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Book Review: Global Fortune

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Global Fortune: The Stumble and Rise of World Capitalism
edited by Ian Vasquez (Washington, D. C.: Cato Institute, 2000); 295 pages; $18.95 cloth; $9.95 paperback.

IN SEPTEMBER 2000, David Henderson, a prominent free-market economist in Great Britain, delivered the annual Wincott Lecture at the Institute of Economic Affairs (IEA) in London. His theme was “Anti-Liberalism 2000.” Henderson detailed the wide and strong intellectual and political currents around the world that are fervently opposed to economic liberalism.

He emphasized that an anti-economic liberalism is occurring against the background of no real ideological commitment to or even belief in the principles of economic liberty and a truly free market. He explained that most of the economic liberalization policies that have been undertaken in many countries during the last 15 to 20 years are based almost purely on a grudging admission that the earlier hopes and dreams for a bright socialist and heavily interventionist future of prosperity and social justice have simply not worked and in many cases have led to dramatic disaster. Very little of the revival of economic liberal-type policies has had anything to do with a reawakened dedication to individual liberty and the institution of private property.

The forces coalescing in their opposition to economic liberty, Henderson argued, center on two themes. The first is what he calls the old or traditional elements resistant to the free-market economy. They represent various special-interest groups desirous of protecting or increasing their relative economic positions in society through the use of the interventionist state. And they are bolstered by popular sentiments supporting notions of redistributive justice, social welfare, and national interest and are often dependent on them.

The second and newer force weighing in against the market economy, Henderson continued, is what he labeled “new millennium collectivism.” This includes “nongovernmental organizations” (NGOs) lobbying in behalf of consumer protection, environmentalism, and various humanitarian and other fashionable politically correct causes around the world. These NGOs wield increasing power and influence with national governments and intergovernmental international organizations, setting and sometimes determining the direction and magnitude of political interventionism, redistribution, and control over the private sphere around the world.

Reinforcing this tendency, Henderson said, is a spirit of anti-globalization. “Globalization is portrayed, quite misleadingly, as a newly-arisen economic tidal wave which is sweeping peoples and governments before it, and creating an anarchic borderless world.” In this borderless world, multinational corporations ravage both the planet and human beings in pursuit of profits, while being answerable to no one and being beyond the control of public-spirited governments. Governments and intergovernmental international organizations must harness these unbridled capitalist enterprises acting against the interests of humanity.

The defense of a free-market-oriented process of globalization is the theme and purpose of the essays brought together in the Cato Institute’s recent book, Global Fortune: The Stumble and Rise of World Capitalism, edited by Ian Vasquez. The volume has three parts. In the first group of essays the authors explain why there is no viable “third way” between socialism and the free market. The essays also describe the benefits that have accrued to America and the world in general from the extent to which the market has been allowed to function.

The Peruvian novelist and politician Mario Vargas Llosa argues that the critics of the market have set up a straw man to attack, which they label “neo-liberalism,” meaning a semi- or pseudo-liberalism. Vargas Llosa states:

Either one is in favor of liberty or against it, but one cannot be semi-in-favor or pseudo-in-favor of liberty…. The term has been invented … to semantically devalue the doctrine of liberalism. And, as we enter the new millennium, it is liberalism — more than any other doctrine — that symbolizes the extraordinary advances that liberty has made in the long course of human civilization.

He also reminds the reader of the long road still to be traveled and the political barriers that impede the way before economic liberty will have really triumphed.Indian free-market economist Deepak Lal explains that not only is there no third way, but it has been precisely the presence of continuing government regulations, controls, and interventions around the world that are the reasons for the economic crises that have plagued the developing economies of East Asia. Furthermore, a new threat to the success of free-market globalization is the West’s campaign of “ethical imperialism,” in which the political and cultural social engineers in the West wish to impose their own standards of conduct and institutional reform on the developing countries of the world. This, he fears, may generate a serious backlash against the West and “capitalism” unless these countries are left to themselves to integrate the structural institutions of the marketplace within the context of their own histories, cultures, and social philosophies of human association.

In a lengthy essay entitled “Twenty-five Miraculous U.S. Trends of the Past 100 Years,” authored by Stephen Moore and the late Julian Simon, the reader is taken through the long list of economic and social categories in which Americans have experienced a phenomenal improvement in their standards of living and the general quality of life. And the authors emphasize that these fantastic improvements have all been due to the ability of the market to operate far more freely than in many other parts of the world.

This is followed by an equally insightful chapter by MIT economist Rudiger Dornbusch, who shows that in spite of the two world wars, a Great Depression, a Cold War, and the disastrous experience of communism, the world economy has had a dramatic expansion in wealth and material improvement during the last 100 years due to the partial existence of market competition and economic liberty.

The second group of essays offers a series of case studies of the East Asian economies in general and Korea in particular, as well as Latin America and Russia. Here the authors show the harmful effects of the supposed Asian third way, which has been merely a form of political interventionism and fascist-type corporatism that has hindered and sidetracked Asian economic development. The cause, intensity, and duration of the Asian economic crises were due to these political elements in the emerging market structures. These negative factors were reinforced by the misguided and counterproductive policies on which a number of international organizations, of which the International Monetary Fund was a primary culprit, insisted. Andrei Illarionov, senior economic advisor to Vladimir Putin, the president of Russia, and a strong proponent of the free market, offers a devastating analysis of the failure and corruption of economic reform in Russia during the last ten years. “The failure of Russia’s transformation does not lie with liberal economic policies allegedly applied to Russia. In fact, such policies have never been tried.” Instead, he explains, “the economic policies actually implemented represent a distasteful mixture of interventionism and populism…. Those developments have been generously supported by international financial institutions.”

The final group of essays straightforwardly challenges the need for the existing network of international organizations, especially the International Monetary Fund. The authors explain the harmful effects from the IMF’s role as policy manipulator around the world as the price paid by the recipient countries to receive huge financial supports of various types. Indeed, they argue that without the IMF’s intervention some economic crises might not have occurred at all and when they have occurred would have been of shorter duration and magnitude if the IMF had not been there to influence the policies introduced by countries experiencing economic downturns.

Together the essays in Global Fortune offer valuable analysis and free-market policy conclusions to resist the arguments of the anti-globalization interventionists in our midst. As Vasquez points out in his introduction to the volume,

The welfare of humanity is in large part tied to the fortune of capitalism itself. We must not again allow globalization to ‘stumble’ because of the loss of faith in [classical] liberal institutions. The consequences of doing so would be devastating to world prosperity and peace.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).