#liberalisation-privatisation-globalizations

In the 1990s, John Williamson, a British economist and senior fellow of the Peterson Institute for International Economics, coined the term Washington Consensus to describe the neoliberal agenda to privatise state-owned enterprises (SOEs), commodify public goods, and liberalise capital accounts and trade. These policy choices, driven by the IMF and World Bank in alignment with the US Treasury, find much of their theoretical justification in neoclassical economics and the works of thinkers like Friedrich Hayek and those associated with the neoliberal Mont Pelerin Society. The Washington Consensus paradigm is perhaps most famous for its role in the so-called structural adjustment programmes (SAPs), which led to a lost decade on the African continent.

For the past several decades, the IMF has enforced a combination of austerity (what they call a ‘balanced budget’ agenda), privatisation, and trade liberalisation on decolonising nations. This has stripped states in the Global South of the capacity to drive their development processes and protect their infant industries. In order to deal with the resulting imbalances, the IMF has frequently encouraged underdeveloped countries to borrow from private capital markets, leading to more debt traps. Meanwhile, the World Bank has historically followed an agenda of recommending anything but large-scale industrialisation for the Global South. In the early post-World War II era, this manifested in its recommendations for countries to stick to their ‘comparative advantage’ in exporting raw materials. By the 1990s, the World Bank was promoting ‘financial deepening’, code for encouraging financial deregulation as a panacea for mobilising resources for development. More recently, the World Bank has shifted its focus to promote development in the service sector and investment in small and medium-sized enterprises (SMEs), both recipes for continued debt bondage on the national and household level. The service sector is often dominated by multinational corporations (MNCs) with monopolistic structures, making states that focus their development on this sector susceptible to the whims of MNCs in the Global North. SMEs, which typically lack the resources (including government subsidies) to compete with MNCs and do not have the advantages of scale of MNCs, end up absorbed into these larger monopoly-dominated networks. Indeed, the combination of financial liberalisation and the promotion of SMEs locks countries into what Samir Amin called generalised monopoly capital, with both upstream (raw materials, technology, and capital) and downstream (distribution, marketing, and consumer access) networks of control.

One of the main outcomes of the Washington Consensus has been an almost religious belief in the power of foreign direct investment (FDI) to drive economic growth and structural transformation. The FDI mindset drives Global South states towards a narrow focus on opening up their labour and natural resource markets to Western monopolies, thereby linking their agendas to the rent-seeking needs of financiers rather than the developmental aspirations of their populations. Empirical evidence of FDI’s transformative capacity, however, is limited at best: this form of investment fails to promote integrative growth that could pave a pathway out of indebtedness and towards national sovereignty, instead promoting unproductive sectors of the economy. Three characteristics of FDI are important to note:

FDI flows are declining. FDI peaked in 2007, the year that the Third Great Depression took hold in the major capitalist countries, and has decreased in the years since. Indeed, according to the United Nations’ Conference on Trade and Development (UNCTAD), both FDI and project finance (long-term infrastructure or industrial funding) have experienced a gradual decline. From 2022 to 2023, for instance, developing countries saw a 7% decrease in FDI flows to developing countries.

FDI flows are non-productive. Over the past few years, UNCTAD’s annual investment reports have shown the changing character of FDI. While in the past it was concentrated in the manufacturing and industrial sectors as well as natural resource extraction, FDI has increasingly been channelled into the financial and service sectors, where it does not generate integrated or transformative development that could help transcend colonial underdevelopment.

FDI flows do not drive growth or investment. According to a 1999 UNCTAD report, large FDI inflows to developing countries in the 1990s had little impact on increasing investment patterns. More recent studies by UNCTAD have shown a clear divergence between FDI flows and GDP growth since the Third Great Depression. This means that economic growth is increasingly independent of FDI flows.

