Obama on Globalization: A Success Story

Barack Obama’s Nelson Mandela speech praised globalization and market-based solutions for their role in lifting one billion people out of poverty. But is this true? For example, half of this poverty reduction is traceable to China’s economic growth. And inequality has only grown, as Obama even admits. Paul Jay and Heiner Flassbeck take apart Obama’s claims

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Story Transcript

PAUL JAY: Welcome to The Real News Network. I’m Paul Jay in Baltimore.

We are returning to take another look at President Obama’s speech July 17 in South Africa, where he delivered the annual Nelson Mandela lecture, which was essentially in praise of globalization and praise of the achievements of global capitalism. And he does point out some of the problems. But we’re going to talk about just what he thinks the achievements have been, and how real are they. Now we’re going to play a clip from that speech, to give you a bit of a taste of it.

BARACK OBAMA: And with these geopolitical changes came sweeping economic changes. The introduction of market-based principles in which previously closed economies, along with the forces of global integration, powered by new technologies, suddenly unleashed entrepreneurial talents to those that once had been relegated to the periphery of the world economy. Who hadn’t counted. Suddenly, they counted. They had some power. They had the possibilities of doing business. And then came scientific breakthroughs and new infrastructure, and the reduction of armed conflicts. And suddenly a billion people were lifted out of poverty. And once-starving nations were able to feed themselves. And infant mortality rates plummeted.

Meanwhile, the spread of the Internet made it possible for people to connect across oceans. and cultures and continents instantly were brought together. And potentially all the world’s knowledge could be in the hands of a small child in even the most remote village. And now an entire generation has grown up in a world that, by most measures, has gotten steadily freer and healthier and wealthier, and less violent, and more tolerant during the course of their lifetimes.

PAUL JAY: Now joining us from Geneva to discuss President Obama’s speech is Heiner Flassbeck. He’s the director of Flassbeck Economics, a consultancy for global macroeconomic questions, and the editor of Makroskop, an international magazine. Heiner is the former chief of macroeconomics and development at the United Nations Conference on Trade and Development, known by people that know of it as UNCTAD. He’s also co-author of the book Against the Troika: Crisis and Austerity in the Eurozone, which he wrote with Costas Lapavitsas. Thanks for joining us again, Heiner.

HEINER FLASSBECK: Thanks for inviting me.

PAUL JAY: So let’s unpack the sort of big claim of President Obama in the segment we just played, which essentially that more than a billion people have been lifted out of poverty. First of all, my understanding of that stat is it’s, first of all, were lifted out of extreme poverty, which is sort of a World Bank claim, and some others. But, but the measure of extreme global poverty is people that make less than $1.90 a day. If you make $1.95 a day you’ve been lifted out of global poverty. So I mean, what, what is, do you think the reality of has something really been achieved over these decades of globalization? I’m assuming he’s talking more or less from the ’80s on. So what do you make of Obama’s claims?

HEINER FLASSBECK: Let’s take the last 30 years. Definitely if you look at the world as a whole, the average of the world, you find some achievements. Which could be expected. Whether it’s due to globalization or whether it’s other things is difficult to say. But these numbers have to be taken with caution, because if you take China out of the picture for the last 30 years, then of the 1 million people that have been lifted out of poverty-.

PAUL JAY: One billion, is the claim.

HEINER FLASSBECK: One billion. Only 500 million remain, because at least 500 million were in China. And we all know China is a big success story, no doubt about it. Their people have really improved their lives. But it is not typical for the rest of the world. It’s not typical for Africa, not for Latin America, and not for India. Everywhere there has been a bit of progress. But overall, over 30 years, this is not a big success story. It’s a Chinese story, plus a little bit of improvement elsewhere. But many chances have been missing.

PAUL JAY: But Obama is arguing that it’s the adoption of market-based principles that are responsible for the achievements, and one could say that is what China did. They’ve adopted over these last 30 years market-based principles.

