adventures in development economics

March 23, 2009

I am taking this class on development economics this term. It’s an introductory grad class, so there’s a variety of different approaches and theories. Thankfully, the professor’s tried to keep the mathematical modeling low (which Krugman might find both deplorable and understandable). The professor likes to liven things up and provides a lot of thought experiments for us to work on, yet these are almost always vague, too broad, and loan themselves too easily to sweeping generalizations that end up as far away from the course texts as you can imagine. His most recent one – in which we have to “stake a claim” on the current debates about the viability of socialist models vis-à-vis capitalism in light of the global financial crisis – was infuriating as much as it was “fun” to discuss. They’re not meant to be particularly sophisticated, just some ideas thrown out there to see what’ll happen. Some stuff I threw out:

The nature of “crisis” intrigues me, mainly because crisis is part and parcel of the irreconcilable contradictions of capitalism as a mode of production. If we think of capitalism as a machine, as Steven Shaviro invites us to do, then the current financial crisis is an episode of “clogging”, in which several key parts of its mechanization have stalled (and been stalled). Crisis ends up a necessary component of capitalism – in order to regenerate and reinvent itself due to abundancy, over-accumulation, and overproduction. This particular crisis is more or less the same as all other crises before, just on a much more massive scale: the lines of easy-access credit that have helped to lubricate the aggravated contradictions of the system have shrunk, and the fantasia of wealth/prosperity/equitable distribution of income that such credit kept buoyant has collapsed, laying bare what Baudrillard referred to as “the desert of The Real” (a modeling for this over-accumulation/overproduction problematic). As Shaviro points out, crisis functions as “the mechanism that transforms the abundance which capitalism produces into the condition of scarcity and deprivation which is necessary to its continued functioning.” Because capitalism is dependent on inequity (fundamentally speaking), but at the same time demands rampant growth, crisis is both an inevitable consequence and built-in safeguard to ensure the continuing (re)production of capital.

We can relate this particular supposition to the massive government support of the private sector as of late. It might be prudent here to refer to a joke referenced by Angela Merkel (a child of the GDR) to her cabinet: “What’s the difference between Communism and Capitalism? Answer: The Communists nationalised all the companies first — and then ruined them.”

as it were, two "former" communists meeting,

Unironic meeting of two (fellow travelers?) heads of state -- both from nations formerly known as communist

Her reference here to lemon socialism – in which governments briefly suspend their usually aggressive capitalist ventures in order to keep afloat various sectors crucial to capitalism’s stranglehold (for the benefit of a few at the expense of the majority) – is telling. As all current attempts at nationalisation are meant to keep those banks from becoming insolvent, the government has no interest whatsoever in altering its primary mode of production. The unwavering optimism in Obama’s financial team (which seeks to replace Bushist neo-liberalism with slightly more humane Clintonian neo-liberalism) is indicative of this; the whole purpose of government intervention as of late is not to try and “correct” the systemic flaws that produce these crises, but to try to unclog and restart the system to get back to “business as usual”. As Shaviro additionally argues, consumers are thus trapped within two vectors of capitalist agenda: the best they can hope for under “irrationally exuberant” times (i.e. non-recession capitalism) is for a trickle-down effect (in which they would be “splashed” upon by the wealth of the privileged few), while times of recession and panic only lend themselves to sympathy – restoring the system (at the expense of all) because we all “share the pain” of the decaying financial sector.

Where is this all going? Well, what is particularly crucial for us to understand then is that due to the political-economy insidiousness, times of crisis themselves are rarely –if ever– the times for social upheaval in capitalist West. This is where Marx and the kernel of revolutionary possibility become problematic. The reality is that crisis is so damaging, so stressful, that revolution becomes stunted, as people retool their efforts to focus primarily on their struggle to survive. Further complications include the historical legacy of 20th century communism’s breakdown – what Fukiyama refers to as “the end of history”, or what Badiou refers to as the “obscure disaster” – that has left many (particularly the Western political left) disillusioned with socialism’s potential as alternative to capitalism (this is not mine entirely, but one of Lévy’s primary suppositions from his latest book). Large economies of scale, in which massive financial institutions – investment banks, for instance – crucial to engineering capitalism’s incessant drive and growth, have momentarily glitched, and all the recent focus to “save the economy” consist of, more-or-less, prime pumping this particular sector with cash. Given this context, it seems here that the shift to socialism is the least likely development to arise from the current financial crisis.

