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Ronald Reagan, father of globalization

Published by The Straits Times, Singapore on 2004-06-07

NEW DELHI -- Mr Ronald Reagan was not universally beloved in the 135 countries of the developing world, nor was he especially well understood. His presidency was often perceived as a swaggering statement about American military and political pre-eminence in a world in which the erstwhile Soviet Union was already imploding. And yet, far more than any post-war American president, Mr Reagan influenced emerging countries, their markets and their governance. In many ways, he can be rightly called the father of contemporary globalization.

His consistent prescriptions of free markets, leaner bureaucracies, more transparency in government, fewer price subsidies, and open elections, are today considered de rigueur in poor countries. Mr Reagan believed, correctly, that the post-colonial rulers of a lot of those nations had made a monumental mistake by subscribing to socialism and state-commanded economic development. He often ascribed those policies to the "evil" influence of the Soviet Union, which wasn't always true because local leaders sought to fashion their own unique systems of governance. Unfortunately, those systems resulted in failed states, growing poverty, and economic underdevelopment.

Mr Reagan urged those countries to open up their systems to more foreign investment, and to more financial scrutiny by monitors such as the International Monetary Fund and the World Bank. While he had reservations about global institutions on the ground that they spawned permanent bureaaucracies, Mr Reagan also held that well-managed institutions such as the I.M.F. could serve as effective watchdogs of economies whose leaders were addictd to profligacy and corruption.

That's why he was generally unpopular in the third world during his time. Mr Reagan was regarded as a man who brandished a big stick and was unhesitant about citing the perceived shortcomings of governments that didn't sign on to his formula for economic and social development. That his formula was often not culturally or politically applicable in the third world did not occur to Mr Reagan -- or if it did, he showed a blithe disregard for such realities. In his universe, there was only his way of development and governance, and it applied universally.

Ironically, what his third world adversaries did not adopt by way of Reaganite political and economic prescriptions during his presidency, many -- if not most -- are doing so nearly a generation after he left office. Any third world leader -- other than in unreconstructed communist states like Cuba and North Korea -- calling for a return to socialism, however benign, would invite ridicule and opprobrium. Any developing-country leader insisting on a revival of state-commanded economies would quickly find that foreign investors would shun his country with ruthless alacrity.

"Twenty years ago, nobody in the world marketplace was talking of globalization," said Mr Prem Shankar Jha, a leading economist based in New Delhi. "But Ronald Reagan sensed that technology was making global markets come closer. He sensed that transportation costs were collapsing and that international trade would become more cost-effective. He began demolishing the artificial national barriers to trade and the flow of capital. Under him, capitalism began to go international."

What's entered in the world lexicon today as "globalization" was indeed that -- the freer flow of capital and trade across borders, and more liberal economic regimes.

What's also accepted far more today than during Mr Reagan's time is the need for transparency in governments that are freely elected. The collapse of the Soviet Union ensured that the 'American Way" of open governance would find resonance throughout the third world. But developing countries didn't just naturally transform themselves into democracies. They were pushed in that direction by donor countries who applied pressures that were spawned during the Reagan era. These pressures came in the form of conditional foreign aid, stricter controls on aid expenditure, and an insistence on human rights and environmental safeguards in the drafting of domestic developmental policies.

Some would argue, of course, that the world was moving in the direction of freer economies and liberal trade anyway because of the humongous failure of socialism worldwide -- that, regardless of whether or not Mr Reagan prescribed his palliatives for third-world development, emerging markets would have eventually become more open markets. But he certainly kick-started the process, articulated a vision for an ordered world of more democracy and sustained economic growth. And for that, as much as anything else, he's likely to be remembered, even in chancelleries where his name was once anathema.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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