HEINER FLASSBECK: No doubt about it. I’m not opposing market-based principles. But China, you have a very untypical economy for, say, in comparison to the rest of the world, and in comparison to many other developing countries. In China you have a very strong government, you have a very strong intervention of the government. You have a steered economy that is strongly steered every day by the government, by a Communist Party, not to forget. And so far this is not the success story of the world. The success story of the world is much more what could have been happening in Africa. Where it did not happen, only in a very few countries with commodities [or so].

But many countries have been hindered by the kind of Obama and his administration, and the IMF, the International Monetary Fund, and the World Bank to develop in a much better way because they were, so to say, the whole development was imposed. They imposed a kind of neoliberal approach, and it, which was really disastrous in many cases. We had Asian crisis, we had Latin American crisis, we had Eastern European crises. And we had a big financial crisis, not to forget, at the end of these 30 years. So to make the big success story, it’s in my view absolutely not justified.

PAUL JAY: If you just unpack this poverty number again, am I understanding it correctly, that the claim of a billion people out of poverty means a billion people make now make more than $1.90 a day? I mean, and the whole kind of treatment of what poverty is- for example, impoverished people in Baltimore, who live in neighborhoods with boarded-up housing, and a large amount of crime, and deteriorating schools. But they wouldn’t even be considered living in poverty if you use the kind of criteria that Obama is using for people lifting out-. I mean, people in Baltimore are living on more than $1.90 a day. So by this definition they’re not even in extreme poverty.

HEINER FLASSBECK: Yeah. I mean, to be fair, Obama mentioned in his speech, he mentions inequality and some other problems; inequality in particular. But this measurement of poverty, absolute poverty, is called absolute poverty, which is the $1.90 per day. This is really not not very helpful. And poverty is always a relative concept. Poverty depends on the overall wealth of an economy, and those that have been left out of the increasing, increasing wealth. And so far even people with $100 a day can be put in relative terms compared to the rest of the economy. So this doesnt mean very much. It’s, so to say, a measure that would tell you some people, less people are hungry in this world.

But if you look around, there are still millions of people and kids who are hungry every day. And this is the, this is the real scandal. Because the means would have been there to feed them all in a reasonable way, and to improve their lives so that they really have more than a dollar in terms of real goods that they have at their disposal.

PAUL JAY: As you mentioned, Obama does recognize the inequality that has developed in the context of this, what he considers great achievements. Here’s a couple of clips of Obama’s speech, again.

BARACK OBAMA: Economic opportunity, for all the magnificence of the global economy, all the shining skyscrapers that have transformed the landscape around the world, entire neighborhoods, entire cities, entire regions, entire nations have been bypassed. In other words, for far too many people, the more things have changed, the more things stayed the same. And the result of all these trends has been an explosion in economic inequality. It’s meant that a few dozen individuals control the same amount of wealth as the poorest half of humanity. That’s not an exaggeration, that’s a statistic.

PAUL JAY: Heiner, he’s recognizing a reality of the world, which I think is in complete contradiction with his claims in the beginning of how wonderful global capitalism and globalization has been. All that being said, what’s the record of his own administration when it comes to dealing with this inequality?

HEINER FLASSBECK: Yeah. I was really surprised to read all these acknowledgments, so to say, of what has not been achieved. And looking, I was very close to his administration when I was working in the United Nations. And we tried to do many things to improve exactly what he mentions, but his administration blocked it all. Let me give you three examples.

One example was I was at the forefront of a study group dealing with commodity speculation; speculation of agriculture commodities. That means foodstuff. We tried to convince the leaders of the world, including his administration, something had to be done. Because people, and these are the handful of people that he’s talking about enriching themselves [scrupulously] at the expense of the poorest who cannot afford their food anymore.

PAUL JAY: So let’s just make this concrete for people. This kind of speculation that takes place is artificially driving the price of food up, making it unaffordable.

HEINER FLASSBECK: Yeah, it was unaffordable. In 2008 we had a big crisis of food, including all the other crisis. But there was also a crisis of food, because the food prices were driven up by what was called the financialization of the market; Wall Street guys who pushed the prices of commodities. Now this is over, this collapsed after five years. But five years is too long for the people to survive. And so his administration blocked it from the very beginning. They didn’t want us to deal with it, and they never, they never did anything to support our efforts.

