World Development Report 2020: Ideological Bankruptcy of Neoliberalism - P J James
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19 December 2019

The theoretical incapacity of standard neoclassical-neoliberal economics in analysing current international economic problems with country-specificities and in formulating appropriate policy prescriptions is not at all a new issue. And, in spite of the presence of innumerable economic research institutions having close proximity with neoliberal regimes, none of them is capable to offer any policy alternative to the irreversible crisis confronting the global economy today. This ideological bankruptcy of neoliberalism is self-evident in the 2020 World Development Report (WDR: Trading for Development in the Age of Global Value Chains) released by World Bank, the premier international body in charge of designing the basic contours of development policy, especially for the so called ‘developing world’.

The core theme of this year’s WDR centres around what is called Global Value Chains (GVCs) defined as “the full range of activities that are required to bring a product from its conception, through its design, its sourced raw materials and intermediate inputs its marketing, its distribution and its support to the final consumer.” Identifying GVCs as the new mantra of development, the World Bank proposes it as the available and affordable path for Afro-Asian-Latin American countries “to boost growth, create better jobs, and reduce poverty provided that developing countries undertake deeper reforms and industrial countries pursue open, predictable polices.” And the advice that is doled out to backward countries for achieving this GVC-led growth path is in conformity with the standard neoliberal prescriptions in coordination with other neoliberal agencies like WTO, MIGA (Multilateral Investment Guarantee Agency of the World Bank group) and MNCs. As a whole, WDR unravels a labour-intensive trade-led growth path for developing countries through the setting up of SEZs to be achieved through a whole set of neoliberal policies such as investor-friendly reforms, liberal FDI, tax and labour regimes and other structural reforms.

In fact, much before the World Bank discovery of GVCs, the 2013 UNCTAD Report has also taken up the issue of GVC contribution to development, though in a less enthusiastic way. For UNCTAD which still bears a reformist camouflage, GVC forms only one part of a country’s overall development strategy on account of its several negative impacts such as harmful effects on environment and social condition, global relocation of production by “GVC governors”  (a euphemism for MNCs), intensified exploitation of workforce, especially of female workers and other risks.  On the other hand, the World Bank being ranged along with IMF and WTO, the other two neocolonial-neoliberal pillars, is very much enthusiastic about the upgrading prospects of GVCs for developing countries on the pattern of the East Asian countries.

However, the most conspicuous aspect in relation to the proposal of GVCs as the new medicine for the economic backwardness of dependent countries is the presentation of the phenomenon as a new-found one. To be precise, internationalisation of production and global assembly lines have been the most prominent trends in international economy for almost half-a-century. Through the invention of  a new nomenclature of ‘global value chains’, the World Bank and other neoliberal agencies are simply trying to posit it as a new conceptualisation which is nothing but ‘the old wine in a new bottle’.  For the very definition and all the various features that the World Bank (and UNCTAD) includes in its conceptualisation of GVCs have been there since the late 1960s and 1970s. And the new nomenclature of GVC is only to cover up the theoretical failure of neoliberal centres in identifying the issue at the appropriate time.  

As a matter of fact, all the features identified by WDR 2020 in the new formulation of GVCs are integrally connected with a fundamental transformation in the global capital accumulation process that yielded the requisite material foundations for envisaging neoliberalism following the advent of the structural crisis called stagflation of the 1970s. It is a pity that neoliberal experts are very late in identifying the emergence of a whole set of new technologies pertaining to production and processing, transportation, information and communication since the late 1960s that immensely facilitated a dislocation and restructuring of the erstwhile centralized and nation-centred basis of production. This started altering the very structural foundations of international economy almost five decades back. The development and refinement of new production and processing technologies enabled MNCs to have a multi-stage decomposition of production and transplant different stages of production to remote global destinations using unskilled labourers who could easily be trained to perform even complex operations. Today the World Bank through its new conceptualisation on GVC is just trying to give a new interpretation as if it is a new thing.

The export-led development trajectory implicit in the formulation of GVCs that WDR 2020 suggests for backward countries is the very same panacea recommended in the 1970s by several agencies like UNIDO (United Nations Industrial Development Organisation) through a revival of the neoclassical slogan of “trade as an engine of growth” (see, for instance, “Redeployment of Industries from Developed to Developing Countries”, unido.org/publications/1979). This was in the context of the collapse of the euphoria associated with international Keynesianism and loss of faith in “import-substitution industrialisation” strategy together with the discrediting of the slogans like ‘welfare state’, ‘state-led development’, ‘public sector’, ‘self-reliance’, etc. in the neocolonially dependent Afro-Asian-Latin American countries. Thus, taking advantage of the emergence of new production technologies and post-Fordist organisation of production, replacing the import-substitution strategy, a new paradigm of “export-oriented industrialisation” was put forward for backward countries.

UNIDO was in the forefront of this neoclassical strategy with the slogan of “trade as an engine of growth”. Poor countries with their inexorable and inexhaustible source of cheap labour were exhorted to fall in line with the ‘new international division of labour’ and ‘global assembly lines’ to move towards an ideal situation of an integrated international economy so that backward economies, with the help of MNCs, could increase production, remove unemployment, boost export earnings, and overcome balance of crisis for ever. The UNIDO even went to the extent of characterising export-oriented industrialisation as a step towards interdependence between the rich and the poor countries, and a hopeful sign that MNCs and developing countries can work together for mutual benefits.  Neocolonially dependent countries were asked to skip over the period of protectionist policies of import substitution and to throw open their economies for free trade and uninterrupted flows of both FDI and portfolio capital. As Keynesian illusions came to an end, neoliberal economists pleaded for unhindered entry of MNCs in the EPZs, FTZs, SEZs and similar export enclaves created in dependent countries in view of the possibilities emerging from global relocation of production. Along with imperialist centres, diehard anti-communists and neoclassical economists like Hla Mynt of the London School of Economics came forward advocating a liberal and flexible labour, tax and environmental regime in poor countries for the implementation of this imperialist-dependent new export-led strategy.

