Merchants and ideologues

Poverty, Prosperity and the World Economy - Trade, Aid and Global Interdependence - The Gains from Trade and the Gains from Aid - First World, Third World
January 24, 1997

Trade, Aid and Global Interdependence by George Cho belongs to the Routledge series, Introduction to Development, edited by John Bale and David Drakkis-Smith. This concise book provides a broad but general commentary on international trade, predominantly emphasising the emerging North-South relationship. It provides a systematic commentary on the growth and development of trade, aid and global interdependence both from quasi-theoretical and historical perspectives. And it touches upon the salient features of international trade theories and global trade reforms, including discussions on the roles, performance and limitations of the multinational companies, aid agencies and the General Agreement on Tariffs and Trade.

Although Cho appears to be fair and succinct in portraying different view points, the style of analysis suggests more of a neoliberalist stance, unwilling to undertake a more critical view. For example, in the "Aid and development" chapter, the author tells us only half the story of how British construction firms won their contracts for the Pergau dam project in Malaysia. The author ignores the much publicised and dubious weapons trade.

However, the chapter on "Countertrade and technology transfer", described as "new mercantilism ... whereby nations are trying to gain advantages for themselves by selling more than they have bought in order to build up a favourable trade balance", is insightful, and shows the implications of the transfer of technology in the new international economic order. This slim paperback, packed with a battery of information, should be affordable even to undergraduates pursuing courses on international development.

Poverty, Prosperity and the World Economy is an edited volume by a group of international development economists reviewing debt, financial reforms, trade, markets and government. They assess the implications of trade and finance in the context of Sub-Saharan Africa, Latin America and Eastern Europe. Probably the most striking feature of this volume is part one, consisting of two separate contributions from S. Abrahamian and G. Corea dedicated to the life of Sidney Dell, who although he worked for 40 years with the United Nations, apparently exemplifies a "radical avant-garde of extraordinary vision and creativity within the establishment". This compassionate, detailed biography provides useful insight into the inner world of New York and Washington-based UN and Bretton Woods institutions from the 1940s to the present. The changing mood of these powerful organisations are vividly captured by these two disciples of Dell. The intriguing episodes on international cooperation for development, and the intense internal power struggles, should be of much interest to those researching "inside the companies". Not surprisingly, the ethos of the rest of the volume (whether discussing the decade of asymmetric adjustment of Latin America's debt crisis or external finance for Sub-Saharan Africa) obediently follows the path of Dell's incomplete work on "International Economic Co-operation through the United Nations 1945-80". While the volume comprises a happy mixture of trade data, tables and construction of models of interest rates, sectoral incomes and savings (Yilmaz Akyuz), the corresponding reflection on poverty (as the title emphasises) is almost forgotten. In keeping with Dell's unfulfilled title "Is Socialism Dead?", the conclusion constructs a democratisation model based on theorising the experience of post-cold war.

The Gains From Trade and the Gains From Aid, edited by Murray C. Kemp, is a collection of papers published by the editor and various co-authors since 1962. It begins with the article by Kemp in the Economic Journal 1962, where he extends Samuelson's 1939 results on gains from free trade. Among other well-known articles are Kemp and Wan's work on gains from free trade published in the International Economic Review, 1972, and the Kemp and Negishi article on variable returns to scale and gains from trade published in the Swedish Journal of Economics, 1970.

The articles in this book are representative of the large body of literature which emerged during this period on the pure theory of international trade. While international trade theory has since moved on in exciting new directions, the articles in this book remind us of the stringent assumptions that are necessary to derive conclusive results within the deductive axiomatic paradigm of neoclassical economics. Once we leave behind the assumptions of constant returns to scale, perfect competition, economies having access to similar technologies, societies composed of utility maximising individuals with given tastes, etc. then precious little of the results of the deductive conventional international trade model remains. The new generation of international trade theorists have tried to incorporate some important dynamic elements, for example, the impact of trade on technological change and growth, and imperfect competition. Kemp expresses scepticism about such endeavours generating the same kind of conclusive results of the traditional theory. Now is the time to reject the deductive axiomatic approach of neoclassical economics, and construct economic models based on empirically given premises with less pretension to generality and with more policy effectiveness.

William Ryrie's contribution to the discourse, First World, Third World, pays homage to that great god of liberation, the free market, the merits of which are accepted by all except the lunatic fringes. The failure of 50 years of aid is largely attributed to corrupt and dysfunctional (read socialist) governments in recipient countries, compounded by aid packages being invested in public sector development schemes. The injection of large amounts of capital into public sector economies merely acts as a protective buffer against market forces, and undermines the workings of its economy.

For the disciples of this doctrine Ryrie offers a coherent and logical argument for the further dissemination of an ideology. By being extremely selective with the available information, the author manages to disqualify alternative perceptions, dismissing nonchalantly the plethora of knowledge gained through rigorous academic research with the accusation that it is ill-informed and usually tarnished through political dogma. The suggested apolitical stance adopted promotes humanitarian motivations, while further veiling political and economic motivations. Ignoring the growing economic disparity experienced by most western economies, and the subsequent social costs created by these very same free market principles, we are left with a view that the West is on track and in control.

The omission of the role of powerful multinational companies in constructing policy protects the integrity of the privatisation lobby, thus avoiding tricky issues of the close relationship between multinationals and political parties. It is precisely what the author omits that reveals an almost blind loyalty to an ideology. This honest and genuine contribution to the discourse around trade, aid, and related issues of sustainability and the environment, prescribes more of the same - simply adjust the target towards the private sector.

Ever since Vasco da Gama set foot in South Africa, trade has always followed the flag. Since the second world war we have witnessed ever increasing Third World debt. The so-called Aid Assistance Programmes of the North have yet to make dents into poverty in the South. In this era of political correctness, while some of us are sipping Oxfam-sponsored coffee, small-scale agricultural labourers in the developing world are driven from their land because of Gatt deregulation of world trade. But this is only the beginning. With the help of Global Agenda 21, the developing world will be bombarded with CFC-free fridges and catalytic converter automobiles. Probably now the time has come to revisit the mercantile economy of the Middle Ages for a comparative study in contemporary global interdependence.

Tasleem Shakur is director and StevePowell research assistant, International Centre for Development and Environmental Studies, Edge Hill University College,Lancashire.

Poverty, Prosperity and the World Economy

Editor - Gary Helleiner, Shahen Abrahamian, Edmar Bacha, Roger Lawrence and Pedro Malan
ISBN - 0 333 63040 8
Publisher - Macmillan
Price - £47.50
Pages - 257

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