Discipline and punish: the new right and the policing of the international debt crisis

Geofonrm. Vol. 23. No. 3. pp. 285-301,

1992 0

Printed in Greet Brttain

001&71R5/92 $S lx)+o.(xI 1992 Pergamon Press Lfd

Discipline and Punish: the New Right and the Policing of the International Debt Crisis

STUART

CORBRIDGE,*

Cambridge,

U.K.

Abstract: This paper explores the ways in which a climate of ideas associated with the New Right has enabled the policing of the developing countries’ debt crisis to proceed in a manner which is (by other lights) unstable and unjust. Its point of focus is a body of work which encourages us to see the debt crisis as a punishment visited on countries which have departed froin the norms of economic and political liberalism, and which proposes to treat such countries accordingly. Particular attention is paid to the linguistic tropes by and through which the New Right has diagnosed and proposed to correct the debt malaise. This paper comprises five sections. After a brief Introduction, Section 2 considers how the discourse of development studies has begun to succumb to a set of ideas and policies associated with the New Right: the socalled counter-revolution in development theory and policy. Section 3 examines the importation of these ideas in the debates on LDC debt and on the debt management policies enacted by the creditor powers and institutions. Particular attention is paid to questions of economic forecasting and equilibrium models, to the theorem of the second-best, and to the notion of just deserts. Section 4 presents an internal and an external critique of New Right perspectives on the debt crisis. Section 5 concludes this paper. It reflects upon the power of ideas in contemporary economic and political life; it also commends the formation of ideas and policies which set themselves against the punitive disciplines of the New Right.

1. Introduction The developing countries’ debt crisis continues to have a devastating impact on poor households in Africa, in Latin America and in parts of South-East Asia. In low-income Africa the misery of famine and civil war has been compounded by a total external debt which, in 1989, was only fractionally less in dollar terms than the region’s combined GNP. In Latin America average living standards have yet to return to the levels set in 1976. Over the period 19861990 net transfers on debt from the region totalled $- 117 billion and the economies of Peru and Argentina stood on the brink of collapse as debt manage-

“-Department of Geography, University of Cambridge, Downing Place. Cambridge, CB2 3EN, U.K.

285

ment programmes floundered amidst hyperinflations (SACHS, 1989). The Brady proposals promise some relief from this haemorrhage, but by no means are they a panacea (WORLD BANK, 1990). Why do the governments of most indebted nations ‘put up’ with such hardships and why is such misery and apparent injustice tolerated in the developed countries? Most answers to this question have focussed upon the asymmetries of power which are present in the inter-state system and in national space-economies (EDWARDS, 1988; KALETSKY, 1985; WOOD, 1986). This is reasonable enough, for few would deny that a fear of retaliation makes indebted nations think hard about the option of default, or that the IMF is, finally, a guarantor for banking capital. It may also be that the ruling elites of

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many Second and Third World nations have as much interest in preserving the stability of the international financial

system as they have in preserving

at home (MacEWAN, ployment of economic conventional

the peace

1986). Nevertheless, and political power

sense) does not exhaust

the de(in the

the list of poss-

management opment example,

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are not shared by many orthodox

devel-

economists the notion

the major

debtor

and liberal politicians. (For that the domestic economies of

nations

have been

mismanaged

is

central to New Right thinking but is widely accepted outside its circles.) We do contend that the policing of

ible explanations of the 1980s impasse. There is also the matter of side-payments made to such as Mexico

the debt crisis is consistent with, and seeks legitimation in, a selective mobilisation of key concepts devel-

for geopolitical reasons (FRYER, NELL, 1987), and the determination

oped within the counter-revolution studies. We consider, in particular:

developed

nations

not to admit

1987; O’DONof the major

the debt crisis as a

foreign policy issue (ROETT, 1989). More important still, there is the matter of the presentation of the debt crisis as a crisis or non-crisis; debt crisis is encoded

with the way in which the

and decoded

by experts

trained

in the languages of libertarian philosophy, utilitarianism and the new classical economics. The purpose of this paper is to examine this last method of policing the debt crisis. Our point of focus will be those commentators whose work encourages us to see the debt crisis as a punishment visited on countries which have departed from the norms of economic and political liberalism, and whose proposals for policing the debt crisis find expression in the language of adjustment and retrenchment, deregulation and openness. We will be looking at the way in which a climate of ideas associated with the New Right may condition economic and political actors to accept a situation which by other lights would appear unstable and unjust. This paper comprises four main sections. Section 2 considers how the discourse of development studies has begun to succumb to a set of ideas associated with the New Right. Following TOYE (19X7), we identify a counter-revolution in development theory and policy which is rooted in ideas about the allocative efficiency of free markets, about the freedom of the individual, about the responsibility of economic and political agents for the actions which they take, and about the absence of generalised non-coercive exploitations (and so of the moral case for the redistribution of income and wealth). Section 3 is concerned with the importation of these ideas into the debates on LDC debt and into the debt management policies enacted by the creditor powers and institutions. We do not contend that such policies are always inspired by the ideas of the New Right. nor do we suggest that certain New Right ideas on debt

trine of market optimism about covery

perfectability the prospects

of the world

recovery

in development (1) how the doc-

informs a continuing for a spontaneous re(and so of export-led

growth from debt), (2) how the notion of an economy in equilibrium informs an account of economic management which lays stress on a local responsibility for indebted non-development (an argument which is thought to gain strength from the example of South Korea), and (3) how the doctrine of ‘just deserts’ is consistent with the view that debt relief is not just expensive but is morally unsound. Section 4 presents a critique of New Right perspectives on the debt crisis. Part of this critique is an internal critique, in the sense that it contests the logic of New Right thinking in its own terms. Part of the critique is an external critique which builds upon different assumptions about the mechanics of crisis formation and displacement in the capitalist world economy. Section 5 is a brief conclusion which reflects upon the power of ideas in contemporary economic and political life. It also commends the formation of ideas and policies which set themselves against the punitive disciplines of the New Right.

2. The Counter-revolution Theory and Policy

in

Development

The last IS years have witnessed the end of the golden age of Western capitalism (GLYN et al., 1988) and the rise to power of Western governments in tow in part to the ideas of the New Right. These events arc not unconnected for, as GAMBLE (lY88, p. 27) reminds us, the New Right attains its seeming coherof many of the ideas, ence through its ‘rejection practices and institutions which have been characteristic of social democratic regimes in Europe and of the New Deal and Great Society programmes in the United States. The New Right is radical because it

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seeks to undo much that has been constructed in the last sixty years” (emphasis added). Beneath this

Third

World

timise

state

unity-in-opposition important points

theorem

(broadly, although

the

surprising

make-up

of the

unsound

and

New studies

Right,

a

2.1.

have

monoeconomics.

to

the

to welfare

bound

to promote

economic

inef-

Monoeconomics

Consider,

moved

which is central

it is not

have become

particular target for counter-revolutionary theorists; why, for instance, Lord Peter Bauer and Deepak Lal felt

be used to legi-

is to misread

ficiency.

work best.

