The South Asian Model
things in common too, but the differences too are great. Hence the need to limit the scope
of this paper. This I do by referring to facts that are specific to India.
There are similarities between parts of India and its neighbours. West Bengal in
India shares more than just a language with Bangladesh. Tamil Nadu and Kerala have
much in common with Sri Lanka and the Maldives. Bihar and Nepal too have common
features. India and Pakistan both have Punjabs. But there are major differences too. I
hope scholars in Pakistan, Sri Lanka etc will write of models specific tb their countries.
From all of that work, we may be in position to speak of a model as being specifically •
“South Asian”. Till then, we have to be more modest in our aims.
I will begin by stipulating some Stylised Facts about India from which I think we
can usefully talk of a model. I his will be specific to India, and draw on her •experience.
Further, I hope that the Stylised Facts I choose will command general agreement,’ for I
have culled out these insights from my reading of the available literature, which is vast.
Fhese facts should not, I think, be controversial. It would be arrogant to claim that these
facts, and this discussion, constitutes a “model’’ in the strict sense in which this word is
used in economic theory. Here, the word, stemming from its place in the title of this
paper, is used somewhat loosely, as a framework of ideas. This should help this debate
proceed.
1
I will use this “model” as an analytical simile to draw some [hopefully useful]
lessons of what this experience teaches us. What should we do now? How should we do
it? It is not likely these facts - and hence these lessons - will at all apply to other South
Asian countries, lliis limitation must be noted at the outset2.
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1 have said that I am limiting my reference to India. Yet, it is necessary to
recognise the vast variations that the word “India” often hides. India is like an
arithmetical average, often hiding more than it reveals. What is common between die
deserts of Rajasthan and the fertile coast of Andhra Pradesh? What is common between
the Bhumihars of Bihar and the Jats of Haryana, apart from the fact that both
communities farm the land? What is common between the entrepreneurship of the
Gujarati and that of the lamil Nadian? Is there anything in common between the role of
the government in Bihar and Karnataka? What, for that matter, is common between the
two Left ruled states of Kerala and West Bengal? Can we put together the Portuguese
inheritance of Goa and the French inheritance of Pondicherry in one picture?
4
The questions can go on, but I have said enough to make the point that I will be
presenting Stylised facts that will have to be accepted in full recognition of these ground
realities. The variations around the average that is India are statistically very high.
Perhaps this is the first of the Stylised Facts - as Joan Robinson is reported to have said,
“For every fact that is true of India, the opposite is also true!” But what is remarkable is
the fact that we see these as variations within one entity, not as differences between
different entities. This is an imnortant fact in itself. It may therefore not be rash to speak
t
In this Conference, there are scholars who are presenting papers on models based on experience in other parts of the
world Together, these papers should address these lacunae It may be more useful for to discuss the points of difference
of India
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February 2-6, 1997
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Vyasulu: The South Asian Model
of one South Asian - Indian - model, at least for some limited purposes. And my limited
purpose here is to fuel debate in this Conference.
A useful stating point for this discussion is Sunil Khilnani’s recent essay The Idgg
of India 3 For India is indeed an idea, and a recent one. 1 begin with this essay because it
poses the idea of India in political terms: a secular republic with a
°
government, democratic nonns, a “free” press and a form of central plannmg for a
“socialistic pattern of society”. This mix is uniquely Indiam For my purpose i is
immaterial whether this was Nehru’s vision or someone else s : it was the vision that
underlay the historical experiences we will call [one version of] the South Asian Model.
Along with the differences 1 noted above, this experiment in governance, paternalistic
perhaps, is a common factor across this vast land. This does not mean things worked, in
the political sphere, in a uniform way: they did not. But the foundation was common; the
states built in different ways on it.
*
This common experience of recent years was put on top of differing local
historical experiences5. One has only to compare Tamil Nadu, West Bengal and Uttar
Pradesh among others, to see this. But the vision of the process, the stated goals of the
larger society, were indeed the same. In India, ideas at the national level have had a dgg£
and lasting influence on local politics - a kind of change from the top down, that has had
positive effects that could not have been brought about in any other way. The protection
to and reservations for the Scheduled Castes is one such6. The introduction of local self
governance in 1991 is another. The idea of India is therelore, a critical factor m the
evolving life of the nation in the half century past.
It is th.. vision that holds the Indian nation together. There is indeed something
[and I submit it is positive] that binds this vast sub-continent together7. The whole here is
greater than the sum of its constituent parts. This is unique to this nation. The rest of
South Asia does not share this specific vision or experience: they have their own. Hence
the need for many South Asian models, each studying a country in depth. Only after this
has been done can we speak properly of a “South Asian” model.
The first of the Stylised Facts, then, deals with the nature of governance. Indians
speak of “continuity with change”. The system adopted builUncrementally upon the past:
there was no rupture as the case of many other countries. Perhaps this was due to the fact
that there was no revolution; those who led the movement were educated in large part in
Britain, and’had imbibed its values. After all, Dadabhai Naoroji, in his critique of British
policy in India, spoke of it as being “unbritish”! Perhaps it was due to the wide range of . •
interests of those involved, from the moral stance of Gandhi, to the commercial interests
3 Hamish Hamilton London 1997 Khilnam then goes on to explore where we stand fifty years after |he transfer qf power
from the British to the -Indians* In the context of this Conference, this phrase may be more appropriate than the more
common 'independence*
4 The contributions of many others, like Vishveshwaryya and Mahalanobis, should not be ignored.
5 Narendar Pani has developed this point in the context of land reforms in Karnataka, in Reforms Ta Preempt Qhan9gl
Concept Publishers, Delhi. 1982.
.
6 Dr B R Ambedkar was a forceful proponent of this view; given the power equations in rural India, he stressed the
’Zope"!
The Ind,an sutxcntlnent. which in
senses is like Europe, has
had one for 50 years'
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Vyasulu: The South Asian Model
of people like Birla and Sarabhai. And there were many others in that spectrum. It was a
question of gaining opportunities blocked by the presence of Englishmen; not of a
revolutionary upsurge as in China. It was a question of filling the vacuum left by the
British, not of creating a new society. It is correct to describe this as a Transfer of Power;
the word Independence would lead us to expect much more8. It is no wonder that Gandhi
died a disappointed man!
lhe Indian Constitution, built upon, perhaps evolved, from the Government of
India Act, passed by the British Government in 1935. Many of its features continued.
[Laws that were not explicitly repealed continued to be in force9]. Essential among them
are: the retention of the powers of preventive detention - citizens could be deprived of
liberty etc. according to due process of law10. This is a power that has been often used,
from the infamous MISA of the Emergency to the more recent TADA that has just lapsed'
Both were in addition to strong laws that already exist. Thus the democracy we adopted
was not unfettered. We ruled ourselves, but we retained the right to tell our fellow
citizens what the limits of dissent are. This may not be unusual. What is unusual is the
narrow line that we drew around dissent. By and large, vigorous pro poor actions became,
not an exercise in democracy, but dissent that was anti-social”. One has only to look at
the land question, or the tribal question to see the truth of this.
ITiere is another way of looking at this issue. It comes in the form of the Ninth
Schedule of the Constitution. This was added a few years after the Constitution came into
effect.
placed in the Ninth Schedule were placed beyond the purview of the
Courts . I his is Extraordinary. It comes on top of the provision in the Constitution that
the matters discussed in the Directive Principles of State Policy13, which were to set the
priorities to any government, are themselves non justiciable. The Courts never had the
power to ensure that any Government of India lived up to its obligation in education or
health ! And it has not. I am no expert in this matter, but I cannot help wondering if there
is some gigantic hoax involved here.
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I here is yet another aspect of this identity question. Recognising that India was
indeed the lower of Babel, rightly or wrongly, it was decided to establish states on the
basis of language. How many languages then are there in this vast land? Somehow, a list
was accepted, and in 1956, the country was reorganised on linguistic principles. Yet, the
principle was not uniformly applied. Hindi is a major language, spoken by about 1 /3rd of
the population. But there are [at least] four states that speak Hindi - Uttar Pradesh, Bihar,
Rajasthan and Madhya Pradesh. Politically, they can call the shots in the country. For the
other languages, there is one state each. This does not mean there is uniformity of culture
See also Partha Chatterjee. A Possible India Essays in Pclitical Criticism, Oxford University Press. New Delhi 1997 for
an effective extension of these ideas
•Indian telecommunications are run under the Indian Telegraph Act of the late 1800s. Government officials are bound bv
the colonial Official Secrets Act. And so on.
The right to property has effectively disappeared This has clear economic implications that are yet to be addressed I
am indebted to R Sudarshan for many discussions on this fascinating subject
’ The worst manifestation of this was tne Emergency imposed by Mrs. Gandhi in 1975-77, described by Acharya Vinoba
Bhave as anushasan parva - the age of discipline The most impressive defence of the Emergency was that tne trains
Today, there are around 300 items in the Ninth Schedule - the largest number have to do with land issues
Part IV of the Constitution, from Articles 36-40.
4 Or. for that matter, prohibition and cow slaughter
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and historical experience in many of these states15. But there is an asymmetry where
Hindi is concerned. This has made language an emotional issue; it has led to something of
a North [HindiJ/South [Tamil?] divide'6 that has had unfortunate effects on the polity and
' society of the country. This is a specifically Indian matter. It had become one more
divisive factor in a country where there are already too many. Are we Indians first, and
Telugus - or whatever - later, or are we Gujaratis - or whatever — first and Indians later?
ITis can be important in our conception of our national identity17. How it has impacted on
development is something that yet has to be carefully studied.
b
India has been described as a Union of States. Yet the Government of India often
behaved as a unitary form of government. The power to dismiss elected state
governments [Art 356] has been frequently misused by the party in power in Delhi. This
has stunted democracy; it has prevented the natural evolution of programmes and policies
in many states. Again, it is difficult to be more specific on this question. It has remained
an irritant in our political life.
This imposition by the Union is especially true where Planning is concerned . For
a long time, for various reasons, the Union government, called the Centre, [and I wonder
why1 ] monopolised decision making, even in areas reserved for the States in the
Constitution20. From being a respected and powerful Think Tank in the 1950s and 1960s,
the Planning Commission degenerated into a politicised bureaucracy under Mrs Gandhi.
Decisions got politicised in the wrong sense of the world - they became elements of
patronage21. The vehemence of the Centre-State relations debate attests to this. This had
important repercussions on how India has fared in the latter part of the last fifty years.
i
So die South Asian Model is premised on Democracy; but it is Democracy With A
Difference. Whether fraud or not, this South Asian democracy was flawed. Even the
ideal, embodied in the Constitution, was watered down in the amendments to it22. Yet we
prided ourselves on our democratic process: the reality was lost in the rhetoric of the
moment.
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15 My state, Karnataka, like the others, is divided into regions - Bombay Karnataka, Hyderabad Karnataka, Old Mysore,
Dakshm Kannada - and sometimes. Kodagu. The majonty do not speak Kannada as their mother tongue. The term
Kannadiga refers to those who speak Kannada, but it is also used as an omnibus term for residents of the state It would
be better to speak of Karnatakans; but we never do.
,B In terms of several development indicators, the South indeed does better than the North. Yet, there is a feeling that the
South is discriminated against.
17 In my years abroad. I have come across Telugu. Kannada, Marathi, Gujarati etc associations, but not an ‘Indian*
Association This may have an impact on the ability of Indian abroad to lobby for their interests, but I do not know much on
this.
'8 The Planning Commission, set up by executive order in the Cabinet Secretariat, enjoyed a great deal of power including, the distribution of Plan funds to the states, outside the purview of the Constitutionally mandated Finance
Commissions. For my views on this matter, see ‘The Finance Commission in a Federal Framework* Economic and
Political Weekly. August. 1995.
When the Constitution has no mention of a 'Central* Government, why does a hundred rupee note, which carries a
promise to pay by the Governor of the Reserve Bank of India, say that this promise is ‘guaranteed by the Central
Government' What is the value of a guarantee by an entity that has no constitutional existence?
" The standard reference is to the Sarkana Commission that went into this issue The recent 73rd and 74th amendments
to the Constitution are important landmarks in this context
The Election Commission too seems to think so The laying of foundation stones etc. is prohibited immediately before
elections This can actually go too far There have been cases when pending appointments to public institutions have
been held up because elections were due - to the detriment of the institutions.
I have learned much in this matter from R Sudarshan. both in discussions and from his writings. This should not be
taken to mean he agrees with me!
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But electoral politics - the power of the ballot - has been important. The illiterate
Indian voter has shown great maturity. I submit this had important repercussions in what
happened in the last fifty years. It has ensured an orderly change in governments - even
after the infamous Emergency of Indira Gandhi. And much of it has , I submit, been
positive. It has prevented extreme responses, such as an Army take-over. It has forced
politicians to negotiate coalitions, and pushed governance by unwilling politicians
forward.
Ihe Hip side of the coin has been a readiness to believe that change can be
legislated24; that if we pass a law, we have taken care of the problem. We have a law
against dowry; ergo, there is no problem any more. We have a law against child labour;
therefore there is no need to worry about developing the potential of children. It is quite
common for people to propose a Constitutional amendment the moment a' problem is
recognised. Law, here, seems to be a substitute for implementation in the field. At present
there is talk of making the right to primary education a Fundamental Right! Will that
make primary education a reality without the allocation of funds, without a political and
organisational commitment? And if we have the latter, do we need a Constitutional
amendment? This ability to believe that legislation is implementation is, I believe, a
specifically Indian one25.
I'he second Stylised Pact pertains to the goal of the so called Socialistic Pattern o_f
Society -which has been variously interpreted. The colonial experience, and the
economics of the time, convinced us that the market fails. We then believed that the
Government of free India could do better. This ideal had a high level of acceptance at the
time, even if there were differences in how it was to be attained26. The slogan, over which
there was then little dispute, was “Growth with Social Justice". Apart from affirmative
action in the form of job reservations27, this was seen as a willingness to give up
immediate increases in consumption levels in favour of high levels of state investment
meant to increase the productive capacity of our society - especially through rapid
industrialisation28. This was seen as essential for building up what was called selfreliance29, an essential ingredient of independence. Some see this as one of the major
differences between the Indian or say the East Asian approaches to development. Be that
as it may, the major instrument for this was the Public Sector.
n An important example is the amendment to the Constitution to bring in local governance - the 73 and 74
amendments.
.
.
24 One must accept though, the it sometimes can be. The increase in the representation of women in local governments is
one such case of important success.
” The reluctance to pass the Bill reserving one-third of the seats in Parliament and State Assemblies for women, when all
political parties have supported it. shows how the narrow interest of the [rrfale] politician dominates decision making when
implementation is guaranteed. And this, after the Bill speaks, not of half, but of one-third!
” In the context of small industry, this has been brilliantly discussed by Nasir Tyabji in his The Small Industries Policy,
Oxford University Press. New Delhi, 1984.
27 This had. not only Constitutional sanction, but I think, a large measure of popular acceptance as well.
” The so called Nehru-Mahalanobis model, which formed the basis of the Second Five Year Plan.
n There has been some controversy over the exact meaning of this term Some have felt it referred to self-sufficiency, a
kind of autarky Certainly, some of the regulations that were put in place made it appear so But if referred to something
else such as ability to trade and function as an equal partner in the globe, then it is a worthwhile goal for the country. It is
m this second meaning of the word that many still support policies of self reliance. The difference should not be one of
semantics
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I
“ni"8 “p
r™.. 2
1
Sovie, Union, also M, ,his was . „seftl| iJe„,ce Zr’Vo“^mp\'Xa“o“ ^ere
!
;o“.v.r
,n ,he
z
■>»»< »>■
Bovonnnen., in ,he ecLoXf the col^' TO
f ^“"V'ly ■O'"' ,he “«"
Indus,™, Developmenl "nd" Regu,X7t, ™ ed 'i “1^^'
,,1‘!
Planning. Further the concent nf
hr
’
1951, before the advent of
set up manufacturing enterprises to anUhinVrunbv
frOm
referring 10 new|y
factories to promotional agencies- from those n
J k e government - from nationalised
owned by State govemmeS'mustn: fo^etZl./of^X^
the public sector. When a unit began to male fosses a d^ma d f
expansion of
up. Ums, textiles and coal came into thTm.h?
f d ?for natlonahsation went
un viable units under the guise of protecting fobs It tT
016 nati°nalisation of
Indian version of the South Asian model withou! a Big^Brnthe0??.1' t0 l“lderstand 1116
powerful civil service in commanding positions" Reforl here ircoXXfoeZ
years before the Tr^isfe^o^plwer IndiTS^lS^^^^
In the 47
economic growth. In the 47
. -1 1%
the 47 years after that, it averaged well above
to
T
I% growth per
PCr year. In
estimates Given all the differences discussed ah°’
diemost Pessimistic of all
Transfer of Power did make a difference In the
^'s is indeed remarkable. The
often forgotten that few countries have averaged sucTst P®SSlmiSm about Planning, it is
This growth36, till recently, gave legitimacy to the wh I t 7 8
3 half eentury.
poverty levels are horrendous, ft s!meS foe^e
“ eXperiment’ » is true that
the
<
: extent
- ....
Bu,
down - there has been
—an under,,able ,mproveraenl“. n,is has kepi hope alive”™
!?irSealso''i?b?Fed^SeZSd^'1"0' dlSCOUn' ,he Bombay P|an of 1944, Wch made a persuasive case
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tO ^mocracy too. The
hnpTcaTi^
Consider agriculture. The government began with' lofty ideas of Community
Development. Although land reforms were seen as critical for progress, the rhetoric of
zamind.tn abohtton and bhoodan was all that took place. Land reform legislation led to
introduction of Ninth Schedule; it was politically impossible. Yet, the Transfer of
ower led to many groups getting benefits. For a while the issue could be postponed And
thenR dtrtOPPewOUi°‘lhe p0l'tlCaI agenda- A famine in
1960s, a devaluation forced by
he Bretton Woods twins, and some arm twisting by the United States39, led to a
fncfret h'1 ° P°1 'Cy
MrS Indlra Gandhi. Self reliance became important From social
Sine H
fniphakS'S *hlftcd ,0 ,ecl’nology inputs. The result was the Green Revolution,
achievement"
managed t0 feed its growing population. This is no mean
change.^fin'lTso'voy'oMb’
been 'it,le by Way of substantive structural
i
, 0
le workforce was in agriculture, producing around 60% of
na iona mcome, today, around 2/3rds is still in agriculture, producinglesl of
number nfCOnie| J'5 ’ th'nk ‘S “
featUre; * is Pronounced ht India. A very large
nber of people do not seem to share in the growth that has taken place40. This is^
disturbing statistic that requires explanation. While growing enough to feed the
population is a commendable achievement, the way in which we have done it leaves
much to be des.red. Whether technology has rendered land reforms irrelevant as Ze
argue, is another matter. At a time when agricultural production seems to have reached a
plateau, this question becomes relevant again.
n IL
J', 7 ’ r nVO 11,10,1 15 another 'mportant development. There is a demand for
ii k, and India, following the co-operative route, has become one of the world’s largest
milk producers, lhe mnovation here is a managerial one: that of organising milk
mXtd”
' a ’".I the
°f
of the latest tihnolog, „f
narketmg milk and milk products. This has been achieved while raising the levds of
mg of the primary producer. What is tlie potential of the co-operative form in India^
How can it be unagmadvely extended? What lessons are there to be learned42? Is this not
India haS ,0 nurture? Where d°
we go from here?6
In industry too, there Vwas
"
some remarkable success. India had little byway of
industry
in
1947.
But
that
changed
. t ,
>.
...
“I soon. The Public Sector developed capabilities in a
w ole host of sophisticated fields - machine tools, power equipment, steel, railways,
('a,er'?Ce
heard'lbarSmay'^ “eUdenTon us SX"
°f 'he U"i,ed Sta'«: ''^ve
A nrpli'Xn?? Ten rP th'S ,heme h'S wonderful Bethinking Economics. Sage New Delhi 1995
nr% * d
1 Oml
S available in ,he 'HSt'lute of Rural Management Anand on this issue
co^perabves"' and ?be “ “ to'lh^'ReXa"^ cX^t
'r' " i" C°nStraint * 'he COlOnial law 90vemln9
except for one sol.tary a^mpt. afew year-ago tn Andhra Pradesh
"
,0
,his ’
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nuclear energy, space applications and many more. Ind^ de'veT^ed VroSS
g^bdities m a wide range oflgchnologies, and a diversified manufacturing capacit7r
Exports became diversified, and began to include manufactures. Much of this is Ikim
wha India cal s the small scale sector, which is a part of the private sector44. It is in this
small also called mformal, sector that the jobs are being created. This is commendable
se J:X”' "“,St
b‘
of subsequep. Mures in orbei
The share of the manufacturing sector in national income has grown but not as
uch as expected. And employment in the formal manufacturing sector has stagnated
n ‘if?7 n° have 7C0I?le an lndustrial economy, but it had developed an industrial
u
■Tzxzrrro,nfac'ihai ",is po,en,iai has "o' b'“
nie fourth Stylised Fact is thecnsis^Hhis system in the 1970s The Emereencvreflect
f t> °rSh!P ~ W3S °ne
could n^bT^h^d. This is I fhink a
reflection of the inherent strength of the Indian
i ♦
x.
nmK’ a
lb
pubiie pX XXXelXXXefX:.°f
of complete distrust in the market wp hav
r
■
■... - » <»- 8oveX„.t
a
ependence . From a situation
"X'n'bXbX',0,a',fr'h “ “
““
At the same time, there is a distrust of all h ? •
■
°y leaving 1110 Pnvate initiative”,
the private sector into areas like insurance nere^^hldd^dT
reluCtance to Permit
to be resolved51.
insurance. 1 here is a hidden debate going on, and this has
August 12. 19939
31 LeC,Ure' PUb"C EnlerPr,se m a Restructuring Economy' Institute of Pubic Enterprise, Hyderabad,
another matter all together
for90rten ,hal the pflvate sector has thrived in India in this period. That it did not do more is
” For example. lsh“ANuwali“?n InSll^t^qnat^s 373^"
Reflected in the number of important “tteesand
Weekly IflHZTrher-y
on centre-state relations and the National CommitteeHSi“Za’nl'on^e^eve?
'he Sa*aria C«nmisSion
See the writings of scholars like S Chakravarty Amiva Ranrhi Ln ^ development of Backward Areas
w Discussed in my Crisis and Response; An Assessment
d Pr^b/hat Patna.k. among others.
This is not free of controversy.
books, Delhi, 1996
Consensus E^mi^a^ ^t^
Pg J97
Kumar' Sllent Consensus Against the Washington
r
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EcoC^ndS^S^Apnl"C2i4eSi^3S,abiliSa,ion an9 Structural Adjustment: A Global and Historical Perspective'
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Vyasulu: The South Asian Model
lhe focus on reducing the fiscal deficit is because of this desire to roll back the
state. We are today expecting the market to do things it has done nowhere52. We can
move overnight from one extreme to the other. Perhaps it is a feature of this South Asian
model that we can live in the world of fantasy!
lhe fifth Stylised Fact lies in the gross neglect of the quality of the
human^^opjdatjpn in India. I am not referring to issues of demography and
population growth, important as they are. Be it education or health, the State has
completely failed to meet its Constitutional obligations53. Literacy was to have
become universal by 1962; even today we are far from this goal. Health has
fared no better; scourges like malaria are ireturning with renewed vigour because
of a failure to complete the public healthi }programmes. Malnutrition among
children is an appalling two-thirds. Whichever 1way one looks at the-social
sector, India has been guilty of neglect. There is» no kind way of putting this
failure - and perhaps, we should stop sugar-coating this failure, for that is what it
is54.
The result ts a large workforce with traditional skills for which the economy of
today provides few opportunities. This workforce is ill educated, ill trained and in illhealth. Unless these failings are remedied, it will difficult to improve its skills and earning
capacity. This workforce is ill equipped to deal with a modem technological society
driven by human skills . Successes in frontier areas like space technology only go to
show how shallow this success is; how narrowly it is grounded in die Indian people. This
sounds harsh, but it is, sadly, true. The variation around the low mean is completely
unacceptable as development bypasses the majority.
i'
Another of the Stylised Facts stems from this neglect of people. It is the neglect of
the_quahtY element in the production process Growth in India has been due to an increase
m investments in the form of inputs, not from greater efficiency in using them.
Productivity has not improved in the economy. Whether it is agriculture56 or industry,
productivity has not been an area of concern, and it has often declined57. We have been
capKahsing on our cheap raw materials58, and perhaps under-valuing our environment59.
Forces in other countries helped this strategy at one point in time60. But its cost, in terms
of the future can be high. Unjess we get more output per unit of input, and on an
lesson that ^'XXl^Ther^^'
mean
‘S 3 d°Uble failure " does n°' ne9ale the basis of the earlier
k?. ik lh>e,market fa,lsi The correct position would be to say: Yes, the market fails but not always ves the State faik
rerZ
3
ex entlty that we musl study m°re carefully What is the correct mix of state' a^d market?
had da
5
'n Karna,aka' we found that education was starved of funds from 1961 the earliest year for which we
d th Pe»r
3 annual exPend,ture on pnmary education in Karnataka was around Rs 7/-; and w^ were told this is
above the national average, [unpublished paper]
5
thet^edy0
Calculat'on of the Human Development Index by the UNDP; but that is more a recognition of
D1mens^ns™pON;n^D^hM997l
X
diSCUSS6d 'heSe iS$UeS " ’The
and A S Se“' ed"°-
'"^^cture Report-The -Son'
4
in Honour of V.K.R.V Rao.
ProducUvity !n the Indian Economy: RIslng Inputs for Falling
*« A P0'01 made many years ago by Ravi Hazari in his article in the Gazetteer of India
Effectively argued in the publications of the Centre for Science and Environment. New Delhi.
For example, the environmentally unfriendly aluminium industry found it hard to expand in countries like France- we
invited it to Orissa
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/
increasing basis, growth is unlikely to be sustained. Unless we re-examine our way of
valuing the environment, growth cannot be sustained. We must re-examine our attitude to
business and work. We need to take a longer view61.
i
These Stylised Facts do not constitute a rigorous “model” of development. The
discussion above at best provides my understanding of events. The inter-relationships
among them need to be spelt out, and the implications for the future must follow. This is
an ambitious task I do not attempt here. But keeping this discussion in mind, is it possible
to ask where we go from here? Ideally, any prognosis must flow out of the model. Here, I
use the implicit model as a base for speculating for the future. This is necessarily
subjective; it is necessarily preliminary. But it is from such speculation that new
directions may emerge. I hope the discussions in this Conference will either show this is
the wrong path, or provide some substance to these ideas.
What does this all mean? First, this South Asian model is one based on a
westernised elite that controlled the State largely through the bureaucracy. This group had
a vision of modernisation that it would promote using the resources of the state via
investments in public sector industry. Until the mid 1960s, it did rather well. But in recent
years, other groups - correctly and legitimately - have begun to assert their rights. This
has led to sectional interests taking a preponderant role in decision making62. Few are
thinking of the longer term; few seem concerned with the cumulative effects of many
short term decisions that will come home to roost in the not too distant future. It is too
early to say where this will lead the country. The old direction is no longer open; but the
future path is still clouded, llie different stakeholders have to hammer out a compromise.
The need to “unbundle” the state is clear: how it is to be done, is still to be understood.
Some steps have, however been hesitantly initiated; it remains to be seen whether we will
reverse them or build on them.
.•!
:■
Second, the system gained legitimacy through the process of elections based on
universal suffrage. This threw up leaders with a rural base who, it was hoped, would be
guided by the bureaucracy: a nexus grew. In the 1970s, this bureaucracy grew in numbers
and strength, and began to interfere - there can be no other word for it - in every aspect of
society. The government became a captive of these forces. The original ideas of service,
based on the Gandhian weltenschung, became diluted; rent seeking became the order of
the day. Criminals became politicians, winning elections and twisting the machinery of
the state to suit their private agendas. The system degenerated in the way Principal-Agent
theory teaches. Perhaps this is a part of growing up; the system needs time to mature and
function more effectively. There has to be some learning. Liberalisation63, in the sense of
debureaucratisation, became essential. It is a difficult battle, because we have to build on
an existing structure. We are not beginning anew.
fJa?6 ‘T16*
°f energyl ^ervation, see A Indira and Vinod Vyasulu. Towards 9 Policy Instruments Menu to
Encourage Energy conservation Bangalore. 1996 unpublished.
---------—---------- v IP
ra.?eSh; Tef|dy' 7b men
■
se2lenced 10 dealh after
murder Many^tp^ha^Vrgue^thaMhe
sen ence should not be carried out because they belong to the scheduled caste. Note that the dispute is not over the
death penally, but over its application to a specific community. We will have to overcome this kind of distortions.
have discussed this matter in detail in my •Debureaucratisation: An Imperative for the next Quinquennium’ Indian
Journal of Economics. June 1996
--------
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Hie concern ot these political leaders, however, was the prospect of re-election.
Ibis moved them in a different direction from the civil servants. At one level, it enabled
tjiem to respond to crises - for example, famine relief. But it also led them in a populist
direction. Ini a fractured society, it led to the politics of reservation and exclusion. Politics
became a zero,, or even negative sum game. This cannot be sustained. But tlie way out is
not clear yet.
To satisfy key constituents, sops and subsidies were freely given. If we consider
the poverty alleviation programmes as essential in a poor society64, we still have to
understand the huge subsidies on fertilisers, on the use of power and irrigation water. The
financial sector was hijacked by these two groups. The loan portfolios of the banks,
whether in industry or agriculture, are far from healthy - the proportion of “non
performing assets ' - a wonderfully Indian phrase - is too high65. Today, several of the
banks are •'weak" or "sick" and are being nursed back to health by the government
through ad hoc measures. Some of the worst scams have occurred in recent years: the
iarshad Mehta stock market scam and the CRB financial scam, among others, are still
fresh in the public mind. The economic logic here runs counter to political clout. Some
discipline, in the form of appropriate regulation and in the form of user charges66, has to
be brought in, for fiscal reasons and for ensuring that waste is minimised. A solution in
a fractured society, is not easy67.
’
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I his has led to a fiscal crisis; to this the system has no response. This is
manifested in the revenue deficits in the budget. They became a regular feature after
I 81, even after the IMF backed Stabilisation Programme of 1991, the revenue deficit has
been yrmvmiz. I his is short-sightedness of the worst kind. Tire system run by the populist
pohtic.an-elite bureaucrat has effectively run into a dead end. More of the same means
disaster. What was once a tonic has now become toxic68.
• I he mixture as before" will no longer do. It is also no longer feasible, because of
the Constitutional amendments bringing in devolution of powers. Local government has
now become a reality. The pressure came from the top. There are formidable [regional
and local] forces opposed to it; yet, future progress, I submit, will be possible only if this
experiment succeeds. More democracy, more participation by local people, especially
women, is essential if we are to move forward. For many reasons, the old model has
ceased to exist. But it is not yet clear what has replaced it. Perhaps the country is in the
ferment of political transition today.
I
lhe external environment has changed too. Compared to fifty years ago, the
autonomy that a nation state can exercise has changed. The notion of the nation state is
itself changing. Concepts like autonomy, self reliance, national interest etc may have to
be re-examined and redefined.
e.corrup'jon and '"efficiencies. It is simply to accept the need for the state to provide merit goods
which have to be decided upon by some welfare criterion
y
'
Frnnnm^^
J
D Rajasekhar- 'The Half Life of Credit—Simulating Fund-Flow in the Priority Sector’
Economic and Political Weekly, August 1994
This is not to be understood as saying everything must be priced. Some things must be Some, like primary education
and public health - merit goods - should continue to be the responsibility of the state
But m spite of this, a lot has been done in the area of financial reforms
No surprise to those who appreciate dialectics'
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India today has to function within the rules of the World Trade Organisation.
Thus, closed economy type of policies are no longer relevant. And since the WTO regime
is biased seriously against the developing countries, there are major constraints on what
can be done; on available options69. We must, however, not make the mistake of thinking
there is no freedom of movement. A great deal depends upon our skills in working within
the W I O system and its various panels. Strategically, we have to make the most of the
limited degrees of freedom available.
Much of this vs ill remain academic if the country does not invest in its people. It is
ridiculous to talk of literacy as a goal in a world where growth depends on high level
skills ^Literacy is at best a_first step towards increasing the educational and technical
skills of a population. Literacy is unlikely to become a reality if there is no investment in
public heath. Tins, I submit, is a necessary condition for any development path for India
It is not suffident; but there will be little point in talking of long term prospects if this
basic issue is postponed, ft is in knowledge, and the ability to harness it, that the basis of
growth lies . If we have a billoin edicated people in our country, nothing can stop our
rapid progress. That is what we must achieve as a necessary condition for developmentclearly, it will not be sufficient.
’
llic educated part of the population may be in a position to make a living. But if
the idea is for India to participate as an equal partner in the emerging world of trade and
high technology, then high levels of investment in R&D are essential It has to be
remembered that technology is lodged in firms. Individuals may have knowledge, but
tgchgolpgigal. capability exists m organisations, and the most successful in this context is
the firm. We may take pride in the fact that Indian software engineers are in the forefront
of the mfonnatrnn technology revolution; but we must also remember that they work for
firms like Microsoft, ft is these firms that own the patents on the work of these brilliant
people We have to encourage and nurture such firms of our own if we are to compete
HLcrnatipnally. And in making such decisions, we must not be led astray by facile
arguments of inefficiency and comparative advantage. There are lessons to^be teamed
from large corporate firms, as Porter has shown73. Whether we are capable of teaming
them is another matter altogether.
®
Hus calls for a_biKbreakfrom the past. Education and R & D have been topics of
polite conversation, not objectives of long term policy. Over the years, we have ruined
our umversities - and it is not simply a matter of unbridled growth. This, among other
things, 1S what we have to change, if technology is to help us improve productivity. This
must include investment in building organisations and institutions74 as well. If we need
one XX1 of
°n lnVeS'men' COTeS ,n,°
,h0 ,Oml
•’W <«•«»»*. >ben it will further limit
emphasised thal it is eduction a^a^levels"mat sraet? mus^suZZm^lhere 376 d'fferences' '• must be
no1',he di~""
"
_ ,min„ o, „
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the market, wc need the state, appropriately redesigned, as well. What are their exact
roles; how can we ensure that they change in an appropriate way as required? These are
the questions that arise from an examination of the “Indian” version of the South Asian
model.
i
■
This requires resources, and resources from the fisc. Methods of increasing
government revenues, and using them more effectively, rather than of cutting tax rates,
has to be the major concern. A restructured state will have to play a major role in this
process: it cannot wither away as the Washington consensus would recommend. A new
direction is essential. Restructuring the public sector has to be an important part of this
vision. That discussion will take us far afield. I stop at noting its importance in any future
strategy.
I
I
One of the lessons of history seems to be that countries tread a unique path. What
one achieves is always in a unique context. India has had a unique experience now. The
experience of this period, both positive and negative suggests that a new direction is now
essential. India today may be a market of 200 million people. But there are around 800
million who are citizens, but not part of this market. Unless they are properly integrated
into the market process, there can be no progress. There is no model to tell us how this
can be done. The impetus for this has to come from within the country, from within its
people. We cannot look outside for solutions. This does not mean there is nothing to learn
from others.
What the ligers have done is commendable75, but their achievements have taken
place in historical time, and that occurs only once. Time’s arrow flies only forwards.
History, as Marx taught us, repeats itself as a farce. If we are to achieve something
important, then we have to find our own unique path. We cannot progress by imitating
anybody, no matter how successful they are. This, in fact, is what the South Asian model
of the type I have discussed in this paper has actually done in the half century past. We
struck out in our own unique direction, in our own unique way. This path is now past its
prime — what next, is the question that we have to answer.
T he Indian model has run into a dead end, for internal and external reasons. This
is now being recognised. T he time has come to break free. It has its quiet achievements
on which wc can begin to build; there are gaps and limitations that we must fill. The
experience of others may give us clues about what can be done. This has to be done in a
manner that is consistent with the new global environment. We have to take these ideas
and put them together in our own way. We have to innovate.
It is such junctures that novelty emerges76. By imitation, by ideological rigidity,
we will get nowhere. While we can, and must, learn frdm countries like South Korea and
Mexico, we must not blindly do as they did. Both have had their crises; the “Tigers” may
National Institute of Rural Development, November1-2, 1997, Hyderabad.
75 Given the current East Asian crises. I suppose this experience will now be re-evaluated But it will take time for a
balanced assessment to emerge
’’ Al a theoretical level, I refer to Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process, Harvard
University Press. Cambridge. Mass. 1977. far an elaboration of this theme
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now no longer
longer be
be held
held up
up as models. The lesson of the Indian model is: there can be no
models. It is in walking that we make a path
The Indian government, like those of other countries, has posed its objectives in ten
of growth. Does experience suggest a need for rethinking? India has been no tiger, but tl
Tigers’ growth has turned out to be fragile. India’s more modest growth has shown son
improvement in poverty, but experience may suggest that failures on this front have more to i
with priorities and less with growth per se. It is clear that savings and investment alone do n
lead to growth. People should be able to identify, and take advantage of market opportunity
Unemployment - the underutilisation of human resources - is a cost in many senses. India h
focussed on capital, not on its abundant labour. Socially, unemployment will be a big proble
if nothing is done. Is there anyway of turning this to an advantage?
It is in investing in the people and expanding the opportunities open to them that
we can move forward. So far, in the 1990s, we have been groping for our way forward.
There are suggestions of what we can do: in the rural non farm sector, for instance78. The
path ahead is not very clear, and it is hard and narrow.
The crisis, to quote former Finance Minister Manmohan Singh, presents the
country with an opportunity. The central question relates to the nature of the state we
want; it relates to the mix of market and state that will help us achieve our goals. It relates
to the role we want our people to play in the process. These are large questions.
We can - must - boldly go where no one has gone before.
4c************************
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77 An old Spanish proverb I learned in Mexico: ’Caminante. no hay camino: se hace el camino al andar*. How true!
78 See Vijay Mahajan and Thomas Fischer, with Ashok Singha. The Forgotten Sector, Oxford and IBH, New Delhi, 1997,
far an excellent discussion of what is possible.
15
International Conference
Colonialism to Globalisation
February 2-6, 1997
II
/
INTERNATIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
THE PHILIPPINES: A CASE OF MULTIPLE
COLONIAL EXPERIENCES
I*
by
Prof. Serafin D. Quiason
Chairman of Historical Council, Philippines
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THE PHILIPPINES: A CASE OF MULTIPLE
COLONIAL EXPERIENCES
Serafin D. Quiason
I
Any attempt to assess the Spanish colonial rule and the American regime in the
Philippines must begin with the reminder that the Spaniards held firmly a large chunk of the
Christianized areas for 333 years and the American tutelage and control of the Filipinos lasted
for nearly 43 years and even beyond in the form of “neo-colonialism”. During the Seven Years’
war, (the English East Indies Company in collaboration with the British Navy and Army took
possession of Manila and Cavite for the period 1762-1764. Compared with other Asian
countries, the Philippines was a unique case of multiple colonial experiences under four different
foreign yokes. However, of the four different colonial powers, it was Spain and America that left
an indelible imprint on the historical and cultural make-up of the Filipinos. This paper shall
mainly dwell on the colonial experiences of the Filipinos under Spain and America, with special
emphasis on the characteristics, techniques and methods of Spanish and American colonialism.
When we were in college, I remember vividly our history professors pounded into our
heads three essentials of Spanish imperial policy, namely : Gospel, Gold and Glory. These
essential objectives - materialistic, spiritual, and ambitious - motivated Spain to colonize the
Philippine archipelago in 1565.
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Guided by the Alexandrine bulls, Spain obtained a foothold in Asia by derecho de conquista or
right of conquest. 1 he path of conquest, following closely the patterns of the various ethnic • ’
settlements, was conducted by sea, through the support of the co-opted native chieftains. At
the very outset therefore, Miguel Lopez de Legaspi spoused the Spanish ideals, that is to
govern the mdios" within the framework of Spanish polity, partly for the imperial honor of
'
Spam and for the profit of the Spaniards and partly for the benefit of the "indios" since thev
were to be received into the fold of Christianity. However, the right to property of the “indios"
was to be limited in exchange for religious instructions and protective paternalism afforded them
Jithin dT™? 1?Stf.lhIOcS °f ‘J'6 e^niC,gr°UpS Were t0 be abs°rbed with certain modifications
within the context of the Spanish colonial system.
t 1
source of spices in the archipelago. The only alternative for them to survive in the tropics was
o put the squeeze on the "indios". The Spanish colonizers were averse to manual labors most
of them came from the soldiery class.
To toil with their hands would have seemed to be
beneath their d.gmty.
The Spanish soldiers expected, naturally, after the conquest and
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pacification, to receive rewards they considered due them. The reward would be in the form of
an encomienda -already a well-defined institution in the New World.
the earlv nh^'
mind tllat the ownership of lands was vested in the Spanish King In
Philinnine S I
tT Col°niza,lon’ one of the feudalized means of control transplanted into the
S
d WaS.
enrC°mienda- 1116 enc^da, created by a royal decree, was a p^dege
not a land gran or a form of land tenure. The encomendero’s right of occupation ofthe ItJd
was limited to two lives, but was extended to the third life.
ex^ieH?16 emn°nl'j. ba,SeS °f the encomienda system were labor service and fixed tributes
exacted from the md.os assigned to the encomendero. The tribute was collected, either in kind
specie, to defray the costs of the colonial administration and to symbolize the “indios"'
" Spa,’,S" kinS' Onl, lh°Se 'vh0
'» “taity w'„ LZTto
1
h tamOUntinF t07 realeS and Iater increased t0 12 reales by mid-19th century In
1886 the tribute was replaced by cedula personal. The first dramatic act taken bv the pZinn
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domestic tasks.
’
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frai|-|ool<ing galleons, budding, weaving and performing
need to knowlhe bTsl^Th^cloT^rehtii6 ?-1SS'Onary
the evangelization of the indios, we
ZeT.gr ,n:° a.qi;as,-sl,Premacy over the Church through his dominions
from the A
I Jr'h
8I’
By virtue ofLh J
King enj°yed 016 right t0 nominate Church functionaries
appoi^
ZXfX
sa
“
todo t'r ?r eXeCUriOn °fthe royal WilL 7,16 Whole ecclesiastical officialdom was expend
to do all m us power to foster obedience and loyalty of the indios.
P
system
r"1" "^'^''^’'gious institution of control of the indios was the missionary
system. Hte fnars who went along with the pacification campaign had specific tasks in mind- m
theliJ ’ ;n,SSI°nS
SP-ead 'he ,ene,S of Christianity. To facilitate the evangelical work ’
care.
2
Il evTTr?? 3 P0'nt ‘T35'6' 016 langUageS °f
ethnic gr°l,ps under *eir sP^i
Iliey wrote dictionaries and grammars as adjuncts to their scholarly endeavors. Others
I
tried their skills in curing the sick indios and in combating epidemics as a way of overcoming the
resistance of the native priestly class - the catalonans and the baybaylanes. As the only visible
agents of Spain in the town level, they came into direct contact with the principalia (native elite) .
and the gobernadorcillo and the barrio folk. In the span of half a century, the missionaries had
already placed under their spiritual influence the low-lying areas of Luzon and the Visayas and
the whole archipelago was partitioned into several spheres of religious influences and control
among the Augustinians, Dominicans, Franciscans, Recollectos, and Jesuits. The Jesuits being
the latest to arrive were assigned to the Muslims areas of Mindanao and Sulu archipelago.
I
In the course of Spanish colonization, the religious orders had several ways of raising
funds. Ihe acquired estates or haciendas and organized them as productive institutions largely
dependent on cheap labor supplied by the mt/ioj/tenants and tied closely to the expanding cash
crop economy. The total holdings of the friars at the time of the Revolution of 1896 was
estimated at 420,000 hectares or about ‘/z of the total land put under cultivation. The friar estates
were the main source of wealth of the religious orders providing them with more than sufficient
means of living in a grand castillan style. Located mainly in the circum-Manila area, the friar
estates provided the religious orders an adequate and independent power domain. Each estate or
hacienda was essentially in control of the indio peasants through the inquilino or overseer. The
friars leased their estates to the inquilinos who in turn subleased the land to the kasama or
sharecroppers, who in reality received the smallest share in harvest time. This onerous
arrangement brought about the reduction of the kasama to the status of impoverished serfs and
the perpetuation of a system of debt peonage, subjecting the kasama to a grinding life of
endless toil.
Many inquilinos and caciques of the 19th century,were so a hard-driving lot that they got
everything out of the kasama they could. They looked down upon the kasama as inferior,
incapable of treating them as equals. Poor and illiterate, the kasama tended to look up to the
inquilinos and cacique as a father-figure and turned to him in many forms of assistance. In
time, the class of inq'iiUnos/caciques entrenched themselves in the expanded principalia that
produced the ilustrados in the late 19th century. The town head or gobernadorcillo who was
drawn from the principalia was at the beck and call of the friar-curate and actually became the
intermediary between the friar and the native populace.
Dealing with the indios wallowing in ignorance and fear, the encomendero exploited
them to the limits without fear of the good padres and good bishops like Bishop Dongo E.
Salazar and a few anthers. The early missionaries were zealously on the side of the indiosy but
were ineffective in many cases. In time, the poor indios became victims of cruel and greedy
encomenderos.
There were other crushing labor services imposed on the indios. In addition to all these
personal services, the Colonial State and Church needed a constant supply of labor in the form
of polo y servicios or forced labor used in the construction of the galleons, churches, houses for
the Spaniards, protective walls around Manila - the primate city, fortifications in several
strategic areas, roads and bridges. The systerp of forced labor that was perpetrated by the
Spaniards was an alien practice to the indios. It did not only interfere with the indios" family
,
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domestic routine, but also did lead to the abandonment of his fanning schedule The decline of
the im/ios population was partly attributed to forced labor.
crown was credited5X' i^deZctiXSyleca^roHttfXilltur^
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p
y because of its old concern for the preservation of the indios. The indios had to be
preserved if they were to be converted to tire Christian fold. However, another key official who
replaced the encomendero was also so obsessed with amassing wealth at the expense of the
m ms that they too became homo-economicos in their respective regions. In spite of the series of
royal decrees prohibiting private trade with the indios under his jurisdiction, the alcalde mayor
C°ni'k'i . i?
hi'1,1SC'r j" h,'S 'UCrative businessFor instance> a
decree which
prohibited the forced sale ol rice at fixed prices below its market value and to resell the same
produce in other districts where there was shortage at handsome profits was flagrantly violated
One common abuse by the alcalde mayor was to compel the indios to work for him without
wages. The untold hardships and injustices caused by the encomienda system and by the
Colonial State and Church led to the periodic outbreak of revolts.
Bitter and obstinate the
revolts were ruthlessly suppressed by the application of divide and rule policy.
closely knitt8edlebv
OnOP°ly was'nana8ed by a Phala™ of Manila merchants, who were
closely knitted by ties of marriage and a common interest.
The galleon trade received its
stimulus arid vigor from the lucrative China trade. The members of the religious order because
insufficiency of their income were also involved in the galleon trade. To circumvent the
k ami Ch' Pr°h,bltlnf t,1C'n fr°n’
the religious orders consigned bales of
and Chinese porcelain wares for the Mexico market under the name of Spanish layman
Manila became an entrepot between Acapulco and China and the only port of trade for Sich
local produce could be shipped aboard. Manila provided a further centralizing force.
d tl
Ma,’lla:^caPulco trade with 'ts two major tributaries - “the country trade with India
and the Chma-Mamla trade was actually a “new creation” as Jacob van Leur puts it: “for the rest
of the tradittonal framework of trade remained the same as it had been”. It was a new concept
of commerce mvolving fleets of sampan, a ready market trade or highly lucrative textile goods
prov.s.ons moving by sea and a variety of consumption items. The necessary impetus for this
uas the annual shipment of a great quantity of silver for Acapulco and the gradual
ransformation of Manila not only a consumption and distributing center for the colony, bm also
as a way station in the trans-Pacific commerce.
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,rade WaS an ini"’ense|y Profitable as well as an extremely perilous venture
ended in 181 5 as a consequence of the outbreak of the Mexican war of independence.
By the 1830’s, the policy of free trade had finally triumphed. Manila was formally
opened to world commerce in 1834 and at the same time Spain decreed the abolition of the
tl w C mm3'17 °f ‘'f Ph,llPPlnes- 7116 significance of these two events lay mainly in the fact
tat the Philippine colony was jarred out of its isolation and was thrown into the orbit of the
expanding European-Asian economy. The free flow of goods, men and ideas would eventually
ave a marked impact on the gradula transformation of the colonial economy and society. The
1850’s and 1860’s witnessed the opening of additional outlaying ports of Iloilo, Sual,
4
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Zamboanga Cebu, Leeaspi and Tacloban. Since then the external trade rose steadily. The
prospect looked brighter for the internal growth of the economy with the entry of AngloAmerican mercantile firms, plus other European commercial houses and the setting up of
consular establishments in Manila. With the British mercantile merchants at the forefront, the
European era of increasing trade set in after 1815 following the stimulus provided by a good
market for Manchester textile goods. The preponderance of British trade in the economy could
be gauged by the presence of more than a dozen mercantile firms , the oldest of which being the
South Bell and Company.
The British trading houses functioned mainly as importers of
English manufactured products, and exporters of Philippine cash crops and also served as
bankers, insurance and shipping agents. In the development of internal and external trade of the
Spanish colony, the Anglo- American firms as well as other European companies engaged the
Chinese as the’intermediaries between the European trading houses and the natives or indio
consumers. By the late 1870’s, the South China Morning Post reported that the “Philippines
was an Anglo-Chinese colony flying a Spanish flag”. Benefiting most also from the expanding
cash crop economy were the principalia in every key town who pledged their crops as security
for the advanced loans or quedans. One indelible legacy of the practice of the advanced loans
was the development of conspicuous consumption pattern among the principalia whose taste for
European luxury items was almost insatiable. The habit of sending their children to exclusive
schools and colleges in Manila and in certain key towns was financed out of the earnings of the
cash crop economy.
4
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I'he Spanish colonial policy was also aimed at securing the loyalty and allegiance and the
inclio elite. To this end, their sons were allowed to attend exclusive secondary schools owned
and managed by the Dominicans and the Jesuits and out of the subsequent generations came the
earliest indio and mestizo secular priests. To control the educational system, the Spaniards
permitted only a small minority of the indio population to receive a Catholic education from the
secondary - seminary schools while the rest of the indigenous populace was kept in darkness.
For centuries, priesthood was the only profession open to the indios because of the nature and
character of the colonial order. Nothing took root in the colony until the children of elite began
to grasp the meaning and significance of the Christian faith. Theology was the most popular
field of study for the sons of the principalia but the changing economy in the 19th century drew
more students to the study of law, pharmacy, medicine, philosophy and notarite because each
study carried with it tremendous socio-economic prestige. The principal parents were themselves
poorly educated that they developed achievement values and projected their unfulfilled
ambitions to their children. The sons of the principalia who studied in Manila began to get rid of
their ethnic biases as they developed friendly acquiantanship and even fraternal feelings for one
another, humanistic outlook and commonality of interests. Through socialization, the indio
students expcricnce’d a rediscovery of the riches of indigenous values, culture and history.
Together they criticized the weaknesses of Spanish colonial educational system and the
shortcomings of the Spanish teachers. The same observations could be applied to the more
affluent native sons who went to Spain and other centers of learning in Europe in search of new
access to the expanding world of knowledge and in order to free themselves from the dark
machinations of the Spanish friars in the archipelago. Eventually, the educated indios in Europe
and in the Philippines found themselves branded by the Spanish friars “personas sospechosas” or
suspicious character infected with dangerous ideas.
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I he Spaniards were well aware of the numerical superiority of the indios, outnumbered
as they were, they had to institute additional mechanisms of control that would keep the indios
at bay. Driven by intense feeling of insecurity and desperation the friars as custodians of the
o-i Z-i ?tatC reSOrted 10 such rcPressive measures such as arbitrary arrests or imprisonment at
Bihbid, deportations to the outlying islands, to the Marianas and even as far as Fernando Po,
death by garrote and public execution en masse. Between deportation and executions the
indios were taught bitter lessdns.
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By the I 88O’s all the repressive measures of the Spanish colonial state to turn back the
clock to pre-1872 conditions were already too late in the day. Time was running out for the
paniards. The Spanish friars who became the dominant power in the colonial state were faced
with two arch rivals - the tndio clergy and the lay-educated indios. The politicalization of the
educed nuho underwent at least three distinct stages of development. First, the idea of change
could be effected through enactment of reforms.
The second stage ’saw the advocacy of
< similatmn that is, the conversion of Fihpinas into a regular province of Spain. In the third
stage, a handful of mdios turned into revolutionaries whose main objective was independence
under a republican constitution.
E
oihpr
Fihpmo revolut.onanes of 1896 and 1898 together with the other educated indios in
other regions found themselves confronted with a new dilemma in the conquest and occupation
o another colonial power - America, thus ushering in an era of American experiment in the art
of self-government, education, “free” trade, health and protestant missionary enterprise.
When the Spanish-America war of 1989 broke out, the United States embarked upon her •
first Bush of unpenahstic adventure.
It was by virtue of the Treaty of Paris signed on
20 mil!
I ll'898 ™en iSpain Ceded t0 thC United St3teS the Whole ^iP^go to the^une of
20 mill on dollars. Tire slogan to take up the “white man’s” burden was a mere rationalization
ncoc ed by the exponents of American imperialism.
At the outset, President William
c mley spelled out America s policy of “benevolent assimilation” in a manifesto towards the
JinfHp5 haId rTi freed°n’ ,and ,ndePendence was nipped in the bud. This was followed by a
se of Presidential letters of instruction to the Philippine Commission. In the midst of a strong
F'l'P'no armed resistance led by Emilio Aguinaldo against the U.S. Expeditionary forces
President Mckinley established a civil government to replace the military rule. As the first
States CaWi|,|iA 8?.Ven’°rJ t13^ On,asj Secretary of War. a"d finally President of the United
States Wilham Howard Taft worked out the nitty-gritty details of the U.S. policies to meet
squarely the realities of the times in the archipelago and to adjust them accordingly to political
economic military, religious and educational aspirations of the ilustrado leadership and the
needs of Amencan business interests. Taft had to coopt the affluent and conservative ilustrados
and the landed native class in order to ensure the smooth operation of the American colonial
system. One way to facilitate the break up of the backbone of the Filipino guerilla resistance
was to organize the Fihpmo constabulary, which according to Taft, “would have a very healthy
effect upon the people because it will show them that they are to take part in the government ”
1 he Fihpino-Amencan War and the aftermath guerilla resistance were costly for both warring
camps in terms of lives and material resources.
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It is in the field of politics that Taft was able to entice easily the ilustrados to participate
in the colonial administration in various capacities, namely as municipal mayors, as provincial
governors, as members of the Philippine Commission, as members of the elected Philippine
Assembly, and as resident commissioners to the United States Congress, in Washington D.C.
Still a mechanism of control was devised in such a way the Filipinos involved in the colonial
administrations was under the watchful eye of the American sub-lieutenants of the Pro-Consuls.
For instance, two members of the provincial board could outvote the Filipino provincial governor
- the treasurer and the superintendent of schools were both Americans. In 1908, President
Teodore Roosevelt anticipated that the Filipinos in the near future would decide to work for their
ultimate independence.
I
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fhe call for an elected assembly was a novel one for the Filipinos. The idea cropped up
during the time of Taft, who at one occasion assuaded the apprehension of Senator Henry Cabot
Lodge, a fellow imperialist, when he said: “ I think we shall always be able to control a
majority of the Popular Assembly”. The comer stones of Taft’s policy were twofold: the
ilustrados participation in the colonial administration and making the Philippine safe for
American investments and business interests. These colonial policies were assiduously pursued
for both the ilustrados and the Americans up to the Commonwealth period and even beyond in
the form of neo-colonialism. The ilustrados were weaned and dazzled by the prospect of more
economic opportunities and the bestowal of political plums, of course, at the heavy price of
the non-alteration of the socio-economic structure of the Philippine rural scene.
The foundations of the American economic policy towards the Philippine colony were
laid out by Taft and his successors, especially when he became the President of the United
States. Under the Dingley Tariff of 1901, the Filipino cacique planters were not happy about
25% reduction in Philippine products because it offered a little help to them. During the first
decade of the American rule, the share of American business in the Philippine trade was still
insignificant, supplying only a fifth of the total importations. The U.S. Congress enacted the
Payne-Aldrich Tariff Act of 1909 in the name of “free” trade, giving “American goods tariff
preferences” in the Philippines. To help the Filipino cacique sugar and tobacco growers,
• Philippine raw materials entering the U.S. were, subject to certain quotas, free of duty. In 1913,
the U.S. free trade policy was modified under the Simmons-Underwood Tariff Act. These two
U.S. congressional acts proved a big boon to both American business concerns and Filipino
caciques. In 1909, the Philippine imports was only Pl2.9 million; by 1913, it rose to 53.4
million; 1938, it was increased to Pl81 million, and in 1946, it reached P515 million or 86% of
the total importations. According to Shirley Jenkins, the sugar imports of the Philippines from
1920 to 1930, climbed up to 450%, the coconut oil to 223%, and Manila hemp to over 500%.
14
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The long term effect of “free” trade on the Philippines is that it fostered a culture of
dependency and underdevelopment in the manufacturing sector of the national economy. It was
the American corporations and individuals who reaped enormous profits from their business
enterprises and advocated the prolonged or indefinite stay of the United States in the Philippines.
(
I
Economic policies and political control were augmented by public education for the
Filipinos as an added and effective instrument of American colonial policy. The Amrican
imperial attitudes towards the Filipinos carried with it a distinct racial undertones, that is many
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“ the Filipino people taken as a body are children, and child-like, and do not know what
finallv ?h
a ■■
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°f preParin8 them for the work of governing themselves,
nally their American guardianship had begun,... By
the very
fact of
of our superiority of
By the
very fact
cmlization and our greater capacity of industrial activity we are bound to exercise over them a
profound social influence. ’
I he attitude of racial superiority was <quite
’ pronounced among the American soldier who
coined all sort of deregulatory terms and insulting remarks against th^Filipinos.’Tt^ FUm^
■
? , , . ?Ca,ekd °r Shaped ,nt0 3 g°od colonial model- in conformity with the American
ideals, he had o be taught the American brand of English by American teachers and to use
American-oriented textbooks. The English language became the common denominator which
separated the tiny well-educated Filipinos and the masses. The colonial education was always
of the A
Andean Vice-Governor General up to the Commonwealth era. The net impact
ml • I meri^a" colonial education on the three successive generations of Filipinos is that their
^derdeveZmen.5
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witM 1111 br'T iSSUe
the Filipin0 ilustrados and the American was the timing of the
withdrawal of Amencan sovereignty and the recognition of Philippine independence The issue
!
r ' ' V ° . ,ie ultin2ate authority. Quezon was even secretly amenable to accept a
Commvnuealth status for a 25 year period for the Filipinos. Under such a political set-up certain
nolitZl s'
f"56’ CUrrenCy and “free” ‘rade W6re reSerVed for the Americans while the other
occa ion the US "CO,1°miC pOwer® ;ere ,0 be transferred to the Filipino ilustrados. The next
occasmn the US Congress imt.ated the move for Philippine Independence upon the prodding of
ihpmo advocates and their American symphatizers was during the Frankli^ Delanf Roosetelt
befomthe fi 18S|
Utfle
P3SSed
1934 Cal‘ing f°r 3 tr3nsition Period of
before the final relinquishment of American sovereignty over the Philippines.
years
•I
, . 1]le An’er|can mission of civilization wits hastened by the collaboration of the ilustrados
combmed with the consummate skills and energy of the American teachers, soldiers
imssionaries and bureaucrats. In the long-run, the “white man’s burden” turned t>ut to be a
piolitable venture for the American business interests.
1 he American type of democracy suffered grievously in the hands of the pricipaliaduslrados in the sense that in the span of four decades, what was evolved was democracy in fomi
8
but not in substance. The American brand of English stands out to be an outstanding gift of the
Americans. The patterns of culture of poverty, dependency and underdevelopment have deep
roots in the Spanish and American colonial policies and practices.
SOURCES
References of Direct Relevance
Abaya, Hernando. Untold Filipino Story. Malaya Books, Quezon City, 1967.
Brand, H.W. Bound to Empire. The United States and the Philippines. Oxford University
Press, Oxford, 1992.
♦
Corpuz, O.D. The Roots of the Filipino Nation. Vols. I and IL Aklahi Foundation, Inc.
Quezon City, 1989.
The Bureaucracy in the Philippines. University of the Philippines, Manila,
T957.
. An Economic History of the Philippines. University of the Philippines
Press, Quezon City, 1977.
Cruz, Romeo V. American Colonial Desk and the Philippines 1898-1934. University of
the Philippines, Quezon City, 1974.
I
Cushner, Nicholas P., S.J. Spain in the Philippines from Conquest to Revolution. Institute
of Philippine Culture, Ateneo de Manila University, Quezon City, 1971.
de la Costa, Horacio, S.J. The Jesuits in the Philippines 1581-1768. Harvard University
Press, Cambridge, Massachusetts, 1961.
Grunder, G.A. and Livezey, W.E. The Philippines and the United States. University of
Oklahoma Press, Norman, 1951.
Jenkins, Shirley. American Economic Policy Towards the Philippines.
Pacific Relations, 1947.
Institute of
Kamow, Stanley. In Our Image : America's Empire in the Philippines. Random House,
New York, 1989.
Miller, Stuart Creighton. Benevolent Assimilation : The American Conquest of the
Philippines 1899-1903. Yale University Press, New Haven Connecticut, 1982.
• •
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Phelan, John Leddy. Hie Hispanization of the Philippines : Spanish Aims, and Filipino
Responses 1565-1700. University of Wisconsin, Madison, 1959.
Quiason, Serafin D. Fhe English Country Trade With the Philippines 1644-1765.
University of the Philippines, Quezon City, 1966.
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Roth, Dennis Morrow. The Friar Estates in the Philippines. Ph.D. Thesis, University of
Oregon, 1974.
Salamanca, Bonifacio. The Filipino Reaction to American Rule 1901-1913. New Day
Publishers, Quezon City, 1984.
Schumacher, John N., S.J. Revolutionary Clergy : the Filipino Clergy and the Nationalist
Movement 1850-1903. Ateneo de Manila University Press, 1981.
Shalom, Stephen Rosskamm. The United States and the Philippines : A Study of Neo
colonialism. New Day Publishers, Quezon City, 1966.
Steinberg, David Joel (ed.). In Search of Southeast Asia. Praeger Publishers, New York,
1971.
Tan, Samuel K. A History of the Philippines. Department of History, University of the
Philippines, Quezon City, 1957.
Wolff, Leon. Little Brown Brothers : How the United States Purchased and Pacified the
Philippine Islands at the Turn of the Century. Doubleday & Co., Inc., New York,
1951.
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INTERNATIONAL CONFERENCE
■
on
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gania
February 2-6, 1998
New Delhi, India
i
!
THE PROCESS OF DEBT IN SOUTHEAST ASIA:
FOCUS ON THE PHILIPPINES
r
By
Prof. Leonor Magtolis Briones
Vice-President, IBN Khaldoun Centre for Development Studies,
Cairo, Egypt
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K'' '
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'’l(OCESS1
i"e
foclis
/h : Prof Leonor nia^tolis liriones'
hi(i oduction
CO.KIUM »„.!
"iggcre1',llc
colonization of Asia.
('
? ai"" Js Xa ■
-------- What happened five hundred
even, rclcgalcil Io lexiboots io l,c incnu.rizv.l I
’aS°
> In be memorized b
" "’cre bisloj io .fl
«i>'«™ .x <i.,
™^;“':;“nfofs“c“is- It was the start
continues
to this
tcrminokigies and players have changed,
the even
victims
‘ ''S,day
tlay . While ‘’^"'od ' forms,
Asia, Latin America and Africa.
’
remain the same: the peoples of
It is ftherefore fitting that on the fifth r~ '
century of Vasco da Gama’s voyage, this
conference is liacing the
pioeess of colonization
-•> up to the present. Now, it is called
globalization.
I'liHiircstalionsofglohahValioiLiMhis ”1’l,bly ()ne .of ,hc 'Most visible and
requires a reexamination of the process ofdebt^"1^1
°f 8Joba,izat'o«
malignant
necessarily
global debt crisis of the 1980’sand (he niuTc^Tf01103/'’ Sou,l’c‘isl Asi™ debt: (he
currently ravaging Southeast Asia" 'tSl'XTwnn del;t due 10 ,lle CII1TC'^
Southeast Asia, its focus will b- on the Philino nes
it
’C'gbl of the global debt crisis, the Philippines was the
’ 0,1
°l,'er C0lllltlies of
°bvious- At llle
Globalization: pjyg
■. India from 02-06
I'bon
..//
/, f Iir.
ne invaluable research
‘ mi( t R ( arandan^ ai r ^rutrfulp
■
■/
of eatho.ine Hool. as >.<■// as
/li.w led^cd.
1
c
M
I
%
« <hs fanner pres, dent of Freedom from Debt
... zi,
the od/niniMr^aye support of
Briones/1
t
i, d
1
At the same time, the current currency crisis which has brought about the
of .he hili,...... . ,.e,o h.„ .esulied i„ .he ,»pid csrala,iorl if i.s e“ ie,™!
I: 11
(Chi. II h .s ,cjo,„„i .he rilnks „n„w.inci,ll,c an,| „,illt||e.i„come coi.Mries c™Kl,l in ihe
ZXX...... ■ '"‘c,'‘li"s s,”ry of slo“
......
I. The Global Debt Crisis
ii
‘7// the beginning,,"
1Hi
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externa .I -I t
t
to the world that it could no longer
longer service
service its
its
xtem.l debt.
Ibis announcement was followed in rapid succession by similar
Hcclarations horn heavily indebted developing countries in Latin America, Asia and
,,Ca . n Al,^l,s(
^cr a year of fruitless efforts at
staving off the crisis, the
Philippines declared its incapacity to pay its external debt.
Sin. e lhen indchled developing co.mlries have agonized llirough (liken years of
he .nos. des1n.el.ve ensis of global propooions in reeen. .hues. The In.nm
h,
en,,s „ des,roved lives, espewhy of .von.en and el.ildren, far exceed .h
™dy I a V
n eed hrndena hespne eh.i.ns .„ ,he eo.n.a.y. ,he global deb. crisis is no, ye'oveY
co ninny, l,e ex.envd dehls of oonnlries affceled I,, Ihe Asian enneney crisis has
n.e,eased Iren.endonsly due h, II,e massive depreeiaiion of .heir cu.Teneies.
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How did the global debt crisis start? Like all
crises, it was a lethal combination of
exogenous and domestic factor'’ r
Exogenous factors include the tremendous pressure to
boiiow from the international financial c„
I community. During the decades of the late
sixties and the seventies, international banks
• Tj were awash with petrodollars. These they
loaned out at irresistibly low interest i '
rates to developing countries.
Young bank
representatives in their twenties set up shop i
. in the developing countries of Asia, Africa
and Latin America. In their eagerness to <
capture the developing country market, they
offered attractive financial terms and neglected
1 to cxcicisc the usual caution in the urant
of sovereign loans.
The Philippines is a case in point.
gove.'nnuflt
go eminent.
I.
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Hundreds of nullions of dollars were loaned
ri,ese°; '""1S
Pa"nCrS ;"Rl h6i’,d mC'nbe,S Were ol,kials of ‘he
I hose loans were guaranteed by the government. Thus the banks did not
KXZ'X1' ’h inor "■"■IS c Gw),"',e in De Di»
Briones/2
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Developing countries were seduced by visions of development characterized by
massive inf.aslructurc projects
power and elect!icity, dams, roads, bridges, bmldmgs
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monuments
all fmanced by loans. While developing country governments were
‘frcnziedly putting up pmjecls for externa! funding a senes of global s. locks
’
decade of the seventies pushed them to even more borrowmg. The first of these shocks
were the higher oil p.iees in 1973-74 and 1979-80. The second shock was the escalalmn
of interest rates in (he United Slates. The Philippines, which owed majority of Us .
lateral debt to the United State* was further crushed by the increaseJ-1 >^cs
payments. Al the height o! the debt crisis, a 1% increase tn U. S. interest rates
automatically meant an increase of $ 159 million tn interest payments.
During
the
early
eighties,
another
global
shock
which
pushed
indebted
developing country governments over the edge was the global recession from 1980-82,
Export earnings of these countries plummeted as market prices went down. (Bitenes m
De Dios and Rocamora, cds.: 1992).
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While the external forces which triggered the debt crisis were powerful and
irresistible, it cannot be denied that domestic causes exacerbated the problem. During
the period of the late sixties, seventies and early eighties, developing countries rushed
into a ‘■development orgy.” Development then was defined in terms of huge projects
which were largely foreign funded, l.argcscale waste and overpricing characterized these
pioiects Huge bureaucracies were created to oversee these projects. Fixers and lobbyists
of both the borrowing government and the creditor countries colluded in building up the
mountain of debt. (Briones and Chavcz-Malaluan: 1988).
|
During my term as president of Freedom from Debt Coalition, case studies were
made of five multimillion dollar loans which were tainted with graft and corruption. 1 he
most infamous of all, the Bataan Nuclear Plant debt, totaled $4 billion. Interest payments
amounted to $350,000 a day. Until now, the 1 ihpino people are still paying for a nuclear
plant which was never operated. In 1996 for example, payments for interest and principal
1
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totaled over $80 million. In 1997, debt service payments were higher at $107.7 million.
