Ismail Lagardien: Neo-colonialism returning?
The French poet and essayist, Charles Baudelaire, once wrote that the greatest trick that the devil ever pulled was convincing the world he didn’t exist. Applying this (loosely) to political economic public policy-making: just when we thought it was safe to go outside, neo-liberal orthodoxy has crept out of the shadows to frighten us – again! But seriously, while the world is seeking new and better answers for enduring problems there appears to be a slide backward to a time of rigid orthodoxy. This seems apparent with the appointment of Paul Romer as chief economist of the World Bank, from whence orthodoxy on global public policy-making and development comes. Let us recap. The portmanteau concept of neo-liberalism includes slashing social spending, focusing economic output on direct export and resource extraction, devaluing currencies against the US dollar, lifting import and export restrictions, increasing stability of investment (achieved, in part, by supplementing foreign direct investment with the opening of domestic stock markets), balancing budgets and cutting down on public expenditure, removing price controls and state subsidies, privatisation and/or divestiture of all or part of state-owned enterprises and strengthening the legal rights of foreign investors. In the briefest, neo-liberalism insists on deregulation and “getting the state out of the way” so that markets can work competitively and efficiently. That, anyway, is what textbooks teach, notwithstanding what happens in the real world. This orthodoxy came under extreme pressure in the 1990s. Its allure began to fade considerably when new evidence emerged (from the successes of the East Asian Tigers) that there was, indeed, a role for the state in expanding the economy, creating jobs, lifting the population out of poverty, ensuring more equitable and inclusive growth, and providing access to the most basic public services. One of the bank’s former chief economists, Joe Stiglitz, had great difficulty convincing people at the bank and International Monetary Fund (IMF) of this during his tenure – which ended in 2001. For the record, I served in Stiglitz’s office at the bank, and have some understanding of the tensions between the bank, the IMF and elements in the US government. Anyway, over the past decade, neo-liberal orthodoxy was battered further when the 2007-08 crisis left it fairly tattered. Even the most mainstream of scholars and thinkers recognised this. The European world’s darling economist, Paul Krugman, wrote that economists had been “seduced by the vision of a perfect, frictionless market system” and were blind “to the possibility of catastrophic failures in a market economy”. Alan Greenspan, who served as US chairman of the Federal Reserve from 1987 to 2006, admitted, in 2008, to a state of “shocked disbelief” because “the whole intellectual edifice [had] collapsed”. In October that year, he also admitted to the US Congress that his ideological obsession with deregulation was, well, faulty.
And so, 15 years after Stiglitz’s departure from the bank, and everything that his tenure promised, and just when we thought it was safe to go outside, neo-liberalism is back, this time bearing the sceptre of empire. This is, of course, a somewhat radical expression. Bear with me. When a very mainstream, and rather status quo, source publishes a foreboding article about the bank’s new chief economist, we ought to pay attention. Romer’s main shtick is convincing poor countries to sell tracts of land to foreigners, who should be allowed to create “charter cities” where domestic laws are denuded. The Atlantic magazine – as mainstream as they come – described Romer’s idea of charter cities as “unconventional, even neo-colonial” and compared it to Britain’s historic lease of Hong Kong. Citing a Columbia University professor of urban planning, The Atlantic wrote: “Romer makes it sound as though setting up a charter city is like setting up a fairground . . . We take a clear piece of land, we turn on the bright lights and we create this separate environment that will stand apart from everything that’s around it. I wish it were that simple.” Anyone who has visited casino complexes around the country, and hyper-real spaces like Melrose Arch in Johannesburg, may recognise this. The differences between places like casino complexes and charter cities, however, is that in casino complexes, domestic laws take precedence, in charter cities they are virtually absent. Come to think of it, that does sound like neo-colonialism. It would be disingenuous to ignore Romer’s stellar contributions to theories of growth. He is, probably, one of the better mainstream economists of his generation. This does not mean that he is exempt from the intellectual influences of his peers. You do not become chief economist of the bank by stepping out of the mainstream. Stiglitz learned this the hard way. What is cause for concern, for South Africa, at least, is that Romer’s “charter cities” idea feeds seamlessly into the creation of the envisaged “market-driven” city that the Chinese have planned for Gauteng. It also feeds into the idea of creating tariff-free and duty-free zones where a country’s labour laws have little to no effect. As for the charter cities idea, well, we can always boast that we did not need Romer to tell us about it. We were there first.