that development

of the second-best

cannot (this

economics); and (3) that the pursuit of equality in the Third World (as elsewhere) is uncalled for, morally

its libertarian and authoritarian wings), on the economy there is broad agreement

that free markets Given

the New Right is riven by some of departure regarding the polity

(as elsewhere) interventions

condemn

the

corruption

(BAUER, 1972, 1981) and poverty (LAL, 1983) of development economics. For such critics, development studies is the bastard child of Keynesian economics and social democracy. The very premiss of development economics is that economic life in the developing world works according to different laws and logics than does economic life in the developed world. As such, the proponents of development economics are proponents of what HIRSCHMAN (1981) has called duoeconomics. The early models of development studies-and it is still these models which command the attention of most New Right criticsmake plain a faith in the capacity of states to push a country from one stage of growth to another on the basis of planned public investment in capitalintensive industrial projects. Correspondingly, in the LEWIS (19.55) two-sector model and in the frameworks of input-output analysis (CHAKRAVARTY, 19X7), the links between development and entrepreneurship, development and human capital formation, development and pricing policy, are downplayed. It is this bias against undistorted price signals-a dirigisme which works against the market-which the counter-revolution in development studies is concerned to combat. Although there is an element of family and nation conservatism in the work of Bauer, and although KIRKPATRICK (1984) sets out to defend authoritarian as opposed to totalitarian regimes, the main thrust of the New Right in development studies has drawn on market economics and libertarian philos’ophy. The counter-revolution in development studies has sought to advance three main propositions: (1) that the norms and laws of economic life hold as much in the developing world as in the developed world (this is the tradition of monoeconomics); (2) that market imperfections in the

authors

first, that

the

question

It is a common development

of duoeconomics

vs

claim of New Right

economics

was born

of

panic, as a misguided reaction to the Great Depression of the 1930s (HABERLER, 1987; LAL, 1983). Put simply, the events of the 1930s-the continual deflationary pressures, the collapse in world commodity prices, the persistence of mass unemployment, the tendency to competing economic nationalisms-encouraged Prebisch and others (Singer and Lewis come to mind) to believe that mature capitalism has an inbuilt tendency to secular stagnation. Drawing on Keynes, this first generation of development economists proposed to tackle this malaise by increased state intervention in the economy and by increased public spending. This recommendation was pursued with particular vigour in the so-called Third World. If the crisis of the 1930s was a crisis of market capitalism in the West, how much more necessary was dirigisme for development in the underdeveloped market economies of the periphery. The counter-revolution dissents from this view. According to HABERLER (1987, p. 56) “the theory of secular stagnation is a gross misinterpretation of the Great Depression . Actually, the Depression of the 1930s would never have been so severe and lasted so long if the Federal Reserve had not by horrendous policy mistakes of omission and commission caused or permitted the basic money supply to contract by about 30 per cent. One need not be an extreme monetarist to recognise that such a contraction of the money supply must have catastrophic consequences. In other words the Great Depression was not a crisis of capitalism, as Prebisch says, but was a crisis of largely anticapitalist government policy, the consequences of horrendous policy mistakes.” Having

established

that

development

economics

is

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founded

in misinterpretation,

the counter-revolution

proceeds to argue that dirigisme for development is bound to fail. Development economics is born of falsehood and its own policy offspring are similarly illconceived. This much is revealed by everyday economic actions in the Third World and by unbiased studies

of these actions.

In agriculture,

the case that there are backward curves for labour or that peasants maximise

it is not

sloping supply are not keen to

their utilities;

SCHULTZ agriculture national

then,

the work of Nobel laureate traditional (1964, 1987) on transforming shows otherwise. Similarly, in inter-

trade,

it is not the case that the income

terms

of trade move inexorably against the producers of primary commodities, or that import-substitution industrialisation promotes economic growth; the experience of South Korea suggests otherwise, as does the work of HABERLER (1959, 1985) and JOHNSON (1965) on trade theory, and BALASSA (1982) and LITTLE (1982) on industrial policy. In each case, the assumption of difference-or the need for state intervention in countries lacking in infrastructure and The counterother market aids-is undone. revolution proclaims its faith in the market and in outward-looking development strategies regardless of time and space. Markets exist in the Third World along with a market mentality; the job of governments is to let the market mechanism flourish. More to the point, this undermining of orthodox development economics is now shared by the IMF and by the World Bank under the intellectual leadership of Anne Kreuger. According to the World Bank: “the record of development and the growing store of empirical research have heightened recognition of the importance of markets and incentives-and of the limits of government intervention and central planning. The new vision of growth is that markets and incentives can work in developing countries. But they are filtered through government policies and agencies which, if inappropriate, can reduce or even negate the possible benefits” (WORLD BANK, 1985, p. 1). This attitude in turn feeds through into some of the development policies and projects which the World Bank seeks to promote. The Bank’s prescriptions for Accelerated Development in Sub-Saharan Africa [the so-called Berg Report on the importance of agricultural pricing policy and on the perils of an overvalued exchange rate (WORLD BANK, 1981)], its advocacy

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of financial liberalisation [the main theme of the 1989 World Development Report (WDR)], and its support for deflationary structural adjustment programmes, are all of a piece. They each chart the progress of a global institution moving away from the discourse of basic

and

redistribution

MacNamara-Chenery

needs

years),

with and

growth

towards

(the a dis-

course which hails the “creativity of the international capital markets” (WORLD BANK, 1989, p. 24) and which warns dissenting nations viable alternative to adjustment”

that “There is no (WORLD BANK,

1987, p. 35). In the new lexicon of development the market is the repository of all wisdom; the dirigiste state a fountainhead

2.2.

The theorem

of falsehoods

and false policies.

of the second-best

A belief in the allocative efficiency of free markets, and in their capacity to operate in the developing world, is not the only defining feature of the counterrevolution in development studies. The counterrevolution allies to this faith a defence of one version of welfare economics and a recognition of the moral force of arguments for natural inequality. The notion that welfare economics should replace a corrupt and corrupting ‘development economics’ has been developed most forcibly by LAL (1983). According to La1 the theorem of the second-best, which stands at the heart of welfare economics, has been used to support state intervention in developing economies on the grounds that markets there do not function perfectly. In fact, says Lal, the theorem points to quite different conclusions. The basis of this claim is simple enough. The theorem of the second-best states that, unless an economy is affected by only one distortion, or departure from the requirements for perfectly competitive behaviour. there is no guarantee that removing the distortion will produce an increase in welfare. Intuitively, one can see that, if there are two or more distortions, their effects could be partially or wholly to neutralise each other. and thus the removal of one of them could make the economy mot-e inefficient than it was before [after TOYE (1987)]. Put like this La1 can see how the theorem of the second-best might lend itself, at best. to policy agnos-

Geoforum/Volume

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ticism, and at worst to increasing

289

311992 state intervention

in

seem to be grounds

for arguing

for equality

through

the (imperfect) markets of the Third World. His argument, however, is that to act thus is to draw a false conclusion from the theorem. Put bluntly: “no

state transfers of resources. Bauer disagrees. He echoes Hayek and Nozick in maintaining that relationships of economic production and exchange can

general rule of second-best welfare economics permits the deduction that, in a necessarily imperfect market economy, particular dirigiste policies will

only be counted exploitative or unfair where they depend upon a prior set of extra-economic coercions (as for example in slavery). Since such coercions are

increase welfare” (LAL, 1983, p. 16). Indeed, dirigiste actions have often “led to outcomes which, by

by definition

the canons of second-best welfare economics, may have been even worse than laissez-faire” (ibid.). Lal concludes that the existence of market imperfections cannot be grounds for state intervention in the economy. The proper course of action is to acknowledge that two interventions are worse than one, and that actions to reduce state interventions in the economy will most likely improve economic welfare.

