They talk about the failure of socialism but where is the success of capitalism in Africa, Asia and Latin America? – Fidel Castro
One of the biggest arguments about capitalism and to a greater extent, globalization, is that it’s a means of multinational organizations to exploit third world developing nations. Large corporations take advantage of unsafe and poorly regulated working conditions and organizations like the World Bank and the IMF are nothing more than a scheme for a rich to elite to make profits at the expense of a nations sovereignty.
These arguments are not wrong. Who can deny Shell’s heinous crimes in the Niger Delta? And economic studies from both sides of the spectrum agree that structural adjustment programs imposed by the World Bank and IMF have done more to harm developing countries. But should we blame capitalism for this?
The Left will be surprised that it is they who are responsible for creating modern American imperialism! The Progressives of the 19th and early 20th like Teddy Roosevelt, William Taft, and John Maynard Keynes created the economic imperialism we know today.
Exploiting Latin America
Roosevelt, founder of the first Progressive Party, is best known for his “Big Stick” foreign policy. But he didn’t carry a large stick for defensive purpose, instead he used it to take over Latin American nations out of economic self interest. One of his most famous examples was when he stripped Colombia of their possession over Panama to build the canal.
Before he became president though, he was the the biggest hawk for war with Spain in DC. At the time, U.S. businesses monopolized the the devalued sugar markets in Cuba. The US owned about $50 million dollars worth of Cuban sugar, tobacco, and iron industries. Roosevelt saw the opportunities America could exploit in Cuba:
Our own direct interests were great, because of the Cuban tobacco and sugar, and especially because of Cuba’s relation to the projected Isthmian [Panama] Canal… Because of these considerations I favored war
– Teddy Roosevelt
William Taft extended upon Roosevelt with his “Dollar Diplomacy.” The 27th president continued the Banana Wars in Central America and the Caribbean by sending in US forces to put down insurgents in Honduras and Nicaragua at the request of the United Fruit Company.
Creating a New Financial Order
Decades later, at the end of the second World War, John Maynard Keynes and Harry Dexter White began planning a post war economic order. This became the Bretton Woods Conference where hundreds of delegates from the 44 Allied Nations. Keynes wanted a world central bank and and an international clearing union to manage international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses.
White however disagreed over the scope of the institutions and Keynes’ idea of a new world currency so in the end the World Bank and the International Monetary Fund (IMF), were founded as a compromise that primarily reflected White’s vision. Nevertheless, both are considered the founding fathers of the two institutions.
Free Marketeers: The Main Opponents of Imperialism
While progressives of the turn of the century were pushing to expand America’s empire, President Grover Cleveland tries to halt America’s expansionism. Cleveland was the 22nd president of the United States who stood for classical liberal ideals such as free trade, laissez faire economics, and open immigration.
One of his famous acts was his handling of Hawaii affair. American sugar planters on the island attempted to overthrow the government but Cleveland did not give into money and backed Queen Liliuokalani’s regime.
Another instance was his view of the Spanish American War after his presidency. Alyn Brodsky in his book Grover Cleveland: A Study in Character writes that the bourbon democrat believed it would be “an outrage to declare war” on Spain even after the sinking of the U.S.S. Maine, and he ridiculed the yellow journalism that clamored for bloodshed.
“I decline to allow my sorrow for those who died on the Maine to be perverted to an advertising scheme for the New York Journal,”
– Grover Cleveland
After the war, Cleveland objected strongly to the idea that the U.S. should annex the Philippines and joined the Anti-Imperialist League to protest against that move and America’s subsequent war against the Filipinos.
Cleveland followed the ideas of the Founding Fathers to avoid foreign entanglements and in favor of a policy of non-interference and non-intervention in the internal affairs of other nations.
Friedman vs Keynes
One of Keynes arch rival was free market advocate, Milton Friedman completely opposed the two. In highlighting the differences between public endeavors and private enterprises and why government is actually the problem he mentioned IMF and the World Bank as examples:
“The general rule is that government undertakes an activity that seems desirable at the time. Once the activity begins, where it proves desirable or not, people in both government and the private sector acquires a vested interest in it. If the initial reason for undertaking for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.
A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates, whether that is a good system or a bad system beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rate. The IMF’s function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development. Now you have two agencies to promote development, both of them, in my opinion doing far more harm than good.”
– Milton Friedman, Why Government is the Problem
So next time some liberal tries to lecture us about how big business is ruining Sri Lanka, let them know they created that mess. We free marketeers have consistently been opposed to centralization of financial power and use of military force for economic endeavors.