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The independent state

About the author
Nadeem Ul Haque is a Pakistan-born economist who for most of his career has lived in the United States. He currently works for the International Monetary Fund. The views he expresses are his alone and are not attributable to the IMF.

"Come in, gentlemen, come in!" said Mr Dawit, distracted for a moment from his engrossing conversation with the official-looking figure beside him. "Please have a seat. Make yourself comfortable. Just give me a minute and I will be with you. I'm just dealing with a very important message from the president that needs immediate attention."

 

Nadeem Ul Haque is division chief for the Asian region at the IMF Institute.

Also by Nadeem Ul Haque in openDemocracy:

"Where do poor countries get their policy ideas?"
(15 February 2005)

The views expressed in these articles are Nadeem Ul Haque's alone and are not attributable to the International Monetary Fund

With that, he returned to his interlocutor. The tone was too low for the three rather daunted guests to overhear. The trio took in the spacious and well-appointed suite of the finest Philadelphia hotel of the time: an imposing atmosphere for colonial visitors who had rarely entered such an opulent place.

Mr Dawit and his companion exuded comfortableness with these wealthy and privileged surroundings. The visitors huddled together on a small sofa, and waited. They were nervous: it was not every day that the opportunity arose to meet a leading figure in the Global Financing Agency (GFA), the most powerful financial institution in the world. A country that failed to be in its good books was committing the economic equivalent of suicide. The world looked to the GFA to grade countries' economic performance - especially emerging ones such as the United States, which had just gained its independence. 

The urgent, whispered conversation ended: Mr Dawit accompanied his guest outside with an air of deference. A trail of words hung in the air: "tomorrow in the meeting with the president....".  The colonial visitors were silent.  

The consultation

Mr Dawit returned with another companion. He was no longer distracted: "Gentlemen, I do apologise for keeping you waiting on account of urgent state business." He introduced his new colleague: "This is Mr Shakut Thanin, the newly appointed GFA resident representative to the United States. He will be responsible for looking after all areas of programme implementation here. He is somebody you should get to know." The visitors shook hands with the beaming Mr Thanin, whose cosmopolitan air carried a hint of steel. . 

 

Among openDemocracy's articles on the world economic order:

Stephen Browne, "Whatever happened to 'development'?" (17 April 2007)

Robert Wade, "The world's World Bank problem"
(10 July 2007)

David Held, "Global challenges: accountability and effectiveness"
(17 January 2008)

Simon Maxwell, "Development in a downturn"
(5 July 2008)

Ann Pettifor, "The G8 in a global mess: 1920s and 1980s lessons"
(7 July 2008)

Andre Wilkens, "The global financial crisis: opportunities for change"
(10 November 2008)

Simon Maxwell & Dirk Messner,
"A new global order: Bretton Woods II...and San Francisco II"
(11 November 2008)

Krzysztof Rybinski, "A new world order"
(4 December 2008)

Paul Rogers,
"A world on the edge"
(29 January 2009)

"Shall we begin?" said Mr Dawit. It was a statement not a question. "As you know, your country in its initial years must put in place much of the infrastructure that a modern state needs to conduct its business. As in many other countries, the GFA will one of the key advisory and financial agencies in this process. Our extensive experience and research will facilitate it enormously. But in order for us to lead this process we need domestic help. In this regard we have found that participation by all stakeholders is necessary for us to succeed. It is for this reason that I am inviting people like yourselves - prominent citizens and leading intellectuals - to see how we can collaborate to bring about this required change. So I thought that perhaps we could begin by my telling you of the reform programme that we have designed for your country.  You can then give me your comments and determine how you think you could be useful."

One of the visitors, a tall and intense man called Thomas Jefferson, found himself interrupting. "But Mr Dawit, you tell us that you have already developed a reform programme for the country. How it was prepared and where do we fit in?  Who exactly from the United States participated in the process of formulating this programme?"

"You need not be concerned about the design of the programme." Mr Dawit sounded a touch piqued. "We engaged the finest brains in the world. We drew upon the very large amount of cross-country information that lies within the GFA. And I might add that some US people were also hired as consultants." "Moreover", he continued, trying not to sound defensive, "the new government has been fully in step in this process. After all it is their - your - programme. We are merely providing the technical expertise. I know that some criticise us for being intrusive and overbearing when it comes to designing country policies. Believe me that that is not correct. We only provide the expertise and rely upon people like yourselves to provide us with key inputs."

The first interruption emboldened the short and pale Alexander Hamilton into following suit. "But we were not a part of the thinking that went into such a programme." The look on Mr Dawit's face was imperious. "Gentlemen, please", he responded, "I said that we had consulted many of your countrymen - not all of them. You will understand if we could not reach you at an early enough stage. But we are doing so now. So please bear with me and let me tell you what we think should be done."

