Tuesday, December 28, 2004

Beware the Development Econs

Two recent articles from the NYT nicely summarize the problem economic anthropologists, and others working in international development, have with World Bank/IMF models for economic success. The first, from Sunday's front page, points to the curious case of Argentina's "mysterious" recovery from economic collapse in 2001:

BUENOS AIRES, Dec. 23 - When the Argentine economy collapsed in December 2001, doomsday predictions abounded. Unless it adopted orthodox economic policies and quickly cut a deal with its foreign creditors, hyperinflation would surely follow, the peso would become worthless, investment and foreign reserves would vanish and any prospect of growth would be strangled.

But three years after Argentina declared a record debt default of more than $100 billion, the largest in history, the apocalypse has not arrived. Instead, the economy has grown by 8 percent for two consecutive years, exports have zoomed, the currency is stable, investors are gradually returning and unemployment has eased from record highs - all without a debt settlement or the standard measures required by the International Monetary Fund for its approval.

Argentina's recovery has been undeniable, and it has been achieved at least in part by ignoring and even defying economic and political orthodoxy. Rather than moving to immediately satisfy bondholders, private banks and the I.M.F., as other developing countries have done in less severe crises, the Peronist-led government chose to stimulate internal consumption first and told creditors to get in line with everyone else.

"This is a remarkable historical event, one that challenges 25 years of failed policies," said Mark Weisbrot, an economist at the Center for Economic and Policy Research, a liberal research group in Washington. "While other countries are just limping along, Argentina is experiencing very healthy growth with no sign that it is unsustainable, and they've done it without having to make any concessions to get foreign capital inflows."

The other, from today's paper, reports that large international firms are changing the face of small-scale agriculture in Guatemala, with dire consequences if farmers cannot support themselves or their families:

Across Latin America, supermarket chains partly or wholly owned by global corporate goliaths like Ahold, Wal-Mart and Carrefour have revolutionized food distribution in the short span of a decade and have now begun to transform food growing, too.

The megastores are popular with customers for their lower prices, choice and convenience. But their sudden appearance has brought unanticipated and daunting challenges to millions of struggling, small farmers.

The stark danger is that increasing numbers of them will go bust and join streams of desperate migrants to America and the urban slums of their own countries. Their declining fortunes, economists and agronomists fear, could worsen inequality in a region where the gap between rich and poor already yawns cavernously and the concentration of land in the hands of an elite has historically fueled cycles of rebellion and violent repression.

The reliance on formal models and accounting ledger logic in international development has been routinely criticized by scholars working in local communities for decades (see the Society for Economic Anthropology - sidebar) and points to a cognitive disconnect between two poles of researchers: those who look only at aggregate, national data; and those who look at income distibution within economies. As I have stated previously, since consumption plays an increasingly important aspect of "modernized" economies (think "consumerism"), getting cash into the hands of consumers with stable household economies becomes the driving force in creating domestic demand for good and services. This is why Argentina's counterintuitive response to 2001 "worked," and why Guatemala's invitation to large-scale argricultural interests threatens to destabilize not only the domestic economy, but the political economy of the state (i.e., the peace accords between rebels and the government).

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