World Bank advice on how to harness equity for capitalist exploitation
Paul Wolfowitz is a worthy successor of Robert McNamara - both as occupation warlord and as World Bank president. He has taken the bull by the horns and in his first World Development Report (WDR 2006) set out a strategy to harness equity for the Neo Con project of global capitalist exploitation. In this essay I will try to show how Wolfowitz seeks to achieve this objective
Wolfowitz begins by defining "equity in terms of two basic principles. The first is, equal opportunity - a person’s life achievements should be determined by his or her talents and efforts. The second is the avoidance of deprivation in outcomes" (CWDR 2006) Capitalist equity - equity as defined by Wolfowitz, is claimed to be a means to enable all individuals to live a life of their own choosing. Equity is not defined as "equality of opportunity" or as "avoidance of deprivation" by the worlds great religions - this becomes evident from the World Bank’s crude distortion of the Buddhist, Christians and Islamic doctrines on pages 76-77 of WDR 2006. The Prophet and Sayadna Isa (peace be upon them) and Gautama Buddha led lives of great voluntary deprivation. Poverty (faqr) is extolled as a cardinal virtue by Buddhism, Christianity and Islam. Moreover talents, like race, gender social class and regional location, are all un-chosen at birth. Why should the flourishing of talent-based inequalities be regarded as equitable? Why should the less talented be less equal?
Capitalist moral discourse addresses this question by developing a conception of the good, which negates its claim that equality of opportunity and deprivation avoidance (i.e capitalist equity) is a means for enabling individuals to lead any life of their choosing. Capitalist equity is compatible only with the capitalist way of life. This becomes clear from the thumbnail sketches of the thoughts of the shameless Anglo Saxon capitalist apologists, Dworkin, Nozick, Roemer, Rawls and Sen in WDR 2006 (it is significant that the more profound work of the shamefaced capitalist Continental apologists Bataille, Foucault, Gadamer and Habermas is not mentioned). These capitalist apologists assign value to choice alone. All specific choices are in themselves valueless. They are relatively valuable only to the extent that they contribute to the expansion of the realm of choice (Sen would call this "capabilities," Roemer "advantages"). This abstract realm of choice is nothing but the concrete circuit of capital. Capital (exchange value in perpetual motion for its quantitative expansion) is the choice of choice itself. Financial markets value all transactions in terms of their contribution to accumulation (abstract choice). There is no space in capitalist order for any other conception of intrinsic worth. Individuals and activities are assigned relative value solely in accordance with their relative contribution to accumulation.
The instrumental character of capitalist equity is stressed throughout WDR 2006. Wolfowitz argues that "broadening opportunities strongly supports the first pillar of the Bank’s strategy namely improving the investment climate". Opportunity inequity is likely to lead to "wasted human potential" - capitalist equity contributes to "sustainable growth". Promoting equity can "correct market failures" and enable "resources to flow where returns are highest". In the absence of efficient markets "re-distribution of access to assets can increase economic efficiency". "Middle and poorer groups (should not be) allowed to end up with unexploited talent (otherwise) society as a whole (is) likely to be inefficient and miss out on opportunities for investment". Capitalist equity promotes "reduced conflict greater trust and better institutions with dynamic benefits for investment." Bringing "equity considerations to the diagnoses of policy means integrating and extending existing frameworks" and not in any sense rejecting the World Bank’s time honoured policy paradigms.
This emphasis on policy continuity, i.e. on incorporating capitalist equity promoting measures within the Neo Con policy paradigm to which Wolfowitz’s Bank is committed - leads to an emphatic rejection of conventional social democratic policies. "The policy’s aim is not equality in outcome," i.e. equality in the actual distribution of income and wealth. Wolfowitz’s Bank emphasizes "the important role of income differences in providing incentives to invest and to work." Promoting capitalist equity is merely promoting "(Capitalist) property rights for all." Equity considerations cannot trump capitalist property rights, since they are means for promoting them. Wolfowitz’s Bank warns against socialist policies, "The history of the twentieth century is littered with examples of ill designed policies pursued in the name of equity that seriously harmed investment."