Origins

The origins of the present crisis can be traced back to the disintegration of the USSR and independence in 1991. Uniquely among the states of the former USSR and Eastern Bloc, Belarus has so far avoided the shock market therapy which destroyed the bureaucratically planned economies and plunged tens of millions into dire poverty.

Instead, the caste of ex-Soviet bureaucrats — Lukashenko himself is a former manager of a collective farm — transformed themselves into national administrators of state capitalist enterprises and successfully consolidated power at the head of a still largely state-owned economy. The ruling elite’s strategy for maintaining power and social stability has been to conduct a careful balancing act between the expansionist ambitions of Western and Russian imperialism, leveraging the benefits of foreign loans and subsidies while denying its people basic democratic freedoms to suppress internal opposition.

Existing as it does within the confines of an international capitalist market, Belarus’s state-owned and bureaucratically managed economy was unable to attract sufficient foreign investment or develop the productivity of its heavy industry, and became heavily dependent on Russian oil subsidies and export markets. Even today, state industry is responsible for more than 50 percent of GDP. Belarus is very different from the oligarchic capitalism of Ukraine or Russia, but far away from a planned economy: its state industries are organised in holdings operating on the global markets at the centre of which are the three big state banks. With credit growth far outpacing real growth and lacking domestic sources of capital, foreign debt has inevitably risen and was at 80 percent of GDP even before the coronavirus crisis. For more than a decade, Belarus has been in the vicious cycle of debt refinancing, stagnation, currency crisis and price stability problems, increasing its dependence on Russia as a result.

To keep the oil flowing, Lukashenko has indulged successive Russian attempts at greater integration between the two states, but delayed or resisted any decisive moves towards privatisation, which would threaten the dispossession of domestic elites in favour of Russian oligarchs. Likewise, if he followed through on his flirtations with the EU, loans and private investment would no doubt be conditional on “reform”, that is, wholesale opening to market forces.

Despite creeping economic stagnation, for decades Lukashenko was able to redistribute the profits from sales of Russian oil to provide an at least reasonable standard of living for the country’s population, including universal healthcare, free education, subsidised rents, high state pensions, and other state welfare programmes. As a result, his government has been able to maintain a certain degree of legitimacy amongst the rural and urban workers, notwithstanding its iron grip on Belarusian civil society. Periodic expressions of pro-democracy sentiment have failed to win wider support and been easily repressed.

Stagnation

Yet Lukashenko’s stubborn refusal to accept his designated role as Putin’s stooge has led to growing tensions between the two countries, resulting in cuts to Russian oil subsidies and contract disputes frequently interrupting oil supply flows. The increasingly pressing need for economic diversification, alongside a desire to avoid aligning itself with Russia in the Ukraine crisis, have led Lukashenko to make overtures to the European Union, engaging in “dialogue” about economic liberalisation in exchange for increased European aid. But the process has been slow — a fully-fledged partnership and cooperation agreement has been blocked by opposition from Lithuania — and is ultimately limited by the regime’s need to hedge its bets between East and West to maintain its own position.

In recent years, that balancing act has reached its limits. During the deep recession of 2015 to 2017, the highly indebted state was unable to act countercyclically and real income fell by 13 percent as a result of currency devaluation and price increases. Faced with falling growth and increasingly unable, or unwilling, to draw on Moscow’s patronage, Lukashenko has turned to an assault on his own working class to claw back losses and stave off economic disaster. In 2015, the so-called “parasite law” was brought in, forcing anyone not in state-recognised employment to pay a special tax or be sentenced to community service. The decree was withdrawn in 2018, but the unemployed are instead being forced to pay for all state services. A series of amendments to the labour code in 2017 unilaterally shifted 90 percent of workers from permanent to temporary contracts.