2.3.

Markets and rnorality

Lal’s faith in the welfare efficiency of free (or freer) markets is widely shared by counter-revolutionary theorists and it dovetails neatly, but not of necessity, with a faith in the fairness of market-based transactions. For Bauer and Lal, as for Hayek and Nozick, the proposition that governments should be involved in the pursuit of greater equality is economically and politically dangerous and intellectually unfounded. The proposition is based on a prior assumption that inequality is a bad thing, that it is a euphemism for unfairness, and that it can be rectified by state-led transfers of income and wealth. Bauer dismisses such a claim; inequality, far from being a bad thing, is entirely natural in a free society. Inequality is the logical result of society comprising a diverse set of economic agents, each of whom brings to market different tastes and abilities, and each of whom deserves a different reward. Unless hard work and innate ability are to go unrewarded, inequality is the norm and the cas’e for equality is something which must be argued for (BAUER, 1981, 1984) [see also HAYEK (1960)]. This brings us to unfairness. It is sometimes said that the inequalities of income and wealth to be found in market-based societies are expressive of relations of production which are in themselves asymmetrical and exploitative (and/or of patterns of exchange which are unequal). Under such circumstances there would

that returns

absent in a free market to economic

society,

it follows

agents within such a society

must be fair. It then follows, at least for Nozick, that there is no moral case for state taxation (save perhaps to finance certain public goods) and/or for state spending policies which embody a measure of wealth redistribution (NOZICK, 1974). Indeed, it is Nozick’s presumption that such actions are immoral since they are founded upon the coercion of individuals by a more powerful state. If the redistribution of income and wealth is to take place, Nozick concludes, it must be on a voluntary basis. To paraphrase Mrs Thatcher on the issue of United Kingdom aid policy: it is not that her governments were against aid (as when people donate to Oxfam or Bandaid); they only resisted the presumption that aid regimes should be constructed by and between governments. The market alone is sovereign and just.’

3. The New Right and the Debt Crisis It would be idle to suppose that a continuing debt crisis has been managed by the banks, by the Bretton Woods institutions and by the OECD powers in a manner which accords wholly with the thinking of Lal and Kreuger. let alone with the musings of Bauer, Hayek and Nozick. Debt may not be a major foreign policy issue in Europe and North America, but it retains sufficient political force that the application of hard-line counter-revolutionary theory is not advisable. Debt negotiations are about geopolitics as much as economics (as witness the recent Special Program for Africa). Nevertheless, the attitude of the creditor powers and institutions towards the debt crisis contrasts sharply with the views expressed by the Economic Commission for Latin America and the Caribbean (ECLAC, 1983, 1986) and the United Nations Conference on Trade and Development (UNCTAD, 1983), and this reflects, in part, differences in each party’s model of how the world economy does and should work. While mindful, then, of HIRSCHMAN’s (1984, p. 111) advice that it is “difficult-and

290 often

Geoforum/Volume ludicrous-to

assign intellectual

responsibility

23 Number

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for actual policy decisions, let alone policy outcomes”, we turn now to an examination of the way in which the debt crisis (in Latin America especially) has

cause of the debt crisis. The point, however, is that this crisis is a temporary interruption to the normal pattern of economic growth and diffusion in an open world economy. The debt crisis of the 198Os, which in

been policed

any case affected some countries

in part by the application

ideas and policies.

In Hirschman’s

of New Right terms,

this is an

examination of “the indirect, or recruitment, effect of new ideas [as much as] their direct, or persuasion, effect” (ibid.). Once again, there are three main areas of interest.

more than others,

is,

for Beenstock [as for CLINE (1984) and KREUGER (1987)], a temporary crisis of global liquidity born of a temporary

recession.

To seek to tackle the debt crisis

by concerted reflation, by founding a new set of global institutions, and/or by offering generalised debt relief, is to encourage an unwelcome dirigisme. It also speaks to a (false) belief that the debt crisis is a

3.1.

The system-stability framework

The most important mechanisms by which the tor powers have policed the LDC crisis are informed by a system-stability model of an world economy. The model embraces three propositions.

credieach open main

The first claim is that the increasing openness of the world economy post-1970 made possible rapid economic growth in the semi-periphery, despite the unexpected economic shocks induced by OPEC, and despite the protestations of academics concerned about the likely instability of world markets under the rule of floating exchange rates and massive capital flows. According to Michael Beenstock, the private recycling of eurodollars in the 1970s worked to the advantage of both developed and developing nations. It did so: (i) by making funds available to LDCs at very low and sometimes negative real rates of interest, (ii) by laying the foundations for a rapid rate of growth in the so-called debtor nations, and (iii) by providing new markets for the developed nations as they drifted into an OPEC-inspired recession. Beenstock implies that the lean years of the 1980s (in Latin America especially) are a fair trade-off for the boom years of the 1970s. To this end he points out that it is the debtor nations of today whose economies and exports grew most rapidly in the 1970s; not those nations whose governments shunned-or were shunned by-the private financial markets (BEENSTOCK, 1984). The second proposition notes that the open world economy received a further shock in the late 1970s when OPEC again raised the price of oil. This drove the major OECD countries into strict counterinflationary policies which in turn made inevitable the sharp recession of 1979-1982. This was the proximate

crisis of global solvency. As BEENSTOCK (1984, p. 259) puts it: “The prospects are that real commodity prices will increase and real interest rates will abate as OECD economies recover once inflation has been squeezed out. The debt ‘crisis’ will then disappear as suddenly as it appeared and growth in Third World and transition in the world economy will resume their normal course” (emphasis added). This sanguine view informs the third element of the system-stability model. Third World countries and governments have consistently been told by international forecasters, and by the IMF and the World Bank in particular, that a world recovery is either just around the corner or is upon us already. All the debtor countries have to do is to correct the distortions in their economies and wait upon the wave of recovery which will pull them and their exports out of the doldrums. The most sophisticated of such forecast remains that of CLINE (1984). More so than Beenstock, Cline is prepared to face up to a debt crisis of global proportions and he does take seriously the threat it poses to the international banking system and to LDC development. Nevertheless, the debt projection model which Cline produced in the mid1980s leads him to suppose that an annual rate of growth of the world economy of 3% or more is both likely, and sufficient to ensure that external debt totals and debt/export ratios in the major non-oil debtor nations would stabilise and decline from 1985 to 1986. CLINE (1984, p. 69) concludes that “because the chances are good for adequate global recovery the debt will indeed be manageable and therefore it will be counter-productive to adopt, out of unnecessary panic, sweeping debt reform measures that might have adverse effects of their own”. Cline’s views are echoed

