“There Must Be a U-turn to Create Healthy Domestic Markets”

Jan 20

Born in the Philippines in 1945, Dr. Bello is the author of more than
10 books, including "People and Power in the Pacific" (1992), "Dark
Victory: The United States and Global Poverty" (1999), "Global Finance:
Thinking on regulating speculative capital markets" (2000) and "The
Future in the Balance: Essays on globalisation and resistance" (2001).

After receiving a Ph.D from Princeton, he was arrested several times in
the United States, peacefully protesting the Ferdinand Marcos
dictatorship in his home country.

Bello is the executive director of
Focus on the Global South and a visiting professor in Southeast Asian
Studies at the University of California at Los Angeles.

Dr. Walden Bello spoke by phone from the Philippines with IPS Canada correspondent Chris Arsenault.

IPS: There seems to be consensus among economists that globalisation,
as practiced by the Bretton Woods institutions, leads to greater income
inequality but also to significant GDP growth. As one of Asia's leading
critics of the Bretton Woods model, don't you feel that growth is
necessary to pull people out of poverty, even if inequality is an
initial byproduct?

Bello: I think that when you aggregate it, in the number of countries
where there has been significant GDP growth, on balance, there has been
an absolute reduction in poverty. Certainly in the cases of Vietnam and
China, there has been an absolute decrease in poverty.

However, certain social groups, especially in the rural areas, and
lower-class groups in the cities, have gone into even greater poverty.
In all countries in South East Asia and East Asia, you have greater
inequality in income distribution. In practical terms, a great
imbalance has grown between the cities and the countryside; people in
the countryside have lost in absolute and relative terms compared to
the city.

Furthermore, we have had tremendous rates of environmental destruction.
The gains in terms of poverty reduction have been counterbalanced by
these other trends. I am speaking only about East Asia in this regard;
the other caveat I would say in regards to Vietnam is that Vietnam has
done a better job in containing these contradictions compared to
countries like China.

IPS: You have written that, "in the Third World the pendulum has swung
so far in the direction of export-oriented production, that it does
need to be corrected back towards the domestic market — the balance
between the two has been lost in the drive to internationalise our
economies." Is this really true? A lot of economists think the
expansion of China's domestic consumer purchasing power will keep that
country's manufacturing base strong even if its export markets, like
the United States, are faced with a recession. Do you think domestic
markets in East Asia will be able to absorb current levels of economic

Bello: There are certain groups who have gained in income, including
the emerging sectors in the cities, especially the coastal cities. To
some extent, they act as a supplement to export-orientated production.

The driving force is still export markets. To maintain that export
edge, you have to be able to keep down your labour costs. Keeping down
labour costs continues to be the main factor limiting domestic
consumption growth. In China, raising the incomes of people is in
severe contradiction with the demand of low wages to continue turning
out cheap commodities.

There has to be a very significant u-turn to create healthy domestic
markets. This turn can only happen with significant measures to
redistribute income, to redistribute welfare. This isn't going to
happen so long as you have your eye on being competitive in export

IPS: According to the environmental monitoring group the Worldwatch
Institute, China now boasts 16 of the world's 20 most polluted cities.
What rate of economic growth would be a good balance between pulling
people out of poverty and having some degree of environmental

Bello: I want to say very strongly that we have to focus on a new
paradigm of environmental sustainability. I am not talking about
achieving 6-10 percent GDP growth, and just changing the driver from
export markets to the domestic economy. I am talking about a whole

I am really thinking about bringing growth rates, as measured in the
traditional way, down to 2-3 percent. You can only do that with
significant redistribution of the benefits of growth, so as to fulfill
a large number of social demands with a relatively low growth rate.

My sense is that, so long as you have good government policies that
support equitable distribution, you can achieve higher standards of
living, even with growth rates that are not high in traditional terms.
Certainly, the kind of 10 percent growth that China has been enjoying
is out of the question; even 6-8 percent growth is out.

IPS: One position paper from your organisation, Focus on the Global
South, touts ALBA, the Bolivarian Alternative for the Americas, as a
possible regional integration model that might work in South East Asia
and other regions. Do you think ALBA would even be possible without
large amounts of Venezuelan oil and the petro-dollars that come with
it? Basing a regional development strategy around crude oil exports to
the U.S. isn't necessarily the most sustainable practice.

Bello: The principles of ALBA, not necessary the wealth base, are what
need to be reproduced; not everyone has those petro-dollars and
environmentally it's questionable as a long-run strategy.

The less powerful economies should have greater privileges than the
more powerful economies, so regional cooperation increases their [lower
income countries'] capacity rather than eroding it. ALBA focuses on
building a regional market based on import substitution and technology

Certainly there are things that aren't present in ALBA at the present
time that would also be important to reproduce in other regional
associations. The lesson we should be taking from ALBA is the move away
from free trade towards genuine economic cooperation.

IPS: Currently, most observers agree that China is not in a colonial
relationship with other smaller and weaker nations in South East Asia.
However, China is on track to displace the United States as the world's
largest economy by 2050 and some worry that China could become a
metropolis gaining markets and raw materials from a South East Asian
hinterland. Do you think China is on course to becoming a neo-colonial

Bello: Definitely, unless there is more real planning, setting firm the
principles of mutual and equitable relationships, on the part of China
in terms of its relations with other countries.

China needs to create standards and policies for its transnational
corporations operating abroad. Unless these things happen, the old
colonial relationship could be reproduced.

There is tremendous demand in China for raw materials and a whole bunch
of other things; China has the capital to export. The structural drives
for a new periphery- metropolis are there; they need to be countered by
policies, strong counteractive state policies from China. We have the
opportunity at this point to have new relations between developing
countries and China that do not reproduce the old colonial
relationship. But we have to act soon. 

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