Widespread cuts have been implemented across health and education and the retirement age has been raised. All this combined with the steadily falling value of the Belarusian Rouble, has meant a serious decline in the standard of living for Belarusian workers. With the coronavirus crisis, the economic problems of its main trading partner (Russia) and the amount of accumulated debt, Belarus is now on the brink of economic collapse. Given the “crisis management” of Lukashenko during the coronavirus crisis so far, the working class and parts of the ruling class have lost confidence in the ability of the existing regime to prevent the approaching disaster. At the same time, the prolonged shutdown of the global economy is causing both Russia and the EU to re-evaluate their budget priorities.

Protest

Thus, growing discontent with the regime has, for the first time since independence, exploded into a mass popular movement drawing in huge swathes of the working class and backed by industrial action across all sectors and across every part of the country. The scale and breadth of the actions reveals the depths of the country’s political and economic crisis and the authentic character of the uprising; a US-orchestrated “colour revolution” this is not.

In the first few days of protests, the movement’s official demands were limited to calls for new elections monitored by international observers and the release of detained activists but, by Sunday, mass protests were demanding Lukashenko’s immediate resignation. The movement has developed a momentum of its own which is quickly eroding the regime’s legitimacy.

If the protests continue and, crucially, if the strike movement grows to paralyse greater parts of the economy, Lukashenko will face a choice between a bloody crackdown and surrendering power. For now, the regime still controls the police and the military, though there have been reports of some police and army personnel joining demonstrations, and protesters have been filmed appealing to soldiers to join the uprising.

The democracy movement is determined and enjoys mass support; its suppression would be likely to involve prolonged violence, risking defections in the military. Putin has promised Lukashenko military assistance in accordance with the two countries’ military pact, but stopped short of endorsing Lukashenko, who he regards as an altogether unreliable ally. In any case, Russian support would come at a high price; Lukashenko would surely be forced to abandon his policy of constructive ambiguity towards Russia and accept a future as a custodian of a Russian protectorate.

A “managed transition” of some sort may become a preferable alternative for parts of the bureaucracy which will hope to placate the democracy movement but preserve parts of the governing apparatus and reap the profits from any forthcoming privatisations of state-owned enterprises. The democracy movement thus far has little organised political leadership, taking the form of a spontaneous upsurge of popular discontent. Many leaders of the liberal opposition, who support economic liberalisation and full integration into world markets, are in prison or abroad. The movement stands on a critical threshold, what comes next will be determined by what kind of political leadership emerges to channel the discontent.

Svetlana Tikhanovskaya, the opposition candidate in last week’s elections, has declared that she is ready to take up the presidency and announced the creation of a national ‘coordination council’ from her self-imposed exile in Lithuania. She stated:

“I ask you to unite in the coordination council. We desperately need your help and experience. We need your connections, contacts, expert advice and support. This coordination council should be joined by everyone interested in dialogue and peaceful transfer of power – working groups, parties, trade unions and other organizations of the civic society.”

Many are now calling for international recognition of Tikhanovskaya’s claim to the presidency and for the EU to mediate negotiations between civil society leaders in exile and the incumbent government. But it would be a catastrophic mistake for the movement to place its faith in the thoroughly capitalist self-appointed leaders of the opposition or their ‘friends’ in the EU. Nor should it recognise a ‘coordination council’ even with bureaucratic union representatives. It is the mass forces of the working class that has brought the movement this far and they should not allow the representatives of the liberal middle classes to reap the fruits of their actions.

Nor will “free elections” on their own alleviate the suffering caused by the contradictions of Belarus’ economy. In fact, unless the mass movement can organise itself around an alternative political programme and prepare to administer the transition itself, Lukashenko’s departure is highly likely to herald a neoliberal programme of privatisations which will further destabilise the economy and turn Belarus into a semi-colony dependent on the EU and Germany.

XII BST : Outcomes of New Industrial Policy 1991

Outcomes of New Industrial Policy 1991 1.      Liberalisation

Liberalisation means freeing of Indian Industry from all unnecessary government controls and restrictions. It is also the end of the licence-permit-quota raj.

Liberalisation has taken place with respect to:

Abolishing licensing requirement in most of the industries

Restrictions on expansion or contraction of business…