in the reports

and policies of

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23 Number

the IMF and the World Bank. reports

of these

WDRs in persistent 1983, the countries momentum

institutions

291

30992 Re-reading (and

the

the annual

and through

influential

a resumption

particular), one is struck by a tone of optimism. In the depths of recession in WDR “concludes that most developing should be able to regain their growth [even though] to do so will require a more

favourable world environment, coupled with significant efforts by the developing countries themselves to make better use of their resources” (WDR, 1983, p. 27). In 1984 reference is made to economic growth reviving and of attention shifting “to the prospects for sustaining the recovery” (WDR, 1984, p. 34), a theme repeated in the report for 1985 which begins with the blunt declaration that “The economic turbulence of the past few years has subsided” (WDR, 1985, p. 1). In 1986 the High Case projection forecasts a 5.9% rate of growth in the world economy, while in 1987, despite reference to a modest and weak expansion of said economy (WDR, 1987, p. ii), the central message is for “each country [to] improve the conditions for its own interaction with the rest of the world in order to benefit from improved global economic conditions” (WDR, 1987. p. 35). Even in 1988 and 1989, with clear evidence of slowing economic growth and continuing high debt burdens, the forecast is “cautiously optimistic . . for somewhat faster economic growth in the early 1990s” (WDR, 1988, p. 36). That said, the international situation is “fragile [and] could rapidly deteriorate” (ibid., p. 37). “The outlook for the developing countries depends critically on their own domestic policies” (ibid., p. 39). Even so, by 1990 the forecast calls for real GDP per capita growth rates in Latin America in the 1990s of 2.3% (and for 0.5% in sub-Saharan Africa) (WORLD BANK, 1990, Table 1.3). The message that emerges is clear enough and is clearly reinforced by the theoretical labours of the New Right. The system is stable and when left to itself it tends toward dynamic equilibrium and growth. For states or international organisations to intervene in the system is to risk outcomes which are third-best and worse. The correct course of action is for the creditor powers to advise or pressure debtor nations to adjust their economies to a changing open market economy (that is, to cut public spending and boost exports), and to trust to the markets to make appropriate judgements about the value of debts outstanding (in the secondary markets, by debt-equity swaps

case-by-case of voluntary

writedowns). bank

In due course

lending

to debtor

nations can be expected. The ex-debtor nations will then resume their ascent of the ladder of development, taking their place in a new world economy in transition.

3.2.

Mismanagement

The optimism of the New Right is not to be discounted. In the context of the debt crisis, however, it is tempered by a caveat which seeks to explain why the inevitable recovery may not be inevitable after all. The conundrum is explained by the concept of mismanagement. In line with Lal’s strictures on the theorem of the second-best, the New Right maintains that problems in indebted nations will continue where and when such countries pursue policies which run counter to the norms required for freely functioning markets. This claim rapidly becomes a tautology. The New Right insists that correct policies of adjustment to external shocks in the world economy must foster economic recovery, export growth and the repayment of debts outstanding. South Korea provides the obvious point of reference. By virtue of its exportoriented industrialisation, South Korea is well positioned to pay off its large dollar debt and “become, as it plans to, a creditor nation by 1994” (SETH and MCCAULEY, 1987) .’ By contrast, the seeming failure of most Latin American economies to take advantage of a resurgent world economy must speak of a failure to adjust. More exactly, the persistence of the debt crisis in Latin America is a sign that loans taken out in the 1970s and early 1980s were not used productively-that money was channelled into Pharsonic projects and into the funding of social welfare programmes which would buy votes for the government concerned. It also signals the failure of Latin American governments to wean their economies away from a range of inward-looking development models, the rationale for which derives from an outdated duoeconomics.

3.3. Just deserts and moral hazards The concept of mismanagement-in the sense of failing to meet certain well-established, value-free, norms of economic behaviour-in turn informs an

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attitude to debt relief whereby the creditors refuse to assume a morai responsibility for the plight of the poor and powerless in indebted nations. This is the third arm of the policing strategy we have been describing. Having suggested that the debt crisis is likely to be of short duration, and that a duty to adjust (to tighten one’s belt) is the rational response to future good times, the counter-revolution by insisting that debt relief is economically and morally incorrect. case very well when

concludes inefficient

Buiter and Srinivasan put the they suggest that recent pro-

posals for debt relief have the effect of punishing the prudent and poor and rewarding the profligate (BUITER and NUNNENKAMP

SRINIVASAN, 1987) [see also (1986)]. In their judgement, a pro-

gramme for generalised debt relief must penalise those such as South Korea, which have taken steps to repay debts outstanding, and those like India and Bangladesh which were too prudent or poor, or both, to take out bank loans in the first place. A non-market system of debt writedowns has the effect of recycling public monies to those countries in Latin America and Africa which abused the privilege of market b(~rrowing the first time around. Having entered freely and with foreknowledge into advantageous credit contracts, these debtors are to be let off an amount of the capital and/or interest due regardless of the moral hazard which then ~IISLI~S. In wider terms, this view is consistent with [even if not derived from (see Section 4)] the Hayek-NozickBauer line on the morality of involuntary wealth transfers. By pointing out that there are winners and losers in a process of generalised debt relief, and that these actors do not occupy an obvious and easily defended distribution of the virtuous and the not-sovirtuous, the counter-revolution is able to claim the moral high ground on debt. An ostensible non-crisis can then be policed by reference to just two sets of arguments: those deriving from welfare rnol~oec~~nomits and those deriving from libertarian philosophy. The New Right’s prescriptions for the debt crisis have amounted to this: deny that there is a crisis of global solvency; treat temporary crises of liquidity on a caseby-case basis; refuse non-market debt writedowns; accept writedowns offered by the banks and in the secondary markets; encourage and/or pressure debtor nations to take responsibility for past policy mistakes; foster adjustments programmcs; and promise good times ahead.

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4. The New Right and the Debt Crisis: a Critique The LDC’s debt crisis has been policed in more direct ways than by the discipline of ideas. Some of these mechanisms are in accord with New Right thinking, while others are not (as, for instance. in America’s favoured treatment of Mexico, and as per the Baker and Brady plans, however anaemic in practice they may be). Similarly, there is resistance to the debt policing mechanisms imposed by the creditors and this resistance extends beyond ideology (ROXBOROUGH, 3989; WALTON, Women and men have taken to the streets supermarkets

to protest

the violence

critique 1989). and the

of debt-“Can’t

Pay, Won’t Pay”-and some governments have pushed for debt forgiveness by declaring a unilateral repayments moratorium (KUCZYNSKI, 1988). Nevertheless, the creation of a climate of ideas which derives in part from New Right thinking is central to the management of the LDC’s debt crisis and a critique of these ideas is central to the task of empowering the victims of the debt crisis. The remainder of this paper seeks to pull together the main elements of such a critique.

