Ever since the end of World War II in 1945 and more especially the past half-century may be seen as a long exposition of the ability of liberal trade to raise living standards not only in the rich world but also among the poor.
It has also more recently been an example of peopleﾒs preference, when afforded the choice, for democracy. The process has been regrettably patchy and far from complete. In spite if this, it has been an extraordinary success, which augurs well for the future.
As we all know, the story began with the growth in western Europe, North America, Australia and Japan once the two great enemies of economic activity war and trade restrictions ﾖ were removed after 1945. These countries ﾖ often called the rich club ﾖ were the main signatories of the General Agreement on Tariffs and Trade in 1947, which initiated the dismantling of trade barriers. That group, also known as "the West," increased its income per capita to 400% in the period 1950-2001, a growth rate averaging 2.8% a year.
The rest of the world communist, socialist or just plain poor- also grew, but more slowly: at 2.2% a year on average. Thus the gap between " the West and the rest" has been widening. It is now particularly wide between the few richest countries in the world and the poorest few, which are mainly in Africa; wider indeed, than ever before. Some skeptical observers use such increases in global inequality as proof that under liberalism the rich get richer and the poor stay poor. But this is wrong.
Such broad figures disguise the underlying trends. These are that countries in Asia have actually been narrowing the gap substantially: there, with the exception of already developed Japan, in 1950-2001 income per capita increased fivefold. In the early decades, Asian growth could be dismissed as exceptional, given that it was limited mainly to Hong Kong and Singapore, and two politically anomalous countries. Taiwan and South Korea. But since 1980, not only has growth spread to South- East Asia but also it has accelerated in the worldﾒs most populous countries, China and India. Bearing in mind that Asia as a whole contains well over half of the worldﾒs population, such progress can no longer be dismissed.
The countries successful in raising living standards rapidly, over long periods, have followed a variety of economic policies under many different forms of government. What they all have in common though, has been a policy of opening their economies to trade and foreign capital. Perhaps we should underline the previous sentence and draw it to the attention of all Bahamians. Many in this county view foreign trade and foreign capital with suspicion bordering on alarm. Neither have these countries grown by somehow promoting exports and blocking all imports. Rather, they liberalized some markets in order to stimulate competition, internally and from imports and they ensured that imports of most basic commodities faced few barriers, in order to keep prices down. They adopted partial liberal trade selectively and gradually. But the important thing was that they adopted it.
Alongside the successful growth in economic liberty there has been an impressive expansion of political and civil freedoms, Since 1980 according to the 2002 United Nations Human Development Report, 81 countries have taken "significant" steps toward democracy, with 33 military regimes replaced by civilian governments. Of the worldﾒs nearly 200 countries 140 now conduct multi-party elections. This may not make them fully democratic, but 82 of them are and those are home to 57% of the worldﾒs population. Especially pleasing is the fact that according to the UNHDR, 125 countries, with 62% of the worldﾒs population now have a free or party free press. The spread of daily newspapers in developing countries has risen to 60 copies per 1,000 people, from 29 in 1970-96 and the number of television sets has increased 16 fold. Recently, it has become fashionable to play down that progress by pointing out that many of the new democracies have not gone beyond elections to build the other, essential protections for liberty: an independent judiciary equality before a re-enforced rule of law, and constitutional limits on the abuse of political power. In Zimbabwe, an elected president Robert Mugabe has ruined the country, sponsored violence and rigged elections. Constitutions have been violated by elected politicians in Peru and Russia, and judiciaries manipulated. Venezuela elected president, Hugo Chavez essentially wrote his own constitution, which he hands out to visitor as a little blue book reminiscent of Mao Zedongﾒs red one.
In sub-Saharan Africa according to "The Future of Freedom" a new book by Fareed Zakaria that wrings its hands about "illiberal democracy," 42 of 48 countries have held multi- party elections since 1990, but most have simply allowed a rotation of plundering governments. A few democracies have even collapsed: Pakistanﾒs elected government was overturned in a coup in 1999 by General (now self-appointed President) Perzez Musharraf.
For all the anti-globalizes cries in their behalf, few of the worldﾒs poorer countries show signs of wanting to retreat from liberalism: their question, rather is whether to extend it gradually and whether they have the domestic governmental institution to be able to cope with it.
Business is under attack, even in the homeland of free enterprise, the United States, whether from politicians, single- issue lobby groups or, most dangerously of all, from lawyers Having made pots of cash from tobacco firms, they are turning their attention to Wall Street and to drug companies. Stock markets remain weak, despite a quick end to the war in Iraq, and a 30% fall in oil prices. So do many economies especially the biggest and richest ones in western Europe, Japan and the United States.
It appears that at the heart of capitalism troubles lie executive pay. The list of scandals among large United States companies is by now familiar. The following are the main offenders:
Enron – Fraudulently inflated financial returns
WorldCom – Fraud inappropriate company loans
Xerox – Fraudulently inflated financial returns
Adelphia – Fraud: misuse of corporate funds by founding family
Tyco – Tax evasion; misuse of company funds to inflate stock value
ImClone – Inside trading, tax evasion obstructing justice
Qwest – Fraudulently inflated financial returns
Global Crossing – Fraudulently inflated financial returns
Health South – Fraudulently financial returns
Aholdd – False declaration of pre-tax profits
Investment Banks – Abuse of conflicts of interest,
Is the above not proof that markets cannot be allowed to rampage freely, driven as they are by greed? Well much of this mess is cyclical the sort of thing happens whenever bust follows boom. As Alan Greenspan, the chairman of Americaﾒs Federal Reserve, has said, in the 1990s there was no increase in human greed, just an increase in the opportunity for greedy behaviour. It would appear that the basic task is to ensure that existing laws are vigorously enforced and that any loopholes in them are closed- much more rapidly than Japan has.
By Maxwell Turner, The Bahama Journal