Payments will continue until the year 2006.
(Department of Budget and Management:
1990).
The debt crisis and globalization
The link between globalization and external debt is all too obvious. Integration of
financial markets is one of the earliest manifestations of globalization. The advent of
offshore banking, (he passage of laws in developing countries allowing unlimited entry
of foteign banks, the availability of petrodollars and the incessant pressure from the
I
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| =
Briones/3
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<: - .
.■cj
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•K:’.
inlcinational cominuni'v to “develop” - - ;all these combined to lure developing country
governments into the web of global finance.
When the indebted countries went into crisis, they wcie subjected to structural
adjustment progiams which (hither tightened (he stranglchokbof globalization. Drastic
budget cuts, liberalization of developing economics and privatization are among the
standard components of structural adjustment.
I he costs of integrating developing countries into the world economy are too
horrendous to contemplate. The economic and social consequences of the external debt,
the tremendous human suffering brought about by structural adjustment as a “solution"
to the debt crisis - all these were faithfully documented by analysts and activists at the
national, regional and global level. International organizations like tire UNDP and the
I INICT-.F added their voices to global protests on the human consequences of debt and
I
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structural adjustment. One of the best known is UNICEF’s Adjustment With a Human
Pace (UNK Id : 1988). The book chronicles the impact of stiuclural adjustment on the
social sectors of indebted developing countries, particularly women and children.
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II. The Crisis and Southeast Asia
As noted eailicr, among the Southeast Asian countries, the Philippines was the
most severely hit by (he global debt crisis. This was the result of a combination of
factors: a corrupt military dictatorship headed by the late President Ferdinand Marcos and
?!
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his wife, Imelda, former Governor of Metropolitan Manila; inefficient public
administration system, and overborrowing for “development at the instance of private
banks and country creditor governments.” Furthermore, the economy of the Philippines
has been tied historically to that of the United States, particularly in trade.
When the Philippines was conquered by the United States , it was compelled to
enter into a trade agreement wherein American goods would freely enter the Philippines
Thus, the Philippines accumulated trade deficits with the United States since its exports
could not match the levels of imports from the U. S. Even when independence was
II
attained m 19'16, (he free hade agreement was extended. Thus, the Philippines was
afflicted with a chronic debt problem occasioned by trade deficits.
When capital flows dwindled in 1982 after the Mexican d fault, the Philippines
was among those who were severely affected. ’It was one of the seventeen heavily
indebted middle income countries and the only one from the Asia-Pacific region to be so •
afflicted. I he others were low-income countries frrtin South Asin.
•
Biiones/4
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I he case of Thailand was difleicnl from that of the Philippines. When the debt
crisis exploded, it had a larpe hade and current accounts position. Its external debt was
inanaecahlc.
Indonesia, an oil exporting country, benefited from the second oil price hike.
I bus it also had huge tiade and current account surplus. However, this was not sustained.
By 1986, it suffered a shaip decline in oil revenues and experienced low'growth.
crisis.
Malaysia, on the other hand, had low levels of external debt at the time of the
Ibis was largely because it oiijoycd a commodity boom in the late seventies.
.Malaysia underwent adjustment in 1983 and improved its external account position in
three years.
Nevertheless, the adjustment process was cos''-.- in terms of growth as well
as social impat i.
In teiins of absolute amount of debt, the Philippine debt at the height of the crisis
m 1984 was less than (hat of Indonesia.
However, it did not have the same capacity to
pay as Indonesia, Malaysia and I hailand. (See Table I )
labk*
Cou ntry
Exurjial Dvbf Qf Sckdfd Sojdhcayt^iLaiLCQuntLics
Total External Debt (In US$ Millions)
Indonesia
31,894
Malaysia
18,811
Thailand
14,981
Philippines
24,242
Data Based on Year 1981
Terence: H.e World Bank. Wo. Id Debt Tables 1989-90: External Debt of Developing
( ounliies. Fiisl Supplement. 1990.
6
t
In the case of the Philippines,
it was subjected to a series of painful structural
.ujustment piogmms which plunged the country into two years of severe contraction
Adjustment aggravated the already crippling economic slowdown and massive poverty
the country was experiencing at the tune.
Thus, the country had tlw worst case of
stiucluial adjustment in Soulheast Asia. (Hiioncs and Chavcz-Malaluan: 1998)
ndlr.KOl^"l.,1S "1C ab°Ve '•'l)servi‘lio»s. He noted that Southeast Asia — with the
exception of the Philippi
. pines
was not mt off from capital inflows in the 1980s. Thus,
Biiones/5
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Ihi' (<i\c h(/\ i/mie r1-, ifor tlnrc
1
ti mawive infusion of
/oK’i^n capilul tn the fomi o'f Jofnmcw investment in search of lowwave prodm non sites afh r the \t n 's massive appreciation in 1985
8<>mc 51 '.S /5 billion \\<>ith of Japanese inscstmcnt rushed into the
region between 1985 ami 1990. and (hispnade a critii al ■
tiibution to
indmmp hipfi or moderate growth rates in Singapore. Thailand.
Indonesia and Malaysia (Bello: 1994)
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Io summarize, the Philippines was (he hardest hit of (he middle-income countries
of Southeast Asia.
I his was because when the debt crisis exploded, it had already
accumulated a large external debt which «, ickly increased, It underwent a scries of
structural adjustment programs which only served ’a feed th? debt as the economy went
into recession, capital flows declined, and poxcity worsened,
On the other hand,
lhailand did not have a serious external debt problem, Indonesia benefited from the
second oil shock. Malaysia ii.id a commodity surplus, 1 bus, they did not undergo
structural adjustment to the c -me extent as the Philippines. In the process, they did not
Undergo the terrible ordeal of recession.
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As nolcd in an earlier paper,
Southeast ,'lsnm <• unfries noted for their economic success like
.Singapore. 1 hadand. Malaysia and possibly Indonesia did not undergo
stmi tural adjustment to the same extent as the Philippines.
The kev
n
iitors ij then mu < (•• v are not identdu d w ith structural ad tinent
! u\i /s the avvri 'Mve role of tin ir governments in pushing for
ctonomie gniwth In stimtural adjustment, the talc of government o
expected to be minimal Second is the protectionist strategy followed
b\ \ome of the NICs like Thailand, Malaysia and Indonesia This is to
(ontiaiy to the prcscuption of strut tural adjustment for trade
hbeiah. anon Hu d. the governments oj these countries were able to
attain sot nd cohesion as an important ingredient of economic growth.
I mler sttuctuial adjustment, social cohesion is difficult to attain since
' ■■ . is 5c< tors oj the c< onomy are destabilized and neg lively affected
while others clearly benefit
Fourth and most important of all.
il
countries wlmh were not a\ heavily l■.•dened with unmanageable
external debts a< hieved high levels ojgrow th because they did not have
to undergo structural adjustment in return for loans from the
multilateral institutions (Biiones and Chavez- Malaluan
I
1988).
I he most imp-•riant point, however, is that the Philippines was pushed much
vailicr into the web ol
global finance than other middle-income countries in Southeast
1 and economic factors.
Asia due to a combination ol historic
Briones/6
Did the solutions n ot h? II hat happened in (he Philippines?
When the global debt crisis exploded in 1982, (he International Monetary Fund,
the World Bank and the private commercial banks were the lead players in overseeing the
formulation and implementation of “solutions.” Indebted countries from Asia, Latin
America and Africa weic subjected to variations of the same theme: structural adjustment
as a condition for the grant of Ivans from the multilateral institutions in order to pay debts
to private banks and bilateral or country creditors.
,
(Jenera! features of structural adjustment programs were practically uniform:
brutal reduction of government expenditures in order to reduce deficits; liberalization in
the form of reduction, if not elimination of tariff on imported goods as well as “reforms”
in the financial and monetary sector; privatization and diastic devaluation. The severity
of the impacts of structural adjustment varied from country to country.
As noted earlier, (he impact of structural adjustment programs on hapless
countries is well documented. The UNICEF study has already been mentioned. Other
UN organizations have consistently called attention to (he human costs of structural
adjustment. Academics, policy analysis, NGO’s and other civil society groups have
documented the experience of most if not all of the countries which underwent
adjustment. They have protested at the national, regional and global level. Even the
International Monetary Fund and the World Bank have recognized the tremendous human
costs and negative economic impacts of their piograms.
The Philippines is possibly among the best documented victims of global debt and
structural adjustment. It has all the ingredients which dramatize everything that is
malignant and evil about that terrible period: a conjugal military dictatorship
characterized by extravagance and waste; collusion among government officials, cronies
in the private sector, private banks and even lending governments; massive grafi,
corruption and looting; more than twenty structural adjustment programs which did not
work; recession; and most painful of all: heart-wrenching human costs.
The international community is familiar with the late President Ferdinand E.
Marcos and his wife, former First Lady Imelda R. Marcos. It was during their regime that
the Philippines accumulated massive debts. Case studies prepared by Freedom from Debt
Coalition documented collusion among government officials, who themselves (if not their
relatives) were owners or partners of private sector colorations ,and lending institutions.
The latter were backed by their respective governments. In several instances, (he
hoi rowed funds never enleied the Philippines. These were icmiltcd directly (o bank
accounts abroad. Many loans did not have collateral and were not backed by assets.
During the period of the debt crisis, the Philippines underwent more than twenty
structural adjustment programs which did not work. The UNICEF case study on the
Philippines examined the impact of structural adjustment on vulnerable groups for the
Briones/7
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period 1979-85. It documented the effect of these programs on household incomes and
consumption. From 1981-85, real per capita GNP fell by 15% to a level equivalent to
that in 1975.
This resulted in visible slowdown in employment growth, rising
unemployment and shaqdy declining real incomes among workers and the self-employed,
aggravated by a deterioration in income distribution and an increase in households falling
below the poverty line. As a consequence, poverty levels rose, particularly in the rural
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areas.
The impact on health was horrendous.
Access to medical services rapidly
deteriorated. Disadvantaged groups could not afford even the most basic of health
assistance.
Performance of major health indicators plummeted.
All other social
development services deteriorated: be it nutrition, education, housing, women and
children.
In short, all the horror stories about structural adjustment did happen!
(UNICEF: Volume 2, 1988).
id
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Studies conducted alter 1985 and up to the end of the eighties showed the same
trend. Servicing of public debt more than doubled the next five years, from 1986-91 from
16% to 39%. By the early nineties, the Philippine Commission on Audit calculated debt
serving at more than 50% of the national budget. As a consequence,-social indicators
The most helpless members of society bore the brunt of the
went from bad to worse.
women and children, the urban poor, the peasants and indigenous
consequences of debt:
peoples.
As the debt problem worsened, the environment was likewise affected. During
the period of intensive “development,” forests were intensively logged
Grounds
considered sacred by indigenous people were turned into sites for power plants Thus,
structural adjustment exerted pressure on natural resources. The confluence of the high
population growth, massive internal migration, and poverty all contributed to the
depletion of commercial forests, agricultural soils and fisheries in the Philippines.
The impact on women has been repeatedly mentioned in many studies. When the
government reneges on its obligations and fails to provide even the most basic of services
to its citizens, the responsibility of making up for these failures fall on women as mothers
and wives. Women bear the primary responsibility for keeping the family together.
During the crisis, women took multiple jobs to supplement their husbands’ incomes even
as they struggled with budgets for food, medicine, housing , clothing and education.
Another consequence of the recession which followed in the wake of the debt
crisis was the dramatic increase in the number of overseas contract workers. The policy
of encouraging the “export of human beings” w,as started during the administration of the
late President Marcos as a temporary measure to case the pressure of rising
unemployment. Overseas contract workers’ remittances have since accounted for a
significant portion of overall inflow of foreign exchange. It is estimated that in IB ,
4
their contributions reached over $5 billion.
Briones/8
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Even as overseas contract workers have helped keep the Philippine economy
afloat, the human costs are incalculable. More than fifty-percent of these workers are
women. In (he process, they have endured conditions approximating slavery in certain
countries. The records of the government arc full of stories of young women who have
undergone physical and psychological violence as domestic workers and entertainers.
The spectacular cases of Flor Contemplacion in Singapore and Sarah Balabagan in the
United Arab Emirates are only two examples of hundreds of women who have undergone
harrowing experiences while vyorking abroad.
To summarize, even as the'financial costs of the external debt constituted a
terrible burden, the human costs in terms of increased poverty, poorer health, lack of
access to nutrition, education and housing are too staggering to contemplate. When we
consider the children who lost their childhood and even their lives, the women whose
lives were broken or lost in the search for jobs and a better life for their families, we see
global finance at its darkest and most evil.
The administration of President Ramos is credited with the so-called recovery of
the economy. Since his election in 1992, the economy has gradually climbed from
recession to “recovery “in the last four years. Thus, it is now claimed that the structural
adjustment programs of the Philippines were successful and the country has finally joined
the global community. However two nagging issues persist. While it is true that the
economy has been growing, structural adjustment goals were achieved at very high
human costs. The second issue was that of sustainability. Critics were warning that the
Philippines had not gone out of the boom and bust, cycle which had.plagued it for
decades. In 1997. the fifth year of the Ramos administration, the Asian currency crisis
started building up. Now, economic growth is slowing down again and the Philippine
economy is beset with rising unemployment and poverty.
III. Debt and the Asian Currency Crisis
Globalization, debt and the present Asian currency crisis cannot be separated from
each other. The latter started with a build-up of private debt. The Asian financial and
monetary crisis has now escalated into a fullblown economic crisis for the affected
countries — Thailand, Korea, Malaysia, Indonesia and the Philippines. The monster of
external debt is rearing its ugly head once more. This time, the Philippines is not the
only one afflicted — the tiger, as well as would-be tiger economies in the region are
undergoing the throes of economic destabilization and instability.
Dr. Walden Bello, professor at the University of the Philippines and Co-Director
of Focus on the Global South made an excellent analysis of the crisis in his monograph,
“Addicted to Capita): The ten-year high and present-day withdrawal trauma of
Southeast Asia’s economies.” (November 1997)
Briones/9
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•'A*-'-Fl
-NpUlp.,.
Numerous analyses have been made of this Asian “contagion”. Western analysts
generally put the blame on “protectionist governments”, overborrowing on the part of the
private sector, unregulated financial markets, and grad and corruption. Government
officials, as in the case of the Philippines, claim that liberalization and opening up of the
economy was not done fast enough. Bello expresses the views of independent analysts
and NGO’s that what is really happening in Southeast Asia is the “unraveling of a model
of development that brought a.certain kind of success but also carried within it the seeds
of its own downfall.” He notes:
This model was one of high-speed growth fueled, not principally by
domestic savings and investment, as in the case of Taiwan and Korea,
the classical NICs or "newly industrializing countries, ” but mainly by
huge infusions offoreign capital. The mechanism to achieve this was
to liberalize the capital account as fully as possible, achieving very
considerable integration between the domestic financial market and
global financial markets. The illusion that propelled the advocates of
this model was that countries could, ... 'leapfrog the normally long and
arduous course Io advanced country status simply by maximizing their
access to foreign capital inflows. "(Dello: 1997, p. 3)
1
Thus, the crisis in Southeast Asia illustrates financial globalization at its most
destnictive. It has spawned a crisis of confidence in the afflicted governments* capacity
to stem the tide of decline, sharp rise in unemployment and levels of poverty, as well as
threatening social problems.
*
JI It ither the tigers?
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The 1996 World Debt Tables which is published by the World Bank, noted with
satisfaction that “In East Asia and the Pacific the rise in export earnings more than
outpaced the 12 percent increase in external debt in 1995 and debt service as a percentage
of exports declined to 10.7%, compared with 16.2% for all low-and middle-income
countries.’’ Further, “The East Asia and the Pacific region has the fastest growing
external debt - the stock of debt rose by 12 percent in 1995, compared with an average of
8% for all low and middle-income countries...the combined debt outstanding of the
countries of East Asia and the Pacific was an estimated $473 billion at the end of 1995.”
The World Bank was not at all worried about the acceleration of debt in East Asia
and the Pacific since their data showed that economic growth across the region outpaced
(he increase in external debt. From the Bank's point of view, “debt restructuring is not an
4
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issue.. ..debt indicators improved across the region.” Only two countries were then
classified as heavily indebted; Cambodia and Vietnam. (World Dank; 1997).
Indeed, not only the multilalerals but also the international financial and business
community thought that the spectacular growth rates of the Southeast Asian tigers’ would
continue beyond the next millennium. Symptoms were emerging, like the build up of
debt, but these were ignored.
Thailand’s economy was the first to fall. By the summer of 1997, the Thai baht
was subjected to a series of speculative attacks, resulting in its depreciation. Thailand
was followed in quick succession by Malaysia, Indonesia, the Philippines and Korea.
Overborrowing in unhedged dollar-denominated loans, and overexpansion in real estate,
construction and financing resulted in an external debt which more than doubled, from
$21 billion in 1988 to $55 billion in 1994. Private debt accounted for over 25% of the
debt. (Bello; 1997, p. 14).
Indonesia, considered by the World Bank as among the best performing East
Asian economies, followed the same pattern of economic strategy as Thailand. Along
with Malaysia, which was rated as the best of Asia’s economies by-key investment
houses, Indonesia eagerly followed a similar formula of financial liberalization, high
interest rates and stable exchange rates. It was this very formula which led to the
downfall of the Southeast Asian economies. Like their threatened animal counterparts,
the Southeast Asian tiger economies are now in grave danger.
Is the present crisis the same as the crisis of the ‘80’s?
Often, this question is asked by anxious citizens of Southeast Asia: is the present
currency crisis the same as the crisis of the ‘80’s? The answer is that it is an offshoot of
the global debt crisis of the '80’s. At the same time, certain features are different.
First, the crisis is presently affecting a specific region: the Southeast Asian region,
home of the tiger economics. The earlier crisis was global, with one country in Southeast
Asia, the Philippines, as the most devastated. Recently, however, Korea joined the club
and plunged into the abyss of the crisis. Fears have been expressed that this regional
crisis might trigger one of global proportions.
Second, the present debt crisis is largely private sector-led compared to the earlier
one where debts were primarily public sector debt, as in the case of the Philippines and a
good number of African countries.
Third, the present crisis is focused on middle-income countries. The earlier crisis
held both low-income as well as middle-income countries in its ruthless grip.
Briones/I I
The different features notwithstanding, especially degree of impacts on the
afflicted countries, the overall pattern is similar, globalization of finance which led to
escalating levels of debt, depreciation of currencies, and finally economic instability.
IV. IMPACT ON THE PHILIPPINES
As noted in the preceding analysis, the Philippines was the only middle-income
country in Southeast Asia which was savaged by the global debt crisis. Thus, it did not
enjoy the spectacular levels of growth which Malaysia, Thailand, Korea and later,
Indonesia posted during the past ten years.
Instead, it underwent a scries of brutal structural adjustment programs which
impacted heavily on the distribution of income, poverty, employment, health and
nutrition. By 1992; the Philippines started on the slow and painful path to economic
growth, prompting the World Bank to note that “The Philippines is in the midst of a
promising economic recovery and is laying the foundation for sustained growth and
development.” (World Bank: 1997).
Even as the multilaterals were singing hosannas to the Philippines* recovery,
NGOs and academics were warning that the modest economic growth was unsustainable
because of the heavy social costs, as well as the build-up of the trade deficit.
Furthermore, economists noted that the structure of the economy had not actually
changed during the past twenty years.
By the first quarter of 1997, the signals were already very clear — the trade deficit
was escalating rapidly and the Philippine peso was subjected to speculative attacks. By
July 1997, after spending more than $2 billion in a vain effort to protect the peso, the
Central Bank finally allowed the peso to float.
They say, we say..., •
When Filipinos started panicking with the fall of the Philippine peso, the
government explained glibly that it was due to speculative attacks. Thus, outside factors
were blamed for what was clearly a problem arising from both external and internal
factors.
What were the internal factors which made the Philippines vulnerable to external
attacks? First, the much-vaunted economic “recovery” was unsustainable. The structure
Briones/12
of the economy had not changed substantially. Even as the gross national product was
growing, there was a marked slowdown in the growth of the manufacturing sector, as
well as of agriculture. These two sectors provide employment in great numbers. Growth
did not have palpable impact on employment. In other words, what was happening was
jobless growth. At the same time, the savings rate was deteriorating even as the GNP was
rising.
Like Thailand, the Philippines enjoyed a boom in the property and construction
sector. This was financed heavily by borrowing. Thus, many banks overlent. At the
same time, private companies borrowed heavily in dollars even as these loans were
unhedged.
On the other hand, NGOs, economists and policy analysts predicted the crisis
precisely because the signals were clearly visible from the macroeconomic data. Thus,
while the government insisted that the Philippine economy’s economic fundamentals are
sound, critics insist that it is the other way around.
A passing storm?
Another point of disagreement on the Philippine crisis was whether it was just a
“transitory phase”, e.g. a passing storm, or whether it was a more serious problem. The
government insisted that it was merely a transitory phase in the Philippines’ march to
growth. A month after the Philippine peso fell, the Secretary of Finance declared, “the
stonn is over.” Soon after he spoke, the peso plummeted further. When it depreciated to
P40 to the dollar from P27, the entire country was thrown into shock. It was not prepared
for the extent of the devastation due to the claims of government. So far, it has
depreciated"byj more than 70% and hovers between P43 to P45 to the dollar.
Economists and analysts, on the other hand, insist that the problem is more
serious. NGOs insist, like Walden Bello, that the present travails of the Philippines are
due to the failure of a development model hailed as responsible for the “economic
miracle” of Asia.
Effects of the depreciation on the Philippines: Back to the debt!
The first part of this paper recounted the impacts of structural adjustment and the
debt crisis on the Philippines. After five years of recovery, the very same impacts are
once more being felt. With the depreciation of the peso, incomes have started to shrink
Briones/13
even as prices are rising. The rise in prices iis exacerbated by a new round of increases in
the prices of gasoline and oil products.
Poverty is once more on the rise. Past estimates of 35% of the population living
below the poverty line are inow being revised. Using the simple formula of people
earning less than a dollar a day/ as below the poverty line, it would seem that 61.8 percent
of the Philippines 70 million residents can be considered poor.
ll
I
!
The spectre of unemployment is likewise engulfing the Philippines. The
Philippine Chamber of Industries has calculated that at least 500,000 jobs will be lost this
year. The numbers are much more horrifying for the tiger economies. In Thailand, 1.5
million people are expected to be retrenched by the end January 1998. More than
900,000 people are expected to lose their jobs in Korea. Unemployment in Indonesia is
expected to increase by one million. (Corral: December 1997, p. 5)
■
I
At first glance, it might appear that the Philippines is the least hit. However, it
must be emphasized that the new unemployed will be added to the millions who have
been inventoried as unemployed even before the currency depreciation. For the past five
years, the Philippines has been plagued by more than 9% unemployment rate and more
than 20% underemployment rate.
Also, many Filipinos work as overseas contract workers in Korea, Thailand,
Malaysia, and Indonesia. Once they are retrenched, they will go home and add to the vast
numbers of unemployed in the Philippines.
Social cohesion, which has always been fragile, is threatened as a consequence of
the crisis. Unrest is palpable among the poor, particularly the workers. They are gearing
up for strikes and protest actions due to the increase in gasoline prices, as well as the
massive layoffs.
Effects on the national budget
As in many developing countries, the government by itself constitutes the biggest
contributor to the GNP. It produces goods and services, and creates jobs. As part of the
economy measures which are now being undertaken to survive the crisis, the government
recently resolved to decrease expenditures by 25%. This measure was impelled by two
factors: the need to produce a budget surplus 'in order to comply with the IMF’s
requirement, and the need to recompute the budget because the assumptions on the
exchange rate have changed radically.
When the budget was prepared, the assumption was that the rate of exchange
would be slightly over P27 to the dollar. As mentioned earlier, the Philippines has a
Briones/14
■
;
continuing burden of foreign debt. The depreciation of the peso automatically increased
the peso requirements for buying dollars to pay off the foreign debt. Also, a substantial
portion of the budget will go into paying for purchases of goods and services requiring
foreign exchange. The latest estimate (as of January 25, 1997) is that the Philippines will
have a deficit of P75 billion, instead of the much anticipated surplus.
This is
approximately $1.8 billion .
Al the sahie time, the surge in interest rates is hurting not only the business sector,
but also the government which continually borrows from the local and international
markets for its operations.
While the logic of the government’s action is understandable, the impact of the
25% reduction on government expenditures is too frightening to contemplate. Services in
health, nutrition, education and labor are already inadequate. Drastic reduction in these
services will only result in a repetition of the nightmare of the global debt crisis.
A simple tabulation of the 1998 budgets of four social development agencies
(Departments of Education, Health, Labor and Employment, Social Welfare and Special
Hospitals) showed that a 25% reduction will amount to P7.6 billion or roughly $180
million. This means that medicines, books, potable water, and other health services will
be reduced by this much. The prospect is too frightening to contemplate.
J
The situation of the Philippines is akin to that of Sisyphus. Since 1983, it has
been pushing the rock-hard burden of debt up a high mountain. After nearly fifteen years
of struggle and unspeakable sacrifice, the Philippines is nearing the top of the mountain.
Then, in 1997, the winds of economic crisis blew and rolled the rock down. Now, the
Philippines must start the painful climb again.
Such is the nature of globalization and the never-ending story of debt.
V. CONCLUSIONS
I
Pl
This paper started with the historic voyage of Vasco da Gama to India five
hundred years ago’. His voyage unleashed a chain of events which placed the rest of Asia,
Africa and Latin America under the yoke of colonization, and later, globalization.
I
Li
What are the conclusions which can be drawn from the process of debt which
occurred in Southeast Asia in two different periods?
1.
The experience of selected middle-income countries of Southeast
Asian conclusively shows that this is part of the seamless tapestry of
Briones/! 5
I
colonization and globalization. Most of the countries have been under
colonial domination. In the process, their economies and societies
inescapably became linked with that of their conquerors.
Colonization involved direct conquest and rule. Colonizers strove
to possess not only the human and material resources of the conquered
but even the very souls of subject people. Colonization is identified
with one country dominating another country. Globalization, on the
other hand is not conquest by one country alone, but by a system — an
international system where national economies are sucked into the
global. An economy is conquered not by one country, but by many
dominant countries.
It is primarily about trade, finance and
economics, but
devastating.
the
political,
social
and
cultural
impacts
are
The countries’ colonial past made it possible for them to be drawn
into the web of globalization.
2. The experience of the Southeast Asian countries described in this paper
show conclusively the unraveling of a model of development based on
accelerated globalization. It is not because they did not liberalize fast
enough, as claimed by Western critics. Thailand, Indonesia, and
Malaysia developed very fast due to financial liberalization which is a
major feature of globalization. The Philippines followed suit when it
started recovering from recession due to its massive external debt.
Unfortunately, the very seed, financial liberalization, which led to high
growth also led to the downfall of these economies.
3. The same experience shows that middle-income countries are not
immune from the devastating effects of untrammeled globalization.
Not only the poor and the lowest income countries are victimized.
Rather, this model of development afflicts the middle-income
countries more.
4. Finally, the experience of the Philippines illustrates beautifully the
interconnection between colonization and globalization. It also shows
how massive debt pressures a country into globalization through
structural adjustment. This is followed by a development model
whose excesses brings the country back to square one and more debt.
1
I
I
Driones/16
a
The Philippines was colonized by Spain in 1521, 23 years later than India. For
three hundred seventy-five years, it languished under the yoke of the Spanish colonial
master. The Filipinos launched a nationwide revolution in 1896, after more than three
hundred rebellions. The Spaniards were then followed by the Americans who ruled for
over forty years. Then the Japanese came and imposed a brutal, murderous regime. In
1945, the Americans returned. In 1946, independence was “granted” but trade
agreements ensured that the colonial trade relationship would be maintained. Thus, it was
easy to slip into the web of globalization after such a long colonial history.
Finally, the experience of the Southeast Asian countries is repeated in many parts
of the world. The story is the same. As economies lurched from one crisis to another; as
they move from various forms of globalization to another, always, always, it is the people
who suffer and pay for the weaknesses of this dominant economic system.
Briones/17
.
/.
1
1
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•
‘
Briones, Leonor Magtolis and Jenina Joy Chavez-Malaluan. “The Morning i
Approaches to the Debt Crisis.” Philippine Journal of Public Administn>
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a.
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I
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*
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I'
Articles
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I
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trauma of Southeast Asia’s economies.” Focus Papers, Focus on the Global South.
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Garcia, Elisha R. “RP external borrowings within IMF program.” Business World, 20
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23
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Lopez, Ditas B. “RP at the 1MF-WB Meet: ‘We’re only victims’.
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23
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i'l
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»»
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15
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I
. Resources and Adjustment. London, 14 July
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Il
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Briones/23
>
INTERNATIONAL CONFERENCE
>
on
I
COLONIALISM and GLOBALIZATION
»
>
»
Five Centuries after Vasco da Gama
February 2-6,1998
New Delhi, India
FINANCIAL LIBERALIZATION, CRISES,
AND MALAYSIAN POLICY RESPONSES
by
Dr. Jomo K.S.
Applied Economics Department, University of Malaya,
50603 Kuala Lumpur, Malaysia
fax: 603-7561879; tel: 603-7593606
email: <g2jomo@umcsd um.edu my>
Financial Liberalization, Crises, and Malaysian Policy Responses
Jomo K. S.. Applied Economics Department. University of Malaya,
50603 Kuala Lumpur, Malaysia; fax: 603-7561879; tel: 603-7593606;
email: <g2jomo'aumcsd.um.edu.my>
Since July 1997. the currencies of all three second-tier Southeast Asian N'ICs have fallen
precipitously, with the Malaysian ringgit almost touching RM4 to the US dollar in
December 1997, its lowest level ever, a tremendous collapse from RM2.5 in July. The
stock market has responded in tandem, with the main Kuala Lumpur Stock Exchange
(KLSE) Composite Index dropping to almost 500 from over 1300 in the first quarter of
1997. The new lows were initially seen as market reactions to Prime Minister Mahathir's
various statements, including his typically tough speech in Hong Kong on 20 September
at a seminar before the joint World Bank-IMF (International Monetary Fund) annual
meeting.
.Arguing that ‘currency trading is unnecessary, unproductive and immoral', Mahathir
argued that it should be ‘stopped* and ‘made illegal’. Coupled with an interview in Hong
Kong’s South China Morning Post which appeared the following day, this was widely
understood as signaling an imminent ban on foreign exchange purchases unrelated to
imports. Despite subsequent denial and clarification by Deputy Prime Minister and
Finance Minister Anwar Ibrahim, the market reaction was swift and painful, pushing the
ringgit to a new low — which can only be explained by market sentiment, rather than any
serious reference to economic fundamentals.1 Subsequent Mahathir remarks in faraway
Chile on the last day of September immediately plunged the ringgit to a new all time low,
casting a long shadow halfway round the world on the Malaysian financial sector the next
morning.
This is not to suggest that the fundamentals are all alright in Southeast Asia. Although
high growth was sustained for almost a decade, during most of which fiscal balances
were in order, monetary expansion was not excessive and inflation was generally under
control, some other indices have been awry. The export-led growth of Southeast Asian
economies since the late 1980s has been followed by a construction and property boom,
fueled by financial sectors favoring such ’short-termist' investments — involving loans
with collateral which bankers like — over more productive, but often, also more risky
investments in manufacturing and agriculture. The exaggerated expansion of investment
in such ‘non-tradeables' has exacerbated cunent account trade deficits. Although
widespread in East Asia, for various reasons, the property-finance nexus was particularly
strong in Thailand, which made it much more vulnerable to the inevitable bursting of the
bubble.
1 Stock market references to fundamentals are often hard to distinguish from sentiment in the macroeconomic sense since much of what it considers fundamental information consists of forecasts,
expectations and perceptions.
i
I
>1
Perceiving the Southeast Asian region as much more integrated than it actually is. the
investment decisions of fund managers based outside the region — e.g. in Wall Street or
the City of London.— have often been *herd-like’.2 causing a ‘contagion' or ’.domino'
effect throughout the region.
The ven logic of hedge fund operations3 has tended to exacerbate these phenomena, with
disastrous snowballing consequences for the region. Other international, regional and.
increasingly, local currency speculators and hedgers have also been responsible, but
mainly reacting in their own self-interest to perceived market trends, rather than as part of
some grand conspiracy. Meanwhile, the ‘market’ —especially Wall Street and the City
of London — has become so fixated with the current account deficit that this indicator,
almost alone, has become the fetish of financial analysts, especially since-the Mexican
meltdown of early 1995. In earlier, different times, some economies sustained similar
deficits for much longer, without comparable consequences. As noted in the immediate
aftermath of the Mexican crisis of 1995, several Southeast Asian economies already had
comparable cunent account deficits then despite, or rather because of rapid economic
growth. Yet. as Fischer observed, the currency markets failed to adjust earlier in
Southeast Asia.
In the mid-1990s, as the US dollar strengthened with the US economy, both the Japanese
and the Germans allowed their currencies to depreciate against the US dollar, with
relatively little disruption, in an effort to regain international competitiveness. After
virtually tying their cunencies to the US dollar since the advent of flexible exchange
rates, most Southeast Asian currencies wrongly resisted similar downward adjustments.
which would have reduced, if not averted some of the more disruptive consequences of
the recent currency collapses.
Some official Malaysian reactions undoubtedly exacerbated the situation. The ringgit had
fallen from around RM2.5 in early July to about RM2.7 before the end of August 1997.
when Prime Minister Mahathir returned from a two-month working holiday abroad. Since
then, it has gone through the ’bottom', long thought to be the pre-1973 rate of RM3 to the
dollar. The rate seemed to hold for the first week after the Prime Minister's return, but
then be^an to tumble, often in response to new pronouncements and policy responses.
The situation has been exacerbated by the perception that Mahathir has taken over
economic policy making, causing ambiguity about who is in charge and what to expect.
Poor crisis management has not helped. The ‘designation of a hundred major counters
an officially-induced Kuala Lumpur Stock Exchange (KLSE) rule change, ostensibly to
check short-selling — also adversely affected buying, causing the stock market to go into
free fall. The post-Cabinet meeting announcement on 3 September of a special RM60
In the face of limited information and a novel, rapidly changing situation, such behavior is often
considered rational by market players, even if unfortunate.
*’ Hedse funds may. however, go in different directions, e.g. when one fund’s currency sell-off provokes
another fund to snap up bargain equities, e.g. foreigners were often persistent net buyers of Japanese stocks
throughout the bursting of the bubble there in the 1990s.
2
1
id
J
billion fund for selected
designed to 'save crontesi fr
d
September
Mahathir’s oldest son Mirzan was the
'
col,apse -has not
Z
helped.
Ato alm»s. thre. r
of
Western dominance.
=E==S==gSS£r
bahXm W ^9?US JoTos may have been right in terms of his own personal
investment, his personal credibility was badb alfected.
................ ....... ..... .............................
Rubin, a former Wall Street trader himself
.
expansion ot capitalism, espec
zsX.
S!'
ilselfP\vhiie admitting that he himself has
d—<i=
liberal vision of a Popperian ’open society .
3
a.sir.d ty his
With the adverse reactions and disastrous market responses to his Hong Kong speech and
other comments. Mahathir’s arguments4 have largely been dismissed outside of Malaysia
except for the few who recognize his rantings as those of frustration in the face of a new
phenomenon demanding original analysis. Hence, dismissing Mahathir would be
tantamount to throwing the baby out with the bath water as Mahathir was addressing a
real problem, albeit incorrectly. After all, as many have pointed out. the international
financial sy stem and its further liberalization have favored those already dominant and
priv ileged in the world economy, at the expense of the real economy and of development
in the South.
*;
J
The prevailing system ot flexible exchange rates was introduced less than a quarter of a
century earlier, inaugurating a new international monetary regime with very mixed
consequences. Hence, the cunent regime is relatively new. only beginning after Nixon’s
1971 unilateral withdrawal from the Bretton W oods* regime of fixed exchange rates —
which had pegged the dollar to gold at US$35 per ounce and the ringgit to the US dollar
at RM3. Under the new regime, the volume of foreign exchange trading had grown to
more than 67 times the value of the international trade in goods by 1995? Hence, such
trading is hardly natural, inevitable or even desirable. For most of human historv,
including that of capitalism, it has not been 'integral to global trade in goods and
services’, as claimed by US Treasury- Secretary Rubin. In fact, as is well known, various
critics have offered various alternatives to the present system ?uch as returning to fixed
exchange rates, the gold standard and so on.
Contrary- to the claim that ‘the market’ will exact swift and painful punishment on
governments and economies which do not have their macro-economic house in order, the
timing, nature and consequences of the mid-1997 financial crisis in Southeast Asia
underline the imperfect nature of financial markets. This has been reflected in the long
delay in 'rectification*. In a telling episode at the beginning of September. IMF deputy
head. Stanley Fischer pointed out that although the current account deficits in Southeast
Asia had emerged quite some years ago. markets had failed to adjust — contrary to the
predictions of conventional economic theory. (Instead of recognizing the failure of
market mechanisms. L’S Federal Reserve Chair Alan Greenspan gently chided Fischer,
expecting the IMF to 'inform* Wall Street.) This is also a market where it seems that the
magnitude of the 'overshooting* seems to exceed that of the ‘correction’ several times
4 It has been sen difficult for Malavsia to credibly take the high moral ground on currency and other types
of speculation because of the well-known behavior of Bank Negara in the 1980s. The Malaysian central
bank was known to take very aggressive, short term speculative positions in the major currencies with a
view to making a profit. This went on for several years until the Bank lost several tens of billions of ringgit
in 1992 while bening on sterling and then withdrew to tamer activities. There is a similar sense about the
tin cartel in the early 1980s (Jomo 1990). Mahathir’s comments are hence seen as insincere abroad in that
he is seen to have directed the government to undertake speculative activities in the past and was able to do
so because the international currency and commodity markets are so open. It has been difficult to gain
sympathy about non Malaysian speculators after having approved of such activities before.
■ Since trade-related currency trading is greatly exceeded by investment-related currency trading, it is not
surprising that the volume of currency trading is so large. One key question is how much of those
investment-related trades are 'healthy', 'appropriate', or ’desirable', and that is hard to determine. These
investors want to hedge their personal income and wealth by spreading their investments across many
countries and adjusting them quite frequently as conditions change, contributing to market volatility.
4
I
over Further evidence of market-induced anarchy can be found in the ’herd behavior
underlying the -contagion' or -domino' effects. In the wake of the Mexican crisis in early
1995 even the International Monetary Fund (IMF) stepped back momentarily from its
advocacy of virtually unfettered financial liberalizahon. Meanwhde. current “count
deficits in Malaysia and some other neighboring econom.es had reached all tune highs,
without anv comparable adverse effect. Unfortunately, the short-termism of financ al
markets extends to our memories and to related policy making and advocacy as well.
In a world economy where foreign exchange spot transactions are worth more ^an
seventv times the total value of international commodity trade transactions, the financial
sector has become increasingly divorced from the real economy. V/ith the recent
proliferation of new financial instruments and markets especially m Malaysia the
fin.mc.al sector has an even greater potential to infl.ct damage on the real “onomy^ Ever
since Lord Kevnes advocated’throwing sand into the financial system to check
potentially disastrous consequences of unfenered liberalization, Keynesians — and others
— have been wary of the financial liberalization advocated by ideological neo-liberals
and (heir often naive allies.
Nobel laureate in economics James Tobin has called for a tax on foreign exchange spot
transactions to enable more independent national monetary policy, discourage speculative
capital movements, and increase the relative weight of long-term economic fundamentals
against more short-tcrmist and speculative considerations. As a bonus, the tax collected
would also more than adequately fund the United Nations system and programs, no
leaving it hostage to the whims of US administrations, as is the case. .Another Nobel
Laureate. Professor Lawrence Klein has mentioned two other options to be considered
besides the Tobin tax, namely regional monetary anangements as well as the introduction
of what are popularly known as -circuit-breakers' into the system — a suggestion also
made by the World Bank’s Senior Vice President and Chief Economist, Professor Joseph
Stiglitz.
But the lobbv for financial liberalization remains much stronger and far more influential,
dominating most of the business media and key financial institutions >ntematl°n^'
especially in the US. Acknowledging that money is not just another commodity, the > all
Street Journal, for example, continues to promote currency boards (instead of central
banks) and the pegging of other currencies against the US dollar, while attacking most
other international monetary alternatives, never mentioning the advantages dollar pegs
have given to the US. such as having the rest of the world finance its huge deficits.
Understanding the Southeast Asian Crisis
In late 1997. Manuel Montes (1998) published the most serious attempt to understand the
crisis in Southeast Asia. He begins by considering the most oft-cited popular
explanations, suggesting that the crisis stemmed from the banking sectoi_duc to
imprudent expansion and diversification of domestic financ.al markets, fueled by shortterm private borrowings. Montes suggests that this was especial y true of Thailand, but
les< so for Indonesia, Malaysia and the Philippines (in order of decreasing relevance),
5
underlining the significance of the contagion effect; ‘the differences raise questions about
how sensitive the currency knockdown (and the associated disinvestment from these
economies) are to economic fundamentals’ (p. 3).
Despite large cunent account deficits for the affected countries, more for Malaysia and
Thailand compared to Indonesia and the Philippines, he notes that macroeconomic
conditions were otherwise sound. He shows high growlh and savings rates, and low
inflation in the 1990s for the four most affected Southeast Asian economies, with the
Philippines a bit of a laggard. By the mid-1990s, all had fiscal surpluses. Instead.
Southeast Asian vulnerability was ‘as in a classic credit crunch, from an over-extended
mismatch in the maturity and currency unit between sources and uses of credit’ (p. 2).
Monies sees the Thai crisis as ‘the latest in a series of such crises in which a currency
attack follows on (or is justified by) an unhealthy domestic banking system, following an
episode, of say 3 to 5 years, of vigorous external capital inflows’ (p. 7). The cunency
collapse weakens the domestic banking system by increasing the range of unviable
investments based on the previous exchange rate, thus magnifying the crisis. Such crises
have resulted in lower growlh, higher unemployment and the deployment of taxpayer
funds to salvage the financial system and related asset holdings.
Monies cites Kaminsky and Reinhart’s (1996) study of 71 balance of payments (BoP)
crises and 25 banking crises during the period 1970-95. There were only three banking
crises associated with the 25 BoP crises during 1970-79, but 22 banking crises which
coincided with 46 BoP crises over 1980-95, which they attribute to financial
liberalization from the 1980s, with a private lending boom culminating in a banking crisis
and then a currency crisis. Thus. Montes attributes the Southeast Asian currency crisis to
the ‘tw in liberalizations’ of domestic financial systems and opening of the capital
account.
Montes argues that financial liberalization induced some new behavior in the financial
system, notably:
1) domestic financial institutions had greater flexibility in offering interest rates to
secure funds domestically and in bidding for foreign funds;
2) they became less reliant on lending to the government;
3) regulations, such as credit allocation rules and ceilings, were reduced;
4) greater domestic competition has meant that ascendance depends on expanding
lending portfolios, often at the expense of prudence.
Meanwhile, liberalizing the capital account has essentially guaranteed non-residents ease
of exit as well as fewer limitations on nationals holding foreign assets, thus inadvertently
facilitating capital flight.
Historically, developing countries in Southeast Asia have successfully induced capital
inflows, often by subsidizing them through a variety of investment incentive programs.
Montes (p. 11) argues that ‘removing controls on capital inflows effectively subsidizes
6
net outflows, a self-defeating stance for a capital-needy economy to take . Opening the
capital account has also provided foreign fund managers with access to domestic n
and stock markets, and given the domestic financial system access to lower cost funds
from abroad. Thus, offshore banking operations have fueled intermediation growth as
well as competition among domestic financial groups.
j -
The lending boom increasingly involved asset purchases fueled by rising property and
stock prices. Montes argues that the Thai authorities hesitated to prick the asset price
bubble for two reasons. The dominant liberal economic ideology deemed it inappropnate
for government authorities to bother about private sector-driven current account deficits.
Similarly, it was felt that greater regulation would undermine healthy financial sector
development.
To defuse upward pressure on the exchange rate, the Thai authorities engaged in cosily
sterilization operations.6 Montes emphasizes that sterilization measures put upward
pressure on domestic interest rates, increasing the differential with foreign interest rates,
thus inducing even more inflows. With the exchange rate peg and sterilization measures,
the interest rate differential widened, especially as international interest rates declined.
Montes argues that the Thai authorities failed to protect the long-term viability of their
banking system through prudential regulation, which would have required curbs on the
massive increase of financial intermediation tor asset purchases.
Montes areues that ’three guarantees’ exacerbated the problem of moral hazard,
contributing to the banking/currency crisis. First is government support for the domestic
financial svstem.7 The commitment to an open capital account and the adoption of a
viiiually fixed exchange talc ut quasi peg cllcclivcly subsidize sliotl tcnii h"cign
borrowings, supporting foreign equity investments as well as off-shore banking facilities.
With these three guarantees, and arguably the expectation of IMF protection of their
interests in the event of a crisis, international lenders are encouraged to lend more while
not having much incentive to effectively monitor the deployment of their loans. The
quasi-pesging of Southeast Asian cunencies to a strengthening US dollar since the mid1990s gaVe non-US dollar lenders to the region unrealized exchange rate gains as well.
a
In a useful chapter (four) on fundamentals and sentiments, Montes points out that
international financial analysts and macroeconomists mean different things when they
. Private asset managers
i to referseem
to ’ factors that support the
speak of fundamentals.
. ear-and-a-half stability. of key. asset prices, especially exchange rates’
one-yeartoy.
”
whereas economics and public officials usually think of the medium
termi in terms of
three years and consider fundamentals ’in terms of the impact of asset prices on real
economic variable, such as output growth, exports, and employment* (p. 29).
6 In contrast to ponfolio investment to buy domestic financial assets, foreign direct investment (FDI) flows
plant, equipment and intermediate inputs have different macroeconomic tmpltcauons. with a
limited impact on reserves, money supply and domestic interest rates (Montes 1998:
FDI is also less
for new
7 Montes points out that incentives in international markets tend to intensify, rather than moderate, over
optimism or over-pessimism due to herd behavior and other factors (p. 27).
7
Montes goes on to identify the following as key fundamentals of the affected Southeast
Asian economies:
1)
2)
3)
4)
viability of domestic financial systems8
domestic output and export responsiveness to nominal devaluations9
sustainability of cunent account deficits10
high savings rates and robust public finances
Despite the sound fiscal situation before the crisis, the Southeast Asian economies are
now expected to have even larger fiscal surpluses despite the need for greater public
financing of physical infrastructure and social services. To restore confidence in their
currencies, they are being asked to cut their current account deficits besides government
spending, with ominous implications for economic recovery and sustainability.
Recognizing a limited but still significant scope for monetary independence in the
Southeast Asian economies, Montes maintains that economic liberalization should not be
allowed to frustrate the sound development of the financial system and improvements in
the productivity of investment. He warns that sound macroeconomic fundamentals do not
guarantee immunity from contagion and crisis. The scope for monetary independence
partly depends on the soundness of macroeconomic management as well as political will.
Favoring flexible exchange rates, he warns that capital controls and other efforts to prop
up a currency under attack are ineffective and actually subsidize further speculative
actions. International cooperation and coordination have often been the best response
during such episodes, but are also important for effective prudential and regulatory
initiatives as well as to reduce ’policy arbitrage’. He also advocates measures to insulate
the domestic banking system from short-term volatility through regulatory measures and
capital controls as well as stricter prudential regulation for the region.
Theoretical Catch-up
It seems fair to say that no one fully anticipated the cunent crisis in East Asia. There
were, of course, skeptics who regarded the claims of an East Asian economic miracle as
1 Monies emphasizes that sentiments can either favorabh or unfavorably influence fundamentals and the
health of financial s\ stems: in particular, the collapse of the Southeast Asian currencies due to sentiments
uould adversely affect the viability'of investments made in different exchange rate conditions, which could
in turn further exacerbate the domestic banking crisis.
Montes argues that the rural-based economies of Southeast Asia have been better able to carry out real
devaluations from nominal changes in currency value, while their export sectors have not been too tied
down by supply side inflexibilities to respond to real devaluations. After asserting that stock markets have
sened to share risks among asset owners rather than raise financing, he argues that except for financial
system weaknesses. Southeast Asian real sectors have been relatively immune from the recent asset market
frenzy,
10 Montes points out that equity and portfolio investments have overtaken direct investment, loans and trade
credit in providing external financing in the 1990s. He cites Reisen’s warning (p. 34) that offers of foreign
financing should be resisted if they would ’cause unsustainable currency appreciation, excessive risk-taking
in the banking system, and a sharp drop in private savings’. Hence, in a market-sentiment driven world,
currencies become too strong with offers of strong external financing and too weak when capital
withdraws.
8
somewhat exaggerated albeit for different reasons, e.g. because they had not achieved
much productivitv growth and would eventually run up against diminishing returns
(Krugman 1994);'others argued that the performances of the Southeast Asian newly
industrializing countries were significantly inferior compared to Japan and the first-tier
newlv industrializing economies (Jomo et al. 1997). Some ot us had warned, in the
aftermath of the Mexican meltdown of early 1995. that cunent account deficits in the
Southeast Asia were worryingly high, and that the region was not immune to financial
difficulties. But even such pessimists never expected the tinancial crisis in the region as it
has unfolded since mid-1997. We only-expected some kind of conventional cunency
crisis, followed by a temporary slowdown before recovery on a more sustainable basis.
Even people like Krugman expected the longer-term slowdown to set m more gradually,
with the lead geese first affected.
What has actually happened has been far more dramatic as well as more complicated,
with asset prices collapsing, banks and other tinancial institutions tailing, many
companies going bankrupt, and probably a far more severe and protracted downturn than
even the most pessimistic expected. The East Asian vulnerability to crisis contagion was
also unanticipated. In light of the limited trade and investment relations among Southeast
Asian economies (barring Singapore) and the fact that other economies elsewhere
producing the same exports have not been similarly affected, popular explanations
invoking regional proximity, linkages and competition — do not stand up to much careful
scrutinv. The plight of South Korea, further away and economically quite different, has
also undermined such easy explanations, encouraging instead new hypotheses about East
Asia more generally, implying that those affected are mutant flying geese with Japanesetype economies and problems.
Paul Krueman's (1998) attempt at theoretical catch-up is particularly worthy of
considera'tion in light of his own previous anempts at understanding related international
economic phenomena as well as East Asian economic growth. As the crisis is still
unfoldine. such an attempt can hardly be definitive, especially since we do not even have
the advantage of complete hindsight. Yet. as policy is very much being made on the hoot,
his anempt to highlight certain relationships may well be illuminating. Hence. Krugman
argues that:
•it is necessar) to adopt an approach quite different from that ot traditional currencv crisis
theory Of course' Asian economies did experience currency crises, and the usual channels
of speculation vsere operative here as always. However, the currency crises were only
pan of a broader financial crisis, which had very' little to do with currencies or even
monetary issues per se. Nor did the crisis have much to do w ith traditional fiscal issues.
Instead, to make sense of what went wrong we need to focus on two issues normally
neglected in currency crisis analy sis: the role of financial intermediaries (and of the moral
hazard associated with such intermediaries when they are poorly regulated), and the
prices of real assets such as capital and land.’
I
Rejecting the conventional views that blamed either fiscal deficits or macroeconomic
indiscipline. Krugman suggests that the East Asian crisis has been brought about by
•financial excess and then financial collapse', involving asset price bubbles and then
9
collapses, ’with the currency crisis more a symptom than a cause of this underlying real
malady'. For Krugman, the core of the problem was that East Asian financial
intermediaries 'were perceived as having an implicit government guarantee, but were
essentially unregulated and therefore subject to moral hazard problems. The excessive
risky lending of these institutions created inflation — not of goods but of asset prices.
The overpricing of assets was sustained in part by a sort of circular process, in which the
proliferation of risky' lending drove up the prices of risky assets, making the financial
condition of the intermediaries seem sounder than it was’ (my emphases).
For Krugman, the crisis was precipitated by the bursting of the bubble: ’The mechanism
of crisis... involved that same circular process in reverse: falling asset prices made the
insolvency of intermediaries visible, forcing them to cease operations, leading to further
asset deflation. The circularity, in tum, can explain both the remarkable severity of the
crisis and the apparent vulnerability of the Asian economies to self-fulfilling crisis —
which in tum helps us understand the phenomenon of contagion between economies with
lew visible links . This sequencing may, of course, be more relevant fori understanding
Thailand.^ whereas the sequencing in the rest of the region appears to have been
According to Krugman, East Asian financial intermediaries ‘were able to raise money at
safe interest rates but lend at premium rates to finance speculative investments’. In fact,
he shows that they had ‘an incentive not merely to undertake excessively risky
investments, but (even) to pursue investments with low expected returns’. Krugman
argues that the moral hazard problem involving over-guaranteed, but under-regulated
financial intermediaries not only distorted investments, but also led to over-investment at
the aggregate level as well as over-pricing of assets. He also suggests why East Asian
businesses became extremely leveraged by Western standards as well as their tendency to
be over-optimistic about their investments. Access to world capital market allowed moral
hazard in the financial sector to translate into excessive real capital accumulation.
He then concludes that such a moral-hazard regime with overpriced assets was vulnerable
to financial crisis as disintermediation set in. For Krugman, ‘the days of cheerful implicit
guarantees and easy lending for risky investment are clearly over for some time to come’
as ’financial intermediaries have been curtailed precisely because they were seen to have
lost a lol oj money' (Krugman’s italics). The problem is exacerbated by a magnification
effect caused ’by the circular logic of disintermediation: the prospective end to
intermediation, driven by the losses of the existing institutions, reduces asset prices and
therefore magnifies those losses’. His analysis offers ‘a story of self-fulfilling financial
crises, in which plunging asset prices undermine banks, and the collapse of the banks in
turn ratifies the drop in asset prices’.
Krugman stresses that the East Asian crisis di tiers from conventional currency crisis
scenarios in several important ways:
11 The differences in sequencing do not, however, affect the rest of the argument fundamentally.
10
L
i(
i
i
H
i
1)
2)
3)
4)
5)
6)
the absence of the usual sources of cunency stress, whether fiscal deficits or
macroeconomic indiscipline;
the governments did not have any incentive to abandon their pegged exchange rate;:.
e.g. to reduce unemployment:
the pronounced boom-bust cycles in asset prices (real property and stock markets)
preceded the currency crisis, especially in Thailand, where the crisis began,
financial intermediaries have been key players in all the economies involved,
the severity of the crisis in the absence of strong adverse shocks;
the rapid spread of the initial crisis in Thailand, even to economies with few links or
similarities to the first victims.
Very importantly then, the traditional indices of vulnerability did not signal a crisis as the
source of the problem was not to be found in the governments per se or in national
income accounts. The (mainly private) financial intermediaries were ’not part of the
governments' visible liabilities until after the fact’. Krugman goes on to argue:
The boom-bust cycle created by financial excess preceded the currency crises because
the financial crisis was the real driver of the whole process, with the currency fluctuations
more a symptom than a cause. And the ability of the crisis to spread without big
exogenous shocks or strong economic linkages can be explained by the fact that the
afflicted Asian economies were ... highly vulnerable to self-fulfilling pessimism, which
could and did generate a downward spiral of asset deflation and disintermediation’.
i
For Kruuman then, one cannot adequately make sense of the crisis in terms of
conventional cunency crisis models; for him. the crisis has mainly been about bad
banking and its consequences, and only incidentally about currencies.
Krugman acknowledges that his simple model of rather complex economic issues leaves
out at least five issues which need to be taken into account for an adequate analysis of the
East Asian crisis:
1)
2)
3)
4)
financial crises have very severe effects on growth because they disrupt the
productive contribution of financial intermediation, which is not merely for rent
seeking. as assumed in the model.
the East Asian crises have not only involv ed excessive investments, but also unwise
investments, w hich are not captured by most of his analysis.
the hueereal currency depreciations, likely to cause large declines in output, are not
well captured by his model, which downplays the significance of monetary factors;
Krugman's model assumes that the financial intermediaries do not invest capital of
their own. thus leading to the prediction that they will almost always need financial
bailouts: in fact, if they invest their own capital, financial intermediaries will have
something to lose as well, which would presumably check their conduct;
11 None of the fundamentals usually emphasizedI seem to have been important in the affected economies: all
the governments had fiscal surpluses and none
i---- were involved in excessive monetary expansion, while
inflation rates were generally low.
11
fl
1
5)
his model focuses on domestic financial intermediaries, whereas foreign institutions
have played a major role in the East Asian crises; hence, other kinds of market
failure, e.g. herd behavior, need to be taken into account.
The analysis offered in this paper is not inconsistent with Krugman’s emphasis on the
asset price bubbles, excessive investments and other problems caused by moral hazard
due to implicit government guarantees for weakly regulated financial intermediaries.il is
also in agreement with his acknowledgement that this crisis is quite novel in origin.
However, as Krugman himself acknow ledges, a more adequate analysis must also
account for various other phenomena including:
*
*
♦
♦
*
the implications of the growth in currency trading and speculation in the postBretton Woods international monetary system
the reasons for the Southeast Asian monetary authorities to defend their quasi-pcgs
against the strengthening US dollar
the consequences of financial liberalization, including the creation of conditions
w hich have made possible the magnitude of the crises
the role of herd behavior in exacerbating the crises
other factors accounting for the contagion effect
A number of policy issues also deserve careful consideration, including the nature and
implications of IMF 'rescue’ programs and the conditionalities imposed, as well as of
policies favored by the international as distinct from the domestic financial conamuniies,
and others affected. The adverse consequences of financial disintermediation and grossly
undervalued currencies for economic development also deserve special attention,,
especially as the crisis threatens the future of growth and structural change in the region,
not only directly, but also as a consequence of policy responses. The contractionary
policies favored by the IMF. the international financial community’ as well as others,
recently including Malaysia’s financial authorities, may well throw out the baby of
economic development with the bath water of financial crisis.
Financial Liberalization
An explosion of international financial flows followed the substitution of the Bretxon
W oods system of fixed exchange rates with a new system of flexible exchange races. The
trend picked up momentum from the 1980s. leading to a US$1250 billion daily foreign
exchange market by 1997. and the proliferation of new financial instruments. However,
many of the alleged benefits of financial liberalization have not been realized, as the
follow ing summary of recent findings (Eatwell. 1997) show.
•
First, financial liberalization was expected to move resources from capital-rich to
capital-poor countries* when in fact* nef flow s of finance — and of real resources —
have been very modest, and mainly toward the capital-rich.
12
1
.
Second while liberalization was expected to enhance opportunities for savers and
lower costs to borrowers, savers have benefited most from h.gher real interest
•
Third lhe new financial derivatives — expected to improve nsk management —
Le e
generated new systemic nsks. especially vulnerable to sudden changes
.
Fourth improved macro-economic performance — with greater mvestment and
growth expected from better allocative efficiency - has not been
15’
13
.
overall macro-economic performance has been worse than betore liberalization.
Fifth financial liberalization has introduced a persistent dejlationary bias on
economic policv as uovemments try to gain credibdity to avert destabilizing capita
tincvs instead
the 'healthy
healthy discipline
discipline' on governments expected to improve
instead of
of lhe
macro-economic stability.
I . ...... Ml nuukut, ,. . !>! bl fnui linn in =u< h a way as in impose lheir own
on the real economy, thus defining lheir own ' tundamenials and logic, wind) in lu n
become self-fulfilling prophecies. In other words, they do not just process information
order to efficiently allocate resources. Since financial markets operate like beauty
X real economy has no automatic tendency to converge to foU-employmen.
growth, the presumed analytical assumptions of other market participants become
imposed on the economy.
The threat of instability in the now massive capital market forces both government and
private investors to pursue risk-averse strategies, resulting in low growth and
employment creation. A deflationary bias in government policy and the private sector
emerges in response to the costly risks of violating the rules of the game. This is
exacerbated bv the high costs of debt due to high real interest rates owing to efforts to
maintain financial stability in a potentially volatile world. Thus lon8
J™* § .
stability' supercedes a high and stable level of employment as the policy pnonty. Such
monetarily stable system involving relatively slow growth and high unemployment, can
last indefinitely.
A sophisticated liberalized financial system, prioritizing flexibility or the possibility of
eas> exit, is necessarily fragile, as reflected in:
Current high interest rates represent a ven unhappy situation for the region. They V' ^te^ed„,n
Foreign creditors who were stupid enough to lend dollars to mismanaged companies shou d see their ban
One could argu^ihat some of this is the result of greed, stupidity, and lack of education or regulation. If
oJX^g
financial openness foreign investment. GDP
growth, and per capita income driven by the performance of the Asian countries.
13
liquidity crises, reducing real output;
private sector risk aversion, encouraging short-termism;16
public sector risk aversion, resulting in a deflationary policy bias;
persistent pressure for ever greater flexibility, increasing the ease of exit.
The benefits that the reduction of financial controls has brought to ’emerging markeJts’
must be weighed against the increased instability due to enhanced ease of exit. While
increased flows of (real) foreign direct investment generally require agreement to
unrestricted profit repatriation, this is quite different from the ’instant exit' conditions
demanded by financial markets.17
Given the power of the dominant ideology which infuses the prevailing international
system, it is virtually impossible to assert control over the financial system without a
fundamental change in priorities and thinking by the major governments involved.
However, the currencies of a small number of major governments — the US, Japan,
Germany and the UK — were involved in over three-quarters of currency transactions in
1995. Hence, acting together, they have the capability to control capital flows, but of
course, only if they abandon faith in the alleged superiority of neo-liberalism.
There is considerable evidence that in the longer term, economic development has been
associated with developmentalist states. The post-war Golden Age — which saw high
levels of output and employment as well as short-run efficiency — was premised on
active macro-economic management under the Bretton Woods system. Post-war
European reconstruction was achieved with tight capital controls. On the other hand, the
recent rush to convertibility and capital control deregulation in Eastern Europe has
resulted in Russia becoming a significant net capital exporter’18
Selectively invoking instances of bad or incompetent policy making or implementation
does not justify leaving things to liberalized markets that render systematic policymaking impossible. Instead, it emphasizes the importance of creating an environment and
developing the capability for good and competent policy to be effective.
Budget 1998: Missed Opportunity ?
The negative reaction of the foreign exchange and stock markets to the 1998 Malaysian
Budget, announced on 17 October 1997. has been variously interpreted and may be
attributed to several factors. The Budget is primarily an instrument of fiscal, not
monetary’ policy, and should not have been expected to address the currency and stock
market crises frontally, as many apparently expected it to. Hence, there were unrealistic
expectations of the Budget, which were not met even though Finance Minister Anwar
16 Due to the separation of ownership and management of portfolio investments, though it may be in the
interest of investors to 'buy and hold', it is difficult to write contracts to motivate pension managers, mutual
funds, and other intermediaries to stay put.
r Of course, liquidity is one of the features which induces otherwise risk averse investors to buy into a
situation. Furthermore, in any transaction, there is a buyer for every seller.
11 Of course, Capital flight is not an inevitable consequence of financial liberalization, but may reflect the
fears and consequent hedging behavior of locals.
14
41
Ibrahim announced some monetary measures in his Budget Speech. As it turned out, the
Budget was largely predictable and had largely been anticipated and factored in by
players. In so far as it was much milder than expected and tried to avoid damaging the
real economy by over-reacting to the financial crisis, financial interests were generally
disappointed.
Some of their preferences would have seriously damaged the real economy, and the
Government wisely avoided caving in to such demands. Unfortunately, it may drag out
the crisis*, but this is arguably better for the real economy, which should have lop
priority. Manv in the financial community were disappointed because the Minister did
not raise interest rates, as they wanted him to. In fact, interest rates have been going up,
but probably not as much as they wanted, especially for the medium-term. Many critics
point out that interest rates in Malaysia have been much lower in most neighboring
countries, neglecting to acknowledge that this has long been the case. .And despite raising
interest rates. Malaysia's neighbors continued to be in trouble.
II
Anwar’s tax initiatives were primarily to influence economic behavior, rather than for
revenue purposes. Unfortunately, however, many of the instruments were blunt and,
arguable, unlikely to be either effective or equitable. For example, the reduced corporate
income tax is unlikely to translate into reduced consumer prices, which is the justification
offered. Although the rate is lower in Singapore, there is no need to lower the rate for
(hose companies which have to locate in Malaysia because of the nature of their
businesses, whereas other incentives have been successfully used to attract companies
which have a choice in locating.
True to form, neo-liberal economists have protested the increase in trade taxes and the reintroduction of non-tariff barriers. In fad. the measures are probably unnecessary in view
of the much cheaper ringgit and the slowdown in construction and car sales. The higher
taxes on imported cars and CKD units will mainly favor Proton and Perodua. the
government's national cars which have yet to make much of a dent in terms of overseas
sales. The structure of the taxes also does not encourage other car assemblers to increase
local content. Nor do the higher taxes address the larger problem of an excessively high
car-io-population ratio, which the Minister claimed they were supposed to address.
■
Not enough was done on the fiscal front, inadvertently sustaining the macro-economic
conditions —’particularly the current account deficit — which have allowed currency
speculators and others to drive down the ringgit and other Southeast Asian currencies.
Despite media hype about a tough Budget, it was surprisingly mild, with little evidence of
belt-tiehtening as far as government expenditure was concerned. Although operating
expenditure for 1998 was expected to go down, development expenditure was expected
to continue to rise despite huge increases in the mid-1990s. This was probably seen as
necessary to offset the anticipated private sector slowdown. Of course, some expenditures
are contractually ’locked in’, while others are necessary or socially desirable (e.g. most
educational or public health expenditures), but this is unlikely to be a sufficient
explanation.
15
The government also missed an opportunity to cancel most of the postponed ’mega
projects'. particularly the economically indefensible ones which have not begun. Such
measures would have sent a stronger signal about the government s seriousness of intent.
The apparent official reluctance to reduce growth rate expectations and to cancel
economically indefensible projects — such as the Genting-Camerons highland highway,
the proposed Kansai-style new Northern Regional International Airport off Mahathir’s
home state and the (world's longest) Malacca Straits bridge to Sumatra — did not help to
inspire confidence in official policy responses to the crisis.19
After all. the main reason the government has been running a fiscal surplus in recent
years is because of its sale of public assets as part of the privatization policy, often in
dubious circumstances or at heavily discounted prices, both with negative consequences
for economic welfare. Now that the privatization policy has been suspended, perhaps also
in response to the growing public outcry about some consequences of the policy, the
government should encourage discussion of alternative public sector reforms which
might be instituted in the public interest. There is even a real danger of ’re
nationalization’ being invoked to use public funds to bail-out businessmen in serious
trouble.
Meanwhile, at least three other concerns have been crying out for government initiative.
First, the savings-investment gap, which was 5 per cent of GNP in 1997, lies behind the
current account deficit, which has exceeded RM 12 billion since 1994. The gap has been
closed historically by heavy reliance on foreign direct investment (FD1). But high FDI
and foreien debt have, in turn, caused growing investment income outflows abroad.
So-called reverse investment, i.e. Malaysian FDI abroad (around RM6 billion in 1996),
has exacerbated the problem in recent years. Such investments were often encouraged by
the Government and sometimes involved the abuse of inter-govemment relations to favor
Malaysian investors, who became the object of much resentment, especially when many
failed to deliver on expectations. In some instances, e.g. logging, Malaysian investors
have often been distinguished by poor practices no longer permissible for loggers from
the North facing more vigilant civil societies.
In some recent vears. the current account gap has been temporarily closed by short-term
capital inflows.'as in 1993 and since 1996, with disastrous consequences, as we have
seen, upon the subsequent reversal of such flows. Many recent confidence restoration
measures seek to induce such short-term inflows once again, but they cannot be relied
upon to address the underlying problem in the medium to long term. In this connection, it
is interesting to note that the Chicago school-influenced Chilean government has
maintained strict controls on the capital account. Portfolio investments in Chilean stock
Not surprisingh then, manv would argue that citizens should not be forced to suffer the consequences of
such government actions by being allowed to buy foreign exchange, as >t were, to protect themselves
* Of course, the availability ofcheap foreign funds - eg. due to a low real .merest rate - can he p to
. temporally close both domestic savings-investment as well as foreign exchange gaps, especially if well
invested or deployed.
16
ar. permilted in .he New York Stock Exchange. ra.her .han in .he Santiago Mock m-rkel
whik unlike foreign direct investment, portfolio capital inflows into Chile are subjected
subjecte
' to conditions which inhibit easy exit.
Second, there was a recent explosion ofprivate sector debt. esPecia‘ly^mhabr°n^f
recent vears. not least due to the efforts of 'debt-pushers associated with the growth of
private bankine'. Apparently, government-owned non-financial public enterprises
(\FPEs) have been verv much part of this supposedly private sector debt growth
phenomenon. The ratio of loans to GNP has risen rapidly in recent years. Meanwhile,
commercial banks' foreign liabilities more than tripled between 1993 and 1997.
Meanwhile, onlv slightly over a quarter of total Malaysian bank lending goes to
manufacturing, agriculture, mining and other productive activities; the percentage is
likeh to be even smaller with foreign borrowings, most of which have been collateralize
with'assets such as real property and stock. There is also no evidence that the stock
market boom in recent years has more effectively raised fdnds for productive investment,
in fact, the converse seems more likely.
pain caused bv currency depreciation, stock market collapse and rising interest rates.
