Why do developing countries find themselves following neo-liberal economic dogma is the aspirations of their governments or are they forced into policies by the organisations of the developed world through their power networks.
Starting with the push effects of global power we have to look back to the 1970's when there was a series of oil crisis’s which had dramatic effects upon the economies of the developing countries. In their desire to progress, develop and increase their standing they had borrowed heavily to spend on the infrastructures of their growing commercial cities. The resultant slow down, following the oil price crisis’s, in the global economy lead to a reduction in the export potential of developing countries, sales that the developing countries were expecting to receive to manage their huge indebtedness. With no money coming in the countries started to default on their international loans, inflation became rampant and exchange rates corrections had a detrimental effect upon the value of international loans.
In stepped the transnational organisations of the global economy, who were established to maintain international stability. The World Bank was formed with the intensions of providing support for failing economies with financial assistance to support development in developing or failing countries.
The IMF came about through following the Bretton Woods United Nations conference in July 1944, it supplements the efforts of the World Bank in shoring up the world economy.
The IMF’s current mission statement is:
‘The IMF works for global prosperity by promoting the balanced expansion of world trade,….’
P.2 What Is the IMF (Now) wwwimf.org/external/pubs/ft/exrp/what.htm
Both organisations have a purpose, they both have their own agendas and they both have their headquarters in major global cities, the IMF Executive Board meets frequently in it's Washington DC HQ, which whilst not one of the major economic cities of he world is probably the most powerful politically.
Whenever the IMF or the World Bank give loans, supply grants or write-off debt they set conditions. In the main these conditions are that the money given should be spent upon development projects, the grants and loans are not to maintain the status quo nor are they provided to give aid to the needy, other transnational non-governmental organisations have this role, the money is provided for the countries to progress, develop, to aim to belong to the global connections of the global economy. See for example the attached report of Tanzania’s recent road building programme where money from the World Bank was given/loaned for the creation of an infrastructure that will help Tanzania to progress and develop as the World Bank sees fit
The organisations have a globalist agenda, they have long since given up on interventionalist Keynesian economic policies. Developing countries are expected to open up their markets to the global economy and adopt global values and processes allowing the invisible hand of free market forces to be the foundation of their economies.
Countries are rewarded if they meet the goals of global processes with the write off of international loans or other assistance. The countries through globalisation attempt to free themselves of the chains of debt whilst at the same time they become tied into global connections as all their development is aimed this way buy the IMF and World Bank.
In addition to the above two transnational non-government organisation the activities of credit reference agencies have also come to exert pressure and power of the policies of developing countries. Credit rating agencies have the power to set the credit worthiness of a county/city/region and this worthiness sets the interest rates that loans and other lendings are based ie, the cost of borrowing.
Like the World Bank and the IMF the credit reference agencies are based in major global cities, with all but one of the major agencies based in the USA. They can be seen as a tool of the neo liberal global economies.
Through the activities centred in the global cities money/financial assistance is leant, granted and written off if the developed countries follow western processes and entertain the flows of information that bring with it western practices and ideals. But is the one development aid suits all the right way, is there room for all countries to develop along the same path, what happens along the way?
Developed countries have found themselves in debt, a debt that is owed to rich developed countries, they found themselves unable to service their obligations and have been forced into neo-liberal policies in order to get financial aid, in whatever form. But other countries were not forced into indebtedness, Columbia, for instance did not find itself in uncontrollable debt but it's capital, Bogotá, has followed free market principles and attempted to become a local powerhouse in South America.
Bogotá has adopted neo liberal conventions and practices in order to gain power in the global economy, whilst it is not quite a global power house it is also not stagnating as other countries are.
For instance Dar as Salaam, Tanzania, has been forced to adopt neo liberal conventions in order to receive financial assistance, see attached report from the World Bank regarding infrastructure development. At the same time it has been forced to change the rhythms of the city. Established power relationships have been usurped by new liberal power relations, what effect does this have the day to day lives of the general populace of a developing country
We are given the example of Dar as Salaam, by adopting neo liberal conventions and practices new power relations are formed as cities move into different spheres of influence. Established relationships have lost their power and may disappear altogether, the disintegration of the formal employment sector reduced the power of men in the country whilst at the same time with the need to provide extra income women formed an informal economy. Mini cottage industries in sewing and cooking rapidly grew forming new connections, new connections that are not a part of the global space of flows but are an example of how the introduction of dominant global rhythms displaces established local dominant rhythms and creates some rather unexpected new rhythms. In this case women have gained power over men as their old connections have broken down.
