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Second Bush term: The economic agenda
FEW can doubt the economic agenda of the Second Bush Administration. It is to take forward Globalisation and make it prevail everywhere, in all its major aspects. It comprises privatisation, de-regulation and freest possible international trade; its central tenet is opening up: all national currencies must become commodities to be freely traded at market-determined prices; free movement of capital is another facet of opening up. In other words, globalisation demands free convertibility of currencies at least on capital account, though if current account convertibility can also be ensured, so much the better.
As for free trade among nations, it is an old hat. They are beating this drum since Adam Smith's day. Today it means low or no tariffs and no government intervention to influence prices through subsidies or price controls, including national currency values that must freely float: the true value of the currency will be determined by the market. Gone are the older concepts of currency being the storehouse of national wealth or as a fair measure of individual success or failure. Stable currency values can arguably give a fillip to all round develop-
ment.
Free trade, like absolute virtue or other good things, is susceptible to mishaps. All of the third world, as former colonies of Europeans, has experienced the benefits of free trade for centuries; colonialists rigged the market, prices, and the terms of trade so that "free trade arrangements" between their metropolitan centre and peripheral markets resulted in metropolitan imperialists being enriched by pauperising the captive markets.
Literature on the subject is conclusive. With rich imperialists' ability to determine metropolitan exports' prices as also of their imports, free trade became a fraud of mercilessly exploiting the poor primary producers of colonies. Why does nobody talk of the terms of trade today or examine what makes free trade actually unfair?
Realities speak for themselves. Free trade is now the mantra of powerful governments. WTO, World Bank and IMF ensure that poor in ex-colonies end all subsidies on pain of no loans; i.e. with no option but to fall in line. Look at US and EU subsidies for agriculture and hidden ones on their exports, also found in OECD countries for agriculture;
they also erect non-tariff barriers on foreign goods; third world exports are disadvantaged. This tragic farce -- the stated belief in free trade -coexists with practices in OECD economies of protecting own exports while rendering third world's exports less competitive. It happens daily. Can OECD countries' agricultural subsidies and scarcely hidden discrimination against poor countries' exports disappear by the conduct of G8 or G9, WTO, IFIs (international financial institutions),
UNCTAD, OECD and other agencies? Fat chance of that.
International economy is likely to go on dealing a bad hand to poor nations. The latter is too weak to resist or force a change in the system. Some western countries like UK and Germany are mounting a campaign for "reducing" poverty and disease, especially in Africa. Isn't it vote-catching altruism in domestic politics? How much can be achieved in Africa? Altruistic speeches lead to some ad hoc loans on soft terms (especially debt reschedulings) and some small grants. Would debt rescheduling reduce African poverty? Perish the thought, the broad picture of third world and Africa will be much the
same after these palliatives.
Let's focus on what is required of Bush government to improve American economy in coming years. Most look at the strength of American economy. It constitutes 27 per cent world economy. Its resource base is astonishingly rich. The US is the mightiest power. And yet areas of uncertainty are frequently ignored. For more attaining power and riches, it has limited its trading advantage to the cutting edge of high technology -- some for civilian
but mostly for military uses. Its manufacturers are less efficient today; it imports consumer goods, including durables, from China, Japan and Asian Far East, running up huge trade deficit.
A few figures will illustrate the holes in American economy's armour. Its negative trade balance is $ 653.8 billion; its current account deficit is $ 603.2 billion or 5.5 per cent of the GDP; the dollar, despite being reserve and chief trading currency, has been in a free fall. Dollar's fall relative to Euro, Yen, Pound Sterling is wellknown. These deficits show that dollar as world currency is becoming incompatible with being a national one. They also have made the US the biggest
debtor. Its net foreign liabilities are 24 per cent of GDP. Now, these deficits make dollar weak and less desired; hence its precipitate fall in value. Fearing a possible run on dollar, the US was forced to raise interest rates to make it worthwhile for foreigners to go on holding dollar assets. Budget deficit last year was 4.4 per cent of GDP.
That carries a cost. Economic transactions, including investments, become too expensive. Growth rates suffer; recessionary
trends get encouraged. In order to preserve foreign dollar-dominated assets US treasury now pays considerably more. The US stock markets have been for sometime wobbly. Jobs are hard to come by; growth suffers. This can cause unrest. The only element of US strength comprises its capital account balance that causes no worry.
Since America's trading advantage is now high technology, mostly for military purposes, the US effort to remake the world has to be in a way that would increase the demand for its high-tech goods; it will need perhaps newly stricken countries to buy them. Corporate America, especially oil and war
industries, has benefited from Afghanistan and Iraq operations. In fact, these big interests had it very good. Insofar as the Bush government loves oil and war industries -and it does -- its preferred method to benefit them will have to be more Afghanistans and Iraqs in future.
Foregoing enunciation of the Bush government's general mission for the next four years made in the Jan 20 inaugural and later the State of the Union report is clear enough. Given this proven methodology, it seems that, one way or another, more Afghanistans and Iraqs may be on their way. The context of his strong desire to bring the blessings of democracy to more states is in tune with the conduct hitherto. Bush has given a broad indication of who his next victims may be: Syria, Iran and North Korea. There is not much about the UN or international law, the way world body was pushed aside for Iraq war in his inaugural or State of the Union. Nor did he involve UN in Afghanistan; lately though he has realised its utility.
Two points emerge. Realism suggests that the Bush plate is full with Iraq; spare troops in reserve are scarce. Even the US cannot have more Iraqs. World opinion wouldn't permit and an imperial overstretch might overtake. Bush may find he faces a dilemma: not following it up with new Iraqs may make his economic troubles worse by sheer weight of current policies while undertaking aggressively the programme of forcing tyrannical regimes to embrace elections may be difficult but at least it promises some economic goodies in the end.
MB Naqvi is a leading columist in Pakistan.