This Week: We Are Not the World

"Quote" of the Week

Economic Reporting and Reality: Not The Same Thing

We Are The World (Or So We Think)

Greetings,

It's been a relatively long time since the last issue of Nygaard Notes hit the stands. In case you are wondering why, the reasons are numerous. I'm not going to go into them here, but I hope to reduce the wait time significantly starting with this issue. My apologies.

Another apology is due: For a couple of issues now I have been talking about a series on the military, the military-industrial complex, the militarization of our culture, and what we can do about it. I am surprised at how much research is needed here in order to do it right. That's why you haven't seen it yet. It's in process. I have a couple of other things I want to get to before I come back to that.

One of the most important changes taking place in the world today is the realignment of global power. The days of the U.S. as "The World's Only Superpower" are over. This issue and the next will look at how the old reality continues to shape reporting on the new.

Nygaard

"Quote" of the Week:

This week, a "Quote" and a "Quote-About-The-Quote." First, the "Quote":

I just can't get this comment by Barack Obama out of my head, even though he said it a while ago. In fact, he said it on January 27th, in his first televised interview from the White House. He was talking to al-Arabiya, an Arabic-language news channel based in Dubai, when he said:

"[I]f you look at the track record . . . America was not born as a colonial power."

This mind-boggling statement was widely quoted in the U.S. media—CNN, MSNBC, NPR, New York Times—but no media outlet commented on it. Thankfully, scholar and activist Roxanne Dunbar-Ortiz did comment, saying in response to Mr. Obama's statement:

"The United States was founded as a European settler state, with maps and plans already prepared to colonize the continent coast to coast, expanding from the 13 colonies of the founding state. Indeed the U.S. was the first state born as a colonial power, unique in the vast territories it brutally conquered, occupied, and administered, crushing over 300 indigenous nations, force-marching hundreds of thousands east of the Mississippi out of their homelands, crowding them into ‘Indian Territory' (Oklahoma), along the way annexing half the Republic of Mexico."

Economic Reporting and Reality: Not The Same Thing

Reporting on the economic history of the U.S., or of the world in general, is often based on ideas that are simply wrong. Here's a brief look at one recent example.

On April 1st and 2nd of this year there was a meeting in London of the so-called Group of Twenty, or G-20, nations. These are the wealthy and/or "systemically important" nations (as they refer to themselves) whose leaders apparently think that they are leaders of the entire world. (In fact, many in the media referred to this meeting as a meeting of "the world's leaders," an odd but not surprising view that I discuss elsewhere in this issue of the Notes.)

The G20 was expected "to come up with concrete policies to fix the global financial system and restore growth," in the words of the New York Times. In a front-page story on the Summit, the Washington Post summarized the historical context for the meeting by saying that it marked "a temporary shift in attitude away from two decades of intense reliance on free trade, deregulation and market-knows-best policies that fueled stunning growth across the planet."

Really? Free trade? Stunning growth? Let's have a look.

First, "free trade." As I've pointed out before in these pages, the "free trade" upon which the Post thinks the world has relied is actually a set of policies that include many restrictions on "free trade." Two good examples of the non-freedom embraced by those who supposedly rely on "free trade" are 1) "intellectual property rights," that is, trademark and copyright protection; and 2) restrictions on "professional services," which economist Dean Baker describes as "barriers that obstruct highly educated professionals in the developing world from practicing their professions in the United States." (For more on unfree trade, see Nygaard Notes #306: "The Key Fact about ‘Free Trade:' It's Not About ‘Freedom'")

So, whatever it may have been that the leaders of these "systemically important" countries have been intensely relying on for twenty years, it hasn't been free trade.

And whatever the Post's "market-knows-best policies" have fueled, it hasn't been "stunning growth." To see what these policies have actually fueled, it would be more illuminating to consider the period of the past three decades, since the era to which they refer was initiated by the election of Ronald Reagan. And here there are some actual statistics that tell a different story than the one believed by the Washington Post.

The latest numbers have not come in, but there are some studies for the twenty year period ending in 2000, which includes the boom years of the 1990s. It also leaves out the Bush years, which we now know were mostly an illusion. (Speaking of illusion, here's what Bush's Treasury Secretary Henry Paulson told Fortune Magazine in July of 2007: "This is far and away the strongest global economy I've seen in my business lifetime.")

So if we compare the 20 years ending in the year 2000 (1980-2000) with the twenty years before that (1960-1980), what we see is not "stunning growth," at least not for most of the world. The best study on this that I could find (published in the year 2000) was done by the Center for Economic and Policy Research. CEPR looked specifically at this issue in a study called "The Emperor Has No Growth: Declining Economic Growth Rates in the Era of Globalization." They found, for example, that "Eighty-nine countries saw their per capita rate of growth fall by at least five percentage points from the period 1960-1980 to the period 1980-2000."

In addition, "In Latin America, GDP [Gross Domestic Product] per capita grew by 75% from 1960-1980, whereas from 1980-1998 it has risen only 6%. For sub-Saharan Africa, GDP per capita grew by 36% in the first period, while it has since fallen by 15%."

Even within the United States, CEPR points out, the "stunning growth" did not benefit many of us, namely those who earn wages. CEPR reported that "In the United States, the median real wage is about the same [in the year 2000] as it was in 1973. This means that the majority of the labor force has failed to share in the gains from economic growth over [those] 27 years. That is drastically different from the previous 27 years, during which the typical wage increased by about 80% in real terms."

