It’s a Big, Big World
The Trade-offs of Trade
Diana Jue—the Tech
Diana Jue—the TECH
In the Buenos Aires financial district, rusting metal riot blockades remain on the sidewalks near the banks, which are modern-day fortresses, outfitted in concrete and secured by guards. In public plazas, black gates surround statues of political figures to protect them from vandalism. Politically charged graffiti is littered throughout Avenida de Mayo, the street that connects Congress to Plaza de Mayo – Buenos Aires’ historical location of political protest. At dusk, cartoneros – who would otherwise be unemployed – pick through city trash bins in search of cardboard scraps to sell. At night, homeless individuals sleep in doorways of closed shops in the upper class Recoleta neighborhood.
These observations were remnants of the early 2000 Argentine economic crisis and consequent riots that revealed a common theme in all the cities I visited: policies promoting market-driven development. These strategies include removing international trade restrictions, deregulation, privatization of state-owned businesses, and private sector management of natural resources. In many cases, international institutions like the International Monetary Fund, the World Bank, and the World Trade Organization play a large role in determining national economic policies.
Before studying abroad, I held a negative attitude toward international institutions and purely market-driven development. The IMF and the World Bank are predominately controlled by wealthy nations because the level of a nation’s financial contribution determines voting power. Market-driven development was unfair and only supportive of the existing wealthy class. Beginning my international studies in Buenos Aires, a city whose citizens are still recovering from crisis, definitely fueled my opinions.
IMF loans in the 1970s and 1980s required Argentina to open its economy to foreign investors. Although this and other events caused debt and inflation, President Menem in 1989 continued these trade liberalization policies. As a result, GDP increased and unemployment tripled. To stop hyperinflation and preserve the currency’s value, the peso was pegged to the dollar. Argentina’s international debt grew through the 1990s, but the IMF continued lending to Argentina, even though it was clear that the country was insolvent. Argentina’s recession scared away investors and the government froze bank accounts when citizens wanted to take out their money.
I visited a soup kitchen of the Asamblea de Pompeya, one of many neighborhood assemblies that discussed politics and practiced direct democracy during the crisis. Ricardo, one of the assembly’s founding members, shared his thoughts with us. He was somewhere between 50 and 60 years old, heavy set, and during our visit, particularly militant-looking in olive drab and a face that could not hide the struggles he faced in his poor community. Using a translator, he described the December 2001 riots.
Ricardo and his neighbors took to the streets, robbed supermarkets, blockaded a neighborhood set ablaze, and participated in deadly clashes with police. After the resignation of President Fernando de la Rúa, Argentina had five presidents in two weeks. Meanwhile, there was a serious lack of jobs and over half of Argentina’s population fell below the poverty line. “Poverty and hunger were everywhere, not just in shantytowns, but people who owned homes, the retired people,” said Ricardo. He recounted how the currency was devalued to less than one third of its original value and “money was useless.”
My Buenos Aires host mother blamed the IMF’s conditional loans. The Argentina program coordinator was fond of community-based anti-government movements that promoted a new, locally-based economic order. This tone continued in Bangalore, where one speaker railed against all international financial institutions for one and a half hours and gave us handouts entitled “A World without the World Bank and the Asian Development Bank.” The country program coordinator criticized the social injustices of water privatization and development on rural lands.
Our last stop was Shanghai, a literal city of lights. I sat on the deck of an evening boat cruise on the Huangpu River, where the view of the lit-up Pudong financial district – with the dynamic pink lights of the Pearl Tower – was absolutely breathtaking. Blue and yellow spotlights lined the elevated highways that ran alongside the downtown skyscrapers. Street vendors sold glowing spin tops and attachable tennis shoe wheels covered with LED lights. There was even an underwater tunnel that covered tourists in a psychedelic light show accompanied by trippy music (it’s worth going through once but definitely not twice).
Shanghai is China’s economic light, a model that has experienced exorbitant success. When the government authorized Shanghai’s market-driven development in 1992, the city of nearly 19 million quickly became a center of trade and finance. Last year it boasted a 12 percent growth in GDP and a $7,500 per capita GDP. The city represents the country’s nexus of a global economy.
I didn’t spend as much time here as I did in the other cities or hear any completely dissenting opinions (Chinese economists and researchers definitely censor themselves) or have the opportunity to see rural China. But after observing the city on my own, walking through crowded Linong residential complexes, and along the sidewalks of tall skyscrapers, I thought, not too shabby. Understandably, Shanghai has problems. However, of the four cities I visited, Shanghai was most able to keep up with the global economy and provided the most economic opportunities at all levels of society – at least for people whom I met and observed. Could the market be working for them?
At the end of this trip and now as I’m processing it, I know that anti-globalization is a wrong choice. Countries cannot develop in isolation, and there are moral issues like environmental degradation, which should be limited but realistically cannot completely stop. A moderate form of globalization may be the best – one in which free trade is allowed but safety nets for the poor are also provided by international institutions or donors. Reforms are needed in international financial institutions, which should be held accountable for failed projects. Middle-income countries like India should investigate other models of development and development financing, as well. Hopefully, development can do more good than bad for everyone affected.