I have read Ross's piece and I must confess that I don't buy it at all - perhaps I have just become more conservative in my old age and have left too much of my red/green background behind, or perhaps I have read too much economic stuff since then.
Herewith just some of my problems:
The material on devaluation is just confused. Why would devaluation necessarily lead to a loss of income? For example, if the price of a crop is fixed in dollars then all that devaluation does is to give the exporters a much larger income in the domestic currency. Devaluation MAY permit the exporters to reduce their dollar price, but this might be offset by higher sales. It is not clear to me at all why devaluation would reduce the overall dollar receipts. The reason for devaluations is to shift the balance between imports and exports - it makes it more expensive to import luxury goods (e.g. Mercedes Benz cars for the local bureaucracy) and encourages people to go for exports. There is a large literature on how overvaluation of exchange rates in Africa led to a thriving black market in foreign currency which eventually undermined the stability of those economies - exporters would prefer to change their earnings on the unofficial market. Many sections of the economy thus went "underground". The author does not seem to have any understanding of this part of the literature at all.
It is true that the IMF/World Bank have required governments to cut back on spending. This is also one of the most contentious aspects of structural adjustment and there are many fairly mainstream economists who have had problems with how these conditions have been imposed. Nevertheless to argue that "Governments have also been forced to levy charges for utilities such as water and health services, thereby putting clean, potable water out of the reach of the majority of the rural poor" seems slightly over the top. How many of these governments actually supplied clean, potable water to all their rural poor? And how many of these governments used their budgets to fund large military machines? (or foreign war efforts - like Zimbabwe is currently doing). The real problem seems to be that faced with a choice many of the governments cut the social programs FIRST and all the other stuff second. The IMF and World Bank might be criticised for not insisting on more appropriate ways of getting these states to balance their budgets.
My main point, however, is a slightly different one - at no point does the article suggest that there are real choices that developing economies have. They are not completely at the mercy of "globalisation". It is true that the deck may be stacked against them and it is useful to focus on the concentration of power in the hands of some of the traders and some of the international organisations, but a more nuanced picture would be much more helpful in working out what can be done.
The material on "small is beautiful" agriculture is also very one-sided. There has been a lively literature on this and some of the more recent stuff suggests that it is simply not true that small family farms are more productive than bigger enterprises. Many of the original studies have compared small farms in very fertile delta areas to large farms in the more arid hinterlands of countries like India. It is hardly surprising that the small farms were more productive per hectare.
The article cites exclusively the NGO type of literature and does not seem to have any understanding of anything else. If you want an opinion piece, that is fine (it should be a little bit more up front about the fact that it is largely opinions that are expressed and not indubitable facts). If you are looking for a more careful assessment of the evidence, this does not really qualify.
|Copeland's response to Wittenberg's review.|