You have two videos to watch for Unit 3.
1. The Commanding Heights Video – next episode
What To Watch
You’ve already watched Episode 1. Now I want you to watch Episode 2: The Agony of Reform. It is two hours long and contains 21 chapters.
What It Is About
From the PBS Commanding Heights website:
In the 20th century, most of the world’s nations tried to create prosperity through government control of their economies — from the totalitarian central planning of the communist world to more democratic nations that tried to develop their economies by nationalizing industries and protecting them from foreign competition.
But in the 1980s those policies began to fail dramatically, and the fall of the Berlin Wall unleashed an era of dramatic and turbulent economic reform around the world — in Russia and the Eastern Bloc nations; in democracies like India that had embraced central planning; and in Latin American countries, which had developed their own brand of government control of economic life, based on a theory called dependencia.
“The Agony of Reform” tells the story of how those economies failed and how new leaders embraced the idea of “shock therapy” — a rapid conversion to free-market capitalism. The program focuses in detail on how reform played out in several countries — Russia, Poland, India, Bolivia, and Chile — as they lived through the upheavals of rapid change, dealing with both the new freedoms and the new dangers of privatization, deregulation, and freewheeling competition.
Where to Watch: The PBS Website
PBS has created a website at www.pbs.org/wgbh/commandingheights/ where the entire series can be viewed as well as background information and many extra materials. The direct link to the videos is here, where you can click to view Episode One (two hours in total) online. Please note that this PBS video series can be viewed online. The series was originally 3 2-hour shows (6 hours total). Each 2 hour show is assigned for each of Assignments 4, 5, and 6. At the PBS site, the original 2-hour shows are called “Episodes 1-3” and each has been divided into “chapters” of approx 5-10 minutes each. Links are available to view each chapter in your choice of Windows Media, Quicktime 5, or RealPlayer verions. Each also has a “broadband” and “low-bandwidth (dial-up)” version. These videos are totally free to watch but they open in a small window, much like YouTube.
Notes and Comments from Jim about Episode 2 of Commanding Heights:
These are comments and observations I’ve made as I watched the video.
- I remind you that the authors of the video, Yergin and Stanislaw, have a definite ideological bias. They are unabashed free-market fundamentalists and they tell a historical story to support their viewpoint. It is a viewpoint I am not necessarily endorsing. I am only using the video because it presents a common, widespread viewpoint (what was the “conventional wisdom” until 2 years ago). I am also using the video because it is a very engaging, quick way to survey many of the economic changes in many countries in the last 30 years.
- In this segment, Yergin and Stanislaw assert as fact some dynamics that many economic researchers dispute. In particular, the process by which India shifted from anti-import, bureaucratic socialism toward a more open, market friendly regime took longer and started earlier than they assert. The original drive for it came from some of the same administrations Yergin criticizes as “socialist”.
- The story of Bolivia is also interesting. Strictly speaking, Bolivia is not what any one would call an “emerging market economy” or “newly industrializing” economy. In fact, there really isn’t much industry in Bolivia other than mining. Nonetheless, pay attention to the story since it will be relevant to our next unit in this course. Also, again, Yergin has not told the full story regarding Bolivia. He leaves Bolivia as a tale of a much improved economy with reduced inflation due to “shock treatment” by the West and bankers. What he doesn’t tell about for example, is how in the late 1990’s the World Bank pressured Bolivia to sell it’s water utilities to a US company, Bechtel, and pressured the Bolivian government to make the collection of rain water by poor people illegal since it would cut into Bechtel’s revenue.
- The second video in the Commanding Heights series begins with the assertion that “countries everywhere moved away from state-dominated economies and toward markets”. I would question this assertion. Yes, it is clear that many (and probably most) countries moved away from either state domination of the economy or state regulation of the economy. But it is not clear to me that this necessarily means that countries moved toward markets, or at least not toward competitive free-markets. In a large number of countries there has been a parallel trend towards increasing concentration of business. More industries are increasingly dominated by only a few mega-sized, global, multi-national corporations. (see oligopolywatch.com for more info). I would suggest that in many ways we have not moved toward free-markets, but rather moved toward large-scale PRIVATE CENTRAL PLANNING. In other words, central planning conducted by managerial and financial elites. This seems to me equally significant. Perhaps instead of the state dictating to the owners of large “commanding heights” enterprises, it is now the executives of those enterprises that now dictate policy to the state. I offer as an example, the bailout of Wall St in 2008 on extraordinary terms favorable to the bank managements.
- The video accurately notes that the Soviet Union collapsed in large part because it could not keep pace with the U.S. in military expansion. Eventually the USSR consumed 30% of it’s annual GDP for the military. Although the US is nowhere near that level of military expenditure, the US does spend more on military than the entire rest of the world combined. With the Global War on Terror, with fronts in Iraq and Afghanistan, the US is now approaching spending 8-10% of GDP on military and security (some estimates say more). Is this sustainable? Will it lead to a fate similar to the USSR?