Meanwhile, the over-investment of investible funds, especially from abroad, m noniradeables has only made things worse, especially on the current account.
Concerns about abuse, including nepotism, caused by the Cabinet's announcement of a
controversial RM60 billion facility to 'rescue selected businessmen by utll‘z1^
held bv the EPF Khazanah and other major tinancial institutions have not been allaye .
The — failed to ensure greater transparency and accountabflitya>n th^of the
facihtv Although the government has since conveyed the impression that the facility has
been suspended-, the apparent willingness of the government to consider and condone
bail-out operations has adversely affected confidence.
Some dancers associated with financial liberalization have now become evident but are
not bemc sufficiently debated, let alone addressed. Most imuatives in this regard cannot
be undertaken unilaterally without great cost, as market reactions to Prime Minister
Mahathir’s remarks have made clear. Many need to be actively pursued l oug
multilateral initiatives, for which the Government needs the support of netghbors and
others. The few options for unilateral initiatives need to be carefully considered, and only
implemented, if deemed desirable.
Shock, Anger, Denial, Acceptance?
L'nfortunatelv. the October 1997 Budget was only part of a series of policy measures
17
ostensible roots. However, ’denial' is an inappropriate metaphor to some extent because
it is not as if the government did not respond at all, but rather that it did not respond in
the manner desired by ’the market', i.e. mainly the Western financial community.
The initial Malaysian government reaction to the 'attack' on other Southeast Asian
currencies after the tloating of the Thai baht on 2 July 1997 was to rush to its defense,
w ith the ringgit rising to RM2.47 against the US dollar from RM2.53 in mid-July before
the authorities had to give up ringgit support operations after making hefty losses of
several billion US dollars. It appears that the main reason for such cunency support
operations and losses in Southeast Asia was the apparent desire of the authorities to
defend the quasi-peg. and thus the interests of those responsible for the tremendous recent
crowrh of un-hedged short-term borrowings in US dollars from abroad by politically
iniluential business interests.
According to the Bank of International Settlements (BIS) (Asian Wall Street Journal, 6
January 1998). well over half of foreign borrowings from commercial banks were short
term in nature, i.e. coming due soon: Malaysia 56 percent, Thailand 66 percent, Indonesia
59 percent and South Korea 68 percent. In response, the Malaysian central bank
announced that only 30 percent of all foreign bonowings were short-term in nature, with
another nine percent due in the next year.
There was widespread consensus that the ringgit and other Southeast Asian currencies
had become overvalued by their ’quasi-peg' against the USS as the US economy and
dollar had strengthened significantly in recent years. This was reflected, for example, by
the ven depreciation from less than 80¥ to the USS in mid-1995 to almost 130¥ in 1997,
or the 1997 float of the Deutschemark against the US dollar. Hence, it was expected that
the ringsit would depreciate to around IUM2.8 against the dollar, the supposed
■equilibrium' exchange rate based on calculations taking account of purchasing power
paritv etc Instead, it ’overshot' to RM4.88 in early January 1998. i.e. over two ringgit
more than the anticipated ’correction' ofRM0.3 from RM2.5 to RM2.8, raising serious
questions about the market instability inherent in the international monetary system.
.1
■ 1
Other sovemment responses to the rapidly emerging downward spiral of the currency and
the stock market did not help. These included designation- of the top 100 stocks
comprising the Kuala Lumpur Composite Index (KLCI). which disastrously froze: up
liquiditv in an ill-conceived attempt to curb ’short-selling', for which no responsibility
has vet been acknowledged. The Cabinet's announcement of the establishment of a
RM60 billion fund to prop up selected stocks and investors, even by buying back stock
sold to them at the original purchase prices, i.e. above prevailing market prices.
The eovemment's threat to use the notorious Internal Security Act (ISA) against financial
analvsts and other commentators for making unfavorable reports about the Malaysian
econonr onlv sirengthened the impression that the government had a lot to hide from
nublic scrutinv. The Prime Minister's largely ill-founded and bellicose attacks invoking
conspiracy theories against Georg Soros, financial speculators and manipulators, t e
international Jewish community and the International Monetary Fund further reinforced
18
4
the impression of official Malaysian denial with blame for the crisis attributed abroad.
The fact that there was some basis for much of his mis-specified and misdirected ranting >
was hardly enough to save his reputation in the face of an increasingly hostile Western
media Thus. Mahathir and Malaysia became the bad boys' as other governments in the
region went 'cap in hand' to the IMF in desperate efforts to restore confidence and secure
funds to service the fast-looming foreign debt liabilities, albeit privately-held.
More generally the middle class has become increasingly outraged about having to pay
for lhe'sins and follies of the super-rich with government-controlled public (EPF. PNB
and Khazanah) funds as well as private resources being diverted to bail-out the politically
well-connected. Meanwhile. Malaysian employees contributing to the EPF will not be
pleased by another year of yet lower returns, especially as they will be seen to be due to
bail-out operations to rescue the well-connected rich as with the EPF s purchase of UEM
shares at four to five times its price in mid-January 1998. The 1998 Budget's tax break
for voluntarily increased EPF contributions is unlikely to have much of an impact in these
circumstances.
For example, the prospect of government funds being used to compensate Ekran —
which received the Bakun project under dubious circumstances — has caused outrage.
Awarded to Ekran in dubious circumstances in late 1994 after Mahathir had publicly
called off the project in 1990, the government is considering paying compensation to
Ting Pek Khiing's company for delaying and taking over the project. In fact, the delay
had come about even before the government announced postponement of some ‘mega
projects' due to the crisis from September 1997 owing to Ting’s apparent change of mind
over iIih < <>nir;»i t h<* bail siuneil uilh lhe Swiss-Swedish concern ABB the principal
CuilUaUui lui cuiiiUucUuii ul ihu dam. Mcuu^hik, 1‘aulHc < liciukab. aimlhui Him
controlled by Ting, has already gained handsome profits from logging the area likely to
be inundated by the dam’s reservoir. The apparent government willingness to compensate
Tina raises many complex issues, and underscores the impression that special
consideration is being given to him as a long-time favorite of the Prime Minister,.
After a protracted two-month saga from mid-Xovember, the authorities allowed a
reputediv cash-rich listed company. UEM. to undertake a reverse takeover of the
reputedly UMNO holding company. Renong. to save the company and its chairman, who
are reputedly deeply in debt. This bail-out to the tune of RM2.34 billion, at the expense
of minoritv shareholders, gravely undermined public confidence in the Malaysian
investment environment in several ways. Stock market rules, including lhe mandatory
general offer required after exceeding the 33 percent ownership trigger point, were
perceived to be manipulated to serve lhe interests of lhe politically influential.
Halim is believed to have been in serious trouble for various reasons associated with the
svstem of cronyism which has emerged in the last decade, including the use of Renong to
take over the Philippines National Steel Corporation (NSC) from Wing Tick Holdings,
controlled by ruling coalition Member of Parliament Joseph Chong. The funds apparently
came from a syndicated loan for US$800 million from Malayan Banking, Bank
Bumipuira, Bank of Commerce and Rashid Hussein Bank, which is believed to have .
19
’■
breached the single customer limits of RM450. RM250, RM 150 and RM250 million
respectively.
In the first three days after the initial 17 November 1997 announcement of UEM's
reverse takeover of Renong, stock market capitalization fell by RM70 billion or 20
percent. Subsequent slides as the authorities dithered over the following eight weeks
suggest that between a fifth to a third of stock market decapitalization since July 1997
can be attributed to this episode and its implications. The conclusion of the affair clearly
demonstrated that the then new ly-appointed executive director of the yet to be formally
established National Economic Action Council (NEAC), UMNO treasurer. Government
Economic Adviser and former Finance Minister Daim Zainuddin. is in a position to over
rule Finance Minister and Deputy Prime Minister Anwar.
Mahathir s announcement in early December 1997 that the ‘land bridge’ project over the
Isthmus of Kra in southern Thailand would proceed seemed to further undermine the
Finance Minister's attempts to emphasize the need for fiscal discipline. However, the
supplementary Budget for 1998 announced on 5 December 1997 managed to reassert
Anwar’s leadership in economic management, at least for the time being. He announced
cuts of up to 18 percent of public expenditure as well as other measures intended to
restore market confidence. The central bank seems to have followed up by drastically
contracting liquidity, which is likely to have severe deflationary consequences, if
sustained. This indiscriminate measure has been partially compensated for by increasing
funding for food production as well as small and medium industries (SMIs). To save the
government-sponsored national car industry, hire-purchase credit for cars has been
allowed.
Meanwhile, the authorities seem to be pushing for the rapid merger of banks and
financial companies, a particularly difficult process in these turbulent times, with limited
chances of success, especially in light of the recent failure of a similar Thai attempt.
While the consolidation of the financial sector is generally seen as desirable to achieve
economies and other advantages of scale in anticipation of further financial liberalization,
the acceleration of its pace in response to the crisis may be less well conceived.
Some of the measures introduced by the Finance Ministry and the central bank since
early December 1997 are perceived as pre-empting the likely role and impact of the
National Economic Action Council (NEAC) to be chaired by the Prime Minister with
Daim as executive director. The NEAC is widely seen as an attempt to over-ride the
Finance Minister, who arguably has much stronger support within the ruling UMNO and
is seen to be aspiring to accelerate the political succession in the wake of the crisis, which ‘
has badly damage the Prime Minister’s reputation 'and popularity.
IMF Role
However, the recent measures are also seen to be closer to what the IMF would like to
see, w hich has raised the question of the desirability of IMF intervention even though the
relatively smaller size of Malaysia's foreign (including private) debt does not really
20
!
|
l'1
1'
necessitate requiring an IMF credit facility with its accompanying conditionalities. In
Malaysia, the possibility of IMF intervention enjoys a certain mystique as vanous
different partieVhave rather different perceptions of the IMF s actual record and abilities.
Instead for manv critical of Malaysian government policy, not just in response to the
cnsis. IMF intervention is expected to put an end to all they cons.der wrong. This pro
IMF lobby sees the IMF as the only force capable of bringing about desired reforms
which domestic forces alone cannot bring about.
But as recent press discussion of the IMF’s record and capability suggests, there is
urowing international skepticism about the IMF's role in and prescriptions tor the
on^oinu East Asian crisis. Most damning of all is the apparent abuse ot IMF
conditionalities in the Korean aid package to resolve outstanding bilateral issues in favor
of the L’S and other interests. Almost in tandem with financial liberalization. IMr
inter* ention is generally recognized to undermine and limit national economic
sovereignty. 21
Perhaps out offeree of habit in dealing with situations in Latin America, Ainca,
Europe and elsewhere, where fiscal deficits have been part of the problem, the same
prescription (’one size fits all’) seems to underlie the recent IMF interventions in East
Asia. There is growing doubt as to whether the IMF actually fully recognizes the novel
elements of the current crisis and its implications (‘old medicines for new disease ). lhe
apparent failures of the IMF — to anticipate the cunent crisis in its generally glowing
recent repons on the region, and also to reverse the situation in lhe region after
interventions in Thailand, Indonesia and Korea — have certainly not inspired much
confidence. Nor has the fact that though the Philippines had long been under an IMF
program, it was not spared from the contagion.
The IMF’s apparent priority for protecting the interests of foreign banks and governments
has also compromised its supposed role as an impartial party working in the interests of
the host economy. IMF programs invariably involve the domestic fmanma sector be^n8
some of the costs of reform while commitments to foreign banks are met. While the 1Mb
insists of ureater transparency by the host government and those under ns jurisdiction it
continues'to operate under a shroud of secrecy. Many of its programs are considered to be
primarily contractionary in consequence, with little regard for the social and other
adxerse consequences ot swallowing its medicine.
International Cards Stacked
The challenge at the international level is formidable, especially with the vested interests
underh inc American as well as European positions on systemic reform. Yet, there have
been many misgivings elsewhere too about the nature and volatility of the international
;l However, invoking national economic sovereignty ’ may become very dubious when it is clearly
“
ewreno h.. « Ul.n
«. h..J . h«. « pM b«.»«
„
inherited) banking and accounting standards are considered relatively better, but also because short-t
capital inflows have been relatively less given the recentness of its economic recovery.
21
financial system, with renewed attention to particular aspects with each new crisis.
Southeast Asians need to work with others who are like-minded and to draw upon the
rich critiques which have developed over the years in developing reform proposals which
are likely to gain broad international support.
That is why it is distressing that at the September 1997 Hong Kong annual meetings of
the IMF and World Bank, the IMF’s policy-making Interim Committee — which
represents all 181 IMF member countries via 24 ministers — gave the IMF a mandate to
alter its Articles of Association so that it would have additional ’jurisdiction’ over the
capital account as well as over the current account of members’ balance of payments,
which it has had for many decades.’3
In December 1997. the World Trade Organization also concluded its financial services
agreement which basically commits member countries to scheduled accelerated
liberalization of the trade in financial services. The Wall Street Journal noted that the
agreement would primarily benefit the United States and Europe since it is most unlikely
that the South is in a position to export financial services to the North. It is therefore
likely that countries of the South will face even greater problems with their balance of
payments as their services, and hence current account deficits worsen. iMuch of the
nascent financial services which have emerged under protection in these countries is
unlikely to survive international competition from transnational giants enjoying
economies of scale and other advantages.
What Is To Be Done?
As a consequence of recent developments. Southeast Asia now faces domestic policy
reform challenges relating to four factors, namely greater exchange rate flexibility, the
urgency offinancial sector reform, as well as handling asset-price bubbles and current
account deficits. Before addressing the challenges on the domestic and international
fronts, it is useful to summarize these four dimensions of the current crisis.
Without the advanced economies stabilizing exchange rates with regards to one another’s
currencies, the quasi-pegging of an economy’s foreign exchange rate has become very
dangerous. Short-term capital inflows may temporarily supplement domestic savings, but
the reversal of such flows can create severe disturbances. While such flows may be
influenced by economic fundamentals in the long term, they are determined by
speculative sentiments in the short term. Short-term exchange rate adjustments — with
disruptive consequences for domestic prices and wages — are then deemed necessary to
stem sudden outflows, but these in turn offer an opportunity for currency speculators.
’ I am grateful to Anthony Rowley for confirming these details with Kunio Saito, director of the IMF’s
new Tokvo regional representative office on 17 December 1997.
The executive board of the Fund is currently holding a series of meetings to discuss the detailed
implementation of this mandate and will report again to the Interim Comminee on the modus operandi at
the spring meeting. Thereafter, individual member governments have to ratify the change, but a simple
majority will be sufficient. In odier words, a unanimous vote Is not needed to approve the change in the
Fund's articles.
22
Financial sector reform has to be thought of not only tn terms of the liberalization insisted
on by international financial interests, but also the new regulation needed to anticipate
and respond to new challenges. While the problems caused by excessive as well as
inappropriate regulation are often emphasized by advocates of liberalization, libera
banking policies can result in a weak domestic banking sector* unable to withstand
competition from abroad, and even the collapse or costly bail-out of weak banks. For
most developing economies, policies of -financial restraint are also still needed to
•direct’ credit25 to finance productive investments instead of asset purchases or
consumption. Greater capital account'convertibility, related financial innovation, and t e
proliferation of non-bank finance companies as well as -private banking also pose new
challenges for financial regulation.
I
Easv credit panlv due to capital inflows, have resulted in meteoric rises in real property
as well as share prices desired by most of those involved. Banking regulation to
minimise such asset price inflation deserves the highest pnonty. and is always difficult to
achieve in ’good times’ without precipitating an asset price meltdown, but will be easier
to achieve now that the asset price bubble has burst.
Current account deficits have been considered natural’ in Southeast Asia, as in many
other fat growth situations, supposedly reflecting the excess of domestic investment over
domestic savings; hence, they were not seen as a source of policy concern in certain
nolicvmaking circles. Since the debt crisis of the early and mid-eighties, the cutting of
fiscal’ deficits gained top priority at the behest of the Bretton Woods institutions and
others. Developments since the Mexican tequila meltdown of early 1995 suggest that e
current account deficit was the Achilles heel of the Southeast Asian economies,
precipitating financial meltdowns beginning with the collapse of their currencies -quasipegged' to the US dollar, inadvertently encouraging massive unhedged private borrowing
from abroad.
No More Denial
How do we deal with the present situation? Obviously, we cannot wish away the present
situation bv simplv claiming that our fundamentals are fine even it that were true.
L’nfonunatelv. as we have painfully learnt, the market is driven by sentiments much more
than by fundamentals. Hence, although a much more serious cunent account deficit in
1995 did not result in the present crisis, we have to be careful to minimize our
vulnerability due to the economy's openness.
One cannot, for example, liberalize our capital account, and then complain when short
term portfolio investors withdraw suddenly due to their whims and fancies. That is why,
as noted earlier, even Chile, the darling of the Chicago monetarists, makes it very
Pk-sc can involve savers being encouraged with tax policies that do not punish them for putting money
awas While banks should still make lending decisions based on economic criteria alone^systemic biases
iowards short-termism need to be mitigated, lite government can prioritize and favor certain type> of
investments by subsidizing them through taxes or loan guarantees for those sectors or activities deems
important.
23
J
difficult — and costly — to rapidly withdraw capital from its economy, and treats foreign
direct investment very differently from portfolio investors. Some other authorities go
further to distinguish those who are simply short-termist to, say, pension funds with a
more medium-term orientation. After all. one cannot expect more birds to fly into rather
than out of an open birdcage indefinitely since the basic premise of financial
liberalization is *<;asy come, easy go'.26
• I
■
*!
In recent years, many Southeast Asian economies became excessively reliant on such
shon-term capital inflows to bridge their cunent account deficits, exacerbated by
excessive imports to make more non-exportables such as buildings. Ostensibly prudent
financial institutions often preferred to lend for real property and stock purchases, and
thus secure assets with rising values as collateral, rather than provide credit for more
productive ends.
While foreign banks were happy to lend US dollars at higher interest rates than available
elsewhere. Southeast Asian businesses were keen to borrow at lower interest rates than
available domestically. The costs of hedging — a hundred basis points or so for ringgitdollar. a few hundred for baht-dollar or rupiah-dollar — now look like a bargain in
hindsight. The existence of a well-developed swap market allows Malaysian companies
to tap into foreign capital markets, at a not unreasonable cost, by swapping away the
currency risk. Hence, the problem was ultimately one of greed: the combination of much
lower foreign interest rates and seemingly fixed exchange rates caused borrowers to
gamble and not prudently pay the cost for some insurance by hedging.
Hence, most such loans remained un-hedged as Southeast Asian cunencies seemed
pegged to the US dollar in recent years despite the official fictions of exchange rates
moving with the basket of cunencies of major foreign trading partners. The boom in
private banking in the region in recent years led to competitive lending reminiscent of the
loans to Third World governments in the late seventies (which built up to the debt crisis
of the early eighties). However, the new fiction in international policy-making circles was
that such accumulation of private sector debt did not matter as long as public sector debt
was reined in.
Meanwhile, portfolio investors moved into the newly emerging stock markets of
Southeast Asia with encouragement from the International Finance Corporation, an arm
of the World Bank. In Malaysia, for example, they came in a big way in 1993, only to
withdraw even more suddenly in early 1994. leaving most retail stockholders in the lurch.
But unfortunately, policy-makers seem to have short memories and did not learn the
lessons from that experience as the new unsustainable build-up from 1995 sent stock
prices soaring once again despite declining price-e^mings ratios. The rest is history, but
as a wise man once said, when history repeats itself, the first time its tragedy, the second
time farce.
■I
"6 Financial liberalization means investors have a choice as to when they ‘come and go , and of course, the
• very existence of that choice may encourage them to stick around in certain circumstances.
24
i
(43
noted earlier. Malaysia's 17 October 1998 Budget tax measures did not help^htle
expenditure proposals were not tough enough, especially on mega-projects. The Financ
Minister had not fully succumbed to pressures to tighten liquidity and precipitate the
'cleansing recession' desired in some circles.
&
r
L nfortunatelv. more than 70 per cfent of bank lending was not for productive investments
in manufacturing, agriculture and mining, but for other purposes, including real property
and share purchases and consumption credit, which should have been rationed a long
time aeo. After tightening bank credit from December 1997. special funds for investment
in food production and for small and medium industries (SMIs) as well as for car
purchases (especially for the ’national cars') were increased, though the contractionary
consequences of tighter credit are bound to otherwise slow down the economy fairly
indiscriminately.
The recent currencv and financial crises in Southeast Asia suggest that the Southeast
Asian economic miracle has been built on some shaky and unsustainable foundations.
Recent erowth in both Malaysian and Thailand has been increasingly heavily reliant on
foreign resources, both capital and labor. Limited and inappropnate investments in
human resources have held back the development of greater industrial and technological
capabilities throughout the region. Southeast Asia’s resource wealth and relatively cheap
labor sustained production enclaves for export of agricultural, forest, mineral and, more
recentlv. manufactured products, but much of the retained wealth generated was captured
bv business cronies of those in power, who contributed to growth by also re-investing
captured resource and other rents in the ’protected’ domestic economy in import
substituting industries, commerce, services and privatized utilities and infrastructure.
Despite various weaknesses, this Southeast Asian brand of ersatz capitalism
dominated by crony rentierism — has sustained rapid growth in the region for at least
three decades, but has come unstuck as it is forced by the forces of economic
liberalization to interface competitively with the rest of the world economy. Failure to
recoenize the nature of the processes of accumulation and growth in the region prevented
the design and implementation of an adequate pro-active strategy ot well-sequenced
liberalization in the face of the apparently inevitable. In this regard. Malaysian
govemment-guided reforms of the banking sector have helped ensure its greater
robustness and readiness compared to its neighbors.
While the TFP critique may be theoretically and methodologically faulted, there is little
doubt that East Asian growth generally has been boosted by high savings and mvestment
rates. While this might give the impression of ’all perspiration, no inspiration . as
suggested bv TFP critics, the dominance of FDI in the internationally competitive exportoriented industries suggests the transfer or import of ’inspiration' embodied in new plant
and equipment as well as the necessary technological learning to get the job done.
25
Although the financial systems in the region are quite varied and hardly clones of the
Japanese ’main bank’ system, as often wrongly alleged, they have nevertheless been
prone to the same financial-property ’bubble’ phenomena, albeit for somewhat different
reasons. Rapid growth on the basis of export-oriented industrialization from the late
1980s gave rise to financial expansion which contributed to a property boom, both in the
more market-oriented or ’Anglo-Saxon' Malaysia as well as the more bank-oriented
Thailand.
The bursting of the Thai property bubble seems to have precipitated the collapse of the
Thai baht, and then subsequently, of the other currencies in the region. While the US
economy has been strengthening, the Southeast Asian economies were growing even
faster. And while the Southeast Asian economies have been running current account
deficits, so has the US, especially with the region, except that it has different
consequences given the actual and ‘quasi’ dollar pegs prevailing in much of the world
today.
With the currency collapses, the assets acquired by short-term portfolio and other
investors in the region depreciated correspondingly in value, precipitating an even greater
sell-out. Outside of Thailand, further property market and stock market collapses seem
imminent in view of anarchic over-building and the property-finance nexus. Thus, many
will be hit by this ’triple whammy’ from the cunency, stock and property markets. The
higher interest rates being demanded by the financial community and touted as our savior
will add salt to the wound, and has shown little success so far in increasing short-term
capital inflows. But even when higher interest rates succeed in doing so, such flows can.
only be temporarily sustained and retained, at great and irreversible cost to productive
investments in the real economy. And if such outflows are eventually reversed in the
precipitous manner experienced by Southeast Asia in the second half of 1997, much
collateral damage will be experienced again.
Political Fallout
The political fall-out in the region has been quite varied. Although there has been
lingering resentment of Mahathir’s perceived role in exacerbating the problem.
Malaysia’s gesture of lending a billion dollars each to both Thailand and Indonesia
reflects a serious commitment to try to bring about East — including Southeast — Asian
regional cooperation on the monetary front, with Japanese support and possibly
patronage, which the US seems opposed to. By the end of 1997. the Asian monetary fund
idea as well as milder versions involving some autonomous facility had been killed by
US and European resistance, partly through the IMF.
In Thailand, the Chavalit government collapsed to be replaced by Chuan, but with little
prospect of an immediate economic upturn. By early 1998, the Thai government was
insisting on greater US commitment to its recovery as well as re-negotiation of the
original IMF package. In the Philippines, the crisis probably influenced Ramos’ decision
not to run for another term. In Indonesia, the imperious Suharto’s more technocratic
ministers have jockeyed to use the crisis to push through long-desired reforms, with the
26
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support of the IMF. as necessary to address the crisis. Right after announcing an
expansionist budget for 1998, Suharto was forced to agree to recant and to dismantle
various monopolies and cartels controlled by his family members and cronies.
Meanwhile, the possibility of his replacement as president before death is being publicly
advocated by dissident elements for the first time in decades.
Not surprisingly, especially after Indonesian President Suharto was forced by the IMF in
mid-January 1998 to dismantle several lucrative monopolies controlled by his children
and cronies, there has been a growing domestic constituency for IMF intervention in
Malaysia to restore confidence and dismantle political as well as economic arrangements,
policies and practices which they find objectionable. However, since the relative
significance of all foreign borrow ings is supposedly lower in Malaysia compared to the
three other East Asian governments which have sought IMF credit recently, it is believed
that Malaysia is less likely to need such an IMF facility.
t
In Malaysia, Mahathir has been badly wounded, not only by the financial crisis, but also
by some imprudent criticisms of the Muslim ulama’. Stung by foreign media suggestions
that he should go. he has come fighting back in typical style, though some of his
opponents would like to believe that he has finally been mortally wounded politically.
For the time being, however, it appears that heir apparent Finance Minister Anwar
Ibrahim will be hemmed in by the Mahathir-dominated National Economic Action
Council, with Mahathir loyalist, former Finance Minister and current Government
Economic Adviser Daim Zainuddin appointed executive director. As principal architect
of the Malaysian crony capitalism of the last dozen years, which arguably bears much of
the responsibility for the current crises in Malaysia, his appointment did riot inspire the
market confidence his *can-do' reputation was expected to generate.
The imminent collapse of much of the property market, its repercussions on financial
institutions and the stock market, as well as the still unknown consequences of recent and
forthcoming government policy initiatives still loom large on the Malaysian economic
horizon. Those who expect salutary' reforms to emerge from the crisis in East Asia are
nonetheless less hopeful for Malaysia because the crisis has not been as severe and the
economy is much more sound. Furthermore, the consociationalist regime presiding over
ethno-populist political mobilization seem likely to continue to sustain some variation of
the crony capitalism which now dominates Malaysia's political economy.
♦
I am grateful to Al Alim Ibrahim. Din Merican and Warren Bailey for their useful critical
feedback, but implicate none of them.
There continues to be considerable debate over the principal causes and consequences of
the recent currency and financial crises in Southeast Asia, particularly Malaysia. This essay
is deliberately polemical as there is clearly no shared understanding of the various
contentious issues involved. As far as possible, the language is not technical, in order to be
accessible to as wide a readership as feasible. Since events are still unfolding, such
reflections should be open to revision with the passage of time, events and trends. Hence,
criticisms and suggestions are especially appreciated.
27
51
Tabic I Selected Indicators of Four Countries in Southeast Asia
Indonesia
1991
1992
1993
1994
1995
1996
GDP Gr Export Gr Import Gr
%
%
%
FDI Gr
%
I/GDP
%
13.5
16.6
8.4
8.8
13.4
9.7
18.5
5.5
35.5
19.9
3.8
12.9
12.8
35.5
35.9
29.5
27.0
5.7
106.2
7.0
6.5
6.5
7.5
8.2
7.9
Thailand
1991
1992
1993
1994
1995
1996
• 8.4
7.8
8.3
8.9
8.7
6.7
23.8
13.7
13.4
22.2
15.8
24.7
-1.9
31.6
0.8
Malaysia
1991
1992
1993
1994
1995
1996
8.4
7.8
8.3
9.2
9.6
8.2
18.6
27.4
0.6
15.8
32.7
24.8
1.4
Philippines
1991
1992
1993
1994
1995
1996
9.7
17.0
26.8
20.3
6.5
6.0
12.2
18.5
5.2
Current Account
USS bil.
% GDP
-4.3
-2.8
-2.1
-2.8
-3.7
-2.2
-1.3
-1.6
-3.6
-3.9
31.1
31.9
-7.0
32.1
-8.7
-17.6
4.9
-14.6
-24.3
51.4
13.0
41.4
39.4
40.2
40.9
42.9
'-7.6 ‘
-6.3
-6.4
-8.1
-13.6
-5.7
-5.1
-5.6
-8.1
-14.7
-8.2
71.4
29.6
-3.4
-13.3
-4.8
35.5
35.9
29.5
-4.2
-2.2
-3.0
-8.8
-3.9
31.1
-4.5
-7.4
-5.2
31.9
32.1
<
I
I
-7.6
-5.0
-6.2 ,
-8.8 .
■I
-0.5
0.3
2.1
4.4
4.8
5.7
14.5
2.8
22.0
15.5
28.7
18.7
11.1
11.5
29.9
16.7
22.4
24.0
2.6
-58.1
443.0
28.5
-7.1
• A*
-1.0
-1.0
-3.0
-3.0
-2.0
23.2
-7.7
20.0
20.9
23.8
23.6
-1.9
-5.7
I
I
-4.3
-4.3
Note: Expons are f.o.b., imports are c.i.f. except for Thailand.
Source: IMF. International Financial Statistics, various volumes.
!
28
Table 2 Key Macroeconomic Variables, Malaysia 1989-96 (percentage)
Growth Rate of
Gross Domestic Product
1989
1990
1991
1992
1993
1994
1995
1996
9.2
9.7
8.7
8.0
9.0
9.1
10.1
8.8
29.0
65.2
50.8
14.4
29.3
18.5
29.1
66.6
52.6
28.4
66.5
52.6
13.9
31.3
63.5
50.5
33.0
62.3
34.0
61.2
48.6
12.6
40.1
34.7
60.5
47.9
36.0
10.8
11.5
In percent of GDP
Gross National Savings
Consumption Expenditure
Private
Public
Gross Capital Formation
Private
Public
I
I
Balance of Pay menls
Current Account
Official Long Term Capital
Private Long Term Capital
Long Term Capital, Net
Basic Balance
Private Capital: Net
Private Capital: Commercial
Banks
Private Capital: Others Private
Errors and Omissions
Oxerall Balance
Implicit Capital Inflows
Short-term Capital Inflows
-0.7
-2.4
14.0
32.4
20.9
-2.1
-4.8
0.6
8.3
7.8
8.9
7.0
7.8
8.4
•1.0
3.9
3.2
8.0
3.6
-6.3
0.3
6.0
6.2
-0.1
8.4
-4.5
2.7
6.2
6.6
1.8
0.1
1.8
5.7
-7.0
2.5
0.2
11.3
15.1
8.1
3.0
0.9
1.2
1.1
0.4
-1.0
2.0
-0.8
2.6
1.2
-0.3
3.2
3.9
4.6
6.8
3.8
2.6
11.4
3.6
I
i
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-3.8
-1.9
2.0
2.7
1.5
i
!
-8.8
-0.5
4.4
Source: Montes (1998).
I
25.9
10.5
13.0
36.0
24.8
11.2
36.4
-2.5
5.5
1.9
49.2
13.1
38.3
26.7
11.7
17.7
22.5
14.1
27.2
13.0
-4.3
2.0
•4.2
12.6
43.0
30.5
12.6
-8.5
2.7
4.7
7.4
-1.1
1.1
58.1
46.9
11.2
41.8
29.2
12.6
-5.2
0.3
4.5
4.8
-0.4
4.5
1.0
-2.0
3.4
1.1
-1.6
-2.0
6.5
-0.9
2.5
7.7
2.9
0.1
1
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References
i
Bello. Walden. ’’Addicted to Capital: The Ten-year High and Present-day Withdrawal
Trauma of Southeast Asia’s Economies.” Issues and Letters, Philippine Center for
Policy Studies. September-December 1997.
Chin Kok Fay and Jomo K.S. “Financial Liberalization and Intermediation in Malaysia.”
in Jomo K.S. and Shyamala Nagaraj (eds) Globalisation and Development:
Heterodox Perspectives (forthcoming).
Claessens. Stijn and Thomas Glaessner. Are Financial Sector Weaknesses Undermining
the East Asian Miracle?, IB RD/World Bank. Washington. D.C.. 1997.
Daim Zainuddin. “I Was Taken By Surprise.” Asiaweek, 7/11/97.
Eatwell. John. International Financial Liberalisation: The Impact on World
Development, Discussion Paper Series. Office of Development Studies, United
Nations Development Programme, New York, May 1997.
Eatwell. John. Selected extracts in John Harwell. “International Financial Liberalisation:
The Impact on World Development’, International Journal of Technical
Cooperation, 3(2). Winter 1997: 157-162.
Fischer. Stanley. “IMF — The Right Stuff,” Financial Times, 17 December 1997.
Gomez. E.T. and Jomo K.S. Malaysia 's Political Economy: Politics. Patronage and
Profits, Cambridge University Press, Cambridge, 1997.
Iwan J. Azis. “Currency Crisis in Southeast Asia: The Bubble Finally Bursts,” paper
presented at the 45th Annual Conference on the Economic Outlook, organized by
Research Seminar in Quantitative Economics (RSQE), University of Michigan,
USA. 20-21 November 1997.
Jomo K.S. et al. Southeast Asia 5 Misunderstood Miracle: Industrial Policy and
Economic Development in Thailand. Malaysia and Indonesia, Westview, Boulder,
1997.
Krugman. Paul. “Bahtulism". Slate Magazine. 14 August 1997.
Krugman. Paul. “What ever happened to the Asian miracle?” Fortune, 18 August 1997.
Krugman. Paul. “Currency Crises”, prepared for NBER conference. October 1997.
Krugman. Paul. “What happened to Asia?”, prepared for a conference in Japan. January
4
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"1998.
Long. Simon. “The Limits to Golf: Regional Implications of the Southeast Asian
Currency Depreciations of 1997.” paper presented at the IISS/CSIS Conference on
“Political Change and Regional Security in Southeast Asia.” Bali. 7-10 December
1997.
Malhotra. Kamal. “Celebration of’Miracle’ Turns Into Damage Control by IMF.” Focus
on the Global South, 3 October 1997.
Malhotra. Kamal. "Globalisation. Trade and Financial Integration: The Case of
Thailand.” paper presented at the Social Research Institute. Chulalongkorn
University. Bangkok.
Montes. Manuel F. The Currency Crisis in Southeast Asia, Institute of Southeast Asian
Studies (1SEAS), Singapore, 1998.
Sachs. Jeffrey. “ Secretive Workings of the IMF Call for Reassessment.” <Vew Straits
Times, 23/12/97.
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Singh, Ajit. “Financial Liberalization and Globalization: Implications for Industrial and
Industrializing Economies," in Jomo K.S. and Shyamala Nagaraj (eds)
Globalisation and Development: Heterodox Perspectives (forthcoming).
Soros, George. “Avoiding a Breakdown,” Financial Times, 31 December 1997.
Soros, George. “Toward a Global Open Society,” The Atlantic Monthly, 281(1): 20-32,
January 1998.
Wain. Barry. “Let’s Not Bury Asian Values," Asian Wall Street Journal, 5-6 December
1997.
Woo-Cumings, Meredith. "Bailing Out or Sinking In?: The IMF and the Korean
Financial Crisis.” paper presented at the Economic Strategy Institute, 2 December
1997.
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INTERNATIONAL CONFERENCE
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COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6,1998
New Delhi, India
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Emulating Southeast Asian Development
The Neo-Liberal Tale of Two Studies
Jomo K. S.
Professor, Faculty of Economics & Administration, University of Malaya
I
Emulating Southeast Asian Development:
The Neo-Liberal Tale of Two Studies
Jomo K. S., Professor. Faculty of Economics and Administration, University of Malaya,
50603 Kuala Lumpur, Malaysia. Tel: 603-7593926/7593606 (office)//554007 (home);
fax: 603-7561879; e-mail: <g2jomo@umcsd.um.edu.my> <massa@tm.net.my>
j
After the high tide of the resurgence of the South during the seventies, as reflected by the
United Nations’ General Assembly’s adoption of the commitment to build a New
International Economic Order (N1E0), the empire struck back with a vengeance in the
eighties, reflected in what John Toye (1987) has called the ‘counter-revolution’ against
development economics - led by Peter Bauer and Decpak Lal (1983), and articulated, for
example in the World Bank’s World Development Reports of the early eighties. Their
essentially laissez faire approach, arguing for a minimal role for the state, basically asserts
that the state has been largely irrelevant or, even worse, actually obstructive of the
essentially market forces which have contributed to rapid growth and structural
transformation, including industrialization. The original and most articulate exponents of
this view include Little, Scitovsky and Scott (1970), but there are many supporters of
such a position. This view became especially influential in the early eighties as the
ideological pendulum in the Anglophone world swung to the far right after the election of
Mrs. Thatcher and Mr. Reagan.
Intellectually, this swing was bolstered by
Keynesianism’s apparent responsibility for the fiscal crises and ‘stagflation’ ■ of the
seventies, the resurgence of monetarism and the emergence of supply-side economics, the
public choice school’s critique of self-seeking politicians and bureaucrats as well as the
property rights school’s critique of ill-defined or weak rights as well as greater attention
to principal-agent problems.
The poor growth and equity records of the eighties generally, as well as of the IMF’s
stabilization programmes and the World Bank’s structural adjustment programmes
(SAPs), raised doubts about the extreme laissez fairism implicit in the new ideology.
With the appreciation of the yen and other East Asian currencies after the second Plaza
Hotel meeting in September 1985, Japan’s economic clout increased tremendously as it
became the single largest contributor of official development assistance (ODA). At the
World Bank, Japanese executive director Shiratori is said to have offered to finance a
study of the rapid and sustained growth of East Asia in the previous quarter century,
which seemed to contradict the underlying economic premises of the Bretton Woods
institutions’ prescriptions of the eighties.
1
Thus emerged the case for the market-friendly state (World Bank 1991), which was
greatly enhanced by the World Bank’s (1993) East Asian Miracle (EAM) study, and is
likely to be seen as drawing additional support from the Asian Development Bank (ADB)
(1997) study entitled Emerging Asia (EA). Drawing from neo-classical welfare
economics, this view accepts the case for government intervention due to the existence
and greater significance of externalities and market failures. This approach has given new
1
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life to and justification for development economics - which had come under near fatal
assault in the early eighties - by emphasizing the more pervasive and deep-rooted nature
of externalities and market failures of various types in developing economies. The
persistence of such externalities and market failures provide the rationale for what the
World Bank (1993) refers to as ‘market-friendly’ ‘functional’ interventions - as opposed
to ‘market-unfriendly’ ‘strategic’ interventions, which the World Bank did not approve
of. While certainly superior to the orthodoxy of the eighties, the new consensus does not
go far enough, precisely because it is limited by underlying neo-classical economic
orthodoxy.
As a consequence, the World Bank (1993) recommends the Southeast Asian second-tier
newly industrializing countries (NICs) - rather than the East Asian first-tier newly
industrialized economies (NIEs) - as superior models for emulation for the rest of the
developing world, claiming that Southeast Asia has progressed precisely after it
supposedly liberalized in the mid-eighties. While the ADB emphasizes the importance of
‘good governance’ - the buzzword of the mid-nineties - it also claims that , market
competition and economic openness have been key to the impressive East, including
Southeast Asian growth performance of recent decades despite the considerable evidence
to the contrary. Hence, it is useful to critically reconsider these two influential versions
of the Southeast Asian economic development experience in order to draw more
appropriate lessons.
i
The World Bank’s Miracle Study
In September 1993, the World Bank published The East Asian Miracle: Economic
Grow th and Public Policy (EAM). According to the EAM study, eight “high performing”
Asian economies achieved the highest growth rates in the world between 1965 and 1990.
fhe argument is made as follows. Eight economies - Japan, the four so-called first-tier
newly industrializing economies (NIEs) of South Korea, Taiwan, Singapore and Hong
Kong, as well as the three second-tier newly industrializing countries (NICs) of Malaysia,
Thailand and Indonesia in Southeast (SE) Asia - were identified as high-performing
Asian economies (HPAEs), having achieved rapid economic growth and structural
change in the post-war period, especially since the 1960s. Since the early 1980s, China
has joined their number. According to the Report, the statistical chance of such success
on a regional scale is extremely remote. The report concludes: “In large measure, the
HPAEs have achieved high growth by getting the basics right. In this sense, there is little
that is ‘miraculous’ about the HPAEs’ superior record of growth; it is largely due to
superior accumulation of physical and human capital” (World Bank 1993: 5).
While acknowledging considerable government intervention, especially in Japan, South
Korea and Taiwan, the study concludes that the gains from industrial policy are
ambiguous. The Bank study emphasizes that besides Hongkong, and more contentiously,
Singapore the second-tier Southeast Asian NICs have also achieved rapid growth and
industrialization without resorting to industrial policy (Thailand), or by abandoning it
(Malaysia, Indonesia). The study emphasizes the difficulty of getting industrial policy
right, as well as the special historical, political and cultural circumstances in the
2
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Northeast (NE) Asian economic miracle which enabled competent, meritocratic and
insulated technocracies to pursue industrial policy and thus strengthen regime legitimacy.
Emphasizing that such conditions are unlikely to prevail elsewhere, the report eschews
industrial policy, pointing instead to the second-tier Southeast Asian NICs’ supposed
record of rapid growth and industrialization without industrial policy as more desirable,
alternative models for emulation.
The study was apparently commissioned at the insistence of the Japanese government to
gain greater recognition and appreciation of the Japanese cxperici e. This apparently
came about after years of frustration with the nco-classical economic orthodoxy and free
market conservatism, which has. long dominated Bank thinking and policy
recommendations, especially since the resurgence of neo-libcral economic
fundamentalism in the 1980s. Though it is still unclear whether the publication is
indicative of a more deep-rooted shift in Bank thinking, as some insiders would like to
believe, the book was nonetheless important for explicitly incorporating some arguments
made by proponents of industrial policy, thus acknowledging a position previously
considered beyond the pale of economic orthodoxy. However, as pointed out by various
critics, in many respects, the publication did not go far enough, as it sought to reconcile
undeniable achievements of slate intervention with its own nco-liberal laissezfairism.
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Despite its emphasis on fundamentals, the report pays surprisingly little attention to the
actual mobilization and deployment of savings, which has been primarily responsible for
the high investment rates as well as the rapid growth and structural transformation which
has taken place. As Akyuz and Gore (1994) have pointed out, the high savings rates in
East Asia primarily involve corporate - rather than household - savings, i.e. out of profits.
This suggests the existence of regulatory and institutional frameworks encouraging such
savings and investment behaviour instead of, say, high levels of dividend payments to
shareholders, which would be encouraged by institutions, such as the Bank, urging the
development of stock markets.
fhe report concedes that directed credit contributed to the success of North-east Asian
economies (i.e. Japan, South Korea and Taiwan); while some observers suggest that this
is due to Joseph Stiglitz’s authorship of the study on industrial financing, others claim
that this was a necessary concession to the financiers of the Miracle study, namely the
Japanese Ministry of Finance. In contrast, the report is more disparaging of the
contribution of other aspects of industrial policy which lie within the jurisdiction of the
Ministry of International Trade and Industry in Japan. While the report acknowledges that
industrial policy has been pursued in Northeast Asia, it also claims that the results have
been mixed, and that the Northeast Asian economic miracle cannot be attributed to other
kinds of state intervention, especially government promotion of selected strategic
industries. Besides relying on the ambiguities inherent in making counter-factual
arguments, the Bank study resorts to an extremely restrictive definition of industrial
policy, which is then translated into a dubious methodology to make its case (see Chang
3
I
1994b). By employing this curious methodology, the Bank concludes that the results of
industrial policy in East Asia have been ambiguous.
I
The study also emphasizes the difficulty of getting industrial policy rights as well as the
special historical, political and cultural circumstances in the North-east Asian economic
miracle which enabled competent, meritocratic and insulated technocracies to pursue
industrial policy and thus strengthen regime legitimacy. Emphasizing that such conditions
are unlikely to prevail elsewhere, the report eschews industrial policy, pointing instead to
the second-tier Southeast Asian NICs’ record of rapid growth and industrialization
without - or even despite - industrial policy as more desirable, alternative models for
emulation. It then goes on to emphasize that the domestic and international conditions
faced by most developing countries today are such that industrial policy is unlikely to
succeed today in case any government should still want to try.
I
Instead, the report claims that the Northeast Asian success has been largely due to their
ability to switch from distortionary import substitution to allegedly non-distortionary
export-oriented industrialization. Wade (1991) has described an interesting variation of
this “free market” argument as the “simulated free market” thesis (Little 1981; Bhagwati
1988). Unlike the “free market” thesis, it at least concedes that the South Korean state has
been distortionary, but argues that the distortionary effects of import substitution in South
Korea were sufficiently negated by and hence compensated for by the same government’s
export promotion and subsidization efforts.
The report argues that Indonesia, Malaysia and Thailand “may show the way for the next
generation of developing economies to follow export-push strategies” (World Bank 1993:
25); unlike the Northeast Asian economies, these three economies followed strategies
courting direct foreign investment and creating a favourable environment for exporters
without at the same time following policies of financial repression and industrial
targeting. Thus, the Miracle study claims that the Southeast Asian second-tier NICs have
grown rapidly by relying on market forces and minimal, but appropriate and generally
supportive interventions (e.g. in the areas of primary education and infrastructure
provision) without, or even despite bad industrial policy, i.e. attempting selective policy
interventions - involving trade, finance, technology and human resources - to promote
particular industries. Thus, the 1993 Miracle study by the World Bank presents the
success of the so-called second-tier NICs (Malaysia, Indonesia, Thailand) as proof that
other developing countries do not need industrial policy to achieve rapid growth,
industrialization and structural change.
Several points can be conceded at the outset. Historical circumstances are undoubtedly
different in Southeast Asia. The post-Meiji experience in Japan and its colonies of Korea
and Taiwan resulted in certain industrial, educational and administrative developments in
the first half of this century which were quite distinct from those experienced in other ex
colonial economies, and arguably more conducive to subsequent rapid industrialization.
More manufacturing activity seems to have developed in these Japanese colonies than in
4
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other colonies. With the possible exception of the Philippines under the US, tertiary
education developed much more in the Japanese colonies than under European
colonialism. Correspondingly, the administrative ethos which developed was
meritocratic, potentially developmentalist and nationalistic. The post-World War Two
conditions in Northeast Asia made possible land reforms which were not only more
equitable and regime-legitimizing, but also conducive to growth and capital accumulation
for industrialization. Cold War considerations ensured generous aid at a crucial time as
well as tolerant attitudes to NE Asian government policies by the United States
administration which would certainly be unacceptable today, e.g. regular violation of
intellectual property claims of mainly US-based transnational corporations.
In emphasizing what it considers getting economic fundamentals right, the report glosses
over differences among the HPAEs. Perkins (1994) has suggested that there are dtree
rather than just one East Asian model, grouping together Japan, South Korea and Taiwan I
as distinct from the municipal economies of Hongkong and Singapore on the one hand,
and the second-tier Southeast Asian NICs of Malaysia, Thailand and Indonesia on the
other. While agreeing with these distinctions at one level, serious attention to other
dimensions would complicate the picture. For example, if we put aside the second-tier
NICs for a moment, it appears that industrial policy has been much more important in
Japan and South Korea, while state-owned enterprises have played a much bigger role in
Singapore and Taiwan. Many other similarly instructive distinctions can be made, which
suggests that nuanced comparative historical institutional analysis may be more
rewarding than the generalizing discourse favoured by the Bank study or the one - or even
two-dimensional categorization favoured by others.
The Miracle study’s rejection of industrial policy and emphasis on creating conditions to
attract foreign investment as policy prescriptions emerging from the study are curious to
say the least. Of the eight HPAEs, only Malaysia and Singapore have generally relied
much more than most other developing countries on foreign direct investment (FDI), for
essentially political reasons. After seceding from Malaysia in 1965, the Singapore
authorities deemed it crucial to attract foreign investment to ensure a continued
international stake in the security and future of Singapore, even at the expense of
discriminating against predominantly ethnic Chinese domestic capital (Rodan 1989). In
Malaysia, foreign investment has been favoured by influential elements in the ethnic
Malay-dominated regimes to limit and circumvent the expansion and accompanying
influence of ethnic Chinese Malaysian capital (Jesudason 1989; Bowie 1991).
Restrictions on foreign investment have allowed internationally competitive domestic
manufacturing, firms to emerge, often with state support, in most of the East Asian
economies. Such regulation has also increased the gains and reduced the losses to the
national economy from the presence of foreign investment. The intensive use of FDI may
also only have been a temporary phenomenon observed at a relatively early phase of
development when domestic capital accumulation, technological capacity and external
5
market access are still very weak; hence, for example, South Korea relied much more on
EDI only up to the early 1970s. The importance of FDI at a particular historical moment
may largely be due to temporary foreign investor interest, e.g. in response to the
Indonesian liberalization in the face of the 1986 petroleum price collapse just when Japan
and the first-tier NICs were facing declines in their international competitiveness in the
face of their currency appreciations, rising wage and other production costs, increasing
political instability, greater pressures for industrial pollution controls and so on, and were
seeking to relocate their more labour-intensive and environmentally less acceptable
industries.
While the Bank’s Miracle study acknowledges that the statistical probability of eight
contiguous economies growing so rapidly over such an extended period of time is very
remote from its own perspective, it does not deem this regional dimension of
simultaneous growth and structural transformation in the region worthy of explanation.
As (his study will discuss, industrial relocation within the East Asian region has grown
tremendously in the last decade, and has contributed a great deal to the export-oriented
manufacturing boom in the second-tier South-east Asian NICs. Much of this has been
driven by firm responses to changing domestic and regional conditions, including
comparative labour and other production costs as well as differential environmental,
occupational health and pollution' regulation. In this connection, however, there is also
considerable evidence that the pattern and pace of “regional industrial restructuring” in
East Asia are not simply firm or market-driven, but also very much influenced by
Japanese, Taiwanese, South Korean and Singaporean industrial policies, which
encouraged such industries to relocate in Southeast Asia and China.
I
ADB’s Emerging Asia
In mid-1997, Asian Development Bank published Emerging Asia: . Changes and
Challenges (EA), believed to be principally authored by Harvard Institute of International
Development’s Jeffrey Sachs and other external consultants. The ADB’sTA study is
likely to have considerable influence, perhaps because it is more reader-friendly than the
East Asian Miracle volume published by the World Bank. Another reason is that it is
more confonnist, with few exceptions, uncritically endorsing the neo-liberal ideology and
policy agenda of our times.
However, unlike most other studies of Asia, the ADB volume seriously considers
geography, demography, the environment, natural resources, and quality of life issues,
albeit in ways many of us may take issue with, butt nonetheless usefully, though mainly •
predictably. This is no trivial matter. For example, the WB’s EAM study acknowledges
that the likelihood of eight relatively contiguous economies all achieving relatively rapid
and sustained growth for over a quarter of a century is very, very remote, but did not see
fit to come to terms with this. While economics obviously has difficulties in dealing with
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geography, it is unfortunate that neither study has sought to address Akamatsu’s original
‘flying geese’ hypothesis, or subsequent variations thereof, even if only to reject them.
While the EA study seems to have gone beyond the EAM study in recognizing the
significance of geography, the study docs not seriously consider the ‘flying geese* and
other related propositions. Proximity seems to matter, as suggested by the recent domino
effect in the collapse of Southeast Asian currencies, but there is no attempt to seriously
consider other implications of geography for economic development, whether in terms of
agglomeration, regional integration, currency zones, etc.
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Similarly, the significance of exchange rate competitiveness is not seriously considered,
both for East Asia as well as Southeast Asia. The post-1986 boom in the second-tier
Southeast Asian NICs came after their currencies depreciated against the US dollar, and
even more against the yen, won, New Taiwan dollar and Singapore dollar, effectively
lowering production costs in these economies and thus increasing their attractiveness as
production locations.
The EA study claims (p. 77) that temperate countries grew, on average, by 1.3 percentage
points more than tropical countries during the 1965-90 period, after controlling for other
factors. Fhe study explains this significant shortfall in terms of the greater prevalence of
disease, poorer soils, more frequent typhoons and other natural calamities in the tropics.
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Surprisingly, the EA study seems to be oblivious to W. A. Lewis’ (1969; 1978)
pioneering work on the economic condition of the tropics. As Lewis (1978) has shown,
tropical exports grew faster than temperate zone exports during the last period of global
liberalization from the end of the last century. For the period 1883-1913, for example,
French Indochina, Thailand, British Ceylon, West Africa, French West Africa and
Madagascar all had average annual export growth rates of five percent or more, while
Brazil had 4.5 percent. The comparable rates for temperate settlements, the USA and
Northwest Europe were 4.3, 3.8 and 3.5 percent respectively.
While the tropics generally had more modest export bases than the temperate zone, this
also suggests that the tropics were able to respond to export demand despite the
disadvantages they faced. Lewis emphasized that not all tropical countries were able to
seize the opportunities from increased export demand. He suggests that the exports in
greater demand were largely w'ater-intensive; hence, only those areas with enough water
to substantially increase their exports were able to take advantage of the new
opportunities. The more arid tropical grassland areas thus could not benefit from the
increased demand for tropical products.
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Since the Southeast Asian newly industrializing countries and some other tropical
countries have also grown rapidly since the sixties, it is necessary to explain why
countries in the tropics have fared so badly in the last few decades. It is not enough to
simply attribute the tropical growth shortfall simply to ‘pests, diseases, typhoons and
other natural calamities’ though such factors may not have been unimportant.
<
In a variation of the Prebisch-Singer argument about the declining terms of trade faced by
the countries in the periphery, Lewis has observed that the terms of trade for tropical
exports deteriorated badly against temperate exports. In the half century between 1916
and 1966, for example, the index for natural rubber fell from 100 to 16. This suggests that
productivity gains in the tropics were largely lost to the worsening terms of trade, and the
situation would have been even worse where few productivity gains were made. Such
phenomena compel us to reconsider the challenge to conventional international trade
theories posed by proponents of‘unequal exchange’.
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Intal (1997) has suggested that sub-Saharan Africa has lagged behind in terms of
agricultural development since the sixties due to inadequacies in agricultural R&D and
infrastructure, crop and agronomic considerations and macro-economic conditions. He
argues that higher temperate agricultural productivity has partly been due to long,
sustained and larger investments in agricultural R&D, which temperate LDCs (e.g. Chile,
Korea and Taiwan) have been better able to take advantage of. The tropical Green
Revolution in rice farming since the sixties has mainly benefited irrigated farms in
Southeast and South Asia, while drier agricultural practices in Africa have generally been
left out.
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However, the Malaysian, Indonesian and Thai success with tree crop agriculture offers
some hope.
The Malaysian experience, in particular, suggests that significant
investments in tree crop agricultural R&D (e.g. in rubber, oil palm and cocoa) as well as
rural infrastructure have made possible productivity gains in tree crop agriculture as well.
The geographic specificities of agriculture imply that for imported agricultural varieties
and technologies to be successfully adopted, there is a great need for effective adaptive
investments in R&D and extension. Unfortunately, in their desire to industrialize, some
governments have neglected agriculture, or worse still, subjected it to considerable
policy bias.
The EA study also suggests that being a natural resource rich country is bad for growth.
Curiously, the study defines natural resource abundance in terms of the ratio of net
primary product exports to GDP in 1971 without distinguishing between extractive
natural resources (especially minerals) from agricultural products. So-called Dutch
Disease mainly involves the former, which tend to be very capital-intensive and only
involve a small proportion of the population in the extraction of the resource.
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Consequently, the added income accrues to a few while the appreciation of the country’s
currency affects the entire population.
Agricultural exports generally involve much more of the population, and increased
income usually accrues to all producers, diffusing the adverse consequences of currency
appreciation. 1'he Southeast Asian high performing economies have been major
agricultural exporters, thus offsetting the problems associated with the mineral exports of
Malaysia and' Indonesia, in sharp contrast to, say, Nigeria. Generally good macroeconomic management has also helped, especially to offset the tendency to indulge m
expenditure on non-lradeables.
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Citing l.indauer and Valenchik (1994: 288-9), Intal (1997) has argued that the marginal
labour productivity and hence the opportunity cost of farm labour for manufacturing is
higher in land-abundant African economies compared to land-scarce Asian economies
even though average labour productivity is usually higher in the latter. Hence, it is
unlikely that the former will be able to compete with the latter in labour-intensive
manufactures. The Malaysian experience suggests that such labour-scarce, land-abundant
economics can only be competitive in skill-intensive, rather than unskilled labour
intensive manufactures, requiring considerable investments in human resource
development.
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Comparing wage rates to labour productivity in manufacturing for 1992, Intal (1997:
fable 4) shows the high proportion of wages and salaries to value addition per worker in
economies such as Hongkong (0.51), India (0.39) and Singapore (0.34) compared to
Malaysia (0.28), South Korea (0.26), Philippines (0.23), Sri Lanka (0.19), Thailand (0.15
in 1990) and Indonesia (0.14). This suggests that the low wages received by Indian
workers do not automatically translate into labour cost competitiveness. The situation in
much of Africa suggests that not unlike Indian labour, African labour may also not be
competitive in wagc/productivity terms.
While largely accepting the arguments for state interventions to address market failures,
the advocates of the developmental state perspective emphasize that the nature of
government interventions in East Asia generally went well beyond the market-friendly
functional interventions approved of by the World Bank. While the World Bank
disapproved of so-called strategic interventions, the proponents of the developmental
state perspective insist that selective industrial policies • involving trade, financial and
other interventions - have accounted for ‘late industrialization* in East Asia (Amsdcn,
1989; Chang 1994; Wade, 1990). lite key argument is that such interventions have been
crucial for developing new industrial capabilities which did not previously exist and
which would not have spontaneously emerged due to market forces alone. Thus, the old
‘infant industry’ argument was resuscitated, with insights from Gerschenkeron’s (1962)
observations on the advantages of economic ‘backwardness’ as well as the requirements
of ‘late industrialization’. The developmental state advocates emphasized the role of
‘strong states’ (in Myrdal’s sense) as well as the manipulation, if not distortion of market
mechanisms to achieve developmental objectives.
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There is, of course, considerable variation in perspectives within the three camps, as well
as positions which may be seen as intermediate. For example, a significant number of
institutionalists have identified and emphasized collective action problems and co
ordination failures, which may be best addressed by direct government intervention or,
nite.rnatively, by private sector collective initiatives, or by improved government-private
sector consultation, or even by corporatist institutions and mechanisms. In so far as some
such problems (may not be generally acknowledged as market failures, the related
solutions may not be seen as within the pale of acceptable market-friendly interventions.
And in so far as the intervention may be anticipatory or pro-active, rather than reactive, it
is more likely to be seen as strategic rather than functional.
As noted earlier, the WB’s EAM study approves of market-friendly functionalist
intcrxentions - such as ensuring good governance, sound macro-economic management,
physical and social infrastructure provision and high savings and investment rates - while
eschewing market-distorting strategic interventions. Nevertheless, given the significance
of the latter, particularly in Northeast Asia, the EAM study considered the impact of the
latter, particularly ‘directed credit’ and ‘industrial policy-related trade interventions. The
EAM study insisted that the latter failed in East Asia,while conceding that ‘directed
credit worked. However, the WB suggested that the conditions and circumstances of
such limited success in Northeast Asia were very unusual, if not unique (Confucianism,
bureaucratic capability, favourable initial and international conditions, etc.), and therefore
not to be emulated.
Growth accounting exercises - suggesting little total factor productivity (TFP) growlh in
most of the region - have also been invoked by the WB, Paul Krugman (1994) and others
to suggest the inferiority of East Asian growth in achieving technical progress. The main
conclusion drawn is that rapid growth in the region has largely been due to massive factor
(capital and labour) inputs due to high savings and investment rates, foreign direct
investment, growth of the wage labour force in the formal sector and human capital
investments. Further factor inputs are bound to run up against diminishing returns, and
rapid East Asian growth cannot be sustained, at least at the breakneck pace of the last
three decades.
There is no time here to go into an extended discussion of the theoretical as well as
methodological issues involved. However, Dani Rodrik’s observation (in Collins and'
Bosworth 1996: 120) that ‘the evidence on investment rates is direct and speaks for itself,
the evidence on TFP is indirect and has to be interpreted with care’. Also, Collins and
Bosworth’ s ( 1996) more recent findings suggest that East Asian economies have been
evolving toward greater TFP gains since the eighties as they attain a higher stage of
development. They also argue that future growth in the region can be sustained as the
educational and skill profiles of the labour forces continue to grow.
Many East Asians have been deeply offended by Krugman’s comparison of East Asian
growth with that of the Soviet Union in earlier times, and the implications that East Asian
economic performance has not been all that miraculous and that slower growth is
unavoidable and imminent. However, there has been less critical attention to the basis of
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his analysis, namely the more conventional neo-classical growth accounting exercises by
Alwyn Young (1994) on the one hand, and the more heterodox exercise by Kim Jong-I
and Lawrence I.au (1995).
Krugman is probably right in claiming that the new endogenous growth theory cannot be
invoked against his arguments as even higher TEP residuals would then be expected.
However, if technological learning only becomes important beyond a certain stage of
development or when technological progress requires changes in the labour process more
conducive to such learning and shop-floor innovation, one would have different
expectations of TEP growth in East Asia outside of Japan.
But even if we accept the theoretical and methodological bases for Krugman’s claims
(which are not unproblematic), there is good reason to suspect his conclusion of lack of
technological progress when one considers the consequences of differences in price
determination in different product markets which affect growth accounting exercises. In
this case, the important distinction is between the more technologically sophisticated
products, enjoying legally protected monopolistic rents, and other more mass-produced
products in far more competitive markets. The differences in the nature of the labour
markets have also had some bearing on product price determination. Most East Asian
workers outside of Japan have been under-remunerated owing to international labour
immobility, among other factors, resulting in the relative under-valuation of the prices of
East Asian exports in international trade.
The different economic performances of the three regions considered by the EA study do
not merely involve differences in economic growth, or even of structural transformation,
though these are not unimportant. Before the nineties, the World Bank’s first-tier East
Asian HPAEs (including Singapore) grew by almost two percentage points more than the
three second-tier Southeast Asian NICs (Malaysia, Thailand and Indonesia); the
difference was even greater on a per capita basis owing to the higher population growth
rates in the latter. When one considers the far larger contribution of natural resource rents
to the latter's growth performance, the former’s achievement is even greater.
Whereas the EAM study obscured this difference, the EA study addresses it in terms of
regional differences. Unfortunately, neither study pays sufficient attention to the major
policy differences between the two regions and their consequences in terms of ‘late
industrialization’. Industrial policy has been far more extensively deployed in Japan,
South Korea and Taiwan than in the second-tier Southeast Asian NICs. The success of
such industrial policy is reflected in the greater industrial and technological capabilities of
the former compared to the latter.
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Neither study comes to terms with the fact that the former selectively kept out foreign
investment, with EDI only accounting for a modest share of gross domestic capital
formation. In contrast, EPI has been far more important in Southeast As-ia, especially in
Singapore and Malaysia, and that too partly for political reasons. In Singapore, the
government was initially concerned with quickly developing a strong foreign stake in the
future survival of Singapore after it seceded from Malaysia in 1965. The ruling People’s
11
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Action Party (PAP) also remained skeptical of domestic business interests, who had
supported other political parties before the PAP came to power. In Malaysia, the ethnic
Malay-dominated government seems to have favoured foreign investment as an
alternative to ethnic Chinese domination of the national economy while the ethnic Malays
expand their stake.
In making regional generalizations, the EA study glosses over many important differences
within the three main regions considered. In reviewing the EAM study, Dwight Perkins
(1994) suggested that generalizations about East Asia obscured the existence of at least
three distinct East Asian types among the eight HPAEs - the Northeast Asian HPAEs
(including Taiwan), the Southeast Asian HPAEs and the two city states of Hong Kong
and Singapore. The significance of industrial and technology policies as well as stateowned enlciprises in the island republic, in contrast to the recently returned British
colony, underscores the difficulties in making facile gencralizations% Any alternative
categorization would also be moot, but the recognition of such variety is often obscured
in stressing regional similarities. State-owned enterprises have performed well in
Singapore and perhaps in Taiwan as well, but less well in Malaysia and Indonesia, which
is not surprising given the circumstances of their establishment and management.
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The ADB's EA study argues that market competition, openness, and export orientation
were the key ingredients of East Asia’s miraculous economic performance. It is not
possible to address these claims comprehensively here, but fortunately for me, others
have already done so very' persuasively.
On the claim of market competition, one can refer to the World Bank’s discussion of the
importance of ‘contests’ in East Asia. In line with the Austrian School critique of the
neo-classical economic fetish for perfect competition, East Asian governments have not
been insistent on competition to avoid wasteful, excessive compci/iion and to enable
firms to achieve economies of scale. Contests or managed competition as well as
managed exposure to international markets have instead been used to force linns to
become internationally competitive as quickly and as reasonably as possible.
Both studies also repeat (he nco-liberal mantra of trade liberalization and economic
openness without fully acknowledging the critical difference between ‘free trade’ a la
Little et alia and the juxtaposition of export subsidies against import protection, as in
Northeast Asia. As many have noted, the East Asian governments have not been as open
to free trade as claimed by the EA study. Instead, Bhagwati (1988) and others have
argued that free trade has been ‘simulated’, with the distortionary consequences of import
protection in East Asia offset by export subsidies, but this is certainly not free trade as
normally understood. Nor were East Asian governments open to EDI as suggested by the
Emerging Asia study. As noted earlier, EDI in Japan, South Korea, and even Taiwan has
accounted for a smaller proportion of gross domestic capital formation (GDCE) than is
the norm for developing countries. Even in the Southeast Asian HPAEs, all with higher
than average FDI/GDCF, there has been significant regulation of EDI.
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The i:.\ study claims that consistently open economies grew by an average of two
percentage points more than considerably closed economies during 1965-90. This finding
is dependent on the definitions and categorization of countries as open or closed as dore
by Sachs and Warner (1995). They assert that Thailand has been consistently open, th it
Indonesia has been open since 1970 while the Philippines has only been open from 1988.
Comparing these three countries, Intal (1997: Tables 1-3) shows that such an
interpretation would require a rather peculiar, if not arbitrary reading of the evidence and
classification of the countries. Citing Naya (1989: Tables 2.8-2.9), he shows:
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average import duties in the 'Philippines in 1982 were slightly lower than for
in 1980 and Thailand in 1983
for intermediate and capital goods, the average import duties for the Philippines in
1982 were lower than for Thailand in 1983.
quantitative import restrictions and other non-tariff barriers in the Philippines in 1983
were lower than in Indonesia in 1980 for crude materials, chemicals, basic
mariulacturcs and transport machinery
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Citing trade-weighted trade control measures from UNCTAD (1987: Supplement) for the
mid-1980s, Intal shows that the total tariff and ‘para-tariff measures were higher in
Thailand than in the Philippines for ‘all manufactures’ as well as both chemicals and
machinery & equipment. Meanwhile, all non-taiiff measures were greater in Indonesia
than in the Philippines for both ‘all manufactures’ and chemicals, and only slightly less
for machinery' & equipment. Then, citing Ariff and Hill (1985: Tables 3.3, 3.5, 3.7), who
only offer comparable figures for Indonesia and the Philippines, he shows that the
effective rates of protection for intermediate goods in Indonesia in 1975 and 1980 were
much higher than for the Philippines in both 1974 and 1980; the data suggest that the
converse was true for capital goods.
The point is clear. The usual indices of trade openness do not allow Sachs and Warner to
categorize the Philippines very differently from Indonesia and Thailand. Claiming that
the foimer was closed and the latter two were open would most certainly distort and
affect findings about the alleged relationship between trade openness and economic
growth since the latter two have performed so much better than the former in the last
three decades. Intal comes close to suggesting that their adverse view of govemment’s
role in agricultural development - as reflected by their emphasis on ‘state monopoly of
major exports’ as a measure of the elosedness of an economy - ‘affected Sachs and
Warner’s categorization and related claims.
The EA study also ignores the problems of liberalization and openness, such as the causes
and consequences of the recent financial crisis in Southeast Asia. Recent experience
contradicts the claim that ‘the market’ will exact swift and painful punishment on
governments and. economies that do not have their macro-economic house in order.
Rather, the timing, nature and consequences of the mid-1997 financial crisis in Southeast
Asia underline the imperfect nature of financial markets. For example, this was reflected
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in the long delay before ‘rectification’ of years-old Southeast Asian current account
icits - as acknowledged by International Monetary Fund (IMF) deputy head Stanley
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a uor d economy where foreign exchange spot transactions are
worth more than seventy times total international trade transactions, dte fmancial sector
has become increasingly d.vorccd from the real economy. With the recent proliferation
of new financial instruments and markets, the financial sector has an even greater
potential to inflict damage on the real economy.
fin nJ?
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C Unre8uIated expansion of capitalism, especially
finmice capital, threatens to undermine the system’s viability and future Je tha^
cap, ahsin has to be saved from itself. While admitting that he himself has profited
greatly from financial liberalization, he argues that excessive liberalization has resulted in
n ua anarchy, which is dangerous for the stability so necessary for the orderly capitalist
g™ vh-and democratic development desired by his liberal vision of a Popperian ‘open
I
' , ""’.f l.°rd Kc>ncs advocatcd ‘throwing sand’ into the financial system to check the
potentially disastrous consequences of unfettered liberalization, Keynesians - and others have been wary of the financial liberalization advocated by ideological neo-liberals and
their often naive allies. Nobel laureate in economics James Tobin has called for a tax on
foreign exchange spot transactions to enable more independent national monetary policy
discourage speculative capital movements, and increase the relative weight of long-term
economic fundamentals against more short-termist and spccukii.se considerations
k sides more than adequately funding the United Nations system and programmes. As
many have pointed out, the international financial system and its further liberalization
have favoured those already dominant and privileged in the world economy, largely at the
expense of the real economy and development in the South.
