Sunday 29th July, 2007

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Emancipating ourselves to reason

Three days short of the August 1 Emancipation Day I make a call—updating Bob Marley—for emancipating ourselves TO reason. I do this in the context of the Guardian’s Business Editor, Anthony Wilson accusing me of: first, hating the IMF; second, of being influenced in my position on the impact of IMF/World Bank in Trinidad and Tobago and elsewhere by “..ideological reasons (or) ideologically-motivated revisionism,” and finally, of proposing that: “the best way to increase tax revenue in the long run is by increasing taxes on the rich and not by increasing the tax base.”

These are unsubstantiated accusations that I would normally ignore if they came from some ‘Special correspondent” or other rightwing crank.

Wilson, however, has shown journalistic energy, enthusiasm and curiosity. He also comes from what the old people would have called long time “good stock” and is also young enough to perhaps learn that throwing verbal stones is no way to advance an intelligent debate.

I am, therefore, going to make an exception—only this once—to reply to his claims. (If he persists in wild claims I will simply ignore him as a lost cause in the future as opposed to responding to reasoned questions as he put forward, partially, in last Thursday’s Business Guardian).

Hating IMF

I hate no one. That is an irrational emotion. I belong to a university fraternity with which Wilson ought not to be unfamiliar in which ideas are contested routinely among colleagues and best of friends.

I have friends at the IMF, for example, who are quite able economists. I, however, disagree with the thrust of that institution’s economic policies. That makes them no less friends.

I have had friends in several T&T governments including the NAR. I disagreed with their policies but that is distinct from our friendship. Anthony Gonzales and myself, for example, will probably never agree on economic policies but that does not make him my enemy.

Ideological lens

In his June 28 article, Wilson implied that I have some ideology that he himself does not have (no need to read and spell to the unwary reader who he is trying to persuade not by logic and evidence but by pandering to some belief system). He initiated this clutched strawman by claiming that, as quoted earlier I have proposed soaking the rich as opposed to increasing the tax base.

I challenge Wilson to quote anything I have ever written that could even be vaguely reduced to this claim. This as opposed to questioning why BP and other investors in Atlantic LNG I, for example, will pay no taxes of whatever kind for a decade (to 2009) while pensioners pay VAT.

Wilson also may be claiming to have no ideology. This is, of course, arrant nonsense. We all have some ideology in the sense of values and beliefs that influence our interpretations of the world.

Reason, for example, is a major value that I treasure and, as a result, logic and evidence are central to my thinking: that is my ideology, which I recommend highly to all.

This is not to ignore the fact that I also have values and beliefs that may influence my thinking, but my central value is actually reasoning.

Moreover, Wilson may be surprised to learn that the IMF-type lens through which he sees the world has been termed the ideology of “developmentalism” by Economics Professor William Easterly of New York University.

I cite Easterly not because he is foreign, American or an Economics Professor at NY University but since he is himself a major advocate of free markets, competition and capitalism.

Yet, Easterly has taken to task “developmentalism” as “...having has its own intelligentsia….(who) share the common ideological characteristic of suggesting that there is only one correct answer….defined as doing whatever the IMF and the World Bank tell you to do.”

Easterly then goes on to elaborate, in even more detail than I did in prior columns, the impact of the failures of the IMF/WB throughout the world. He ascribes responsibility to these Washington-based institutions not merely for the turn to the left in Latin America but also for the rise of Islamic fundamentalism and a yearning for communism in Russia!

Easterly notes, to quote: “….Development ideology has a dismal record of helping any country actually develop. The regions where the ideology has been most influential, Latin America and Africa, have done the worst. Luckless Latins and Africans are left chasing yesterday’s formulas for success while those who ignored the Developmentalists found home grown paths to success…

“In Nicaragua IMF and WB structural adjustments failed so conspicuously that the pitiful Sandinista regime of the 1980s is back in power. The IMF’s actions during the Argentina financial crisis of 2001 now reverberates a half decade later with Hugo Chavez, Venezuela’s illiberal leader, being welcomed with open arms in Buenos Aires. The heavy-handed directives of the World Bank and the IMF in Bolivia provided the soil from which that country’s neo-socialist president, Evo Morales, sprung...Mexico, which saw rapid growth until 1980, ...has had slow growth ever since, despite embracing the experts’ reforms…

Lasting nostalgia

“The disappointing payoff following eight structural adjustment loans to Zimbabwe helped Robert Mugabe launch a vicious counterattack on democracy.

“The IMF/WB- Jeffrey Sachs application of shock therapy to the former Soviet Union has created a lasting nostalgia for communism. In the Middle East...45 structural adjustment loans and expert advice produced zero per capita GDP growth that helped create a breeding ground for Islamic fundamentalism.”

I have quoted Easterly at length since Wilson (and Gonzales) cannot claim that he has a differing ideological frame from them: in the process debunking the easy and intellectually lazy attempt to dismiss my similar conclusions on impact of IMF-type policies not by reference to logic or empirical results but raising the red herring of ideology.

Wilson and Gonzales also attempt to explain away the impact of structural adjustment in Jamaica with the latter making the amazing point that “Jamaica went too late” when Jamaica’s first IMF agreement was in 1977! Since then Jamaica has had some 20 plus IMF, WB, IDB and USAID structural adjustment loans.

Wilson puts the blame on the PNP’s rescue of the financial sector without acknowledging that it was the policy conditionality of financial sector liberalisation that preceded and, effectively, facilitated the financial sector meltdown.

Former World Bank Chief Economist Stiglitz also has eloquently detailed how the IMF added fuel to the fire of the East Asia Financial crisis of the late 1990s.

It is theoretically conceivable, however, that IMF/WB policies worked in T&T although being an abject failure virtually everywhere else.

Next week, therefore, I will turn specifically to the T&T case and also take up some of Wilson’s questions on my analysis of why the T&T economy has gone through successive boom and bust periods taking into account the views of newly re-appointed Central Bank Governor Ewart Williams.

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