Wolfowitz’s Bank obscures the negative relationship between the growth of capitalist equity and the growth of distributional (income and wealth) equality by incoherently measuring capitalist equity on the basis of income and asset distributional characteristics. Growing distributional inequalities in the Western countries are not mentioned. Wolfowitz’s Bank is embarrassed to admit that capitalist inequity as measured in a regression model using data from Brazil does not significantly explain distributional inequality (the results are in any case banal for they implicitly involve auto regression).
Wolfowitz’s Bank is even more embarrassed to admit that capitalist equity enhancing policies - those emanating from the Washington Consensus - have contributed to an increase in distributional inequalities since 1990-specially in the ex-socialist countries of East Europe where these Neo Con policies have been rammed down the throats of unwilling populations by the IMF and Wolfowitz’s Bank.
Despite this, WDR 2006 fully endorses Neo Con macroeconomic policies. The primary emphasis is on growth, even as a means for reducing global inequalities. It is stressed that "the distribution of opportunities and the growth process are jointly determined" - the invisible hand ensures capitalist equity if growth is enhanced, "Each policy does not need to take equity into account." "Equity must not be an excuse for poor economic policy" i.e. high budget deficits, industrial protection, employment subsidization, credit planning etc. In particular expropriation of capitalist property is to be avoided at all cost "A focus on equity does not change the fact that asset appropriation even in the face of historical grievances (has) adverse consequences for subsequent investments". The principle objective of macroeconomic policy is to support or substitute for markets because "markets are central for shaping the potential to convert human talents." The government should therefore "open up financial markets" and liberalise trade. "A concern for equity would lead to a highly prudent stance on macroeconomic management and financial regulation. Populist macroeconomist policy is bad for equity and bad for growth. Policy design can support equity through the pursuit of counter cyclical fiscal policy, building safety nets, reducing risky lending (and promoting) independent central banks and autonomous financial regulatory agencies" says WDR 2006.
This macro policy should be supplemented by meso initiatives to restructure institutions for allowing capitalist capabilities (greed, lust, ruthlessness, cruelty) to flourish and for markets to function efficiently. Power, status and wealth should not impede the flourishing of these capitalist capabilities and rationalities for if they do "they are also bad for investment, innovation and risk taking".
The key institutional restructuring initiative advocated is privatisation. This is seen as key to the provision of infrastructural services and for their marketisation. Privatisation of utility services is strongly endorsed as an equity enhancing measure. Utility sector regulation should be market oriented and profit incentives should be provided for the production and distribution of utilities (specially electricity and gas). Any subsidies that cannot be avoided should be targeted at utility market development.
Most important, there should be no land reforms. "Broader access to land does not come through ownership change. Improving the "functioning of land markets and providing greater security of tenure (is) fruitful. "Expropriating land is the most disruptive redistribution instrument" and should be rejected for the promotion of capitalist equity.
Similarly capitalist equity requires the universalisation of the practice of "employment at will." The firm has the right to dismiss the worker at the time of its choosing. The firm should be free to determine the terms of the employment contract. "State regulation for workers reduces the flexibility of labour markets and are a poor deal for the workers". Employment regulation regimes should not impede the type of economic restructuring imposed by Washington Consensus policies on developing countries. "Worker security is provided by stringent forms of employment protection legislation which makes it costly to hire and (fire) workers". "Levelling the playing field" in the labour markets, means bringing down the formal full time contract workers to the level of the causal labourers.
"Levelling the playing field" also requires reducing the tax burden on the rich. "Developing countries are best served by avoiding high marginal taxes on income and relying on a broad base specially for taxes on consumption." Taxes on consumption are notoriously regressive but they are necessary means for promoting capitalist equity.
With its strong emphasis on the need for regressive taxation, small and falling budget deficits Wolfowitz’s Bank cannot ask for a major increase in public funding of safety net and health and education services. It apposes expansion in public health services. "Relying on public hospitals works badly." Here too privatization is the key policy. Promoting capitalist equity requires "incentives for (health services) providers to be responsive to markets." Marketisation and privatisation of educational services is also strongly advocated. Schools should ultimately be accountable to the markets and should produce a labour force capable of accelerating the pace of capital accumulation.