Dani Rodrik (1994) has challenged the World Bank’s EAM study’s claim of the
significance of export orientation. I he economic histories of Japan, South Korea, and
Taiwan suggest that most industries began by producing for the domestic market as has
been typical of import-substituting industrialization. The East Asian difference has been
in effectively requiring and facilitating the rapid transition to production for export, often
through the creative deployment of trade policy, as suggested earlier.
All this is not to imply that industrial policy has always been well-motivated and
successfully deployed.
The World Bank’s'claim of trade policy failure is
methodologically problematic, and does not even bother to distinguish government
interventions motivated by different considerations, e g., the desire to enrich a politically
influential, or otherwise favoured concessionaire. The EA study cites problems with the
Korean heavy and chemical industrialization drive, but just as with the policy failures
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attributed to the Japanese Ministry of International Trade and Industry (Mill), such
selective evidence is not conclusive proof of the failure of industrial policy.
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I he EA study is quire ccrrect in emphasizing the new constraints in the articulation,
elaboration, and implementation of industrial policy, especially those imposed by the new
international .economic governance, particularly through the World 1 rade Organization
(WTO). But instead of urging Asian governments to work together in their common
intciest to resist the emerging international economic governance, the EA study seems to
urge precisely the opposite, i.e. acceptance and conformity.
I 'nfortunately, neither the EAM or EA studies go very far in trying to explain or
understand why government interventions have, on balance, .ccelcratcd structural
transfoimalion and resulted in the development of significant industrial and technological
capabilities in East Asia, and to a lesser extent, in Southeast Asia. This suggests that
better understanding of the political economy of government intervention can take us
some way towards greater appreciation of some reasons tor the different outcomes of
government intervention in the three main Asian regions considered by the EA study.
•
This paper draws from other work, including Jomo et al. (1997), which offers a
different interpretation of the second-tier Southeast Asian NIC experiences. It
disputes some, though not all, of the World Bank’s explanations for rapid growth and
structural change in the second-tier Southeast Asian NICs. It reviews the historical
and contemporary factors contributing to rapid economic development in the region,
especially in the last decade. While there is little disagreement about the broad macro
economic and other trends noted by the Bank, the study offers a more nuanced
explanation focusing particularly on the nature, role and consequences of regional
location as well as state intervention, especially industrial policy. After identifying
some distinctive characteristics of the Southeast Asian second-tier NICs which would
require qualification of the tendency to speak of the East Asian region and experience
in homogenizing terms, the role of ethnic Chinese business networks in the region is
also mentioned. East Asian regional economic dynamics, particularly since the yen
and other East Asian N1E currency appreciations of the mid-1980s, catalyzed a chain
of developments that have sustained rapid growth throughout the region since then.
Various chapters look at economic growth, industrialization and industrial policy in
Thailand, Malaysia and Indonesia respectively, critically considering the nature, role
and implications of state intervention in these economies. The evolution and
outcomes of development strategies, particularly industrial policies in Indonesia,
I hailand and Malaysia, especially with respect to investment, trade and labour, are
considered. This raises the question of whether the second-tier NICs offer a superior
or more feasible model for emulation by identifying the sources as well as
sustainability of their growth, and examining the role of industrial policy in the three
countries, with special attention given to related labour, human resources and
technology issues. Ihe concluding chapter draws some lessons from this study,
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especially for policymaking by other developing countries. It critically reconsiders
some of the major policy implications and recommendations of the Bank’s Miracle
study as well as of other efforts to interpret the Southeast Asian component of the
recent rapid growth and industrialization in East Asia.
References
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Amsden, Alice, 1989. Asia's Next Giant. Oxford University Press, New York.
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Ariff, M. and IL.Hill, 1985. Export-oriented Industrialization: The ASEAN Experience.
«
Allen and Unwin, Sydney.
Asian Development Bank, 1997. Emerging Asia. Asian Development Bank, Manila.
Bhagwati, J., 1988. ‘Export-promoting trade strategy: issues and evidence’, World Bank
Research Observer 3(1), Jan.: 27-57.
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c
c
Chang Ha-Joon, 1994. The Political Economy of Industrial Policy. Macmillan,
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«
Collins, Susan M. and Barry P. Bosworth, 1996. ‘Economic growth in East Asia: •
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«
Gerschenkron, A., 1962. Economic Backwardness in Historical Perspective. Harvard
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c
«
c
Intal, Ponciano S. Jr (1997) ‘Comments on Chapter 2 of the Emerging Asia Study:
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e
Kim Jong-Il and Lawrence Lau. 1994. ‘The sources of economic growth of the East Asian
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e
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<
Krugman, Paul. 1994.‘The myth of Asia’s miracle’. Foreign Affairs 73(6): 62-78.
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Lewis, W. A. (1978) Growth and Fluctuations, 1870-1913. Allen & Unwin, London.
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Little, Ian M. D., 1994. ‘Trade and industrialisation revisited’. Pakistan Development
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Little, L, T. Scitovsky and M. Scott, 1970. Industry and Trade in Some Developing
Counlriet: A Comparative Study. Basic Books, New York.
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1
1
I
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Myrdal, Gunnar, 1968. Asian Drama, 3 vol., Pantheon, New York.
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Na>a, Seiji, et al.AWV. ASEAN'-US Initiative, Institute of Southeast Asian Studies,
Singapore.
0
9
Perkins, Dwight, 1994. ‘There arc at least three models of East Asian development’.
World Development 22(4): 655-61.
9
Rodrik, Dani’, 1994. ‘Getting interventions right: How South Korea and Taiwan grew
rich’. Working paper 4964, National Bureau of Economic Research, Cambridge, MA,
December.
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Rodrik, Dani, 1995. ‘Trade strategy, investment and exports: Another look at East Asia.’
Working paper 5339, National Bureau of Economic Research, Cambridge, MA,
November.
Sachs, Jeffrey and Andrew Warner (1995) Natural Resource Abundance and Economic
(Irowth. 1II1D Discussion Paper no. 517A, Harvard Institute for International
Development, Cambridge, MA.
Soros, Georg, 1997. ‘The Capitalist Threat’, 1'he Atlantic Monthly, February.
9
Toye, John, 1987. The Dilemma of Development. Blackwell, Oxford.
»
UNCTAD, 1987. Handbook of Trade Control Measures of Developing Countries.
Supplement: A Statistical Analysis of Trade Control Measures of Developing Countries.
United Nations Conference on Trade and Development, Geneva.
b
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9)
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X)
B
B
Wade, Robert, 1990. Governing the Market. Princeton University Press, Princeton.
World Bank,
1981. WorldDevelopment Report 1981. Oxford UniversityPress, New York.
World Bank,
1983. WorldDevelopment Report 1983. Oxford UniversityPress, New York.
World Bank,
1991. WorldDevelopment Report 1991. Oxford UniversityPress, New York.
B
World Bank, 1993. The East Asian Miracle: Economic Growth and Public Policy. Oxford
University Press, New York.
B
World Bank, 1997. World Development Report 1997: The State in a Changing World.
Oxford University Press, New York.
9
Young, Alwyn, 1994. ‘Lessons from the East Asian NICs: A contrarian view’. European
Economic Review 38(3-4): 964-73.
Young, Alwyn, 1995. ‘The tyranny of numbers: Confronting the statistical realities of the
last Asian growth experience’. Quarterly Journal of Economies 1 10(3): 641-80.
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Palestinian-Israeli Relations: From Conflict to Reconciliation?
An Abstract by Moshe Ma’oz
During the century-old conflict (since the 1880’s) in Palestine between
Arabs and Jews, Palestinian Arabs and Zionist Israelis, the mainstream
i
among the Palestinians considered the Jewish Zionist movement a
European-colonialist invader and occupier, that illegitimately and forcibly
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dispossessed them of their land and established a Jewish state (Israel in
1948) on a large part of it. Following the 1967 War and the occupation of
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other parts of Palestine (the West Bank and the Gaza Strip), Israel formally
annexed EasVArab Jerusalem and created Jewish settlements on these
territories.
By contrast, the Zionist-Jewish community in Palestine considered
itself as a national liberation movement, aiming to deliver the Jews from their
2000 years of exile and revive their national, social and cultural life in their
ancient land of Israel.
The mainstream of the Jewish-Zionist community in Palestine, under
a
the British Mandate, acknowledged the national rights of the Palestinian Arab
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community and, in 1947, adopted the UN Partition Resolution (181) of 29th
November 1947, which provided for the creation of two states. Arab and
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Jewish, in Palestine.
The Palestinian Arabs rejected the UN Resolution and, with the help of
five military expeditions from neighboring Arab countries, attacked the newly
established Jewish State in 1948, but were all defeated. Only on 15th
November, 1988, after four more decades of military and political struggle,
»
did the PLO (the legitimate representative of the Palestinian people) accept
UN Resolution 181, while pronouncing the creation of a Palestinian state
(alongside Israel). Israel, however, under the premiership of Mr. Shamir, the
right-wing Likud leader, has continued to reject the Palestinians' rights of self
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determination in the West Bank and Gaza, while constructing more Jewish
settlements on these occupied territories.
am
Only in September 1993, did Israel, ted by Mr. Habin. the Labour
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leader and the PLO led by Mr. Arafat sign the Oslo Peace Accord, thus
bringing about an historical and psychological breakthrough in the century-
old conflict between Arabs and Jews in Palestine/Eretz Israel. Despite
various difficulties and delays, the Israeli-Palestinian agreements were
carried out fairly well and in an atmosphere of mutual trust and cooperation.
However, since late 1995 early 1996, the Oslo process has
encountered serious obstacles and almost came to a standstill by the spring
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of 1997. The major causes for this stalemate have been Palestinian-Hamas
terrorist attacks in Israel and the new policies and measures of the Israeli
Likud government against the Palestinians. Consequently, the pre-Oslo
•I
mistrust between Israeli and Palestinian leaders has been revived and is
likely to further deteriorate into armed clashes. By contrast as most
Palestinian Arabs and Israeli Jews, Including many of their leaders, still
believe in peaceful coexistence, the prospects of pursuing and completing
the Oslo process - are by no means negligible. Are Palestinian-Israeli
relations reverting to a renewed conflict or leading toward historic
reconciliation?
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INTERNATIONAL CONFERENCE
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COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
MODELS OF DEVELOPMENT IN WEST ASIA
AND NORTH AFRICA AND THEIR
IMPACT ON REGIONAL INTEGRATION
©
By
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Prof. Muhammad Ali-Sayed Selim
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Director, Centre for Asian Studies,
Faculty of Economics and Political Science,
University of Cairo, Egypt
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Models of Development in West Asia and North Afriea
and their Impact on Regional Integration
Mohammad El-Sayed Selim
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Of all the major world regions. West Asia and North Africa
(WANA) has had the longest and most varied relations with Europe.
Throughout die millennium after the advent of Islam, this area was on the
descendant. The Arabs developed a thriving civilization, which they
passed to Europe. The Ottoman rule in WANA in the first half of the
sixteenth century heralded the beginning of a long cycle of isolation from
the emerging European Renaissance and societal decay. During the
centuries of the Ottoman rule the intei action between WANA and Europe
was disrupted and there was
a decline in level of technological
development and scientific knowledge. For example, when the Ottoman
Sultan Selim 1, invaded Egypt in 1517, he forcibly deported all the
technical strata to Istanbul thereby disrupting the normal development of
the country. 1 lowever, the Ottomans succeeded in protecting WANA from
the Spanish and Portuguese onslaught on the Arab world after the fall of
the Arab rule in Andalus in 1492, and the subsequent scramble over
imperial control oi Africa and Asia. As a result, WANA came to be the
last region to fall under Western imperialism. This process began to occur
with the French intrusion into Egypt in 1798, but gained momentum in the
fourth decade of the nineteenth century
Contrary to the widely-held belief that the advent of the French
campaign to Egypt represented the beginning of the modernization process
in Egypt, when Napoleon invaded Egypt , the Arab world was already
experiencing a process of civil revivalism motivated by the weakening of
the Ottoman empire. In the Arabian peninsula, and what is known now as
Libya, the Wahabi and Sanoussia movements respectively succeeded in
unifying the tribes under one single authority, and establishing a viable
model of the Arab Muslim slate. In Lebanon, Prince Bashir II, who ruled
between I 788 and I 840, achieved significant progress in rejuvenating the
Lebanese society f urther during the first four decades oi the nineteenth
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century, the Arab world witnessed numerous projects to make up for the
weakness of the Ottomans by building modern states. These projects relied
mainly on local resources and to a lesser extent on European technology
without sacrificing Arab Muslim culture. The most important of these
was the Egyptian project led by Mohammad Ali between 1805 and 1840.
Mohammad Ali was able to achieve the difficult task of modernization
without dependence on the West. The conclusion to be drawn from this
re\ iew is that when forces of imperialism began to descend over WANA,
this area was already experiencing radical national projects. •
By the 1 830s,
European imperialist powers began to extend their
domain to WANA. In 1820, Britain forced the tribal heads in the coastal
areas of the Arabian Gulf to concede its influence and in 1853 they were
forced to accept British political supremacy in the Gulf. In 1827, France
invaded Algeria where it was confronted with national resistance lasting
for almost thirty years and in 1 839, Britain occupied the port of Aden. But
more importantly, Britain, in co-operation with the Ottoman empire and
the Great powers, was able to bring the Mohammad Ali modernizing state
to an end in 1 840, and to restore the Ottoman markets which Mohammad
Ah was able to control. After the fall of Mohammad Ali’s national project,
the European imperialist scramble over WANA began. In 1881, France
occupied T unisia and Egypt fell to British occupation in 1882 which was
extended to Sudan
In 1907, Persia was divided between Britain and
Russia according to the Russo-British agreement of 1907, and in 1911 and
1912 Italy and France formally occupied Libya and Morocco respectively.
After the First World War, the Aral- East was divided between France, and
Britain according their secret deal of I H5 known as the Sykes-Picot
agreement, and Zionist colonization of Palestine was formally
acknowledged.
The conservative western school argues that the late arrival of western
imperialism into WANA meant that the region came to experience
“halfhearted pussy-footing imperialism,” an imperialism which would
neither create nor tolerate stable and orderly institutions. This school goes
even further to argue that western imperialism has introduced and
reinforced forces of modernism into WANA(I). The radical and liberal
schools contended that imperialist control of WANA had disrupted the
national development projects turned Arab societies into dual societies
dependent upon Europe in technology, and culture. The national
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modernizing projects, were forcibly reversed and new models of dependent
development'and dual societies were imposed (2). These contending
views reflect the mixed impact of imperialism on WANA. Imperialism
introduced some WANA societies to modem technology and helped to
build modern infrastructures. Hpwever, such introduction occurred mainly
at the cost of subjecting local economies to the interests ot imperialist
ones, destroying the local technologies, eroding the independent bases for
a self-reliant development, and in many cases destroying national cultures.
After the First World War, present WANA states began to emerge.
Egypt Turkey, Persia (Iran), Saudi Arabia, and Iraq emerged as
independent states during the 1920s. The process of independence slowed
down in the inter-war period but accelerated after the end of the Second
World War
WANA newl\-independent countries were confronted with the
aurarian trap whereby the economv is mired in the production of cheap
agricultural commodities, the system of production which denies modem
skills to all but a privileged few, and the forcible integration of their
agrarian economies into an unequal global trade system and international
division of labor Thee purported to achieve the tasks of economic
development and social equity under conditions of scarcity ot resources
and post-colonial indirect control. Throughout this process, they adopted
different strategies of state-building and development
The objective of
this paper is to review ’he development models pursued by WANA
countries since the end of World War I , to assess their viability as means
of development , and outline the present attempts to re-structure them
given the global pressures for privatization and structural adjustment.
I
\\ ANA Models of Development
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Despite the drastic variations of the models of development
adopted by WANA countries alter the World War 1. these models shared
certain common characteristics, namelv, Westernism, statism, , and
Internal Renterism. A brief review ot these characteristics may be in
order
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(i) Westernism:
Because of their Western colonial legacies and Western-educated
and oriented elites, ’virtually
‘
all WANA developmental models purported
to emulate the Western
.n experience in some way or the other. Despite their
emphasis on
<cultural
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authenticity and self-reliance, the goals of
development were clear i.e.
i.e. to achieve what the West has already
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achieved at least in the area <of economic development. In some cases this
goal was simply to Westernize,
as in the cases of I urkey under Ataturk
<
In both cases, the quest was towards
emulating the Western secular ideals and values to the detriment of the
tradmonal ones
The Israeli developmental model is an extension of the
e
and
Persia under Reza Shah,
Western exper.enee
The West played a erucial role
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m the creation of
srac and continued to support its economic projects through direct
economic aid and the exportation of human skills.
In the case of the
Arabian Gull states, the entire development process occurred under
Western supervision. Quandt described the Saudi development model as
«
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•in economic enterprise under American political supervision.” (3) In
he cases of Morocco, Algeria, and Tunisia, the French model is viewed as
1
u‘aTa DeSPIte the ant|-Westem rore'g" Policy orientations of some
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1er
states, the objective of the development process was to re
incarnate Western economic achievements. This was clearly articulated by
Nasser when he emphasized in the early 1960s that “our objective was to
ac neve m
30 years what Europe had already achieved in 300 years ” It is
important
to notice that the decisions of some WANA countries to resort
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l-levclt,Pmcntal assistance were taken only when
the Western options were exhausted The only exception to the Westemist
orientation was the former Marxist regime of Southern Yemen
I
(h) Statisrn
of
WANA models of development are < '
characterized by the legitimacy
the central role of
the interventionist state. States monopolize
resources,
control
Ilarge
investment budgets, and the nation’s
infrastructure, and employ large numbers
’
people The state plays a
number of
functions
I unctions related
related to
to social
social engineering, and economic
development. Ideologies vary but not the crucial role of the interventionist
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state. Such state is viewed by WANA peoples as a legitimate one. They
may question the legitimacy of a particular regime, but they agree that the
state and its leaders have a right and an obligation to set a course for the
society and to use public resources to pursue that course.
fhe emphasis on state interventionism may be deeply-embedded in
the geopolitical setting or national cultures. But it gained momentum after
independence because of the high magnitude of the colonial legacy of
underdevelopment and dependency, and the scarcity of resources relative
to the requirements of development. Throughout the region it was assumed
that the private sector could
functions
of
not be relied upon to undertake the crucial
resource mobilization and planning. Reliance on private
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entrepreneurs and market forces to allocate scarce resources would not
achieve development and social equity.
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I urkey was the first WANA state to inject the concept of state
)
in the development process. In 1931, Ataturk, the founder
»
interventionism
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ot present Turkey issued a manifesto that contained six principles. Among
these was the principle of etatism.
Ataturk defined this principle as
meaning that “the government take an active interest especially in the
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. economic field , and to operate as far as possible in matters that lend
themselves to the safeguarding of vital and general interests.’' (4). Within a
lew years of the enunciation of these principles, Turkey established a
planned development model within its first five-year plan in 1934. The
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model focused on the creation of a large public-sector and import
substitution under the auspices of the state. During the 1950s. the victory
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of the Democrat Party ushered in a liberal
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1960 inihtary coup, Turkey returned lo etatism.
I he I urkish model was emulated by Iran under Reza Shah., and
his successor Mohammad Reza Bahlavi. They created a powerful state
which controlled by the end of the 1970s almost 43% of GNP. This
tradition was reinforced under the Islamic Republic of Iran bj a wave of
nationalizations.
I he emphasis on the role of the slate in development was echoed
(other models which were later on adopted by WANA countries
Sonic‘ of these countries, such as Egypt (1957-1974) and Syria (1963by
present)
adopted socialist models which explicitly emphasized upon the
central role of the state-led public sector. Others, such as Saudi Arabia ,
Kuwait, and' -Iordan pursued market economy approaches. Despite these
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anti-etatist phase. After the
5
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in all cases the state dominated the development
ideological differences,
process. I he private sector in the Arabian Gulf states is an extension of the
state. Its very survival depends on the subsidies provided by the state
through oil
revenues.
Israel is no exception from such statist
developmental orientation. It was Ben-Gurion, the first Israeli prime
Minister, who developed the doctrine of etatism (in Hebrew mamlachtitut)
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and subordinated to the state his Labor Party and its powerful trade union
affiliate, the
The end result was a “ large, paternalistic welfare
Histadrut.
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state with vaguely socialistic objectives and extensive public ownership. In
this system, the citizen would be perceived as an object available for the
activities of the state and its bureaucracy." (5).
Consequently,
development process
capitalism
regardless of the ideological slogans ,
the
in WANA countries took the form of state
process in which the state enterprise
I his term refers to a
controls economic interactions
indirectly or directly. In this respect, one
!
may distinguish between two major variants of state capitalism in WANA.
I he first was a model whereby the state supports the private sector by
providing the infrastructure, raw materials, semi-manufactured goods,
financial support, and protective legislation, and absorbs major risks.
I lowever. n
the
model
transfers external rents to expand its own activities. This was
pursued
by Morocco, Turkey, and the Gulf Co-operation
C ouncil ((iCC ) states, Lgvpt after 1974 when the Economic Open Door
policy began, and I unisia after 1969. The second model of state capitalism
was one in which the state dominated all aspects of resource allocation,
and captured the social surpluses and external rents. The state controlled
the economy through a master central plan which identified certain goals to
be achieved in a specific time frame. Turkey in 1930s, Egypt between
1957 and 1974. Algeria since 1962 . Libya, and Tunisia between 1964 and
1969 adopted this model.
In most of the cases, this model had an
explicitly socialist and redistributive variety in which equity issues take
precedence over prof it-and-loss criteria in assessing state activities. It also
focused on the pursuit of an import-substituting industrializing strategy.
State capitalism was mostly applied within an authoritarian
framework of power I he state controlled and/or monopolized economic
and political power, with few exceptions such as Lebanon , Israel, and
Sudan in the inlur-coups eras. Democray was viewed cither as a constraint
on resource mobilization,
or as facilitator of foreign intrusion, or as a
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which contradicted traditional cultural values or simply
Western eoneept
Ruling traditional or military elites decided the main
as a luxury,
variant of state capitalism, and de-politicized the masses
components
ot
its
3nd,'m^nized them to accept such variant. The masses were rarely
mvolved in the decision-making process leading to the a. option o
specific development model Most WAN A countries adopted the sing
party or the no party systems.
...
r xx/ANA
' Authoritarian State capitalism constrained the ability of WAN
states to achieve meaningful regional integration. The dominance of state
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bureaucracies and enterprises linked political relatl°^
S^‘
economic transact.ons. Accordingly, crises in pohtical reUuonsi spdied
over non-poliucal transactions. Projects to create an Arab free trade are
which started in the mid 1960s were caught in the "Arab cold W ar and
economic reprisals were the tradHional response to any political crisis in
,nter-Arab relations l or example, some GCC states withdrew the
eontribuuons in the Arab Organization for Industnahzalion, a promising
framework lor the integration of Arab defense industries, w ion -gyi
signed the peace treaty with Israel in 197'). One may cite many other
m winch Arab state bureaucracies utilized economic integration as a
means in them political rivalries, f urther, regional integration could hardlx
occur under condilmns of political authoritarianism. Authontarurn regimes
lack the traditions of bargaining and compromise which are pre-requisites
lor the resolution ol the integration erises.
...
. .
nO™
I lowever, these were not the only factors which delayed the creatio
of a single economy m WANA. The competitive nature of WANA
cconom.es played a major role m such delay. Most of these countries
produce and export raw malenals and import manufactured goods Almost
02% of the exports and 65% of the imports of the Arab states in A ANA
take the form of raw materials and manufactured goods respectively.
Under these conditions, it was difficult to increase inter-Arab trade
hevond its low level of 5-7% of total Arab foreign trade. Further, the
Arab-Israeli conflict proved to.be a major obstacle to the creation of a
single economy m WANA through which Arab and Israeli economies
would integrate. For the past fifty years it was, and in my judgement still
is impossible to enter into meaningful Arab-Israel, economic co-operation
because- Arab-Israeli relations were always characterized by the presence
of major territorial disputes and stmlcgic disequilibrium. Under these
7
conditions, integrative ventures would be viewed as a means to reinforce
the status quo. One may recall that when Western Europe began the
integrative process in 1949, these two conditions were not present.
(iii) External Rentierism
I he concept of external rentierism refers to
the accumulation of
externally-generated income constituting a large portion • of the national
income without
corresponding local productive sectors. External rent
becomes the main generator of domestic economic activities(6). Israel
represents the first model of external rentierism in WANA. The state
depended heavily on the external inflow of rent from Jewish communities
living
outside
Israel and from Western countries. Until today, Israel
remains the largest recipient of US foreign aid (US $3.1 billion annually).
After the 1974 “oil boom'1 almost all WANA countries have become
rentier states either directly through the exportation of oil (mainly the
(it'C and Libya) or indirectly through remittances and financial assistance
(such as Egypt and Syria) (7).
External rent reinforced tlie role of the state in development as.
the state became the only recipient and distributor of the external rent. It
also weakened
the relationship between income and effort, as it became
possible to obtain huge revenues without a corresponding effort. Although
the inflow of external rent has helped the GCC states to jumpstart the
development process, most of the development achieved relied mainly on
external human skills and , as such, lacked any indigenous and durable
roots
I his was in contrast with the Israeli case in which external rent was
used to create locally-generated infrastructures.
External rentierism has not only reinforced state capitalism,
but also constrained the creation of a single economy in WANA. Granted
that the flow of' external rents has led to the rise of new form of socio
economic transactions (such as labor migration) which linked most WANA
economies more than ever before I lowever, it also led to the emergence of
the process of status inconsistency especially in inter-Arab relations. This
term refers to a process in which states do not possess equal shares of the
elements ol power or status in a regional s\ stem. This would occur when a
state possesses high economic capabilities but limited military ones. This
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nrocess characterized inter-Arab relations after the flow of the oil rents in
1974 ' Egypt lost its leading economic regional role which was captun: y
some other oil-exporting Arab states. However, it continued as the leading
Arab power in military, social, and cultural leans Consequently, Egypt
lost «' ability to steer inter-Arab rclatioits in the direction of tmegratiotu
" j "e« Arab economic pot«rs began to claim Egypt's rote, olnch. m
turn, led to the intensification of inter-Arab rivalries
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II
WANA Development Models: The Record and the Future
State capitalism as a model of development-was an extension of the
deeplv-embedded historical traditions in WANA region of state conlro . It
was also a response to the colonial legacy which required a model of
development which would enable WANA countries to jumpstart the
development process and achieve a structural transformation in a limited
umc frame. To what extent were the two variants ol state capitalism able
to achieve the goals of development?. In answering this question one must
recall that in most cases WANA models of development were applied
under crisis conditions. The region has been an arena of regional wars and
great power nvalrv, which made it one of most owr-armed regions by all
accounts Military expenditure has traditionally represented between 10/o
and 50% of GNP (compared with a global average of 5-6%), and
WANA's •contribution to global military' expenditure is almost four times
Ks contribution to global GNP WANA's high military expenditures and
over-armament reinforced the underdevelopment dilemma and the
numerous regional wars led to the waste of valuable resources (8).Further
the sudden oil boom of the 1970s has led to the rise of serious socia
dislocations and deformities The infusion of tremendous external rents led
to the rise of a social money-hunting race especially that it became easy to
accumulate
wealth
without
a corresponding developmental
achievement.(9) It also led to a deeper penetration of WANA by Western
0
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powers in their quest to re-cireulate the petro-dollars through arms sales.
So, one may argue that WANA’s development models were never put to a
real test.
Considering these constraints, WANA development modelshave
achieved a great deal in terms of structural transformation. Both absolute
and per capita national output grew at reasonable rates in most countries of
the region even before the oil boom, the share of manufacturing industries
in output and employment also grew, and literacy and education rates
improved. This performance was no mean achievement in-view of the
speed of population increase and the constraints on the application of the
models which we have just mentioned. Meanwhile, there were some basic
failures. I he state-led growth model suffered from the problems of and
allocative and bureaucratic inefficiencies. Industries were created to
generate jobs and/or to substitute imports regardless of cost-benefit
economic considerations. State enterprises were dominated by inefficient
bureaucracies which led to the w aste of scarce resources, f urther, many
countries in the region tried to invest more resources than were saved
domestically which led to external indebtedness Further, because of the
lack of a genuine mass participation, political corruption increased and the
regimes failed to achieve the goals of equitable income distribution.
I hese problems were exacerbated in some WANA countries by
declining terms of international trade, increase in the cost of energy
importation, and increase of social expenditures as a result of the high
levels of population increase. All of this led to problems of debt default
and chronic balance-of-payment deficits. In order to deal with these
problems, especiallv those related to debt default, many WEANA
countries resorted to the World Bank and the International Monetarv Fund
(IMI ). Between 1956 and 1984, fourteen WANA countries (such as
I urkev, Eg_\pt. Syria, Morocco, Iran. Tunisia, and Israel) entered into
agreements with the IMF calling for reductions in government spending
and increases in interest rates in order to stimulate savings and dampen
inflation rates. By the mid-1980s, the IMF was calling for the introduction
of a new development model which evolved around the notions of
structural adjustment and “’privatization.” The new model advocated by
the IMF calls for the reduction of administrative interference in pricing
mechanisms and to allow supply and demand to determine price levels,
the phasing out of subsidies of consumer prices and inputs in the
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manufacturing sector, educing government spending, revising terms of
trade prevailing between the agricultural and non-agricultural sectors, and
streamlining the public sector and stimulating the private sector. Later on,
the last element was modified to mean phasing out the public sector, that
is, dismantling state capitalism, Jhrougli privatization.
The IMF formula was presented to all WANA countries as a
prescription to bail them out from their economic troubles, regardless of
their different socio-economic backgrounds and problems. The basic
assumptions of the formula are that the lesser the role of the state, and the
more integration into world capitalist economy, better the economic
performance. Historical record tells us that there has never been a single
model of development which could be applied across the board and to all
countries. Further, the experience of the East Asian states during the last
thirty years shows that the state has played a crucial, but different, role in
the development process. The East Asian state did not own the means of
productionas was the case in WANA states. It played a crucial role in
indicative planning , persuading the private sector to move into areas of
production which were urgently needed, and preventing local capitalism
from becoming an agent of foreign capitalism. In our judgement, the
emphasis of the IMF on privatization and integration into world economy
is a part of strategy to make sure that WANA countries would be able to
re-pay their debts, and their markets would be open to the manufactured
goods of the capitalist countries. I bis is the logic underlying most neorgional projects in the post Cold War era, including the Euro
Mediterranean project submitted to most WANA countries in 1905 This
project envisages the establishment of a free liade area in the EuroMediterranean world in which only manufactured goods will be taded
freely Agricultural commodities, in which WANA countries enjoy a
relative advantage, will not be incuded( 10 ).
Most WANA countries accepted the IMF new model with some
reservations. However, after the global transformations of the early 1990s,
which led to the demise of the Soviet Union, and the dominance of the
capitalist Western coalition, virtually all WANA countries have fully
endorsed the IMF' structural adjustment and privatization programs. For
example, in 1991, Egypt devised a comprehensive structural adjustment
program, which was supported by a Standby arrangement with the IMF
and a Structural Adjustment Loan with the World Bank. The application
iz»
11
1
of this package has made noteworthy achievement in the areas of current
account balance, the budget deficit, inflation rate, and nominal exchange
rate However, it generated a recessionary trend, and negatively influenced
most real variables such as the growth rate of GDP, GDP per capita, the
consumption per capita, the merchandise exports, the unemployment rate,
and the real wages per employee in the public sector(l 1). The Egyptian
experience is typical of the experience of other WANA countries.(12)
Given this experience, WANA states are not likely to withdraw
from the social functions as envisaged by the IMF. They will attempt to
reconcile the IMF demands with their social restributive and allocative
responsibilities. At the moment, their is a great deal of interest in WANA
countries in the East Asian models of development. Further, the East Asian
economic crisis has shown WANA countries the limitations of integration
into global economy. What is likely to emerge from these soul-searching
processes and cross-cutting pressures is a new model of development
vyhich trakcs into account the special saocio-economic characteristics of
WANA societies.
12
I
Endnotes
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ft
(1) Bernard Lewis, "Democracy in the Middle East, its state and
prospects ” Middig Eastern Affairs, 6 (4), April 1955, p 105.
This view is also shared by Dankwart Rustow, “Modernization, oil,
and the Arab countries,” in Ibrahim Ibrahim, ed., Arab Resources, the
Transformation of a Society, (Washington, D C., Center for
Contemporary Arab Studies, Georgetown University, 1983), p. 269.
(2) Galal Amin, al-Mashrek al-arabi wa al-Gharb (The Arab East and the
West), (Beirut: Center for Arab Unity studies, 1981), p 17
Albert Hourani, A History of the Arab Peoples, (New York: Warner
Books, 1991), pp.295ff.
(3) William Quandt, Saudi Arabia in the 1980s: Foreign Policy, Security,
and Oil, (Washington, D C., the Brookings Institution, 1981).
(4) Quoted in Alan Richards and John Waterbury, A Political Economy.of
the Middle llast: State. Class, and Economic Development, (Cairo:
The American University in Cairo Press, 1991), p. 189.
(5) Ibid, p. 213.
(6) Hazem al-Beblawi, “The rentier state in the Arab world, ’ al-Mustakbal
al-Arabi, (Beirut), no. 109, September 1987, pp. 65-77.
(7) Ali Dessouki, “The crisis on inter-Arab politics,” The International
Relations of the Arab world 1973-1982, Joint research Program Series,
No. 39, (Tokyo Institute of Developing Economies, 1083), pp. 149I 50
(8) Abdel-Razak al-Fares, Arms and Bread, Military Expenditure in the
Arab World, (Beirut: Center for Arab Unity Studies, 1993), in Arabic.
(9) Ali Khalifa al-Kawary, Development of Loss or the Loss—of
I Development Opporl unities. (Doha: Mimeo, 1995), in Arabic.
Saad al-Din Ibrahim, The New Arab Social Order, (Beirut: Center for
Arab Unity Studies, 1982).
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(10) Mohammad Selim, "Egypt and the Euro-Mediterranean Partnership:
Strategic choice or adaptive mechanism?" in Richard Gillespie,ed., The
Euro-Mediterranean Partnership (London: Frank Cass, 1997).
(I 1 )Alia El-Mahdy, “The economic reform in Egypt after four years of
implementation," m Alia El-Mahdi, ed.. Aspects of Structural
Adjustment in-Africa and Egypt, (Cairo: Center for Developing
Countries Studies, Cairo University, 1996), pp. 15-56.
(1 2)Nazih Ayubi, “Etatisme versus privatization: The changing economic
role of the state in nine Arab countries,” in 1 leba Handoussa ed
Econonnc Transition in the Middle East, Global Challenges’ and
Adjustment Strategies, (Cairo: The American University in Cairo
Press, 1997), pp 125-166.
14
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INTERNATIONAL CONFERENCE
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9
St
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6,1998
New Delhi, India
WEST AFRICA : CONTINUING DEPENDENCE AND
GLOBALIZATION
by
Prof. S.K.B. Asante
a
a
B
O
9
a
s.
E
Senior Regional Adviser,
Cabinet Office, United Nations
Economic Commission For Africa (Rtd.)
b •
la
a
WEST AFRICA : CONTINUING DEPENDENCE AND
GLOBALIZATION
by
□
Prof. S.K.B. Asante
Senior Regional Adviser,
Cabinet Office, United Nations
Economic Commission For Africa (Rtd.)
I. INTRODUCTION
0
%
>3
W
B
B
II
SI
*
9
I
pl
a
‘Dependence’ and ‘globalization’ have become, at different historical periods,
fashionable concepts in the social sciences and catch-phases for journalists and politicians of
every stripe. While dependence, conceived simply as external reliance, was increasingly used in
the 1960s and 1970s to explain the causes of underdevelopment of the Third World countries of
Africa, Latin America and Asia, globalization has in recent years become a very familiar term
and almost a byword for both the right and the left in their analyses of the international economy
and polity. In both political and academic discussions, the assumption is all too often made that
a process of globalization is well underway in the contemporary world and that this represents a
qualitatively new stage in the development of international capitalism. Hence the wide assertion
that we live in an era in which the greater part of social life is determined by global processes, in
which national cultures, national economies and national borders are dissolving. Dependence
and globalization both imply external domination in different forms. In this regard, they
demonstrate an element of continuity between the colonial and early independence and the
present post independence periods.
The impact of dependence and globalization on the economies of West Africa and,
indeed, the rest of Africa South of the Sahara, has been heightened in recent years by the
combination of increasing regionalization and liberalization of world trade, rapid changes in
technology, coupled with the new trading environment ushered in by the Uruguay Round and the
establishment of the World Trade Organization (WTO) which are creating a radically new world
environment which poses formidable challenges to the West African sub-region. The new
conditions demand fundamental changes in policy and perspectives, indeed new policy initiatives
by the countries of the sub-region, if they are to avoid their marginalization from the mainstream
of the,world economy.
'Hie challenges are made more grave by the failure of the West African countries to tackle
successfully some of the major problems impeding rapid growth and structural transformation as
a consequence of their incorporation into the expanding capitalist system over a period of some
four centuries. This failure continues to manifest itself in the slow growth of GDP and
uncertainties about the future, little progress in manufacturing industry, relatively static trade
structure and limited progress with diversification, and declining share in world trade. All this
has retarded the efforts of the West African countries to reduce their continuing dependence and
to effectively meet the challenges of the growing globalization which is not only making them
more dependent than when they were colonies; it is also taking a new form of external
domination. With little progress in promoting sub-regional economic integration, substantial
losses and few gains expected from the implementation of the Uruguay Road and poorer
1
prospects for official development assistance (ODA) receipts in future years, the task of
development and structural transformation promises to be even more difficult, despite the recent
significant shift to political pluralism, the recovery and the positive changes taking place on the
African continent and the strengthening of private initiative leading to signs of hope
optimistically described as the seeds of African renaissance.
It is against this background that this paper seeks to examine the main features and impact of
continuing dependence and globalization on the peripheral economies of West Africa and the
challenges that they pose to the sub-region. Following this introductory section, section II of the
paper devotes attention to West Africa as a portrait of neo-colonial mesh, while section III
examines the efforts towards reduction of dependence. In section FV, the implications and
challenges of globalization are reviewed. Section V highlights the agenda for policy responses.
II WEST AFRICA: A PROTRAIT OF DEPENDENT ECONOMY
Background
The present structure of underdevelopment in West Africa, as in other parts of Africa,
stems from the incorporation of the continent into the expanding capitalist system over a period
of some four centuries. This process of incorporation had its beginnings in the sixteenth century
when the mercantile phase of capitalist expansion brought European explorers and traders to the
coast of Africa. By the nineteenth and early twentieth centuries this incorporation of Africa into
the international capitalist system had been compieted with the colonial partition of the continent.
Consequently, the continent as a whole but, particularly West Africa, was fragmented like a
patch-work quilt into a number of separate colonial units under the various capitalist metropolis
of Western Europe, principally France, Great Britain and Portugal.
Under colonialism, the basic features of the present political economy of West Africa,
like the other regions of the continent took form. Colonialism provided the context within which
‘the development of underdevelopment’, to quote Andre Frank’s phrase, took place in Africa. In
the colonial period the traditional pattern of economic relationships in Africa were destroyed and
in their place were created satellite economies whose primary function was the production of one
or a few cash crops or raw materials for export to the colonial mother country. The European
demand for African products, and the brutally self-interested way in which it was satisfied, led to
a form of development which made the economies of West Africa and the rest of Africa heavily
dependent on the metropolitan economies.
A considerable amount of literature exists on the problem of dependence. This literature
has arisen largely from dependency theory, particularly the debate over the relationship of
dependence to underdevelopment, as copiously highlighted in the works of Andre Gunder Frank,
F.H. Cardoso and Osvaldo Sunkel, to mention only a few.1 The availability of this literature
obviates the need for going into a lengthy discussion here. We will limit ourselves to a few
llustrations of the extent of the persistence of dependence and a brief discussion of aspects of
dependence, which arc particularly salient to the subject under discussion.
An economy is dependent to the extent that its position and relations to other economies
in the international system and the articulation of its internal structure make it incapable of
autocentric development. As Dos Santos puts it, a dependent qountry is one whose development
is ‘conditioned by the development and expansion of another economy’.2 The result of such
2
I
• continued uneven development, stagnation, unemployment,
dependence for any country is
integration among economic sectors. This
income inequality, regional dise^'1,bn^
‘hr0 h
apparatus of domination, which, m
marginalization and exploitation are t
nce8betwecn internally privileged groups and
dependent countnes, takes the form
Thus> while external
of
external interests and forces, a l of whtch U„efit from the^ 9^
relations are the starting point .or the an
thePinternal class relations of dependent
dependency theorists like Cardoso an
of the Afrjcan independence, notes in
£s
uUu‘to local
■■
■
as discussed
below, are reflected in this definition of the concept of dependence.
Neo-colonial Mesh Economy
:■
4
b
has the largest number of mini-states.
universally accepted notion
definition of the West AfricantSU^0^
* f h sub-region has not been in dispute, there
of what counines consli e .Xergen'e of opo.on ™»ng geographers 'as >0 rhe exaer
has always been a considerable d
g
HarrisOn Church has defined it broadly as the
deMon Of to outer hours. ' One geo nphe^•
\e Camer00„ Republic. ™s
whole of the area lying west of the boundary be ween N
l
>
I
I
to
»
covers rhe area » .ECOWAS - rhe Leonora
ihsoverergneoth.eagFosiv.SEoshsh 21 orJ,
counrrres. whrch arc not
>
.
Ar.b-speaking countries. These
continMl
They occupy nearly 2.5
S’onsraare miles an area larger than Europe excluding Russia, and share among themselves a
"Xpulation Of aimosr i 50 million io 1980. Table I below illustrates the venous srzes of the
16 countries as well as the population, income, and growth.
»
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as
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oe
Other significant characteristics of West Africa are first, the level of poverty and second
the standard of living in the sub-region which is one of the lowest in the wor d. The average
GNP was about $760 per capita in 1980, including subs.stence incomes. Seven of the 16 West
African countries are officially listed among the 30 least developed countries ° the wor^f
are Benin, Burkina Faso, Cape Verde, the Gambia, Guinea, Mali and Niger. In all, 13 of
ECOWAS members are listed among 42 countries that are at the greatest disadvantage in the
world economy.
Since independence the economies of the West African countries have exhibited a variety
of structural characteristics that reflect and reinforce the sub-region’s dependency on the
capitalist
oeen suu^u^d
.o meet the needs of that
capitalist world
world system.
system. As
As these
these economies
economies nave
have been
structured to
system,, their performance since the early 1960s must be evaluated witlur.
°^ext Sa^rent
within this ccontext.
y ,... .
structural characteristicsofofthe
theeconomies
economiesare
arereviewed
i-----------in this section, though the
clSpCClJ}> of the
-----------discussion is by no means exhaustive.
3
only bZeToX,'
or™'Z
not
continuity of the
Africa meant a change of the dramatic f
n "’h'><»
=Sv ?”r
—I control over the
dependent countries,
external interests...’12 This
This trend
lrenci has
ka<! < fr’ • .
,ru e on,y through collaboration with
African eoumriesaMZX^^X
X
'’0^ ,l,e devd»Pm“‘ »f -e W«t
consequently delayed the
developmental capacity for autonomous decision makfn
"T °f
S'gnS of bu>'ding-up
Africa employ
employ different
different methods
methods to mainta'
S' -SlnCe the ex'coIonlaJ powers in West
Africa
ECOWAS ccLries according ,0 .he nX “ZZ
“ iS USCful “
«*
. I
Br.lam being ll,e dominnn. ex-colonial powers in Wers“Afr^":lh^“!,T' ''"‘"n f™" “d
mostly on them and their former colonies
’ th ana,ys!s W111 concentrate
1
metropole is most pervasive and intensive - is composed 'thS dependenCe On 1116 former
monetary systems are very closely linked to the F pos^d of the Jormer French colonies whose
zone is central to the whole issue of France’s relati/SS’
membershiP in the franc
has so far given Paris almost total e
• r nS WIth 1 s cx'colonies. It is this link which
sunendcr of .base’ .X“'y c^Z^V'8'' an<'
i
exercise an essential component of their sovereignty ^mon]6 h^ depn.VeS them of 016 right to
on their monetary independence it has also creaT H th
Y ,haS 111,5 placed serious constraints
be,„een France L .hose conn.'ries
“"“'’T f°r ’*«*» “*« '“s
capilal..? and reinforced .he rela.iee power ofdre FrencheV
dePendenc'
.he eon.inua.ion of dependence on export comn.odi.iea
inuVaSnlmZ
.he FreZZX^^XS XV.ZZTZZ
foreign
an‘'
°{
decided exclusively by Paris - automaticallv aff
m
L Y French devaluation, which is
payments of these countries by increasing theh 1
C tr^ding baJance and die balance of
hand, these states can neither revalue nor hXL m Y COnSlderable extemal debt. On the other
as a consequence of the existence of a fixe l^
CU?'en5:ie5 indePendently. Furthermore,
devaluation the franc zone ha created an av
CFA
prior t0 tbe ’994
control over the repatriation of ca^^lTad ZLs
'h 6
°f CapitaL
“ 110
II
of capital domestically It has enhanced the n f
er aS‘C Impediment to any accumulation
has naturally left an open path ^ French caS
Capi,a' "
banki** 5>5tem “>d
capital present in all the embryonic industrial
C0UntI7- Ulven the structure of foreign
encouraged the investment of transnational co^ratfoh
h3S
subs.d.anes; this has again stimulated the outflow of capita™
‘h
Ugh *0Cal
of!-»Z‘sAc“'d.^ «•
high proportion of foreign firms and technical
‘
enega
t^e Cote d Ivoire have a very
Senegalese has observed that industrialisation rp355-5 T0356 °f the Pormer’ a critical
retaining overseas linkages rather than gener itin^dome^82 Y i?^'8". hands’ whicb has meant
4
.
r
r
& g ggg g g g g' y gs g gs
TABLE 1 WES I AFRICA: POPULATION, rNCOME. AND GROWTH (GNP - 1980)
C'ountn
CEAO
Ivory Coast
Burkina Faso
Mali
Mauritania
Niger
Senegal
Mano River Union
Guinea
Liberia
Sierra Leone
Other ECOWAS
countries
Benin
Ghana
Nigeria
Togo
Guinea-Bissau
The Gambia
Cape Verde
Total ECOWAS
Population
Aiea
Population
density
(inhabitants
per sq km)
Rate of population
growth 1970-80
Aggregate
(5)m
0 o of sub
group
8.3
6 I
7 0
1.5
5.3
5 7
339
322
274
1.240
1.031
1.267
196
4.330
25 8
22 3
5 6
1 6
4.2
29 1
5.0
18
2 7
2.5
2.8
2.8
9 550
1.280
1.340
660b
1.760
2.560
17.150
56
7
8
4
10
15
100
54
I 9
35
108
246
111
72
429
21 9
1" I
48 6
2.9
3.4
2.6
1.590
1.000
980
3.570
45
28
27
100
34
11 7
M7
25
08
06
0.3
148 7
113
23«
924
57
36
11
4
6.143
30 1
490
91 7
43 9
22.2
54 5
75.0
2.6
3.0
2.5
2.5
NA
3.1a
2.0a
1 ^0
4,s>20
85,510
1.020
130
150
100
113.600
°o of
ECOWAS
Per capita
(S)
1980
GNP per capital
(% real av
Annual growth)
1960-80
2.5
0.1
14
1.6a
-1.6
-0.3
15
1.150
210
190
440b
330
450
510
I
I
1
3
290
530
280
330
0.3
1.5
1
310
420
1.010
410
160
250
300
760
0.4
-1.0
4.1
3.0
NA
1.7
NA
8
1
1
1
2
2
4
75
1
100
a9170-79
bThe estimates of GNP and growth rate for Mauritania should be treated with reserve Alternative World Bank estimates (e g Atlas) suggest a
Real • 1DP growth (%
average
annual growth
WoO-70 19’0-80
80
30
NA
2 7
2 5
3 5
6 7a
3 5
49
1 7
29
2 5a
5 1
4 3
3.3
1 7
1 6
26
2.1
3.1
8 5
NA
NA
NA
33
-0 1
6.5
3 4
NA
NA
NA
subslanttally lower GNP ($530m ) and a negative annual growth rate
U7%T
•less than half total unit shown.
Lt 198 > World BanK Ad. (W.h.ngron, DC.: The World Bant .982) and Worid Bant
(NeW Yort Oxford Univershy Press. ! 982)
5
£ U
t^le lyPe °f growth that the Cote H’t •
^ain,r Amin has argued in a
not eutomatically result in an economic take oZ .
“S “P"ien«d over the yearZes
-nek,ng of growth'. ,le has okacZd'"."'Z “T
development’.17 ■"
w„ds. there has been
development.
strength ofCtqhU,red independent currencies issued by^het/resnl
‘ndependence’ each of dtese
na®l8th °f the economy of each depends on levels of f respectlve centraJ banks. Although the
levels of foreig]
aCCOrd'n8 t0 197« UN ources on TNCs Rv't^ Senegal’s’
C'"‘ 'Si^Le!^
economy, and 84.4
off all
industriall investment
i
Percentage holds true for Ghana as well.18 per cent
Cen‘ °
311 lndustria
and a simS
control 87 per cent of the
^eign ^OpX
In addition to the French
■" i
bcowas
countries that do not belong to either
posttion. These countries are ILibena,
which belongs to the dohar are^ J 3 m°re Or leSS is°Iated
egal tender; and Guinea-Bissau
........... iJc—-......
Portugal.
trade dependence is a chartccerta'ic'feature of d' '’i'""' 01 'he ECOWAS sub-region 19
Sr ’Se
’"o-.
For if
ZXi'L.TwXi",h' s”"’Pp"^
II
6
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21
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a»
s®
Besides monetary and trade dependence of the West African countries is the cultural and
technological dependence. Dudley Seers has highlighted the particular importance of cultural
dependence because of its role in shaping ‘the way governments perceive their problems .
Cultural dependence also takes the form of addiction to foreign technology especially in
manufacturing, but also in agriculture, architecture, civil engineering, etc., which makes the
importation of foreign equipment and materials seem essential. Cultural dependence in West
Africa not merely determines in large part the pattern of consumption and the choice of technique
in every field and increases ‘brain drain’. It also shapes, in some degree, government
development policy, and thus the whoje economic structure.
Such then, is the state of dependence of the West African countries whose destiny is still
in large measure shaped (i) outside the sub-region and (ii) within the sub-region by foreign
forces. Thus although these countries have been ‘independent’ for more than three decades now,
the basic structure of their economies have not fundamentally changed. None of the countries is,
as yet, within striking distance of self-sustaining growth and economic independence. Yet the
creation and maintenance of meaningful political independence requires the attainment of
national political economies. A state whose economy is characterised by concentrated external
dependence can hope to have neither a significant degree of control over the rate of growth and
nature of allocation of domestic resources, nor a high level of external credibility from which to
bargain.
'fhe central problem for the sub-region, therefore, has always been how the West African
countries can break free from the historical conditions in which they find themselves. For since
all social systems seek to ensure their continued existence, it follows that dominant countries - in
the case of West Africa, the former colonial powers - will try to retain the bases of their
dominance over others and thus see to it that dependent countries do not follow their ‘dream of
independence’. This, then, is the crux of the matter. By he early 1970s, when dislocations in the
international economy revealed the extreme vulnerability of almost all the countries in the sub
region, the West African governments were faced with a choice between continuing to support
the inherited structure of dependence or beginning to initiate a viable strategy that can really
transform the West African economies from a dependent structure responsive to the external
demands of the world market to an integrated economy responsive to domestic needs and
resources.
III. TOWARDS REDUCTION OF DEPENDENCE
&
Historically, West Africa was the advance guard of the nationalist revolution that swept
away the European colonial empires in Africa in the two decades following World War II. Since
coming into power, the new West African leaders, like their counterparts elsewhere in Africa,
had insisted that political independence was the essential preliminary to a fundamental
restructuring of the colonial economy, and many students of West Africa seemed to agree that the
political hegemony of the colonisers was a critical factor in the underdevelopment of West
African social formations. After more than three decades of political independence in West
Africa available evidence on the validity of this assumption is ambiguous. Revolutionary
changes in the structure of West African economies, like those in the rest of the continent, have
clearly not occurred, and even their growth rates have been less than satisfactory.
By the time political independence came, the colonial economy had so to speak, matured;
its structure was firmly set and could not easily be changed. The new government no longer
7
L
TABLE 2: SHARE OF INTRA-WEST AFRICAN TRADE*
Description
(«) Total trade with all
countries of the world
(b) Intra-regional trade
(ECOWAS)
(c) (b) as % of (a) (average
for the period)
(d) Exports to all countries
of the world
(e) Exports to countries in
the sub-region
(ECOWAS)
(0 (e) as % of (d) (average
for the period)
(g) Imports from all
countries of the world
<h) Imports from countries
within the sub-region
(ECOWAS)
<«) (h) as % of (g) (average
for the period)
1968
3,846.6
144.8
3.8
2,017.6
75.1
3.7
1,829.1
69.7
3.8
IN TOTAL EXTERNAL TRADE (U.S. S MILLION)
1969
1970
1971
1972
1973
1974
4,546.6
5,683.4
6,684.5
7,503.5
10,548.5
21,435.3
133.9
162.3
236.4
241.9
428.3
975.3
2.9
2.9
3.5
3.2
4.1
3.7
1,392.2
2,954.3
3,397.2
4,126.4
6,094.5
13,902.3
66.1
86.2
140.4
127.1
231.1
411.3
2.8
2.9
4.1
3.1
3.8
3.0
2,154.5
2,728.5
3,287.3
2,277.1
4.454.0
7,533.0
67.8
76.1
96.0
114.8
197.1
384.0
3.1
2.8
2.9
3.4
4.4
5.1
‘Excludes Guinea-Bissau
Source: I.M.F., I.B.R.D., Direction of Trade 1968-1972, 1969-1973, 1970-1974.
s
«•
enjoyed the freedom of fabricating an economy from the start. The fully formed economy that it
inherited imposed a certain logic and rigidity on the course of future development, and this logic
was essentially one that favoured the persistence and even the reinforcement of the syndrome of
disarticulation and dependence.
Strategies for Development
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As Ake has rightly underlined, one important impulse for change in African economics is
the desire of African leaders, apparently shared by heir followers, for development.22 The
informal and formal pronouncements of the West African leaders and their counterparts in the
rest of Africa give one the impression of an unshakeable commitment to the idea that they must
try to achieve development, perceived as the primary condition for their own welfare, the
legitimation of their leadership and the well-being of their countries. They are convinced that
there is a link between the underdevelopment of their countries and the most fundamental
problems which plague their states, such as poverty, the high incidence of disease,
unemployment, military weakness, ignorance, technological backwardness, cultural deprivation,
short life-expectancy, social disorganisation, and the high incidence of political instability. They
see development of their economies as the necessary condition for dealing decisively with these
problems. I hat is how development has come to be an obsession in the West African sub-region
as in rest of the continent. Various development strategies were adopted.
(a) Increase and Diversification of Primary Commodities
One development strategy which was popular in West Africa during the earlier years of
independence, and which continues to recur in development plans, is the expansion and
diversification of agricultural export commodities. It was one of the central issues of the Lagos
, Plan of Action (LPA) adopted by African leaders in April 1980, and it is high on the agenda of
the African Priority Programme for Economic Recovery (APPER) 1985 and the United Nations
Programme of Action for African Economic Recovery and Development (UNPAAERD) 19861990.'
Under pressure to earn foreign exchange for development projects, West African
countries were tempted to tum to the expansion of output of agricultural commodities.
Phis strategy met with only very modest success. To begin with, the developed market
economies were very reluctant to allow free access to the commodities of agricultural producers
in West Africa. Although this reluctance was gradually overcome since the African-CaribbeanPacific (ACP)-European Union (EU) Lome Convention in February 1975, this has been a far cry
as Lome, as highlighted elsewhere, ‘has become an empty shell’24 The products of the countries
which received preferential treatment in the EU did not expand their market share; rather their
share of the EU market shrank. The export stabilisation (STABEX) of the Lome system which
has helped to some extent to insulate a large number of ACP states from the worst efFects of
instability in earnings from primary commodity exports, has been inadequate to cope with the
scale of short-term instability in the commodity markets.25 Not only is STABEX chronically
underfunded, the Lome conventions as a whole have not contributed much to diversification of
West African export commodities.
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Besides, the strategy also suffered from the problem of demand, which arose in part from
the shift in the consumption patterns of developed countries towards a preference for consumer
durables, from the availability of synthetic substitutes arid from the slow rate of increase of
population in the developed countries.
9
I
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dependence of West African economies
1116 exploitative
h
countries. And it sees
------ 1 arrangements,
,es attention being paid to the
and local capabilities. This type of
Z^rwes'r 5?Of **>
fostos
•
d^i^Z
" erraregy' of
-------.-..jn and ultimate!v th#*
rhe
import
subs.irution JSe
limitation of West Africa’s resource base. TNor
’ has
‘
impact on reduction of dependence.
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(b) Import Substitution
Africa h fteX^sTJ™
subsequent fall i, fnrpi„
“ W'a
L? TJ"13'
P^P5 t0 ^e fall of demand for primary products and the
w»dM noXl^XwX rL .^Ti^ a?il‘b"
indusrri^isarion^dthed.vSmcZ of ^
f°re,8n
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import substirution efforts i„ rhe sub-region as highlighted by P«er KUbv "
substitution was taken as a maior tool of
7"
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evidence shows that it has not been a success O th
h i k d ersificanon In Nigeria, the
import substitution has had at best a marai I tr e w ° e’ die ev>dence is that the policy of
diversification, and on the reduction of de 0 J
ePromotion of industrialisation, on
leaders wanted io elTeet with it. HowabouX'u-"“gy o'feXpotion?' ““
Af''C“
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c. Export Promotion
“ d?vt'opm“'
been justified by the p^tieal
supposed to solve
These are the eoe,
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. nects in so*ving the problems it was
solve, namely industrialisadon Xetae.! a"’^Ch. T,,X’n
™s supposed to
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I ike import substitution, the strategy of export promotion has not worked well in West
Africa, as evidenced in the numerous data about the performance of African economies available
in government publications such as Development Plans, as well as in publications from agencies
such as the World Bank and the United Nations Economic Commission for Africa. West African
countries are not yet in a position of exporting significant quantities of manufactured goods.
The poor results of the pursuit of export promotion in West Africa, as in the rest of the
continent, have been due to many factors. First, there was the usual problem of breaking into a
highly competitive international market. The disabilities imposed by the underdeveloped state of
West African economies - the high capital-output ratio, the rudimentary development of
infrastmetures, the limited opportunities for linkages and economies of scale, etc. - made it
difficult for the policy of export promotion to succeed. Second, the international atmosphere has
not been helpful to the African quest for export promotion. To begin with, there is the shift of
demand in industrialised countries from cheap primary semi-processed goods to high quality
goods. Third, the disparity in the rate of increase of the prices of manufactured goods relative to
primary good’s, debt servicing, etc. created serious balance of payments problems for the West
African countries. This pushed them to take drastic steps to restrict imports. This protectionism
was unfortunately unfavourable to export promotion (although it favours import substitution).
Fourth, the Lome Convention has not helped much. Although by. the conventions the EU
countries have promised free entry to virtually all the products of the ACP countries, this is
hedged with qualifications and the mechanism of covert protectionism. More worrying is the
lack of impact of some of the Lome arrangements supposedly designed to promote
industrialisation and the export of manufactures in the ACP countries as detailed elsewhere and •
should not detain us here.
d. Regional Economic Integration
The last development strategy to be considered is regional economic integration as
reflected in the signing of the Treaty of Lagos on 28 May 1975 by the West African countries to
establish the Economic Community of West African States (ECOWAS for the English-speaking
and CEDEAO for the French-speaking). This event represented the culmination of many years
of effort by these states to increase the economic mass, and therefore the bargaining base, of their
economies. Through a pooling of economic ‘sovereignty- their intent is to transform their
economics so as to extend the struggle for political decolonization into one for economic
decolonization.29 The creation of ECOWAS was also a response to the recognition by the West
African countries that the fragmentation of the sub-region - the product of colonial balkanisation
- into narrow domestic markets renders a shift in he pattern of production, designed to reduce
dependence, both difficult and costly.
In brief, therefore, the inauguration of ECOWAS must be seen as an attempt by the West
African states to enhance their economic opportunity and to reduce their external dependency.
Thereby they hope to overcome the existing structures of neo—colonialism and under
development. The lessening of the high degree of external dependence is a precondition for
achieving basic structural development goals.20 But to what extent is ECOWAS as an economic
integration scheme sufficiently equipped in terms of resources and power to disengage, even if
partially, the peripheral West African countries from inherited dependency on the former
metropolitan powers and, by extension, from the existing pattern of asymmetrical economic and
political relationships prevailing in the international system? The objective of dependency
11
with a view ■„ mak „g i ^
■rad"'0”1 1'“le “d
■ fo'the w
reMonships
economic and political destinies h d Id
C0UntneS t0 SeCUre fu,ler contro1 of ^eir
restructuring of the present Ze of ZdZ"55'^’
n™8 °ther thi^S’ a deliberate
external linkages in the interest of domestic deTelTpmTnt °PtlOn °f re8,°nal P°licies t0 re8ulate
1
not been stimulated, and hVsho^ a tenXcv M d 'r deVe,Opn,ent- ^-community trade has
the foreshadowed measures of Zdve
m
has not seen the light of day.31
Pr°8reSS *n
integratio". ‘hat is, in
& t0 mitlgate payment difficulties
Westlf1^11^"07 redUCti°n
Africa?^h^be^^^
i
abiZ.
Th'“f "» « base
or Wes. Africon economies in™^™
this narrow base are usually too meacre so that
foreign inves.n.en. sough. eV
Pt
iT F°r One thlng 1,12 resources from
'’°'T“W"’8
be r''”rKd “ “b
«
really. aTV.'ed
imperialist exploila.ion of Hie sub-region In so f
,/ C r a??On part of lhe slnicli!rc of the
champion elTeclively .hose changes which will l.bL./ Wes.ThV’
'b'7
““h''
exploitative dependence and diversify thp
tt.
St ^^lcan economies from heir
capital and Western capital quite oftln resolvZself
°f’ntereSt h^6611 indigenous
delimitation of spheres of influenceZd collaboZ 7 “ aCCOm™dati^ resting on the
indigenisation in West Africa for instanrp ‘ \r
•
JVe arranSementsThe process of
SO much as economic na.i^nalisni?"*
br,cresting no,
accommodation. The effect of this tvoc of am
'culation and institutionalisation of this
gieat potential for ...... rZL, ch'X m X
m’ "
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•Western capital aids the forces of inertia
II
he cf,n’r',dlc,'on between local and
which in recent years, has been heighlened by
IV. GLOBALIZATION: IMPLICATIONS AND CHALLENGES
Ifevelopmen'l^UNCTADWldVnU"iM Nations Conference on Trade and
as a .eV which refem to .he m”
V’ Apn‘ I!”6' 1’aS de,i”ed globalization
investment and capital markets’.32 TechnolW ° ,eodntnes ln world ‘rade, foreign direct
Process in transport and communications and bv6^
hl7?r
abetled Ihe Slobaliza(ion
and capita. Hows, both at .he nalloS'Z
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about globalization has focused on the more visible aspects of globalization, notably, the sea
changes taking place in the pattern of production, pace of diffusion of knowledge and
information and the convergency of factor markets. Less well understood and analysed,
however, is the phenomenon of marginalization or the extent to which globalization has affected
the least developed countries, particularly those in Africa which are at the periphery of global
processes.33 This section focuses attention not only on West Africa but the whole of sub-Saharan
Africa. This is because one can hardly distinguish between the West African sub-region and the
other sub-regions of the vontinent so far as the effects of globalization and dependence are
concerned.
Features of Globalization
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Iheic has been much publicity about globalization, a process or a state of affairs that
holds much promise for the future of “planet earth” and not a little trepidation among the people
of many countries, particularly those in sub-Saharan Africa, for whom even nationhood, as
analysed tn the case of the West African sub-region, has not delivered the things that they had
expected. These countries are yet hardly nations, and now they are being pressed, especially by
the multilateral financial institutions, to forget their nationhood and go for globalization
something that they cannot yet comprehend but which they know would be too big for them to
handle.
l or there is a widespread perception that globalization may, at some cost limit the
autonomy of policy making at the national level. The best way to achieve development in the
view of the multilateral financial institutions, is to enhance the role of tire market’ while
dmumshing that of the state. The role of the latter should be confined to creating a suitable
environment (including macroeconomic policies) for private enterprise to flourish and
compctit.ve markets to function. Scholars like Horsman and Manhall have asserted that the era
o the nation state is over, and that national-level governance is ineffective in the face of
globalized economic and social pressures34. World market forces which are stronger than even
the most powerful states have sidelined national politics and political choices. Hence the nation
state has ceased to oe an effective economic manager. It can only provide those social and public
services international capitals deems essential and at the lowest possible overhead cost Nation
states like those in West Africa are perceived by authors like Ohmae35 and Reich36 to have
become the local authorities of the global system. They can no longer independently affect the
levels of economic activity or employment within their territories: rather, those are dictated by
the choices of international mobile capital.
7
Hence the continuing dependence of the West African countries after more than thirty
years of attaining nationhood has been reinforced by the phenomenon of globalization Already
these countries have found that their politics, their economy, their social and behavioural systems
are .11 under the control, directly or indirectly, of the old colonial masters and the great powers.
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In the bipolar world ol the Cold War period the countries of West Africa and those of the
Hurd World as a whole had at least the option to switch allegiance even though allegiance often
amounted to acceptance of hegemony. In a unipolar world they have lost even the choice to
submit. I hey have to submit to the successful super-power and its cohorts whether they like it or
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With that experience it is incomprehensible to think that globalization will mean more
independence for these countries, or mean more equitability for them. Globalization can only
mean one thing - loss of the nominal independence they have had since the 1960s with nothine to
compensate.
There is yet another disturbing implication of globalization. The phenomenon of
globalization would leave the West African countries totally exposed and unable to protect
themselves. I rue globalization may result in increasing foreign investments in these countries.
But such investment will depend on the competitive advantages that these countries have. If
investment like trade is linked to labour rights and wages, etc. then corrective measures taken by
the West African and other developing countries will remove their competitive advantage.
Without these advantages why should foreign investors invest in these countries?
1
On the other hand, if fairly successful developing countries were to open their economies
to all and sundry, the huge corporations in the developed countries will overwhelm the small
companies in the developing countries of Africa and the rest of the Third World. The huge banks
can afford to lose in a small country when they are making profits in their own country or in
other developed countries. The local banks cannot afford such losses and will either shut down
or be forced to merge and lose their identity. The same thing can happen to telecommunications
companies, power companies, construction companies, etc. Hence the effect of economic
globalization would be the demise of the small companies based in the West African sub-region.
Large international corporations originating in the developed countries, particularly those of the
former colonial powers, will take over everything.
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The manufacturing, trading and telecommunications companies together with the banks
will grow and merge, controlled and run by the huge core companies of the developed world.
I he little players from the Wesi African countries would be absorbed and would disappear.
Their shareholders, big players when they were in the small companies, will wield insignificant
authority in the huge conglomerates. And so will their chief executive officers and other
executives, reduced to mere names on the payroll.
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Already, because of lack of success in manufacturing industry, in the acquisition of
technology, in attracting foreign investment, and in developing efficient service industries, West
African countries have not been able to participate to am significant extent in the globalization
of world production and the development of industrial linkages across countries, which has been
one of the most remarkable developments of recent years, and a major factor explaining the
dynamic growth of the Asian countries.
V. POLICY RESPONSES TO CHALLENGES OF DEPENDENCE
AND GLOBALIZATION
Many approaches to the challenges of the age-old dependence and to the new challenges
of the world economy will be of a similar nature, whether they respond to the multilateral
challenges of the implications of the recent Uruguay Round Agreements,'to the regional .
challenges of large-scale integration system or to liberalization and globalization. True, most
African countries have been or are too weak to benefit from globalization or to keep up with its
speed, given their frail institutional and general capacity and management ability. True also, too
many people and individuals have been excluded from the benefits of globalization, especially in
the developing world. But West Africa and, indeed, the whole of Africa, cannot escape
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gl'obnlization whether it likes it or not. Thus Africa should not just complain but position itself to
become an active player in the globalizing economy.
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What needs stressing is that the forgoing analysis of dependence and globalization htu
important policy implications for the countries of West Africa and the other African
requiring careful reflection on policy responses by the countries individually and collectively
West Africa faces the critical problem of building its competitiveness in an atmosphere of
progressive multilateral and regional liberalization of world trade, increasing globalization of
production and rapid changes in technology. The African continent as a whole must, there ore,
develop an effective response to these changes in order to partictpate in the global trends that are
going to shape the future of international economic relation. What are the prospects for West
Africa and the rest of sub-Saharan Africa in effectively meeting the challenges of globalization
and dependence? How can the recent promising trends towards an emerging dynamic continent
be sustained?
