Securing Security: Canada's Development Policies

By Metta Spencer

You should learn the term "human security" because it designates the bedrock commitment of Canada's new foreign policy. The fundamental idea is that our policies should be oriented more toward protecting human beings than defending the power of states.

When it comes to military action, there will always be debates as to whether a particular action does or does not advance the cause of human security. Indeed, this has been a fierce debate with regard to NATO's recent intervention in Kosovo. However, this seems to be a good time to turn toward other aspects of human security.

Canada's new commitment to human security is a promise to concern ourselves with human rights, the establishment of an international rule of law, and the advancement of literacy, food security, health care, political representation, and the well-being of the weaker members of the human family. Another familiar concept - development - designates all these non-military aspects of security. Peace Magazine has usually paid more attention to the problem of violence than to development, and in this article I want to rectify that imbalance - first by summarizing some debates over various approaches to development, and then by reporting on a recent discussion at the University of Toronto.

From Modernization to Dependency to Neo-Liberalism

Thirty years ago there were even more arguments about development than today, but the issues were framed differently. Especially controversial was a dispute between modernization theorists and dependency theorists.

Modernization theorists of the day, such as the politically liberal Talcott Parsons, Alex Inkeles, and Seymour Martin Lipset, maintained that there was a trend for societies to become more alike as they adopted modern technology, urbanized, and became educated. They envisioned a single world-wide culture that would be generally secular and rational, with small, equalitarian families whose members shared a sense of efficacy and a belief in the value of science and political freedom. Whether people lived in Shanghai, Chicago, Beirut, or Cairo was less important than the nature of their work when it came to explaining the modernity of their ideas. Not all countries would modernize at the same speed, of course, and many scholars tried to identify the factors that would hasten or retard this development. It was assumed that democracy, the spread of primary level education, industrialization, and the adoption of a market economy were particularly favorable conditions for progress. Opinions varied as to how best the West could help advance the modernization of poor countries. Initially it was considered to be a straightforward matter of transferring modern science and technology to traditional societies. A little later many theorists shifted their emphasis to the need for capital, and after that they paid attention to what was called "human capital" - the acquired skills of each nation that would enable modern technology and culture to take root.

In contrast to the optimism of modernization theories, there arose during the 1960s and '70s (particularly in Latin America) a pessimistic Marxian view called dependency theory. Its leading theorists such as Andre Gunder Frank and Fernando Henrique Cardoso differed in many ways, yet agreed that it would be almost impossible for many of the poorest countries to become modern and prosperous. The title of Frank's most famous article, "The Development of Underdevelopment," revealed his view that most poor countries were going downhill instead of up. He blamed their poverty on exploitation by the advanced industrial countries, which could become prosperous only at the expense of underdeveloped countries. Dependency theorists offered no solution for the plight of the Third World nations, except to advise them to steer clear of foreign capitalists and transnational corporations, which would inevitably try to buy up the new economies. Development theorists persuaded leaders throughout the Third World to aim for "autarky" - to avoid foreign trade and to make their national economies self-sufficient. If this could be accomplished at all, it would be through industrialization and "import substitution" - reliance on local products instead of foreign trade.

During the 1970s communism seemed to be winning the fight against capitalism, and as a result dependency theory gained in popularity, even in Western societies, while modernization theory seemed discredited. In fact, no policies seemed to reduce poverty, so those development experts who continued to search for democratic and market-oriented solutions began to focus on employment and equity - at least until 1979, when the United States hiked interest rates and created a global debt crisis. Throughout the 1980s discussions concerned the stabilization of badly shocked economies; most people forgot about the development debates for about a decade.

On the other hand, by the mid-1980s there was another theoretical reversal. When Gorbachev came to power he discovered that the Soviet economy had been in plummeting but that the true facts had been covered up. The country's high windfall profits from OPEC's jacked-up world oil prices had enabled the Soviet economy to seem all right, even as its productive systems were failing. When oil prices fell, the Russians blamed Gorbachev's economic policies. When the Soviet Union collapsed, all Marxist doctrines, including dependency theory, lost credibility. It was clear that almost everywhere communist economies had failed to deliver as promised.