PAUL JAY: And those would have been to limit how much speculation can take place on food supplies.

HEINER FLASSBECK: Yeah, in particular on foodstuff. Sure.

PAUL JAY: You said there were three examples. What are the others?

HEINER FLASSBECK: Yeah, the second example, the second example was speculation on currencies. Brazil at a certain time was, so to say, overflooded by speculative money, so-called carry trade, that appreciated the Brazilian currency in the first years of the century. And to a point where Brazil was really, couldn’t breathe anymore. Brazilian industry couldn’t breathe anymore. The Brazilian finance minister was speaking about currency war against his country. And we tried to put up a discussion, only discussion, here in the World Trade Organization about this topic. And the U.S. administration under Obama blocked it from the very beginning. When I was speaking, and I was saying that what is, what is at stake. And what really happened, the U.S. guy went out of the room, and they never commented on anything. And they- I’m absolutely sure. I cannot prove this exactly. But they urged the representatives from the International Monetary Fund, the IMF, and the OECD not to say any substantive word on this matter.

The third point is UNCTAD fought for a long time for what we call a policy space; that is, more room of maneuver for developing countries to do economic policy. Just the kind of economic policy that the industrial countries are doing all the time. Monetary policy, fiscal policy, and so on. And again, this was, was opposed by the Obama administration. And this went so far that the Obama administration even tried to cut down the mandate of UNCTAD to prevent it from taking up these kind of topics, and to be competition to the International Monetary Fund.

PAUL JAY: So that’s what’s so disingenuous about the speech, is that he has a very sophisticated understanding of how this whole process has worked. He gets how destructive it has also been. But he acts like somehow it’s completely out of anyone’s control why these things happen. And maybe, maybe to some- in some way it is, in the sense that finance has accumulated so much wealth and so much political power that maybe it kind of is out of the hands of the political forces that are capable of taking control in Washington.

HEINER FLASSBECK: Yeah, so he could have said, he could have said in that speech, I learned all this in the last two or three years, unfortunately, only. Or he could have said, oh, I was forced by the financial industry to pick Larry Summers as my main economic adviser. That would have been an honest statement, so to say, and that would have shown what is going on in this world. But he just complains about the big powers, but he was, he was the most powerful man in the world. Everybody says, at least. Maybe it’s not true. But that’s what everybody believes. And he did nothing. On the whole economic side he did nothing to oppose the mainstream, he did nothing to oppose neoliberalism, he did nothing to oppose this monopoly creation all of the world. He did nothing to oppose in particular, this is absolutely crucial, the financial industry, the so-called financial industries. He was the one with the others also, other presidents before. Clinton was exactly the same. But they protected Wall Street against any, any critique. Only critique from outside. Not to speak about measures to cut down the power.

PAUL JAY: In this speech he talks about the rise of right populism, and you know, inferring Trump, but also other right-wing movements in Europe. And he acts as if somehow, again, this is some, you know, out of anyone’s control. This is just a consequence of the global economy and such. But clearly the inequality exploded under his administration. And as you mentioned, a process that Clinton, of course George Bush following Clinton even more exaggerated it. But the this economic inequality was not fought under the Obama administration, and certainly, certainly seeded the soil for the rise of Trump.

HEINER FLASSBECK: Yes, sure. And the right is taking this issue successfully because the left has given it up. The so-called left, people called the left, the Democrats considered to be left. But they have given up the fight against inequality in their own country. So you know, everybody, like all of the world, everybody talks about inequality and how bad it is, and that what has developed, and so few people are so powerful. He gives the example, Obama gave the example of, I don’t know, five people owning as much as half of the world. So all these silly things. It’s true. But if you ask them, why don’t you do anything about it? Why don’t you even ask for higher taxes? He’s not asking for higher taxes. Why he’s not asking for higher taxes for the rich? Why is he not asking for kind of control, a better control of monopolies? Why is he not asking for concrete measures to demolish the big powers that have developed all over the world in the global economy?

PAUL JAY: All right. Thanks very much for joining us, Heiner.

HEINER FLASSBECK: You’re welcome.

PAUL JAY: And thank you for joining us on The Real News Network.