Why does it matter that an influential newspaper like the Washington Post believes that the past "two decades of intense reliance on free trade, deregulation and market-knows-best policies [have] fueled stunning growth across the planet"? It matters because a serious misunderstanding of the past inevitably leads to misunderstandings of the present, which in turn limits our ability to assess proposals for the future. Many people, after all, believe that what worked in the past will likely work in the future.

The belief in the type of mythology discussed here is a big part of what makes it so difficult to get a hearing for any policies that do not reflect the "market-knows-best" philosophy that supposedly has been so successful in recent decades. A great current example is the congressional discussion of health care reform, in which the possibility of having a national single-payer health care plan is off the table. Why? Because it is based on the idea that the market most decidedly does NOT know best, which is counter to the prevailing mythology.

Speaking of getting a hearing for innovative policies, don't expect much from the G-20 countries. A look at who they are is the subject of the next article.

We Are The World (Or So We Think)

The previous article referred to a meeting last month of the so-called Group of Twenty countries, or G-20. In its April 3rd lead editorial on the meeting, headlined "The Economic Summit," the New York Times told us that "today the world's leaders have responded with an unprecedented set of comprehensive and coordinated actions." Speaking of the same meeting, the British prime minister, Gordon Brown, in a comment widely reported in the media, was heard to say that "this is the day the world came together to fight back against the global recession." Barack Obama himself said at the close of the meeting that "the world's leaders have responded" to the global financial crisis.

What world are they talking about? Not the world I know. The world I know is a big place, and it has a lot of countries—far more than 20—and a lot of leaders. Here are a few thoughts on the event—and the conventional understanding of the event—that many media outlets insisted on calling the "Global Economic Summit."

The actual world has more than 190 countries (exactly how many depends on whether we count places like the Vatican and Taiwan as "countries"). Yet the economic summit was attended by the leaders of only 20 countries. Here's what the official website tells us about this self-appointed Group of Twenty:

"The Group of Twenty (G-20) Finance Ministers and Central Bank Governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy."

Who are these "systemically important" countries? They are: Argentina; Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, and the United States of America. The European Union, who is represented by the rotating Council presidency and the European Central Bank, is the 20th member of the G-20.

What makes these countries "systemically important"? Here's what the G-20 itself says:

"Together, member countries represent around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) as well as two-thirds of the world's population. The G-20's economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system."

Let's take each of these factors—economic activity, trade, and population—which supposedly give the G-20 a "high degree of legitimacy and influence" over the entire world, and see what we can learn.

Economic Size

The G-20 claims that its membership represents "90 per cent of global gross national product." [Technical note: The use of "Gross National Product (GNP) instead of Gross Domestic Product (GDP) is significant here. GDP does not include the stuff produced by a country that are produced outside of its borders, but GNP does. So, by using this indicator the G-20 gives more weight to countries that have more multinational corporations, like the U.S. and the European countries. For that reason I'll use GDP to talk about the economies of the countries in this discussion.]

As for the 90 per cent claim, we would only need to include 15 countries to reach that percentage. Or, if we use a different method of calculating Gross National Product, we would need just four countries—the US, Japan, China, and the "20th member," the European Union—in order to reach 90 per cent. (I don't know which method the G-20 uses to back up its claim.)

What this means is that this benchmark of legitimacy could be achieved without including such countries as Turkey, Australia, Saudi Arabia, Argentina, or South Africa. Any number of other countries have a larger GDP than some of these five. Iran, for instance, has a larger economy than Argentina. Pakistan is bigger than Saudi Arabia.

Using the other method of calculating GDP, this barometer of legitimacy seems even less legitimate. That is, the Big Four countries plus the guys on my soccer team—or anybody else—would "represent around 90 per cent of global gross national product."

World Trade

Similar to the GNP numbers above, it would only take ten of the G-20 nations to reach 80 per cent of world trade, leaving ten slots open to whichever countries are deemed "systemically important." That is, the inclusion of such countries as Australia and Argentina appears to be arbitrary, or possibly based on criteria different from the stated ones.

Population

The fact that the G-20's membership represents "two-thirds of the world's population" seems, on the face of it, to be the most valid claim to a "high degree of legitimacy" for the group, since it is the most democratic criterion. However, even this measure is deceptive. Again, one can reach the two-thirds measure by including only 15 countries, many of which are not members of the G-20. Pakistan is far more populous than Canada, for example, and Nigeria is three times the size of South Africa. Canada has fewer people than Vietnam, Ethiopia, or Egypt, and Australia has a population less than half the size of Tanzania.

The more interconnected and interdependent the world's economy becomes, the more important it is to have the capacity to manage economic issues on a global scale. But if it is really "economic weight and broad membership" that supposedly gives a group "a high degree of legitimacy and influence over the management of the global economy and financial system," then can't we find a better group than the apparently self-appointed and exclusive Group of Twenty? Can't we find a group to address the global economic crisis that really does represent "the world"?

Sure we can. In fact, such a group is already in the works, and some very interesting and important proposals for dealing with the global crisis are already being discussed outside of the United States. It all starts with the Group of 192—the United Nations—and I'll tell you about some of these proposals in the next issue of the Notes.