Thus during the 1980s, a very different model was emerging: neoliberalism. Not only were certain countries (especially in East Asia) growing at a phenomenal rate while privatizing and pursuing "export led development," (the antithesis of the autarky prescribed by dependency theorists) but Reagan and Thatcher were promoting the same policies within their own countries, reducing the social benefits formerly provided by "welfare states." Dependency theory was passé, except among a declining number of leftists in the Western societies. Even Cardoso dropped it when he became president of Brazil in 1994, adopting the new neoliberal orthodoxy of mainstream economics.

At the same time, the industrialized societies cut foreign aid, just when the underdeveloped countries suffered the worst of the debt crisis. The eighties was a decade of decline, not development, in most poor countries.

In the nineties there has been some recovery or, here and there, growth. A main change in recent years has been a widespread shift back to one of the assumptions of modernization theory - namely, the view that democracy and an accountable government are important for economic development. The discussion centres on such prescriptions as creating a workable judiciary system and holding democratic elections.

However, two years ago, another shock took place that has undermined the confidence of neoliberals: the collapse of financial markets in East Asia, almost matched by grave problems in Mexico, Brazil, and Russia. We are in a period of transition, for no one is certain today that free markets alone will be stable enough to allow for continued growth. Moreover, no one can be sure that growth can be environmentally sustainable. And if those problems were resolved, no one can say that the distribution of income would be egalitarian enough to keep the poorest of the world's people from becoming poorer.

If Canadians are going to address human security, we have to choose which approach to take in matters of development. Neither modernization theory, dependency theory, nor neoliberal theory alone seems adequate, yet no plausible alternative is at hand.

With these concerns in mind, I asked three colleagues at the University of Toronto to meet and discuss development policies for the benefit of my tape recorder and our readers. Here I shall share some of the insights and quandaries that arose in our chat.

Speaking of Development

My three experts gathered around a table in the Science for Peace office one rainy morning in June. Ian Spears is a political scientist and peace researcher who has been following the spread of democratization and "power sharing" in Africa. Mel Watkins is an economist who specializes in Canadian political economy. He serves as president of Science for Peace and is active in the New Democratic Party. Gerald Helleiner is a development economist who specializes in international trade and finance as they affect developing countries. He has been research director of the G24, the developing countries' caucus in the IMF/World Bank for the past eight years. I asked more questions of him than anyone else, since economics is so central to the topic of development.

Helleiner related a surprising fact: "At present there is ferment in the mainstream North American economics profession, epitomized by an unprecedented struggle between the chief economists of the World Bank and the International Monetary Fund (IMF) over their analyses of what went wrong in East Asia and how to respond to it. There's never been anything like this."

Though the heads of the IMF and the World Bank claim to be on the closest of terms, it seems that in fact they are locked in a crucial struggle. The Bank's head is pushing for a direct assault on poverty. He is opposed by most of his staff but backed by NGOs, including churches, which are promoting a plan for "jubilee" or debt-forgiveness toward the poorest countries. A few days after our discussion, the G8 announced new plans for partial debt forgiveness and a moderate new system of international financial regulation; no one knows whether these will be adequate for the problem, or even whether the U.S. Congress will approve the plans.

It was apparent that Helleiner favors the World Bank in this historic dispute. "The IMF," he said, "dislikes the new prescriptions for success, which call for local ownership. Officially, the World Bank's new approach is to allow people a certain amount of room for maneuver, for experimentation. The IMF has a different mode of operation. They like price stability and financial targets and they cut you off if you don't meet them. The Bank is taking a more relaxed, longer term view now."

Ian Spears, for his part, noted some changes taking place within the IMF, which is at least talking now about the risks of a hostile international environment. "None of these people are dependency theorists," Spears said, "but the debate is less polarized than a few years ago. Nevertheless, they are still saying to Third World leaders, 'Get on the train or you'll be left behind, you'll be increasingly marginalized. Capital is always searching out efficient markets and Africa cannot afford to be left behind.' Comparison is always made to the Asian tigers - Singapore, Taiwan, Malaysia, and so on - but the IMF is also saying that Africa's lack of integration in the global economy actually shielded it to some extent from the worst effect of the global crisis. That doesn't mean, though, that in future they shouldn't be on that bandwagon. In fact, there is no alternative but to globalize."