>
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An Emerging West Africa?
>
No doubt the prospects for development in Africa as a whole are much brighter now than
they have been in the past several years. Economic recovery and growth are taking hold in more
countries. And in nearly half of the countries of the African region economic growth has
outpaced population for two years in a row.37 According to the Economic Commission for
Africa’s Report on the Economic and Social Situation in Africa, '997, preliminary figures
indicate that the economic recovery underway since 1994 has continued.
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With particular reference to West Africa, the growth momentum that started in the sub
region in 1994 was maintained in 1996, despite threats to sustained agricultural production in a
few' countries and the problems and uncertainties of post-war reconstruction in Sierra Leone and
peace, settlement in Liberia. Sub-regional GDP growth js estimated at 4.2 per cent in 1996,
compared to 3.4 per cent in 1995 and 2.5 per cent in 1994.v,
Nigeria, by far the largest country of the sub-region population-wise (106 million in 1987
according to World Developinent Report 1989), registered a significant economic recovery in
1996, aided by high oil prices, increased oil output and a budget surplus that sustained
macroeconomic stability, plus of course the favourable improvements in the agricultural sector.
GDP is estimated to have increased by 3.8 per cent, against 2.3 per cent in 1995.
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In Ghana, the second largest country in West Africa in terms of population, which
according to World Development Report 1989, was 13.6 million in 1987, GDP growth was 5.0
per cent in 1996, which compared favourably with the 4.2 per cent in 1995 and 3.8 per cent in
1994. Inflation has been on the decline, from 70 per cent at the end of 1995 but remains higher
than the target of 20 per cent for 1996.41
Significantly, too, virtually all the French-speaking countries of the CFA zone are
expected to register increasing benefits from favourable investment opportunities emanating
C om the economic reform programmes under way since 1994. The ECA Report has noted that,
in Cote d’ Ivoire the largest CFA franc zone economy in the sub-region, GDP growth fell below
expectations but was still a respectable 6 per cent in 1996, driven mainly by strong recovery in
agriculture and water, power and construction sectors, as well as revival in manufacturing and
15
1
services.4- I he Report highlights the case
of Senegal, where GDP growth is estimated to have
reached 5 per cent m 1996 due to the expansion in the tourism and construction and
senices
sectors, and export-oriented activities.43
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Despite the series of important gains and the positive changes taking place in West Africa
on the continent as a whole, the spectre of marginalisation remains, as social indicators
as environmental
and populate pressures keep almost half of Africa’s 758.4 million people as at mid-1997 in
poverty. In fact, absolute numbers living in poverty in West Africa and in the rest of the
continent are increasing. Against this background, how can the 16 countries of West Africa or
the 47 sub-Saharan Africa’s countries as a whole prepare themselves to enter the new millennium
as global players and equal partners with countries of other continents and nations? How can an
African renaissance be engineered and sustained? What type of leadership and commitment will
be required to enable the West African sub-region to effectively meet the challenges of
dependence and globalization?
Policy Measures
To 'ustain the present positive trends and to effectively meet the challenges of the world
econonij the following policy measures would be required.
i. Adopt selective integration
As far as economic development in West African countries is concerned, the “first best”
po icy with respect to liberalisation and globalization is not to seek rapid and close integration
u rather to define careful policies of selective integration or what may be called strategic
integration 1 o benefit from the dynamic gains that would flow from integration with the world
economy, more rather than less government intervention in economic management would be
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As experience has shown, the role of governments, today and in the third millennium will
be more crucial than in the past - in setting the policy and legal framework, building institutional
and human capacities, putting in place the necessary infrastructure, creating an appropriate
enabling environment, where necessary, sponsoring entrepreneurship and enterprise creation.
ii. Enhance human resources development
Major efforts are required to enhance human resources development which is crucial to
msZe^'anS'f institutional
bectmeZImper^. if tJ^ountries'of We“
i
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nca are to cope with existing and future complex multilateral trade agreements whose scope
tends to cover areas tradmonally considered as the exclusive domain for autonomous national
policy-making.
I here must be massive investment m at least basic education, primary health care, basic
social services of safe water and adequate nutrition and in the extensive provision of family
planning services. Massive investment in human development is key for tackling poverty
improving the comparative advantages in Africa’s external trade position and attract private
investment flows so essential for further development.
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iii. Promote trade and investment
5
Trade and investment are important vehicles for integrating West Africa and the res of
the continent into the global economy and reaping benefits which accrue from it A policy
framework to promote investment in West Africa must address issues relating to the political
climate a conducive economic policy framework, increased public savings and investment
increased private savings; attracting foreign investment, and enhanced regional co-opera^on and
integration. In regard to trade-expansion, West Africa must embark on a more dynamic course
marked by increased participation in world trade and a more purposeful engagement in
international exchange of resources. To do this the countries of the sub-region would need to
»•
enhance their international competitiveness in the world markets.
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iv. Achieve macroeconomic stability
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As rightly recommended by a recent UNC FAD conference, it is essential that
governments, particularly those of West Africa, achieve macroeconomic stability and attach
impottance to institution-building if they are to develop a sustainable approach to globalization.
Externally oriented liberalization policies must likewise be carefully planned and monitored as to
any possible undesired effects or outcomes.44 Certain basic principles can be suggested. For one
thing, a sweeping liberalization of import regime should not precede but should go together with
enhanced export capacity and performance. Also, exchange rates should be maintained at
realistic levels. An over-appreciation of the exchange rate will reduce the competitiveness of
export industries and therefore should be avoided through prudent and credible macroeconomic
policies.
v. Deploy the right policy instruments beyond SAPs
West African governments need to deploy the right policy instruments beyond the
precepts of short-term structural adjustment, essentially guided by the requirements of long-term
structural transformations. The sub-region must be moving away from traditional dependence on
primary commodities (agriculture, forestry, fisheries, mining and extractive industries) and
modernise, expand and diversify its production and exports, carefully identifying right markets
for value added products and services, empowering the feeble local private sector and engaging
in non-traditional items for knowledge-intensive production. In particular, West African
countries must stimulate the service sector and modernise ports and communications. Not only
should the manufacturing and services sector be developed; importantly too. West Africa must
develop its agriculture to enable it to feed its population.
vi. Remove physical, social and institutional infrastructure constraints
Physical, social and institutional infrastructure constraints must be removed. Ideally, this
should be embedded in pro-poor policies comprising broad political participation, accountability
and transparency, enhanced roles for community groups and NGOs. Massive investment in
human development, as noted above, is key for tackling poverty, improving the comparative
advantages in West Africa’s external trade position and attract private investment flows so
essential for further development.
vii. To vastly extend and upgrade educational, scientific and technical infrastructure
17
Furthermore, West Africa must vastly extend and upgrade its educational, scientific and
tech ical infrastructure so as to enable it to enter the mainstream of technology use and
internalisation, acquiring new technological skills, developing new materials and building nontraditional economic activities.
The sub-region should embrace the new information
technologies which hold the promise of leapfrogging and a more effective delivery of services in
the fight against poverty through long-distance learning, telemedicine, natural resource
management, environmental protection and enhanced popular participation.
■
viii. Explore new opportunities in the world market
There is the need for the West African countries to actively explore areas where there
nay be growing opportunities for expanding their exports of goods and services, and take
advantage of the opportunities provided by tariff reductions and better market access under the
Uruguay Round on the one hand, and of growing import demand in large scale integration
systems derived from their better growth prospects on the other. In this connection, export
promotion efforts should target the following objectives, among others:
• Geographical diversification of trade towards rapidly growing markets including developing
countries in South East Asia and Latin America.
• Explore new market opportunities in traditional agricultural sectors as well as processing
industries;
• Diversification of industrial exports; and
• Exploiting new opportunities in services.
ix. Enhancing South-South co-operation
Developments on the international scene, characterised, among other things, by the new
trading environment ushered in by the Uruguay Round, are creating a radically new world
environment which makes it necessary for developing countries to strengthen co-operation
among themselves in order to achieve collective self-sufficiency and improve their position in the
world economy.
■
Interregional co-operation among developing countries of Africa, Asia and Latin America
can provide additional support to the diversification efforts of West African countries. This
should involve, for example (i) promotion of transport and communication networks and
facilities, including shipping lines between West Africa or Africa in general, Asia and Latin
America; (ii) establishment of mechanisms for financing of South-South trade and investment;
(iii) promotion of multinational production and services; and (iv) establishment of a network of
technical support centres for research, consultancy and training.
x. Strengthening West African integration process
Meaningful economic integration, as outlined in the 1993 ECOWAS Treaty, is
indispensable if West Africa is to industrialise, develop the capacity to participate effectively in
the evolving global linkages and markets, reduce her vulnerability to fluctuating overseas
markets, mobilise and maximise scarce resources of capital and skills, and finally forge the way
to effective West African unity - political and economic. To this end, the process, as highlighted
in a recent study,45 must go beyond the mere integration of markets. It must deal as well, and
effectively, with the integration of physical structures and the integration of production. This
18
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will encourage and facilitate the participation of West African countries in the global trend
towards the integration of production processes on a worldwide basis, involving the
establishment of linkages between production units in different countries.
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New initiatives in the process of West African economic co-operation and integration
should involve, among other things:
• speeding up the liberalization provisions of ECOWAS
• encouraging current efforts to rationalise the integration organs in West Africa so as to
prevent not only costly duplication, but also to establish certainty and a better investment
climate;
• promoting new efforts to achieve the harmonisation of macro-economic policies at the
ECOWAS sub-regional level;
• promoting greater role for service and enterprise or private sector - the business community,
chambers of commerce and industry - in the integration process;
• encouraging strong political commitment of the West Africa governments to advance
integration towards common objectives and to give regional economic co-operation and
integration a central role in the activities of governments; and, above all,
• ensuring full participation of all sections of the West African society, particularly, the socio
economic groups - trade unions, professional associations, employers’ organisations, student
and academic bodies, women’s and peasant organisations, newspaper and media executives . .
- in the process of West African economic co-operation and integration.
CONCLUSION
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This paper has attempted to analyse the phenomenon of dependence and globalization as
it relates to the peripheral economies of the West African sub-region. It has stressed that despite
the attainment of nationhood of the sixteen West African countries, the problem of dependence
continues to bedevil efforts towards development. In technological, trade, monetary, as in other
areas, the old patterns of dependence largely remain, even though West African countries have
now rather more room for manoeuvre. These countries continue to rely on the industrialised
capitalist countries for their technology as well as for trade and monetary systems. The
persistence of dependence has been deepened in recent years by the growing interest in both
official and private quarters in the phenomenon of globalization which is threatening to
marginalise the countries of the West African sub-region and, indeed, the rest of sub-Saharan
Africa from the mainstream of the world economy. To meet the challenges of external
domination which has been characterised by dependence and globalization, the paper has
highlighted a number of what may be considered as appropriate policy responses. Taken
together, these measures, perhaps, will reduce somewhat the continued vulnerability of West
Africa to outside forces, with important implications for regional and continental development
practice and policy.
?»
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19
I
NO I ES
See for example, f leraldo Munoz (ed.). FrornDependency to Development:
Mrateg.es to Overcome Underdevelopment and In^juality (Boulder, Colo: Westview
Press 1981); Dudley Seers (ed.), Dependenc^Theory: A Critical Reassessment
London: Frances Pmtcr Publishers Ltd., 198iTp^er Evans, PependenF"
-.eye 1 op merit (Princeton, New Jersey: Princeton University Press, 1974).
*
<
I
'1 hC Structure of Dependence”, American Economic Review. Vol
60(5), 1970, p.236.
I'.II. Cardoso and E. Faletto, Dependengcia e Desenvolvimento na America LatinImg^o^intetp-gtacao Sociologica (Rio de Janeiro: Editora Zahar, 1970), p.140.
4
5
^krUniah’ ^Struggle in Africa (New York: International Publishers
1970), p.63.
PmssBC1978)ep~IO3litiCal Ge°praphY °f Africa (Cambridge: Cambridge University
i
i
i
i’
i
i
1
t
R.J. Harrison Church, West Africa (London: Longman, 1963), p.xxv.
UN Economic Commission for Africa, Economic Bulletiin for Africa (Addis Ababa)
Vol. 1, No.l (1961), p 17.
~————
g
1
i
i
i
Boateng, Political Geography, p. 105.
Douglas Rimmer, The Economies of West Africa (London: Weidenfeld and
Nicolson,
l
1984), p.x.
For a full-scale study of ECOWAS, see S.K.B. Asante, The Political Economy of
^gior^ljsni m Africa: A Decade of the Economic Community of West African
States (ECOWAS) (New York: Praeger, 1986).
11 Ibid., p.35.
‘‘ Timothy M. Shaw and Malcolm J. Grieve, “Dependence as an Approach to
Understanding Continuing Inequalities in Africa”, Journal of Developing Areas
Vol.13, No.3, April 1979, p.236.
”---------------------
Alex Rondos, “How Independent is Francophone Africa after Twenty Years” West
Africa, 1 September 1980.
’-----14
. ‘Trane Zone and French Africa”, West Africa, 8 September 1980.
1 Rita Cruise O’Brien, “Factors of Dependence: Senegal and Kenya”, in
Decolonisation and Alter: 1 he British and French Experience, (ed.) W.H. MorrisJones and Georges Fisher (London: Frank Cass, 1980), p.287.
i
I
I
20
a
P
£»•
16 M B. Akpan, “Neo-colonialism: The Political Economy of Combating Dependent
Modernisation s West Africa”. Paper presented at the conference on the New
International Economic Order, Lagos, September 1977.
17 Samir Amin, “Capitalism and Development in the Ivory Coast”, in African Politics
and Society (ed.) I.L. Markovitz (New York: 1970), p.288.
at
18 John Kwadjo, “Collective Self-reliance... or Collective Neo-colonialism?”, West
Africa^ 15 September 1980.
ikt
ft
19 l or details see International Trade Centre UNC1AD/GA1 1, “ I he Profiles and
Potentials 1.1 External Trade of Members of the Economic Community of West
African States”, in ECOWAS Trade, Customs and Monetary Study (Geneva:
December 1979).
n
20 Kwame Nkrumah, Africa Must Unite (London: Panaf Books, 1963), p. 160.
£»
21 Dudley Seers, Development Options: The Strengths and Weaknesses of
Dependency Theories in Explaining a Government’s Room to Manoeuvre (Discussion
Paper 165), September 1981.
s
22 Claude Ake, A Political Economy of Africa (Longman, 1981), p. 141.
23 f or details of the LPA, APPER and UN-PAAERD see S.K.B. Asante, African
Development: Adebayo Adedeji’s Alternative Strategies (London: Hans 7ell
Publishers, 1991), pp.59-78; 144-158.
24See S.K.B. Asante, Regionalism and Africa’s Development: Expectations, Reality
and Challenges (London: Macmillan Press; New York: St.Martin’s
Press, 1997 ),p. 126.
31
25 ll.M.A. Onitiri, “Primary Commodities and African Development”, in B. Onimode
and R. Synge (eds.), Issues in African Development: Essays in Honour of Adebayo
Adedeji at 65 (Nigeria: Heinemann, 1995), p.150.
26 UN Economic Commission for Africa, Survey of Economic and Social Conditions
• n Africa for 1976 and 1977.
Il
2/ Peter Kilby, Industrialisation in an Open Economy: Nigeria 1945-1966
(('ambridge:
1969).
•
28 See S.K.B. Asante, "The European Union-Africa (AGP) Lome Convention:
Expectations, Reality and Challenges of the Twenty-First Century”, African Insight,
Vol.26, No.4, 1996; “The Lome Convention: Towards Perpetuation of Dependence
or Promotion of Interdependence? ”, Third World Quarterly 3(4), 1981; “How
Relevant is the EU-ACP Lome Convention to African Development?”, West Africa,
December 18-25, 1995.
21
s K Ji. Asante “ECOWAS: Towards Autonomy or Neo-Colonialism”?, in R I
Onwuka and 1 M Shaw (eds.), Africa in World Politics: Into the 1990s (Londono^
Jt55’ I989)’PPJ27-151; also S.K.B. Asante, “Regional Economic Cooperation and Integration in West Africa: The Experience of ECOWAS”, in O.S
/m 53
’• ——g the Future: Economic Integration and Co-operation in Africa
(Nairobi: AC TS Press, 1991), pp.109-130.
------------------- B—non in Arrica
ECOPolitical EconomY
'
Regionalism in Africa: A Decade of
Asante, Regionalism and Africa's Development, pp.53-56.
United Nations Conference on Trade and Development (UNCTAD); Globalization
■
Relations on Poverty.
UNC I AD/ECDC/PA/4/Rev l.New York and Geneva, 1996, p.l.
"UM ’J AD, BieXe^L^velope^^
p J. See also, IMF, World
MEW)"01' 0°k: G °ba lzatlon and Challenges (Washington D.C.: IMF,
" M.IIorsman and A. Marshall, After the Nation State (London- Harper
Collins, 1994)
■
R. Ohmae, The_Border]ess World (London, New York: Collins, 1990); “The Rise
of the Regional State”, Foreign Affairs, Spring, 1993, pp.78-87.
’6 R.B. Reich, The World of Nations (New York: Vintage, 1992).
■
t'rr AYrt AnmOak°’ (cExeCU,ive Secreta7h of the C* Economic Commission for Africa
LCA))’ —of the Technical Preparatory
Commnte^hMVhoh^^
EC A, Addis Ababa, Ethiopia, 28ApAl 1997.
38
f t A, Report on_the Economic and Social Situation in Africa 1997
E/ECA/CM.23/3, Addis Abab^M^n^T""----------
39Ibid., p. 16.
40 Ibid.
41 Ibid., p. 17.
42 Ibid., p. 16.
43 Ibid. p. 1 7.
UNC I DAD, Globalization and Liberalization, p.18.
S.K.B. Asantc, Regionalisni and Africa's Development, pp. 135-146.
22
I
I
INTERNATIONAL CONFERENCE
on
i
COLONIALISM and GLOBALIZATION
i
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
I
I
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Africa In The 21st Century: Development of
Democracy Or Democratic Development?
by
»
Prof. Haroub Othman
»
Institute of Development Studies
University of Dar es Salaam
Tanzania
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AFRICA IN THE 21ST CENTURY:
DEVELOPMENT OF DEMOCRACY OR DEMOCRATIC
DEVELOPMENT?
By
Ilaroub Othman
■
Institute of Development Studies
University of Dar es Salaam
a
w
fhe late Guyanese historian, Walter Rodney, remarked in his seminar work
How Europe Underdeveloped Africa that".....the vast majority of Africans
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went into colonialism with a hoe and came out with a hoe", forty years after
independence, the African is still with hoc. But. while under colonialism it
was survival in servitude, now that very survival itself is at stake.
rhe Euphoria for Independence
Il was only 40 years ago that the decolonisation process really started in
Af rica. Ghana is considered by most Africans as having blazed the trial for
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independence, though before the independence of Ghana in 1957, Morocco,
Tunisia, Libya, Sudan, Ethiopia, Liberia and Egypt were already independent.
At the time of the euthoria, the hopes of many people were that with
independence, Africa will be able to solve all its problems. The crying motto
at the time was: Seek first political freedom, and all else will follow. It was
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believed that independence will bring in national unity and solidarity, will
eradicate starvation and illiteracy, will abolish diseases and provide housing,
schools and universities, and raise life expectancy. But independence has not
fulfilled all of Africa's dreams. Instead the continent has witnessed a series of
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wars, killings and assassinations, hunger and starvation, refugees and
displaced persons, natural and man-made disasters-- all causing damages of
enormous proportions to the African society. It is true that some of the
problems were inherited from colonialism, but most of them were of Africa's
own creation.
The Army Enters ’ Ikulu’ (State House)
At the founding meeting of the Organisation of African Unity in 1963, the
delegation of the military regime that overthrew President Olympic was
refused admission because it came into power through unconstitutional
means. But that did not act as a warning to possible coup makers in other
places. Africa has seen 60 coups in the last four decades.
At the 1964 OAU Summit in Cairo, a resolution was passed calling on
African states to recognise colonially inherited borders,* yet 15 border
disputes have erupted involving 30 countries. Africa had seen also 15 civil
wars, some of which arc still going on until now. In 1967 at the signing of the
OAU Convention on Refugees, it was hoped that the number of refugees
would dindle in the continent, but today it is the only region of the world that
has the biggest number of refugees.
Poverty in the Midst of Plenty
Africa has vast reserves of chromium, gold, manganese, uranium and platium.
Congo Kinshasa alone is endowed with vast cobalt reserves, industrial
Al lhe International Conference on leadership in Africa: Forty Years Alter Independence' held in
December 1997 al the University of Dar cs Salaam, former Tanzania’s President, Mwalimu Julius Nycrcrc,
explained the reasons that led him to introduce the resolution in 1964: he had received in I960 a delegation
of Maasai Elders Irom Kenya, headed by an American Missionary, wanting Kenya's Maasai to be
incorporated into Tanzania in 1962 Dr. Kamuzu Banda of the then Nyasaland (now Malawi) approached
him with an idea that Mozambique be sliced up, with a part going to Nyasaland, the second part going to
Southern Rhodesia (now Zambia) and a third part going to the then Tanganyika; in 1963, during the founding
meeting of the OAU, Somali and Ethiopia were at war over Ogadcn
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diamonds anil copper. Africa's uranium potential can easily satisfy all its
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projected energy requirements for years to come. I he continent presently
consumes only one-sixth of its current oil output, and by itself would have
ample reserves to last for many decades. All this wealth lies in a continent
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where infant mortality rale is at 145 deaths per 1000 births; where tetanus,
i
measles, whooping couph and diptheria annually kill over 400,000 children in
it
Nigeria and 100,000 children in Congo Kinshasa. Millions of children of pre
school age die every year as a result of manutrilion-linked conditions. One
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million people died in the 1984-85 Ethiopian famine.and millions more in
Mozambique and other places in the years that followed. Africa is a continent
where 240 million of its people are poor, and where one out of every three
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Africans is underfed, yet pays over 46% of its export earnings to service debt
t>
obligations.
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Man-Made Problems
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with the colonial power France, Algeria was forced to go to war with
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Morocco over a border dispute. Somalia was one of the only countries (the
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Immediately alter attaining its independence in 1962, after a seven-year war
other being Morocco) that abstained from the 1964 OAU resolution on border
icslions, only to come and show its reasons why it abtained when it went
into war with Kenya over the North Front District, and with Ethiopian over
Ogaden region. Nigeria was at war with itself when the Ibbos in Biafra were
threatened with genocide. But, of course, great destruction and devastation
)•
occured in Southern Africa where ideological differences, ethnic animosities,
apartheid hegomonislic plans and big-power rivarly combined
to put the
region's socio-economic advance to a halt and to send it back to barbarism.
Rwanda and
rundi epitomise the cheapness of life in Africa and show that
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When it comes it, crimes, some leaders in Africa can surpass Hiller. Pinochet
and Pol Pot.
But how can Somalia be explained? A people of the same colour, the
same religion and the same ethnic background who speak the same language,
yet kdl each other more ferouciously than in the Palestinian-Israeli War! The
clan rivalry can be explained only in terms of the allocation of resources, and
the ursurption of the control of the sources of those resources. Siad Barre, the
Aidceds (both father and son) and the regime in the seccessionist region are
all fighting for the control of the diminishing resources. The shifts of alliances
with external
forces (Soviet Union, apartheid South Africa, United States,
Egypt, Kenya Saudi Arabia, etc.) that one saw happening in the last years of
Siad Barre regime and soon thereafter can be explained in this context.
Debts for Underdevelopment?
Another Sword of Democlcs hovering over Africa, and that bears directly to
the questions of peace and stability, is the debt crisis. With the rise of the oil
prices and the drastic decline of commodity prices, the African economies
were faced with an acute crisis. By the end of the 1970’s, real commodity
prices were, on average, 13% lower than their levels in the 1%0's. The
collapse of the prices imposed a foreign exchange loss of US< 2.2 billion in
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1979-81.
The solution, recommended very strongly by the international financial
institutions at the time, was to borrow from the commercial b nks and to take
loans from the western donor countires. It would be remembered that at the
time the banks were overflowing with petro-dollars, and
5
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were more than
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willing to off-load them to whoever wanted them at very low interst rates.
This eounsel of the 'wise' was followed religiously by the African states.
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The result was that the African countries found themselves heavily
indebted. Since most of the borrowed money was not put into use in the
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productive sectors of the economy to produce more wealth, there were serious
problems when it came to repaying the loans. As M'Baya has aptly put it:
"Debts entered into for purposes of financing development were transformed
into debts for underdevelopment".
>
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In the 1980's these countries were caught in a s(|iiceze when debts
became due at the same time as interest rates soared. The short end of the
long story is that today African countries are constrained by debt to the extent
that they spend 25 cents to US$ 2 on debt serving for every dollar that they
earn overseas. According to the UN Economic Commission for Africa, the
continent paid out USS 200 billion in interest in 1983-1991. This was more
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than the entire debt it owed in 1982. Anri the debt has been soaring. By 1992
it stood at USS 289 billion, representing 95% of the continent's GDP. These
countries cannot pay their debts. Some of these countries have external debts
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four times their GNPs. They have to choose between paying their debts and
feeding their populations, providing desks to their school-children, fertilisers
to their peasants, chloroquine and other medicines to their sick, and clean
water to the rural poor. In any case, as Cheryl Payer and many others have
pointed out, the dominant causes of the debt crisis are external, and Africa
cannot therefore be held responsible for the debt crisis. But the commercial
banks, the international financial institutions and the creditor governments
insist that these countries can, and must, pay. And the Bretton Woods
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institutions have become debt-collecting agences. Yet the obvious response
ought to be to repudiate these debts.
I hat will cause no ripples in the financial world. For one thing, Africa
has long repaid its original debt. For another, the cancellation of Africa's debt
will be no big loss in a world where, as Susan George observes, five times
that sum can easily be lost on Wall Street in an afternoon without undue
stress. Morality demands that Africa's debt be cancelled.
1 he Inevitable Road to Marginalisation
I he Structural Adjustment Programmes (SAPs) or Economic Recovery
I rogrammes (ERPs) that had been intioduced into Africa, as a solution to the
continent s deep crisis, are not just economic policy measures, but they are
hightly political too, induced by the political fundamentalism of fantastics. A
number of measures proposed by the economic recovery programmes do
bring a lot of suffering to the majority of the people, and in some places
create social unrest, resulting in what has been termed the 'IMF riots' in
several countries. In fact the word at the grassroots in Mozambique was that
SAP brought to the cities the suffering that RENAMO created in the rual
areas.
I he basic assumption of SAP is that reforms will increase savings
(hence investment), productivity, and exports - which in turn will raise the
incomes of the working poor. SAP/ERP requires a grater reliance on the
market forces to determine prices and allocation of production inputs and
finance. I here arc so many shortfalls in this strategy that one does not need to
deal with them here. Numerous recent studies have shown the fallacy of the
intellectual arguments behind such a strategy. What is important for us to note
7
„ere ,s .ba. .he sba.egy .» no. working. In lac. n ,s cans,ng more problems
than it is supposed to solve.
Almost forty African coun.ries are implementing a structural adjustment
programme of one sort or another. None of the countries following the
scriptures to the letter can show an over all success. The African countries are
told io emphasize on export promotion of primary products, privatisation,
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user charges, etc. None other than the UNDP, in its 1993 Human
Development Report, shows the fallacies of some of these directives. The
Report states that it is not true that private enterprise can deliver better results.
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"Not all public enterprises lose money, and not all arc always more
inefficient, than private sector firms".
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Kenya showed that several public manufacturing firms were
A study on
performing better on the basis of a number of indicators than private sector
companies. A study of the state-owned steel industry in the Republic of South
Korea reveals that it is among the most efficient in the world. The Report tells
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us to bear in mind that privatisation may not be the only way to reduce losses
in public enterprises. This is not to say, however, that we continue with the
public sector enterprises even when they are making losses. It only cautions
us that privatisation is no panecea, and if it is hastily concieved or executed, it
might achieve very little. But what is important is the admission in the Report
that privatisation is not merely a technocratic excercise but also a political
r
process. Other studies indicate that many experiences of privatisation in the
South lead to oligopolistic-monopolistic power of the dominant groups,
resulting in market concentration, not market democratisation.
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A great emphasis is placed on export of raw materials; and as part of the
drive to boost exports, governments are required to raise producer prices for
export crops. I he result of that is that countries with no food security are busy
exporting pyrethrum, cut flowers and tobacco. In Zimbabwe, because of the
producer price mechanism, the farmers abandoned the production of food and
expanded their efforts on the production of tobacco and cotton. Thus even
when the extent of the drought was clear and the prospect of hunger loomed
very high over the country, the Zimbabwe Grain Marketing Board was still
exporting grain, honouring the requirement that it balanced its books.
Zimbabwe, which was once a surplus maize producer, ran a deficit of one
million metric tonnes in 1991, and in 1992, more than half the population
required food aid assistance. Over in Malagasy, because of the incentives
given to the farmers there for cultivation and export of corn, as part of the
export-oriented logic, forests were burnt in order to obtain more land. One
would not be surprised if in the near future the African farmers are advised to
embark on the cultivation of poppy, coca or marijuana, since a hectare of such
crops yields 10 to 20 times more than coffee or cotton, and the demands for
them are growing and the profits much higher!
In many African countries, trade liberalisation has led to the collapse of
local industries. Again in the case of Zimbabwe, which has a stronger
industrial base than any other country in the Southern Africa region except
South Africa, its manufacturing output in the first half of 1993 was 19%
lower than in 1992, which was in turn 12% lower than in 1991.
I he effects of SAPs are left even much more in the social services,
particularly in health care, education and the provision of clean water.
9
(ihana (and now Uganda) has been paraded as a 'success story' in SubSaharan Africa. But no other person than Ghana's President, Jerry Rawlings ,
himself who stated that "Ghana's economic recovery programme has not
solved the country's economic problems as its gains have yet to be felt tn
most households and pockets". The UNDP 1993 Report stated that the
statistics on Ghana show clearly that the so-called 'success story' "has not yet
been translated into improved living conditions for the majority of the
people". It is envisaged that, with some luck, Ghana might, by the year 2000,
be able to attain the levels of output which it had in 1960.
i
But this is not to say that there are no people in Africa who benefit from
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SAPs. These are;
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lop executives in the public services, who, owing to the
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technocratic demands of the SAP, are called upon to attend
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numerous conferences, workshops and seminars and are also
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engaged as consultants and advisors;
Top executives in private business who deal with foreign capital
and have benefitted from the injection of foreign exchange in the
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economy;
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Local agents of foreign business and institutions providing
specialised services such as hotel and advertising agencies;
Beneficiaries of divestiture measures who are able to buy up or
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buy into sale-owned enterprises;
Large land-owners and big-time commercial farmers who benefit
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from higher producei prices and other incentive packages;
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Further more, the political class also continues to lead the same lifestyle of
conscpicuous consumption, thus creating tensions in society:
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SAPs as a donor solution is easy to impose, but they only grasp the
(
manifestations of the crisis. In an article titled Human Dignity as a
<
Universal Value, the President of the Development Commission of the
t
European Parliament put it so well when he said:
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I he...structural adjustment criteria of the Bretton Woods institutions
are perfect for Sweeden but are completely outlandish for a country
like Zambia or Mozambique...Let us stop the massacre. For there is no
country where it has been successful, at least as far as the people are
concerned. Why? Statistics indicate that over the past ten years there
has been a permanent transfer of capital from the poorest countries of
the world to the richest countries.
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I he economic crisis of the late 70’s and early 80's led to serious crisis of
political legitimacy. The popular discontent has swept away most of the
military regimes and authoritarian governments. The solidarity and unity that
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was manifested during the struggle for independence and soon thereafter was
now being questioned by demands coming from different social groups. The
national movement has given way to political formations with diverse, and
many times opposing, interests. As Adebayo Adedeji has pointed, the crisis
was
i
largely the result of political and social conditions on the continent,
characterised by poor administration lack of political accountability,
and the non-participation of the majority of the people, further
reduction of the decision making base, the confidence crisis between
the government and the governed....The transformation of the entire
political economy into an economy of despotism where
authoritarianism and clcptocracy replace democracy, responsibility of
public authority and political empowerment, have not only negatively
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impacted on individual freedoms, but have also even marginalised
individuals in the development process, the result being that, in the hat
of it all, the population has been entirely forgotten.
It is from this background that calls for political pluralism and multiparty
democracy started to be heard. Although the introduction of multiparyism in
the continent has not come without problems and conflicts, some have
characterised the phase in which Africa is going through at present as the
struggle for second liberation.
Towards an IMF State in Africa?
Early debates on the post-colonial slate in Africa centred mostly on the class
character of the state, and which forces were in control of the state (Arrigi and
Saul, 1974; Leys, 1975; Mamdani, 1978; Othman, 1980). The paradigms set
by Hamza Alavi and others (Alavi, 1972; Girling, 1973), when analysing the
post-colonial state outside Africa, were accepted unquestioningly, and it was
implied that they were considered relevant for Africa. What those debates
lacked was an analysis of the functions and tasks of the state. It was just
assumed at that time that once a state called itself 'socialist', then it would
have the same purposes and functions as those of a developed capitalist state.
Perhaps this lack of a proper analysis of the functions and tasks of the post
colonial state in Africa might explain why in mot cases African scholarship
followed the whims of the African political leaders instead of basing itself on
a scientific inquiry. And now, faced with the situation where all African
countircs, regardless of their past ideological strances, are confronted with
deep political and economic crises, African scholarship fails to give proper
explanations. As Lemarchand puts it:
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Peasants avoid (the state), urban workers despise it, military men
destroy it, civil servants rape it and academics ponder the short-and
long term results (1988).
'1 he State of the Whole People'?
<
Soviet theory of the late 1960s and early 1970s held that the Soviet state was
no longer a dictatorship of the proletariat but a dictatorship of the whole
people. 7 he idea was that the Soviet society had alrady reached a stage of
developed socialism when all classes had withered away and class
contradictions had disappeared. The state then was only a legal entity for
purposes of international relations.
Some of the ideologue of Africa’s post-colonial era transplanted this
theory into Africa by maintaining that there were no classes in Africa, and
thus the state was of the whole people. What some studies revealed on the
existence of classes in Africa (Hussein, 1970; Nkrumah, 1970] and the nature
of the state as a class instrument was discarded for political expediency. The
reason behind this was to conceal the class forces that were in power. The
oppressed and exploited classes were made to believe that the 'state' was
theirs too.
The Intellectual Rationale for One-party System in Africa
The first victim of the post-colonial political arrangement in Africa was
'democracy' itself.While the independence movement rallied around itself
broad sections of the population, with a character of a mass political
phenomenon, what followed the demise of the colonial rule was an elitist
arrangement. The principles of anti-colonialism and fullest democracy on
which the independence movement was rooted gave way to a monolithic
political centre and the creation of a 'personality cult'. Individuals who were
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leadcis among equals wcie now laiscd Io a highest mountain and were
supposed lo lx* endowed with all the virtues Sih h was the fertile ground for
the rise of dictators and one partyism in Africa.
i
Most of African countries gained their independence through the
dominance of one major political party. In most cases this party was national
and pan territorial. Nycrcrc argues in fad that there were no political parties,
in the Western sense, but nationalist movements representing the interests and
aspirations of th whole nation (Nyercre, l%3| Only in a few cases, such as
the Sudan and South Africa, did political parties in the Marxist sense, i.e.
(actions articulating class interests, emerged |lxrumo, 19711. Il was possible
■
then, alter independence, for the dominant parly to portray itself as the
J
I
national movement, and to mobilise all sections of the community to rally
I
around it. I hc tasks then Ixrcamc nation building and the creation of national
f
I
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I
integration, unity and cohesion.
I hc imposition of the one party system had been explained in different
ways. There were those like Nyerere, Senghor and Kaunda, who appealed to
I
Africa’s past, claiming that in pre colonial srxieties, chesses were unheard of,
I
)
9
)»
I)
and |K‘ople sat down under a tree to discuss their problems until they came to
a consensus. But once a consensus was achieved, everybody was expected to
toe ihc line. This argument was transplanted on the post-colonial African
societies by maintaining (hat they too were classless, and if political parlies,
ill the modem sense, aic to ailiculalc class interests, then they cannot exist
»
>
■>
where classes arc non existence. This analysis pretended to be ignorant of the
lad (hat one ol the things (hat colonialism did was to introduce classes where
they did nol exist, and cxccibale class divisions in places where classes had
already appealed prior to ihc coming ot colonialism. To maintain al the
|s>
)»
Ib
In
E
II
1
morrow of independence that Africa was classless was to turn foul of (his
reality. It was also fell that (he dangers of multi-party system included that of
aggravating ’tribal' antagonism (Mazrui, 19911. But what has been too often
noticed in Africa was (hat (he one party regime shields (he incumbent
leadership from justifiable criticism of its conduct' (Sklar, 1967). As Howard
states:
I
I
I
I
I
some African infcllcc tuals |H-rsist in presenting the communal ukhIcI of
social organisation in Africa as if it were in fact, and in maintaining
that the group oriented, consensual, and redistributive value system and
hence (hat it ought to be the basis of a uniquely Afiican model of
human rights. Ideological denials of economic and political inequalities
assist memliers of (he African ruling class to slaly in |X)wer, (Howard,
|9H6|
Among some of (lie proponents of the one party system in Africa were
those who believed (hat
it was possible to have democracy within such a
system (Nsibambi, I9KX|. The belief was premised on (he fact that multi
party politics breed (iickery and dishonesty; this is especially so during
election time when:
each party is led into conducting its election campaign by the 'political'
tactics of evasion, distortion and even downright lies about the other
paily's motives and intentions. Nor docs it stop there. Once in
Parliament, as we have seen, members of the opposing parties must still
observe the rules of the party unity which, in themselves, must
inevitably stifle not merely freedom of expression, but, indeed, honesty
of expression (Nyeierc, l%21
There were yet others who come to the one party system through fear of
democracy. Hie idea was that under one-parlyism it would be possible to
centralise power and monopolise politics. It was under this group that the
IS
tel
8
cultivation of the 'personality cult' reached its heights, and the holding of
alternative ideas or dissenting opinions was considered treasonable.
l or a long period the one party system was mistakenly equated with
socialism, it was believed that a society aspiring to build socialism had
necessarily Io have a one party system. The then Soviet Union was given as
r
r
a
an example. But nolxxly cared to look at the Soviet history, and examine the
reasons which led (hat society into a one-party state. Nor was anybody
interested in the lad that there were several other socialist countries (China,
Poland, t iDR.etc) which had multi-partyism recognised in their constitutions,
and had non communist political organisations, although the 'leading role' of
a communist party was constitutionally guaranteed.
W
Socialism vs Capitalism Debate
The last thirty years saw
’a
tierce debate in Africa on the question of a
development path. With the exception of Malawi and the Ivory coast, no
African country could admit openly that it was building laisscz affaire
capitalism. Many of them came up with different versions of 'mixed
3
economy' and different faces of so called 'African socialism'. Some African
leaders (Nkrumah, Nyerere, etc), were convinced of the relevance of
socialism to their situation; but many others got on the bandwagon because it
ar
was fashionable al the time to be seen as a 'socialist'. Moreover, socialism
r
could always Ik used as a way of stopping pressure from the internal popular
forces, and as a card to play against luisl and West in the ideological rivalry.
But by the end of the decade several of these 'socialist' regimes had been
overthrown by the military.
With the decline of 'populist socialism', we saw the rise in the seventies
ol 'scientific socialisin' and the establishment of so-called vanguard parlies.
IG
Congo Brazaville, Benin, Malagasy, Somlia, Ethiopia and Burkina Fasso, all
under miliary rule, declared themselves followers of ’scientific socialism’, and
in all those countries the parties hoisted by the regimes were called ’Marxist-
Leninist. In Angola and Mozambi [ue where the liberation movements came
to power after prolonged armed struggles, the nationalist parties were also
declared Marxist-Leninist. All that is history now, because popular discontent
has swept away all those military regimes. Though FREL1MO is still in
power, the cruelty of the war with RENAMO, and the pressures from the
United States, Portugal, the IMF, the World Bank and others, have forced it to
abandon its Marxist garb. MPLA in Angola, no doubt because of the peculiar
situation it has been thrown into as a result of the war, seems to be reluctant
to throw away its leftist poses. However, it has in its programme replaced
’scientific socialism' with 'democratic socialism', and no longer refers itself as
a Marxist-Leninist party.
What was generally agreed, though, despite different political stances,
was that the state had an important role to play in the proposed
transformation. And until the 1980s this position was accepted by the
international financial institutions and the donor countries (World Bank,
1981) and massive support was given through the state to various
development projects. I Kings changed with the appearance ot Reaganomics
and I hatcherite "people's capitalism" on the international stage.
The Interventionist State
The state was very crucial in the development of capitalism [Miliband, 19731.
Not only did it direct research into the development of science and
technology, but also increased the accessibility of remote areas through road,
rail and sea transport. It not only decided on avenues for investment but also
17
i»
II
>
I
I
on priorities. The welfare programmes of the modern bourgeois state were all
propelled by an interventionist state. The countries of late capitalism, the so-
;
i
called Asian Tigers, could not have achieved what they did without a strong
interventionist state. At present it is in the North that one finds the strongest
presence of the state in the economy. The insistence, therefore, by the IMF
»
and the World Bank that the African state should be stripped to a skeleton,
>
and its role be limited to the maintenance of law and order, cannot be
>
>
supported.
i
i
Developmentalist State
j
The modern African state is a colonial creation. During the colonial period
>
the colonial state did everything; it organised labour, directed it to farms and
mines; compelled it to build roads and raiwaly lines; and specified for the
>
farming communities what to produce. At independence, the colonial state
was adopted and legitimised. If one is looking for the origins of the
3
3
S'
'overdeveloped' and 'overburdened' state in Africa, then one has to look at the
inherited state.
»
■
Because of the expectations of the African masses at the time of
B
B
IB
independence and the aspirations of the new classes in power, the state had to
be developmentalist. It took upon itself the task of integrating into a cohesive
nation different ethnic and linguistic groups, but went further into developing
physical infrastructure and providing social services. However, it also
»
undertook the construction of grandiose development projects which were of
»
no direct benefit to the poor, either rural or urban. Vast public funds have
either been siphoned out of the country or been diverted to support the costly
demands of the ostentatious life styles of the ruling elites.
B
!»•
IK
1
I he I ME/World Bank State
I he present economic crisis in Africa has brought to the fore debates on what
went wrong. While every body agrees on the causes .of the crisis, there arc
differences as to who has mainly been responsible for the predicament that is
facing our continent now. It is true that the undemocratic nature of the
intenational economic ststem and the natural clamities have ontributed to the
crisis. But what about the bad development policies pursued by different
African regimes of whatever political colouring? Arc the donor countries and
aid agencies also not to blame?
I he World Bank has been involved in Africa since independence, and
the IMF has been in the forefront in he last twenty years. Many African
countries are now applying SAPs and HRPs under the guidance fo the IMF
and the World Bank, but what one sees in the whole continent are complete
failures.
Africa at the Cross Roads
The major political achievement of Africa in the last forty years since the
independence of Ghana in 1957 is the almost complete liberation of the
African continent. With the exception of Western Sahara, Mayotte, Diergo
Garcia and the Reunion, the rest of Africa has attained political independence.
Various studies on general economic and social trends in Africa, and of
individual African states, have shown that SAPs are not working. If anything
they
are infact exacerbating the problems in Africa. These programmes
cannot resolve the legacy of underdevelopment. As the former President of
Algeria, Ahmed Ben Bella, stated: "
although colonialism only died
yesterday, officially at least it weighs still heavily, crushingly , on our future
and we have not finished dressing its wounds."
19
Democracy and Development: Walking on Two Legs
I
Everyone agrees now that food security is very important in maintaining
i
political independence. Africa must feed itself, and this cannot be done by
depending on the hoe and leaving the individual peasant to fed for himself.
f
J
State intervention in agriculture is necessary. Countries of the North subsidise
their agriculture at the rate of US $200 billion annually. Norway alone in
1993 did spend NKR 12.8 billion as state subsidy to its agriculture. The
I
European Union spent 60% of its 1992 budget on the Common Agricultural
I'
Policy. Where then is the rationale in demanding of African countries, for
I
whom even food security is still a dream, to abolish subsidies on agriculture.
1
Market forces seem to be the fashion now, but can market forces
»
marketise development and alleviate poverty? Do markets know equity?
»
»
>
Where do we move from here? The dcmocratisation process taking place
in Africa at present is a positive development. But it should not end with the
It
l»
establishment of multi-partyism and the right to elect who should rule.
i»
Democracy is all-embaracing, and its human rights criteria include the right to
life, work, education, health, etc. It requires a political culture of tolerance
|»
19
and an atmosphere in which 'hundred flowers blossom and hunadred schools
of thought contend'. The state cannot shirk from its responsibilities. While I
:
I®
id
id
would not like to define its tasks, it must be interventionist, devclopmentalist
and democratic.
Planners, economists and politicians in Africa need to go back to the
drawing boards and devise a democratic development strategy. They have to
understand that 'development' is not the copying of the production and
20
1
consumption patterns of the North or replieation of the experiences of Japan
and the so-called Asian Tigers, because the international context from which
they emerged was
different. Democratic Development
in Africa is about
bread and shelter, chloroquine and 'Kitenge', schools and clean water, better
roads and state intervention in agriculture. It means involving the majority of
our people in the definition and control of political issues and the political
process. I he outlines for that kind of strategy cannot be found in the
documents from the IMF and the World Bank, but in the African Alternative
Framework to Structural Adjustment Programme adopted by the
Organisation of African Unity, and the recommendations of the report of the
South Commission, The Challenge to the South. The philosophy behind
such a strategy is self-reliance and national independence.
21
Bibliography
Arrigh, G. and Saul (1974) Essays on the Political Economy of Africa.
Nairobi: EATH.
Bochie- Danquah. Y. (1992) Structural Adjustment Programmes and Welfare
Intervention: The case of Ghana. Africa Insight, Vol. 22 No. 4
pp.244-248.
Brown, M.B. and Tiffen. P. 91992) Short Changed: Africa and the World
Trade Amsterdam: Transnational Institute.
ECA-African Alternative Framework to Structural Adjustment.
J
I
I
h
•
>
Kananayakam.T. 91993). the Global Market vs Human Development (paper
presented at a 'Seminar on UNDP's Human Development Report
1993' Oslo 27 May).
Eemarchand, R. 919KK). The State, the Parallel Economy and the Changing
Structure of Patronage Systems', in Rothchild, D and Chazan, N
(eds) The Precarious Balance: Stale and Society in Africa.
»
»
»
»
Westview Press.
Nkrumah, K. (1970)- Class Struggles in Africa. New York: Internatioal
Publishers.
Nyerere, J.K. (1963), Ujamaa-The Basis of African Socialism, OUP.
OAU (1981) Lagos Plan of Action for the Economic Development of Africa
I9R0-2000 Addis Ababa.
E»
22
a
Othman, H. (1980) - I he Slate in Tanzania: Who Controls It and Whose
Interests Does II Serves? Dar es Salaam: Dar es Salaam
University Press.
Rodney, W. How Europe Underdeveloped Africa. TPH, Dar es Salaam.
€
e
Salim, S.A. (1990) The OAU and the African Agenda in the 1990s (Lecture
given at the Africa Centre, London, 11 October 1990).
Sawyer, A. (1990) The Political Dimension of Structural Adjustment
Programmes in Sub-Saharan Africa. Accra: Ghana Universities
e
c
e
«
Press.
«
Sekou Toure, A. (1963) - Guinea Revolution and Social Progress. Cairo:
S.O.P. Press.
c
c
t
c
South Commission - The Challenge to the South.
s
€
UNDP (1993) - Human Development Report 1993. New York & Oxford:
Oxford University Press.
£
World Bank (1981) Accelated Development in Sub-Saharan Africa. .
Washington.
€
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c
4
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c
c
c
e
$
4
1
(
$
23
<
INTERNATIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
I
ri
i>
Five Centuries after Vasco da (Jama
February 2-6,1998
New Delhi, India
COLONISATION CONTINUUM: THE NEVER ENDING
STORY
i»
by
li
Bittu Sahgal
»
I
»
&
»
&
W)
Editor, Sanctuary Magazine
Mumbai, India.
n
COLONISATION CONTINUUM: THE NEVER ENDING STORY
3
By Bittu Sahgal
3
a
To deprive a man of his natural liberty and to deny to him the ordinary amenities of life is
wo.se than starving the body; it is starvation of the soul... the dweller in the body. Mohandas
Karamchand Gandhi
As India approaches the 21st Century we need to recognise the threat within and to redefine
war The imageof an invading army should be recognised as a rare and confinable threat
Infinitely more dangerous is the Trojan Horse battle being waged under the cloak of international
Id national trade !nd commerce. Conventional war kills instantly. ITe war that 1 refer to kills
slowly and targets our most vulnerable citizens.
»
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2>
g>
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31
S>
Bl
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at
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a
In the avaricious race to secure more luxuriant lifestyles for ourselves around 50 million
Indians have begun to affect the stability, security and livelihoods of over one billion others. T is
powerful minority is colonising the entire subcontinent and in the process they are shattering he
ecological stability of one-fifth of humanity. Neither water nor tood is any longer secure for the
victims of this colonial misadventure. These have been snatched from rural India by urbamtes in
what would have been considered an act of war, had the 'transaction' taken p ace across an
international border. Predictably, the affected rural communities are angry and sullen. Ihey are
now prime tinder for the destabilisation of India.
The roots of violence
Punjab Kashmir. Assam. The central Naxal belt. All these were once relatively peaceful
states. A contributory cause for their descent to violence has been the erosion of the life-support
system of communities - clean water, fertile soil, forest supplies such as ftiel, fibre and fodder...
and of course, food. Not the food in the public distribution system, but that available from village
ponds, rivers, pastures, forest fruit-trees and marginal fields. As a result of a sustained assault on
coastal India I predict that the coastal towns and villages will emerge as the new arenas of violence.
Marine pollution and coastal land degradation have combined to cause fish catches to plummet.
Millions of once-self-sufficient communities now migrate to urban India. Others have taken to
landing explosives, weapons and contraband of all descriptions.
What exactly have we done to coastal and forest communities which is so reprehensible?
We have converted their habitats to mines, dams and urban complexes. Our thermal plants, copper
smelters, chemical complexes, refineries, prawn farms, five star hotels and national highways have
combined to degrade the quality of resources and life of those who were not invited to our urban
celebrations. Thus pushed, fisherfolk are fast moving to urban slums where they join millions of
rootless souls. We respond by demolishing slums and making such victims pay over 100 times
more for water than we do. They have virtually no access to our health, law and justice systems. In
search of justice therefore, they often prefer to settle scores outside courts, in ways that shock the
»•
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gentle sensibilities of the middle class. Cocooned in air-conditioned homes, cars and offices, this lot
pretends not to recognise this recipe for the destabilisation of Indian society. Like a cancer, the
double barrel assault of ecological degradation and injustice thus sets India against India.
Our land was once blessed by some of the most extravagant gifts by nature: dense forests,
water-stocked Himalayan ranges, a productive coastline, fish-rich estuaries, grassy pastures, rich
soils, a bountiful river system, abundant rain and a warm climate. We devalued these resources and
converted them to cash on the advice of turn-coat economists indoctrinated by the World Bank,
loday our forests are virtually gone. Our coastline is fast becoming a toxic soup. Our aquifers have
been so poisoned with industrial and agricultural effluents that it will take at least two or three
hundred years (and yet undiscovered techniques) to make much of our drinking water fit for human
consumption again. The air in our cities is unbreathable and tap water contains fecal matter. Breast
milk in parts of Punjab is so contaminated by DDT that it is dangerous to infants! Nuclear plants
such as Tarapur, just outside Mumbai, spew radiation in doses which no civilised nation should be
expected to tolerate. Himalayan forests are in Utters and one tiger loses its life to poachers every
day. This, proponents of the new economic policy, call 'development’.
Poisoned Progress
lhe impact of chasing the mirage of development is not restricted to the mere colonisation
of resources. Ihe consumer lifestyle also acts to destroy natural resources without anyone ever
having a chance to user them. Such destruction points to the usurpation of the resources of those yet
to be born. This is intergenerational colonisation, the ultimate adventure. This act of treason is
performed 'in the national interest' by political and corporate collaborators from among us who
conspire with powerful multinational corporations and governments to generate and despatch
millions of kgs. of toxic wastes to India. Arsenic, mercury, PCBs, and dioxins move malevolently
and speedily towards India by sea and air to poison forever our coastal waters, lakes, aquifers,
rivers, soils... and people.
Apart from the direct import of toxic wastes such as lead and PVC scrap, dirty industries too
are moving to India at break-neck speed. The chlorine industry, for instance, which is being phased
out in industrial nations (because of a direct connection with growth and genetic mutations in
humans through the production of dioxins-endocrine disrupters) is systematically being relocated in
India. Unwanted, old and decrepit factories have begun to scar states such as Gujarat in particular.
Additionally, hazardous compounds are being sent to India for 'recycling' without asking why the
industrial nations of the North do not wish to recycle their own stocks of lead batteries and
contaminated zinc ash. Our Ministry of Environment and Forests (MOEF ) knows of these threats,
but its technocrats willingly fain helplesses to resist pressures from their political and financial
masters. Many grow richer in the process. The Supreme Court of India has been watching such
events with increasing disquiet and it recently censured the MOEF by stating that: "It appears that
the breaking of the law was being encouraged more by the Ministry." What kinds of poisons are
being dumped within our borders? Where are these being dumped? Have the affected
communities been warned? Have any baseline studies been undertaken to monitor the impact of
hazardous waste contamination? Such questions require urgent answers, but we see no e\ idence
2
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that our leaders are even peripherally interested. On the contrary, they view such issues as irritants
and obstacles on the fast road to progress.
■
Little wonder that India, enjoys the dubious distinction of harbouring the world's largest
number of development refugees. Ihese are people who have had to leave their homes because the
forests, grasslands, rivers, wetlands and coastal habitats were usurped "in the national interest" or
became unusable because they were either poisoned or altered beyond description. The
development dream has turned into a toxic nightmare.
*
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The most convincing proof of this trend is the falling fish catch off the western coast of .
India. Not so long ago, Goa, Maharashtra and Gujarat, for instance, were among the most
productive fish-producing states in India. No longer. Where fishing boats could catch a boat-load
of fish in a few hours, they must now stay at sea for days on end, often to no avail. Directly
responsible are the industrial effluents released from centres such as the Gulf of Kutchh, Vapi, the
Thane Creek, Patalganga and Chiplun/Guhagar and the wounded estuaries of Goa. Herechlorinated compounds, heavy metals, among other substances, and mine tailings have laid waste
the breeding grounds of fish, lobsters, crabs and prawns. Five years ago, the National Institute of
Oceanography actually unearthed evidence that heavy metals such as mercury lay buried at a depth
of 50 mm on the bed of Mumbai's Thane Creek. Instead of taking the companies to task the
hopelessly politicised Maharashtra Pollution Control Board rewarded more than six delinquent
organisations by approving capacity expansions.
Sulfur dioxide and nitrous oxide-laden grey-yellow clouds have become the new symbols of
Third World countries. The toxic smog that envelops us produces a variety of illnesses ranging
from emphysema, to chronic bronchitis. The very young and elderly suffered the worst. The key
culprits are millions of vehicle owners who spew thousands of tonnes of toxic pollutants, including
lead, into the air every day. To this chemical cocktail are added hundreds of tonnes of city garbage
such as papers, plastic and even leaves (potential compost) from street comers and landfills.
I
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In almost all-urban centres, factories and industrial estates manufacture a lethal array of
products involving dyes, chemicals, heavy metals and pesticides, in the heart of populated areas.
Many pharmaceutical companies have installed shoddy incinerators to 'deal' with their wastes.
Such incinerators merely convert the toxins from solid to gaseous form, which enable our bodies to
absorb the toxins even more efficiently. This is why almost 2,000 hospital incinerators were shut
recently in the USA. This is also why Canada just banned the incineration of PVC. Right now,
however, incinerator manufacturers from the USA are scouring India in an attempt to sell their
death machines to* unaware municipalities. Community effluent treatment plants are equally
misleading options. These actually serve as a cloak behind which dangerous processes are
operated. The solid and liquid wastes from such facilities have often proven to be even more toxic
than what goes in. Clearly, the toxic waste import into India, when married to the amount we
generate within the country, is assuming "chemical warfare" proportions. The victims are the poor,
the very young, the infirm and the elderly... the precise categories of citizens who should be on the
receiving end of protection.
f
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On Friday, May 10, 1996, Justices J.S. Verma and B.N. Kirpal observed (in response to a
public interest petition filed by the Research Foundation for Science) that it was better to have no
law at all than have laws, which were not followed. The judges threatened to record a finding of
"breakdown of government machinery" and noted that the Central Ministry of Environment was
encouraging laws to be broken, rather than followed.
Public pressure can reverse such trends. Creeks and coastlines washed by the Southeast
Monsoon can be detoxified. Alternatives to the most poisonous wastes do exist. A stroke of a pen
could prevent the import of toxic wastes. Investments in public transport and pedestrian plazas can
help to decongest Mumbai's streets and our lungs. But none of this will take place if we continue to
allow industrial hoodlums to profit by trading on our health.
Gandhi betrayed
Day after day, despite new scams and convictions hitting the headlines, we continue to be
subjected to the sight of politicians of all hues, wearing the uniform of Gandhi even as they abuse
his nation-building value systems. Which is why, Gandhi's cry: "Enough is enough In the name of
God... go!" has begun to cleave the air once more. This time by the millions who reside in Dakshin
Kannada, Narmada, Guhagar, Tehri, Indravati, Pooyamkutty and Koel Karo against the neocolonial get-rich quick brigade. Such communities are joining hands against the inheritors of
British power-India's politicians, planners, big businessmen and bureaucrats. These latter-day
brigands festoon themselves in tricolour images, yet sec no irony in regularly and unashamedly
using black legislation crafted by the British - The Land Acquisition and Official Secrets Acts-to
accomplish their dark deeds. The direct result of this has been the annihilation of over
per cent
of the adivasi cultures of India. Sadly, the displacement of adivasis and the loot of their lands,
forests, rivers and ancestral properties continues unabated. In fact, virtually the only places where
forest communities are still able to lead their traditional lifestyles today are our over 500 protected
wildlife sanctuaries and national parks. Here the threat of urbanisation has been stopped thanks to
the Wildlife (Protection) Act 1972 and the Forest (Conservation) Act, 1980. But a series of
denotifications threatens to extinguish even these relic pockets.
Given such ruthless exploitation, it is little wonder that the seeds of separatism and violence
have sprouted through the length and breadth of our once-peaceful land. Indeed, those who fear the
iismemberment of India should consider whether our country has not already been split in two-rich
India... and poor India. Only self-inflicted myopia prevents us from recognising this tragic reality.
I cannot help but feel that, were he alive today, Gandhiji would have been forced by inner
compulsion to launch yet another satyagrah. This time against the haves of India, because we have
outdone the British in our acquisitive quest for 'development'. Never in the history of free India
have so few people grown so rich at the cost of so many. .Even as we delude ourselves with the
notion that India is progressing thanks to its industrial and financial policies, we must face up to the
fact that our own consumptive lifestyle is actually turning us into predators. When the British left,
with unseemly haste we began constructing Nehru's modem temples. And where did we site our
mega-projects? Deep in the hinterland, from where we began to suck all resources towards urban
centres. Predictably, such acts resulted in mass migrations, as people followed their resources to
4
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our cities. Here we spumed them. We herded them into slums and hovels in which conditions
i the infamous the^^
refugee camps during the dark days of
^tiZr A^’him ^^eSZ^'a^sio^m
also stole from the proud people of India that
vital to the human spirit-dignity. It is a mystery to me how we have managed to absolve ourselves
of responsibility for such crimes. Even now, at conferences, seminars and from the hallowed
corridors of Parliament House one hears that calumny: "India could be at par with Amenca, the UK,
or Japan, if only we did not have to carry the burden of the teeming millions who drag us down at
every step."
How different things would have been had Gandhiji been alive today. If we had him at the
forefront of the human rights and environmental movement he would have travelled from village to
Indian village to consult with the people. Instead of dispensing knowledge to them, he would have
learned from them their technologies for survival and sustainable development. He would then
have prevailed upon the rest of us in urban India to set an example of simple, ecologically sound,
living for the benefit of others. Gandhiji had provided solutions to our current environmental
problems even before they had manifested themselves. He was not merely a man before his time,
but also an environmental prophet whose precious lite was squandered on a people who, even
decades after his death, have failed to recognise his true worth.
J
Protecting the infrastructures of survival
When confronted with demands to improve the management of our natural assets the
development set breaks into a familiar chorus: "Anti-development, anti-national, anti-progress’
Only a mass of public opinion will be able to quiet this shrill and hurtful lot.
: •
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Clearly India needs to dedicate itself to the upkeep and maintenance of its existing
infrastructures and past investments before contemplating the purchase of new and flashy toys oi
development. And the misguided economists who have graduated from the World Bank school of
exploitation need to contemplate Gandhi's advice, to examine whether what is done will first
benefit the citizen on the lowest rung. This they must be made to see was not sentimentalism, but
pragmatism. That there is no other way for a nation of one billion people to coexist and thrive.
Unfortunately, the powerful minority has taken advantage of the pressure put by the World
Bank and the IMF to commercialise the Indian nation. Community wells, rivers, coastlines, forests,
grazing lands and even people's homes have become little more than raw materials for blind
personal ambitions.. Legitimised by the guidelines laid down by a new economic policy (a scarcely
concealed plan to auction India to repay past and future foreign debt) businessmen have taken to
profiting from the construction of nuclear reactors, highways, airports, prawn farms, chemical
factories and storages, refineries, thermal plants, five star hotels, deep sea ports and other urban
infrastructures. As we have seen, these so-called development projects are, without exception,
carved out from the survival infrastructures of ecosystem people - fisherfolk, forest dwellers,
marginal farmers, pastoralists and the rural poor.
5
There is another way
Despite spending crores of rupees since Independence-and destroying priceless natural
a-ts such as nvers, crests and soils-our dams, thermal plants, mines, roads8 ^TciXs are ah
HerXsT?hree-PoimXginninngder’Perf0nnin8
Wha'
d° ‘0 impr°Ve °Ur ‘"Structures?
of our food security. The plant load factors of the vast bulk of our thermal plants is abysmal and
our transmissmn systems are literally falling apart. The nuclear power sector has taken more from
the nation than it has delivered. Floods and droughts take a greater and greater toll of our people
and the per capita availability of water is less today than it was 50 years ago. More than 90 per cent
of our people have no access to safe drinking water and the few sources that are pure are likely to be
poisoned by scores of new factories being set up. Our coastal areas have been ruined by misguided
attempts to industrialise regions that were always water-poor. Over extraction of water and
dumping of toxins threatens to permanently damage our ground water. Not one city has adequate
medical or residential facilities, yet we continue to displace thousands more millions each year.
The less S3 id about our roads and highways the better
Unless we acknowledge that our past investments on infrastructure development have let the
nation down and that we must incorporate radically new strategies for the future, we are destined to
regress into a ’’business as usual mode from which there is unlikely to be any escape The first
cure for alcoholism is to acknowledge the problem.
2. Invest in maintenance and efficiency: Every rupee we spend on <
efficiency today will
yield us greater returns than a rupee invested in creating new infrastructure
. We need massive
mvestments m terms of both labour and finance to desilt our water reservoirs, repair our tattered
watersheds relme our canal systems, resurface our roads, repair and improve our transXon
ines, retrofit turbines, replace meffic.ent pumpsets and motors and detoxify our soils. There is a
name for this strategy, which involves employing millions of people in the rural hinterland (thus
househoM neind8aratl°n f°r PC°ple t0 urJan centres)^lled preventive maintenance and every
household in Ind.a practices it to perfection. This is why our people are among the mort
environmentally friendly m the world. If our government was able to do imbibe simple attitude
hat almost every housewife possesses, in a span of one decade India could become a world power
in erms of our ecological security, food self-sufficiency and financial stability. One proviso of
XsT 7U l °Ur reC°gnitlOn Of 1116 futility of replacing the infrastructures of survival (forests
grasslands, lakes, r.vers, coastlines and wetlands) with the infrastructures of commerce (dXs’
mines, roads, factones). Fortunately, nature is a self-repairing machine. The moment we stop
destroying our natural assets, they will themseh js return to life.
6
{
I
3. Go back to the future: In the crucible of India's cultures lie solutions to the problems of
tomorrow. Rather than fall for the line that is being sold to us by the OECD countries (that we can
and should consume more and produce more to look after our people), we need to make attitudinal
changes to recognise that the purpose of development is not growth, but stasis. No organism or
system can keep growing continually. There is a name for such a phenomenon. It is called cancer.
43
!e
I
I
I
lb
I
Of the one billion people who live on Indian soils today, perhaps over half are directly
dependent for more than half their caloric intake on the productivity of natural ecosystems.
Fisherfolk need the sea. Forest dwellers get food, fibre, fuel and fodder from trees and grasses.
Pastoralists and marginal farmers, using technologies passed down through generations, get by on
lands that citizens of industrial countries label "decertified". By plundering these survival assets for
short-term economic gains, we demonstrate more than just ecological ignorance. We wear our
barbarity on our middle-class sleeves. This penchant for stealing other people's properties has only
one possible outcome and that is violence. To avoid reducing India to the state of sub-Saharan
Africa, I submit we will need to wean ourselves away from the notion that money can buy
ecological stability. Our past can ensure our future survival, but only if we imbibe the most
fundamental lesson of history live and let live.
I have served on an Expert Committee of the Ministry of Environment and Forests (MoEF),
which deals with CRZ issues, for over six years now. Though not quite as well drafted as I might
have liked, the rules did actually serve the purpose of protecting the coastline and its prime
beneficiaries, fisherfolk. Unfortunately, "poor communities" do not benefit the ruling elite of India.
Therefore, this piece of legislation became a canker in the side of all manner of commercial
brigands who wanted to build five star hotels, housing complexes, chemical dump yards and
factories in one of India's most fragile ecosystems. Using money as a tool of persuasion, profit
seekers began to attack the CRZ Rules from 1991 onwards, when they became effective.
Environmental groups and communities affected by militant economic ambition fought back
through the courts and landmark judgements were earned. These judgements not merely upheld the
law, but went so far as to rap officials as high up as Secretaries of the Government of India on the
knuckles for their inesponsibility.
Power brokers hated the fact that the judiciary was coming down on the side of the poor and
the dispossessed, so they began to hatch conspiracies to change the very law that protected the
environment and "ecosystem people." Thus, forest dwellers found that industry was being favoured
with permissions to exploit lands that once used to feed their families. Fisherfolk discovered that a
the money generated by fistful of prawns was more compelling than appeals to allow the sea to look
after their children for a lifetime. Marginal farmers, pastoralists and rural poor thus found
themselves living in a democracy with none of the rights of self-determination that democracy
promises.
Instead of protecting our forests and our water sources, MPs are themselves investing in
prawn farms, buying land for commercial development along soon-to-be built highways, and
blatantly negotiating maladroit terms for India in exchange for favours from foreign companies.
While doing all this, they think little of displacing thousands of poor and marginal communities.
Perhaps the trucker on National Highway 17 had it right. His sardonic comment on India,
7
emblazoned on the back of his vehicle: Sau me nabbe baimaan phir bhi mera bharat mahan. (Out of
one hundred, ninety are crooked yet my India is great.)
Bittu Sahgal, Editor, Sanctuary Magazine, 602, Maker Chambers V, Nariman Point,
Mumbai 400 021.
email:<bittu@giasbm01.vsnl.net.in
8
I
>
THE RESPONSE OE SUB SAHARA AFRICAN COUNTRIES
TO COLONIALISM AND GLOBALISATION
Emelia Arthur and Tony Dogbe
I
Introduction
■■I
>
cultural domination.
We also look at the response of African leaders to this at die time of independence by way of
Lelopment models embarked on. So much has been written on development struggles in
Sahara Africa, but this paper seeks to look at the same issue with a cultural dimension.
Four countries - Ghana, Tanzania, Guinea and Cote d'Ivoire - are presented as case studies and
die generalities similarities and differences among them are drawn. Also, we attempt to sio
Jhe hnk itween the colonial process, the local leadership, die pattern of development chosen
and the growing inequalities.
I
°
pccmpnt nf the models we argue that no one model can be said to have definitely failed
S-Su,. f3C<
eeruin ■nodds received Wesiem supped
medeis’did „■>. change the roies defined for ihose Afncan Conn™> donng fire
colonial period Those countries remained producers of raw materials to
economy and consumers of Western manufactured goods. Other countries which sought
alternative models to development, aside of internal problems, faced severe external resistance,
such as the withdrawal of Western aid and support.
With regard to globalisation, we argue that it would lead to the annihilation of the culture of the
countries in SuLsahara Africa. Africa, over the period, has become more and more powerless
and as a result cannot resist die dictates of institutions such as dre World
Consequently, across the continent, most countries have embarked on IMF
I
1
Structural
Adjustment Programmes (SAP).
Cultural rejuvenation and active role of civil society in building a new breed of leadership who
are rightly oriented to meet the demands of the time as the
L. world becomes more a more a global
village is advocated for. This would enable Sub-Sahara Africa to articulate with the rest of the
world on the basis of its culture and values and not just accept anytlung thrown at her.