4.1.

lnternd critique’

Consider, first, what might be called the internal logic of the counter-revolution’s position on debt. The continuing severity of the debt crisis is demonstrated in data set after data set: in, the failure of Cline’s sanguine predictions to come true (CORBRIDGE, 198X); in the willingness of the secondary markets, in 1989, to mark down Bolivian debt to 10 cents in the dollar; in the still increasing tlows of money from Third World to First World countries; in the swelling tide of unemployment in Latin America; in the drive to make ends meet at the cost of environmentally sust~lin~~ble de~~elopment; and so on. All of this calls into question the optimism of the counter-revolution on the state of the world economy and on the dynamics of regional integration within it. it also raises the question of why the IMF and the World Bank continue to produce optimistic forecasts for world economic growth and why events have so often belied these forecasts. One answer is that forecasting the performance of the global economy is fraught with difficulties and a margin of error is to be

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expected. This is true enough, but it fails to explain why the margin of error so consistently errs in favour

norms-depends actively

disguised.

of economic optimism. COLE (1989, p. 177) has shown that “year after year the forecasts of the World

review

of the

Bank lie above the respective trends [suggested by past performance] by several percent”. A second and third answer to the question would seek to explain this systematic

bias.

According

to COLE

(1989, p.

186), World Bank models of the world economy, especially post-1983, are calibrated in such a way that they embody the standard assumptions of “neoclassical economic theory, namely that growth depends on the expansion and improvement of production through

facilities, including international trade”.

the division of labor, The World Bank model

is insensitive to important regional variations in the economic feedback mechanisms it seeks to describe and it assumes a multiplier or locomotive effect (of industrial countries on developing countries) which its own data-base suggests will not be forthcoming. Cole goes on to explain the manner of construction of the economic models of the World Bank in politicalcum-sociological terms. COLE (1989, p. 177) argues that World Bank forecasts, especially since 1980, have been “highly conditioned by the dominant political agenda of the US administration, and that this has co-opted the scientific agenda and transformed it into a manipulative exercise”. The very authority of World Bank forecasts has encouraged Bank officials to substitute “a narrow selection of results” (ibid., p. 186) for rigorous scientific modelling, a process which presents the developing world with a consistently rosy view of a world economy heading for growth and development. Instead of recognising an increased instability in the world economy, World Bank models forego an account of “restructuring, depreciation and technical change [in favour of a] neat theoretical relationship between growth and capital accumulation” (ibid.). An optimistic quantification rides roughshod over a more pessimistic and qualitative account of a world economy in crisis. Cole accepts that such a proposition is difficult to prove and that such pressures are likely to be implicit rather than explicit. Individual modellers did their best amidst the reforms imposed on the Bank by Reagan and Conable. Cole’s conclusion, however, is consistent with a second criticism of New Right theories: that their claims to a value-free policy relevance-to a correct knowledge of undisputed

on a prior political

agenda

which is

John Toye makes this point in his

counter-revolution

in development

studies. TOYE (1987) notes that the counterrevolution puts forward an undefended list of those activities which governments may reasonably undertake and those which it may not. According the maintenance money supply,

to Bauer,

of law and order, the control of the the provision of basic health and

education services, and the establishment of basic communications are all proper functions of the state; the promotion of industry or regional policy or trade barriers are not. The problem is that “it is precisely on political of activity

grounds

that Bauer

by the government

proscribes ..

certain

kinds

The extent

of the

government sector in India was to be determined, according to Bauer, by the requirement of developing a society resistant to the appeal of a totalitarian regime, which was the essential American interest in India (BAUER, 1959, p. 95). If that is not a political criterion for deciding whether or not the public sector is over extended, it is difficult to imagine one. Yet Bauer himself complains bitterly that development economists subordinate knowledge to political purpose” (TOYE, 1987, p. 57). The import of Toye’s critique in the context of the debt crisis will be obvious. The thrust of most debt policing strategies depends upon the presumptionand consent to the presumption-that markets do clear, that second-best markets are better than thirdbest dirigisme, and that voluntary bank lending will soon be resumed. But such claims are hardly innocent or apolitical. Lal’s dismissal of dirigisme is based on an assertion that imperfect markets are more efficient than imperfect state interventions. Such an assertion cannot reasonably be defended by reference to the theorem of the second-best, which points only to policy agnosticism. Whether or not states work better than markets, or vice versa, is an empirical matter to be determined with reference to particular states and markets in particular temporal and spatial locations. (All of which undercuts the claim to ubiquity which lies at the heart of monoeconomics.) The same conclusion holds true of structural adjustment. The suggestion that debtor countries have no choice but to adjust is true only in the narrow sense that to stand still is to perish. Moving beyond such humdrum exactitudes, it is clear that the indebted

294 countries

Geoforum/Volume have several

choices

in the matter

they adjust development,

to impoverishment and to a world market

control.

might,

They

for instance,

of how

and beyond

remind

nontheir

their ad-

23 Number

30992

capital available, especially its imported components; and all this with the explicit aim of producing goods and services and accumulating the basic social capital required

by the majority

sectors of the population,

visers that development is about the provision of basic needs and rights-roughly the definition which

improve their levels of living and their productivity” (ibid., pp. 184-195).

the World Bank adopted under MacNamara. This is, of course, a value judgement, but then so is the Bank’s current assumption that development is a

Whether

second-order

goal, to be worked

meeting the requirements market deregulation.

towards

of financial

only after

discipline

and

The indebted countries might also take steps to move towards the state of development defined above. One proposal widely discussed in Latin America is that put forward by GRIFFITH-JONES and SUNKEL (1986). In the judgement of these authors. the debt crisis in Latin America is the result of that continent’s increasing, and increasingly dependent, integration into a world economy built around the expansion and privatisation of industrial and financial capitals. Latin America’s transition from a limited importsubstitution industri~llisation to a so-called export-led development is said to have exposed further the economy of the region to the power of the TNCs and to the whim of the international exchanges. The transition ensures that the countriesof Latin America face an “overwhelming and implacable necessity to obtain foreign financing” {GRIFFITH-JONES and SUNKEL,

1986, p. 26).

The tail, in short, has come to wag the dog. The need to export consumer items, to earn hard currency, to buy an increased flow of imports, has removed from most economies in Latin America a form and a structure of growth which is able to meet basic needs and over which the government has effective control. What is needed, according to Griffith-Jones and Sunkel, is a parting of the ways with both importsubstitution and export-led growth. More positively: “‘It cannot but be recognised that true national and regional development will have to be based mainly on the transformation of the resources and natural envirt~nment in which Latin America is relatively rich, incorporating the efforts of the entire population, together with the adoption of lifestyles and consumption patterns, techniques, and modes of organisation appropriate to this natural and human environment; with very prudent and efficient utilization of the little

more

or not one endorses

radical

manifestos

this programme,

set out in other

to

or the

texts [see

BRANFORD and KUCTNSKI (1988), KORNER et al. (1986) and RODDICK (1988)] is not an issue in this context.

