David Miller: Why I Did Not March On May Day

In the course of my business and research I travel to Wellington frequently throughout the year. When in the capital, I make a point to visit the House of Representatives, the numerous art galleries and museums, the cafes and bars and enjoy the cities nightlife. However this year I see there was one more engagement on the cities calendar; the May Day parades. While I believe free speech is a basic human right and do not wish to see it denied to anybody I must say that I did not join in the May Day parade. This has nothing to do with the fact I'm unfit, it’s because I believe in free trade and enterprise. Although the call is to rally against the forces of globalisation and capitalism, many who tout such slogans have a misconception of the concepts, which they believe are fashionable to fight.

To those claiming to fight globalisation, the concept represents an ideological export of the United States and the free market West and has become the dominant ideology of the post Cold War world. It is used to increase gaps between the industrialised nations and those in the developing world as it is through globalisation that capitalism can rein with its unchallenged policy of exploitation. The consequences are things such as environmental devastation, the exploitation of indigenous peoples, the invocation of wars, the forcing of longer, harder hours and conditions onto the workers and the global supremacy of institutions such as the International Monetary Fund and the World Bank.

The misconception begins with the idea that globalisation is limited to money and financial markets, although this is how those on the left like to portray it. Instead it is a portmanteau concept. A marked increase in this perception occurred following the Asian economic crisis in 1997 when a massive outflow of money left the region causing the serial collapse of regional currencies and financial markets. This was followed by the measures the IMF took when called into countries such as Indonesia and Thailand to relieve the huge national debt that had amounted and to try to put those states back onto a stable footing.

The misconception is furthered with the idea that it is the financial markets that were the cause of the problem. It is true that these are the means by which money is moved around the world, but that are merely the channel. The problem was that many developing nations attempted to establish their economies on the back of such massive borrowing. This was the case with East Asia. In this case, nations borrowed vast sums of money to fuel their growing manufacturing base with much of the money borrowed in US dollars to take advantage of the lower interest rates. States in the region and around the world pegged their currencies to the Greenback to avoid costly repayments. The problems came when the US dollar rose in the mid 1990’s pulling other currencies with it making their exports more expensive and undercutting their competitiveness.

The result of this was the accumulation of debt, which increased when foreign currency and investment began leaving. Many developing countries suffered under corrupt and nepotistic governments and much of the money either enriched them and the family members or was sunk into prestige projects which where designed to enhance a regime’s image. Another point often overlooked.

Once the IMF and World Bank are called on to assist the developing nations this ushers a process known as Structural Adjustment. This concept has also received a bad press from those on the political left and the matter of IMF or World Bank involvement often becomes highly politicised. To many these institutions use a situation such as the Asian crisis to further their influence and impose their harsh economic measures onto that state in a bid to keep it weak. In reality what happens is that the measures are set in place to try and trade a country out of its crisis and ensure that the lessons of the past are learnt. These measures involve currency devaluation, cheaper exports and increased debt repayment. If they are not set in place then the vicious cycle begins to repeat itself.

Unfortunately structural adjustment is necessary in order to help developing states. Once a government begins to intervene in the financial markets of the state or simply relies on borrowing to further development then it either becomes isolated, thus cutting of its access to trade, funds and wealth or the growth that is stimulated isn’t real. What happens is that economic development is artificially stimulated. Once a government can no longer borrow to sustain this then the recession begins. It also means that once the recession begins to bite or there is economic meltdown, the results are far more catastrophic as the true value of these economies are realised.

I'm sure that at some point on May Day, economic remedies where discussed and no doubt debt relief was a favoured solution. There is merit in this, however debt write-off is not the answer. If developing countries are to benefit then they need access to finance and investments and these need to be utilised wisely, for example developing a competitive manufacturing or agricultural base. No government or private institution will invest in something or a place where the price is too high or is not at its real value, and this is another point so often overlooked. Globalisation and free trade are not perfect solutions but they are necessary for a country to gain wealth and a better standard of living and do need to be managed correctly, or so begins the vicious circle of artificial acceleration. However valid this argument may be, I'm sure that on May Day it was overlooked, because as these concepts become fashionable and convenient political footballs, alternatives to globalisation, capitalism and structural adjustment are seldom offered.

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