1
1
>
jrauu. - jaw—
Colonialism - A Process of Cultural Domination
envimnn^eX^is'andLTef; a'nd^temction w^tlZerLSs ^AsAli M^ort ^d^
his documentary series, "The African- Thp Trinh u
♦
Afm.m c„01,„onelrxI,,,,,.,
„aveto(„,„, oscx„rce„„:is^l^teZ8;„
,
A Mazun portrayed in
™~nia;
way
te°rXA — S“‘"y’'lk' "V s“i«>' " “»
fashioned out a
way ofSaZg8^iZm»de2 ‘tor s“lai dis“""", ,,”,i,icai ins,i"“i<’“k ■
insontinns); a way of tnakin/sense
"™dpul”dd«he?8XT^
=* “
,e£
as Je “ e^d' i^eX
.Zl'hy’^ ™
-~~X^0As
‘Progress’ m that era, like development now, was perceived along the evolutionary
soctehes down the league of progress.... It, therefore, provided the ideological
usttficatton and rafonahsat.on in the West for the slave trade, colonisation and the
imposition of die culture of the coloniser".
Ngugi wa lliiong'o argues that for this colonisation c
or domination to be effective, it had to
extend beyond the economic to cover 'the mental
-1 universe of the colonised’ (mental
colonisation). In his words,
olomahsm imposed its control of die social production of wealth through military
conquest and subsequent political dictatorship. But its most important area of
domination was die mental universe of die colonised, the control, through culture of
how people perceived diemselves and their relationship to the world. Economic ^d
political control can never be complete or effective without mental control. To control a
people s culture is to control their tools of self-definition in relationship to others.
Io succeed, Ngugi contends, die colonisers deliberately destroyed or undervalued die culture of
those they colomse and consciously elevated dieir language, for example, over diat of die latter.
2
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|
i
For the post-colonial era, Vandana Shiva gives us the clue to the ideological weapon which is ,
being used to perpetuate this control and domination - "development", which she has termed a
'post-colonial project'. This project, she says, provides the necessary conditions for capitalist
erowth and wealth creation in the West, without which capitalist accumulation would come to a
halt. The conditions which need to prevail for "development" or capital accumulation to occur
are (i) the exploitation or exclusion of women (of the west and non-west); (n) the exploitation
and degradation of nature; and (iii) the exploitation and erosion of other cultures.
I
In its typical disrespect for other cultures, the ‘ideology of development’ disregards self
provisioning economies and seeks to replace them with market or cash economies. According to
Vandana Shiva,
3
0
“Subsistence economies which satisfy basic needs through self-provisioning are not
poor in the sense of being deprived. Yet the ideology of development declares them
so .. People are perceived as poor if they eat millet (grown by women) rather than
commercially produced and processed foods sold by global agri-business. They are seen
as poor if they live in self-built housing made from natural material like bamboo and
mud rather than in cement houses. They are seen as poor if they wear handmade
garments of natural fibre rather than synthetics .
Four Case Studies
I
(
Now let us turn our attention to the four countries which we have used as case studies for this
paper. Though they have all been and still are victims of this cultural imperialism, die form of
the domination in each country and the respective responses of each have been different. The
purpose of this section of the paper is to look at the development models adopted by each
country in response to its colonial past and its current role in the global economy, and the factors
which influenced the choice of a model. Against this background we may be able to judge
Africa's chances in resisting globalisation.
!
What emerges from a study of the different models adopted by the various countries at
independence is that on one hand there were those who made no attempt to change their
colonial legacy and just carried on in the 'business as usual' manner. These include Kenya and
many of the former French colonies, notably Cote d'Ivoire and Senegal. On the other hand there
were those who sought to radically change the status quo, often opting for a socialist path, what
some called African Socialism. Notable among these is Ghana, Tanzania, Zambia and Guinea.
The case studies chosen illustrate these two responses to colonial legacy.
Cote d'Ivoire and Ghana - A Tale of Two Countries
1
Let us start with that of Cote d'Ivoire and Ghana - two neighbouring countries - similar
traditional culture, similar colonial past but different post-colonial responses.
■I
Despite the fact that Cote d'Ivoire was colonised by France and Ghana by Britain, the colonial
state fonnation was no different. Both countries became political entities when in each country,
more than fifty ethnic groups, with as many different languages, were brought together as a
colony of the French and English Empires in 1893 and 1874 respectively. The northern
u
IB
IK
3
boundaries of both countries were determined at later dates. In both countries, there was lack of
unity among the ethnic groups.
'Though the two colonisers adopted different modes of colonial administration, the immediate
effect on the populace was not different. France, unlike other imperialists, did not hide its
intention of turning the Africans it had colonised into French men and women with its policy of
assimilation. This meant extension into the colonies of the French language, institutions, laws
and customs. In this regard, "the French trained a native elite in their administrative practices
and this corps in turn formed an intermediary group between the French and die Africans".
(I uinder, B. pp 12). Britain on die other hand combined a British administrative system with a
policy of indirect rule. A network of civil servants dominated the national and district levels of
governance, while at the community level, it governed through die well developed systems of
tribal authority of the chief.
With regard to the economy, in both countries, the policy of the colonialists, was for the
colonised countries to produce raw materials that were processed mainly in France and Britain
while the former was a market for French and British manufactured goods. In both countries,
during the colonial period efforts were made to intensify the production of timber, coffee and
cocoa, by improving the transport infrastructure in the south of the two countries. At
independence, die economy of both countries was booming and prospects for further growth
were very good.
In both countries, through tlie medium of Christianity, the French and British education systems
which emphasised the three 'Rs' - reading, writing and arithmetic - were made to supersede the
traditional education of vocational skills training in the occupation of the area - farming, fishing,
weaving, construction etc. The newly emerging elite (middle class) from the European
educational systems were quick to adapt to the European ways, especially their social and
religious values and norms which they then helped to propagate.
Ghana gained its independence in 1957 and Cote d'Ivoire shortly after in 1960. Interestingly, the
response of the two countries at independence was different. A number of reasons account for
this but prominent among them is die leadership style, background and vision of the leaders of
the two countries at independence.
Houphouet-Boif>ny's Response
Felix Houphouet-Boigny, the first President of Cote d'Ivoire was a product of the African
Planter class which emerged in between the two world wars. He had spent his education and
working years in Cote d'Ivoire. Being a wealthy planter himself and of royal lineage, he
organised a movement to express the country’s dissatisfaction with the colonial policy which
favoured the European planters and the intensification of die recruitment of forced labour. This
movement ended up becoming Cote d’Ivoire’s only political party.
Being a planter himself, Houphouet-Boigny was a believer in an agricultural based economy.
Not being radical or revolutionary, he accepted the colonial status quo he had inherited and
sought to build on it.
4
•I
&»
"Given the positive results of tlie economic policies pursued earlier, it is not surprising
that the government decided to continue along the same lines after becoming
. independent." (Tuinder, B. pp 15,)
In 1960, Cote d'Ivoire outlined a ten-year projection of what flic economy would be like at the
end of the decade. In this ten-year projection was the decision to continue tire outward or
export-oriented development inherited from tlie colonial regime. In addition to the crops it
inherited, Cote d'Ivoire also introduced, as far back as the 1960's, when tlie world prices of
cocoa and coffee were falling, other crops such as bananas, pineapple, rubber, coconut, and
palm oil.
"The government was fully aware that further economic success was dependent on more
foreign capital and labour. Political and economic stability and growth, together with a
liberal policy toward foreign investors, were considered essential in creating the
confidence abroad needed to acquire these production factors. This was one oi tlie
reasons the government decided to stay in the franc area.
(Tuinder, B. pp 16,)
While Nkrumah was busily engaged in organising the entire continent for the "political
kingdom", Houphouet-Boigny was engaged in similar activities within the French West African
Community but for Cote d’Ivoire’s economic gains. Between 1959 and 1962, Cote d’Ivoire
played a prominent role in the establishment of three organisations, namely, the Conseil de
1'Entente in 1959, the Union Douaniere des Etats de 1'Afrique de 1'Ouest (UDEAO) in 1959 and
the Union Monetaire Ouest-Africaine (UMOA) in 1962.
"Because the Ivory Coast was the most prosperous member, it was in a unique position
to exert a dominant influence in these groups and lead tire movement for unity of
Francophone West Africa." (Tuinder, B. pp 16,)
II
I
I
I
With regard to manufacturing industry, in both Cote d'Ivoire and Ghana, this was neglected in
the colonial days. In the case of Cote d'Ivoire, in 1960, manufacturing was limited mainly to tire
timber, textile and food industries and served only the local market. Again the government at
independence did not seek to alter the situation. Instead:
"In 1960 the government recognised that to create a solid, long-term industrial base, it
was necessary first to develop sufficient domestic sources of raw materials, human
resources and domestic demand. In the short to medium term, while the bases for
industrial development was being laid, growth would have to rest primarily on
expansion and diversification in the sectors in which the Ivory Coast had the greatest,
immediate comparative advantage, agriculture, particularly export agriculture and
forestry." (Tuinder, B. pp 18,)
To a very large extent, to date, Cote d'Ivoire has consistently pursued its agriculture-based,
export-oriented and liberal economic policies it inherited at independence.
5
Kwame Nkrumah's Response
Kwame Nkrumah, die first president of Ghana on the other hand, was from a poor background
and had studied in the United States of America through his own sweat and tears. His
imagmation had been fired by U.S.A industries and large-scale, highly mechanised, agriculture.
While m die U.S.A, Nkrumah, had the opportunity to participate in the Pan-African Congresses
and Movement which also influenced his vision of post independent Ghana. He had also spent
some years in London where he came into contact with Marxist and Leninist ideas. He returned
home an ordinary man ready to lead ordinary people. The leaders of the United Gold Coast
Convention (UGCC), the only political party at the time, who had invited him to be the
secretary to the party, were members of the traditional elite and the new intelligencia. Nkrumah
disagreed with them on how they should approach the issue of independence. While the UGCC
leadership were in favour of a gradual approach to independence, with as little disruption to the
status quo, Nkrumah favoured independence without further delay, and wrestling it from the
colonialists if need be.
Hus is how the two traditions of Ghanaian politics evolved. If the UGCC tradition and not the
Convention Peoples’ Party (CPP), had won the battle as to who should lead the nation to
independence, their policies would have been no different from that of Houphouet-Boigny. It
was Nkrumah's CPP which eventually won the battle in the elections of 1951 and subsequent
elections, which saw him and his party lead the country to independence.
Nkrumah with his Pan-Africanist, communist and American influences did not accept the
economic, political and social legacy of die colonial state. He sought to change the status quo
on several fronts. In the U.S.A, he had experienced the power and strength that exudes from
several states coming together to form one nation. This he saw as a model for Africa, as stated
in his famous Independence Day speech:
" Hie independence of Ghana is meaningless unless it is linked with the total liberation
of the African continent".
(Dumor, E. K. (1991) - pp 3).
It is widely acknowledged that Nkruinah was at the forefront of Africa unity and one of the
founding fathers of die Organisation of Africa Unity (OAU). In fact many people argue that he
placed African unity before Ghana's development on his list of priorities.
Another front on which he sought to bring change was in how the African perceived of him or
herself - the African's sense of identity or culture. This he called the “African personality.”
Tliough die concept of African Personality can be traced to W. E. Du Bois and Marcus Garvey,
the early founding fathers of the Pan-Africanist Movement, during his time and on the
continent, it was Nkrumah who forcefully propagated it. In essence, African Personality is:
"... an attempt at fashioning a coherent philosophy which would enable the African not
only to enhance his material wealth but also to elevate him from centuries of humiliation
which has been his lot and thus enable him to re-establish his dignity in a world which
had hither to considered him none." (Dumor, E. K. (1991) pp 35 )
6
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1
<
N^nrdt also re^ed lo aeeepi dte mubbpady
as imposed at the time of independen .
muki.party systcm and
chieftaincy institution to the
- . 'Already existing divisions in a newly emerging
chieftaincy institutions further leigh
Today however, the tide has changed. A
■i
I
u Ghana md a ^i dea! of emphasis is being
placed decentralisation, though chiefs are still relegated to the backgro
On the economic froni, he sough, io change
.
71”n o7‘Zt£“£
economy 10 an industrial economy y
i culminaled in the construction of the Voila
infrastruclural base for an mdusinal iake-off. lb.
lake.
Dam, which resulted tn what for many Yen^J « e|ectric energy for fuelling industrial growth.
The dam was not only to provide the muc
water Way. The state,
but was also to provide water for tmga io
development and for this reason numerous
rather than private capital was
oil refinery, steel, etc. In the
-hZ, staged famts were set up to produce raw
materials such as palm oil to feed these industries.
Today, in the era of IMF and Wodd Bmk
owned enterprises, are being sold off to private e
Xrp
since
sZde^zz;^
capital.
Recognising that bis mdustrial — soukl no.
Nkrumah embarked on a nation-wide, free, univ
p
y
universities to add to
establishing numerous secondary schoo s, training co g
British model.
the existing one. The educational system inherited at mdependenc^
Th“e X7"Ze-XeZZucTdid not have the skills and knowledge for use
rr’l— Zi and^had to m.gta.e to duties ^"s^Z
1
America and Europe.
The case of Tanzania
I
D™nber, 1961 and Zanzibar two years larer. in April, 1964 the « became untied ro gt.e
birth to Tanzania.
7
In addmon to ethmc.ty, Tanzania also had the issue of race to contend with. Both the mainland
nd Island had Arab, AS1an and Afhcan population. At independence, there was pressure on
Nyerere to Africamse the cm] service and the economy which was dominated by the Asian
ommercial bourgeoisie. Many African traders and trade unionists became impatient with
Nyerere s policy of gradualism'. He, however, stood firm.
"To his eternal credit, President Nyerere stood firm and was unequivocal in his
opposition to any racist sentiments masquerading as class conflict in arguing that 'where
economic classes are also identical with race', his countrymen 'live on dynamite', that
one day might 'explode' unless something was done about it. 'But', as he said 'positively
not ncgatively”.( O’Neil, N. pp 1 1)
Due to die racial under-current, Nyerere capitalised on an army mutiny in 1964 to formally
institute a one-party state on 5th July, 1964. Though the one party system was not unique to
anzania - it was in practice in Cote d'Ivoire, Ghana, Zambia, Kenya among others - in contrast
to odier countries its structures stretched down to the community level:
... the ruling political party in Tanzania is organised to the level of the individual
household, every ten household having a 'ten-cell-leader’ who is a party' official with
responsibilities and powers of control." (David Bevan et al, 1987 pp 4)
Tanzania is best known for the 'Ujamaa' concept, a development model, introduced by Nyerere
as a practise of his brand of African Socialism at the dawn of independence. He defined Ujamaa
The basis of African socialism which was to define the political philosophy of the new
state based on the principles of human equality.' (Michael Von Freyhold: Ujamaa
villages in Tanzania, Analysis of a social experience)
By die Ujamaa Concept', Nyerere urged Tanzanians to return to traditional values according to
which everybody had a right to be respected, an obligation to work and die duty to assure the
welfare of the whole community. Individualistic search for wealth and security at the expense
others was denounced. The Ujamaa model sought to draw on what Nyerere perceived as an
inherent and existing resource of communalism in the African. This, if redirected into
development will benefit die rural folks, who are often die victims of poverty. The following
statement from Carole Rakodi sums up, in our view, die aims, implementation and outcome of
Ujamaa.
Hie aims of ujamaa were to relocate the dispersed rural population in nucleated
settlements and to collectivize farming. Between 1967 and 1970, the programme was
implemented on a voluntary' basis. However, where communal agriculture and
enterprises w'ere introduced, these tended to be poorly administered and gave rise to
conflicts (Brebner and Briggs, 1982; Kauzani, 1988). Impatience with the slow progress
led to the adoption in 1973 of the villagization programme with its twin aims of
rationalising, although not collectivizing, farming and facilitating the delivery of
production and social services by concentrating population and providing infrastructure.
This programme had a much wider impact. While in 1973, it was estimated that only 2
8
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h.
I
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million rural Tanzanians lived in villages, by 1977 this has increased to 13 million
(Legum, 1988). This programme, together with increases in foe expenditure on social
services, has resulted in increased access, especially to primary education, health care
and co-operative retail facilities, on a relatively equitable basis (Maro and Mlay, 1979,
Kulaba, 1982; Kauzani, 1988; Legum, 1988)". Carole Rakodi in Simon D.
Of all foe brands of African Socialism established on foe continent, Ujamaa was foe most
radical, controversial and unique as expressed by Rukhsana A. Siddiqui:
"Development strategies in Tanzania have attracted foe attention of social scientists, foe
' world over, because of foe uniqueness of the country’s attempt to establish socialism.
This expressed commitment emerged not through class-struggle, a violent revolution, or
a coup d'etat, but peacefully, after foe struggle for political independence, and largely
through an ideology articulated by President Julius Nyerere".(Capitalism, Socialism and
foe Development Crisis in Tanzania, Norman O'Neil et al)
The uniqueness lay more in foe peasant participation in development schemes in relation to
planning, implementation and monitoring, a process which eventually empowers foe poor of foe
society and promotes ownership. Though this process is argued as an action more in response
of foe difficulties encountered in foe villagisation strategy rather than a direct extension of its
4
Under Ujamaa, an attempt was made to break away from the colonial education system. In this
regard, there was the policy document on 'Education for Self-Reliance' which emphasised that
education should be structured to meet the needs of people in rural areas and that Ujamaa
villages would need to stress self-help and villagisation. This is very important, since as a result
of colonial legacy African educational system is run with a curriculum that does not necessarily
take into consideration the needs of tire people and country. Most African countries have
agrarian economies and there is the need for younger generations to assist the older ones in foe
farming profession which serves as their learning period to take over foe profession from foe
older ones. Educational curriculum should therefore be structured taking this into consideration.
1
li
I
I
I
principles'.
The Case of Guinea
While foe model chosen by Guinea is very similar to that of Ghana and Tanzania, it is worth
looking at as it was a departure from foe model chosen by most of foe Francophone countries.
At independence, Sekou Toure's primary objective was political, ethnic and class integration of
foe varied and diverse ethnic groupings made of 30% each of Fulani, Malinke and Soussou. In
foe face of this, development strategies with foe objectives of ensuring internal integration and
achieving more conventional economic goals were necessary. This task he believed could not be
achieved if Guinea continued to participate in international capitalism. For this reason it
announced its intention not to participate in foe French African community and left foe Franc
zone. As a punishment for this decision, as was foe case for other African countries that
embarked on alternative models, France wifodrew its capital, business people and bureaucrats
and cut off all aid. As a consequence of that, Toure's Guinea had a closed economy and society
for a longer period than any other African State
9
Foure aimed to achieve political integration through cultural change, which played a major role
in building the Guinean identity in the midst of internal and external occurrences to derail the
development pattern Guinea had embarked on. Sekou Toure is no doubt one of the strongest
leaders of Africa in the quest for new lines of development looking into and utilising resources
available in the land - the soul of the land, being culture.
It was strongly believed by Sekou Toure that the most important component for achieving
political integration was through the rediscovery, development and dissemination of national
culture. This is summed up in his words:
"The African personality cannot serve to mask anything which harms the interest of the
African people, including purely economic interest, but it is the cultural development of
African man which is the prerequisite for every other kind of development. His moral
values, his intellectual capacity, his cultural characteristics are the prime manifestation
and affirmation of his personality” (Toure, 1979, quoted in Slowe 1990 pp 42)
A clear and well-planned means of bringing about the cultural change, through channel of
communication was set out. This had the primary aim of educating Guineans to be independent
of the West, western ideas and way of life which has been carved to suit their culture, which is
different from the culture of the African, which defines the African’s existence. It was also
aimed at educating the government in the ways and thinking of the ordinary Guinean.
In this policy, there was a two-way information flow system, where the government orientated
ordinary Guineans in ways of expressing themselves, and cadres trained in listening to these
people and send the ideas and information to the centre; and at the centre, government
formulates development policies based on the aspirations and priorities of the ordinary people in
their communities.
"The flow of information from the villages to the centre reflected African Cultural
values and not the European objective of economic growth. Water was the first priority;
education and health were far ahead of industry, commerce and agricultural
development." (Slowe, M. P. 1990 pp 42)
It would be difficult for anyone to despise such a policy which eventually involves the ordinary
people, especially rural villages which form the bulk of every African population in identifying
development priorities beneficial to them.
ii is on record that Sekou Toure's Guinea, with this approach achieved three major results.
"First, villagers came to identify in part with the state, alongside tribe and village.
Second, villagers were encouraged to make decisions for themselves in their own
physical and cultural environment, often leading to the articulation of alternative
economic and social priorities to those proposed by the state's central planners....Third,
the methods used ensured an effective flow from villages to the government, so the
government knew local aspirations and could ensure its popularity more easily."(Slowe
in Simon D.)
I
Though Sekou Toure’s period of leadership in Guinea was associated with the acrimonies and
challenges the then new African leaders faced, especially as they ruled one party states, Guinea
10
1
&
was able to achieve its aim of political, etlinic and class integration policy to a large extent, as
sacrifices for immediate purely economic policies were made. He provided an important model
of integrated development with an approach appropriate to Africa. Comparing annual economic
growth between 1979 and 1984, of Guinea and neighbouring states and other African countries
which took different approaches to development, the sacrifice of economic gains for integration
was not great.
"For example, liberal economic policies have been relatively successful in their own
terms in Cote d'Ivoire but not in Sierra Leone. On the other hand, Toure's Guinea and
Nyerere's Tanzania provide models of integrated development with very slow economic
growth" (Slowe in Simon D.)
Assessment of the Development Models
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Of the models presented above, the Cote d'Ivoire model is heralded as successful. Looking at it
in purely economic terms, one is tempted to accept this assertion because, Cote d'Ivoire is still
pursuing its liberal economic policies of development embarked on after independence and the
other countries such as Ghana and Tanzania, which gave consideration to alternative models,
have switched, under the influence of the IMF and the World Bank, to the Cote d'Ivoire model.
However, as is generally acknowledged, development is not just economic development or
wealth. Even with economic development, distribution of the wealth generated goes to
determine the future development of that society. As it is with capiulist economies, the bulk of
the wealth in Cote d'Ivoire remains in the hands of a minority upper and middle class and multi
national Corporations. As Aryeetey pointed out:
"La Cote d'Ivoire, which between 1950 and 1965 saw a more intensive modernisation of
its economy than many other African countries, has not escaped the skewed
development characteristic of Africa".
He quotes Amin (1973 p.66) to buttress this point:
"The experience of La Cote d'Ivoire, in the last twenty years has many lessons to offer.
It can be summed up in the phrase, growth without development... growth generated and
maintained from outside, without the establishment of a social structure, capable of
bringing flbout an automatic transition to the further stage, that of internally-centred and
self-regulating growth."
For development to be sustainable and far-reaching, it must be one that integrates all other
aspects of human life. Ngugi puts this across when he says:
"Let me briefly isolate the five crucial elements in that integrated whole: physical
survival, economic survival, political survival and psychological (identity)
survival".(Ngugi, 1993 pp 76)
IE
The other countries which embarked on alternative models sought to go beyond the economic.
Countries like Tanzania and Guinea sought political, etlinic (and race, in the case of Tanzania)
and class integration of the entire country. They were conscious of the fact that the colonial
state they had inherited from the colonialists were fragile and could disintegrate if they did not
11
1
pay attention to these issues. Nkrumah's Ghana saw the problem as going beyond national
boundary'. Ihe development of one country was tied to the political, cultural and economic
hberauon and consequent integration of die entire continent. At the time, Nkrumah was seen as
a lunatic. Today the scale of poverty and civil wars on the continent bears him out.
What the post-independence leaders of these countries were aiming at was to break away from
international capitalism (globalisation), conscious of the fact that continued participation in it
would make tire integration of their newly formed nation states almost impossible. If they had
achieved tins goal, their respective countries would have been in a better position to articulate
with the world economy. This obviously was not in the interest of tlie powers who controlled
international capital. It is not surprising that in <all** the countries which embarked on alternative
models, there were covert and overt attempts to> see that they failed. The following quotes
testify to this:
■
C,r.e,atl°n °f 3 one‘Party state was only one feature of Tanzania that caused concern
in die West, and held back the aid and private investment that were so urgently needed
to implement the 1960-3 and 1964-9 development plans .... A British loan was frozen
because Tanzania honoured an OAU resolution that diplomatic relations be withheld
from Bntam in protest against its handling of UDI in Rhodesia, and die unequivocal
anti-mipenalist stance adopted by Tanzania, particularly over Belgium operations in the •
Congo... ".(O'Neil, N. pp 12-3)
" Ihis is not to suggest that in the late 1950s Toure understood die full implications of
dependency. Radier, die hostilities of the French government when Guinea announced
that it did not intend to participate in the French African Community forced Toure's
hand and left him no alternative but to try and develop Guinea in relative isolation to
achieve his goal of integration. French capital fled, along with the business people and
bureaucrats... France cut off all aid and withdrew all its experts, which meant dial
change simply could not be piecemeal - a structural transformation of Guinea's economy
and society would take place anyway, it was just a matter of whedier Toure could take
charge of die process." (Slowe, M. P. 1990 pp 40-1).
On die other hand, one can argue that if die dien Eastern Bloc countries had more economic
power dian the West and had come to the aid of these countries, today, it could have been dieir
model which would have been proclaimed successful. As this did not happen, the economic
ortunes of these countries declined and so did their physical infrastructure. In addition they
were under severe pressure to satisfy die demands of their people 'for the good life' they see on
television (CNN and M-NET), read in the newspapers and hear from those who have travelled
abroad. They turned to the IMF for help. IMF provides loans to these countries on the condition
diat diey implement Structural Adjustment Programmes (SAPs). As stated in a discussion
paper of the Unit HI Commission Meeting of the World Council of Churches, held in Nairobi
Kenya from 13-19 January, 1997 (Document No. 7):
SAI s have two roles, to restructure the economies of Southern countries so that tliey
can better save foreign exchange to service their debts; and to alter die fundamental
macro economic and eventually social policies into a single ’monocultural' laissez-faire
economic model that would be compatible with the long-term requirements of
integrating these economies in the world economy".
12
Consequently, most Sub-Sahara African countries are pursuing liberal economic policies under
Structural Adjustment Programmes in the hope that they can fill the shops with imported goods
paid for by foreign exchange earned through the export of primary products, and with grants and
loans given by bi-lateral or multi-lateral corporations. Currently, it seems there are no
' alternative models to look up to.
n
Globalisation - A Process of Cultural Annihilation
I
Presently, the world is at the dawn of anew era. An era in which economic and political power
are being concentrated in the hands of a few countries and multinational corporations, and
within countries, in the hands of a few people. This is the era of‘globalisation’.
■i
Under colonialism, Europe dominated the cultures of many Sub-Saharan African societies
through either trade, military conquest or religion and its brand of education. As has been
argued above, through this cultural domination, it had a firm and long-term grip on the
development of the nation-states that emerged at independence. Try hard as some did, they
could not break free from this domination. Today, under globalisation, the domination is
taking a more intense and fierce dimension. The Discussion Paper of the World Council of
Churches quoted above, uses the term globalisation to refer to:
"... the growing integration of 'free markets', investment flows, trade and
infonnation....Globalisation is largely the product of liberalisation, deregulation and
privatisation. In the South, deregulation and liberalisation policies in many cases grew
out of the structural adjustment measures that were adopted, often following armtwisting by external creditors (especially the IMF and the World Bank), in the aftermath
of the debt crisis of the 1980s. Globalisation and liberalisation are the two twin
elements of a single phenomenon".
This "single phenomenon", in our view, is the gradual annihilation of die culture and identity
left of the countries in Sub-Sahara African which some have fought hard to retain. To quote the
Discussion paper once again:
"Globally marketed consumer products and tlie media are super-imposing a
homogenisation of culture. While the world's more than 1.2 billion TV sets can help
spread knowledge and understanding, they can also be a new form of cultural
domination through the incentives and values they transmit".
I
lhe key value which globalisation espouses and transmits around the globe is 'consumerism'.
Its message seems to be, "seek ye first manufactured goods and you don't have to worry about
creating anything of your own". This is unfortunate because to create is an expression of who
we are; and who we are is embodied in our culture. Our culture therefore becomes our soul.
What therefore does it profit a country if it gains the whole world, but looses its culture, its
soul? 'Ibis is the challenge facing Sub-Sahara African states today. Unfortunately, it seems,
judging from the rhetoric of the leaders of these countries, the body is willing to carry on the
fight against domination but the soul (i.e. the culture) has been so weakened that many have
given up and decided to swim with the tide.
13
How can Suh-Sahara Africa Respond to Globalisation?
Cultural Rejuvenation
We would like to suggest tliat a starting point for Sub-Sahara African countries is a rejection of
tlie notion that 'West is best' and eveiything African is bad. This implies a cultural rejuvenation
a ong the lines attempted by the late Captain Thomas Sankara of Burkina Faso. This calls for a
c.ose scrutiny of our traditional values and ways of doing things, discarding what is detrimental
to human development and improving on what has kept our societies together despite the
assaults over the past century. One value Africa can give the rest of the world is "being each
other’s keeper" - the underlying value of the communalism that Nyerere, Nkrumah and others
sought to promote. Instead of holding fast to this and allowing it to continue to determine our
social, economic, political, religious and cultural development we seem to be giving it up for the
capitalist value of "each for himself'.
Because our confidence in ourselves and our culture has been so undermined, we in Sub-Sahara
Africa are too quick to relinquish what we do and are for others. We used to live in harmony
with nature, but the West made us to feel that was primitive. Today the West is claiming to be
the champion of sustainable living. In many African communities, the animals which people
rear for meat intermingle with them in a free-range manner. Today, the West, having promoted
factory-style animal rearing around the world, is again claiming to be tlie champion of animal
rights. There are many more examples one can give but these should be enough to get the point
across. Tlie lesson for us in fSub-Saharan
'
‘ ’
Africa,
especially our intellectuals, researchers and
policy makers is that we start with
what
—
-d we have, study it critically and improve on it.
This is not going to be easy. Under tlie current international order, Africa finds itself in a
powerless position. Its present leadership, both the political and social elite, see no other
alternative to globalisation. What we are suggesting therefore goes against the tide. To achieve
this cultural rejuvenation would mean putting in place processes which would generate more
Nyereres, Sekou Toures and Nkrumahs, who are in tune with tlie dynamics of the present time
and are prepared to stand up to tlie challenges of the time.
Globalisation also offers opportunities and avenues which can be used to great advantage in this
process of cultural rejuvenation. The driving force behind globalisation is the ideology of
'’unbiased” infonnation and with it, the information technology or super liighway. Through the
information super-highway and die liberalisation of the imass media, in particular of the air
waves, more people, especially diose in rural Africa who, toj a large extent, are still holding on
to some of the cultural values, can be reached with this message of cultural rejuvenation.
The Role of Civil Society
A lesson from die post-colonial models presented above and the case of die late Captain
Diomas Sankara and diat of the Sandanista Revolution in Nicaragua is that a political leader or
government who attempts to embark on an alternative model of development would face fierce
resistance from the powers of international capital. In present times, it is the political and
business
elite who
----------------...j are benefiting from globalisation and therefore have the least motivation to
14
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society and its organisations.
services l^ere is low participation of civil society in the development process because often
people are involved in actions that have been thought out or designed and controlled by others,
notably government. For Ghanaians to be active participants in the development process, th y
need to cultivate the ability to investigate, analyse and understand tire dynamics of the socia ,
economic and political reality in which they live, before they venture to act on it, to change t.
To bring abouil change in their life situations would require ability on the part of people to
I
organise themselves to undertake and manage collective actions.
We will illustrate this point, using Centre for the Development of People (CEDEP), tire
Ghanaian organisation we work for. CEDEP is, what is referred to in toda/s parlance as a nongovernmental organisation (NGO).
CEDEP sees conscientisation and animation as the starting point in any development process.
This is because it is only by analysing their situation, that people can arrive at then own
conclusions and decide on a cause of action for which they would have the motivation to carry i
out.
r
lih
I
.
To achieve
this objective,
objective, CEDE?
CEDEP has
has set
set up
up a Development Education Unit, which it sees as
To
achieve this
being central to the work of die organisation. Two of tire unit's activities - a School Outreach
being central to L._ ---Programme and a Community Action Group project - aim at building a new constitution of well
informed and action-oriented young people (a new breed of Nyereres and Nkrumahs) who
would feel a sense of responsibility for the management of their communit.es and eventually of
the country These activities provide the platform or forum for the youth to discuss development
and topical issues, analyse the internal and external causes and identify necessary action they
can take immediately or in the future or recommend changes, where possible. Taking advantage
of die liberalisation of the media as a result of globalisation, die unit seeks to make effective use
of local (FM) radio stations, while also using drama and video - a blend of die traditional and
the modem.
■>
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I
Under the Community Action Group project, for instance, the unit takes identified community
vouth groups dirough leadership course, development education (conscientisation and
Limation) widi emphasis on cultural awareness. These activities instil in die youtha greater
sense of purpose, interest and motivation in die development of their communities. The youdi
groups then involve dieir communities in problem identification, prioritisation and action using
^participatory methodologies.
Arising from these activities, one can see a growing number of youth who have gained self
confidence in their ability to analyse and draw conclusions and are prepared to act to bring
about change. This is a slow but a more lasting process. This is a silent revolution. Just as
the Pan-African conferences prepare people like Nkrumah for their role in the liberation of
the continent, so in drese youth are die seeds of resistance against the annihilation of culture.
They, hopefully, may provide the alternatives to globalisation, when the tide turns against
globalisation.
Conclusion
accept the status quo and embarked on alternative paths were subverted and today these
countries are back in line.
Pie world today is at the threshold of a new era which is generally referred to as
globalisation . It is an era in which economic and political power is being concentrated in
the hands of a few countries, corporations and individuals. With the force of the information
super-highway behind them, these new emerging powers are spreading capitalist values and
die culture of consumensm'. With an already weakened culture and confidence, it seems SubSahara African countries stand very little chance to resist this new assault.
We have argued that rattier than giving up, these countries should embark on a cultural
rejuvenation and tlus challenge should be taken up by civil society. In doing so the
organisations of civil society should prepare a new cadre corps who will come up with
alternatives when globalisation begins to crack.
16
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References
i ■
Aryeetey, E. Planning African Growth and Development - Some Current Issues
David, B. et al (1987) East African Lessons on Economic Liberation
Dogbc, D. K. (1991) From Post-Colonial Project to Social) Transformation: A Challenge to
Community Organisation (Masters Dissertation - unpublished).
Dumor, E. K (1991) Ghana, OAU and Southern Africa - An African Response to Apartheid.
N
Freyhold, V. M. Ujamaa villages in Tanzania, Analysis of a social experience.
Ngugi wa Thiong’o(1987)DecY>/oHZSzng the Mind - The Politics of Language in African
Literature.
Ngugi wa Thiongo (1993) Moving the Centre - The Struggle for Cultural Freedoms
O'Neil, N. and Mustapha, K. Capitalism, Socialism and the Development Crisis in Tanzania.
Simon, D. (1990) ITiird World Regional Development - A Reappraisal
■ Tuinder, B. Ivory Coast: The Challenge ofSuccess. A World Bank Country Economic Report.
World Council of Churches Unit III Commission Meeting in Nairobi, Kenya (1997)
Globalisation - A Discussion Paper
***++**+++**+*
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INTERNATIONAL CONFERENCE
I
on
COLONIALISM and GLOBALIZATION
>
>
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
Various Sub-Saharan African Models
»
6
by
Ms. Emelia Arthur
CEDEP, Ghana, Africa
I
I
r
INTERNATIONAL CONFERENCE
On
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da gama
February 2-6, 1998-01-12
New Delhi, India
GLOBALIZATION IN EAST AND SOUTH AFRICA
Mulima Kufekisa Akapelwa, CCJP - Zambia
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GLOBALIZATION IN EAST AND SOUTH AFRICA
MUL1MA KUI EKISA AKAPELWA, CCJP - ZAMBIA
I have been asked to discuss globalisation in Eastern and Southern African countries.
To do so 1 will begin by giving a brief background of the region's historical experiences. This
will not be a detailed account, however it is intended to highlight some similarities. In it will
■be shown that participation in world trade dates back into colonial period and indeed before.
As I proceed with the discussion you will notice a tendency to emphasise human development
concerns. This is because the discussion is made from a social development perspective.
THE COLONIAL PERIOD
Before talking about the colonial era, it needs to be stated that during the pre-colonial
era this part of Africa suffered a great deal at the hands of slave traders. Slaves were taken
from the continent to the America and the Caribbean to work on plantations. This had a
detrimental effect on the continent.
In this paper countries referred to are Kenya, Uganda, Tanzania in East Africa and
Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Sw'aziland, South Africa,
Zimbabwe and Zambia in Southern Africa. These countries have until quite recently, been
colonised by West European countries. For most of the above stated Britain was their colonial
master until the 1960s when they gained independence. Angola and Mozambique were ruled
by the Portuguese, gaining independence only in 1975. South Africa and Namibia were not in
the same category. The former occupied the latter up to the year 1990. South Africa, as you
all know, was a case of racial exclusion.
These countries can be categorised as regions of white settler colonialism. They
served as labour reserves. Consequently during colonialism there was significant migration in
the region. Locals left their countries to work in the gold mines of Zimbabwe and South
Africa or the Copper mines of Zambia. Indeed some migrated to work in the coffee and tea
plantations of East Africa and on commercial farms. Due the introduction of cash economy
men had to work in order to gain money to pay tax.
During the colonial period, the colonised territories had their economies distorted to
serve the- interests of the colonial master countries. The former became economically
dependent on the latter and on the international market. Distortions resulted in dependence on
single raw material export such as copper and coffee. Each geographic and cultural entity was
incorporated differently into the world capitalist system, hence shaping specific function that
entity played in the process of capitalist accumulation on a world scale.
1
1
THE POST COLONIAL PERIOD
Zimbabwe. L ZulZcoloZZNZibil bcinT'mcb’cZ' For’Z
coloniahsts to let go thI h
UP .0 be cm by ZonZ
" W3S for d-
XlnVeStn,Cn,
is now termed nationalist projcctsHlh's^ra spt^edlhUQ^T C^Untr‘“ embarked on what
period massive construction programmes were embn k- H S t0‘he earl>' 1970s- During this
bridges were built. These were indeed amh'f
,arked’ schools, roads hospitals and
provide services and infrastructure to the hitherto nmch j'08™™155. were ^signed to
expectations of independence Such pynanei ■ ,
h d prlved C|tizens and to fulfil
economies were doing well •Juch expansionist programmes were carried out at a time that
currencies However little did the inex currencies equalling or even better than some hard
in ...e w„,d economy
,.rUeluZmZ‘'Z,se( £ JST““"0"“ “<*
.“c'z poz x:'sb
»r ,be c010z
-
,akinE ,he p<>ii,i“i
’’parliamentary democracies”. Durino this
• j
.
er Bntlsh col°nies they became
pressure from the Cold War Were they to ^diPnedV
C0Untries were under
countries such as Mozambique and Anenh d
8 f 1°
°r t0 the EasP 1 or “Re
played out in their territories. After a few ve^sU’ 'r °SS °f llfe as thc cold war was
turned to socialism these included Zambia P
th Caplta lst orlentation a number of them
For others though, they proceeded on a
mode as in the case of Kenya, Malawi. The
°n a capitalist
econom.es. No.„ithstandi„e. X ZZenZeZ?^
‘
~ investment in their
learn that their single export based
I over commodity prices on
SX"a dis~-Th- “ “•
other
for .heir pecp.es.
cemcd w^riheVl''’1'5' ™y' "alio"alis"li‘>" of multinaiional and
f'""
Xto" ess '
“f-m“ ~
shares of multinationals and some cases comp! Nv toT
r^™161115 gained large
Zambia by the dose of the 1980s 80»/o of the economy was inth" h^Z'thl "tate"^5’
number of cotnp.es enrolmeM ZFi”nZsZXi"lilZn t'.''elopm"''
In »
malnutrition
reduced
As emost
willLeo
kn , ’ l' "f,h%m'Ld-“
' -"<i«
d S° Wen<
Up andofundcr
Southern
Arne™
count
X ofn vou
o det
» "umber
East llve
and
burden worsened due to Z ZiZ “t^ZZm
li”L' Cighfe
‘"b'
were forced to take up adjustment nr™
borro^ money countries then
P justment programmes recommended by thc IMF and World Bank.
2
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WHAT IS GLOBALIZATION
The term globalization has now become a buzzword. It is used in many contexts, often
not defined but used to promote arguments favouring business interests. In this way it has
acquired both a legitimacy and an aura of "sacred, goodness and desirability" (R. Diwan). In
order to move away from this weakness I begin by giving the definition of the term and hence
lay out a framework for discussion. This will be followed by discussion of the elements of
globalization in E & S Africa and some of the counter-effects.
Anthony Egan a Jesuit priest in South Africa writes that globalization is not just a
matter of being able to communicate with every corner of the world by telephone, computer
internet or satellite television. It is not just the globalization of information but rather
globalization of trade and economics. It means turning the world in to one market economy.
In the same vein A. Ouattara of the International Monetary Fund emphasises the economic
aspect saying in basic terms globalization of the economy is the integration of economies
throughout the world through trade, financial flows, the exchange of technology and
information and the movement of people. Ouattara further states that globalization is first and
foremost a result of the expansion, diversification and deepening of trade and financial links
between countries especially in the last decade.
I
Tilburg in his address distinguishes three aspects of the phenomena, first the speeding
up of world-wide economic integration caused by the choice for a market economy and free
trade coupled with the sharply increasing freedom of capital movements. All this, he observes
provides ample room for the rapid growth not only of trade but also of transnational
enterprises. Secondly, the globalization of communication and information. Lastly he
identified the globalization of politics. In the past people thought in terms of the f irst, Second
and Third Worlds. Now that communism has collapsed there is little left of this traditional
division.
I
One can also speak of the globalization of issues, such as human rights, environmental
concerns and gender. In this respect one refers to the aspect of u. iiversalisation of concerns.
•
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In this paper I will focus on economic, political and cultural elements of globalization.
An underlying therpc of the paper is that globalization as it stands has not had significant
positive impacts on the lives of people. In fact this is not an ideal that is the primary objective
of theses economic changes.
Recognition also needs to be made here of the differences in the literature. Economists
from the North in their discourse mainly discuss the benefits that are in store for those that
put in place the necessary policies in order to fit into the global picture. They only fleetingly
refer to issues of marginalisation for countries that do not embrace the challenge. Writers
from the South on the other hand, are quick to point to the shortcomings of the drive to
globalization. They point not only to the losses for developing countries but also to the
inherent inequalities of structures. One is drawn to identify with South discourse not simply
because of a kinship spirit but because one primarily questions: who is benefiting from these
changes? From what one observes in the part of Africa that I come from, globalization does
3
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developing world and on TNC terms.
elements of globalization
P
of 1NC actl'lties to the
IN EAST AND SOUTHERN AFRICA
STRUCTURAL ADJUSl'MENT PROGRAMMES
better entry point
n.odali.U'fc’X'i'Z
’’ to:than
1’:™0 te8in 'V‘,lh S,rUCtUral Adj“Stme"' p"*“ “
----- This
~nLs
s™; Z-XbliX3' far
Consequently most countries had to borrow teaX^'orttalt'S Ih"'”"1 d'bt “7'“'
Having done so they had to tqkp nn
« i
° Ge 1 k p their ec°nomies afloat,
.he deb8, situation
XAS »f
Botswana
Lesotho
Mozambique
Uganda
Zimbabwe
US $ 0.7
US S 0.6
US $ 5.5
US 5 3.5
US$4.4
DEBT SITUATION
Kenya
Malawi
Tanzania
Zambia
US $ 7.3 billion
US$2
US $ 7.4
US$6.7
primao' £T,o’b™/I you are “aware
Z l’of
' what "'
theC e’'"™"-'"1
entail. Their
.
; an economy to growth and to stabilise
ol the package involves trade liberalisation.
food subsidies, consideredJ as wasteful outlays. Privatisation of state owned enterprises
wage freeze, credit control and
encouraging exports and foreign investment complete the
picture.
ar ":rodf ^T;ocy,,Nc,?D:,x co"r're"“in s”ih
«£
creating and
means
r‘S“' e“'S ‘■r“"'rolli"S
inna.it, Ll“ e "iS
into conlhct w th the expectations that people have of their governments- to invest'in e
social sectors In Mozambique for example, Nova Vida a Catholic magazine writes that the
Finance Minister was forced to promise the IMF further cuts in health and education
pending. I he country also had to cut back on a donor funded programme of rebuilding war
ensurmg an enablmg environment for the private sector which Xn
4
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l
damaged infrastructure because the spending was considered by the IMF as inflationary.
Neither could that government raise the minimum wage from $14 a month by 37.5 percent or
half the rate of inflation because that was going to be "excessive".
■'
In Zambia, public service workers are among the least paid. Their take home pay
($110 for, the highly paid and $75 for the least paid) falls far short of the cost of a basket of
food. A basket of food for a family of six costs $132. This does not include electricity,
shelter, health, education, transport and clothing. In the coming year government has
announced a wage freeze. This is intended to keep salaries low so that government will be
able to meet payments for thousands of workers who are to be retrenched. This is a
continuing process of cutting down on the public service.
i
During adjustment years, in Malawi, Zimbabwe, Tanzania, Zambia human
development indicators plummeted. In Zambia the situation was so dire that the country was
seen by the UN as having reached crisis proportions. During the same period though, there
were claims that macro economic indicators had improved tremendously with inflation
reaching all time low. Ibis led the Zambian Bishops to ask the question "who in Zambia is
doing well"
The design of SAP programmes and their subsequent implementation lack the
participation of recipient countries. Countries are forced to take up priorities of the package
without due recognition of a common vision, historical, political, economic and social
differences. The choice of a free market is not made freely. Indeed, alternatives to the package
are not explored. The Economic Commission for Africa drew up an alternative framework in
regard to. handling foreign exchange and privatisation. The framework has not been
implemented in any country at all and is least likely to receive support.
In the Eastern and Southern region globalization has entailed opening up of markets to
foreign goods. In the southern African countries this has often meant cheap imports from
South Africa, which is proving to be quite a force to reckon with. At an UNCTAD
Conference in May/June in South Africa several leaders from developing countries decried
how globalization and liberalisation had run their local companies out of business and
marginalised their economies. Tanzania's president Benjamin Mkapa said that "countries
undergoing liberalisation and privatisation under World bank and IMF policies had suffered
immense social costs, including job losses, cuts in health care and education and the immense
possibility of instability" He further added that opening up of economies is also a problem
The prospects of integrating these countries into the global economy are extremely dim.
i;
Despite the above the IMF states that it needs to maintain emphasis on
macroeconomic stabilization, trade liberalization, price reform and other reforms that allow
stabilization to take hold. "But we have learnt that this 'first generation1 of reform is not by
itself, enough either to accelerate social progress sufficiently or to allow countries to compete
more successfully in global markets. Consequently the IMF set out eleven commandments for
broadening and strengthening the strategy of the 181 member. These covered areas such asquality of fiscal adjustment, bolder structural reforms, better government and strengthened
financial institutions.
5
1
■hrough'^SA^^h^'X'da "i
rr rf"C1S
choice i„ ,he process ^sX,*' o sa J "Yr ? °f
paper on In this paper I reside,ed myself 10 ah "7
Wider issue. !„ ,he nex, pS or iheX^To u L
"Educed
I- of equi,, end
3 tOp'.c lllal one C3n ^ile a separate
n0"°
si8h' ”f'he
3 Promot,on ot foreign investment and
liberalisation.
liberalisation and foreign investment
With the exception of Botswana, Malawi and Kenya <
economies of most countries of
Somh8^
controlled Prior to SAPs. Here we bear in
•i
mind the different situation of
South Africa and Namibia.
Price
L, ' b dies reAovT ™uri(?
procedures .ssocia.cd will, iuveZem L^d
have indeed widened ,he nu,„C“ „Tru
ro"ed eCO"OmiK
7 pr01'“,"'"isls P°'^. =«rine legal
g' "'re^la“" »f P^r reieniion. These
increased competitiveness and guaranteed
priVate sector Liberalisation has
than was the ca'e beforeJ n 7a^
3 Wder
choices
This has been made possible by theIsImeZf SoXfr"™
Ch°lCeS °f
brands!
I he ability to avail of the various consumer
u
• ,AfrlCan brewenes >n these countries.
As has been said earlier real incomes have
^d "S 'm'ted t0 on,y those 11131 can afford,
ordinary people cannot afford to buy the 'fruitso^Lalfsation^^
M°St
intpo J^f^rZ^LdLr^iHs^s15
Wkh Chea>
unfair competition. Since restrictions on imoorNh
/1C C °SUre of companies due to the
come in |n Zambia the textile industry was the firs^to^o 'Sea^
^"d^ °f pr°ductS
clothing from Europe and North Am> '
■
' Lheap imported second hand
companies has alXe™< Hss of inh >' 7“ J""8 breu«h‘ in'° ,l’e
Cl°— of
Wdiiional Chi,cage ma,erial closed down be^eThXuld^","'^"
,n,akir,B the
materials from China.
V U d no compete with the imported
the region's rice producer, now
* reE?n “
'™h
r'™ A3 in the rural
reduced income due . .
,'—
seii
'S-■ieP'"<ien, ™ ’8"“"- Th«
significant
on their lives. In
addihorn imported rice is more likely to be highly polished
thus” r impact
■
> not
L heno
Pt
riCe- Libera,isati- of agricultural markets
ha'sas nutritious as locally
in a raw deal
for the poor producers particularly in rural areas. Rural producers are at resulted
a
disadvantage
due to
middlemen that buy from them at low prices. The Middlemen then
transport agricultural
bvtheTem
T"5 WhCre “ 'ClClleS mOre 'noney' Rural 'ivelihoo’ds are .
negatively affected
in
~XS“—
S'7SJ'°'’
,l" reBi‘>"'S f°Od S"“ri,y' Tl’e r'ei0" has in "'c f”
faced food
6
!
£
In the drive to attract foreign investors governments have in some ways lost their role
of acting for the public good. For instance, the drive towards making tourism a major income
earner, licenses are given to operators along riverbanks and lake shores for resorts.
Consequently local villagers may lose their communal right to that water source for their
animals. This is only one of the ways. In Namibia big fishing companies have fishing rights
on the coast. Local people are not allowed to catch more than a certain number of fish
considered adequate for home consumption. They are denied fishing as a livelihood. Another
way that the drive to foreign investments strips local people of their traditional property is
through land reform. I itle deeds replace traditional land tenure systems. Ordinary rural
people lack the money to secure their land in this manner. In Zambia the Justice and Peace
Commission of the Catholic Secretariat is working with some other concerned NGOs to fight
for the rights of the poor. The interest of governments is only on how many dollars will be
earned, poor people suffer.
Introduction of Export Processing Zones is one of current consideration in Zambia
and other countries. Kenya was of the first countries to implement EPZs. The primary goal of
such zones is to attract production and employment. The downside to EPZ is tliat more often
than not, workers lose their right to organise, thus end up on very poor wages. Government
also loses a source of income since companies would operate on a tax-free basis. Our Latin
American and Asian friends am sure have more experience of this.
IL
I
The inequity of globalization in Eastern and Southern Africa manifests in the share of
investment being taken up. In Southern African countries liberalisation has resulted in South
African companies taking a large share. Anglo-American [mining]. De beers [diamond
mining], Shoprite [supermarkets], Pep Stores [low priced clothing], Multi Choice [satellite
television], to name only a few, are big companies that have outlets in several countries of the
region. For companies in other countries the inability to borrow for capitalization during
implementation of SAP, has meant that they are not able to expand. Intra-country inequalities
have also meant that only the rich have benefited from the process of liberalisation and
privatisation. In Zambia for instance, only politicians are declaring their wealth in millions
and billions of Kwacha. In Zimbabwe again we hear of politicians getting the better of the
"indigenisation programme" as it applies to land reforms.
It seems to me that the overriding concern to free markets does not benefit or improve
ordinary people's livelihoods. Even when governments earn the much needed dollars peopl
e
question how such monies are spent for the good of the nation. Does the money go to more
social services, credit schemes, or does it go to presidential and ministerial travel and huge
perks for politicians? This is a question that was raised by the CCJP in its contribution to the
1998 budget debate in Zambia.
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What is the picture in relation to Direct Foreign Investments (FDI)° Globalization is
intended to improve FDI to countries. The truth is that in East and Southern Africa most of
this goes to countries that are already well place such as South Africa. Chang notes that the
bulk of FDI is only among developed countries. Only a handful of developing countries are
taking part in the transnational investment story. Excluding China FDI during 1990 -1994 to
developing countries was only 17.8% going up to 21%. 1 he percentage of FDI coming to
only East and Southern Africa is very small.
7
C,
regional trading BLOCK
I
COMESA
Market^' East and ’^H^m'AWca TOMEsT^ ’’f^
C°MESA- ,hc Common
within the region. It operates along the lines of mb
35 3
°f enhancing hade
region is increasing. However the bluropean S iJXT
6 bl°CkS
Withi" ,he
countries in the region.
P
S S 1 1 ie maJor trading partner to most
of
.he
dtT UV'a"4'’5O' " d“" f'“Kli
from
Bxan,rles of .hose are; comXlX '
"8 f°r sP“ilk
O"«
computerised information systems on the mo
departments 10 member states, installing
donors are major actors in glXizatiln COMESA
and,:ai,W wagons. Western
effectively fight for fair agreements with otherworld bodies
Self’SUS,aini"g to
" C°MESA ”
hindered by°X''
Botswana, Namibia and Zimbabwe Colse
i h'S 'S m Countnes such as South Africa,
tariff are now at a disadvZgt Anmher sna^"oVTr
liberaHsed
countries depend quite heavily on revenues generated , P ete removal of tanffs 's that some
hoover envisaged .ha. .he Bering oO.lffs
to get X*
a...
p“p,e wlw hme “
“"a “
households. The harsh elTcels of SAI’ necessitae^his'hTt A T'Cg?il func[Ion in most
middle class have to engage in cross border int
t ''
^.Vldlla,s w,,° n,ice were in the
border towns this is indeed a livelihood The easing ofTd ‘n8
‘0
3 livin8'
The easing of trade
has been beneficial to these small-scale traders
thc re8ion
help of the World Bank, Stock Exchanges have b^^' °f 8loballzation in ,he re8'on. With the
African Exchange is one oi"the ol
Z
Z?'
°f Zambia- The South
Zambian and Namibian. Some of these resultedTonmhe^^ J3"65 'nClUde
Uganda and
programmes. The region has not yet experienced stoeL
° rekSpOnd t0 the Privatisation
However the Asian developments Le a rnter
35
the case
Asia-
<
I
speculation and money exchanges. With a majority ofthe’6 6 l^80?- W'th be‘ng CaUght Up
line and without savings, investing in shTrT 7hvmg below the poverty
«v„1u.io„ofs,oClmark^is„:,!x;xa8j:dZy “one of lheir prionfe-
■
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8
pe
DEMOCRATISATION AND HUMAN RIGHTS
I
Since the breakdown of a bipolar world, the move to democratisation has spread to
more countries on the continent, fhe end of the cold war has meant that the West reigns
supreme. This has also resulted in the West pushing for certain political reforms that they see
as compatible with the new economic order.
East and Southern Africa have not been left out of this influence. A number of
countries have been caught in the net. Those that resisted moves to democratise were caught
up in a donor squeeze, such as Malawi. Donors began to tie aid to good governance issues. In
Zambia for instance donor countries suspended balance of payment support in July 1996
because of differences over governance issues. These included the constitution and the
electoral process. This action had significant impact on the country's budget. At the same time
there was a proliferation of new NGOs calling for participatory politics and good governance.
These were also funded western donors.
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One of the consequences of opening up politics in the region is the relatively greater
freedom of speech than before. In recent years there has been a proliferation of independent
press. Many countries were served by government press only. However, adoption of multi
party politics does not necessarily mean better economic standards for people. The experience
in most of the countries in the region shows that multi party politics, taking part in voting
does not translate into the needs of the most needy being attended to. In fact poor people
begin to question the whether it is worthwhile to participate in elections. In Zambia there was
a notable decrease in participation of die 1996 elections. Often the rich are die ones that get
into parliament and they use their monies to buy votes. Do we still need donor ultimatums
before we can make our political systems work fairly?
This past era, there has been a globalization of certain concerns such as human rights.
The region has also had to act in ways seen as upholding human rights as defined by various
international articles. Again here, there is great donor influence in this matter. Kenya, Malawi
(during late Kamuzus rule) was often accused of violating human rights. For countries whose
budgets are dependent on donor money as Zambia is, this accusation could cost a lot. In
upholding human rights I wish to point out that these refer to political rights, such as freedom
of assembly, freedom of expression not to basic rights such as the right to daily food, die right
to receive education, the right to decent shelter. Consequently, there has been much pressure
to uphold these without equal attention given by the same advocates to the concern of
ensuring the people's economic and social rights are met. Should we be more concerned with
political and legal rights than with economic and social rights?
TECHNOLOGICAL INNOVATIONS
Globalization has now brought to reality things one only dreamt of. Information
technology and flow have reached such unprecedented levels. I can communicate with
various people around the world through e-mail. One can also get information on the Internet
by just sitting and punching keys on the computer. A number of countries are now on Internet
in the region. These include South Africa, Kenya, Zambia, Zimbabwe, Botswana and
9
Namibia. It is now possible to send out and receive information for lobbying among different
partner organisation in a short time. The internet has been very useful to the CCJP project in
exchanging information with our partner CAFOD.
However this novel technological development has not touched the majority of our
peoples. Most professionals access the web through their places of work. In fact only a
minuscule part of the population own computers. On the other hand due tc lack of access to
such technology the result is that one hardly finds information put on the web by African
writers. The web is filled with writers of all shades from the north. I was struck by this dearth
during the time I was working on this paper.
However, computerisation is taking shape in the region, as prices of computers fall.
I bis may lead to the reduction in the numbers of people employed. In the long term is hoped
that this will result in an increase in business and improved employment rates.
Apart from the spread of computers, advancement in production technology is another
aspect of globalization. With the exception of South Africa, Kenya and Zimbabwe other
countries lag behind in robotisation and high-speed assembly lines. This is partly due to a
lack of capital to invest because of SAPs and because these technologies have not been
deliberately brought. In fact the region needs more of such technologies in order to improve
livelihoods.
CULTURE
Globalization has had a big impact on culture in the region. Culture is a broad term,
its many attributes have been touched by the main tenets of globalization. These include;
profit motivations of business, primacy of free market and private enterprise in to all’
processes of human development,
Globalization in Africa has meant among other things, the promotion of exports that
countnes are supposed to be good at. This emphasis on high returns has affected food
production. Small-scale farmers, most of whom are women grow less of their staple food, for
example maize. They are drawn to grow non-food crops that will give them more money,
such as cotton, sunflower or coffee. In rural areas where agricultural inputs are expensive
fanners are drawn into 'contract farming" deals. Commercial farming companies such as
LONRIdO, provide all the inputs on condition that the entire crop is sold to that company at a
fixed price. This poses a threat to country's food security.
On the other hand removal of subsidies on agriculture has had a negative impact on
food production. In the past small scale farmers could produce by obtaining loans. In the
1990s small scale farmers have become one of the region's category of the poor due to lack of
credit and government subsidy. Women are most affected by the inability to obtain credit.
finder attack too from globalization is the extended family system so common to
Africa. Devaluation of currencies, wage freezes and high unemployment due to SAPS, has
10
resulted in difikulties for families. Families are more unlikely to take up responsibilities of
the extended family due to the high cost of living. With the HIV AIDS problem leaving in its
wake orphaned children, people are beginning to see western kind of institutional care such
orphanages as alternatives.
I referred earlier to an increase in cross border trade and smuggling as income generating
ventures. These activities have been necessitated by unemployment. However, the absence of
parents from home means that children are left to care for themselves. Their socialisation
process is affected.
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I
In addition traditional roles of men and women are challenged by globalization. In the
past men were seen as breadwinners. Now women are taking more active roles in ensuring
basic needs for their households. Consequently women are more burdened as engage in
various activities in order to meet economic and social needs.
Notably one of the effects of globalization is the growth of a global culture. This
culture is transmitted tlirough the television. The emergence of satellite television has meant
the spreading of uniform cultural values and products "largely made in the USA" across the
region eroding traditional values. Youth aspire for values they obtain through the media.
Music and dance have been greatly impacted by western style, as seen in the media. This is
particularly so for music produced by young people. It appears that music is considered good
if it sounds like the so called "R and B". The majority of African artists no longer use
traditional instruments to produce commercial music.
Because of the high cost of living, the free market systems and lack of employment
family patterns are changing. Children both boys and girls spend more time on the streets
trying to sell foodstuffs in order to earn money to feed their families. The phenomenon of
street kids and street persons is increasing. This is particularly so in Kenya, Zambia, Tanzania
and South Africa.
ENVIRONMENT
As the world becomes closely knit economically other challenges arise. The
awareness of a global economy raises awareness too of ecological concerns Today the
environment is under threat of global wanning. The causes of global warming lie mainly in
the western world, through emissions from industries and motor vehicles. Yet the
repercussions are felt not only in America and Europe but all across Africa and Asia. With the
lifting of restrictions by governments and easing of operations for TNC they are likely to
move production plants with toxic emissions to areas with weak environmental controls.
These would be countries trying to woo investors into their economies. Poor countries in the
region may be lured to accept toxic waste by big multinationals in exchange for dollars.
I
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In Zambia charcoal burning is one of the contributory factors towards deforestation.
With the decline in incomes and unemployment people in rural areas have opted to selling
charcoal as a livelihood. However such a livelihood is not sustainable. Because globalization
is driven by market dynamics it is not respectful of the environment.
II
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11
w?
money
I
I
ARMS TRADE
Afrie.
“’am" XX"'” . ............
S"“'hCra “d E“' Afri“
outside for others to kill tiemseZ. W th
but S0,d t0
companies have engaged in this trade We h P t'6 ^mmunication and liberalisation some
South Africa was providing aXt^to Xs n B^md '
"h651" ^h^0"31
Angola, UNITA is
still
able
to but aX
r r, ----u ’’ " C°Untry tOrn by ethnic strife•
♦'ll
II
6
t0
buy
arms
t0
government
elections. Zambia, Zimbabwe and Mozambitu^atethe
co^ttieTthT
‘n
------j
and
Mozambique
are
countries
that
during liberation struggles. Should economic th •
k
j that are quite heavily mined
economtes
thrive
by
endangering
.2
farming communities are unable to till their land ewn whin t^8"'118 African
AfnCa? lives?
'iveS? F._
Rllral
1
even
when
the
war
is
over
because
of
the
------mines. How will they survive?
War 1S °Ver because °f the
CRIME AND DRUG TRAFFICKING
Drug trafficking in the region has become
a significant part of the underground
economy. Drugs can be transported fast from sou;
sources
to consumers. Not only has have South
Africa, Zambia and Kenya become conduits, there
2 is also increasing consumption.
Smuggling of cars is big business in the
1' region. Prostitution in coastal areas increases
with tourism. Corruption is a big problem in sev’eral countries
• This involves big contract,
government and private sector deals and multi-nationals. The world bank withheld
--------- 1 project
asststance to Kenya unless that country did something to fight corruption
CONCLUSION
In what ways can the public be educated when most of them do not even know what
has hit them?
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2
REFERENCES
Camdessus Michel, Fostering an Enabling Environment for Development" Geneva, July 1997
I
Chakravarthi Raghavan, "FDI Needs Differentiated Strategic Approach",
</south/soulh/wtwnbar.gif>
Chakravarthi Raghavan, "What is Globalisation" </south/south/wtwnbar.gi£>
3
Chakravarthi Raghavan,"Failed Expectations of SAPs, Liberalisation"
<http://www.twnside.org.sg>
Collins J.L. Carole, "Reshaping Africa: Effects of Economic Globalization" Publication of
the Africa Faith and Justice Network, July 1996
Egan Anthony, "Globalization A Blessing or a Curse?", Challenge 41, April/ May 1997
Griswold Dierdre," What Imperialism Has Done To Mozambique", <ww@w\s publish.com>,
February 1996
Henriot Peter, "Impact of Globalization on Sub-Saharan Africa’', May 1997, presented in
Johannesburg
Khor Martin, "Growing Consensus on ills of Globalization" <http://www.southside.org.sg>
Khor Martin, "Globalization: Implications for Development Policy"
</south/south/wtwnbar.giP> September 1996
Kufekisa Mulima Akapelwa, "The SAP Monitor", newsletter Number 12, July/August 1997,
Lusaka
Mohamad Bin Mahathir, "Globalisation: What it Means to Small Nations"
. </south/south/wtwnbar.gif> July 1996
Muyale-Manenji Fridah, "The Effects of globalization on Culture in Africa in the Eyes of an
African Woman" for Catholic News
Ouattara D. Alassane, "The Challenges of Globalization for Africa", Harare, May 1997
Tilburg Address, "Globalization: Towards a New Perspetive on Political Economy",
Wagaki Mwangi "Who Gains and Who Loses From Globalization and Liberalisation" GATT
Briefing No 10, RONGEAD, 1996
13
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INTERNATIONAL CONFERENCE
on
■
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
)
COLONIALISM AND THE TERMS OF
DISCOURSE IN INDIA AND CHINA
by
Prof. Manoranjan Mohanty
Depatment of Political Science,
Delhi University
L
i
(OLONIAL1SM AND THE TERMS OF DISCOURSE
IN INDIA AND CHINA
by
Manoranjan Mohanty
C hina Can Say No (Zhongquo Kuyishuo bu) is the title of a book published in 1995
which challenges the West and records Chinese deteiurination to withstand Western
pressures. Even in the height of economic reforms in China and spread of Western
technology as well as cultural forms in recent years the Chinese elite has emphasised
"Chinese characteristics" on every front. On the other hand, the Indian elite has smoothly
assimilated itself with the various waves Westernization in the spheres of culture, economy
and politics. The way the latest phase of liberalisation and globalisation has been
accepted in India confirms the trend of the last two centuries. A look at the cultural and
intellectual responses to colonialism in Asia, especially in India and China shows this
contrast to be conspicuous. Colonialism successfully determined the terms of discourse
in India but failed to conclusively shape the discourse in China.
In this paper an attempt is made to explore the reasons behind this divergence in
the struggle over terms of discourse in India and China. Why is it that the struggle was so
easily won by the colonial forces in India who succeeded in institutionalising their values
about civilization and human conditions which got consolidated after independence through
the policies of the post colonial state. British rule in India claimed the role of a'civilizing
mission.' It established institutions of the state, which included civil service, judicial
magistrates, priice and clerks for managing the organisation of society. It introduced
European educational system to promote European ideas of arts and sciences. Imposition of
English language through the educational institutions and operation of governmental
machinery and especially in the realm of culture and media finally shaped the terms of
discourse in favour of the interest of the colonial power. Indigenous institutions of politics,
economy and culture were by no means ideal. They w'ere also arenas of struggle as
evident in course of many uprisings and cultural and religious reform movements. But
colonial regime subdued these struggles and declared its view of the world as modern.
Scientific and rational, therefore bearer of advanced civilisation. That it had a certain class,
race and ethnic basis and was subject to struggle in Europe itself was not conveyed to
the colonial society. The struggle against the colonial imposition continued to erupt from
time to time in India but it lost the battle each time.
no
In China however the story was different. The early contacts between the European
missionaries and traders on the one hand and the Chinese emperors and the officials on the
other clearly recognised the high status of the Chinese. Even after China w as defeated in the
Opium w'ar in 1840, the Chinese rulers as well as masses consistently nurtured the idea of
regaining China's honour. Each war, even when the Chinese were defeated produced
greater nationalist consciousness of the Chinese. Even when they w ere influenced by Japan's
modernization after Meiji Restoration of 1868, they made a distinction between techniques
■
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7
or use and basic values. Taking Chinese tradition as the basis and applying western
^ unques tor appl.eat.on' (Zhongti Xiyong) was a perspective advan^d bv some
C unese thinkers in the late nineteenth century. In many ways the ti-yong perspective
RCl1 1
,,,e M;,y F,’U*,h ""’“t. The developments after P^to Ju ring
C nese Revolution proved that all foreign influences were discriminatingly imJgra^
into 'IK internal struggles producing unique Chinese strategies and experiments the fifty
yeiirs ot the Communist Party rule in the People’s RepubliLf Chma during Ztadersh!p
1 Mao Zedong and Deng Xiaoping have continued this trend of terms of discourse beinj
mamlysetbyChme.se people themselves. Whether it was the Yan'an nldel of petmles
emocratic revolution, the Chinese socialist experiments under Mao or socialism with
Chinese characteristics under Deng they had emerged through domestic struggles nThel
XnnT ‘ ? •C°,Onh? imp(>SitiOn' EvCn When the Chi-- chose JoX wS^
leones and techniques, ideas about society and nature they did it from a position of
autonomy and self.m„fide„ce. in course of fair negoliaiions an,I objecrive evalumton "ihur
^ina.i™
r,,>m
k"OW"d‘!e
""'-'J)' » rela^hip of poilriS
which embody
r
t
I his contrast needs to be nuanced in several ways But
for our purposes in this
exercise we can take the difference in the experience of the
two countries as an
assumption. Our main purpose is to seek explanations for this
divergent pattern of
meLXTh'is cZ""S ‘'"d """ “""I”""5- Thal
e'vidence
; to
It IS argued here that the nature of the political movements in twentieth century in the
AZ Z.'ti
t Criticaldifference in the solution of the terms of discourse in
in Chin s n
i' rhlSf.IS i,,so s,^lt'c;ln,,y elated to the distinct features of state formation
r - -==
subeoubueu, I,„d .he ^“Ew:E'Tli.” to
muldple domination by European powers and the Japanese.