The decline of dependency

I was surprised to learn that dependency theory has completely dropped out of the debate, since it still is seemingly believed by most peace activists in Canada. Helleiner explained these changes. "The underlying idea of the dependency literature," he said, "was that poor countries are very influenced by external events and that their elites have allied themselves with external interests, at the expense of the less privileged domestic groups. All those observations remain valid. What is gone is dependence theoreticians' conclusion that there was nothing you could do; no matter how much you struggled on the hook, the only solution was to cut the line.

"And maintain autarky?" I asked.

"In a more modest form," explained Helleiner. "Maintain a strictly functional interaction with the world, a controlled approach to everything from the outside - culture, money, and trade. Maintain economically independent systems. That view is dead. The centre of that debate has shifted massively in the direction of markets and a favorable approach to the global economy. Insofar as the debate continues today, its principal question is: Should you interact with the world strictly in terms of domestic, national interests? And who determines what those interests are?

Spears and Helleiner agreed that the major reason why dependency theory was abandoned was that its main policies - import substitution and industrialization - did not achieve as much as expected, though Helleiner thinks they were more successful than mainstream economists admit. In any case, that failure, plus the rise of Reagan and Thatcher and the collapse of the Soviet Union, spelled the end of dependency and the rise of neoliberalism - the promotion of markets, internal and external.

Mel Watkins said, "An economist of conventional persuasion - the market model - has no room for the notion of dependency. There are buyers and sellers who deal with each other on a voluntary basis. That rules out any notion that people are doing things they don't want to do or are being exploited.

"You could add a footnote," Watkins continued. "The dependency model had quite an attraction to the left inside Canada. And just as it has become problematic in terms of Third World discourse, it is utterly nonexistent as a rhetoric here now. The issue was mostly about foreign ownership and the belief that we could regulate it."

"The NDP still talk that way," I said.

Watkins replied grimly, "Yes, and you can see how far it has got the NDP, to be frank about its number of seats."

Gerald Helleiner said, "Take comfort, though, Mel. There's a significant shift regarding openness to foreign capital in the centres of financial orthodoxy because of the Mexican and East Asian crises. They got a shock. The MAI would have opened countries to all forms of foreign capital inflow, including foreign direct investment. But the MAI has been stopped, not by NGO pressure, though that was helpful, but by governments. Even Tory governments refused to subject themselves to this degree of risk. Take comfort because the extreme neoliberals in this sphere have been pushed back."

Watkins, evidently not consoled, said, "Canada has never been so reliant as now on trade with the United States. It's not useful to debate the old dependency arguments. However, in most sectors of the Canadian economy now the American market is bigger than the Canadian market. Once that happens, that is an extraordinary level of interdependence."

Helleiner said, "It still makes sense for us to work with other groups to establish a multilateral rule system in which others have the power to punish the U.S. for its misbehavior. The World Trade Organization is a way to build international rules rather than rules constructed bilaterally with the U.S."

I asked their views about free trade, but Watkins reminded me that the term has a very particular meaning. It's about rules and regulations. "Sometimes," he said, "our friends get confused and think that what they are arguing against is trade itself. For a Canadian to argue against trade itself is truly bizarre. The NAFTA debate was about getting more benefits inside Canada."

I mentioned an interview Peace Magazine had published with Ivan Head a few years ago about his book, On a Hinge of History. He argues that if we really want to help developing countries, we should let them sell more to us.

Mel Watkins answered, "The areas where we are most vulnerable are the relatively low-wage areas inside Canada, such as the textile industry. We have admitted people to Canada who work in those industries and are badly paid. Do we want to wipe those out in the name of letting Third World imports in? It is a situation involving the lesser of evils. I find it very hard to mount an ideological crusade on this one."

Gerald Helleiner said, "The problem is true throughout Canada. The industries that employ the largest number of women, immigrants, and minority groups are the ones with which the Third World is competing. What this implies is a serious need for help to those in the worst positions. And make the behavior of our policy-makers less arbitrary toward, say, Bangladesh. They slap on quotas without prior notice. Anybody thinking of investing in Bangladesh knows that if he tries to sell in the U.S. or Canada or Europe, overnight someone probably will declare that this is too much. And he'll lose his investment. It's very detrimental to the perspective that is required.

Watkins said, "I remember studying in the sixties with Gunnar Myrdal, the great Swedish economist who wrote a book called Beyond the Welfare State. He was ahead of his time; he said that the test of a sustainable nation state is that it accepts the redistribution that takes place in welfare states. Myrdal was saying that if we're going to live in a global society, then rights are going to have to extend beyond citizenship. When we're discussing globalization, there's less of that than there used to be. We're getting less redistribution within states, but not so we can do more redistribution beyond."

