(NAMIBIA) MintPress – Mitt Romney unveiled his “new vision” for foreign assistance last week in a speech at the Clinton Global Initiative, calling for a shift toward private-public partnerships that promote job growth through market liberalization tactics.
“If foreign aid can leverage this massive investment by private enterprise, it may exponentially expand the ability to not only care for those who suffer, but also to change lives,” the GOP presidential nominee said.
“For American foreign aid to become more effective, it must embrace the power of partnerships, access the transformative nature of free enterprise, and leverage the abundant resources that can come from the private sector.”
While the Obama administration has already began to implement private-public aid partnerships with cell phone and credit card companies, Romney’s plan seeks to implement “Prosperity Pacts” which will identify and remove barriers to trade and investment in exchange for aid packages focused on liberty, the rule of law and property rights.
“Ours is a compassionate nation. We look around us and see withering suffering. Our hearts break,” said Romney. “But too often our passion for charity is tempered by our sense that our aid is not always effective. We see stories of cases where American aid has been diverted to corrupt governments. We wonder why years of aid and relief seem never to extinguish the hardship, why the suffering persists decade after decade.”
Few would argue that U.S. foreign assistance does not always achieve the intended results of fair and sustainable development. However, Romney’s idea to promote free enterprise through foreign assistance is not a revolutionary concept (the World Bank and IMF have been holding aid funds hostage in exchange for privatization for decades) and is definitely not without critique regarding the effectiveness of free trade in developing countries.
The power of corporations
According to Romney, “Many of our foreign aid efforts were designed at a time when government development assistance accounted for roughly 70 percent of all resources flowing to developing nations. Today, 82 percent of the resources flowing into the developing world come from the private sector.”
Romney is right that the private sector is having a greater impact on the developing world, but whether that impact is positive is questionable.
According to the Institute for Policy Studies, the profits of the world’s top 200 firms grew by 362.4 percent, while the number of people they employ grew by only 14.4 percent between 1983 and 1999.
The same study found that the top 200 companies accounted for a quarter of global economic activity while employing less than 1 percent of the world’s workforce in 2002.
In his speech, the GOP presidential hopeful said that work must be at the heart of U.S. efforts to help others build economies and create jobs. Romney commended a pilot project by John Deere in Sub-Saharan Africa that provided farmers with tools that can be attached to small tractors.
Romney said the project was a good investment for John Deere and a “greater opportunity for African farmers.” However, no jobs were created in Africa as a result of the project since the tools were produced at a factory in India.
“Work builds self-esteem. It transforms minds from fantasy and fanaticism to reality and grounding,” said Romney. “Work will not long tolerate corruption nor quietly endure the brazen theft by government of the product of hard-working men and women.”
Unfortunately, the free enterprise is not exempt from corruption, and privatization in developing countries has been infected by corruption, regulatory failure and corporate bullying numerous times in the past.
It was frustration over this corruption, greed, lack of accountability, economic inequality and corporate governance within privatized industries in the U.S. that motivated thousands of people across the country to take to the streets when the Occupy Wall Street movement began over a year ago.
The rights of the worker
Romney mentioned Muhammed Bouazizi, the Tunisian street vendor whose self-immolation sparked the Arab Spring, stating that his actions were based on a desire to work a steady job and provide for his family. However, the average worker (like Muhammed Bouazizi) is likely to be most affected by the corruption and bullying that can result from privatization.
Foreign corporations usually invest in developing countries to take advantage of lower wages, tax incentives and tariff-free zones (TFZ). A large part of Foreign Direct Investment (FDI) is made up of companies buying out state firms or through mergers and acquisitions, which usually result in a net loss of jobs as a result of the downsizing. Companies with branches overseas also send profits back to their overseas headquarters instead of keeping them in the country.
Companies operating in a TFZ do create jobs in the community. Foreign investors tend to bring innovative technology and pay higher wages with better working conditions than some local companies; however, corporations are also known to disregard wage policies and take advantage of loose regulations.
Treaties like those backed by the World Trade Organization (WTO) and other bilateral agreements that open up an avenue for TFZs and foreign investment restrict national governments’ ability to intervene or implement restrictions on powerful corporations.
In some situations, the restrictions free trade agreements place on national governments leave the door open for countries to come and go as they would like. A study of the Ramatex clothing and textile factory in Namibia’s tariff-free Export Processing Zone (EPZ) found widespread abuses of workers’ rights including forced pregnancy tests, non-payment for sick leave, insufficient health measures and low wages with no benefits.