V
Moving the centre in terms of discourse:
here io th,, f a . ,
P
?
W'
deali"S w'"’- Auenrion is drawn
. oncenis nd h,' ''ral”"'"rts » knowfedge embody a poli.kal rulalionship; ideas,
ncepts and the ones carry meanings which have aa political
political history.
history. II'ven when they seek to
explain reality or truth about (he world they do i' ”
thry sick to
it from some vantage points. Thus "terms of
discourse like terms of trade are favourable
to of
some and unfavourable to others."!
Meaning systems are constructed in the context
power relationships.
whi -I rer'i'S Of diSC0UrSe :,ri' llsed in two senses. Firstly, in the sense of terms as words
which may be concepts and ideas. A great deal of literature
exists on terms- of discourse
arising in different periods of history. "Social justice"
"sustainable development", for
example are terms of recent political
in India.
In.t;, In the second sense, and that is
political discourse
discourse in
the sense in which it is used here,
, it means governing conditions of knowledge. To
2
take an example, the discourse
on
freedom
for
a long lime w; is limited to defending the
lights of entrepreneurs and the upper classes. Terms of discourse on freedom changed with
tnv emergence of worker's movement and later with the dalu movement in India and more
recently with the women's movement. Thus the word may be the same but the concept
evolved with the changes in the terms of discourse.
Ngugi wa Thingo has contributed a powerful concept which clarifies terms of
discourse. He talks about the need for moving the centre. First "from its assumed location in
the West and ... from its assumed location in the minority social stratum in all societies to
its creative base among the people."2 Ngugi has analysed in the African context how
colonialism robbed the people of the colonies not only of natural resources and enslaved
the human beings but "one of the worst robberies is that of the means of perceiving all that."
Il colonised the values ot the local people by a variety of means including the most
effective
means
of colonising the imagination by imposing the colonial
language. Thus
Africa was made speechless. A new class of elites with foreign tongues was nurtured as
interpreters between Europe and Africa. The educational institutions produced this class
to manage the new institutions of economy and the state. In the new markets and the courts
the native turned into a foreigner in his/her own country. Even when the movements for
change
appeared on the scene often the peasantry did not know how they were being
represented. Thus according to Ngugi the agenda of liberation has to contain the basic human
right- "the right to name the world."
Thus it is important to be conscious of the way the meanings of various notions came
to be constructed. Colonialism snatched away the colonised people's right to imagination,
rights to understand history in their own way, right to interpret nature from their vantage
point. Upper class, uppci caste, patriarchal, racial standpoints too denied similar rights. The
struggle for liberation, therefore, entails 'moving the centre' from EurocenttK’colonial
vantage points to the Third world's own and in the Third world itself from the dominant
elite's to the vantage points of the oppressed people themselves, thus the terms of discourse
could change in favour of the oppressed only through the process of struggle.
In China the political movements evolved in such a way that colonial worldview did
not get
i
internalised by the Chinese people and the struggle to move the centre from the elite
to the
’ serious
‘
.j rmasses made
advances. In India the Eurocentric worldview was adopted by
the Indian elite in course of
... aj century of colonial policies and though there are some
I
in the democratic movement ia favour of the oppressed classes, castes, tribes and
women the struggle continues in
i a zig zag course. This is because of some significant
differences in the environment of struggle, historical tprocesses and ideological trends
involving the elites and political groups in the two countries*
gains
i
State formation and National Consciousness:
Hie fact that China was a unified political entity whereas India was not had
s.gmficant consequences for the struggles taking place in
India and China during the
I
nineteenth century. Emperor Quin Shih Huang had defeated the feudal kingdoms and set up'
Zhongguo
or
Chinese State or the middle country in 221 B.C. Even
though
there
were
3
r/
i
I
uprisings within inner ( hina or invasions by Mongols, M.inuhu and others the unified entity
by and large continued. The emperor as the head of a bureaucratic state apparatus and an
imperial army governed C'hina for over two thousand years. It also performed certain
welfare functions such as maintaining the Grand Canal for irrigation. When this imperial
stale was defeated in the Opium War and was forced to accept unequal treaty Chines
nationalism acquired a perspective to fight Western imperialism. A feeling of humiliation or
hurting of national honour and the fast fighting points which was built into Chinese
nationalism. I he Han elite also blamed the non-Han Manchu emperor's regime for this
humiliation so the anti-imperialist consciousness was connected with a political campaign to
overthrow the Manchu dynasty and establish a republic. Thus the concept of politics in the
second half of the nineteenth century China centered on altering the power structure by
defeating Western imperialism and Manchu monarchy.3
In India the picture was one of dispersed political power in Eighteenth century when
the East India Company expanded its influence, the Mughal Empire had.declined, some
regions were under Maratha rule and there are numerous small and big kingdoms, the
situation was very <different from the political character of the subcontinent during Ashoka's
rule in 4th C.B.C..or during Akbar's rule in the late 16th century. In the nineteenth century
wien the British evolved an integrated administration for maintaining their control and
collecting revenue it was seen by the Indian elite as the first attempt at state formation.
The British very cleverly maintained the princely states as separate entities with indirect
control under the rule of paramountcy. After crushing the first war of independence in 1857
they set up direct administration making India part of the British Empire in 1858. Thereafter
started the step by step building of the state apparatus, the Indian civil service leading this
process.
I he two institutional interventions that had long-term effects were introduction of
the British education system and the legal system. The missionaries played a major role in
setting up schools and colleges , which were channels for introducing modern European
knowledge system to India. Graduates from these schools and colleges were recruited as
personnel in the offices of the government and companies. This was the beginning of the
mass production of clerks at various levels. Since the economy had been plundered
resulting in famines and destitution these were regarded as opportunities for making good
in life. 1 he introduction of the zamindari system and ryotwari system required an army of
surveyors and record-keepers to demarcate agricultural land and legitimatise property rights
so that the extent of revenue could be determined. This in turn required courts of law to
settle property disputes hence the import of the British legal system. The new legal and
judicial system gradually limited the operation of the prevailing sysi-ms of law in the Indian
society. They were based on convention, customs as well as codes. Like the bourgeois
system of law they too had discriminatory class, caste, and gender basis. But they also were
based on centuries of experience and struggle.
I he state formation in British India-military conquest, economic expropriation,
educational
and
legal
institution building delegitimatised the local systems of
knowledge. It shaped new terms of discourse about society and nature, what is good and
what is bad. It moved the centre of discourse to Europe. Therefore, when reformers arrived
4
■
:
I
on ihe scene to begin with they saw these developments as pos.tive tor Indian people
They thought Indian people owed political unity to the British, lhey did not realise then that
basis of state formation and its forms can vary and the fact of dispersed political power m< y
actually be a positive heritage for building a decentralised, co-operative paincipatory and
federal polity. Indian nationalist discourse continues to debate these two perspectives on the
legacy of state formation in India. The terms of discourse on nationalism shaped by co oma
mlicies in the nineteenth century later on had the dominant section of the Indurn Nattonal
Congress subscribing to the centralistic view. Nehru's Discovery of India tiaced the roo s
of unitv to Indeus valley civilisation and Ashoka and unfurled a unitartan, centralistic
perspective on state formation. This viexy
vievy was in its peak during Indira Gandhi's regime
when India saw the
glimpses
of
the glimpses of an
an tauthoritarian
--------------- centralised state. Mahatma Gandhi
represented the alternative view of decentralised federal or even confederal relationship
among political regions in the subcontinent-a view that has echoed again and again in
the politics of autonomy groups throughout the subcontinent since the 1970s.
Elite Power and Political Movements:
*
-
I
B
China's gentry was a unique social stratum combing wealth, knowledge, status and
power in one class. These were landowning families who trained their children with years
of tutoring to taker the imperial examination. So the officials of the imperial government,
the provincial government as well as the country government came from the gentry
class. No other class--the peasants, artisans and traders had the resources or the
perspective, which could afford decades of preparation for the public examination. The
examination system was such that only the gentry's children had the family culture and
environment to study and qualify. Therefore, they are called the scholar bureaucrats
who mastered the literary techniques. They were based in the rural economy dominating
over the peasantry and other classes. They were the official class, which ran the state
apparatus. The dominant ideology of confucianism was internalised by this class which
practiced the "three guiding principles and five virtuous relationships." Thus the economic,
political and cultural dimensions of power reinforced one another. No doubt Confucianism
had to contend with Tacism and Buddhism producing new elements of the value system and
value movement went on in Chinese history involving diverse trends often conflicting
with one another. But on the whole the gentry determined the terms of discourse in imperial
China.
When contacts with the West increased and ideas about Western science and
democracy spread in China the gentry reacted sharply to their challenge. The first set of
reactions belonged to the Ti-Yong framework. The idea was to learn the enemy's
techniques to fight the enemy. This developed into a new stage when attempts were made
to reform the manchu
monarchical government since that was blamed for China's
humiliations and weaknesses. After China's defeat in the Sino-Japanese war of 1894-95,
there was serious attempt for constitutional reforms in 1898. It was an internal response of
the gentry to adjust with the new situation. Meantime Japan had emerged as an inspiration
to China and the rest of Asia because of her modernising experience. Many Chinese
students studying in Tokyo got together under the leadership of Sun Yat Sens Fong Meng
5
I
I
,he «L>„ship between The "e„(ry etadd
th^gh whteh it m„|d ente, end
Mayimperi-ilism
4th movement
in 1919
as
ThJ n r
w iq
T """‘"S"1
y»“,h
np its' piesene^'.J*“'"^Te
th^ firn
•
i ..
H
me gentry, i ne
major challenge to gentry domination as well
Chi me Kai" Sli1lkbUllt 'h10
emergln8 democra>ic agenda. The Kuomintang under
Chnmg-Kat Shek sought to defend Confucian ideology and assimilate Western s.-^nX
Sdong
,^eSL ?e Chinese C—is‘
X5 ZerC,Z
built upon Sun Yat Sen's Th
‘O fight feudalisni as wel1 as colonialism. It
Rights Pand People's I
. ^ee.PeOples Princples, namely, People's Nationalism. People’s
nnth .
r .
,
Llvel.lhood 'o evolve its ideological perspective in course of a
peasamrv wlm^-'rfthan<J errors‘ 7,16 CPC accluired mass support of the Chinese
.
( 'yas su fertng the oppression of the gentry for centuries Thus the oeonle's
emocratic revolution significantly altered the terms of discourse. Mao Zedong's on New
ar^ind^cultW"
ff POllll|CS’ economics and culture and the talks at the Yen’s forum of the
stn/ t
e^ectlve,y Initiated currents of new knowledge. The new discourse
ngly repudiated feudal elements of Chinese culture but
inherited the popular
tlXr“T,he WeXTS‘ l,“"T "
“Ploil»'iv'. bourgeois and ToLiai
The power .,f evaluarion wasTcquhed”^
rentr
e o
6!“eS 10 ‘J'm“rl'tic ide“ antl
()n,y a brief Period when a section of the gentry had moved the
now e ge to the West during the first two decades of this century Before that the
x^Xh:::2'r'deTlsce7rr"b”“,s"’’d
especially through the writmgs of Lu Xun and others and through the political strumde
dur,„g .he am. Japanese war. ,he pen,re of disc.mrse was moved"„ £ dX™ TX
"“’k "
wiTln'.'TeP'iX' XXX"?
rH'
i
oZ. X
‘‘rxism.
knowledge sysren, underlying i,
In other words, Marxism did not push
S’',n '"di”
P
<len»wra,ie .an,
Chinese
discourse
"ZnXX
W'S'e,n "«1“s'™|i‘»'«>n model and .he
Indian elite had a disjunction between land, Knowledge and political governance
They had no ('‘
lementary roles sbudras cukivating land, Brahmins specialising in
knowledge. Kshatriyas by and large 7u]ing7he
i
,
■=
kingdom and ornanising the armv and
Vaishyas ('
d-’'.ng trade. ~
Together they exploited the majority of the people namely the
service castes which included many lower castes and the so-called untouchables and the
I
6
i
i
-4
tribals were kept separate from the caste order.
During the
system took place through centuries.
standardization
Much churning
upper caste elite formation.
in
in
the vaina and later jati
Mughal rule there was a
certain
The British used them in the respective
feudatory states and their administrative zones thus maintaining the caste system. In course
of building the political and economic institutions they recruited from these upper castes.
They added a legal economic basis through the zamindari and ryotwari systems so that
from
these elites now came
1
•!
land-owning • families. Modern India's first wage of elite
was
formation thus owed a great deal to the British initiative. It
agriculture and it was nurtured though modern schools
now
rooted
in feudal
and colleges. In the process the
section of the elite which got trained in the traditional Sanskrit education systems, the
gurukuls, ashrams, tols and Islamic institutions such as Madarsas and other centres slowly
became the second class academics not needed by the modern state. This never took place
in C'hina. There was no great divide among the educated. Those who got education in Japan
J
in the-early part of the twentieth century, those who want to school in France and Germany
in the I92()'s did have some advantage in skills. But their privileges and their role in the
national political and economic process were not comparable to the English speaking elite
in India.
The fact that India was colonised by one European power and China had several
European countries and Japan indirectly
controlling various
sectors
of economy, culture
and society made a great deal of difference.
In the field of technical education this divide became
Western medical education entered
knowledge
more conspicuous in India.
India under colonial auspices, Western engineering
replaced local knowledge very fast. The learning of English
section of the Indian elite from the rest. Whereas in
distinguished this
China the Chinese language got
simplified after the May forth movement and was made accessible to the ordinary Chinese.
In India the local languages were pushed behind since the elite made English an instrument
of power. In other
words,
India who were rendered
the
Indian elite now became the interpreters for the people of
speechless, to use the words of Ngugi. But they
using Western theories and concepts.
Because they had lost
interpreted
it
the moorings of local culture.
own history. They know more about the history of
Western political thought than about Indian political thought. Whereas a Chinese child can
They knew very little about their
recite the dynasties and their dates and the principles
Buddhism
with
ease
Indian
child's awareness of
of Confucianism, Taoism and
India's
history
and
philosophy
is
almost non existent. The Indian elite grew up with a colonised mind suitably permeated by
the local class caste race patriarchal outlook. It is this elite which was put id charge of
running independent India under Nehru and his successors.
It is an elite . which
perpetuates the colonial terms of discourse.
The Struggle Continues:
The experiences of struggle in China and India no doubt present a contrast. The
Chinese revolution created people’s democratic terms of discourse. Whether the terms have
v
I
I
It
I
been
retained
and
further
democratised
or
new
sources
of hegemonic terms have
emerged in the context of the reforms of the past two decades has to be further examined.4
Whether a new Chinese bourgeoisie has emerged which has opted for Western capitalist
values in course of recent economic developments in China has to be investigated, the
7
I
liberation (Jietang) discourse of the people's demi
incratic revolution in China which sought
to seek liberation from alien rule as well as from class
----- ethnic, racial patriarchal and other
torms ot oppression continues to be on
the agenda of the Chinese people. Similarly the
swaraj (self rule) agenda that Gandhi
had laid down for Indian people continues to
acquire new meaning and in course of the many social
I struggles of peasants, workers, •
women, dalits and adivasis in recent decades continues i
to challenge the dominant terms
of discourse which colonialism together with local po
wer structures
had laid down. Thus struggle of the Vasco da Ga
ma epoch is not over.
I
I
0
Manoranjan Mohanty is Professor, Department of Political
Countries Research Centre, University of Delhi, Delhi 110007 i Science and Developing
and Co-Chair, Institute of
Chinese Studies, 9 Bhagwandas Road, New Delhi 110001 Fax91-11-3388155, email:
sscsdsfaren.nic.in
Notes
1.
VoTmiv.
2. Ngugi wa Thionhgo, 'Decolonising the
Means ot Imagination' in Symphony of Freedom (Hyderabad: AIPRF, 1996).
3.
Gong Shuduo, 'Chinese Revolution and Culture'in I.L..
Manoranjan Mohanty (ed) Chinese
Revolution: Comparatives Perspective on Transformation
- 1 °f Non-Westernm Societies
(Delhi: Ajanta 1992).
4.
Manoranjan Mohanty, 'Swaraj and Jiefang: Freedom Discourse
m India and Chma’ in Neera Chandhoke (ed), Understanding the Post-Colonial WorldTheory and Method (Delhi: NMML & Sterling, 1994).
* * * *
8
* * * * ♦ * * ♦
*
I
INTERNATIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
1
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
II
I
II
THE NATURE OF THE FREEDOM STRUGGLE
IN SOUTHERN AFRICA
by
ll£I
Prof. Fatima Meer
Director. Institute of Black Studies.
Durban, South Africa
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THE NATURE OF THE FREEDOM STRUGGLE
IN SOUTHERN AFRICA
International Conference
"Colonialism to Globalisation"
I
Fatima Meer
New Delhi
2-6 February 1998
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1.
STAKING CLAIMS IN SOUTHERN AFRICA - PORTUGUESE AND
BRITISH
Vasco Da Gama touched the coast of Zululand 500 years ago on Christmas
Day and named it Natal, "The Birth". His reference was to the birth of
Christ, but it was also the birth of a new era in human relations, one in
which Europe took the centre stage of the world, "discovered the rest of it and
staked its claim to dominate and possess it. Thus the phenomenon of
colonisation.
J-
/ .<
o
British Colonies
Africa
Britain’s interest in Southern Africa began in the early nineteenth century,
as a hrect expression of her bid for hegemony over the Dutch. The Dutch
East India Company had established a refreshment station on their trade
route to the East in 1652.
The Cape became a British colony in 1806 following wars in Europe. Conflict
arose between the Boer/Afrikaner settlers and the British government over
policies of race. The Boers left the Cape, trekked into the interior and
founded independent states in Natal, the Transvaal and the Orange Free
State. The British annexed Natal
in 1842 and incorporated the Boer
Republics of the Orange Free State and Transvaal in
Boer War. The four British colonies united
1909 after the Anglo-
as the Union of South Africa in '
1910, and the racist white state came into existence with the full concurrence
of the British, despite several deputations by the disenfranchised black
peoples, to the heart of the Empire in London,
one of which was led by MK
Gandhi on behalf of South African Indians.
Lesotho, Botswana and Swaziland
Lesotho, Botswana and Swaziland became
British protectorates because their
kings feared the more rampant marauding of other colonial predators,
particularly the Boers. Lesotho was incorporated in 1884 to be saved from the
Boer Republic of the Orange Free State, and Swaziland already incorporated
3
into Paul Kruger’s South African Republic, fell to the British as a spoil of war
in 1903. Botswana was incorporated in 1885 to secure a road into the interior
and to forestall German intrusion.
Britain does not appear to have reaped much in the way of material benefits
from these "protectorates", but then she did not incur any significant
expenses on their behalf either. They were ruled by the High Commissioner
in South
Africa and
by
and large
remained
underdeveloped and
impoverished. During 1966-67, Botswana and Lesotho had
the dubious
distinction of being on the United Nations list of the world’s poorest 25
countries. [1]
II
I
Zambia, Zimbabive and Malaivi
The founding of the Rhodesias and Nyasaland, (Zambia, Zimbabwe, and
It
I
Malawi) as British colonies was primarily due to the imperialist and
capitalist zeal of Cecil John Rhodes. Convinced of mineral wealth in the
regions, he made treaties and gained concessions to mineral rights from the
local kings and became the virtual coloniser of the territories north of the
Limpopo by obtaining a Royal Charter from the British government on behalf
of his British South African Company (BSA). The Company administered the
Rhodesias from 1890 to 1921 when they were taken over by Britain and
IS
administered directly. The Company assisted significantly in meeting the
financial costs of running Nyasaland (Malawi) which became a British colony
in 1890.
It
The indigenous peoples of all the British colonies were subdued, both through
diplomacy-cum-intrigue and sheer brute force.
b
n
Jr.
4
Portuguese Colonies
Mozambique and Angola
While Portugal's right to Mozambique and Angola was formalised by the
Europeans in 1884, and her real control of these territories was entrenched
only during the late nineteenth and
early twentieth centuries, her
involvement in the region goes as far back as the fifteenth century when
Portuguese maritime pioneers, set up refreshment stations on the East Coast
of Africa for the purpose of accessing India. Missionary work, trade in ivory
and gold and later, in the eighteenth century, the most lucrative commodity
of all, slaves encouraged small Portuguese settlements.
Colonial Exploitation
Colonisation left all the southern African colonies severely depleted in terms
of material and cultural resources. All of them were both culturally and
economically solvent before colonisation. They were governed by their kings
and chiefs whose powers were limited by their dependance on their peoples
for their material resources and comforts. Land was owned communally and
was held in trust for the people by the king.
Colonisation destroyed the traditional economic and social structures and
replaced them with European institutions. The colonised were dispossessed
of most of their land, and what remained was segregated into African
reserves where the colonial governments replaced the paramount chiefs and
d
5
held the land in trust for the "Natives". Local chiefs were used to allocate
plots on communal tenure. Thus, Africans had no individual land rights and
by dint of that, no capital to invest in the European economy. Commercial
farming became a European preserve.
With the alienation of land, went the alienation of labour. In the nineteenth
century, all enterprise was labour intensive. The colonialists, whether mining
capitalists, or farm families, could not survive without the labour of the
indigenous people who were consequently domesticated and their labour
harnessed to the white economy, to plunder their own, the colonised’s natural
resources for the benefit of the colonisers. Systems of labour were developed
where labour was extracted at rates often cheaper than slave labour: contract
■
labour on the mines; or labour was forced with no payment at all: labour
I
tenants, who paid with their labour for the privilege of remaining on their
own land usurped by the whites.
Through the imposition of taxes and the need to earn money in order to pay
them, through Christian missionaries who induced accommodation to
subservience by enshrining new ‘moral values’, in their minds and souls - the
gospel of work, obedience to their masters, submission to their divinely
decreed position in life - through overt force and subtle intrusion into their
psyche, the "Native" was made receptive to his new designation as second
class citizen and labourer.
2.
I
RACIAL SEGREGATION
Three policies developed with regard to relations between black and white in
Southern Africa: the Portuguese policy of assimilation into Portuguese
n
•
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'6
culture and thereby escape from the exploitative conditions of the indigena
(Native); the comparable British policy of according equality to the "civilised
Native sloganised by Cecil John Rhodes as: "Equal rights for all civilised
men from the Cape to the Zambezi" and the policy of permanent and
irrevocable segregation enshrined in the constitutions of the late nineteenth
century Boer Republics of the Transvaal and the Orange Free State and
expressed in the words: "The people are not prepared to allow any equality of
the non-white with the white inhabitants, either in church or state." [2]
Africans were excluded from both the Republics, except as labourers.
Civilisation, ofcourse, meant Europeanisation and the missionaries played
the crucial role in this regard by converting the Natives into Christians,
putting them into European clothes, European churches and European
schools. Both the Portuguese and British integrationist policies however,
were so applied that minuscules of Africans qualified for co-option. By 1961,
less than one percent of the African populations in the Portuguese colonies
had become assimilados. [3]
However, while the assimilados became
Portuguese citizens on the same basis as white settlers, civilised men were
never integrated into civilised society in the British and the franchise was so
structured that few Natives' made it on the voter’s roll. Even this right, as
limited as it was, was expunged in the course of time.
The coloniser expected the "civilised" Native, rescued from the state of
barbarism, to stand on his side as a bulwark7 against the barbaric hoards who
threatened the march of civilisation, and for decades the "civilised Native"
played this game. Even Gandhi, in his very early years in the colony of Natal,
deemed the "civilised" Indian as worthy of the franchise and made out no
case for the vast majority of Indians who were indentured labourers.
J
E
7
Most "civilised" Natives in South Africa were, at the beginning of the century,
concentrated in the Cape, primarily due to the fact that the Cape was the
only South African colony that extended the franchise to Africans. This gave
rise to a number of associations, or more specifically, electoral clubs of the
I
Ih
small community of enfranchised Africans - the Imbumba Yama Afrika in
»
There were similar elitist organisations in some of the other colonies, such as
1882 and the Native Electoral and Native Educational Associations in 1884.
I
the Rhodesian Bantu Voter’s Association (1923) and the early exclusivist
I*
associations of teachers and clerks in Malawi.
The "civilised" African trusted the white coloniser and accepted in good faith,
his patriarchal promise of "equal rights to all civilised men". In the early
years, African organisations pleading for human rights restricted those
rights for the civilised and Christianised.
Giving evidence to the 1903-1905 Native Commission, leaders of the Native
I
Vigilance Association of the Orange Free State, emphasised the difference
between heathen and Christian when they clarified they were not asking for
the extension of rights to “that class of people who are still far in heathenism
and in darkness , but for those "we call the enlightened people
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3.
[4]
FACTORS IN DECOLONISATION
The key factors in the decolonisation process in Southern Africa may be
identified as: the extent of the involvement of the mother country in the
colony; the size and nature of the European settlers and the value of the
natural resources to the colonisers.
I
I:
1
8
Britain was far more laid back in her administration of the colonies,
devolving significant power to the white settler communities who jealously
restricted the volume of capital moving to the coffers of the mother country.
Except in the Rhodesias, there
more important, the British
African
colonies.
By
was not much wealth to be plundered anyway:
economy was not dependent on her Southern
the
mid-twentieth century, she volunteered
decolonisation, the restraining factor was
not Britain, but the white settlers.
Portugal, by contrast, resisted decolonisation stringently. A small country
with a population of nine million, [5] Portugal was economically dependant
on her Southern African colonies and yielded only after a long and bitter
military struggle.
The size oClhe settler population was not an issue in the Portuguese colonies
since no political power devolved on the white settler, who had the same
eight, a. the assimilados to elect deputies to the parliament in Portugal.
Angola's while settlers constituted a larger
percentage of the total
population, 5.4% than Zimbabwe's 4.4%. but whereas the Rhodesias stood up
against both the British and the Africans and ddayed the process of
independence by seventeen years. Angola's whiles fled the country en masse
at independence. Even the smaller Mozambiquan while settiers <2.8%) put up
some resistance. The size of the white population inHuenced the volume of
power Britain devolved on the white settlers: she had devolved considerable
power to the while settlers in Southern Rhodesia (Zimbabwe) and they used
that power to prolong their dictatorship over the blacks.
I
9
Ultimately, it was the combination of three factors: number, political control
and the value of the vested interests of the colonisers that accounted for the
staying power of the whites. All three existed in Zimbabwe.
South Africa’s whites, (13% -'total population 42 million -1996), retained
their power for as long as they did because, in addition to three conditions
identified, there was the additional one, the indiginisation of the majority of
the settler population. By the end of the nineteenth century, the Afrikaners
had become alienated from Europe and claimed no other fatherland beyond
South Africa. They saw themselves as victims of British colonialism fighting
for their own land, not land they had usurped. When the Nationalist
president, PW Botha met his prisoner, Nelson Mandela in 1989, they talked
about their mutual oppression at the hands of the British!
r
The other British colonies had minute white settlements and though
politically empowered and highly privileged, could not muster sufficient
muscle to take on the overwhelming black majorities. [6]
4.
I
THE STRUGGLE FOR INDEPENDENCE
Mobilisation against colonial oppression depended on the consciousness of
the colonised of the extent
I
and nature of their
exploitation; their
understanding of the value and meaning of their plundered resources to the
coloniser; and on leadership. So long as the colonised remained locked in his
traditional prism, his wants restricted by his choiceless self-subsistence,
>
illiterate and ignorant of the world of commodities and achievable status so
long he remained trapped in colonial exploitation.
I'
I
10
The coloniser knew this and attempted to isolate him from the forces of
enlightenment, but the forces of capitalism, the need for rationalised labour
and the impact of urbanisation thwarted these attempts.
Even
the
Portuguese dictator, Salazar, who had for decades restricted the inflow of
foreign capital into his colonies because of fear of the undermining influences
it would bring in its wake, eventually capitulated to the new economic
forces.[7]
The emergence of an educated elite within the ranks of the colonised was a
crucial element in the rise of African nationalism and the freedom struggle.
The post-colonial first generation leadership was cautious and grateful to
their Christian liberators". Many of them were mission trained and the most
prominent of them had st'-’^d abroad, usually in the States. Their great
concern was to be like their colonisers and to be "accepted" by them, not to be
repudiated and segregated like the heathens.
They did not pursue
independence and reassured the whites that they did not seek ascendancy
over them. Thus the South African Native Congress (later ANC) wrote to His
Majesty’s Secretary of State for the Colonies in 1903:
I he black races are too conscious of their dependance upon the white
missionaries, and of their obligations towards the British race and the
benefits to be derived by their presence in the general control and
guidance of the civil and religious affairs'of the country to harbour
foolish notions of political ascendancy.” [8]
Even the representative of the Independent Catholic Church of Zion,
considered rebellious because they had broken away from the mother church
i
11
and set up their ecclesiastical hierarchy denied to the Native Commission
(1903-1905) that blacks wanted to govern whites:
k
[i
"No it is not so. While we live together, it would not be for us to govern
the white people, but to be'with them. We are under the whites and I
do not think we would ever come up to a standard like them to govern
the white people." [9]
The second generation leaders of the forties and fifties were a different breed
altogether. Young men, many still students, emergent doctors, lawyers,
teachers and trade unionists, were fired with ideas of freedom, equality and
democracy. They were suspicious of the motives of sympathetic whites and
preferred to work on their own. Africanist in their first flush of awakening,
they espoused socialism and Gandhianism, but were above all, influenced by
Marxist-Leninism. Their preferred strategy of action was passive resistance;
but they were not averse to using force when necessary. They entered the
political arena with a militancy aimed to rouse mass action and to topple
white domination. The role of the "mass", the people aware of their
exploitation and ready to deal with it, was the essential factor in their
leadership. Unlike the first generation leaders who interacted with the
colonisers, these leaders interacted with the people, at the forefront of whom
were the workers. They linked into the volatile mood of the post-World War
Two black workers, struggling to survive in the post-war depression, angry in
P'a
their awareness of the wealth they created and deeply resentful of the
poverty they suffered. People and leaders interacted and produced the mass
i
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k-■
1
If
i
movements that prophets of passive resistance saw as the motor force of
change, sans weapons, sans violence.
I
12
I
The Workers
Rapid urbanisation and deepening economic problems that followed in the
wake of both world wars, discharged a ferment of discontent among black
workers in all the Southern African colonies. In South Africa in 1920, forty
thousand African workers went on an unprecedented strike in Johannesburg:
in 1919, Clement Kadali formed the Industrial and Commercial Worker’s
Union (ICU). The Union grew into
a mass movement, sustaining its
momentum into the thirties. While it concentrated on labour and welfare, its
thrust was pointedly political.
In Zambia and Zimbabwe contact between black and white workers on the
copper mines roused the consciousness of the latter to their highly
exploitative wages: a rash of strikes broke out in Zambia in the thirties and
when these were suppressed, the African workers formed welfare societies
which were constituted into a national federation and subsequently into
Zambia s African National Congress.
In Angola and Mozambique after the 1975 coup in Portugal, the workers
downed tools in the colonies, organised themselves into labour movements
and quickened the pace of decolonisation.
It was in this kind of political environment that the Southern African
struggles for liberation matured in the mid-forties and fifties. The institution
I]
of apartheid in South Africa in 1948 and the constitution of the Central
African Republic in the three British High Commission territories, by the
European settlers in 1953, as a bulwark against black political aspirations,
were crucial challenges to African resistance.
I
13
TRANSITION TO INDEPENDENCE
Relatively Peaceful Transition
Zambia, Malawi, Botswana, Lesotho and Swaziland
The resistance struggle was not very protracted in Zimbabwe, Malawi,
Botswana, Lesotho and Swaziland, primarily due to the fact that the small
settler populations did not exercise sufficient power and it was left to Britain
to grant independence. All these colonies became independent at about the
same time, towards the mid-sixties.
The Nyasaland African Congress, formed in 1944, became increasingly
militant in the early fifties. Lacking a charismatic leader, Dr Hastings Banda
who had been abroad for forty years, was recalled to lead the party in 1958.
He proved to be a gifted leader and so stepped up the campaign that a state
of emergency was declared in 1959, 1346 agitators, including Dr Banda were
detained, and Congress banned. Resistance then continued under the banner
of the Malawi Congress Party. Talks for constitutional change began in
London in 1960, elections followed and Dr Banda was sworn in as the first
prime minister of the independent state of Malawi in 1964.
In Northern Rhodesia, the African National Congress headed by Harry
Nkumbula and supported by the mineworkers agitated for universal
franchise and secession from the Federation. Conflict erupted within
Congress over the proposed British constitution; Kenneth Kaunda broke
away and formed the Zambian Congress which was banned and the leaders
14
banished to remote areas. In 1960, their restrictions lifted, they formed the
United National Independence Party (UNIP), and mounted a vigorous
campaign of civil mass disobedience, mass arrests and convictions followed.
Britain finally proposed a new constitution and in 1964 Kenneth Kaunda
became the first Prime Minister of Zambia.
The Protectorates
Botswana, Swaziland and Lesotho transited into independent states without
national struggles and without shedding their monarchical families. In
Botswana, Seretse Khama, forced to renounce his position as paramount
chief by the British, (because he married a white woman), formed his own
political party, won the first elections after independence in 1966 and became
president of the country, a position he maintained until his death. The Swazi
king, Shobuza II, contested the elections through his Imbokodva Party, and
was returned to power by an avalanche victory, his opponents losing their
j
deposits. Firmly entrenched, Shobuza went on to revive the Swazi monarchy
and centralised power in himself. Swaziland today remains the only
Southern African country which is not organised on the basis of a modern
democracy and continues as a one party state.
Lesotho, a small mountain kingdom, assumed its mantle of independence in
relative peace, but has continued in a state of political instability because of
internal conflict. The first election in 1965 was won by two seats by Chief
Lebowa Jonathan; he lost the second in 1970, but abrogated the constitution
and usurped power. He was displaced following a coup in 1986 and the
Basuto King played an important part in government. However, in 1990, the
4
0
*
15
I
Military Council assumed power and in the elections that followed, Ntsu
Mokhehele of the BCP, which had won the 1970 elections, formed a
government. Political peace, however, continues to evade the little country.
e
IS
6.
ON THE THRESHOLD OF VIOLENCE
Portuguese Colonies
Angola, Mozambique and Zimbabwe
In the Portuguese colonies, internal organisation was made virtually
impossible by Dr Salazar’s dictatorial regime which ran a police state in
Portugal and extended the ’’policing" even more viciously to the colonies.
Dispersed black resistance groups emerged but these remained disconnected
in the face of the vast network of police and informers and the close
surveillance of all signs of dissent. The emergent radical groups in Angola
and Mozambique were thus forced out of the country and from 1960 onwards
set up bases in exile.
Zimbabwe
The Zimbabwean resistance movement was bitter and long. Joshua Nkomo,
formerly a trade union leader, revived the Southern Rhodesian African
National Congress, adopted anon-racial policy and launched a campaign of
mass civil disobedience to bring down the government. Suffering the usual
spate of bannings and detentions, the Congress re-emerged as the Zimbabwe
16
African People’s Union (ZAPU), but the white settlers, posed with a British
proposal that would eventually lead to majority rule, formed their Rhodesian
Front (RF) in
1963, declared UDI in
1965 and unleashed repressions,
matched only in their excesses by the Afrikaner Nationalists further south.
While the whites remained united, a division erupted within the Party, on
issues of tactics and ZANU emerged as a rival force. It
Robert Mugabe. The situation within the
was eventually led by
country, however, became
intolerable and both groups were forced to go into exile and plan military
attacks.
7.
PASSIVE RESISTANCE IN SOUTH AFRICA
In South Africa, passive resistance, the deliberate defiance of targeted racial
laws, and the preparedness to suffer the consequence, was the onlv militant
form of action right up to 1960. In 1913 Gandhi had led 2 000 Indian miners
on a march, deliberately breaching the provincial barrier that confined them
to the province of Natal, in protest against the poll tax: in the same year
African women began a sustained passive resistance campaign in the Orange
Free State against passes that were for the first time inflicted on them. Six
years later, in 1919, African men, organised by the Native National Congress,
(founded in 1912 and renamed the African National Congress in 1923),
waged passive resistance against passes in Johannesburg, sloganising,
"Down with Passes! No violence!" [10] The form was similar to that adopted
by Indians in their Anti-Pass Campaign, in the same city in 1907.
The m earn of passive resistance pursued black political organisations into
the thirties and forties. Members frustrated by inaction, urged action, but
i!
17
they were warned that they did not have the capacity to launch such a
campaign. "You must have a leader who is prepared to make sacrifices such
as Gandhi in India", warned Dr Abdurrahman, the popular coloured leader at
the 1930 Non-European Conference. Passive resistance was proposed and
actually adopted at an earlier XNC conference, but not implemented.
ANC Ideas, Ideology and Action
The African National Congress jogged along its conservative path until its
Youth League, formed in 1943, took over its leadership in 1949, and mooted a
>1
plan of action to boycott segregated institutions and mount a campaign of
civil disobedience. The Youth League was based on an Africanist ideology. Its
key theorist was the young Anton Lembede, who vigorously propounded the
thesis of a distinct African spirit, "unique and peculiar to Africans", and
claimed Africa for Africans. He influenced his colleagues, three of whom,
■
Nelson Mandela, Oliver Tambo and Robert Sobukwe, were to play key roles
later, the first two as heads of the African National Congress, the third of the
Pan Africanist Congress.
I
Initially, maintaining a purist Africanist stance and resisting foreign
ideologies and non-African overtures of co-operation, the "Africanists"
changed their approach as leaders of the ANC. They co-operated with other
resistance groups and accommodated other ideas into their Africanist
4
I
II
framework. Thus the ANC, in co-operation with the Indian Congress,
launched the Defiance of Unjust Laws Campaign in 1952, and admitted
Gandhianism into their political thinking. The ANC had been inspired by the
1946 Indian passive resistance campaign against their racial segregation.
II
!
1
18
The campaign had drawn world attention to colour discrimination when
India had raised the issue at United Nations.
Marxism, however, became the sustaining guide in ANC thinking, and sights
were set on a socialist democracy. As early as 1927, the then president,
James Gumede, after returning from a visit to Moscow, had advocated an
alliance with the South African Communist Party. The ANC, he observed,
had historically depended on Christians and liberals, but this had not helped
the African cause. While his proposal was rejected at the time, the ANC
collaborated effectively with the South African Communist Party from the
1950s onwards and in 1990, two-thirds of its executive members were also
members of the SACP. [ 11]
The Communist Party had contributed significantly to the ICU and crucially
to the organisation of black workers in the forties. The chief organiser of the
1946 mine strike, when 70 000 workers had downed tools, was Moses Kotane,
both a Party and an ANC member. Although white in leadership, the SACP
was overwhelmingly African in membership, and the Africans without
exception, were also members of the ANC. In 1929, the SACP had 1750
members of whom 1 600 were African. At the time of its dissolution in 1950,
(in the face of impending banning), only 400 of its 2 000 members were non-
Africans - 150 being white and 250 Indian. [12]
The Afrikaner Nationalists, assuming power in 1948, began implementing
apartheid laws with disastrous speed. By the nineteen fifties, the population
was racially classified, coupleshaving sex across the colour line even when
married, were spied upon and prosecuted, the urban areas were reclassified
mainly as white and hundreds of thousands of Indians and coloureds had
1^
19
lO
S3
their properties virtually confiscated if these fell in 'white" areas, and were
S)
moved into newly created Indian and coloured areas. Similar forcible
removals occurred of African settlements deemed to be "black spots".
Hi
»
Eventually almost four million people were forcibly moved and relocated: 13%
of the land reserved for Natives were converted into nine homelands, each
with its own legislature and the option to become independent.
>
»
>
The disenfranchised reacted as militantly as they could. Following the
>
Defiance Campaign, the ANC, together with its allied white, Indian and
coloured organisations, mounted the massive Congress of the People at which
the Freedom Charter, outlining the form of liberated South Africa, was
>
adopted. This provoked the government into arresting 156 leaders of the
participating organisations on charges of treason.
)
)
The Freedom Charter, however, also provoked a split within the ANC and
I
the formation of the Pan-Africanist Congress under Robert Sobukwe. The
I
PAC called amass civil disobedience campaign against passes in 1960. At
>
Sharpeville, the military opened fire on peaceful demonstrations, killing 67
I
and injuring 186. Memories of Bullhoek (1921) and Bondelswarts (1922)
resounded in the memories of leaders when similarly defenceless peoples had
I
l
been killed, 63 in the first instance simply for staking their claim to worship
i
on their comonage, and a hundred in the second because they had refused to
I
pay taxes for their dogs. As far as the ANC was concerned, passive resistance
I
J
was over.
20
8.
THE MOVE TO VIOLENCE
Violence and non-violence are not mutually exclusive, it is the predominance
of the one or the other that labels the struggle. There was never a
consciousness, not even in India, about the exclusive use of the one or the
other mode in struggling for independence: it depended very much on
exigence. Thus while the Indian struggle is popularly seen as non-violent,
based on the Gandhian philosophy of Satyagraha, it included prophets
of
violence, and violence also played its role in India’s freedom, and its
transition to independence was unspeakably violent.
Non-Violence
Non-violent resistance against colonialism was initiated in South Africa by
Gandhi during a period straddling the end of the nineteenth
beginning of the twentieth. Regardless of the
i
century and
i
i
measure of its success, it was
i
seen right up to the sixties, as the most feasible, if not the only response to
colonial oppression in Africa.
Kwame Nkrumah acknowledged his indebtness to Gandhi in developing his
strategy of positive action", wrote, "After months of studying Gandhi’s policy
and watching the effect it had, I began to see that, when backed by astrong
political organisation, it could be the solution to the colonial problem."
(1959)[13]
i
Patrice Lumumba categorically condemned violence. "Our weapon is non-
violence because we believe that one can achieve anything through peaceful
means." [14]
l>
21
IJ!
»
Julius Nyerere maintained a cautious note when he emphasised that, "the
preference of every true African patriot has always been for peaceful methods
£
»
of struggle. We abhor the suffering and the terror, and the sheer waste, which
is involved in violent upheavals, and believe that peaceful progress is worth
some sacrifice in terms of time." However, he added, "But when the door of
peaceful progress is slammed shut and bolted, then the struggle must take
b
other forms; ive cannot surrender". (1967) [15]
»
One of the five aims of the original constitution (1958) of the Pan African
b
Freedom Movement of East and Central Africa (PAFMECA), was,
b
»
»
To
champion non-violence in the African national struggle for freedom and
prosperity." Non-violence was also the official stance of the All African
People’s Conference, which, when confronted with the Algerian request for
n
support for their military action against the French,
reaffirmed its
3>
a»
commitment to non-violence and reluctantly conceded support
i®
s9
who are compelled
->
independence and freedom for the people." [16] Its attitude continued to be
to retaliate
against violence
to all those
to attain
national
cautious at its 1961 Conference when it endorsed "the necessity in some
SB
SB
respects to resort to force in order to liquidate colonialism."
Gandhi himself never ruled out violence absolutely and unreservedly. He was
=>
quoted in African circles of having said, "Where choice is set between
cowardice and violence, I would advise violence. This is because he who runs
39
■X9
S»
«•
w
a*
£
away commits mental violence; he has not the courage of facing death by
killing. I would, a thousand times, prefer violence than the emasculation of a
whole race. I prefer to use arms in defence of honour rather than remain the
vile witness of dishonour." [17]
i
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1
22
1
f
PAFMECA abandoned its commitment to non-violence and gave unequivocal
l
i
I
support for the use of violence following on the address of Nelson Mandela in
C
1962, in Addis Ababa. Supporting him, the Malawian delegate declared to
(
c
enthusiastic applause, "Force is the only language that imperialists can hear.
f
No country ever became free without some sort of violence." [18]
(
(
I
Mandela told the Conference:
f
"During the last ten years, the African people in South Africa have
t
(
fought many freedom battles, involving civil disobedience, strikes,
I
<
protest marches, boycotts and demonstrations of all kinds. In all these
(
campaigns, we repeatedly stressed the importance of discipline,
peaceful and non -violent struggle ... because we felt that there
still opportunities for peaceful struggle and we
(
were
I
(
sincerely asked for
(
peaceful changes."
I
t.
South Africa is now a land ruled by the gun. The government iz
is
{
increasing the size of its army, of the navy, of its airforce, and the
<■
police ... Peace in our country must be considered already broken when
(
a minority government maintains its authority over the majority by
(
force and violence."
(
(
I
"In a country where freedom-fighters frequently pay with their very
hves, at a time when the most elaborate military preparations are
i
i
i
being made to crush the people’s struggle, planned acts of sabotage
against government installations introduce a new phase in the political
situation and are a demonstration
of the peoples unshakable
determination to win their freedom whatever the cost may be." [19]
*
I
(
<!
r
b
23
b
i
In 1963, the OAU undertook to finance liberation activities. By then freedom
movements in South Africa, Angola and Mozambique had already embarked
on violence. As Ali Mazuri commented, "African Gandhianism was now
I
I
nearly dead.” [20]
i
It had taken the ANC all of sixty years to reach that position. It had up to
i
that point remained implacably opposed to the use of violence. Unlike the
pre-colonial kings and chiefs who had engaged the British militarily; unlike
Chief Bambatha who, in 1906 had led an armed rebellion against unjust
I
taxation, the old school of civilised Christian leadership had continued to
J
emphasise its loyalty to the British, and later to the South African
'•
government.
I
I
I
I
)
*
[
I
I
b
Despite this abandonment of non-violence, the ANC remained squeamish
about violence and chose sabotage, as Mandela said because nit did not
involve the loss of lives and it offered the best hope for future race
relations. "[21]
The ANC signed a protocol of the Geneva Convention committing itself not to
attack non-combatants and continued its focus on sabotage and instructed its
cadres to avoid civilian targets right up to the Kabwe Conference of 1985,
I
when it relaxed these constraints. [22] Nonetheless, the overall respect for
b
life remained and cadres were instructed to avoid places where civilians
»
congregated, like supermarkets, schools and sports stadiums.
b
h
h
i)
la
I
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1
24
9.
GUERII.I.A WARFARE
Thebeginning of the sixties heralded the guerilla struggle in South Africa
which threw the whole region in a state of unrest for a decade and more and
depleted the resources of the newly liberated states, seriously arresting their
attempts at development and social reconstruction. Southern African could
not be free without the freedom of its southern-most component. It would
take thirty years after most of the other Southern African states became
independent before that most important part of the region would be free.
Organised violence by the colonised against colonial aggression opened in
Southern Africa in 1961, with an explosion in South Africa on a government
installation and a guerilla attack in Angola by Holden Roberta’s FNLA. In
1964, two hundred Frelimo insurgents attacked outposts in Mozambique;
ZANU, led by Joshua Nkomo made its first attack in Zimbabwe in 1967.
i
In Mozambique, the insurgents were organised into one force, Frelimo; in
South Africa the ANC-organised Umkhonto we Sizwe was the dominant
i
I
I
J
force, with the Pan-African!st APLA an attendant one. In Angola there were
three competing forces each with their distinctive African and overseas
supporters and tribal and regional loyalties. The region became a platform
for Soviet-American rivalries, and this was most evident in Angola so that
when Cuban troops moved in to assist the MPLA, the USA backed other
competing guerilla forces, and when the MPLA eventually formed
a
government, she was the only major state which refused to recognise it.
Cuba, Algeria and China provided training and resources: the Soviet Union
was the main supplier of arms to the insurgents. It was then hardly
I
4
25
surprising that a significant part of the Southern African region was
influenced by Marxist-Leninist thought.
Guerilla Insurgents in Angola and Zimbabwe
The war accelerated fairly rapidly in the Portuguese colonies; in Zimbabwe it
became quite fierce from 1972; it remained low level in South Africa. State
reprisals were brutal in all the colonies. In their bids to separate the
insurgents from the people, whole villages were razed, hundreds of thousands
?
of people were forcibly cordoned off into "protected" encampments, and
hundreds of thousands fled into the bordering countries: Tanzania and
Zambia found themselves burdened with huge refugee problems and in
addition, obliged to provide bases for the nationalist militants, which in turn
i
subjected them to vicious reprisal attacks from the Portuguese, Rhodesians
and $outh Africans.
By the mid-seventies, the war was costing the Rhodesian government one
million dollars a day, apart from the loss of production due to the
conscription of civilians; Portugal was s pending 41% of her budget on the war
in 1969, her expenditure on socio-economic development had fallen to 14% in
1968 and the country saw a flight of its labour resource. One and a half
million of her labour force had found jobs abroad, leaving 3.1 million in the
country. [23] While the government remained determined to stamp out the
insurgents, because of the crucial importance of the colonies to her economy,
the people were drained by the war and conditions became so desperate that
it resulted in a coup in 1975. That paved the way to democracy and opened
the way for mass demonstrations in the colonies. There were labour strikes
and peasant uprisings and these combined with the guerilla attacks, foiced
i
26
the pace of decolonisation.
The guerilla insurgents numbered between 8 to 10 000: state forces on the
other hand were 100 000 or more in Zimbabwe, 150 000 in Angola and
Mozambique and the South African Defence Force was estimated at 103 500
4
plus 7 900 conscripts.
(
In Zimbabwe, "negotiations” continued alongside the war as Britain, the
1
United States, the Front Line African states, and even South Africa
1
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(
attempted to broker a settlement from the nineteen sixties onwards.
1
I
(
Sabotage in South Africa
1I
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While the guerilla movements were crucial to the liberation of Zimbabwe,
Angola and Mozambique, the South African movement never reached the
(
capacity to cause a serious threat to the apartheid State.
i
\
i he goal of any guerilla movement would be to set up attack bases within the
4
targeted country. The ANC had little success in this regard. When its
<
numbers were reported to be as high as 10 000, no more than 500 [24] were
operating within the country. The first two years (1961-63) were disastrous,
<
with little to show in terms of ipjury to the system and almost the entire high
i
command and cadres in prison. The Soweto uprising in 1975 provided the
army a new lease, as the world reacted with horror against South African
brutality and youth fleeing police, became ready recruits for Umkhonto. Even
then, the total attacks between 1977 to 1984 were recorded at 279, annual
i
f
t
averages ranging from 13 to 56. [25] They were mostly small scale sabotage
(
I
I
It
27
i®
i
attacks in the black townships, carried out by a few insurgents, using limpet
f
mines, grenades and guns. The exceptions were the 1980 rocket attack on the
Sasolberg synthetic refinery and the 1982 bombing of the Koeberg nuclear
power station. Recorded casualties during that period were 70 MK cadres, 15
I
policemen and 16 civilians, four of them suspected collaborators.
>
9
I
I
I
I
The situation changed in 1985, the attacks were taken into the white areas
and the number of explosions accelerated. The total recorded incidents from
1985-1989 were 1137, the annual number varying from 136 to 281 per
annum; MK casualties, through deaths and capture also rose, 160 in the
eighteen months following 1985. [26] The attacks still remained small-scale
sabotage attacks.
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While MK did not gain militarily, it gained politically. The black people
1
identified with it and saw it as a force the whites had to reckon with; it was a
palpable sign that the ANC was alive and kicking. It helped the internal
a
revolution against the government in the eighties; and the internal unrest in
turn, helped the ANC to make significant gains internationally. President
9
Oliver Tambo was meeting important executives, if not heads of states by the
mid-1980s. Congress was being recognised
h
kla
widely as the legitimate
government in waiting and setting up "consulates" in all the major countries.
Simultaneously, it was building a cadre of administrators to help run the
country when the time came.
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The silence of the black people after the shock of Sharpeville and the banning
J*
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of their organisations broke in 1976, when the police fired on and killed
peacefully demonstrating school children in Soweto against the imposition of
Afrikaans as
the
medium of
instruction.
A powerfully
led
Black
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28
i
Consciousness Movement swept through the country: in Natal, Chief
Buthelezi established the Inkatha Freedom Movement which unfortunately
came into conflict with the anti-apartheid formations. Detentions without
trial, tortures and the killings of detainees, explained away as accidents, the
most notorious being that of Steve Biko, became the order of the day.
It was, however, the youth, brutalised by the police, who mounted the most
potent resistance, making the townships literally ungovernable. Their modus
operand! was consumer, transport and school boycotts and the calling of
national stayaways. The offensives were largely unco-ordinated, sporadic,
undisciplined and poorly planned, due mainly to the need for secrecy and the
consequent lack of consultation with those whose co-operation was sought.
Soviet analysts under-estimated the revolutionary content of these township
boycotts; they saw the "young comrades" as lacking in understanding of
socialism, and doubled that the ANC and CP could control them.
"The process of shaping a revolutionary situation which we now
witness in South Africa is far from being
completed.
Protest
demonstrations are largely confined to African townships. The broad
!
masses often stay aloof. The main participants are students and the
unemployed. The working class has not yet thrown the full measure of
its enormous revolutionary potential into the struggle." [27]
The very uncontrollability of the youth, unleashed a terror the State could
not contain and strengthened sanctions against the economy. Whatever the
shortcomings of the youth, their boycott campaign had a global effect. South
Africa s trading partners lost their confidence in the nationalist state, major
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banks called in their loans and refused to make further loans, and the very
forces that had resisted the calls for sanctions, began applying them because
their pockets were threatened.
The South African government had held the disenfranchised black people of
the country hostage and the West had supported it through arms and capital.
It was precisely because of the link between western capital and apartheid
oppression that the colonised had called for sanctions. While capital creates
jobs, it also creates profit and oppression is linked with the appropriation of
profits. If the profits dried up, racial oppression would also dry up and this
was the hard reality that ultimately forced the western powers to use the
weapon they always possessed to destroy apartheid, economic sanctions. The
Nationalist government was forced to negotiate; the ANC was the key party
with which it had to negotiate.
Adding to the revolt of the youth was the mass civil disobedience campaign
organised by the newly-formed United Democratic Front in the mid-eighties.
The apartheid State, in a bid to arrest the revolutionary tide, introduced a
new constitution which offered Indians and coloureds separate legislatures,
the Africans being deemed to have their own legislatures in their homelands.
The election that followed created space for mass meetings which had been
banned through recurring emergencies: the "space” was used to propagate a
massive boycott campaign.
State reaction to the boycott campaigns were excessive. There were 45 000
detentions during 1984-88 and 4 012 people were killed in political violence.
Ninety percent of the casualties were black, 83.3% of township residents, and
while many were of black-by-black, the majority of the killings were
attributed to the police.
£
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Negotiations
The South African situation was unique in that whereas liberation struggles
throughout Africa and Asia had been against foreign colonisers whose
authority had remained over the country even when the governments were
effectively in the hands of white electorates, in South Africa, the resolution
had to come from within. So in 1990, President De Klerk, momentously and
unexpectedly announced the unbanning oftheANCand of the other banned
organisations and set the stage for negotiation and change.
The negotiation process was long and marked by violence, as the main
contenders tried to strengthen their positions outside the talk table, and
desperate, extremist whites tried
to sabotage the process. Eventually an
interim constitution was hammered out and the Government of National
Unity was formed, with President Mandela at the head. The government is
working well and the credit goes to the people, who, for all the rancor of the
past, are prepared to reconcile and get on with their lives. Their attitude is
that the injustices happened because of the uryust racist system, that system
has now been destroyed and it is upto the people to manifest inter-race
harmony.
The problem today is not of race, but of class. Political freedom has not
brought freedom from want for the poor. The new struggle to be mounted is
the struggle to eliminate poverty.
31
10.
POST INDEPENDENCE
The Economic Position of the Southern African States
Independence has meant the recovery of some lost ground so that material
f
conditions in each of the decolonised countries have shown improvement.
Health, welfare and educational services, where practically non-existent or
peripheral, have been established or improved, per capita incomes have risen
in real terms, though negligibly, and while vast differences remain in urban
1r
and rural standards of living, legislations restricting interflow between these
sectors have been expunged.
Apart from South Africa and Zimbabwe, the latter ironically due to sanctions
in the wake of the Ian Smith’s government’s UDI, the new states have
peripheral industrial sectors and rely on the export of primary mineral and
agricultural products for their revenue. Botswana and Angola with relatively
recent discoveries in mineral wealth, have moved away from their former one
export position.
The SADC countries (Angola, Botswana, Lesotho, Malawi, Mozambique,
Namibia, Mauritius, South Africa, Swaziland, Tanzania and Zimbabwe) are
estimated to account for 40% of Africa’s population, 81% of its GNP, 81% of
the continents total imports and 80% of its total exports. [28]
i
The Southern Africani region is thus the vitals sector of the continent and if
problems of want are ]not solved here, the entire continent can be expected to
< continue in its present state of poverty.
32
{
A common problem with all these countries is economic growth without
f
development. New wealth continues to be siphoned off by the multi-nationals
I
and their local domestic partners, with the people seeing few benefits.
I
While all the countries have had infusions of foreign capital, none have been
t
able to create sufficient jobs to absorb the vast numbers ofjob seekers who
enter the market each day. Mozambique and Lesotho would collapse into
crisis if South Africa did not absorb their "surplus" labour. Most crucial is the
migrant labour sector with all its attendant evils of the breakdown of family
life, traditional sexual morality and the deterioration of the agricultural
economy, for lack of labour.
!
1
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Mozambique exports an average of 100 000 workers per annum to the South
African mines. In terms of a 1928 agreement, the larger part of the wages are
deterred and are paid in gold bullion, fixed at $ 42.2 per ounce. Previously
transferred directly to the vaults of Portugal, they are now sold on behalf of
the Frelimo government by the South African Reserve Bank.
The greater part of the wages earned are in the nature of deferred payments
deposited in the accounts of the respective governments. In 1988, Lesotho
earned R 347.8 million in deferred payment from South Africa, 40-45% of her
GNP is dependant on exporting her labour: Mozambiquan’s earned R 102.7
million, Malawi R 54.8 million and Swaziland R 15.2 million. [29]
I
Apart from these contract workers, there were 1.5 million illegal workers
employed mainly in agriculture in South Africa in 1990. But the job situation
in South Africa, for its own citizens is in bad shape. The n
new economic policy,
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Growth, Employment and Reconstruction (Gear), planned 270 000 jobs per
annum over five years. In 1997, the government was 197 000 jobs off target.
Instead of job creation, the country is suffering job losses. It is estimated that
195 jobs are lost daily in the country due to retrenchments and the
unemployment rate stands at anything upward of thirty or more percent. [30]
I)
It is the unskilled and semi-skilled who are reflected in this figure. Bantu
I
education introduced in 1953 explicitly to keep Africans out of the
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Africans.
I
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mainstream of the economy, is taking its toll. 98% of the unemployed are
t
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While there are buoyant predictions for the Southern African economy,
I
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significant distribution of that capital to the poor. There is great enthusiasm
about the African Stock Exchanges Association (ASEA) and about the
membership of eight of the SADC countries all of whom are making
apprehensible profits - but one may ask again, where do these profits go?
Who are the beneficiaries?
II
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Mozambique and Angola had proclaimed implementation of Marxist-Ler.inist
scientific socialist societies and established authoritarian governments,
concentrated in the central committees of the respective parties, and
nationalisation was pursued where it didn’t affect State coffers. Thus in
i~
Angola, funeral parlors and private medical and legal practices were
nationalised, but not the oil industry involving fifteen foreign companies. Oil
P
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Ir
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through the 12 member Southern African Development Community (SADC),
the recipe is for growth without development, capitalisation without
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accounts for 90% of Angola’s exports and 80% of government revenue. The
government dared not rock the boat.
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Zimbabwe’s commitment to Marxist-Leninist scientific socialism was bridled
■
by the Lancaster House Agreement, in terms of which the position of the land
was negged> to comply with the principle of a willing buyer and willing seller,
!
even though half the land was owned by 4.5% of the population. The same
principle was adopted in South African where only 13% of the land was
allocated to Africans by the former racist government. Angola instituted a
protective clause, recognising, protecting and guarding private property,
including that of foreigners. It is clear that in this very essential respect,
global interests have taken precedence over local.
!
In South Africa, dramatic changes have taken place, and the official face in
government and even in top executive posts in commerce and industry is now
observedly black, but the face of poverty has not changed. Poverty is vast,
and poverty continues to be the monopoly of blacks. There is an emergent
black bourgeoisie, former revolutionaries now in government and business,
and the indications are that they are being absorbed like the neo-colonial
compradors into the privileged class. They have apparently slipped into the
white strata of super-salaries, super-profits and super-perks with no care
about the need for a more equitable balance between "management" and
workers. The new democracy is based on the old capitalist class system, the
difference being the racial integration of a few at the top.
Reconstruction and Development were the common buzz words in all the new
Southern African independent states. The rhet'oric focussed on getting rid of
the colonial baggage that burdened the psyche of the people and inhibited a
just and equitable distribution of the wealth. The ANC, in terms of its
Freedom Charter, adopted in 1955, was committed to certain socialist ideals,
like restoring the "national wealth to the people"-, transferring "the mineral
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35
i
!
wealth beneath the soil, the banks and monopoly industry to the ownership of
>
the people as a whole" and "dividing the land amongst those who work it."
Far from nationalising any sectors of the economy, the ANC dominated
»
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I
government has begun a process of unbundling and privatising some of its
parastatils.
b
The concentration of all resources in the State is certainly not the answer to
b
eliminate poverty. The State, in the final analysis, is the bureaucracy,
I
invisible and heartless. Nationalisation of all assets does not ensure an
I
I
equitable distribution of those assets. The prevailing tyranny of globalisation,
i>
a globalised ideology, globalised media, globalised capital, has blinkered the
t)
l»
vision of alternatives. The reference model of the globalised is the rich and
Id
powerful; to eliminate poverty, the reference model should be the poor, so
that the baggage of colonialism, replete with capitalism, may be truly off
lb
loaded and the national wealth truly transferred to the people through
i:
equitable distribution.
Is
S3
13
IS
[3
w
le
p
lp*
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>1
Footnotes
1.
Morgan, E. Philip, in Gwendolen M. Carter and Patrick O’ Meera (Eds), Southern Africa: The
Continuing Crisis, Indiana University Press, 1979, p.242
2.
Wilson, Monica and Thompson Leonard, The Oxford History of South Africa, Clarendon
Press, 1969, p.430
3.
I
Grundy Kenneth W., Guerilla Struggle in Southern Africa: An Analysis and Preview,
Grossman Publishers, 44 West, 56th Street, New York, NY, 1971, p.92
■
4.
Karis, Thomas and Carter, Gwendolen, From Protest to Challenge -1882-1969, Volume 1,
Hoover University Press, California, 1972, p.35
5.
Grundy, p. 105
Percentages of European population in relation to total population:
>
Angola - 5.5% - total population 5.5 million - 1968
Zimbabwe - 4.4% - total population 5.3 million - 1970
Malawi - 0.2% - total population 4 million - 1966
Zambia - 1.3% - total population 58 351 - 1969
Lesotho - 0.2% - total population 96 9634 - 1966
Botswana - 0.8% - total population 514 378 - 1964
Swaziland - 2% - total population 395 138 - 1966
[Africa South of the Sahara, Europa Publications, London, 1971]
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South Africa - 13.8% - total population 36 million - 1988
[Race
Relations
Survey
1988-1989,
South
African Institute
for
Race
Relations,
Johannesburg, 1989]
7.
Karis, p.181
8.
Karis, Vol.l, p.18
9.
Karis, p.42
10.
Roux, Edward, Time Larger than Rope, University of Wisconsin Press, p.120
11.
Lodge, Tom and Nasson, Bill, All, Here, and Now: Black Politics in South Africa in the 1980s,
South African Update Series, Fort] Foundation, Foreign Policy Association, 1991, p.124
1
37
12.
Karis, p.108
13.
Grundy, p.30
14.
op cit, p.30
16.
op cit, p.32
16.
op cit, p.31
17.
op cit, p.34
18.
op cit, p.32
19.
Meer Fatima, Higher than Hope: An Autobiography of Nelson Mandela, Madiba Publishers,
University of Natal, Durban, 1990, p.203-204
20.
Grundy, p.31
21.
Mandela, No Easy Walk to Freedom, Presidential Address, ANC Transvaal Branch, 1965,
p.175
22.
Lodge, p.181
23.
Carter, p.180
24.
Lodge, p.178
25.
Lodge, p.181
26.
Lodge, p.182
27.
Colin Legum and Stanley Uys reporting on the Soviet-African Conference of peace and Co-
operation and Social Progress, in the Sunday Tribune, June 18, 1987
r
■
28.
Magliolo, Jacques, Towards Democracy, Journal of the Institute for Multi-Party Democracy,
Volume 6, No. 2
29.
Race Relations Survey 1988-1989, South African Institute for Race Relations, Johannesburg,
1989, p.42
30.
h
t
Financial Mail, July 14, 1997
1
38
f
^^conJ iry Sources
1.
Nkrumah Kwame, Ghana: The Autobiography of Kwame Nkrumah, New York: Thomas
Nelson and Sons, 1957
2.
Nyerere Julius, Tanzanian Policy on Foreign Affairs: Address by the President Mwalimu
Julius K. Nyerere, Dar es Salaam, Ministry of Information and Tourism Information
Services Division, 1967, p.9
3.
Mazuri Ali, Violence and Thought: Eseaye on Tensions in Africa, New. York, Humanitaa
Press, 1969, p.36
ii
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INTERNATIONAL CONFERENCE
On
COLONIALISM and GLOBALIZATION
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Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
S
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ABORIGINES AND THE POLITICS OF AUTHENTICITY
IN AUSTRALIA
Dr. Patrick Wolfe
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Post-Colonial Centre, University of Melbourne
Aborigines and the Politics of Authenticity in Australia
Patrick Wolfe
University of Melbourne
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Two issues currently dominate official interchanges between Aborigines and
the Australian state: Land Rights (or Native Title) and the so-called ‘stolen
generations’ of Aboriginal children who were officially abducted in pursuance of a
policy of assimilation that obtained for most of the twentieth century1. In the media
and in most scholarly commentaries, these two issues have been treated separately.
Indeed, it often seems that commentators view them as affecting separate
communities, with Native Title being represented as a question concerning
traditionally-oriented Aboriginal communities in remote outback locations whilst the
stolen children are assumed to have come from ‘detribalised’, ‘urban' or displaced
Aboriginal populations subsisting in the margins of White Australian society. Yet
such distinctions are profoundly misleading, serving as they do to obscure a basic
continuity that has united official policies towards Aborigines from the initial
invasions into the present. Ibis continuity stems from the fundamental fact that all
Aboriginal people confront, which is that Australia is a settler-colonial state.
In contrast to many of the colonial formations represented at this conference,
Aboriginal people have not constituted an oppressed majority on the supply of whose
labour a colonising minority has been vulnerably dependant. The difference is crucial.
I'or Amil Cabral2, for instance, genocide of the natives could only be
counterproductive, creating ‘a void which empties foreign domination of its content
and its object: the dominated people’. Analogously (in this regard at least), when
Frantz Fanon asserted3 that ‘colonization and decolonization are simply a question
relative strength’, he was referring to relative capacities for violence, on which basis
the coloniser was ultimately superfluous. Given certain African contexts, especially
in the 1960s, the material grounds for such optimism can reasonably be credited. But
what if the colonisers are not dependent on native labour? — indeed, what if the
natives themselves have been reduced to a small minority whose survival can hardly
be seen to furnish the colonising society with more than a remission from ideological
embarrassment?
In contrast to franchise or dependent colonies (the British Raj, the Netherlands
East Indies, etc.), settler or creole ones (Australia, Israel, etc.) were not primarily
established to extract surplus value from indigenous labour. Rather, they are premised
on displacing indigenes from (or replacing them on) the land — as Deborah Bird Rose
1
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3
This issue has recently been covered in some depth in the report of a national commission ot
enquiry established by the previous (Labor) government. See Bringing Them Home (Report of
the National Inquiry into the Separation of Aboriginal and Torres Strait Islander Children from
their Families), Canberra, Commonwealth of Australia, 1997.
1973: 40.
1967:47.
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thV distinction
points outh to get in the way, all that the
relationship between Native an
nc
•
were cleared from their land
fiow titrough, particularly m so far as they
Brieny> whilst the
‘miscegenation’ that have been appue
withstand unlimited admixture,
one-drop rule has meant that the^category black can with
a
the category ‘red’ has been high y vu n
rnmrnodified (so that white plantation
situation in which, whilst black labor w
acknowledged (so that white
owners fathered black children), red labor was no
ed). In
/ was
was compromis
compromised),
fathers generated so-called ‘half-bree s; w o^
g
white convicts>
convicts, which
which has
has
Australia, the structural counterparts to African sla
differently '
meant that racial codmg and
have been
between the two countries. W
^m;iarities between the racial calculations
concerned, however, there are substantial si
lndi„enous Case, it is difficult to
on which official policies have been premis .
native since the determinate
speak of an arfieulalion between eolontser and nauee.^ s.n«
articulation is not to a society
organisation. Since U.S
nt
tree y
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^jculition between humans and
“'ega,ive amculatton. Settler
things, this social relationship can b
native societies. The split tensing
colonies were (are) premised on the e imma 10
colonisers come to stay.
neets a aeterm.na.e feam.er. sencontra, for aU the
XZXl‘decolonisation, a. least the iegislators ehMge eoiour.