What matters

is that such a programme

can be outlined and departs so clearly from the structural adjustment programme to which, supposedly, there is no alternative. The discourse of the New Right is built around a premature epistemological and ontological closure. It takes for granted a map of the world which in fact is problematical. It seeks to maintain a facade of political neutrality-an apolitical economy-when it is as closely engaged in political debate as are its politicised opponents.

A similar presumption of closure marks the moral agenda of the New Right. There is no doubt that Nozick has put forward a rich and intellectually powerful charter for libertarianism. Annrchy, State curd Utopia (NOZICK, 1974) is a serious and rewarding work, and Nozick’s debate with John Rawls must be a starting point for all those hoping to contribute to an emerging exchange between development studies and moral philosophy [see. for example, KIM (1984) O’NEILL (1986. I991), KIDDELL (1987) and SEN (1989)]. Nevertheless, there are widely perceived problems in Nozick’s account and these are compounded in the field of development stud& (where his theses have been echoed by such as Baucr and Little).

In the context of the debt crisis, the most obvious problems with the just deserts argument are as follows. In general terms, first, the Nozick-HayekBaucr argument assumes not only the absence of coercive and exploitative relationships in the cconomy, but also that individu~~l economic agents are the true and sole owners of their intellectual and physical labours (the products of which can be clearly identified). As TOYE (1987, p. 59) points out. this “runs into the objection that in a society, as opposed to a desert island inhabited by Robinson Crusoe, no one

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creates

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his or her income

all alone.

They do

so under a set of laws and social conventions which regulate the forms of economic cooperation with other people. These laws and conventions are historically specific and moral criticism.”

may be the legitimate

object

of

of international effect

of this

difficulty

to condemn

concerns

the drawing

boundaries in space and time. Libertarian the immorality of income and wealth internalise

a distance-decay

redistribution assumed

of income

to be just

of moral

of moral tracts on transfers

rectitude.

The

and wealth within a family is

(and

indeed

necessary

where

libertarian thought allies itself to certain New Right perspectives on the importance of stable family life). Some redistribution of income and wealth within a country is also allowed, on the principle of nationhood and citizenship. [This runs counter to the pure Nozick line, but it is implicit in LITTLE (1983).] When it comes to international transfers of money, however, the friction of distance seems to take over. Moral responsibilities stop at national boundaries and LITTLE (1983, p. 51) is disposed to claim that ‘.the idea of justice requires a moral community. Those who appeal to the community of man seem to be going beyond what exists.” Now this may or may not be understandable, but it is hard to see on what basis in logic it is to be defended. This suggestion that charity should begin at home is an assertion, a moral judgement; as such it is open to objection. Further, as RIDDELL (1987, p. 72) points out [after BEITZ (1979, 1981)]: “if national boundaries are not morally decisive features of the earth’s social geography and if international relations are becoming more and more to resemble domestic society in terms of developing complex patterns of cooperation and interaction, then the cosmopolitan image of a world of individuals united by transnational interest and universal values into a community of humankind becomes more relevant than other images, even if this community does not yet exist in any complete or recognised form”.

Finally, there is the question of prudence and profligacy. The New Right position is that structural adjustment is a necessary and just process of restructuring, the burdens of which must fall on those nations which frittered away the bank loans of the 1970s. There is some force to this argument, and a version of it is accepted by China and India (two non-beneficiaries

money). and

Nevertheless, of policies

the

acted

in

accordance with it, is to hide from view two arguments of equal, if not greater, moral force; namely: (i) is it reasonable, by virtue of structural adjustment, large numbers

of basic human A second

credit argument,

burdens violently

needs?;

of structural [in absolute of an indebted

signatories

to, or major possible

to a life devoid

adjustment should terms] upon the

powerless

gacy’ made

of people

and (ii) is it proper

nation,

that the fall most poor and

when they were not

beneficiaries

by international

of, the ‘proflicredit

money

transfers? In Rawlsian terms the answer to each question must be: “no, it is neither fair nor reasonable”. The application of an overriding moral principle-in this case the principle of moral hazard-here works to condemn fellow humans to a form of existence which few rational outsiders [those living under RAWLS’ (1972) veil of ignorance] would be prepared to accept. It also fails to distinguish between the active and passive progenitors of the policies in which moral hazard is thought to reside.

4.2.

External

critique

The battle over boundaries which defines the NozickRawls debate is not limited to the terrain of logic (RYAN, 1985). What makes the debate so important is its excavation of different starting-points and assumptions; for instance, the clash between Nozick’s strident individualism and defense of the free economy, and Rawls’ reworking of the tenets of North American liberalism. By the same token, a critique of New Right perspectives on the debt crisis cannot confine itself to the formal logic of the counterrevolutionary position. The value of that logic must itself be set in context. In practice, this means looking in on the system-stability framework from the perspective of an outsider-on the basis of the contrasting assumptions and claims associated with a systeminstability framework. From this perspective the system-stabiIity framework looks doubly flawed. On the one hand, it fails to consider the global economic inefficiencies associated with a drive for national economic adjustment (roughly the Keynesian objection). On the other hand, it fails to place the debt crisis in the context of a wider crisis of accumlllation and regulation under the rule of capital (roughly the Marxist objection).

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4.2.1. The macroeconomics of debt. Consider, first, what might be called the macroeconomic (and polit-

similar

magnitude

to service

23 Number its external

311992

debt of $1

ical) implications of dealing with the debt crisis according to the principles of the New Right. The

trillion. (This assumes that the U.S. is unable or unwilling to continue to finance its debt from the savings of non-U.S. citizens.) Added together, this

point of focus of the system-stability market as a self-balancing mechanism.

suggests that we might see a debtors’ surplus of $2 trillion in the early 1990s and a potential swing in

is directed

also to individual

case-by-case

policy adjustments.

debtor

theorist is the But attention nations

If country

and to A is hav-

ing problems in servicing its debts, it is the duty of that country to adjust to external market conditions by cutting

public

spending

and by running

a trade

sur-

plus. Keynesian unhappy,

critics have no difficulty in exposing the if unintended, consequences of such an

approach. In the case of the debtor nation such a formula is likely to lead to currency devaluations (and so, perhaps, to high rates of inflation). It is not clear either how development is aided by selling abroad those products which ordinarily provide an individual family or nation with a token or sign of its level of development. Nor is it clear that all debtor nations can run a trade surplus at the same time, especially when trade between debtor nations has historically been very significant. In the case of the creditor countries, there is reason to suppose that the imposition of strict financial disciplines in the Third World works to promote unemployment and/or low growth in the manufacturing and (non-financial) service economies of the developed world. Recent estimates suggest that close to 2 million person-years of employment have been lost in North America on account of declining exports to the indebted nations [based on UNCTAD (1986)]. Great Britain, too, suffered a loss of exports to Latin America equivalent to 49% in real terms between 1980 and 1983 (MARCEL and PALMA. 1987, p. 389). More serious still are the future trading implications of the current debt crisis. In the 1980s the Latin American debtors have been encouraged to run a collective trade surplus which in practice has been absorbed mainly by the United States (and created mainly by cutting back on imports). To service a collective debt of almost $1 trillion (ca 1990-1992), the Latin American debtors will have to generate a trade surplus equivalent to 4 or 5% of total world trade. The problem is that, in the 199Os, the United States itself may have to run a trade surplus of a

world

trade

equivalent

to 8-10X

of total

world

exports (PARBONI, 1988; CORBRIDGE and AGNEW, 1991). The implications of such a scenario for West Germany

and Japan,

and the trade surplus

countries of East Asia, hardly needs to be spelled out (and clearly will be resisted). In general terms, the implication is that individual initiatives for local system-stability

can

threaten

widespread

system-

instability (in terms of the future geographies of trade and debt). In Brandtian terms, the choice in an interdependent world economy is between the recognition of mutual interests and/or the prolongation of a common crisis (BRANDT, 1980, 1983).

