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Third World countries edging towards freer markets

TYPESETTER: Check my formatting for the sandwich quotes. Remember this is in Arts 1. I did the same as for News 1.5, which I'm sure won't work right. --mg

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[ML7.1]This past year has witnessed a rather sudden demise of communism as it has been practiced in most Eastern-bloc countries. The events in Poland, the Soviet Union, and Hungary highlight the problems inherent in a centrally-planned economy while demonstrating the increasing fascination worldwide with the apparent wonders of free enterprise. In fact, to some analysts the free-market "victory" has been so decisive that the "evil empire" is no longer considered to be so evil after all. Instead, it is now treated as a defeated enemy worthy of sympathy. William Safire, a columnist for The New York Times, even lamented the fact that he no longer had any bad Russians to beat up on anymore.

[ML7.1]These analysts might have celebrated the conversion of the big communist giants a bit too early, as the tragic events in China demonstrated last June. They have, nonetheless, some cause for celebration in the slow conversion of several developing countries, where a big fraction of the world's population lives. Although involuntarily at times, many less-developed countries (LDCs) have gradually trudged along the path towards free markets throughout this decade. This transformation is as much a result of arm-twisting by the International Monetary Fund, the World Bank, and their chief sponsor, the United States, as it is of the unmistakable failures of the communist or socialist policies practised in these countries. The brief experimentation with freer markets thus far has produced encouraging results for many LDCs. Mexico has managed to win some concessions from its creditors and their economy promises to make a recovery. The Thai and Malaysian stock markets are booming, and a handful African countries are now in the good books of the IMF. Simply put, a lot of developing countries are realizing that their past economic policies, professed in the name of socialism, have just not produced the goodies that most of their citizens desire.

[ML7.1]The origins of these policies perhaps lie in the historic experiences of these former colonies. Influenced by 19th century socialism while studying at liberal European colleges, the post-independence Third World leaders put into place a centralized, bureaucratic system, ostensibly to protect the poor masses from the evils of industrial capitalism. This brand of economic and political system was labeled "democratic socialism" -- an oxymoron, in the opinion of some critics.

[ML7.1]In any case, some countries have begun acknowledging the problems associated with big governments and stifling bureaucracies, which seems to be an inevitable byproduct of centrally-planned economies. While still retaining the word "socialism" in their official names or first pages of their constitutions -- a practice common to almost all LDCs -- many developing countries have gradually begun loosening tight-fisted regulations in an attempt to increase private investment and employment, and to curb out inefficiency. Some leftist intellectuals question the wisdom behind such moves. Remember Castro's decision to ban certain "bourgeois" Soviet publications in Cuba just a few months ago? Or the denunciation of perestroika by many Third World communists? But given the distinct possibility that government officials are much more corrupt than we publicly know, I find it hard to imagine how the private sector could hurt the country any more than the big governments have done so far.

[ML7.1]Is it any wonder then that privatization and liberalization have become the buzzwords of these years? Who would have imagined even five years ago that Polish shipyards might be bought over by American capitalists? Or that Aerflot would start a frequent-flyer kind of program called "perestroika perks?" Would anyone have predicted the bizarre scene of Chinese soldiers dancing in Tiananmen Square as part of a government program to convey a sense of normalcy to those foreign investors who had left after the massacre? Which Latin American analyst would have predicted that Carlos Andres Perez, the Venezuelan President and the Vice President of the Socialist Internationale, would have adhered to the IMF austerity programs so religiously? Or that Mexican President Salinas would have turned out to be the tough man on union-busting that he has proven to be?

[ML7.1]Even Castro's Cuba has begun courting foreign tourists in hopes of attracting hard currency, and the Jamaican "bad boy," Michael Manley, sounds much more reasonable to Washington this time around than he did during his last term as Prime Minister. And if all of that is not shocking enough, here is some news that takes the cake: the recently-concluded Non-Aligned Summit in Yugoslavia actually managed to issue a communique at the end of the meeting without denouncing the United States! Whether it is the muscle behind the

mighty dollar, the resurgence of conservatism, or a realization of failed policies in the name of socialism, developing countries seem to be moving irreversibly towards a more market-oriented system.

[ML7.1]It would be naive to assume that the transformation is going on smoothly. Besides the leftist intellectuals, disgruntled civil servants and politicians are not exactly jumping with joy at the usurpation of their powers. But then something good might come out of even this. For one, William Safire might still find thousands of Cuban, Ethiopian, and even Indian bad boys to beat up on.

who

[ML7.1]Pankaj Vaish is a graduate student in the MIT School of Management as well as a member of the Class of 1989.

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[ML7.1]Who would have imagined even five years ago that Polish shipyards might be bought over by American capitalists? Or that Aeroflot would start a frequent-flyer kind of program called "perestroika perks?"

[ML7.1]Simply put, a lot of developing countries are realizing that their past economic policies, professed in the name of socialism, have just not produced the goodies that most of their citizens desire.

Pankaj Vaish G

Sloan School of Management

253-8050 (office)

3-1773 Tang desk. Apt. #14B1 in Tang

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