- A strong counterpoint to the Commanding Heights version of Latin America’s economic development (or lack thereof) is offered in the book “Secret History of the Empire” (one of the books on the books project list). This book offers a view of how current global economic and financial institutions such as the IMF and World Bank have combined to perpetuate what is essentially a colonial resource-exploitation model.
- The Commanding Heights perspective is clearly that: “economic crisis occur –> a shock transition to free markets and reduced state involvement is the advised policy –> short painful adjustment by people –> all is well again and growth happens, Yeah free markets.” But author Naomi Klein (“Shock Doctrine”) offers a different view. Klein argues that sometimes political and financial elites allow crises to fester and become severe (and are sometimes artificially contrived) precisely so that public assets may be plundered. Think for example of how the Russian oligarchs exploited the political and foreign currency crisis in Russia to obtain ownership of large Russian enterprises at very low, negligible cost. What do think? Which comes first, the policy desire or the crisis?
- “Dependency theory”, as the video points out, was the idea that industrialization could be fostered and promoted if a country created import barriers to trade, in effect forcing consumers to buy domestic products and supposedly building local industries. It was widespread in Latin America by both left-wing (Castro and Allende) and right-wing politicians (Peron) after World War II and until the 1970’s-1980’s. What the video does not say is why dependency theory was developed. It was developed because in the period 1880-1929, many Latin American countries grew very rich based primarily on exports of raw materials to the US and Western Europe. But when the Great Depression hit the US and Western Europe in the 1930’s, they stopped buying and what’s worse, went off the gold standard, plunging the Latin American countries into crises that they did not recover from. “Dependency theory” was an attempt to industrialize without being dependent on the US or Europe.
- Unmentioned in the movie was the US involvement (via CIA) in the Chilean coup that saw Pinochet overthrow Allende because President Nixon and Sec of State Kissinger feared Allende would not be an anti-Soviet ally
- Milton Friedman (and many of his present day followers) maintain that a “free economic market” necessarily leads to, and indeed, requires political freedom. The video series clearly supports this view. Yet, there are examples of countries that don’t fit this view. Singapore and South Korea have had tremendous economic growth over the past 50 years, yet have only very recently moved toward political freedom (Korea). China has moved towards markets consistently over the past 25-30 years, yet is clearly not free politically. Do you think Friedman is right?
- Chile ( and other countries in the video) have experienced very rapid, if somewhat unevenly distributed, economic growth for 10-20 years following transitions to free-market, capitalist economies. Yet the transition was often harsh and oppressive and sometimes took as much as 3-8 years to get through. Is the long-term growth worth the shorter-term human cost to the society, keeping in mind that 8 years of severe economic contraction can easily destroy an entire generation’s hopes and aspirations.
- Echoes of the present age: The video quotes Bolivian leaders about how the Bolivian crises was initiated by “reckless lending by big international banks that had too much money to lend – so they lent it unwisely”. Sounds much like the U.S. today and the recent bank lending-led housing boom-and-collapse.
2. “Billions of Entrepreneurs: How China and India are Reshaping Their Futures and Yours” – lecture by Tarun Khanna
What to Watch
The entire lecture. It is approximately 55 minutes long. Yes, it has a fair amount of plain “talking head non-action”, but it is reasonably interesting and punctuated with some good graphics. It is a video of a live lecture given as part of the Google Tech Talks series.
What It Is About
Removing half a billion people from poverty and into the productive workforce will profoundly affect on the world economy. India and China are doing just that with insane growth rates and lots of what used to be American jobs: China is the factory floor and India the back-office, software shop. China is top-down party driven. India is a messy, vibrant democracy. This may be the complementary duo that changes the world. Including your world. Come hear Professor Tarun Khanna in a discussion about his book, Billions of Entrepreneurs: How China and India are Reshaping Their Futures and Yours. Called well worth reading by The Economist and entertaining by the Financial Times, Khanna’s book shows how Chinese and Indian entrepreneurs are creating change through new business models. The speaker is Tarun Khanna. Tarun Khanna is the Jorge Paulo Lemann Professor at the Harvard Business School, where he has studied and worked with multinational and indigenous companies and investors in emerging markets worldwide. He joined the faculty in 1993, after obtaining an engineering degree from Princeton University (1988) and a Ph.D. from Harvard (1993), and an interim stint on Wall Street. During this time, he has served as the head of several courses on strategy and international business targeted to MBA students and senior executives at Harvard. His new book, Billions of Entrepreneurs: How China and India are Reshaping Their Futures and Yours, was published in February 2008 by Harvard Business School Press (Penguin in South Asia), with translations into several languages underway. It focuses on the drivers of entrepreneurship in China and India and builds on over a decade of work with companies, investors and non-profits in developing countries worldwide.
Where to Watch
The video is approximately 55 minutes long. If the embedded viewer won’t work or doesn’t show, go to: http://www.youtube.com/watch?v=8liTZBhDQ3o