The Sorrows of Empire (43 page)

What began as a poorly conceived program of emergency measures for debtor countries early in the 1980s slowly matured into the hard orthodoxy of the “Washington Consensus” in the 1990s. The U.S. government
became determined to impose neoliberal economics on every country on earth. To do so, it unveiled its master plan, the “Uruguay Round” of international trade negotiations (1986 to 1994), and its crown jewel, created on January 1,1995, the World Trade Organization (WTO). Acting in compliance with a seemingly innocent effort to create a common set of trade rules for all and to bring agriculture under such rules for the first time, “many developing countries discovered that in signing on to the WTO, they had,” as Bello put it, “signed away their right to development.”
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It should be understood that there was no need to create the WTO. There was no crisis in international commerce between 1986 and 1994 that required rectification. International trade was expanding nicely under the GATT formula. The WTO was created because the United States discovered that it could be created. Concretely, it had two objectives: to try to manage the growing trade rivalry among the leading industrial countries, particularly the United States, the European Union, and Japan, and to ensure that the Third World was prevented from using trade as a legitimate instrument for its industrialization, thereby threatening the neoliberal global economic structure. The United States achieved the latter objective through the Agreement on Agriculture and the Trade-Related Intellectual Property Rights Agreement, two of the pacts that the Uruguay Round delivered in 1995 to the WTO to enforce.

Prior to the World Trade Organization, agriculture had for all intents and purposes been outside the purview of GATT because the United States had long threatened to withdraw if it was not allowed to continue protecting domestic sugar, dairy products, and other agricultural commodities. To head off an explosion, GATT simply decided not to enforce any rules on agriculture. By the 1970s, however, Europe had become a net food exporter, and competition between the two agricultural superpowers, the European Union and the United States, was growing ever fiercer. Both wanted to force open the Third World as a new market for agricultural exports. To do this, they had to put the farmers of poor countries out of business and replace them with giant agrobusinesses. In the Uruguay Round of agricultural negotiations, the European Union and the United States excluded all representatives of the Third World and agreed
between themselves on rules covering agriculture. In the Blair House Agreement of 1992-93, they prohibited the Third World from protecting its agriculture but exempted their own subsidies because these were already in place before the agreement was concluded. Unsurprisingly, a huge surge of agricultural imports then poured into developing countries without a commensurate increase in their exports. This intrusion produced a flight into Third World cities by displaced agricultural workers, an ever-greater concentration of land holdings, and a marked rise in rural violence as local farmers tried to protect their way of life.

In the late 1990s, under the European Union’s Common Agricultural Program, the fifteen EU countries spent $42 billion annually subsidizing their farmers, while they allocated to the Third World only $30 billion in developmental aid for all purposes. The level of overall subsidization of agriculture in Western countries rose from $182 billion in 1995, when the WTO was born, to $280 billion in 1997, and $362 billion in 1998. By 2002, European Union subsidies to agriculture were six times the total amount of foreign aid that all rich countries gave to the poor.
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The result in the First World was the overproduction of a vast range of agricultural products, including cereals, beef, pork, milk, butter, tomatoes, sunflower oil, and sugar. These commodities were then unceremoniously “dumped” (that is, sold below the costs of production) in developing countries. Joseph Stiglitz’s conclusion is unavoidable: “The well-to-do countries that officially praise free trade frequently use tariffs and subsidies to limit imports from poor countries, depriving them of the trade they need to relieve poverty and pursue their own economic growth.”
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Having deprived the Third World countries of access to agricultural subsidies and crippled their ability to build competitive industries, the WTO proceeded to prevent them from using the foreign technology employed by the industrialized nations and to lock in the monopoly profits of companies that owned patents on indispensable products such as medicines. The Trade-Related Intellectual Property Rights Agreement (TRIPS), which instituted these barriers, proved to be a gold mine for transnational corporations. Its purpose was to prevent developing countries from copying or stealing proprietary technology in the same manner the currently advanced countries had done in their processes of economic
growth. The agreement provides transnational corporations with a minimum patent protection of twenty years and places the burden of proof in a dispute on the presumed violator. It is a clear example of the rich nations kicking away the ladder to keep poor nations from catching up.

The chief profiteers have been American and European pharmaceutical companies and agrobusiness conglomerates. On the drug front, Third World countries have demanded that they be allowed to import or manufacture cheap generic copies of patented medicines to deal with acute public health problems, something currently barred by the WTO. All members of the WTO except the United States have in fact favored relaxing a strict interpretation of TRIPS for medicines. The United States instead demands that exemptions be restricted to treatments for AIDS, malaria, tuberculosis, and a few tropical diseases, claiming that the pharmaceutical industry must continue to receive high prices in order to finance future research.
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With regard to agriculture, the TRIPS system has for the first time given corporations the right to patent life-forms, particularly seeds. Companies that produce genetically modified food (what the Europeans call “Frankenfood”) lobbied strenuously for this provision. Monsanto, for example, holds the patent on Roundup Ready soybean seeds, which, until recently, tolerated Monsanto’s weed-killing herbicide Roundup.
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Monsanto is a major player in the corn and soybean markets in North America, Latin America, and Asia and in the European wheat market; one of the ways it and other companies, such as Novartis and DuPont, use the TRIPS system is to develop and patent genetically modified plants that will not produce seeds for succeeding years’ crops and that must be fertilized with expensive products made by those same companies. These corporations are thus in a position to extract monopoly profits from poor countries by dominating their agricultural sectors and dictating what they will eat, if they eat at all.