4.2.2. From Keynes to Marx. International Keynesians recognise the debt crisis as a global crisis of solvency and recommend appropriate policy actions. In the case of the Brandt Commissioners the policy emphasis has been upon reflationary fiscal and monetary policies in the OECD countries, debt writedowns and greater public control over the private creation of international liquidity. A greater role for the SDR is also envisaged, along with the creation of a new global institution, the World Development Fund (BRANDT, 1983). Other Keynesians add to this list, with proposals for interest-rate caps, for the recycling of the Japanese trade surplus, for exchangerate stabilisation programmes, and so on [see ISLAM (1989)]. Again, some of these recommendations have been acted upon. Recent attempts to engineer a soft landing for the dollar, the consolidation of the exchange-rate mechanism of an emerging European Monetary System, tax breaks for bank writedowns, and the Baker-Brady plans all point up the role of nation-states and international institutions in reining in the free play of the markets (STRANGE, 1988).

Most Marxists would be broadly supportive of this programme and certainly they would defend it against the ‘no alternative’ logic of a structural adjustment programme. Nevertheless, the Marxian wing of the system-stability framework departs from the Keynesian wing in two key respects.

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A first point of departure

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concerns

the political

con-

ditions

of existence of ‘Keynesian’ policy interAccording to MacEWAN (1986), one ventions. reason why Latin American countries choose not to default is that it is not in the interest of local ruling elites. In wider terms, a political economy approach to questions of economic management and mismanagement points up the dangers in a state-centred economic philosophy. Marxism would locate the pliant nature

of many debtor

facto international dominant proprietary economic

nations

in terms of the de

economic affiliations of their classes. It would point out that

mismanagement

is itself a function

of the

distorted and dependent nature of the development process in most debtor nations, and of a systematic plundering of these economies by such as Marcos and Noriega (and the ruling elites from which they draw strength). From the perspective of Marxism, the concept of mismanagement assumes the existence of a normal, or steady-state economy, which under capitalism cannot be realised; instead, each economy gains definition only in its particularities (or ‘abnormalities’) of class, region, ethnicity and dependence. By the same token, Marxism is sceptical of the idea that Keynesian policies could ever be warmly embraced by the creditor powers (in the name, perchance, of international economic growth). Demands for a massive new allocation of SDRs, and for further state control of finance capitals, have not been well received in Washington and New York, and nor will they be so long as they threaten the role of the dollar, of U.S. hegemony, and of the free operation of the banks. [Whether such policies would gain support in the indebted nations is a moot point. Although MacEwan emphasises the comprador nature of Latin America’s ruling elites, it is clear that such elites are not unitary and that different class fractions do pull in different directions. These tensions, together with the desire of most governments to sustain some measure of domestic political support, caution BRANFORD ancl KUCINSKI (1987, p. 134) against the view that “Latin American government officials are [simply] bought off by the industrial countries”. In their judgement, the present “destructive policies are damaging the interests not only of ordinary Latin American people. who are losing their jobs and going hungry, but also of the ruling elites, who run the risk of losing the economic basis of their domination” (ibid .). By implication, there is scope for the con-

struction

of a popular

against

externally-imposed

alliance

within debt

Latin America servicing

obli-

gations.] A second point of departure instability framework concerns

within the the different

systemmodels

of crisis formation and displacement put forward by Keynesians and Marxists. Put crudely, the Keynesian emphasis rational)

is upon inter-state conflicts and the (irfailure of governments to act in the mutual

interest.

Policy is then a matter

of education

or will:

the solution lies with managed international economic and political cooperation. Marxists take a different view, moving

rather

further

from the equilibrat-

ing assumptions of New Right social and economic theory. Put crudely, again, Marxism locates the international debt crisis within a wider crisis of capital accumulation and regulation in the world economy. This crisis has three moments. The process of capital accumulation is marked, first, by uneven development and by a tendency for the rate of profit to decline. To buy off this first tendency to crisis formation, capital, and its controlling agents, searches out new markets and new sources of labour. This process would describe and include the movement towards global Fordism identified by LIPIETZ (1982). This spatial fix is aided by an attempt to promote an increased rate of capital accumulation through increased state spending in the economy and/or by prevalidating the process of accumulation by the massive expansion of fictitious capitals [or credit monies (HARVEY, 1982)]. The problem then is that the crisis is dampened down only to reappear in a generalised form. The Middle-Income-Countries are integrated into the circuits of global capital, but mainly on an exclusionary basis. (That is, their integrations depends heavily on debt-led export growth; the majority of the population remains poor and the internal market-on which Fordism so much depends-remains underdeveloped.) Meanwhile, the strategy of debt financing leads to inflation. This threatens the function of money as a store of value and has to be halted: hence the swing to monetarism in the mid-to-late 1970s; hence high interest rates; hence recession; hence the debt crisis. Seen in these terms, the debt crisis is anything but localised and temporary. According to Lipietz the debt crisis signals the end (for now) of peripheral Fordism, and so represents one moment in the second

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great crisis of capitalism in the twentieth century (LIPIETZ, 1987). But that is not all. The work of Lipietz, and his fellow theorists of the Regulation School,

directs attention

ation in the incidence

to an important of indebted

spatial vari-

development/non-

development. Lipietz is able to prise apart the relationship between debt and development/nondevelopment differential

in a manner political

ticular nation-states

which

and economic

focusses

on the

integration

of par-

in the world economy,

avoids the free-standing language economic mismanagement. In

and which

of correct policies/ his terms, South

Korea has followed an inclusionary gration, wherein most of the citizens

mode of inteof that country

share in the developmental achievements of that nation, and whereby a strong economy generates the resources to service the debts incurred in the 1970s. The basis of this process of inclusion-which does not extend to full citizenship rights and which does not imply ‘equality’-was the process of land reform in the 1950s and the willingness of the state to invest in local industries in preparation for a later orientation to world markets. Brazil, by contrast, has followed an exclusionary mode of integration. Local and extreme inequalities in the distribution of income and wealth (not least in respect of land), destroy the foundations of a Fordist equation between mass production and mass consumption in Brazil. It ensures that funds are lost to development in favour of the importation of luxury goods and high defence spending. As LIPIETZ (1987, p. 152) puts it: “Because it was so exclusionary, and therefore made the middle-classes richer, the Brazilian regime generated a structural flow of imports by buying luxury goods or the means to produce them. The cost of financing Pharaonic projects also has to be taken into account.” Lipietz does not maintain that because a given regime of accumulation is exclusionary-which in any case is a descriptive term-it has to contract debts. India has a polarised distribution of incomes but has funded its development mainly from domestic resources. But this is to move off track. The main virtue of Lipietz’s work is that it puts before us a model of the debt crisis-its origins, its differential spatial impress, and possible responses to it-which is at odds with the views of the New Right, but which attends to one of the main exemplars of that paradigm. By taking on the Brazil-South Korea distinction, Lipietz is able to insist on the value of a political economy approach to

the

debt

crisis.

