Review: “The Economic of Empire: Notes on the Washington Consensus”

Review of:
Finnegan, William. “The Economics of Empire: Notes on the Washington Consensus,” Harper’s Magazine, May 2003, 41-54.

How does Finnegan explain the failure of development and what does he see as the essential factors for development to succeed?

Finnegan’s article is one of the best selections we’ve had to read this course. He exposes the problems of globalization and blind worship of capitalism. I love the term “market fundamentalism.” It seems to describe the blind adherence perfectly. I’ve mentioned in other classes that I think we’re living in an era of fundamentalism and that the conflict between fundamentalism and moderation is deeper than the surface conflicts between countries, cultures, or religion. Let’s face it, Ian Paisley, Jerry Falwell, Wahhabi fundamentalists and fundamentalist ayatollahs have more in common with each other that moderate members of the same countries.

Capitalism is not evil, it is not inherently bad, but the deification of Adam Smith and the etching of market economics into stones from Sinai make it almost impossible to criticize. No one complains when critics point out the positives of capitalism, but if one points out the negatives, they are labeled a communist or some other McCarthy-like response. Rarely are the critiques answered on their merits. The most powerful statement Finnegan makes is that market fundamentalism “is not an ideology of freedom or democracy. It is a system of control. It is an economics of empire” (Paragraph 8).

If the proponents of market fundamentalism called it what it is, a system of economic control, then it would be more easy to accept. Then, thinkers could debate the positives and negatives of empire. However, the continued farce that we’re democratizing and opening up the world for everyone’s benefit is a joke. Yes, as Finnegan says in paragraph 22, there are good people who genuinely believe that what they’re doing is good, but being genuine doesn’t mean that a) you’re right or b) that the system is genuine.

Finnegan uses Bolivia as his main example, but leaves it to discuss similar catastrophes of market fundamentalism in Argentina, Mexico, Haiti, and then back to Bolivia. It’s interesting that Finnegan laments Evo Moralas failed election bid, but of course Moralas did now just win the 2005 election. I wonder what Finnegan’s take on this would be?

Finnegan shows how globalism hurts not just the countries that the US pretends to helps (the Haiti story was horrible, paragraph 47), but also how it hurts Americans as well. Paragraph 21 illuminates corporate welfare at its worse, hurting US taxpayers. Paragraph 42 continues, specifically with argribusiness welfare, which is the hot topic in the WTO.

The tariff inequality of paragraph 48, policy changes in paragraph 60, and the military faux pas in 58 all come together when Finnegan makes the point in paragraph 65: “More poignantly transnational capital always has its own logic and pursues its own ends. While we make the world safe for multinational corporation, it is by no mean s clear that they intend to return the favor.” That’s a scary idea.

Paragraph 34 shows that downsizing didn’t mean that jobs were going overseas, but that jobs were just plain disappearing.

Finnegan also points out that not all ‘growth’ is positive. Not only does he discuss environmental problems, but his reference to Clifford Cobb’s quote was very funny (Para. 30).

Again, back to the nature of debate. The market fundamentalists always attack the messenger and never listen to the message: they believe that “Attacking America is, therefore, attacking the theory, and attacking the theory is attacking America (Para.4). On the other hand, Finnegan specifically goes out of his way to say that the financial system was not always negative. In paragraph 17, he points out that the system was originally designed for post-war Europe and that after the Marshal Plan made the system redundant that it became negative with MacNamara’s overexpansion in from 68-81 and that in the eighties market fundamentalists completely “changed their [the IMF/WB’s] operating philosophies (Para.19).

Finally, in paragraphs 45 and 49, Finnegan shows that free trade is a myth…no one actually practices free trade and especially not the US who preaches it to the rest of the world. Implicitly, Finnegan asks if we don’t practice it, then why do we demand others do?

In paragraph 20, I’m not sure Finnegan’s use of the poverty numbers is fair. He seems to be forgetting % of total population. I think that in addressing tax policy (Para.29) and negative aspects of growth (Para. 30), Finnegan goes a little too far…in stretching his argument; he looses his focus on the main issue of market fundamentalism. Also, he really only dealt with the extras in two paragraphs, so its not completely laid out and thus easier for readers to dismiss or critics to tear apart.

Since Finnegan offers a blistering critique of international financial networks and institutional failures, how will these systems need to adapt to meet the immediate economic challenges of the present?

Not to take the easy way, but reading Finnegan, I’m not sure there is a) a desire on the part of the US/IMF/WB to adapt or b) even if there is, its seems almost impossible.

To answer this impossibility, I think I’ll have to couple part of the first question “what does Finnegan see as the essential factors for development to succeed” together with part of this second question “how will these systems need to adapt to meet the immediate economic challenges of the present?”
In the only places that economical development has truly succeeded (post-WWII), the countries ignored IMF/WB/US recommendations, rules, and guidelines. Paragraph’s 26 and 27 illustrate how SK, Taiwan, Singapore, Thailand and Malaysia raised tariffs, local content laws and used state planning.

If Finnegan’s assessment is accurate though, other nation-states will probably not be able to replicate this program because now because MNCs have gotten wise and set up their businesses so as not to set up future rivals (Paragraphs 29 and 30).

The difference between Latin America and East Asia are once again very appropriate for this discussion. Some point squarely at government leadership; I think this flows with what Finnegan writes. Latin American officials were more willing to go along with IMF/WB/US recommendations and became more under the control of the US and MNCs whereas East Asia did it their way and thus have escaped as much control. I wonder, though, how Finnegan would include the Asian financial collapse in this article?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s