Jewish World Review April 8, 2002 / 27 Nisan, 5762
Is terror the flip side of globalization?
Is Latin America
heading for trouble because liberal economics failed
there? Does September 11 prove the sunny economic
focus of the 1990s naive?
No, no and no, free marketeers would argue. But even
they concede that making the case for the all-healing
powers of commerce has become harder lately.
Beleaguered free marketeers may find useful ammunition in a new television
documentary. On Wednesday evening in the US, PBS will air the first segment of a
mini-series that lays out the free market world view on a scale not seen since
Milton Friedman hosted Free to Choose 22 years ago. UK networks will show the
The Commanding Heights is largely historical, tracing the battle between free
marketeers and central planners from the collectivisation of Soviet agriculture to
the fires of September 11. (The title comes from that great wordsmith, Vladimir
Lenin. Produced by William Cran, based on the book of the same title by Daniel Yergin and Joseph Stanislaw )
The series also offers a bit of wisdom for the now queasy, war-driven west: never
forget economics. The overwhelming demands of a war - be it the cold war or the
war on terror - must not obscure a simple truth: without the expansion of trade,
there can be no long-term stability.
This is not as self-evident as it sounds. Governments tend to have two modes: the
peacetime mode and the military one. And once the military mode switches on,
economics tend to be subordinated. Free market steps are dismissed as a
Consider, first, the role of war culture and the challenge to markets in the past.
Britain's sacrifices in the second world war created the mood of national solidarity
that laid the ground for its postwar determination to build a better society. Under
Clement Attlee and later Labour leaders this meant the nationalisation of industry
and healthcare. Whatever the motivation behind them, these ideals were
eventually a factor in bringing Britain to its economic knees. It was the fading of the
culture of wartime unity that permitted the rise of that champion of markets,
Margaret Thatcher, and Britain's 1990s successes.
In post-colonial India, the nation's awkward cold-war position between two
superpowers led it to focus on self-sufficient modernisation, implemented from
the top down.
"To develop meant to harness science and technology" - not to free them - as the
producers of The Commanding Heights summarise. The British Raj was
replaced by a "permit raj", a protectionist bureaucracy. Only after the cold war had
receded did India liberalise and achieve the growth its over- engineered
modernisation had failed to generate.
Latin America, too, had cold-war challenges to overcome. Soviet and Cuban
influence helped bring to power Socialist leaders who wrecked their economies.
Where it took place, the switch to freer markets was extremely painful for all
involved. It is worth recalling that to reform Chile, economist Milton Friedman had
to associate with the Augusto Pinochet regime and therefore subject himself to a
worldwide hate campaign (some of the best footage in The Commanding Heights
shows Mr Friedman's jaw tightening as protesters disrupted his receipt of the
Nobel Prize). But the results Mr Friedman generated were more humane than
socialism: a violent dictator's free market plan yielded, eventually, the end of
dictatorship and a chance of prosperity.
In the case of the Soviet Union, the headquarters of the control culture, we also
learn a few things. The producers of The Commanding Heights interview Oleg
Gordievsky, a Soviet official who spied for Britain. His handlers were interested
only in his military information: "The west neglected the foundation of the
argument, the economy" - the Soviet Union's vulnerable under- belly. Western
intelligence reports generally vastly overestimated the strength of Communist bloc
economies. (As recently as the late 1980s, our most esteemed analysts were
convinced East Germany's economy was as big as Britain's.) Cold-war myopia
deprived western leaders of vital knowledge.
Last, there were the outliers, the Middle East and Africa - cold-war casualties of
another sort. Some of their territories were cold-war battlegrounds - such as
Angola and Afghanistan. Others suffered indirectly from the cold-war policy of
containment, which tolerated dictatorship in exchange for the promise of secure
oil flows (Saudi Arabia, Iraq). The result was that citizens of both groups were shut
out of globalisation, helping to foster a climate in which terrorism could breed
And now? In Latin America, liberalisation is again challenged. The Commanding
Heights tells us liberalisers should not be deterred. If, as the programme argues
they should be, property rights are honoured and individual enterprise is
rewarded, prosperity is not impossible.
In the Middle East, the message is that war alone cannot make the rest of the
world safe. Today the spotlights are trained on the chemical stores of Saddam
Hussein, as they once were on Moscow's missile arsenal. But without economic
and political liberalisation, stability will not come.
These points may seem obvious but they are worth rehearsing at this moment of
peculiar uncertainty. However horrible the threat of terrorism, however disastrous
the economic troubles of certain regions, the challenges today are less than
those that were presented by communism.
The concerned guardians of markets should take heart. The lesson here is that
hesitation alone can lose them the spot they have secured on the commanding
JWR contributor Amity Shlaes is a columnist for Financial Times
. Her latest book is
The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.
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© 2001, Financial Times