Does the example of Bogotá ‘s globalisation as a long path towards greater prosperity provide a justifiable and achievable goal? Bogotá started from a good position it was not as hard hit as other countries by the fuel crisis and the subsequent economic downturn. Without the strangle hold of debt it has been able to maintain a comparably good sense of living for its residents, growing with the numbers of immigrants, finding work for them as they arrive. Other countries are not able to support their citizens as well as Colombia, in addition to the development and social costs of a free market economy they are also still burdened by debt. Additionally the economy of Bogotá is not especially booming at the bottom and whilst the general population are still better off now than they were 20 years ago, over the last 10 years their increased prosperity has reversed.
But who benefits from the change in rhythms in the developing world, from the evidence given in Chapter 6, we can see no immediate benefit for the working class, and for those below this level. Forced to compete and open up their markets, whilst at the same time the developed world enforces trade barriers to maintain its home industrial/agricultural base, many producers cannot compete against the subsidised products that are dumped on the global economy leaving them unable to compete.
The developed world lends money to the developing world which then spends the money on imports which are cheaper than those produced within their own boarders. For the developed world this seems to be a win win situation, whilst for the developing nations tied into western free market policies, due to aid conditions, see existing internal, and regional, power relationships crumble.
But what are the alternatives for a country that has aspirations of being a global power. Kuala Lumpur, Malaysia, is seen as an example of a city trying to become regionally powerful, yet there is already another city, Singapore, nearby with the same goals of being a regional power node. But whilst Singapore is attempting to fix information flows of the global economy through it’s new information infrastructures Kuala Lumpur is vying for the same levels of power within the Muslim world.
As a mainly Muslim country Malaysia aims to become a key player to other Muslim cities, to fix the space of flows of Muslim commerce and regional power in it’s capital city. Perhaps Kuala Lumpur believes that it is impossible to compete against Singapore on the global market or perhaps it just believes in the Muslim way. Kuala Lumpur has chosen to choose a different trajectory to that of its regional neighbour, but it had the power to choose.
This is just one example of alternatives webs of connection that exist today, there are many others, some like Kuala Lumpur taking a different path towards development and others, such as Al Queada, attempting to gain power through other means. So whilst the neo liberal conventions of the globalised developed world may seem the right way to progress to those organisations located there other cities and organisation may see another path to go down.
In conclusion we have seen how the economic conditions following the oil crisis lead to developing countries becoming reliant on global economic organisations for financial aid to meet their global commitments. That once tied to the policies of the west the developed countries have to meet conditions in order to receive aid, be it grants, loans or debt write-off. Countries that stray from these policies are threatened with sanctions or increased costs of borrowing and that these form a metaphorical rail road along which the developing country has no choice but to follow, no matter what impact the neo liberal policies have on their established economies.
Yet other webs of connections do exist and other developing nations have chosen their own trajectories, such as Kuala Lumpur, but Malaysia is not constrained by the levels of debt found in South America and Africa. Being less reliant on the Organisations of the west they have more freedom to choose and whilst some like Singapore have chosen the western way other chose not to.
As Castells and Sassen both state, power is not physically fixed in one place. Connections ebb and flow in the world rankings it is only by staying within at the top of the powerful connections that Global cities can exert their control. What if Malaysia has got it right and Singapore has it wrong in the future Muslim connections could be the dominant connections who knows which is the right path of development or web of connections, the professionals in the current global cities think they have it right but there have been many empires in the past that have come and gone with the passage of time.
Word Count 2200
References
Sassen (1991) The Global City: New York, London and Tokyo, Princeton, NJ, Princeton University Press.
Castells (1996) The information age: Economy, Society and Culture, Volume 1: The rise of the network society, Oxford, Basil Blackwell
Attached
Herbet Boh/Rosalie Ferrao (2004) Tanzania Obtains Credit for the Central Transport Corridor that Boosts National Development and Trade with Neighbors, Official World Bank Website.