Whether

or not

23 Number one

3/1992

endorses

his

account, the notion that South Korea’s development is the result of uniquely apolitical decisions taken in favour of the market is comfortably exploded. South Korea does have a lesson for development studies, but it is not a lesson in laissez-faire economics.

5. Conclusion The management

of the international

debt and bank-

ing crises in the 1980s is testament to the power of ideas in economic and political affairs. The Bretton Woods institutions and the OECD powers may like to proclaim their sound and impartial management of the world economy, but their policies of structural adjustment and conditionality are clearly informed by the political agendas of the New Right. If Hirschman is right to deride attempts to link policies directly with theorists, so too is KEYNES (1936, p. ix) right to insist that “Practical men, who believe themselves to be quite exempt from any political influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” The point is that the language of economics is also the language of politics. Attempts to disguise this fact in the models of general equilibrium theory and econometrics are themselves political decisions and devices. McCLOSKEY (1985) speaks pointedly of the rhetoric of economics; of the pressures placed upon economists to sell their ideas in part by means of metaphors and other linguistic tropes. This is not a sign of the weakness of economics, although positivists might by inclined to see it as such. Rather, it is an expression of how economics is and must be; of how it remains wedded to the discourses of philosophy, politics, sociology and human geography, even though some may search in vain, and at great cost, for the pure terrain of ‘economics’. Standing up to the New Right involves making this point clearly. The New Right has some able theorists in its ranks, but its persistent and unproblematic equations of markets with efficiency, and markets with liberty, are grounded in an attitude towards competing explanations of economic and political

Geoforum/Volume

23 Number

e,vents which is fundamentally illiberal. The New Right seeks to prevent debate by invoking, rhetorically, the existence of perfect (or perfectable) markets, correct management decisions, and the absence of policy alternatives. It proposes a vision of modernisation and modernity which is one among many and then presents it as the singular, sensible, gateway to economic growth, freedom and development. In the lexicon of the counter-revolution little space is found for the needs of men and women, as opposed to their rights and obligations. Nor is time found to study or to understand those movements which seek to contest a modernisation and markets.

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311992

born of deregulated money supplies Discussions of peripheral nationalisms,

or of Islamic economics, or of present and other protest movements, are noticeable by their absence. The result is that old debates have to be replayed as if they had never occurred, or as if an Old Right had won the day. In the context of the debt crisis one thinks immediately of KEYNES (1971). Keynes warned in 1919 that ‘The existence of the great war debts is a menace to financial stability everywhere’ (ibid., p. 177); such debts threatened a widespread ‘inflationism’ and a debauchment of the currency which would be destructive of the institutions of capitalism (ibid., p. 148). Keynes’ work was duly reviled by an English establishment in tow to the economic orthodoxies of the Old Right and to a fateful jingoism. In the 1980s similar warnings from the descendents of Keynes (the Brandt Commissioners among them) fell on similarly deaf ears. One must hope that it will take only an emboldened Brady Plan, and not global militarism, to put matters right this time. To signal the power of ideas is not, however, to ignore the power of events in shaping the production of ideas. If the discourse of Keynesianism and social democracy was the ‘natural’ ideology of the golden age of capitalism (at least in the core Fordist nations), so too are the discourse of Friedman and Hayek ‘appropriate’ to the crises of global Fordism which became manifest in the 1970s and 1980s. This sounds more functionalist than it is intended to be, but there is a sense in which the disciplining of labour in the 1980~5, together with attempts to impose the disciplines of sound money, gained legitimation in and from the doctrines of monetarism and libertarianism. The indebted nations, in particular, have suffered grievously from New Right policies designed to make

safe

a banking

national

crisis by policing

a crisis of inter-

debt (and then not the debt of the United

States).

But all is not lost and nor is the present

ascendency

of

New Right ideas and policies uncontested. Ordinary people continue to protest the indignities heaped upon them by policies duits of international (1987) proclaims that

designed to protect the concredit money. If WOLFE money makes the world go

round, so too do the proponents of Can’t Pay, Won’t Pay signal a populist belief that money is the root of all evil. The echoes of Simmel and Freud are at least as loud as the echoes

of Smith

and Friedman.

Mean-

time, the growing security of a restructured financial services industry (THRIFT and LEYSHON, 1988) is encouraging the spokespersons of industrial capital to step forward to demand an end to the debt crisis (or import crisis) in the Third World. In the United States, especially, business and labour groups have joined together to put pressure on Congress to support the Brady proposals for a step-wise reduction of debts in America’s back-yard. The possibility that the Brady plan might be underwritten by Japanese money only reinforces such pressures, and at last beckons a cautious optimism that the indebted nations will be treated less harshly in the 1990s.

Academics not convinced by the arguments of the New Right can seek only to push at this opening door. This paper has joined with the more substantial texts of TOYE (1987) and RIDDELL (1987) in developing a critique of the counter-revolution in development studies and development policy. In so doing it shares with TOYE (1987, p. viii) a distaste for what he calls “The magnificent vision of the 1980s [a vision] of a world developing its resources and capacities in response only to the ups and downs of relative prices and the self-imposed stasis of limited government”. This vision is brutish and brutalising and it is made possible by a social theory which seeks to rule real people, living in real places, in real time, in the name of an abstract principle: The Market. It is important that this trend is resisted, that old battles are refought, and that a pedagogy of The Market is replaced by an emphasis on the interaction of particular markets and particular social formations in particular locations. People deserve better than the punitive discourses of the New Right.

300 Notes The fact that the United Kingdom continues to be a sizeable donor of foreign aid does not invalidate this claim. It suggests only that the utopian abstractions of New Right philosophy have in practice been tempered by an attention to realpolitik and domestic political agendas. It is necessary to emphasise that by referring to the work of Seth and McCauley (or Nunnenkamp and others) we do not imply that these authors are committed to the political and intellectual agendas of the New Right. A number of writers share several of the perspectives which we have identified with a generic New Right position; by the same token, some of the writers who we have identified as New Right theorists (e.g. Bauer, Beenstock, Hayek, Lal, Little, Nozick) at times take up positions without that generic paradigm. The concept of a New Right is used in this essay mainly. in a generic and archetypal sense. Our aim is to illummate a series of connections between theoretical and practical work; it is not our intention to damn authors by association.

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