"In our view", he continued, "the first order of business is developing the instruments of economic control. "We are therefore going to help you create a treasury and a central bank. For this purpose, we are sending both several advisors as well as a number of missions who will help develop these things. A high priority will be fiscal discipline, so we will have to keep a tight lid on wages and salaries and other items of expenditure." He stopped there, reluctantly acknowledging Jefferson's request to speak.

"Mr Dawit, I do not know if you are aware that we are currently working on a constitution and a bill of rights for the United States of America", said Jefferson. "To us the adoption of a stable constitution and guarantee of rights is" - here he glanced at his companion to the right - "an absolute prerequisite for any kind of political or even economic stability. I would personally request that any programme that you propose must include these items as a priority. Should you wish we are all prepared to discuss these matters with you."

"Tom - may I call you Tom?" Mr Dawit did not wait for a reply: "In our experience, which is supported by cross-country econometric investigation, democracy or the enforcement of rights is not a prerequisite for economic development. In fact our advice is that these matters are best left until after some development has taken place". With an expansive gesture he added: "After all, freedom and rights are luxury goods." A gust of cold air crossed the room. Mr Dawit laughed at his own sally. The three colonial gentlemen waited in silence for him to continue.

"Please don't misunderstand, gentlemen. As an international agency we are committed to liberty, equality and fraternity - but given our limited resources we must be prudent and focus our expenditures. We are also helping your government to work in the areas you mention. After all, our experts have put together constitutions in several countries. However, to us the first task is the generation of investment for longer-term growth. The government can play a leading role in this, both through its own public-investment programme for the development of physical and social infrastructure and through creating an environment for the growth of private-sector investment. Consequently, we urge the government to use wisely the international funds available to it, so that money will flow into these activities."

Jefferson responded. "With regard to social development, I have been working on the topic of educational reform, including the design of a major university in my home state". This time it was Mr Dawit's turn to interrupt. "Once again your thinking runs somewhat contrary to evidence. In our experience, education should be developed sequentially. The level of illiteracy in the country means that the first order of business must be primary education. University education is a luxury good that you can ill afford."

"In addition, the low level of human development in this country leads us to recommend a social-action programme that will attempt to sequentially develop education from the lowest level up", he went on. "Any grandiose project such as creating a major national or state university funded by public subsidy will never be competitive - at least, it should be left for a later stage. But please do not worry. Our experts will take care of it all. Talk to them at the next sensitising session that they hold here."

Mr Dawit was back in his stride. "As I have said, the first order of business is to put the fiscal house in order. The new republic has accumulated a large stock of debt and is displaying the usual symptoms of macroeconomic instability". 

It was again Alexander Hamilton's turn to interject, a little more confidently each time. "Mr Dawit, I have done a lot of thinking in that area. I worked out an entire schedule of tariffs on incoming goods as well as a set of taxes on domestic items of luxury-good consumption such as carriages. I would appreciate it if you could support these ideas, since it is your agency that will eventually determine policy."

"Alex - may I call you Alex? - again, your enthusiasm in seeking to run your own country is impressive, but please do note what is happening in the international arena. Nowadays, we do not use tariffs or tax luxury goods. Instead our experts will put in a system of tax-collection at source from all producers and consumers. Once again I urge you not to worry, to cooperate with our work. Our teams will be working in all the areas that you are interested in and proposing solutions and reform ideas. We will have technical-assistance experts and advisors here for many years to midwife this process."

The outcome

Mr Thanin, the GFA representative in the United States, had been silent throughout. At last he leaned over and whispered to Mr Dawit, who smiled. "Indeed, we are impressed by your creativity and desire to help develop your country. Mr Thanin has reminded me that there are several junior positions in the resident mission here. Perhaps you would like to work for him? That would be very good for you as well as us. It would place you right in the middle of where it is happening. You will be able to interact with our missions and advisors and pick up on a lot of our experience. And we could certainly use your help. I might also add that the pay is very good - certainly the best in your country." 

The cold air had turned to chill. The three colonial gentlemen felt a rush of patriotism. In a calm voice, Jefferson spoke for all of them. He indicated that they were unimpressed, even insulted by the offer, and prepared to insist on their right to run their own affairs. He noted that they knew more about their own country than the GFA. The meeting ended. Each side knew the outcome.

Two years on, Thomas Jefferson has joined the resident mission as a case-officer. He reports to Mr Thanin's deputy and often arranges the carriage for Mr Dawit's visits. Alexander Hamilton is a consultant reporting to Jefferson. He wishes to work at the headquarters of the GFA; the salary and job prospects are much better there.


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