Source: Carnegie
Lessons from the Recent Past
By Moisés Naím
Originally published in the Financial Times, December 28, 2001.
Recession, international instability, social inequality and terrorism: 2001 has been a difficult year. In the search for explanations, many have found a common root to the world's travails in the political and economic developments of the 1990s.
After all, it was in the 1990s that books entitled The Clash of Civilizations, The Coming Anarchy and Irrational Exuberance became bestsellers. The 1990s saw the end of the cold war and with it the resurgence of armed ethnic and religious conflicts. As states failed, anarchy ensued from Somalia to Afghanistan, creating havens for terrorists, drug traffickers and the usual activities bred by lawlessness. Meanwhile, as poverty and economic frustrations deepened in emerging markets betting on capitalism, the wealth of the moneyed classes in prosperous countries soared thanks to their bets on new-economy companies with no tangible assets and no prospective profits.
But this troubled past represents just half the story. Not only is the other half brighter but it also bodes better for the future.
It is a story where in the 1990s economic recoveries became faster than ever, new democracies proved surprisingly sturdy and economic reforms showed unexpected resilience. It was also a decade when technology began to open doors with a potential that remains largely untapped and when improbable international agreements such as the North American Free Trade Agreement or the adoption of a single European currency, commonly dismissed as infeasible, became a reality.
Financial crises used to cripple a country and its neighbors for decades. In 1982, Mexico's crash triggered a global debt crisis and led to a lost decade for most developing countries. In contrast, during the 1990s countries such as Russia, South Korea and Mexico recovered from massive financial strokes within a few years.
The decade also showed how most incipient democracies were able to survive despite malfunctioning institutions and angry electorates energized by a freer media and a vociferous political opposition bent on exposing governmental corruption and incompetence. In the 1990s the number of democracies nearly doubled, leading to a world with more democratically elected governments than ever. This trend is still with us.
The same can be said about market reforms. True, their promise has not been fulfilled and frustration runs high: it is easy to make a living writing columns or giving speeches denouncing the "Washington consensus" as a scam and globalization as a passing fad. At times, such criticism has been so intense and broad - ranging from Nobel Prize winners to street protesters - that a wholesale repeal of the market reforms inspired in the Washington consensus has appeared to be under way. But that is not happening. Inflationary public deficits that were once common are now as rare as countries where privatized companies are being renationalized or where governments are ill-treating foreign investors or spurning the World Trade Organization.
The 1990s ended with the battle of Seattle and with anti-globalization protests as a fixture of all international meetings. But the decade also set the stage for China and Russia to join the WTO. China's WTO membership will have far more practical consequences for humankind than all the anti-globalisation protests. And in spite of the protectionist pressures and the scathing criticisms of free trade that normally surge during economic downturns, there is every chance that President George W. Bush of the US will be granted the fast-track authority to negotiate trade agreements. Moreover, the outcome of the WTO summit in Doha far exceeded expectations.
In fact, international outcomes that exceed expectations were common in the 1990s. In theory, Middle Eastern countries could never join a coalition with the US, the UK and others to wage war against another Muslim country. Mexico's anti-Americanism and its enormous gap in development vis-a-vis the US and Canada would make a free trade agreement among them impossible. NATO could never bomb another European country and thus take part in a civil war. Replacing the D-mark or the French franc with a common European currency was unimaginable.
As we know, however, all this happened. The 1990s show that new multilateral endeavors dismissed by experts as unattainable frequently happen. That may well inspire international collaborative ventures that tackle problems no country can solve alone. The surprising new international coalitions and the unprecedented collaboration between intelligence services spurred by the terrorist attacks already offer a good example.
Of course, not everything will go smoothly in 2002. The trends outlined here will suffer setbacks and the world's chronic problems will not disappear. But neither will the positive developments of the 1990s. Greater recognition of that should give us hope for the year ahead.