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ECONOMICS – THE BIG PICTURE (PART II)

July 3, 2015

ECONOMICS  – THE BIG PICTURE (PART II)

If, as appears to be our destiny, we either are or are shortly to be world citizens by necessity, then it is time to start thinking like world citizens, and if we do, many of the parochial views we now hold will have to be either altered or jettisoned altogether. Sachs writes that the twenty-first century will overturn many of our basic assumptions about economic life, that the twentieth century saw the end of European dominance of global politics and economics and that the twenty-first century will see the end of American dominance, citing the rising influence of emerging economies of China, India and Brazil.

However, more will be involved in the new world order than a mere rebalancing of economics and politics among different parts of the world. The challenges to development economists and indeed all of us will be how to do what we must in order to enjoy sustainable development, which will include such essential initiatives as protecting the environment, stabilizing the world’s population, narrowing the gaps between rich and poor, and ending extreme poverty. Our current means of enforcing “peace and prosperity” with troops is not only a proven failure and counter-productive; it is also far more expensive than investments in such countries’ citizens with aid for their health, advanced agricultural practices, basic infrastructure etc. To be sure, merely defanging our military in the face of any threat to our petroleum security and the terrors of communism will not be enough in this brave new world where everyone is a “world citizen.” We should send targeted aid to our fellow world citizens, not troops.

We in this country are going to have to come to understand that for a market economy to work it must be regulated and guided by overarching principles of social justice and environmental stewardship, and not only in this country but globally. Sachs notes in this connection that our global society in the twenty-first century “will flourish or perish according to our ability to find common ground across the world on a set of shared objectives and on the practical means to achieve them,” writing further that “the pressures of scarce energy resources, growing environmental stresses, a rising global population, legal and illegal mass migration, shifting economic power, and vast inequalities of income are too great to be left to naked market forces and untrammeled geopolitical competition among nations.”

He is right. Troops and strutting politicians have a sorry record in solving the world’s problems or even the specific problem a “successful” war was supposed to solve (see Iraq, Afghanistan et al.), and the idea since Adam Smith that market forces could sort out and solve our economic problems if left alone has repeatedly been disproven. International politics and economics are far beyond solution by “the market” in all events. Such efforts are reserved to government, not GE or Chambers of Commerce. We have serious problems confronting us on a global level and the market with its overriding profit motive is not and cannot be motivated to solve them for the good of all. They are in business for themselves.

Sachs incisively notes that “These problems will not solve themselves. A world of untrammeled market forces and competing nation-states offers no automatic solutions to the harrowing and increasing difficulties. Ecological conditions will be worsened, not improved, by the rapid economic growth that is under way in most of the world unless that growth is channeled by active public policies into resource-saving or sustainable technologies. . . . Market forces alone will not overcome poverty traps.”

So why is it deemed necessary by many in the rich countries to send troops into failing and violence-ridden states (other than for oil and preservation of the status quo, whatever that status quo may happen to be)? Violence is the result and not the cause of such breakdowns and is fueled by extreme poverty and a bulging increase in the population of young men ready to join revolutions in the hazy hope they can escape the hopelessness of their dire poverty. We could much more cheaply and fairly provide aid to such failing nation-states out front and remove the grounds for a “troops first” policy.

Our “troops first” policy has been a patchwork of Band-Aid failures in any event. Such “policies” have just recently supported bin Laden during the Russian invasion of Afghanistan and Saddam Hussein during the Iraq-Iran War of the early 1980s – both of whom were on the CIA payroll (though Reagan and Ollie North found a way to cooperate with the mullahs of Iran when ferrying Iranian arms to the Contras in the Iran-Contra scandal) – but that was yesterday. We have since killed bin Laden and Hussein. (?)

Does aid work to further economic recovery and development and thus contribute to the long-term stability and goodwill of the countries in question, or (as with present-day Israel and Egypt) is it just a payoff to allies and not a true instrument of development? Do you help only your friends? Aid works, and you help former enemies as well as your friends. Consider the following statement of George C. Marshall, who after WW II recognized that aid to Europe would be vital for achieving American postwar political goals: “It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace. Our policy is directed not against any country or doctrine but against hunger, poverty, desperation, and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist. Such assistance, I am convinced, must not be on a piecemeal basis as various crises develop.” So did aid work? Marshall was clairvoyant – it worked beyond expectations. Europe recovered quickly and is now prosperous and the home of several countries who by the Treaty of Maastricht in 1992 now have a common currency and an European Union that contributes more in aid to poor countries than we do.

One more quote in this connection seems pertinent here. The National Security Strategy statement of 2006 on the linkage between aid and overseas stability reads as follows: “Effective economic development advances our national security by helping promote responsible sovereignty, not permanent dependency. Weak and impoverished states and ungoverned areas are not only a threat to their people and a burden on regional economies, but are also susceptible to exploitation by terrorists, tyrants, and international criminals. We will work to bolster threatened states, provide relief in times of crisis, and build capacity in developing states to increase their progress.” We know that aid works and wars don’t, and yet we poor-mouth aid and lavish appropriations on “defense” budgets with a “troops first” policy on the apparent theory that you can beat poor people into democracy (though it has yet to happen in history). We have ignored the startling success of the example given us by the Marshall Plan some seventy years ago. What are we thinking – or are we? When do we exit our Stone Age mindsets?

As we enter this new world (in which we are citizens whether we like it or not if we are to survive), I think that to succeed we have much rethinking and repositioning to do free of posturing and greed and all within a spirit of cooperation rather than one of a naysayer – so let’s get on with it.    GERALD     E

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