Perhaps then we can use this information to think more about the Philippines. As past experiments in socialism in underdeveloped countries — with projects ranging from the Yugoslavian workers’ councils (Horvat’s autogestive “radničko samoupravljanje” syndicalism) to Tanzania’s Ujamaa communitarianism, Vietnam’s thời bao cấp subsidy-based transition “phase” (abandoned in favour of Đổi mới free-market based economic reform policies) to Maoistgreatleapforward_poster China’s “Great Leap Forward” industrialization plan – have clearly shown, major infrastructural and cultural changes that must be in place in order to facilitate socialism have faced significant challenges. As Marx argues in his theory of productive forces (from The German Ideology), the emergence of a “bürgerliche gesellschaft” (a civil society) from bourgeois society can only be perpetuated through the conduit of larger, abstract prisms of human organization (e.g. nationalism), but these cannot be sustained in the relative absence of material conditions of productive forces. This is more or less part of Marx’s treatise on how to “deal” with the problem of socialist societies equally distributing the wealth (of, say, a nation) in lieu of capitalism (which, as Marx fairly points out, at least has a way of extracting abundant wealth – via the industrial revolution). The problem is that societies that have put forth productive forces before ideological ones have all been severely underdeveloped*. When Marx was working on his major treatises, the United States and England were by then technically advanced, and their political-economies had achieved a high degree of efficiency and sophistication. A country such as the Philippines is still primarily agrarian, and its agricultural sector, due chiefly to uneven land distribution rights (legislative attempts crippled by the vested interests of landed aristocratic families, remnants of a feudal, colonial hacienda system) have created an uneven, inefficient agricultural sector. The disinterest of landlords to invest more into capital-intensive technologies for the purposes of higher yield is problematic. Of course, why should they? Neoliberals would argue that overabundance deflates the market, and labor-intensive operations keep people poor, but at least employed**. Mobilizing such a largely-agrarian population has proven especially tough for socialist experiments in developing countries***.

The possibily for social change (the Issue, so to speak) is therefore not to make the switch to socialism by completely abandoning capitalism (which the Maoist NPA’s low-intensity warfare in the Philippine northern hinterland is supposed to do), since that would be tantamount to initial, prolonged disaster, but instead to utilize capitalism’s productive capacity in favour of socialist values. Since socialist values has, at its root, some form in Philippine indigenous thought****, it would not be too far fetched to imagine the congruence of political and cultural spheres of mobilization in order to generate long-term economic viability. For practical intents, we could argue here that the crisis could give the Philippines some benefits: to restructure debt payments, encourage OFW remittances into entrepreneur activities, the slow dampening of free trade policies with a corresponding increase in fair trade ones (despite the risk of loss due to comparative advantage), and favouring the stronger growth of domestic markets. Of course, a corresponding need for stronger, less corrupt government (a lifetime’s work just for analysis), a strong civic society, better education and health systems, and a host of other social problems are both concurrent issues that need their own attention and formal resolution.

___________________________________________________________

*We can talk endlessly about the relative “failure” of the Great Leap Forward, though perhaps the discussion of the relative “success” of comrade Deng Xiaoping’s “socialism with Chinese characteristics” (具有中国特色的社会主) would be a lot less limited. Comrade Wang Yu’s article, “Our Way: Building Socialism With Chinese Characteristics”, takes staunch defense of the necessity of China to be less “hard-line” in its ideology in order to prioritize the development of its socialist society. After The Great Leap Forward failed to propel China into the vanguard of developed countries, Zu writes that

production stagnated for a long time. There was little improvement in people’s quality of life, and China’s gap with developed economies widened further. All of this made Chinese Communists ask themselves time and again the following questions: Where on earth was the superiority of socialism? Was socialism rich or poor? What is revolution and what was its purpose? The theory of building socialism with Chinese characteristics, which took the development of the productive forces as its fundamental task, came into being amid and as a result of these reflections and reviews.

**Though it’d be easy to lay blame on the culture components that give rise to these grotesqueries — post-colonial industrial insecurity, debt reciprocation institutions such as “utang na loob” which encourage feudal tenancy, nepotism, and so forth —  we could say that this fundamental assumption of the prevailing economic order is where neo-liberalism’s fantasy of a “perfect market” with synchronous flows of supply/demand and “rational” economic consumer behavior fails. There is absolutely no such thing as a “perfect market” without “irrational” (i.e. human) behavior. The trick is to make things socially “work out” for the benefit of a political-economic society. After years of trying to destroy the “guanxi” networks under Mao, for instance, the Chinese have come to realize that these informal institutions often do help in generating their own checks-and-balances within the capitalist system, encouraging relatively efficient growth (as long as you can keep them marginally restrained, of course).

***The Khmer Rouge’s aggressively ideological political programme (based on moving back to more communitarian, “primitive” modes of productive force that harkened back to ancient Angkor civilization) ended up completely failing, with millions dying in slave work/collective farms in the Cambodian hinterland.

**** I am referring here to the notions of “pakikipagkapwa” and “pakikisama” as “core” social institution principles (encouraging SIR), traced back far enough through historical trajectory, due to the communitarian notions of pre-Hispanic Philippine civilization (societies which Marx valorized for being communist in spirit, but ineffective and ultimately disastrous due to their lack of sophisticated productive force and inability to produce abundance).

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