Most of us have heard the saying “to the victor belong the spoils”. Well, to the victors of WWII belonged the greatest spoils humanity had ever seen; the undisputed mandate to set up a single economic model for the world to insure that human potential is put into productive peaceful pursuits. Europe and Japan were rebuilt with economies based on what England and the US thought were best suited for their own cultural value systems. It was strongly believed that a developed world where private ownership of resources with the least amount of regulation and the pursuit of free market ideals will surely make our planet a better place. In addition, for less developed countries wishing to pursue this Utopian dream, institutions like the IMF and the World Bank were set up through the Breton Woods System of Monetary Management to help them finance this arduous journey.
More than sixty years into this experiment and the results seem to have produced a very mixed bag. On one end of the spectrum the free market economy concept worked well for nations that were already developed and had the institutional capacities in place to make the transition to highly industrialized consumer-based economies. At the other end of the spectrum, less developed countries have gotten further behind and are struggling to feed millions of their own people. So, what went wrong? The answer might lie in the developed world’s inability to identify barriers to development from a cultural values perspective.
How Economic Policies Deny Evolution of Cultural Value Systems
At the end of the colonial era imperial powers carved up tribal lands into arbitrary countries with the hope that tribes will be forced to dismiss thousands of years of rivalries for a cause called “Nation”. The promise of industrial prosperity was the carrot at the end of the stick; A concept that worked so well for Europe and Japan but has remained foreign to most places in Africa, the Middle East and many poor places till this day. What the framers of the Breton Woods architecture ignored was that places that are primarily tribal in nature must build their own indigenous capacities that would eventually transcend tribal existence and propel them into their own unique expression of cultural prosperity. Before a tribe can embrace industrial age values, it has to go through an egocentric stage where an individual’s values are imposed over those that make up the collective values of the tribe. Europe went through this evolution over hundreds of years and the results were many bloody wars. The US went through it during the civil war at a cost of millions of lives to get to a stage to say “never again”. The conquest of this egocentric stage should never be underestimated or it will manifest in pathologies that create organizations like Al-Qaeda and the endless number of failed states. (Bin-Laden’s family was extremely wealthy but relied on nepotism and tribal favoritism to become wealthy instead of through the industrialized system of merit that levels the playing field in the West). What policy makers should have been aware of is that this stage of social development wouldn’t need to take on the form of bloody warfare. Instead, designing for economic prosperity at the tribal level will blunt any unhealthy desires to start wars with the neighboring tribes. This type of policy setting would have required intimate knowledge of the indigenous life conditions of those tribes and the challenges they face. Based on information gathered from these places, we can create the base for what I call “Stratified Economic Policy”. The concept of micro loans created by Muhamad Yunis is a great example of such highly functional solutions for Bangladesh and places of similar indigenous challenges.
Without the interference of Western designed development programs, the non-western world would have very likely developed along these lines: In order to move to more advanced developmental stages, capital accumulation earned from hard work must be applied by a tribal culture towards what evolves next and naturally for that tribe. To some it could be acquisition of farm land. To others it could mean sending their first born to a good school, or buying more cattle like the case is with most Central African tribes. These normal transitions to healthy manifestations of a culture’s uniqueness were halted by the appearances of two phenomena that were the byproduct of post WWII prosperity: The West’s insatiable appetite for resources and the creation of the IMF.
Into a Tribal World Enter OPEC and the IMF
After WWII the industrialized world shifted its focus to a consumer-based industrial economy, which required a tremendous amount of resources and raw material. And lo and behold, as if the Gods were testing the West’s true intentions in claiming to help the rest of humanity, most of these raw material were found in third world countries; OPEC for oil and Africa and South America for the rest of the raw material needed for our modern day consumption. From a macro development theory perspective, these non-industrialized countries had never experienced a systemic enforcement of the rule of law at a national level nor had the resources or the complexity to understand the meaning of most of the institutions that the West takes for granted. In describing the reason for the arrested development stage of these countries, a renowned social scientist said that they never had the chance to rebel. The discovery of natural resources in tribal cultures had, in essence halted the normal stages of human development within them. Left to their own devices, without having the West take the stuff from the ground, these cultures would have maintained a natural evolutionary process and formed healthier and more cooperative tribes tested and tried by the passage of time to smooth out tribal differences before the idea of “Nation” could crystallize. Life conditions at the time of discovery of oil were such that egocentric warriors had to rise to leadership positions without ever being exposed to concepts such as nationalism, the importance of state institutions, and a real understanding of wealth management. To protect their new-found “lute”, these leaders used tribal warfare tactics in making sure their own tribe prevails. Till this day, if you’re a developer wishing to get a Billion dollar project approved in Saudi Arabia, or Dubai, a poem written just for the occasion that praises the generosity and the greatness of the Sheikh, will improved your odds of success over someone who’s done extensive research about the market viability of the project and its associated costs. The OPEC dynamics in a place like Venezuela have taken on a slightly different twist. Populist economic policy has been the tool of choice for tribal leaders in South America. Chavez, while paying lip service to the poor and giving them small siphons for food has sidelined most national institutions and stolen billion in oil revenues in the process.
The story with the IMF is slightly different in the sense that it catered to the same pathologies through loans instead of oil revenue. Without ever knowing what Africa needs like Dr. Yunis knew what Bangladesh needs, the IMF, by shear ignorance of the role that cultural values play in the development of a place, is single handedly, responsible for more death and corruption than any other post WWII institution. One only needs to look at which countries borrow from the IMF. Over 97% of borrowing countries were dictatorships (before recent loans made to Iceland). Yes, dictators with the blood of thousands on their hands like Mugabe and Assad (the father) are on the top of that list. A full discussion of IMF policies is a subject needing many posts to expose its pathologies.
The road to that Utopian dream hatched by FDR and Churchill in Breton Woods, NH over a Brandy (as President Obama says) has turned out to be the road to Perdition for third world countries rich and poor . If the G-20 want to address the causes of poverty they need not look any further than the dysfunction inherent in the institution they just voted to triple its resources The flood of unconditional oil revenues from industrialized countries and loans with little accountability from the IMF have corrupted tribal values forever and created a pathology that has become very difficult to undo. When oil revenues disappear, most OPEC countries will have to wake up and realize that to prevent future abuse of power it’s not enough to choose a good tribal leader to lead. Rather, it becomes paramount to establish societal institutions and the rule of law. To Europe, the US and Japan, this rule of law came after hundreds of years of bloody warfare. To the third world, it would have to come from a perspective of “stratified policies” that are informed by the life conditions on the ground and not by some Western think tank with Ivy League credentials billing the UN for millions for their advice and claiming to know what ails a world of lower complexity.