Globalization the Theory vs. Globalization the Reality — A Preview

Some readers may notice that I haven’t been writing as much this past couple of weeks as earlier. One reason, happily, is the easing of Bolivia’s various political crises of the past month. The other reason is that I am up to my neck in writing a major report that The Democracy Center will release soon. It is the carefully documented story of how International Monetary Fund-forced budget cuts and tax hikes led to a national rebellion here in Bolivia that left 33 people dead. That happened exactly two years ago this month.

We have been at this report for a while. I have interviewed President Carlos Mesa, IMF officials, a well-known international economist, and many others at length. We’ve also immersed ourselves in the views of social movement leaders, the testimony of victims and their families, and dozens of tedious policy papers. I am grateful for the aid of two stellar volunteers, Carolyn Claridge and Nicholas Verbon of the University of Washington, who are helping us here.

So much of the debate about the World Bank and IMF, from both sides, is abstract and rhetorical. Once again Bolivia provides a story of what these global policies mean on the ground, for real people, living in the real world. We plan to release the report in Bolivia and in Washington in connection with the joint IMF/World Bank meetings in April.

Meanwhile, as a preview, I thought I’d share a pair of economic declarations that speak volumes about the gap between what conservative, pro-market economic reforms were supposed to bring to Bolivia and what really happened. This is an important point. I have come to the conclusion, after studying these issues for a long while, that the split over globalization is not so much about left vs. right but about the world of theory vs. the world of reality.

Here is that theory vs. reality come to life in Bolivia.

Here is what the IMF, World Bank and Bolivian government jointly predicted, in 1998, about the rosy economic results that would come from privatizing oil, water, electrical service and other state-owned companies, as well as other pro-market reforms:

“… a significant reduction in poverty by 2002 through faster economic growth and stronger social programs. Specifically, the program aims to raise economic growth from 4½ percent in 1998 to 5½– 6 percent by 2001, reduce inflation gradually to 5 percent in 2001, achieve moderate gains in reserves, and keep the external current account deficit on a sustainable path.

Here is what the Bolivian government reported back to the IMF four years later about the actual results:

Economic growth averaged only 1½ percent a year in 1999-2002. The resulting fall in per capita income and employment, and the contraction of the informal economy owing in part to the coca eradication campaign, have contributed to rising social tensions that erupted recently. Moreover, the weak economy has undermined government revenues, raised the fiscal deficit, and placed a heavy financing burden on the public sector. The prolonged economic stagnation has also weakened the financial and corporate sectors.

As I wrote about the El Alto water revolt, the reason that Bolivians are so suspicious about the World Bank’s and IMF’s economic prescriptions of privatization, budget cutting, and the like is not because of either stupidity or ideological blindness. It is because, in point of fact, it hasn’t worked.

We will have a lot more to say about all of this shortly when we release our report.