WDR 2006 presumes that the optimal level of capitalist equity has been achieved by the West and therefore has nothing to say about the domestic policies of the West. In the view of Wolfowitz’s Bank global policy has only a marginal role to play even in reducing global capitalist inequities. "Reducing global inequities will depend primarily on the domestic policies of poor countries". The global policy proposals in WDR 2006 therefore need not be taken seriously. Wolfowrtz’s Bank has neither the intention nor the resources to significantly influence the West’s global policy agenda.
Resources:
World Development Report 2006: Equity and Development
Background Papers for the WDR 2006
Wolfowitz begins by defining "equity in terms of two basic principles. The first is, equal opportunity - a person’s life achievements should be determined by his or her talents and efforts. The second is the avoidance of deprivation in outcomes" (CWDR 2006) Capitalist equity - equity as defined by Wolfowitz, is claimed to be a means to enable all individuals to live a life of their own choosing. Equity is not defined as "equality of opportunity" or as "avoidance of deprivation" by the worlds great religions - this becomes evident from the World Bank’s crude distortion of the Buddhist, Christians and Islamic doctrines on pages 76-77 of WDR 2006. The Prophet and Sayadna Isa (peace be upon them) and Gautama Buddha led lives of great voluntary deprivation. Poverty (faqr) is extolled as a cardinal virtue by Buddhism, Christianity and Islam. Moreover talents, like race, gender social class and regional location, are all un-chosen at birth. Why should the flourishing of talent-based inequalities be regarded as equitable? Why should the less talented be less equal?
Capitalist moral discourse addresses this question by developing a conception of the good, which negates its claim that equality of opportunity and deprivation avoidance (i.e capitalist equity) is a means for enabling individuals to lead any life of their choosing. Capitalist equity is compatible only with the capitalist way of life. This becomes clear from the thumbnail sketches of the thoughts of the shameless Anglo Saxon capitalist apologists, Dworkin, Nozick, Roemer, Rawls and Sen in WDR 2006 (it is significant that the more profound work of the shamefaced capitalist Continental apologists Bataille, Foucault, Gadamer and Habermas is not mentioned). These capitalist apologists assign value to choice alone. All specific choices are in themselves valueless. They are relatively valuable only to the extent that they contribute to the expansion of the realm of choice (Sen would call this "capabilities," Roemer "advantages"). This abstract realm of choice is nothing but the concrete circuit of capital. Capital (exchange value in perpetual motion for its quantitative expansion) is the choice of choice itself. Financial markets value all transactions in terms of their contribution to accumulation (abstract choice). There is no space in capitalist order for any other conception of intrinsic worth. Individuals and activities are assigned relative value solely in accordance with their relative contribution to accumulation.
Talents in capitalist society are valued on the basis of the accumulative calculus alone. The talent of the monk and the mother can command no value unless they are facilitators of a capitalist transaction or a capitalist spectacle. Accumulation requires the flourishing of a specific set of talents-selfishness, lust, greed, jealousy, ruthlessness, cunning and cruelty. These are Sen’s capabilities. Capitalist equity is a means for the flourishing of these capabilities for they facilitate accumulation while the talents nurtured in the monastery and the madrassah do not.
The instrumental character of capitalist equity is stressed throughout WDR 2006. Wolfowitz argues that "broadening opportunities strongly supports the first pillar of the Bank’s strategy namely improving the investment climate". Opportunity inequity is likely to lead to "wasted human potential" - capitalist equity contributes to "sustainable growth". Promoting equity can "correct market failures" and enable "resources to flow where returns are highest". In the absence of efficient markets "re-distribution of access to assets can increase economic efficiency". "Middle and poorer groups (should not be) allowed to end up with unexploited talent (otherwise) society as a whole (is) likely to be inefficient and miss out on opportunities for investment". Capitalist equity promotes "reduced conflict greater trust and better institutions with dynamic benefits for investment." Bringing "equity considerations to the diagnoses of policy means integrating and extending existing frameworks" and not in any sense rejecting the World Bank’s time honoured policy paradigms.