The outcome of this super-imposed, cheap labour based, export-oriented strategy was a gruesome situation in the 1980s called “lost decade” manifested through a deplorable impact on the social and human development indicators of Afro-Asian Latin American countries as measured by UN agencies themselves. The ruling regimes of backward countries started building up the economic infrastructures and social overheads for transforming specific regions or even the entire country as cheap “export platforms”.  Highways and industrial roads connecting “export zones”, luxurious hotels, golf courses, amusement parks, townships, etc. sprang up forcibly displacing indigenous and aboriginal peoples from their habitat.  MNCs, their junior local partners, money spinning speculators, etc. who are in search of making a fast buck flocked to these export zones for the uncontrolled exploitation especially of women and children.  Large scale evictions and displacement of people in the name of export oriented industrialization had become a regular feature in all neocolonial countries since the 1980s. The FDI that came in to the processing industries in the export enclaves of  ‘developing’ countries did not create any linkage effect in the economy; rather it resulted in an increase in social inequalities and widespread poverty in poor countries.

Ironically, at this critical juncture of the second decade of the 21st century when world economy is in recession, having no worthwhile alternative to put forward, the World Bank in its WDR 2020 is simply reviving this beaten track of export-driven growth in the new garb of “GVCs coordinated across geographies”, in the form of a new thesis. The international fragmentation of production or what is called relocation of production to neocolonially dependent countries aimed at the super-exploitation of the vast majority of low-paid informal/unorganised workforce there that the World Bank now proposes is an already failed project. Outsourcing, division, categorization, and fragmentation of workforce,  availability of wide  variety of consumer products, market diversification, autonomous profit centres and  network systems, etc.—a process that came to be characterized as internationalization of production—all that World Bank explains with new jargons have been there for decades. The much trumpeted “East Asian Miracle” associated with that of “Asian Tigers” that it highlights in WDR has ended up as a tragedy in the past decade itself. Western MNCs and corporate speculators were the gainers of that model.

In this context, the “GVC-driven success of China” that is “delivered by combining competitive costs of production with high technology” (quotes from WDR 2020) that World Bank experts suggest as a model to be emulated by other countries needs a bit clarification.  Unlike countries like India that depends on imperialist powers for capital, technology, expertise and policy prescription, after embracing capitalist path since the late 1970s, China transformed itself in to a bureaucratic state monopoly capitalism with Chinese characteristics. As an independent state-capitalist power standing on its own legs eventually transforming itself in to an imperialist power, China could effectively appropriate the gains from the inflow of massive FDI in to the cheap labour-based SEZs that generated around 60 percent of the Chinese GDP by the end of the 1990s. Effectively competing with US imperialism and other Western powers, Chinese monopolies were exporting capital to more than 100 countries (around 130 as of now) by the turn of the 21st century. No doubt, the working class, the peasants and the broad masses pay the price for China’s “success story” which World Bank highlights. All the remnants of erstwhile socialist achievements including the “iron rice bowl” being dismantled, China is subjected to all evils of uneven development associated with neoliberalism.  Tens of millions displaced from self-reliant and self-sufficient communes swelling the ranks of the “reserve army” of unemployed provided the badly needed cheapest labour for super-exploitation by both Chinese and foreign capital in flourishing EPZs. Suffice it to say that similar to other neoliberal societies, large sections of Chinese people are also subjected to extreme forms of misery, destitution, corruption, sex trade, cultural degradation and so on.  Hence the World Bank appeal towards poor countries to uphold China as an example in making use of GVCs “to boost growth, create better jobs, and reduce poverty” and “to catch up with richer countries” is only a pipedream and quite irrelevant to the context.

On the other hand, being the core neo-colonial institution (World Bank-IMF-WTO trio together) still controlled by US, the supreme global arbiter, World Bank is duty-bound to act as a facilitator of capital accumulation at a time when world economy is in an irreversible crisis. Through the misnomer of GVCs, the World Bank through its regional subsidiaries like the Asian Development Bank, African Development Bank, Inter-American Development Bank, etc. is working overtime to facilitate the large-scale transplantation of “global assembly lines” of production and trade controlled by MNCs to dependent cheap labour economies. Under the cover of expert opinions and through policy guidelines, pliable regimes are manipulated to super-impose pro-corporate laws pertaining to ease of doing business, flexible labour, environmental and tax regulations and similar other investor-friendly measures required for eliminating “local obstacles” for the refashioned operations and globalised capital streams of MNCs under the garb of GVCs.  But instead of any improvement in the living conditions, the masses are increasingly subjected to extreme forms of deprivation, plunder inequality and poverty everywhere. In brief, the academic prognosis on GVCs now put forward By World Bank, rather than contributing anything in the direction of uplifting the broad masses of people, will be another tool in the hands of neoliberal experts and policy makers obstructing any efforts towards a pro-people development that is sustainable in the long run.  

The Communist movement in India has a history of almost a century after the salvos of October Revolution in Russia brought Marxism-Leninism to the people of India who were engaged in the national liberation struggle against the British colonialists. It is a complex and chequered history.