Helleiner smiled. "That's a very North American view," he said. "The British, the Dutch, and the Danes give money. In the last election in Denmark, the parliamentary competitors were bidding against each other as to how much they would raise foreign aid. We used to think of globalization as a way in which we would all look after each other. But in North America during the last ten years globalization has come to mean something competitive."

The Asian Financial Collapse

I asked their views on the East Asian collapse. Mel Watkins expressed amazement that it had not affected the First World as adversely as had been predicted. "Perhaps we bought too much of the globalization rhetoric," he said. "You can have a financial crisis of this magnitude - Mexico, Asia, and other places, and somehow it's contained. Such asymmetries in the distribution of power enable us to build a wall that protects us."

Helleiner saw this in a different light, as he explained, "I would read it as an indication that for the first time, Northern financiers were seriously frightened by events in other parts of the world. And there were profound consequences in the developing world. When Russia defaulted on its external credit last August, the entire continent of Latin America was cut off overnight from the World's capital market. The interest rates on those countries that could get loans went up by 10 percent overnight, with devastating consequences. Nobody could afford to borrow. We don't understand how the global financial markets now function. And the regulators and financial supervisors that Paul Martin and his friends are trying to put together are far behind the people who are designing new devices for evading the proposed supervisory systems. And they won't catch up. That leaves everybody very nervous, even in orthodox circles."

I asked Helleiner to explain the collapse of the Asian markets. He replied, "It was a classic financial market failure. There are those who say that it was the product of a messed-up system that will ultimately fall into ruin because of its crony-capitalism character. They were investing their own savings and it's not surprising that they grew as fast as they did. There is nothing fundamentally wrong with the way these economies were performing and they will do so again. What happened was because of the herd instinct that characterizes financial actors. When the market turned down slightly and could have been rectified with a fast insertion of liquidity, which the IMF was created to provide, bankers and foreign direct investors instead suddenly refused to roll over the credit which they had been extending - which these countries hadn't needed. Korea, for example, had been pressed to allow capital in that it had formerly controlled. Capital had poured in, but some of it turned out to be very short term, liquid, and subject to fast reversal."

Many observers are suggesting that the crisis in Asia happened because the financial markets are no longer controlled adequately. I asked Helleiner whether he believes in control as a solution. He answered, "That's what people are arguing about: How significant was the decontrol and liberalization that took place in the Far East, relative to the importance of crony behavior and corruption? Reasonable people can disagree on the inrelative importance.

"I think globalization and decontrol influenced the subsequent crisis. That is also the position of the chief economist of the World Bank. The position of the IMF is that they liberalized in the wrong sequence and in a disorderly fashion, and that, if only they had been more careful, it wouldn't have turned out so badly. The chief economist of the World Bank's position is that financial markets are inherently unstable, and you're bound to have crises of this character. You'd better set up mechanisms to respond to them. I agree with that. You have two choices. Either you create enough liquidity to pump money in quickly with no conditions when you hit a crisis, to restore stability and confidence, or you authorize controls. It's one or the other. Banks that have refused to roll over their loans should even be forced by the IMF to stay in. And one can write rules to that effect."

Democratization

Ian Spears said, "The IMF is looking for stability of policy and long-term certainty that the government is going to be in place. The feeling is that the only way to achieve this is through some democratization, and also by power sharing - letting different groups into the political and economic process. If everybody has a slice of the pie, everybody will be happy. There's some truth to that, but in violent areas of Africa, power sharing does not come easily. Rarely does it last. I'm not sure it's going to work in all areas of Africa.

"I've been watching Somalia, which suffered disastrous consequences of the end of the global forces that worked during the Cold War. Yet - and this will surprise you - the fact that it has no government has been one of the best things that could have happened to it."

It was a surprise. We all laughed, but Spears went on, "There's been massive decentralization. You've got a more active civil society, more effective local governance, more active participation in some areas, and there are businesses operating. There is some development. We always assumed there would have to be some kind of central government in place, if only as a conduit for aid. There's still violence among the warlords, but nobody could control all of Somalia as Siad Barre tried to do. I don't know if that represents a model for the rest of Africa but I'm not sure centralized government is the way to go either."