The cultural logic which is organic to a negative tuticulation is o» of
I
elimination. Once Australian history is
Aboriginal people’s present
the logic of elimination, seemmg y lsp^ . t follows therefore, I shall sketch the
S^rS^em^X settler-colonialism in order to make sense of the
present.
r
sac in the case of the Guanches (indigenous Canary
In its purest form, as in
strives to replace indigenous
Islanders), Tainos, Caribs, etc the logic o e *n"
Australian praclice, this cultural
society with that imported by the colomper .
: use to which the colonised
togicXasaemabsedbyeiriue.^^^
k,
o.; actualised by virtue
land was principally turned '
inherently
tubers, shoots and
territory was i...
;eed's whereby
mdigenoXna
competed
with the
indigenous
1•
*
StVViO
—J
~
to mud.
In a relatively
mud. !„
rdativdy short time,
Indigenous h imans was the i-------
4
1991.46.
e protection was bas.e to the
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pastoral project5. Hence pastoral settlement became a zero-sum conflict whose
violence was neither gratuitous nor random but systemic to settler-colonisation.
None of this should be taken to suggest that Europeans failed to exploit
Aboriginal labour where it suited them to do so. On the contrary, settler colonisation
relied upon Aborigines at every stage and in every site of its development. For
instance, in early Tasmania (Van Diemen’s Land), Aboriginal women were
extensively used for sealing and oyster-diving, while Torres Strait Islands men were
employed as divers on pearl-luggers. Almost everywhere, Aborigines guided,
interpreted for and protected explorers. They cut bark, built fences, dug, planted,
maintained, shepherded, stock-rode, mined and performed every conceivable settler
colonial task except governance6. Above all, they kept house and provided sexual
services, whereby pastoralists 'bred their own labour'7. The north Australian cattle
industry was until recently much more dependent on Aboriginal labour than major
enterprises in other parts of Australia. Most of the north was invaded after the
shipment of convicts had been terminated, so cheap white labour was unavailable. In
remote and (to Europeans) forbiddingly hostile regions, Aborigines were not only
available but, once conquered, were generally willing to accommodate to the new
system so long as it meant that they could remain in their ancestral country. Though
admittedly exceptional, however, the northern cattle industry does not invalidate the
general rule. It merely slowed down its operation somewhat — for instance, no
sooner had equal wages for Aborigines been introduced in die 1960s and 1970s than
Aboriginal labour was dispensed with and relegated to container-settlements at a
revealingly rapid rate (Berndt and Berndt 1987, Drakakis-Smith 1984: 100, Rowse
1993). Thus it is not the case that, in practice, settler-colonisation only eliminated the
natives. It is rather the case that the exploitation of native labour was subordinate to
the primary project of territorial acquisition.
Another important distinction concerns the question of gender. Aboriginal
men and Aboriginal women have in many respects been differently colonised — not
only in terms of sexuality but in terms of their positioning in relation to the European
economy (within or without the domestic sphere, etc.), whilst white men and white
women have invaded in different ways. Such factors can produce practical
contradictions. I will argue below that the single most important contradiction to have
obstructed the logic of elimination was quintessentially gender. This was the sexual
abuse that male colonisers imposed on Aboriginal women everywhere. The
systematic nature of this abuse has prompted some to set up a competition between
territoriality and sexuality so as to champion the priority of their own preferred
determinant, as in Ann McGrath’s partisan claim8 that ‘The women would be fust, the
land next’. Quite apart from its dubious empirical basis (it was certainly not the case.
for instance, when the First Fleet established their fledgling settlement), such a claim
5
6
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8
McGrath 1987:1-23, Reynolds 1981:128-130
See, eg, Beckett 1977, Christie 1979, Curthoys 1982, Evans 1984, Goodnll 1996, Haebich
1989, May 1983; 1986, McGrath 1978; 1987, Pope 1988, Reynolds 1990, Ryan 1981, M
I onkinsun 1988.
Bleakley 1961: 317, McGrath 1987: 68-94, Huggins 1988.
1990:206.
3
misses f’;e foundational genderedness of settler colonialism as a world-historical
project, on which basis it is only to be expected that its contradictions should also
operate in gendered ways9. As a direct articulation to land, which it claims to render
productive, settler-colonialism is gendered in a particularly thoroughgoing way.
Hence the ubiquitous rhetoric of interiors waiting to be opened up, a process in which
the expansion of the frontier figures as a fertilising penetration10. In Judeo-Christian
culture, the theme could hardly run deeper — Eve. after all, means both woman and
land. So far as Australia is concerned, there has been no shortage of gendered
expressions of settler colonialism, as Marcus11, McGrath12, Schaffer13 and others have
shown. In this broadest of senses, the gender of individual Aborigines and individual
colonists becomes irrelevant — Europe is male, the conquered land is female, and
ever the twain shall meet. For historical purposes, however, such metaphors do not
get us very far. They are too general and too archetypal to evince any contingent
development. We need to go beyond the metaphors to discern the social processes
that shape them and give them life in particular contexts. As will become clear, at a
particular stage of its development, colonial strategy in Australia became concentrated
on the colour-coding of bodies that testified to sexual relations between male
colonisers and Aboriginal women. In this most material of contexts, it would be
perverse to try to separate territoriality from gender, since we do not encounter one
without the other.
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Since frontiers moved across Australia from coastal beachheads variously
established over the century following the landing of the First Fleet in 1788, it is not
possible to date the development of Australian settler-colonisation as a whole.
Nonetheless, the primacy of the logic of elimination means that certain key patterns
have consistently dominated the evolution of Aboriginal/European relationships.
Thus it is convenient to organise the establishment and consolidation of Australian
settler-colonisation into a threefold typology of strategic phases that succeeded each
other with a high degree of regularity, though at different times in different parts of
the continent14. For heuristic purposes, I shall term these phases, seizure, carceration
and assimilation respectively. Of these, the first and the last represent opposite ends
of a historical transformation during which Aborigines' relationship to European
society shifted from one of exteriority to one of interiority.
9
10
11
12
13
14
Gender is not, of course, restricted to women. Rather, as Joan Scott so influentially stated (1988:
28-52), it is a way of encoding power relations (a major precedent for this style of analysis was
Ortner 1974). Accordingly — and as we shall see below — we should not conceptualise gender
as being restricted to a realm of signification that can be separated from that of power Rather,
gender happens as power.
“Guiana...”, as Raleigh remarked, “hath yet fier maydenhead” (Montrose 1991: 12). As gender
provides a female model and precedent for the dominated, so, by the same logic, does it
construct the dominator as male — or, in Catherine Hall’s more complete (1992) formulation, as
white, male and middle class.
1988.
1990.
1988.
For alternative typologies for this process, see Beckett 1989; Broome 1982; Drakakis-Smith
1984; Read 1988.
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Seizure
In this phase, during which invading Europeans first confronted Aborigines
defending their territory (or ‘country’), Aboriginal resistance was subverted as a result
of the combined effects of four related agencies: homicide, introduced disease,
starvation and sexual abuse15.
(i) Homicide
Though its duration was conditioned by local ecological factors, this phase was very
short. Europeans hunted down and killed Aborigines to pre-empt attacks on sheep
and cattle. Whilst massacres in the conventional sense — the indiscriminate killings
of numerous people on single occasions — were standard practice, they were not daily
events. Nonetheless, they were continuous with the routine process of casual
homicide whereby Aborigines were killed on sight in the vicinity of sheep or cattle
runs, so the definition of massacre needs to be extended to include a serial or
cumulative dimension.
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ft
b
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A particular feature of the killing of Aboriginal people in this first phase is that
it was quite often carried out by other Aboriginal people, either acting at the behest of
European authorities or defending their own country from invasion by neighbouring
groups who were fleeing from the European front line. It should be borne in mind that
Aborigines were not a single continental society before European colonisation.
Rather, they belonged to a large number of different societies, with different
languages and traditions, whose relations with each other could be cordial, hostile or
indifferent. Indeed, since the very category ‘aboriginal’ only became unitary or
homogeneous in contradistinction to the Europeans, it should be viewed as an artefact
of colonialism. Since the bush skills of Aboriginal people were immeasurably
superior to those of Europeans, Europeans recruited Aboriginal policemen, whom they
provided with horses and firearms for the purpose of tracking down and killing other
groups of Aborigines. Alternatively (or, perhaps, correspondingly), it could be said
that the Aboriginal men involved recruited Europeans to provide them with the
wherewithal to suppress their opponents. The issue has provided a pretext for
conservative historians16 to justify the invasion. Yet their accounts betray a
depressing paucity of historical reflection. It should surely be unnecessary to point out
that the invasion could not but have produced refugee crises in regions where
resources were already subject to unprecedented strain as a result of the
encroachments of sheep and cattle. There are no prima facie grounds for imagining
that the consequences should have differed greatly from ones which have
characterised comparable situations in Europe. The causal chain required to trace
15
16
See, e.g., Budin 1983; Christie 1979; Critchett 1990; Elder 1988, Green 1984; Jenkin 1979;
Loos 1982; Markus 1974; Millis 1992; Pepper and Araugo 1985; Plomley 1991; Reece 1974;
Reid 1982, 1990; Reynolds 1981; Rowley 1970; Turnbull 1948 et al.
See, e.g., Blainey 1975: 108-109, Nance 1981.
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intenigenc?11011065
Eur°Pean agenCy *S hardly t0° lon8 t0 tax a normal historical
(ii) Starvation
Aborigines were generally driven to spear cattle or sheep by desperation It is
hard to improve on the manner in which the settler, anthropologist and Victorian
government official Edward Curr summarised his own first-hand observations:
In the first place the meeting of the Aboriginal tribes of
Australia and the White pioneer, results as a rule in war, which
lasts from six months to ten years, according to the nature of
the country, the amount of settlement which takes place in a
neighbourhood, and the proclivities of the individuals
concerned. When several squatters settle in proximity, and the
country they occupy is easy of access and without fastnesses to
which the Blacks can retreat, the period of warfare is usually
short and the bloodshed not excessive. On the other hand, in
districts which are not easily traversed on horseback, in which
the Whites are few in number and food is procurable by the
Blacks in fastnesses, the term is usually prolonged and the
slaughter more considerable .... The tribe, being threatened
with war by the White stranger, if it attempts to get food in its
own country, and with the same consequences if it intrudes on
the lands of a neighbouring tribe, finds itself reduced to make
choice of certain death from starvation and probable death
from the rifle, and naturally chooses the latter (Curr 1886100-101,103-4).
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(iis) Introduced diseases
I he invaders brought with them a whole range of diseases with which, over the
millennia, they had attained a viable accommodation. Having lived in a highly
insulated continent. Aborigines had not encountered these diseases and had minimal
resistance to them. Smallpox, syphilis, diphtheria, typhoid, measles, dysentery,
influenza, whooping cough, tuberculosis and a range of other exotic diseases ravaged
Aboriginal communities, often simultaneously. Disease travels faster than explorers.
By the time of their first encounter with Europeans, most Aboriginal groups were
already thoroughly weakened by the impact of disease, especially since it was
compounded by starvation. As the First Fleeter David Collins reported of an
expedition to an area that colonists had not previously visited, conducted barely a year
after their initial landing:
!
On visiting Broken Bay, we found that it [smallpox] had not
confined its effects to Port Jackson [Sydney], for in many
places our pathi was covered with skeletons, and the same
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spectacles were to be met with in the hollows of most of the
rocks of that harbour.
(iv) Sexual Abuse
Wherever they went, European men visited their sexual attentions on
Aboriginal women. This provided further grounds for hostilities between Aboriginal
and European men, and contributed significantly to the spread of disease. In a more
general sense, however, as already noted, sexual relations between European men and
Aboriginal women were to become central to Aboriginal/European relations in the
twentieth century, when Australian policies on Aborigines came to be dominated by a
perceived threat that was generally termed 'the half-caste menace'. We shall return to
this issue in relation to the stolen children.
Clearly, these four salient features of the seizure phase were mutually
compounding and, in their combined effects, cataclysmic on a genocidal scale. In the
absence of any credible treaty or resolution, the Australian state continues to be
premised on these foundations.
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Carceration
j
The decimated but largely pacified groups of Aborigines who survived the
disaster of the first phase found themselves reduced to improvising whatever
livelihoods they could in the pores of the alien new society, which generally regarded
them with contempt. As Cherokee leader John Ross observed of the national
mourning that followed the death of the Indian-killer President Andrew Jackson, the
peipetrators of a wrong never forgive their victims. In turn, each of the Australian
colonies introduced measures to confine the surviving Aboriginal remnant' to fixed
ocations, either by the lure of rations or by coercive measures17, a procedure which
whilst no longer directly homicidal, continued the effect, consistent with the logic of
elimination, of vacating Aboriginal country and rendering it available for pastoral
settlement. In keeping with both social-darwinist doctrine and the tangible evidence
°f ^ decimation, these people's sojourn on the missions and reservations where
they had been gathered was seen as a temporary expedient, since they were held to be
a dying race (the evolutionist rationale for this being that, unstiffened by selection
hey w'ould be unfit to survive in the presence of their immeasurably distant future).’
rough couched in philanthropic rhetoric which contrasted strongly with the
homicidal sentiments of the first phase (the missionary role was held out as
smoothing the dying pillow') the premise of the dying race was no less consistent with
the logic of elimination. Missionaries' avowed aim of uplifting and civilising the
natives was also conducive to the legitimization of settler society. On the basis of
rmss.onary rhetoric, colonisation could be held out as bringing salvation to the
Aborigines rather than expropriating them.
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17
See, e g., Attwood 1989, Brock and Kartinyeri 1989, Brook
and Kohen 1991. Christie 1979,
Crjtchett 1980, Gunson 1974, Haebich 1989, Rosser 1978, 1985
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Invariably, missionaries paid particular attention to Aboriginal children,
believing that they had more chance of converting them than older Aborigines who
were already set in their ways. Accordingly, the majority of missionaries sought to
separate Aboriginal children from the influence of their parents and families, placing
them in separate dormitories or even removing them to distant missions in different
peoples countries (in this respect, as will be seen, the missionaries anticipated the
single most destructive feature of twentieth-century Australia’s policy of
assimilation). Since Christianity and European civilisation were seen as closely
linked (there was considerable evangelical debate as to which should come first),
missionaries sought to socialise Aboriginal people into European ways of life as well
as imparting a religious message to them. It was not only cleanliness that was next to
godliness, but industry, sobriety, punctuality, monogamy and a whole range of other
bourgeois-protestant cultural values as well. In Foucauldian fashion, Aborigines were
disciplined to labour by the European clock, their housing arrangements divided them
up into nuclear families, and their marriage partners were often chosen for them by the
missionary. To secure rations, they had to attend frequent church services and submit
to constant surveillance, not only of their personal hygiene but also of their avoidance
of Aboriginal language and ceremony (dancing was particularly proscribed).
Aborigines from a wide range of different localities, language groups and cultural
traditions were shuffled together on missions, so it would in any event have been
difficult for them to maintain their traditions. English was widely used, not only
because it was enforced by the missionaries, but also because it acted as a lingua
franca between different groups. In a thousand different ways, through every detail of
public and private life, missionaries sought comprehensively to remodel Aborigines as
civilised Christian individuals.
Though Aborigines generally succeeded in
frustrating their attempts, they could hardly remain unaffected by such a total
institutional experience, maintained from generation to generation. New solidarities
and collective traditions were built up. Most contemporary Aboriginal people trace
their historical identities back through particular mission communities, which have
now been transformed from places of involuntary confinement to centres of
community life and identity, places where the old people are buried.
■
I he boundaries of the mission were not enough, however, to withstand the
sexual bombardment that white men visited on Aboriginal women everywhere
(indeed, in the case of some missionaries, this emanated from within the mission).
White men s sexual exploitation of Aboriginal women produced offspring who,
growing up as they invariably did wdth their maternal kin, were accounted native
rather than European. Moreover, far from dying out, this section of the native
population threatened to expand exponentially. Crucially, in other words, the sexual
element of the invasion contradicted the logic of elimination (to put it another way,
the behaviour of individual colonisers was bound to negate the interest of
colonisation). In other colonial situations, where native (as opposed to imported)
labour is at a premium, people with combined ancestry can be accounted settlerbecome-nati ve (as in the case of Latin American mestizaje ,8) or something separate
18
Bartra 1992, Ginny and Pagden 1987, MOmer 1967;-1970.
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from either native or settler (as in Collette Guillaumin’s sharp specification19 of South
African ’Coloureds' as a ‘class formed by people belonging in fact to one anJthe other
group [which] is declared to belong to neither one nor the other but to itself). In
Australia, by contrast, as the logic of elimination would indicate, the only category
whose expansion was tolerable was the settler one. In other words
and in stark
distinction to situations in which a metropolitan society depicts itself as being
contaminated from within, as in the case of Nazi Germany — the answer to the
problem of’miscegenation' could only be absorption into the settler category.
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As the nineteenth century progressed, the romance of the dying race steadily
gave way to the spectre of 'the half-caste menace'. Towards the end of the century, a
movement for the federation of the separate Australian colonies gathered momentum.
As envisaged by its predominantly entrepreneurial promoters, federation would
dismantle barriers hindering free trade between the separate Australian colonies, a
development that would prepare the ground for separate nationhood (with dominion
status). At the tum of the twentieth century, this goal was achieved, with the
Commonwealth of Australia being constituted by an act of the British parliament that
took effect from the 1st of January 1901. At this moment, 'Australia' became a
national as well as a geographic entity. This was not a natural convergence. Despite
Australia's insular geography, New Zealand was at one stage to be included in the
federation, whilst, at another, Western Australia was not. Nationalist rhetoric aside,
therefore, before 1901, 'Australia' was a natural rather than a cultural category. Hence
Edward Curr's above-cited book, The Australian Race, published in 1886, was about
Aborigines, who were categorised among the natural features of the landmass on
which the several colonial polities were constituted. Accordingly, at a single stroke
(the last one of 1900) Europeans became, and Aborigines ceased to be, Australians —
an inversion which was formalised by Aboriginal natives' exclusion from the terms of
the new constitution. As if in anticipation of structuralism, therefore, the 'half-caste
menace' straddled the boundary between nature and culture, threatening the basis on
which the citizenship and geography of the new imperialist nation-state were
predicated.
The official response to 'the half-caste menace' was the assimilation policy,
whereby people of mixed descent were not to be accounted Aboriginal — which is to
say, they were to be accounted settler. As administratively implemented, this meant
the separation of people of'mixed race' from their natal kin. /This strategy constitutes
the third phase of Australian settler-colonisation. The first instance of such legislation
occurred in 1886 in the colony of Victoria (the year of Curr's book), when an act was
passed which provided for the expulsion of 'half-castes’ from Aboriginal reserves20.
As federation approached, other Australian colonies began to follow suit. This
process was effectively completed by the outbreak of World War One, the conflict
which, in nationalist mythology, constitutes the national baptism.
i
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20
1988:27.
Attwood 1989: 81-103, Christie 1979: 178-204, Critchett 1980, Wilkinson 1987.
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l or Aborigines, however, the baptism of blood depended on whether or not
their particular portion of it was Tull’. As the new nation and the twentieth century
unfolded, official policy progressively, turned from a negative strategy of expelling
’half-castes’ from reserves (which, so far as it worked at all, only produced ’fringe
camps’ and a rural landscape punctuated by destitute Aborigines shuffling between the
margins of more or less hostile country towns) to a positive strategy whereby the
products of’miscegenation' were taken from their kin and incorporated into the settler
domain21. This strategy was applied to children, whose natal links could more readily
be obliterated. Assuming continued 'miscegenation', the policy of leaving behind a
'full-blood' population as the only officially recognised Aboriginal category would
ensure that this category became an ever-dwindling one. In other words, the
legislation sought to reinstate the dying of the dying race — or, as it was put by J. A.
Cnrrodus, secretary of the Australian government Department of the Interior, at the
national conference which formulated a version of assimilationism for uniform
implementation across all states:
It would be desirable for us to deal first with the people of mixed blood. Ultimately,
if history is repeated, the full bloods will become half-castcs (Commonwealth of
Australia 1937: 21).
We have now moved into the third phase, that of assimilation. Before
analysing its logic, however, it is important to recall that the purpose of this historical
sketch is to establish the connection between Land Rights and the stolen children, the
two issues that arc currently most prominent in official relations between Aborigines
and the Australian government.. As indicated, both derive from the determinate fact
that Australia is a settler-colonial state w'hose dealings with Aborigines are governed
by a logic of elimination. Having proceeded thus far with the argument, it is now
possible to establish this connection in a preliminary way. The logic of elimination,
most crudely manifest in the first phase of territorial seizure, continued into the
second phase, which I have termed carceration. As observed, though associated with
markedly different rhetoric, carceration had the effect, continuous with the homicidal
activities of the first phase, of vacating Aboriginal territory. To establish a link
between carceration and assimilation is, therefore, to establish a continuity between
the seizure stage and assimilation. In so far as the assimilation policy sought to
restore the dying of the drying race by minimising the number of people who might be
accounted Aboriginal, it was no less eliminatory — albeit less crude — than the more
directly physical methods of the first phase. This is not to suggest that assimilation
was less than physical, some mere sleight of bureaucratic tabulation. On the contrary,
children were snatched from schoolyards, torn from their mothers’ arms and
ambushed at play, usually never to be seen again. The point is rather that assimilation
was premised on a classificatory scheme, a definition of authentic Aboriginality, that
would have been altogether superfluous in the first phase. Thus it is important not to
underestimate what is at stake in ‘identity politics’. In aspiring to identify Aborigines
out of existence (or, which is the same thing, to displace them into the past), the
21
See, e g., Beckett 1988, Edwards and Read 1989, Hasiuck 1988, Jacobs 1990, Mulvaney 1989:
199-205, Neville 1947, Read 1983a; 1983b; 1984, Wilkinson 1987.
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Australian state stood to eliminate an alternative claim to its territorial foundations.
On this preliminary basis, therefore, it is plain that Land Rights and the issue of the
stolen children are integrally linked as co-products of the expropriation on which the
Commonwealth of Australia continues to be founded.
Assimilation
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Though the assimilation policy was framed in terms of genetics (blood
quanta), genetic and cultural criteria were interchangeable and mutually supportive —
Teal’ Aborigines had to be both genetically and culturally pure. Those who failed on
either count were disqualified from being officially classified as Abon6mal, a
condition that set in train the machinery of assimilation. In oilier words, authentic
Aboriginality was everything that white Australians were not and vice versa, the two
categories mutually constructed each other. Thus hybridity was repulsive because, in
threatening the black category, it thereby threatened the white one as well. Though
readily obfuscated by ‘race’, the essential feature of European society was not,
however, its colour but the fact that it was tlie expropriating party. Thus ambiguity as
to whether people were whites or Aborigines should be understood as an ambiguity as
to whether or not they were being expropriated, with corresponding implications for
the legitimization of tlie Australian state. Ideologically, therefore, representations
based on race or colour obscure the primary historical relationship of invasion. Given
a dichotomy of white and black, Chinese, Indians and others can be anomalous. But
Chinese and Indian children were not officially abducted on racial grounds, so their
anomalousness was of a secondary order, one peripheral to the primary terms of the
underlying invader/invaded opposition. Where Asians were neither white nor black
but neither, ‘half-castes’ were neither white nor black nor neither. This does not mean
that white Australia was not racist — it simply means that racism which was not
predicated on the invasion (which is to say, racism which was not directed against
Aborigines) was secondary. In other words, Aboriginality is a matter of history;
Aborigines can be defined as that group which settler-colonial society has attempted
to eliminate in situ (other groups have alternative social bases22). In a non-circular
sense, therefore, Aborigines can be designated in terms of the logic of elimination.
Thus the primary object of white-Australian hostility should not be defined in terms of
race or colour but in terms of prior entitlement, of being there from the beginning (ab
origine), a condition that takes us back to the issue of alternative sources of
sovereignty and the legitimization of the settler-colonial slate.
For some purposes, as the contemporary tourist trade, illustrates. Teal’
Aborigines have been valuable to Australia, so long as they have been safely
Tribalised' and tucked away in the outback. But being Tribal' is a cultural rather than a
genetic criterion. This takes us back to the interplay between culture and genetics.
I
22
By the same token, nor could Aborigines be deported or repatriated in the manner of those
Pacific Islanders who were expelled after December 1906 under the terms of the White Australia
Policy (Willard 1974: 182-186). A corollary of the same general point is that, whereas migration
constantly swells the settler population, migration or adoption into Aboriginal societies is
precluded.
11
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Whether culturally or genetically framed, assimilationism set up a dichotomy between
pure black and pure white, and stigmatised everything that lay in between. The two
categories constituted each other: in the period of the White Australia Policy,
assimilationism not only strove to ensure that 'real' Aborigines stayed black - it also
strove to ensure that 'real' Australians stayed white.
In this respect, assimilationism is by no means confined to genetics or to
official legislation. Nor is it a thing of the past. It remains alive and ideologically
potent in both popular and official culture, in the guise of a set of precontact
Aboriginal stereotypes that repetitively circulate in media discourse as well as on the
money, postage stamps and related signatures of the settler-colonial state, even though
that state is predicated on the elimination of those stereotypes' empirical counterparts.
This is because, as Andrew' Lattas23 and others have pointed out, in order to produce a
legitimate narrative that can bind it transcendentally to its territorial base — to make
it, as it were, spring organically from the local soil — the settler state is obliged to
appropriate the symbolism of the very Aboriginality that it has historically effaced.
The Australian dilemma of state-formation is the problem of the fragment: how to be ■
European — i.e., ‘civilised’ — for the purpose of expropriating Aborigines, but
Australian — i.e., not British — for the purpose of national independence? Solutions
to this conundrum included symbolic juxtapositions whose absurdity pre-empted
surrealism — regal insignia in which emus and kangaroos stood in for lions and
unicorns, for example. The serious underside to this symbolism is, however, that it
suppresses the historical process of replacement. A human analogue to the heraldic
kangaroo and emu is provided by the conspicuous inclusion in the architecture of
Canberra's national parliament-house of a Warlpiri totemic design, drawn up by a
Western Desert artist, sanctioned by the ritual owners of the design and turned into a
mosaic by Italian ceramists24. Reportedly, the design's representation of serpents
converging on a waterhole denotes a meeting place at the centre of things. Yet the
remote Western Desert locale from which the design originates is some three thousand
kilomc .es from Canberra, whilst those to whom such events really are central — the
dispossessed Ngunawal (so-called ‘urban’ Aborigines) on whose country the national
capital has been planted — go symbolically unregistered and can only manage a
physical presence about the national capital. Thus the continuing dispossession (cum
welfare-dependency) of historical Aboriginal subjects is effaced by the valorisation of
a snfely remote Aboriginality which, for its part, seals an eternal bond between the
settler-colonial state and the land of the Ngunawal. Hence the romanticised
indigene is stereotype simultaneously performs two vital ideological services —
positively, it grounds the national narrative in the local soil; negatively, it effaces the
disruptive counter-narrative embodied by the dispossessed.
To begin to close the circle: the same ideological structure also characterises
Australian Land Rights and Native Title legislation. Nationally, there are two
legislative bases for Aboriginal Land Rights in Australia. An act passed in 1976
provided for Land Rights to be granted to certain Aboriginal communities in the
23
24
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For details and critiques, see, e.g., Lattas 1990, Werrick 1989
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Northern Territory, though without negating the doctrine of terra nullius (‘land
belonging to no-one’), which provided the legal rationale for the expropriation of
Aborigines. In the wake of the Mabo judgement of the full bench of the Australian
High Court, a more significant act (the Native Title Act) was passed in 1993.
Momentously, the Mabo judgement had invalidated terra nullius and recognised the
unextinguished Native Title to ancestral land of at least some Indigenous Australians.
In the case of both acts, only unalienated Crown land - public land that has not
become private property (or, under some circumstances, been leased) - can be subject
to a claim. In addition to this major restriction of the areas of land that can be
reclaimed, a key feature of both acts is the definitional qualifications that Aboriginal
claimants have to fulfil. In either case (i.e., both in regard to the 1976 Act’s concept
of ‘traditional ownership’ and the 1993 Act’s ‘continuing association’), the requisite
criteria are overwhelmingly ritual/spiritual - as opposed to historical or
pragmatic/economic. Since the majority of Aboriginal people have been driven off
their traditional country and have not been initiated or been able to maintain their site
specific dreamings’, both Acts specify the most restrictive of qualifications, ones that
exclude the bulk of Aboriginal people25. The fundamental political consequence of
these qualifications is that they shift the burden of responsibility from the fact of
expropriation to the character of the expropriated. Indeed, the more that Aboriginal
people have lost through colonisation, the less they stand to gain from this legislation.
The narrative structure should be familiar. Just as the assimilation policy provided for
a dwindling rump of authentic Aborigines in the idiom of genetics (‘full
lloodedness’), so, in a culturalist idiom, Native Title legislation seeks to ensure tliat
authentic Aboriginality (‘traditional ownership’, ‘continuing association’) is only
acknowledged in the most restricted number of cases. Indeed, in a world where the
white suprematism informing the doctrine of terra nullius is becoming increasingly
untenable (especially for an enclaved European outpost in the Pacific), the narrowness
of the Native Title Act’s qualifications suggest that, rather than removing terra nullius,
the legislation could come to be seen as its fulfilment, as marking the point where
terra nullius had completed its historical task.
In providing a minimal concession to Aboriginal rights, Native Title legislation
de-authenticates the principal victims of settler colonialism, the majority of Aboriginal
people whose more thoroughgoing history of dispossession prevents them from
meeting the qualifications.
For these people, whose appalling fourth-world
deprivation constantly threatens Australia with the spectre of international scandal,
measures to improve delivery of health, education, housing and employment
opportunities are projected. In other words, a return on the Native Title concession is
that it depoliticises the dispossession of the majority of Aboriginal people, in
particular the stolen generations and their families, converting their invadedness into a
welfare problem. To return to the question with which we started, therefore, it should
be clear that Native Title and the question of the stolen children are not separate issues
but related aspects of a historical programme which has consistently sought to
eliminate empirical Aboriginal people (as opposed to symbolic stereotypes) from the
settler-colonial polity.
25
For a more detailed early formulation of this argument, see Wolfe 1994: 120-130.
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In 1996, the full bench of the Australian High Court handed down another
significant decision in the Wik case. The question had arisen as to whether pastoral
leases extinguished Native Title in the same way as freehold title did (the land
available for claim, it should be remembered, is restricted to unalienated Crown land,
which excludes land that has been alienated into private hands). The court held that,
in this as in other regards, leaseholds were not the same as freehold; Native Title and
pastoral leases can coexist, with the proviso that, where the two conflict, the pastoral
lease will prevail. The reaction of the current conservative government has been
frenetic. Exploiting an increasingly racist cultural climate, they have introduced
legislation which, if passed, would be tantamount to converting pastoral leases on
Aboriginal land into freehold property. Since some 45% of the Australian mainland is
held as pastoral leases, successful implementation of this legislation would constitute
an overnight land-grab of nearly half the continent, one whose audacity would have
flabbergasted the most rapacious of nineteenth century squatters. In comparison to
this, the scramble for Africa pales to a crawl.
At the time of writing (November 1997), the fate of the Wik legislation is not
clear. In any case, much more will have eventuated by the time of the conference, so
we will be in a better position to assess the issue in Delhi. For the present, however, I
would like to move on to some strategic implications that seem to me to flow from the
foregoing.
Practical Implications
Thus far, I have deliberately refrained from characterising Aboriginal
resistance in favour of analysing the colonial formation that they confront. This is
because none of us at the conference are Aborigines, so it is better for us to
concentrate on what others can do to support them. In any event, after surviving
against apparently impossible odds for over two centuries, Aboriginal people hardly
need tactical advice from outsiders, let alone from a white Australian like myself. If
they feel the need for such advice, they will ask for it.
This notwithstanding, Aboriginal people remain a small demographic minority.
As noted at the outset, the anticolonial resources at their disposal are exclusively
ideological, since, even if they wished to adopt them, neither violence nor the
wholesale withdrawal of their labour would be promising options. The most potent
ideological force available to Aborigines is international opinion, to which Australian
goverrmcr.ts have consistently shown themselves to be acutely sensitive — as well
they mip.ht, given their geographical location as a European colonial enclave deep in
the poslcolonial Pacific.
Taken together, these considerations demonstrate the potential for conferences
like this to provide powerful support for Aboriginal people at a significant juncture in
their long historical struggle against the ravages of Australian colonialism. The
current Australian government, and especially its leader John Howard, have been
14
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astonishingly inept at disguising the racism of their policies. They are particularly
vulnerable to international scrutiny. fortunately, this vulnerability arises at a
particularly enabling moment, since the next Olympic Games are to be held in
Sydney. The effect of sporting boycotts on the morale of the apartheid regime
(another white-settler enclave that found itself beleagured in a postcolonial context) is
well known. Complementary to sporting boycotts are trade sanctions, a prospect that
no Australian government would dare to risk.
An international campaign against the racist policies of the Australian
government would start with the dissemination of information which that government
strives to keep within Australia. Between us, participants in this conference are well
positioned to spread this information widely in Africa and Asia and to encourage
governments, sporting associations and trade delegations to inform the Australian
government that they persist with racist policies at their peril. I hope that, at the
conference, we can establish an international network to liaise with Aboriginal
organisations in Australia. The outcome could well be rapid and emancipatory.
i
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f.?.
h
k.
15
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i
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**41*41*41*******
23
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I
INfERNAlIONAL CONFERENCE
on
COLONIALISM and GLOBALIZATION
Five Centuries after Vasco da Gama
February 2-6, 1998
New Delhi, India
Changing Economic Development Model of China
Fang Cai
Clunese Academy of Social Sciences
/
i
Changing Economic Development Model of China1
I
Fang Cai
Chinese Academy of Social Sciences
I. Introduction
The progress which has come about as a result of China’s economic reform and
development since the late 1970s has received .worldwide attention. In late 1970s, China
started to reform its highly centralized and inefficient economic system. The first step
toward reform was to introduce the household responsibility system in rural areas, to
initiate various reforms that decentralized the decision making authorities to state
enterprises and permitted them to share profits, and to legally allow the existence of non
state enterprises. Accompanying the reform of highly centralized planned allocation
mechanism was the gradual adjustment or partial liberalization of the control over
product and factor prices. I he government also adopted an open-door policy to attract
foreign capital, expand trade volume, allow foreign direct investment, and encourage
investing enterprises of sole proprietorship or joint venture in China.
I he reform in the past decade have increased economic efficiency and adjusted the
economic structure. I he Chinese economy has been transformed horn a ty pical centrally
planned one into one in which the market plays a major role in resource allocation. The
reform has enabled China to become one of the fastest-growing and most robust
economies in the world. During the period 1978-1995, GNP and per capita GNP in teal
term grew, respectively, 9.8 percent and 8.3 percent annually (SSB, 1997), the incidence
of severe poverty in China has fallen from 26 percent in 1978 to 4.7 percent.
!
In the past seveial hundred years, China’s development fell behind that of othei nations.
Why was it able to catch up so fast and achieve tremendous economic progress in just a
decade oi so? Will C hina be able to maintain the momentum of rapid growth so as to
stand at the head of world development in the next century and realize the dream of
becoming a strong nation once again? These are questions to which not only Chinese
politicians and people would like clear answers, but which others are curious about as
well. China is both a developing and a transitional country, lite nature of China’s
successful experiences with development and reform, and the question of whether the
experiences have any general implications, are of great importance to other economies
undergoing similar types of development and transition.
■
One major task of this paper is to answer the question of why China’s economic
development was so slow before reform was implemented, and so rapid afterwards. After
the founding of PRC in 1949, the government explicitly set out to catch up with and
I
1 A great part of this paper is joint work by Justin Yifu Lin, Fang Cai, & Zhou Li ( Lin et al., 1996a, 1996b
)■
1
i
1
mc'Ukc aJeanecJ
in „lt. Wcs,. a„j
cski|)|jsh
an.,1 ms,nlI,hi|i;,i,li,ln f„ 1|lis
•
,
IV|I18 standard remained at subsistence level with little
inprovement throughout the period. Since the reform started, the economy has en oyed a
"s■ '"’Piecedcnted growth rate. An important purpose in this paper is to
su,n'"n"/c De experience of the reform and to explore, through historical comparisons
the reasons it has accelerated economic growth.
mpansons,
^"OlbCpT,CS'i"n
Paper tHcs t0 addl^
<° answer why China’s refer,n has been so
startedSin er'1 e 'C (’'"1
many otller tla'>sitional economies has not. When reform
■ < cd
C Inna, a market economy was not the goal. However during the reform
I
.■Mjd.hshn,™, of a
^^rrXvnm^
...arko, economy have up ,2
, “"“aNiL’l
i™°
" C'lina’ i,S eXperi™ces Reform would
c "relevant to other transmonal economies. However, this paper will reveal that
<1 hough the results of China’s reform, and reforms in the former Soviet Union and
•Atm l.iiropcan economies have been very different, the countries were not
midameiitally different at the outset of their reform periods, or in the final objective of
. mm. he most likely explanation of the dramatic dissimilarity in the results of reform
■ ih<. dillercnces m approach. Iherefore, this paper describes the approach of China’s
----crelorm and explore its implications for other economies mXgoing re^m m
U. reap F„,| Straic;,) a,,,] (bc Tradiiipna, Econ,,,,,,,. s)s(e„,
At the foundmg of the PRC in 1949, the Chinese government inherited a war-torn
ag moan economy m which 89.4 percent of the population resided in rural X and
inc ust.y consisted of only 12.6 percent of the national income. At that lime, a developed
Like go vernmen? ieadem 'in" Ind'ia^ f'b' '"""’"’i
a"d eC0,,0niic achievement.
mdustrS. 'After'
^^ng^^^Jeindus^li^o^
record of mH
I H
',al7 SeCUrity- ,n addj,ion’ l,lc Sovict Union’s outst n.ding
co d of nam.n bmldmg m the 1930s, in contra., to that of the Great Depression in
Dlsrn ma.ket economies, provaded the Chinese leadership with both inspiration and
cxpencnce for adopting a heavy- industry-oriented development strategy. Therefore after
tetovermg from wartime destruction in 1952, the Chinese government^et heavy industry
2
1
as the priority sector of economic development.
1 he goal was to build, as rap db< as
possible, the country's capacity to produce capital goods and military materials.
Ihis
development strategy was implemented through a scries of I i\c Year Plans.
lleav; industry is a capital-intensive sector. I he construction of a heavy mdiistrv project
has three characteristics: (1) it requires long gestation; (2) most equipment for a project,
at least in the initial 'dage. needs to be imported from more advanced economics; and (3)
each project requires a large lump-sum investment. When the (’hincse government
initiated that strategy in the early 1950s, the Chinese economy had three characteristics:
(1) capital was limited and the market interest rate was high; (2) foreign exchange was
scarce .
d expensive because exportable goods wore limited <ind piimaiily consisted of
low-priced agricultural products; and (3) the economic surplus was small and scattered
due ’ > the nature of a poor agrarian economy. Because these characteristics of the Chinese
economy were mismatched with the three characteristics of heavy industry projects,
spontaneous development of c.ipital-intensive industry in the economy was impossible.
Therefore, a set of distorted macro policies was required for the iinplcriKillation of the
strategy.
.At the beginning of the First Five-Year Plan, the government instituted a policies that
depressed interest rate and ovei valued exchange late and distorted input pi Fes -including
nominal wage rate for workers and prices for raw maleiials, cncigy, and tian>portalion--
to reduce the cost for development of heavy induslrv sector.
1 he low micrc.-a rates,
overvalued exchange rates, and low prices for investment products and living necessities
constituted the basic ma<:o-polic\
nvironment under which the hcavv induslrv-oriented
development strategv was implemented.
Ihis macro g'dicy induced a total imbalam.e in the ''"pph ol and <lcm.i:id for credit,
foreign exchange, raw materials, and living necessities. Because non-pr iority sectors
would compete with the pri- rily sector for low-priced resources, a highlv centralized
resource allocation system was then formed, ensuring that limited rcsouices would be
used for the targeted projects. .As a result, the slate monopolized bunks, foieign trade, and
material distribution svMcms.
'I he developmenj strategy and resulting policy environment and allocation .system also
shaped the evolution of entcrpiise and farming institutions.
1 he basic puipose of the
macro-policies was to ma.ximi/u mobilization of scarce resources.
I’o secure cheap
supplies of farm products, and to control over the surplus of agriculture, a People’s
Commune system was established. Meanwhile, private enterprises were nationalized and
newly formed key enterprises were owned by the stale to secure the stale's control over
profits for heavy industry projects.
From the formation process of China's traditional economic system, one can clearly see
that the historical and logical sequence of
events runs from the choice of the heavy
industry-oriented development strategy to the fuimalion of the product and •factor-price*
distorted macro-policy env iionmcnt, the highly cciitrali/cd planned icsoiiicc allocation
3
I
1
'"'ch.inis.n
n
and linally
,|lc
A" r:''1CC'Cd ’
pU|,pel.,;ke
nderonp,,,,
ins,i„„|on
~ono,„ie ra.iLli.y .Z
'i
Ti,,
c
I
»f capl.arinionsive Indus.,y in a eapi.id-sea.ee
a8raX Xy
China was not alone in <'
choosing such an economic system. Similar institutional
arrangements can be found iin other countries when they adopted similar development
strategies. After World War II,
, many socialist countries and newly independent
developing countries, which
„ .
,
are currently undcigoing economic reform or adjustment
adopted a dcvclopnient strategy similar to China’s, and their economic systems have
features SI m ar to China s. Apart from the several reasons discussed previously for
China’s .<■ cc ion o t ic stiategy, there is a number of common theoretical and practical
reasons that contributed to its widespread sele^iom'
.....
U'VOrC"Ca’ and
First to play a pan in the selection of such a development stratcev was ■tbn.m
development strategy
a
•
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!
'
SSESHSSSSSS
achieve np.d eeon(>lmc gr0„.lh a„d climil,alc pow,.|y an<1 backward,““
hh,.i?i
B°V.'r"'”nL At
I
“ c °
''’"ever, developing eoum, A laiLd
(
I
I
I
ioe'iho
by",cvic"slK'klby<
*
!
advanced economies, also had an important impact'on d^tdopiVX^^
J
devaopinen, shaiegy. Unde, ,„e indnenee of Konesian et„o„,“S ^1,;,
influence of Keynesian
I
4
<-
<
i
I
*5
development economics al that time held that the market contained insurmountable
defects and that the government was a powerful means which could be used to
supplement it and accelerate the pace of economic development (Lal, 1985). Looking at
developing countries’ realities from the viewpoint of development economics, many
economists opposed conventional economics; emphasized market imperfection in
developing countries, despite the role of the market and price mechanism; and advocated
the implementation of centralized and detailed planned management so that the national
economy could operate smoothly and reasonably. Because of academic exchanges, the
hiring of economists from developed .counties as economic advisers to developing
countlies, and the participation of international organizations such as the World Bank in
the formation of development policies in developing countries, this tendency greatly
affected the choice of development strategies in the developing countries, which had only
begun to construct their own economies independently.
Because of the influence of the above-mentioned common ideas on the choice of
development strategy, and the impact of the development strategy on the formation of the
macro-policy environment, resource-allocation mechanism, and micro-management
institution, many developing countries -- whether they were socialist countries such as
China, countries of lormcr Soviet Union and Eastern European countries, or non-socialist
developing countries in Asia, and Central and South America -- had a roughly similar
trinity within their traditional economic systems.
first ot all, the logical starling point for such an economic system was the choice of the
leap forward development strategy. China, India, and former Soviet Union were typical
nations which chose the heavy industry-oriented development strategy. Some developing
countries, notably those in Central and South America, called their economic strategy the
import substitution strategy. The heavy industry-oriented strategy and the impoil
substitution strategy arc in essence the same. I lere, we call both leap forward strategy.
Second, the core of this economic system was the price-distorted macro-policy
env iionment, which usually included suppression of the interest rate, exchange rate, raw
material's prices, agricultural prices and so on.
I
I
I
3
I
I
Lastly, the economic system required the use of various regulations, as well as different
types of discrimination and protection, to replace the function of market and price
mcchani in. Those measures carried out the distortion policies included: (1) the
nationalization or pursuance of an exceedingly high proportion of state-ow ned enterprises
to control the lifeline of the economy; (2) the government’s involvement in the allocation
of scarce resources, monopolization of trade, and support of infant • industries by
establishing an industrial protection system and erecting entry barrieis; (3) the adoption of
financial suppicssion, including setting up credit ceilings and restricting Hnancial
activities, so as to give the strategically important priority indusliies preferential credit
5
I
I
conditions, und (4) the adoption ot an urban-biased social welfare policy to encourage
industrial development.
The above discussion shows that the traditional economic system as a result of the leap
forward type of development strategy was not unique to China. It is due to this fact that
the analysis of the formation, consequences and reform process of China’s traditional
economic system has useful implications for other nations which adopted development
strategies similar to China’s and are undergoing their transitional processes.
*
*
HL Process and Logic of China’s Economic Reform
Judging from China’s sector composition, the trinity of the traditional economic system
reached its intended goal of accelerating the development of heavy industry. In the entire
pre-reform period, heavy industry received a lion’s share of the state’s investments. As a
result, the value of heavy industry in the combined total value of agriculture and industry
grew from 15 percent in 1952 to about 40 percent in the 1970s (SSB, 1989). However,
China paid a high price for such an achievement. The economy is very inefficient because
of (1) low allocative efficiency, due to the deviation of the industrial structure from the
pattern dictated by the comparative advantages of the economy, and (2) low technical
efficiency, resulting from manager’s and worker’s low incentives to work (Lin et al.,
1996b). This taught China's leaders that the prevailing economic theories and practices in
China would not lead to its development. In order to develop the economy, it was
imperative to carry out a reform that would change some fundamental aspects of the
traditional economic system.
There are political reasons behind China’s attempt to implement a reform to build its
economy. First, pursuing the heavy industry oriented development strategy did not
achieved the hoped for results. Under this strategy, the gap between China and developed
countries widened. The income level of the population remained low. Daily necessities
were in serious shortage, and several hundred million peasants still lived under the threat
of starvation. After the Cultural Revolution, the national economy was on the verge of
collapse. Second, while China struggled, neighboring economics, especially the
astonishing four Little Dragons, which originally had the same prospects for development
as China, developed rapidly. The difference in the level of development between China
and these economics increased. 'Third, when the new leadership resumed power after
purging the Gang of Four, who were the hand-picked successors of Chairman Mao, they
hoped to offer people a better life so they could strengthen the legitimacy of their
leadership position. Lastly, the problems with the distorted macro-policy environment,
planned resource allocation mechanism, and puppet-like micro-management mechanism
became increasingly apparent as time went by. The opportunity costs of giving up the
traditional economic system became lower and loweL
It is unlikely tint China's leaders had worked out a blueprint when they set out to reform
the economic system (Perkins, 1988). However, retrospectively, China’s transition
followed a logical process that is predictable from the logic which formation of
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traditional economic system followed, lhe trinity of the traditional economic s}stcin is
endogenous to lhe adoption of a heavy industry-oriented strategy in a capital-scarce
economy, lhe main fault in the cconoipic system was low ccorKunic efficiency arising
from structural imbalance and incentive problems. Before the late 1970s, the government
had made several attempts Io address these pioblems by decentralizing the resourceallocative mechanism. However, lhe administrative nature of the allocative .. ■<.clianism
was not changed and lhe policy environment and manag> <1 system were not al'- icd;
thus, lhe attempts to rectify the structural imbalance and improve economic incunlives
failed. What set the reform stalled in 1978 apart from previous attempts were lhe micro
management system refol ms that made faimcis and managcis and workers in slate
unteipriscs partial residual claimants. That small crack in the trinity of the traditional
economic system was eventually pried open, leading to the gradual dismantlement of the
traditional system.
l he most important hange in the micro-management institution was the replacement of
collective farming with a household-based system, now known as the household
responsibility system. In lhe beginning, the government had not intended to change lhe
farming institutions. Although it bad been recognized in 1978 that solving managerial
problems within the collective system was lhe key to improving farmers’ incentive, lhe
official position at that time was still that the collective was to remain the basic unit of
agricultural production. Nevertheless, a small number of collectives, first secretly and
later with the blessing of local authorities, began to try out a system of leasing a
collective’s land and dividing the obligatory procurement quotas to individual households
in the collective. A year later those collectives brought out )ields far larger than those of
other teams. The central authority later conceded die existence of lhe new ‘drm of
farming, but required that it be restricted to poor agricultural regions, mainly to hilly or
mountainous areas, arid to poor collectives in which people had lost confidence in the
collective system. However, this restriction was ignored in most regions. Production
improved after a collective adopted the new system, regajdf • s of its relative wealth or
poverty.
hull oJ’ieial recognition of (lie household responsibility system as a nationally acceptable
farming institution was eventually given in late 1981. By that lime, 45 percent of the
collectives had already Kun dismantled and had instituted the hou>cl old responsibility
system. By the end of 1983, 98 percent of agricultural collectives in (Tana had adopted
the new system. When (he household re.\ >nsibi)ily system fust j-'peared, the land lease
was only one to three years. The shqrt lease educed f imeis’ incentives for landimpruvcmunl investment. The lease contract was allowed to be extended up to 15 years in
1984. In 1993, the government allowed the lease contiact to be extended for .:••• •.other 30
years after the expiration of the first contract.
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Unlike the .spontaneous nature of fanning institution refoiin, the reform in the micro
management institution of (he state enterprises was initiated by the government. Those
reforms have undergone four stages. The first stage (1979-83) emphasized several
important experimental initiatives that wcie intended to enlarge enterprise autonomy and
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expand the role ol financial im'cntivcs wjihin the traditional system. 'I he measures
included the intioduction of pjofit retention and performance-related dmnuses and
permitted the enterprises to produce outside the mandatory slate plan. The enteiprises
involved in exports also wee allowed to retain pait of tlieir foreign exchange earnings for
use al their own discretion. In the second stage (1984-86), the emphasis shifted to a
formalization of the financial obligations of the slate cntcrpiises to the government and
exposed cutcipiisos to maikcl intluem.es. Iiom 1983, profit remittances to the
government were replac' d by a profit tax. In 1984, the government allowed cnlciyiises to
sell output in excess of ■juotas at negotiated prices ..nd to plan their output accordingly,
thus estahlislimg the dual-track price system. During the third stage (1987-92), the
contract responsibility system, which attempted to clarify the authority and
responsibilities of enterprise managers, was formalized and widely adopted. The last
stage (1993- present) attempted to introduce fhe modern • mporatc system to the state
enterprises. In each stage of the reform, the government's intervention was .educed
further and the enterprises gained more autonomy.
The increase in enterprbe autonomy put pressure on the planned di< ibution system.
Because the state cntcrpiises weie allowed to produce outside the mandatory plans, the
cntcrpiises needed to obtain additional inputs and to sell the extra output outside the
planned distribution svstern. Under pressure from be entciprises, material supplies were
progressi\ely delinked from the plan, and retail commerce was gradually deregulated. At
the beginning, certain key inputs remained controlled. Ilowewer, the controlled items
were increasingly reduced. Centralized credit rationing was also delegated to
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at the end of 1984.
An unexpected el feet of the relaxation of the resource allocation system was the rapid
growl!) ul the nonstate sector, especially the township and village enterprises. It has been
recognized that the reforms in the system of micro-management in both agriculture and
industry have created a How of new resources which turned out another condition causing
dcvelHpinent of non^tate sector. I he share of industrial output from noiwtate enterprises
increased from 22.4 percent in 1978 to 71.2 percent in 1996 (SSB, 1997).
Consc'-ucntly. llic raj.id .-iitry of nonslate <.nlupiiscs produced tw- .•fleets on the reforms.First, nom-tate enterprises were the product of markets. Being outsiders to the traditional
economic system, nonstale enterprises had to obtain energy and raw- materials from
competitive maikets, and their products could be sold only to markets. They bad budget
cmvUmints . .. ’ would not survive if their maiijucment was pour. I heir emp’ gees did not
have an “non rice bowl ' and could be filed. As a icsult, the nonstate enterprises were
m^rc prodia tive than the slate enlcrpi r es, as the comparLsons of output growth and total
factor productr by growdi b-Uween the state and collccti-1 seclois show (Woild Rank,
1992). S-cond, the <k\•■lopm.-ut of nonstate sfector siguillcnntly rectified the
mi^allocuUon ■ r resoim * s. In most cases, nonv<-'te enterprises had to pay market prices
lor their inputs; and their pnvlucts were sold at market prices. The ire of market prices
indueed most nonstafe enterprises to adopt labor-intensive technology to concentrate on
labor intensive small iuduMi i<-s. Thciefore, the technological 'ruulure of nom-fate sector
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was consistent with the c»«mpuiali\c advantages ol China's endowment*- 1 he entry of the
new sector mitigated the structural imbalance caused by the heavy mdustry-oriented
h
bim-.cgy.
Changes in the macro-policy environment started in the commodity price system. After
the introduction of profit retention, the enterprises were allowed to produce outside the
mandatory plan. The enterprises first used an informal barter system to obtain t’ c outside
plan inputs and to sell the outside-plan products at premium prices. In the mid 1980s,, the
government introduced the dual-track price system, which allowed the slate enterprises to
sell their output in excess of quotas al market prices and to plait their production
accordingly. The aim of the dual-track price system was to reduce the marginal price
distortion in the stale enterprises’ production decisions while leaving the state a measure
of control over material allocation. By 1994 only 7.2 percent of retail sales were made at
plan prices (Guo, 1995). Which shows that a market mechanism in determining
commodity prices play s a dominant role.
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The second major change in the macro-policy environment O‘.currcd in the foreign
exchange rate policy. A dual rate system was adopted at the beginning of 1981. After
1985, Chinese currency was gradually devalued. Meanwhile, “foreign exchanges
adjustment centers” were established in most provinces in China and more than 80
percent of foreign exchange earnings was swapped in such cuilcis. While (he difference
between swapped and official determined rates were becoming smaller and smaller, the
climax of foreign exchange rale policy reform was made on January 1, 1994, establishing
a managed floating system and unifying the dual rale system
Among the trinity of the traditional economic system, the distorted macro-policv
•cmironment, especially the interest rate policy, was linked most closely to the
development strategy. Therefore, the reform in this area appeared most difficult one.
Interest-rate policy is the least affected area of the traditional macro-policy environment.
Although the government have oeen forced to raise both the loan rates and the savings
rates several times, the rales are now maintained at levels far bellow the market rates.
Nowadays, the state banks are being commercialized, and there have appeared several
new ly formed banks. However, the mentality of the leap forward strategy is deeply rooted
in the mind of China's policy makers. It is likely that administrative interventions in the
financial market w ill linger for an extended period.
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This is how China’s incremental reform has proceeded. The reform is irreversible because
it started with a change in the micro-management institution. Power and benefits given to
enterprises, workers, and farmers cannot be taken away again. Therefore, when the
inconsistency within the trinity of economic system began to cause serious economic
problems, the reform was eventually carried out in such a way that the resource allocation
mechanism and the macro-policy environment were made to adapt to the liberalized
micro-management institutions in spite of govern. .wnt reluctance. Reform has proceeded
in a logically consistent manner, despite ups and downs. Phis fundamentally due to the
fact that the root of every economic problem the reform attempted to solve possessed an
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economic logic of its o\sn. After thorough!) anal)/ing and shmnmiizing (’! iia’s reform*
process, one shall be surprised to discover a splendid blueprint underneath the
incremental transition to a market economy.
IV. What Can We Learn from China’s Experiences?
In contrast to the kind of radical all-encompassing economic reform opted for by many
former central-planning economics and developing countries (the most common type
being the shock therapy approach adopted by Poland and Russia), China has taken an
incremental reform approach. It has been proved that China's reforms have been more
successful than the reforms in other countries in transition. If China's success was mainly
the result of her unique initial conditions, such as a large agricultural sector or relatively
decentralized regional economic structure (for instance, see Sachs and Woo, 1993; Qian
and Xu, 1993), then that success does not have any implications for other economics,
where the initial conditions may be different. However, as discussed'previously, most
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countries that have implemented reform measures have adopted a leap forward strategy
and put into place price-distorting macro-policy environment, a highly centralized
planned resource-allocation mechanism and a micro-management institution devoid of
autonomy, just as China did. All these countries have felt pressures to improve the micro
incentive and managerial efficiency, and have experienced an urgent need’to correct the
distorted industrial structure or to develop suppressed industrial sectors, as well as for the
price signals needed to earn' out such efforts. China’s incremental reform process has •
been quite successful in its initial attempts to accomplish these goals. Thus it should be
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useful to other counties, in the process of implementing reform measures to draw some
lessons from China s experience both of success and unsuccess.
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1. Gradualism and a Pareto improvement
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lhe Big Bang approach begins with price reform and reallocation of the existing stock of
assets instead of reforming the micro-management institution so as to create new stream
of resources, fheiefore, that approach is, of necessity, a non-Parcto improvement and a
non-Kaldor improvement. 2 China’s reform that starts with the micro-management
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institution, that is, which improves the incentive mechanism and efficiency by delegating
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autonomy to and sharing profits with micro units, can accelerate the growth of new
resources and enable the state, enterprises and workers to increase income without
harming anyone. Such a reform is a Pareto improvement. Idle first stage of reform in
China, has resulted in a rapid increase in social wealth which has helped boost the
economy s capacity for compensation during tlie reform process, thus creating the
conditions necessary for the reform of macro-policy environment and making it possible
ior the next stage of reform to assume the nature of a Kaldor improvement. Such a reform
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frel°.improvement. " refers to a change that will benefit al least one person without hurting anyone else,
j-.a’dor improvement ’ refers to a change that will make the number of beneficiaries so much greater than
the numb^^Frlon-beneficiaries that it is possible for beneficiaries to compensate for non-beneficiaries so
that th’ej^r>jill not s’jfien^ee Kaldor ( 1939 ).
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* > avoiding the social shock v.hich could possibly be
is bound to gain their support, thus
caused by the reform of the non--Pareto improvement or non-Kaldor improvement type.
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Tiic lack of autonomy and incentives in the micro-management ’nstitulion is common
among all countries that have adopted the leap forward strategy. Although suppressed
sectors differ from country to country depending on each country s dcxelopment stage
and resource endowment, these sectors still have something in common. First, they had
relatively high price levels. Second, there was a serious shortage of supply. Third, the cost
of entry was low. Because of this, an/ country who has adopted traditional economic
system has chance to expand its suppressed sectors while not resulting in a decline in the
priority sectors because the expansion of the suppressed sectors was supported by a new
stream of resources. And a higher growth rate could be reached because the new stream
of resources was allocated to the more efficient sectors.
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2. Intrinsic logic and irreversibility of the reform
As can be seen, a trinity of traditional economic system is endogenously formed, with a
high degree of ii-lrinsic unity, inseparability among different components, and
adaptability of each component to the whole system. Because of these characteristics,
inconsistency of reform measures could result in a cyclic pattern of growth, w hile a sound
approach of reform would make the reform process irreversible.
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Because reforms in macro-policies, especially those regarding the interest rate, lagged
behind the reforms in the allocation system and micro-management institutions, there
were several economic consequences. The first one was the recurrence of a growth cycle.
Maintaining the interest rate at an artificially low level gave enterprises an incentive to
obtain more credits than the supply permitted. Before the reforms, the excess demands for
credit were suppressed by restrictive central rationing. The delegation of credit approval
authority to local banks in the autumn of 1984 resulted in a rapid expansion of credits and
an investment thrust. As a result, the money supply increased 49.7 percent in 1984
compared with its level in 1983. The inflation rate jumped from less than 3 percent in the
previous years to 8.8 percent in 1985. In 1988 the government’s attempt to liberalize price
control caused a high inflation expectation. The interest rate for savings was not adjusted.
Therefore, panic buying and a mini-bank run occurred. Loans, however, were maintained
at the previously set level. As a consequence, the money supply increased by 47 percent
in 1988. The inflation rate in 1988 reached 18 percent. During the periods of high
inflation, the economy os erheated. A bottleneck in transportation, eneruy, and the supply
of construction materials appeared. Because the government was reluctant to increase the
interest rate as a way of checking the investment thrust, it had to resort to centralized
rationing of credits and direct control of investment projects -- a return to the planned
system. The rationing and controls gave the state sectors a priority position. The pressure
of inflatii'n was reduced, but slower growth followed.
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Although the reforms in the micro-management institution in • meed the p.oductivitv of
of\h‘‘T "1CrCaScd due 10 a rasler inc,easc of'cages and welfare as a result
of the discret.onary behavior of the managers and wmkers in the state enterpX
Thus ore, fiscal income increasingly depended on the nonstate sectors. During the period
of fightenmg state control, the growth rates of the nonstate sectors declined because
access to credits and raw materials were restricted. Such a slowdown in the growth rate
became fiscally unbearable. Therefore, the state was forced to l«ze the
mimst!at,ve controls to makc room for the growth of the nonstate sectors A period of
aster growth followed. Nevertheless, conflicts arose again between the distorted macro
inst'itmion “OnnlCnt
thC 1,be,a!ized alloca,ion mechanism and micro-management
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While meeting the problems caused by reform inconsistency, the government had to
choose between options in order to maintain the integrity of the econoZsXn 1 e
“ wisKmwilh iVT"°"'y
«*» W ta they wodd
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be co nsistent with the macro-policy environment. Ilie other was to deepen reforms to
include the macro-policy environment in order to enable the economic sy/tem to achieve
a new internal consistency on the basis of a market economy. The government on many
occasions, those the first option, but for two reasons this neither achieved the hoped for
result nor could it be sustained. First, the reform of the micro-management institution
enabled SMe eme^se,. peasant and „„„sla,e see.ors
.eqnir®
economic interests to varying degrees, thus becoming the beneficiaries of reforms
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esistancc Second, the rcfoim of micro-management institution brought about impressive
benefichr^of hTr'k
Wh aCqU'rCd ''eS°UrCCS'
',liS ?enSe’ 'Iie S,ale
aiso a
beneficiary of the tiorrn. When state enterpnses were stripped of their autonomy once
again, and when the development of township and village enterprises was conhined
economic growth slowed dramatically and the state’s financial revenue dwindled This
forced the state to decentralize once again, and to take a step forward in the rZ of tile
a
h^hu/thaV ainir?ll,1C'lt 111 °rJer 10 makc ,I1C economic system internally consistent. It
■ thus that Chinas reform has proceeded. Although rer ited setbacks have hilled
piogrcss for brief periods, the general direction of lherefomi is irreversible.
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3. Crossing a chasm in two steps
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Price d^tortion is the major defect of the traditional economic systems of all countries
schedu^? rC?rifi
n’a,,errwhlch refor,n approach was adopted and how the reform
schedule was drafted, price reform or the reform of the macro-policy environment had
occurred sooner or later. Under the shock therapy reform method adopted by E stem
European countries and the former Soviet Union, prices were usually completdy
crosT^'h3 1,1 3 S'n8 £ SteP‘ rhe rcasoning behind this approach was that a person cannJt
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had to tr .r"1 n1 T° StCiPS' I°1lher W°rdS’thC pr'Ce Signal eithcr had 10 be distorted, or it
had to truly reflect supply and demand and the relative scarcity of resources There could
be no m-between. Multiple prices would necessarily lead to multiple rules and multiple
behavioral modes. It was therefore necessary to cross the chasm in just one step
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However, price-distorting macro-policy environment produce corresponding vested
interest groups. To liberalize prices in one step is very risky. In other words, if the gap
between the distorted price and market price is so great that crossing it in one step is
impossible, there is the danger of falling into the chasm.
1 he nsk arises from two sources. First, vested interest groups can oppose the reform. In
China, large and medium-sized state enterprises were the beneficiaries of low factors
prices and low-priced energy and raw materials. Therefore, they were the potential
opponents of price reform. Since the leaders of large and medium-sized state enterprises
h,ad close relationships with government officials, and because they hired large quantities
of workers, they had strong resistance power. Urban residents were the beneficiaries of
low-pnccd consumption goods. They also had close relationships with government
Officials It was cheaper for them to organize, and easier for them to form groups to
oppose the reform. If the losses felt by these two interest groups were great enough and if
tompensaHon was impossible, price reform could not be implemented successfully
Second, pnee reform can lead to a slowdown in economic growth or even to m
economic dechne. lhe correction of price signals will undoubtedly induce enterprises to
eventually become more competitive and lhe resulting production structure will conform
moie closely to the economy's comparative advantage. However, under the traditional
th nr’c '1C dlSl01r“0H ln,pr0ductl0n slructu,e is d^tly related to price distortion. After
he prices are relaxed, the structural adjustment necessarily involves the reallocation of
the existing stock of assets and resources, thus the J-shaped economic growth curve
■which first drops and later rises, or even the L-shaped long-term recession curve, results.
i
andinalKPr'Ce
thC dual’track '^S'^n approach of adjusting plan prices
and allowingmarket prices to emerge alongside with them. First, reform of micro
management institution gave enterprises opportunities to appropriate a portion of the
newly created resources. Correspondingly, the enterprises demanded the righ o alt te
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environment in China lagged behind the i
reform of micro-management institution and
resource-allocation mechanism, the reform
used shows that, at least in this particular i was less risky and less costly. The method
case, crossing a chasm in two steps is possible.
after all/
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V. Conclusion
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Introduction of the paper The oT’-'TT'^ f rm"’" t0
qUCStionS raiscd in the
introduction of reform is the adoZn of 7
7'' S,°W dcve,0Pmen‘ before the
in a capital-scarce economy, anddte key to
"jdust^oriented development strategy
introduced lies in the reform of the trinhv ofthe7m(
T"1*0 8f0Wth af’er reform was
resulted in a better use of China’s 7 7 ,T
economic system, which has
former central planned economies and d^ 7
advanta?cs' rhe experience of other
countries which have opted for the lmn f7 0P?8 C0Un,ries a,so shows lhat all those
unsatisfactory economic performances- andTlHc S'rat°\8y’ Su^er frcr'n '"efficiency and
mechanism to exploit their own comnini’ - (-n0lll|es that have relied on the market
have'achieved rapid economic growth ^fh 7° 3 Van,ages are operating efficiently and
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rerom ■in ,hc
sl,in S5* siX.
some of the institutional arrangements bm nnt T
reason is that the reform of
the various institutional arrangements within the 7^
Ca^cd'ncomPatibilit>' among
cycle lies in extending the refefrm tohe' J t
°my' I,1C
10 ^"mating the
and for all the leap forward development strategy0In^sand abandoning once
China’s reform has proceeded steadily and ; 8 tr P O^.’arious snags a"d setbacks,
As long as the orientation of reform rema' ’ S U lmf,e gOal 1S becoming more evident,
can b/overcome.
mTZTXS '7 d'nkl‘,lieS
thc Pa‘b reform
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C ' sl,PPort sustainable and rapid
economic growth.
similar to that ofprerefonn China- C1 )nHrnatntanCfmPtU,S
10 3n cconornic sy^eni
■■W* .He l^lve
impessitlo
„„ss ,
” aTX I f"
to cross the river ” ( The World Bank, 996b ).
h1^
S'" °r,'h'C"Ch R'P"blic 'te ” “ “
10056
De"g S " " fell'ng llle slones
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productivity; (2) Allow the new stream of resources to be allocated by the autonomous
enterprises outside the plan and at market prices to the suppressed sectors while
maintaining the survival of the old priority sectors with the resources still in ’er the
states plan control, and (?) liberalize the distorted policy environment and planned
allocation system to make th?m consistent with the autonomous micro-management
system when the new stream of resources allocated under the market outweighs the
stream of resources allocated under the plan.
Reference
SSB (Slate Statistical Bureau of China), 1997, A Statistical Survev of China. Beijing:
China Statistical Press.
SSB (Statu Statistical Bureau ol China), 1989, China Statistical Yearbook, Beijing: China
Statistical Press.
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lhe World Bank, 1996, World Development Report 1996, Oxford: Oxford University
Press.
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lhe World Bank, 1992, Reform and Role of the Plan in the 1990s, Washington, D. C.
Lin, Justin Yifu, Fang Cai, and Zhou Li, 1996a, The China Miracle: Development
Strategy and Economic Reform, Hong kong: lhe Chinese University Press.
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Lin, Justin Yifu, Fang Cai, and Zhou Li, 1996b, The Lessons of China’s Transition To a
Market Economy, Cato Journal, Vol. 16, No. 2 (Fall).
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Frank, Andre Grander, et al., 1984, The Issues of Economic Development and Under
development from a Historical Perspective, in Wilber, Charles (cd.). The Political
Economy of Development and Under- development, Pat 2. Beijing: China Social Science
Press.
Lal, Rcepak, 1985, I he Poverty of" Development Economics ", Cambridge, MassHarvard University Press.
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Perkins, D. IL, 1988, Reforming China's Economic System, Journal of Economic
Literature, Vol. 26, No. 2 (June).
Guo, Jianying, 1995, The Changing Shares of Three Types of Prices, China Price, No. 11.
Qian, Y. Y„ and C. G. Xu, 1993, Why China’s Economic Reforms Differ: The M-Form
*
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l uuykxpanshm of the Nonsiatc Sector, I he Economics of Transition,
vol. I, No. 2 (June).
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Sachs, J. D., and W. I. Woo, 1993, Structural factors in the I-conornic Reforms of China,
Eastern Europe and the Former Soviet Union, paper presented at the Economic Policy
Panel \'ceting, Brussels, Belgium, October.
Kaldor, N., 1939, Welfare Propositions of Economics and Interpersonal Comparisons of
Utility, Economic Journal, Vol. 49 (September).
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