New world economic order under fire again at Davos 2001

Ensuring Socio-economic Justice

Rahhalah Haqq

Dhu al-Qa'dah 22, 1421 2001-02-16

Special Reports

by Rahhalah Haqq (Special Reports, Crescent International Vol. 29, No. 24, Dhu al-Qa'dah, 1421)

With the opening of the 2001 World Economic Forum (WEF) meetings in Davos, satellite-TV viewers worldwide have once again seen drastic security measures against the threat of protests. From Seattle to Switzerland, in recent years global economic policy meetings have come under fire from a broad coalition of what the media call ‘anti-globalization’ or ‘anti-capitalist’ forces. With emotionally charged images of street-battles between armor-plated police and black-masked anarchists as a backdrop, most reporting seems to focus on the potential for violence, but ignores or plays down the issues raised by the protestors. Since the American election, amidst growing fears that the American economy is entering a recession, the WEF delegates at Davos 2001 are under increasing public pressure to justify their own goals and policies.

The recent protests, whether directed at the World Economic Forum, the World Trade Organisation (WTO), the World Bank, or the International Monetary Fund (IMF), are symptomatic of growing discontent with the economic policies promoted by these transnational entities, policies which are collectively called “neo-liberalism”. Developed in the 1960s by a minority cadre of conservative American economists led by Milton Friedman, and run by a network of foundations, research centers and publishing houses, neo-liberalism has emerged as the dominant paradigm and the ideological engine of the new global economy, steadily overturning the Keynesian welfare-state model developed in the mid-1900s.

In the 1980s, neo-liberalism was put into practice in the US and Britain as ‘Reaganomics’ and ‘Thatcherism,’ and its precepts also inform brutal structural adjustment programs imposed by the World Bank on African, Asian and South American countries. Insisting that privatisation, competition and efficiency inform all decisions on economic and public policy, and supplemented by a strict form of social Darwinism, neo-liberalism has re-directed the world economy at the turn of the millennium. In the neo-liberal worldview, anything that has not yet been privatised is inefficient, and this belief informs the incessant drive to privatise the public sector, including healthcare, education, welfare and social security. Ironically, though neo-liberalists are incorporating the welfare state, many of the sectors they now seek to privatise were initially constructed at the public expense.

The privatisation of large public-sector industries has often ended up handing them to banks and investment firms. In Britain, for example, public employees were only able to purchase two percent of publicly-held shares when Thatcher privatised the telecommunications, aviation and aerospace industries, and many formerly public services are now run for the benefit of investors: in some cases these have been run into the ground. More recently, with the California power-grid on the verge of collapse, activists and community organisations in the US and elsewhere are blaming such problems on the deregulation and privatisation of public utilities.

Neo-liberalism has tended to benefit the wealthiest segments of the societies in which it has become the dominant economic force. In the US, for example, income-distribution shifted radically under Reagan’s neo-liberalist policies. During the 1980s, the wealthiest 10 percent of American families increased their income by nearly 20 percent, while the top 5 percent took home a staggering 25-30 percent more. But 90 percent of Americans lost income, with the bottom 10 percent losing over 15 percent of their already paltry earnings. While the income of the wealthy 10 percent doubled to $400,000 per year, the income of the bottom 10 percent fell to $3,500. American executives became notorious for taking home astronomical salaries, up to 200 times higher than those of their average workers, who often struggled just to keep their jobs in the face of increasingly weakened trade unions, massive work lay-offs, and benefit cutbacks.

Neo-liberalists insist on a definition of the free market characterised by three related features: freedom of trade, freedom of capital, and freedom of investment. Anything that inhibits this utter economic liquidity is labelled a ‘trade barrier.’ The keystone of these efforts was the creation of the WTO in 1995, which came about after gruelling negotiations largely out of sight of the public eye. In practice, the WTO has put strict limitations on the power of the state to regulate investment, industry and trade, and has often curtailed trades unions, small businesses and environmental regulations, thus reducing the power of national governments to determine their own economic policies. It has also provided a friendly environment for mega-corporate predators.

Established in 1971 and based in Geneva, the WEF is a powerful engine for neo-liberalism. The Forum consists of a thousand of the largest private corporations and another thousand up-and-coming ‘global growth’ corporations, supplemented by a thousand delegates selectively invited from government and academia. The WEF was influential in promoting neo-liberal trade pacts such as the Uruguay Round of the General Agreement on Trade and Tariffs (GATT) and the North American Free Trade Agreement (NAFTA). The new global economy is increasingly governed by this club from the G7 countries (with a few honorary members) who direct it through the WTO, IMF and the World Bank. These organisations are becoming the sole regulatory powers of the world economy, superceding national bodies.

The international economic policy meetings, like those at Davos, which are often billed as ‘informal’ gatherings, create cultural and personal links among members of an emerging transnational ruling elite, while largely excluding the voices of the vast majority of the world’s population. But the growing tide of public protest is becoming difficult to ignore. With the weakening of national governments and other public entities under neo-liberalism, the fate of humanity now seems to have been turned over to the private sector. In addition to voicing public anger and discontent, the protests can be seen as a way of reminding the transnational ruling elite that there are broader and more pressing concerns is life than simply hoarding more and more wealth. So far, the concerns raised by protestors have been met by the new global elite with brutal police repression, coupled with public relations ploys such as inviting representatives of carefully selected non-governmental organisations to participate in highly publicised but utterly useless ‘open forums.’

The rising tide of protest has forced the WEF to try to legitimise itself and show its secret or semi-secret decision-making processes. For thirty years the WEF has convened in virtual secrecy with little or no media-coverage; few people even knew of its existence. Now it is in the spotlight, along with many other financial organisations driving the global economy. The recent agenda of protest has consistently included debt-relief for poor countries, more transparency in international economic organizations, and public taxes on international financial speculations. As more voices enter the discussion, more recommendations may emerge. With the current uncertainty in the western system, a door may now be opening for the rest of humanity to contribute to meaningful ways of understanding and solving the world’s problems. It is tragic that the door remained firmly locked for so long while the neo-liberal economic order was constructed, and it is imperative that public pressure continue in order to prevent neo-liberalism from gaining any more ground.

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