I was skeptical and protested, "But you certainly couldn't call it democracy, could you?"

Spears stood his ground, replying, "Well, in Somalia there are for instance more newspapers speaking their minds than before. There are also women's groups that are more active than before. Is this better than it was? Maybe the Somalia community just has to wait until there can be a more realistic reformulation of a limited central government which relies on the participation of clan representatives."

Gerald Helleiner said, "That's a healthy caution against well-meaning outside interventions. Outsiders come and tell the locals how to run their affairs, but the truth is, they have to find their own way over a longer period of time. People need to believe that whatever is being done will stay in place, even if it is half right and half wrong. But the donors and major western countries expect results in three to ten years."

I protested, "But if the outcome is unexpected, it's not surprising that there should be a turnabout on what to do. And outsiders do know some things. For example, the Nobel laureate in economics, Amartya Sen, points out that there's never been a famine in a democratic society. That's pretty good information to have, and if I were in a position to make policy in Africa, I would take that into account."

Ian Spears said, "Sen says that a free press is the best early warning system. And yes, he says that democratization does avoid famine. The problem is, what are we talking about when we talk of democratization? Are we talking of a centralized government or about localized making of day-to-day decisions? When you're talking about human security you're bringing policy down to the individual level - freedom from hunger and so on. I think that this more localized view may be the way to go."

Mel Watkins reminded us that Sen also argues that respect for women's rights has demographic and economic consequences.

Ian Spears said, "In my course I play Amartya Sen off against Samuel P. Huntington, who in many ways is the opposite. He says that you have to defer political liberalization and democratization because only a non-democratic government can survive the turmoil that goes with economic liberalization."

Watkins said, "Huntington is one of those American academics, like W.W. Rostow, who simply believe that the key is to create growth. And if there's a little messiness along the way, you may have to tolerate dictators. Rostow believed that the worst thing you could have would be a communist take-over. That's a long standing position within the American establishment."

Clash of civilizations

"But Huntington has at least two faces," I interjected, "and I thought you were going to talk about his more recent view - that there are several different civilizations on the planet with different agendas and they are going to clash. His earlier position - to allow for economic development, even at the expense of democratization - is no solution to that. He's just plain predicting trouble."

Spears replied, "But, as you said, don't we have to have some kind of policy? People who talk about globalization are anticipating homogenization, which early modernization theorists talked about - the creation of a world culture. Can you have a policy on that?"

I answered, "I do: democracy. I value democracy for its own sake, but also if you compare places that have been unusually successful in their economic development, they are usually democratic. Compare Kerala to northern India, for example, or compare Costa Rica to the rest of Central America. Kerala is communist but democratic; they do have opposition parties. Countries that have done well tend to be democratic states."

Spears retorted, "There's also a view that inappropriate democracy can exacerbate ethnic cleavages. This was true in Nigeria, Somalia, and Zaire."

I said, "Okay, I wouldn't disagree with that. There may be a trade-off between those things."

Helleiner said, "You have to be careful about your notion of democracy and not impose parliamentary systems on everybody. If a one-party state holds elections for each of the seats in the one-party parliament, is that democracy?"

"No," I said.

Helleiner replied, "It isn't clear that Uganda, say, would be more stable as a multi-party democracy. The president is retaining a so-called 'movement' because he thinks that going back to parliamentary style democracy would bring a reversion to savagery and break-up."

My concern was as much about the lack of democracy in transnational governance as within particular states. As Helleiner said, "The globalized economy is under-governed. The functions of governance are performed by organizations that disproportionately represent the powerful. These are agreements being put in place by the great powers in their last gasp."

"The great powers are in their last gasp?" I asked with surprise.

"Yes," said Helleiner. "The world's demographic and economic strength is shifting. Fifty years from now people will make a lot of noise. The current situation is not sustainable. In the meantime, you work on the margin and try to improve the transparency, at least. You build in independent evaluations of bank procedures. You build a different, more democratic voting structure into the WTO. You build up regional institutions where the influence of the great powers isn't so great. You have to establish a democratic process, which may be even more important than the product."

It was noon and still raining as we parted. On Helleiner's hopeful last recommendations, we all were in agreement.

Metta Spencer is the Editor of Peace Magazine.

Peace Magazine Summer 1999

Peace Magazine Summer 1999, page 14. Some rights reserved.

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