Another abuse of the TRIPS system has come to be called “biopiracy.” In this practice, some firms and universities obtain patents on plants that Third World countries have known about and used, often for centuries, and then extract royalties if these countries want to continue growing them. A classic case was the 1997 attempt of RiceTec, Inc., of Alvin, Texas, to patent a hybrid of India’s basmati rice, which has been harvested for
two centuries throughout the subcontinent; so far its patent is good only in the United States and has been universally denounced by the Third World.
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Given these abuses of medical and agricultural technology, even some supporters of the WTO now argue that it would have been better not to include agriculture in its purview and not to extend patent rights over life-forms.

In all, the WTO system that came into being in 1995 is a deceptive but extremely effective tool of economic imperialism wielded by rich nations against poor ones. Within a few years after it was launched, however, the system started to fall apart. Post-September 11, the overemphasis on militarism and unilateralism in the United States has radically weakened the effectiveness of international law, eroding the facade of legality that supports the WTO rules. At the same time, the interests of American militarists and economic globalists have begun to clash, particularly over the rise of an obvious future superpower—China. The economic globalists have invested more heavily in manufacturing in China than in any other place outside the Anglo-American world. The militarists, on the other hand, are already plotting to contain China, militarily if necessary, to decide future global supremacy.

Moreover, as the Bush administration declared “war on terrorism,” it discovered that globalization was as helpful to terrorists trying to launder their money and finance their militants as it was to capitalist speculators. So it began to tighten its grip on, restrict, or close down various channels of American economic interaction with the rest of the world, including access to our universities by students from the Third World. This trend suggests that globalization, at least as it was promoted in the 1990s, may enjoy a rather short life.

Perhaps the first clear sign that globalization and the WTO were in trouble was the Asian financial collapse of 1997. The Clinton administration had put the smaller economies of East Asia under tremendous pressure to accept neoliberalism, particularly to open up their financial sectors to foreign participation. None of the East Asian countries truly believed this was a good idea, and none of them realized what was necessary in the way of bank supervision and regulation of capital markets in order to operate an American-style economy and prevent a crash, but favorable
credit ratings and access to markets required cooperation with Washington. Moreover, foreign investors did not care about the outcome; after the U.S. government’s bailout of Mexico in 1994-95, most investors concluded that the U.S.-IMF combination would not permit major defaults in emerging markets, and so capital poured in from all over the world.

Once these smaller nations were loaded up with debt and announced that they would have trouble meeting their repayment schedules, the foreign capital fled even faster than it had arrived. Starting with Thailand, then proceeding to Indonesia and South Korea, most of Asia’s economies suddenly were teetering on the edge of default and had to implore the IMF for help. The IMF imposed draconian reforms as a precondition for its loans, prompting a full-blown political crisis that led to the revolutionary overthrow of the government of Indonesia. A permanent and deep-seated hostility to the IMF, the World Bank, and the United States spread slowly and quietly across East Asia.
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American globalists did everything in their power to divert blame for the East Asian collapse away from its proxies, the IMF and World Bank, and to keep it from tarnishing globalization itself. They argued that the cause of the collapse was Asian corruption, which they termed crony capitalism—meaning insider dealing and a lack of transparency—a phrase originally invented by the Filipinos to describe their own Marcos regime.

One of the few East Asian countries to emerge from the crisis unscathed, indeed in better shape, was Malaysia, and its success in standing up to Washington’s neoliberal “remedies” helped discredit globalization still further. Mahathir Mohamad, the Malaysian prime minister, resisted the demands of the IMF and quickly restored capital controls over his economy. The fraternity of international economists declared that he was committing commercial suicide. He, in turn, accused Western powers and speculators like George Soros of manipulating markets and currencies in order to destroy healthy East Asian economies. This charge greatly irritated Thomas Friedman, a columnist for the
New York Times
and author of a best-selling paean to globalization,
The Lexus and the Olive Tree.
Friedman gibed, “Excuse me, Mahathir, but what planet are you living on? You talk about participating in globalization as if it were a choice you had. Globalization isn’t a choice. It’s a reality.... And the
most basic truth about globalization is this:
No one is in charge....
We all want to believe that someone is in charge and responsible. But the global marketplace today is an Electronic Herd of often anonymous stock, bond, and currency traders and multinational investors, connected by screens and networks.”
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Two years later in Seattle, to the apoplectic fury of Friedman and other neoliberal apologists, a coalition of nongovernmental organizations began to put names and faces on this electronic herd of politicians and IMF and World Bank officials who were responsible for globalization and who, they argued, ought to be held accountable for its consequences.

Even more disconcerting to Anglo-American globalists, Third World poverty grew faster after the creation of the WTO. Corruption was certainly one factor. For example, Raul Salinas, the brother of the former president of Mexico, siphoned $87 million out of his country through Citibank accounts in New York, Switzerland, and London. Sani Abacha, Nigeria’s former dictator, looted his nation of $110 million, also laundered for him by Citibank. One authority estimates that Carlos Menem, president of Argentina from 1989 to 1999, collected close to $1 billion in bribes during his two terms in office.
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The poor countries’ domestic and administrative structures were another factor; these nations lacked, according to Peru’s de Rivero, “both the middle class and the national market they needed in order to be governable and viable.”
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In 1999, at the WTO’s third ministerial conference in Seattle, a coalition of people with experience in Third World development programs—environmentalists, trade unionists, anarchists, and some Americans concerned about the role of the “sole remaining superpower”—advanced an alternative explanation for Third World poverty, finally unmasking the imperial, expansionist motives behind neoliberal theory. They emphasized the absence of democracy within the IMF, the World Bank, and the WTO: IMF voting rules, they pointed out, are rigged so that only the richest countries have any influence; the United States reserves the right to name the president of the World Bank; and the WTO takes decisions based on “consensus” whereby any rich nation that does not join the consensus has a de facto veto.
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