This emphasis on policy continuity, i.e. on incorporating capitalist equity promoting measures within the Neo Con policy paradigm to which Wolfowitz’s Bank is committed - leads to an emphatic rejection of conventional social democratic policies. "The policy’s aim is not equality in outcome," i.e. equality in the actual distribution of income and wealth. Wolfowitz’s Bank emphasizes "the important role of income differences in providing incentives to invest and to work." Promoting capitalist equity is merely promoting "(Capitalist) property rights for all." Equity considerations cannot trump capitalist property rights, since they are means for promoting them. Wolfowitz’s Bank warns against socialist policies, "The history of the twentieth century is littered with examples of ill designed policies pursued in the name of equity that seriously harmed investment."
A fundamental weakness of WDR 2006 is its inability to theorize the relationship between equality of opportunity and distributional equality. Capitalist order promotes equality of opportunity and reduces absolute poverty as a means for increasing distributional inequality. The human capabilities capitalism values are highly concentrated. Only a microscopic minority of individuals are sufficiently selfish, lustfull, greedy, ruthless, vicious and cruel to rise to the top in capitalist society (moreover, the critical minimum level of cruelty, selfishness, greed and ruthlessness required for success in capitalist society keeps on rising at an accelerated pace). It is this microscopic minority, which appropriates power in the finance markets - the markets, which value all individuals and activities on the basis of the accumulative calculus. As capitalist equity flourishes barriers to the social dominance of the selfish, the greedy, the ruthless, the cruel, the morally depraved individuals are eliminated and the financial markets - both global and local - colonise culture, politics and economy. This is the price paid for the reduction of absolute poverty.
Wolfowitz’s Bank obscures the negative relationship between the growth of capitalist equity and the growth of distributional (income and wealth) equality by incoherently measuring capitalist equity on the basis of income and asset distributional characteristics. Growing distributional inequalities in the Western countries are not mentioned. Wolfowitz’s Bank is embarrassed to admit that capitalist inequity as measured in a regression model using data from Brazil does not significantly explain distributional inequality (the results are in any case banal for they implicitly involve auto regression).
Wolfowitz’s Bank is even more embarrassed to admit that capitalist equity enhancing policies - those emanating from the Washington Consensus - have contributed to an increase in distributional inequalities since 1990-specially in the ex-socialist countries of East Europe where these Neo Con policies have been rammed down the throats of unwilling populations by the IMF and Wolfowitz’s Bank.
Despite this, WDR 2006 fully endorses Neo Con macroeconomic policies. The primary emphasis is on growth, even as a means for reducing global inequalities. It is stressed that "the distribution of opportunities and the growth process are jointly determined" - the invisible hand ensures capitalist equity if growth is enhanced, "Each policy does not need to take equity into account." "Equity must not be an excuse for poor economic policy" i.e. high budget deficits, industrial protection, employment subsidization, credit planning etc. In particular expropriation of capitalist property is to be avoided at all cost "A focus on equity does not change the fact that asset appropriation even in the face of historical grievances (has) adverse consequences for subsequent investments". The principle objective of macroeconomic policy is to support or substitute for markets because "markets are central for shaping the potential to convert human talents." The government should therefore "open up financial markets" and liberalise trade. "A concern for equity would lead to a highly prudent stance on macroeconomic management and financial regulation. Populist macroeconomist policy is bad for equity and bad for growth. Policy design can support equity through the pursuit of counter cyclical fiscal policy, building safety nets, reducing risky lending (and promoting) independent central banks and autonomous financial regulatory agencies" says WDR 2006.
This macro policy should be supplemented by meso initiatives to restructure institutions for allowing capitalist capabilities (greed, lust, ruthlessness, cruelty) to flourish and for markets to function efficiently. Power, status and wealth should not impede the flourishing of these capitalist capabilities and rationalities for if they do "they are also bad for investment, innovation and risk taking".
The key institutional restructuring initiative advocated is privatisation. This is seen as key to the provision of infrastructural services and for their marketisation. Privatisation of utility services is strongly endorsed as an equity enhancing measure. Utility sector regulation should be market oriented and profit incentives should be provided for the production and distribution of utilities (specially electricity and gas). Any subsidies that cannot be avoided should be targeted at utility market development.
