Things have not improved much since Luiz took over. True, he has successfully fought off several patent suits. But if he loses even one of the three that are still pending (none of them is looking hopeful), he will face ruin. His Ecuadorian partner, Nanotecnologia Andina, is already threatening to sell off its share in the company.When his firm disappears with the rest of the Brazilian nano-technology industry, most of Brazil’s manufacturing industries – except for aerospace and alcohol fuel, in which Brazil had established a world class position in the late 20th century before the rise of neo-liberalism – will have disappeared. Brazil will be back to square one.
Unlikely? Yes – and I hope it stays that way. Brazil is far too smart and independent-minded to sign something like my IAIA, even if it had a former World Bank chief economist as its president. Mexico has enough wise people and vibrant popular movements to be able to mend its ways before it is thrown into a full-scale civil war. The Chinese leadership is fully aware of the threats posed by the country’s widening inequality. They also know the dangers of any premature opening of its capital market, thanks to the 1997 Asian crisis. Even the mighty US patent lobby would find it difficult to secure a retrospective application of 40-year patents in any international agreement. There is a growing consensus that something has to be done about global warming soon. The next round of the WTO talks is not likely to lead to a near-total abolition of industrial tariffs.
But what I have just sketched out is not an impossible scenario. Many of the things I have made up have been deliberately exaggerated, but they all have a strong basis in reality.
For example, the near-total abolition of industrial tariffs following my imaginary Tallinn Round may sound fanciful, but it is actually a little milder than what was proposed by the US at the WTO in 2002 – it called for a total abolition of industrial tariffs by 2015 – and is not far off from what other rich countries are proposing.[1] My Inter-American Integration Agreement is really a (geographically) broader and stronger (content-wise) version of NAFTA (North American Free Trade Agreement). The countries mentioned as possible members of the Bolivarian Economic Union are already working together closely (I have deliberately omitted Brazil, a member of this group, in my story). Of these, Venezuela, Cuba and Bolivia have already formed ALBA (Alternativa Bolivariana para las Américas: Bolivarian Alternatives for the Americas).
Given the growing importance of the Chinese economy, it is not totally fanciful that a major economic crisis in China in the late 2020s could turn into a Second Great Depression, especially if there was political turmoil in the country. The chances of upheaval in such circumstances would be strongly influenced by the gravity of its inequality problem which, while not yet at the Brazilian level, as in my story, could reach that in another generation, if no counteraction is taken. As for a civil war in Mexico, this may sound like a fantasy, but, in today’s Mexico, we already have one state, Chiapas, which has been, in effect, ruled by an armed guerrilla group, the Zapatistas under Subcomandante Marcos, since 1994. It would not be impossible for the conflict to escalate if the country were thrown into a major economic crisis, especially if it had continued for another two decades with the neo-liberal policies that have so ill-served it in the past two decades.
My US patent scenario is certainly exaggerated, but US pharmaceutical patents can already be de facto extended up to 28 years through data protection and in consideration of the time needed for FDA (Food and Drugs Administration) approval. The US has made sure that these provisions are written into all its free trade agreements. And, as I discussed in the story of Mickey Mouse in chapter 6, in 1998, US copyright was retrospectively extended.
The reader may find it particularly implausible that China would prematurely open its capital market. But when your economy becomes the second biggest in the world, it is hard to resist the pressure to act ‘responsibly’. This is exactly what happened to Japan when it was made to revalue its currency by three times almost overnight in the 1985 Plaza Accord. That currency revaluation was an important cause of Japan’s huge asset bubble, whose bursting in the early 1990s (and the incompetent management of its aftermath) resulted in economic stagnation for a decade.As for my saying that China would join the OECD to celebrate the 100th birthday of its Communist Party, that was certainly said tongue-in-cheek. But countries can become over-confident when they are very successful, as the case of Korea shows. Until the late 1980s, Korea had skilfully used capital controls to great economic benefit. But, in the mid-1990s, it opened its capital market wide, and without careful planning. This was partly due to American pressure, but also because, after three decades of its economic ‘miracle’, the country had become too full of itself. It decided to join the OECD in 1996 and act like a rich country when it really wasn’t one. At the time, its per capita income was still only one-third that of most OECD member countries and one quarter that of the richest ones (or slightly above the level China is likely to reach by the mid-2020s). The outcome was the 1997 financial crisis. So my imaginary China story is really a combination of what actually happened in Japan in the 1980s and Korea in the 1990s.
Is it really plausible that Brazil would sign up to something like the IAIA? Absolutely not in today’s world, but I am talking about a world in the middle of the Second Great Depression and an economy ravaged by another quarter of a century of neo-liberalism. Also, we should not underestimate how political leaders driven by ideological convictions can do things which are so ‘out of character’ with their countries’ history, if they are there in the right place at the right time. For example, despite the famous British tradition of gradualism and pragmatism, Margaret Thatcher was radical and ideologically driven.Her government changed the character of British politics for the foreseeable future. Likewise, Brazil may have a history of independent-minded and pragmatic foreign policy, but that is not an absolute guarantee against someone like my Alfredo Kim driving it into the IAIA, especially when Brazil does not lack its own supply of free-market ideologues.
So, my ‘alternative history of the future’ is not a total fantasy. It is grounded in reality a lot more strongly than may appear at first. If I have been deliberately pessimistic in painting this scenario, it is to remind the reader how big the stakes are. I really hope that, 30 years from now, I will be proved completely wrong. But if the world continues with neo-liberal policies currently propagated by the Bad Samaritans, many of the events that I ‘document’ in the story, or something very like them, could happen.
Throughout this book, I have made many detailed proposals as to how policies, both nationally and globally, need to be changed in all sorts of areas in order to help poor countries develop and to avert the kind of disaster scenario that I have just described in my ‘history of the future’. In this concluding chapter, I will not repeat or summarize these suggestions, but rather discuss the key principles that lie behind them. In the process, I hope to show how national economic policies and the rules of international economic interactions need to be changed if we are to promote economic development in poor countries and make the world a better place.
1
The 2002 US proposal argued for a radical reduction in industrial tariffs to 5–7% by 2010 and their total abolition by 2015. Since it did not envisage any exception, it is more potent than what happens in my Tallinn Round. The current EU proposal is slightly milder than my Tallinn proposal in that it calls for a reduction to 5–15%. But even that is going to bring tariffs in developing countries to the lowest level since the days of colonialism and unequal treaties – and, more importantly, a level that was not seen in most of today’s developed countries before the 1970s. For further details on the US and EU proposals, see H-J. Chang (2005),