At the height of operations in 2004, the company employed about 7,000 workers. Over the next few years, employment dropped to 3,000. Suddenly in 2008, Ramatex closed its doors without notice, leaving workers unemployed with no compensation.
According to labor researcher Herbert Jauch, “Ramatex represents a typical example of a transnational corporation playing the globalization game.” According to Jauch, the presence of Ramatex in Namibia was a disaster. “Worst affected were the thousands of young, mostly female workers who had to endure highly exploitative working conditions for years and in the end were literally dumped in the streets without any significant compensation.
“When dealing with foreign investors there is an urgent need to ensure (at the very least) compliance with national laws and regulations, workers rights, as well as environmental, health and safety standards,” said Jauch.
Romney believes his foreign aid policy would protect human rights and labor laws in other countries. “To be effective, our aid programs must leverage private investment and trade to foster environments conducive to job creation,” said Romney.
“Free enterprise and institutions that support political freedom, the rule of law, and respect for human rights are critical ingredients for progress. If developing nations grow strong private sectors, they will become strong trading partners and friends of the United States.”
If elected, Romney’s administration will need to outline more clearly how to ensure the necessary ingredients of political freedom, the rule of law, and respect for human rights are met in order to prevent another Ramatex disaster in the future.
Protecting SMEs
A Romney administration will also need to develop a plan for supporting small and medium enterprises (SMEs), a major focus of his free enterprise policy, without letting these small businesses drown under corporate monopolies.
MintPress previously reported that millions of Indians are currently protesting against the Singh government’s decision to allow major Western corporations to enter the Indian market – a move protesters believe will destroy small businesses and harm public sector jobs.
The entry of major corporations like Wal-Mart into a region frequently results in a net job loss and lower wages for workers.
India has been affected by broad market deregulation since the early 1990s. While India’s private sector has created a surge in middle class growth, little has been done to alleviate extreme poverty and income inequality in the country. According to Indian government figures, nearly 30 percent of India’s 1.2 billion people are living below the poverty line.
Opponents of trade liberalization believe the obstacles to free trade that the WTO and other bilateral trade agreements hope to remove are an attack on national, state and provincial laws that are in place to protect the environment, small farmers, public health, consumers, food safety, SMEs and labor workers.
While the current administration’s economic policy pressures developing countries to remove trade barriers including tariffs and subsidies, the United States continues to spend billions of dollars each year in farm subsidies to protect agriculture industries at home.
U.S. agricultural policies continue to protect cotton, sugar and corn producers despite a 2008 WTO ruling that said U.S. subsidies to cotton farmers were illegal. These subsidies are contrary to Romney’s outline for foreign assistance, and according to the 2011 Hunger Report, they have a negative effect on farmers like those in West Africa that produce cotton as a cash crop.
Promoting freedom and democracy
Contrary to reports claiming Romney wishes to downgrade the emphasis of foreign assistance on humanitarian needs, the GOP presidential nominee acknowledges the importance of humanitarian assistance as the first goal of foreign aid.
According to Romney, the three goals of foreign assistance are: to address humanitarian aids such as HIV and AIDS; foster a substantial strategic interest militarily, diplomatically or economically; and to bring about lasting change in communities and in nations.
Romney suggested that the best way to promote U.S. interests in freedom and democracy is through free enterprise. “I noticed the most successful countries shared something in common,” said Romney, reflecting on his various international business trips.
“They were the freest. They protected the rights of the individual. They enforced the rule of law. And they encouraged free enterprise. They understood that economic freedom is the only force in history that has consistently lifted people out of poverty – and kept people out of poverty.”
Romney makes the assumption that free enterprise can only prosper in a free nation. Yet, some of the world’s flourishing market economies are in the world’s most autocratic and tyrannical states: Saudi Arabia, Malaysia, Indonesia, Pakistan, China and Colombia to name a few.
In many countries, global corporations now wield more economic power than the nation-states do.
“The aim of a much larger share of our aid must be the promotion of work and the fostering of free enterprise. Nothing we can do as a nation will change lives and nations more effectively and permanently than sharing the insight that lies at the foundation of America’s own economy–free people pursuing happiness in their own ways build a strong and prosperous nation,” said Romney.
Let’s hope Mitt Romney remembers these words if he wins the election this fall and allows free people of other nations to pursue happiness in their own ways without sacrificing state sovereignty or human rights for forced free enterprise.