Privatisation is a means for the legitimating of capitalist property. A comprehensive overhaul of the legal system is advocated to achieve this end. Customs such as those incorporated in marriage and kinship systems, which inhibit the flourishing of capitalist capabilities (greed, lust, ruthlessness and cruelty), should be de-legitimised. The "playing field is to be levelled" for the exercise of these capitalist talents and of course no play is to be permitted outside this field. "Legal institutions should uphold the (capitalist) rights of citizens and curb the capture of the state by (non capitalist) elites". "Protecting (capitalist) property rights ensures non discrimination. (The protection) of property rights is central to unbiased dispute resolution so important for investment" Customary practices should be subordinated to "the rights and responsibilities of (capitalist) state law" as is being done in South Africa.
Most important, there should be no land reforms. "Broader access to land does not come through ownership change. Improving the "functioning of land markets and providing greater security of tenure (is) fruitful. "Expropriating land is the most disruptive redistribution instrument" and should be rejected for the promotion of capitalist equity.
Similarly capitalist equity requires the universalisation of the practice of "employment at will." The firm has the right to dismiss the worker at the time of its choosing. The firm should be free to determine the terms of the employment contract. "State regulation for workers reduces the flexibility of labour markets and are a poor deal for the workers". Employment regulation regimes should not impede the type of economic restructuring imposed by Washington Consensus policies on developing countries. "Worker security is provided by stringent forms of employment protection legislation which makes it costly to hire and (fire) workers". "Levelling the playing field" in the labour markets, means bringing down the formal full time contract workers to the level of the causal labourers.
"Levelling the playing field" also requires reducing the tax burden on the rich. "Developing countries are best served by avoiding high marginal taxes on income and relying on a broad base specially for taxes on consumption." Taxes on consumption are notoriously regressive but they are necessary means for promoting capitalist equity.
With its strong emphasis on the need for regressive taxation, small and falling budget deficits Wolfowitz’s Bank cannot ask for a major increase in public funding of safety net and health and education services. It apposes expansion in public health services. "Relying on public hospitals works badly." Here too privatization is the key policy. Promoting capitalist equity requires "incentives for (health services) providers to be responsive to markets." Marketisation and privatisation of educational services is also strongly advocated. Schools should ultimately be accountable to the markets and should produce a labour force capable of accelerating the pace of capital accumulation.
WDR 2006 presumes that the optimal level of capitalist equity has been achieved by the West and therefore has nothing to say about the domestic policies of the West. In the view of Wolfowitz’s Bank global policy has only a marginal role to play even in reducing global capitalist inequities. "Reducing global inequities will depend primarily on the domestic policies of poor countries". The global policy proposals in WDR 2006 therefore need not be taken seriously. Wolfowrtz’s Bank has neither the intention nor the resources to significantly influence the West’s global policy agenda.
America is held up as a model throughout WDR 2006 - as a provider of the correct incentives promoter of domestic markets, effective regulator of institutions etc. But these are not America’s principal contributions to the promotion of global capitalist equity. Far more important are its merciless slaughter of thirty five million Red Indians in the 17th to 19th century, its 20th century slaughter in Vietnam and Cambodia and its present day slaughter in Afghanistan, Iraq, Colombia, Bolivia and Puerto Rico.
Wolfowitz’s appointment as the World Bank president is appropriate for he, like McNamara is a principle strategist of this slaughter. A policy framework focusing on the provision of opportunity equalities and the elimination of deprivation (i.e. capitalist equity) is a necessary means for the universalization of these capitalist capabilities-selfishness, greed, lust, ruthlessness and cruelty. It is hardly surprising - as WDR 2006 recognizes — that similar policies are required for the promotion of both capitalist equity and capitalist growth. Capitalist equity is after all, only an instrument for the acceleration of capital accumulation.
Resources:
World Development Report 2006: Equity and Development
Background Papers for the WDR 2006
posted by Alghazalians at 12:04 PM
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