Neo-liberalism is still the best development model - Francis Fukuyama.
Fukuyama later publicly disavowed his earlier links with the neo-cons following the disastrous invasion of Iraq and the exposure of the use of torture by the US military. His views on the causes, effects and possible solutions to the current financial and economic meltdown have been much sought after within intellectual circles. Fukuyama, who is a professor at Johns Hopkins University, talks to Adama Gaye in this exclusive interview.
African Business: How do you classify the current economic crisis in terms of modern world history?
Francis Fukuyama: It is true that in the history of capitalism we have had repeated crises. We had thought that for a while we have managed to regulate the system sufficiently so that this would not happen. But obviously that is not the case.
What is happening is really the end of a period in economic thinking which began with the rise of Ronald Reagan and Margaret Thatcher to leadership in the US and Britain respectively. We saw the emergence of the minimalist regulatory state and emphasis on free markets and the like.
That approach worked for many countries over the past 30 years but I think that in the financial sector there were limits on how this free market model would develop. I think we have reached those limits now.
AB: Do you think the criticism of the Washington Consensus is justified?
Fukuyama: There have been several criticisms after the 1997-1998 Asian Crisis. There was a broad recognition that if you have liberalisation of capital markets without adequate bank supervision and regulation, you are asking for trouble.
That is exactly why Thailand, South Korea and other Asian countries got themselves in trouble.
It is a little bit ironic that the US gave that advice to a lot of developing countries but we didn't take it for ourselves in the sense that we allowed a big unregulated, shadowy, financial sector to develop into the main cause of the crisis we are now going through.
AB: Some, like the former USSR leader, Mikhail Gorbachev, are saying it is time for the state to take control of various economic activities.
Fukuyama: In terms of regulating the financial sector, the state is going to return. Across the board, though, that is probably not a good idea as you have to ask who controls the state and what their interests are.
If you take the case of Russia and ask that question you will come to the conclusion that it is controlled by a bunch of shadowy former security people; people who have been associated with the communist party; oligarchs and other non-democratically elected officials. If that is to come back, that is not good for anybody.
AB: Do you still stand by the theory you promulgated 20 years ago on the end of history?
Fukuyama: I think people did not understand that argument when I made it.
The argument about the end of history was something that was believed by most progressive intellectuals ever since Karl Marx. Marx had a progressive view of history in human society. In his view, the point of end of history was some form of communism through the socialisation of the means of production.
What I said back in 1989 was that this did not look like the end of history but that the stage before that, the bourgeois liberal democracy, was much more likely to become the end of history than communism. And I think that is still true. Despite everything that has happened, I don't really see a superior model to liberal democracy.
AB: Still people argue that this current crisis of capitalism must lead to the opening of a new chapter in economic thinking.
Fukuyama: I don't think it is a new chapter. If you look at the history of capitalism, you will find periods of more regulation and others of less regulation. For instance, during the 1920s, we had less regulation but after the Great Depression we had more regulation.
AB: Does this not mean that the state will take over the commanding heights of the economy?
Fukuyama: I don't see that happening. Now the US has taken over the control of some banks that failed or bailed them out but I don't think that anybody in the Obama Administration wants the state to hold permanent positions in these institutions.
That is just a temporary stance aimed at bringing stability to ailing entities in order to sell them back to the private sector later on.
AB: What is your opinion of the new ideas emerging from US academic forums?
Fukuyama: Many of the dominant ideas on development have come from Washington or elsewhere in the US. But a lot of them have been discredited.
The question is whether the Chinese, the Indians or the Africans have alternative models and strategies of development to fill the vacuum? My personal view is that I don't see any powerful idea emerging so far.
There is this thing called the Beijing Consensus. But I don't think consider that to be a coherent set of ideas or policies. I am not quite sure whether the Chinese have even figured out what it means. They tend rather to do business wherever they can, without paying much attention to governance, democracy or environmental issues.
AB: Should Africa now look East rather than West?
Fukuyama: Again, if there was a coherent strategy coming out of Asia that would be valid point. But I don't see that: Japan, Taiwan, South Korea. Thailand, China - all of them have different approaches to market developments.
One of the general characteristics in East Asia has been a heavy emphasis historically on industrial policy. The state has played an important role in promoting certain sectors of industrial development. But the problem with that is that it worked well in countries like Japan or Korea where you have a competent and development-minded state.
You can't take that for granted in Africa where there is a much higher level of corruption and much weaker state capacity. You have to be very careful when you look towards the East because in copying those so-called models, you may be confronted with more trouble.
AB: You have said there are various routes to development - not just via democracy?
Fukuyama: The critical issue is how capable the state is. If you have a welfare state like Norway or Denmark with still a large government presence, high levels of taxation and good productivity - you don't necessary need to follow the US model but you need a set of capable administrative tools.
AB: Some intellectuals argue that authoritarianism can also deliver the goods?
Fukuyama: That is not enough, per se. Mobutu's Zaire was authoritarian but the country was ruled by a crook. On the contrary, Lee Kwan Yew, in Singapore, was an authoritarian yet he promoted very good development policies.
AB: Is the quality of leadership the answer then?
Fukuyama: It is partly the key, but leadership by itself is not sufficient. You also need bureaucracies of good quality. Most Asian countries have had finance ministries that were packed with PhDs, economists trained in the best Western universities. They had the ability to project state power on the basis of a strong rule of law, strong court system, etc. Leadership is important but the broad capacity to govern is also fundamental.
AB: How do you see Africa?
Fukuyama: The biggest challenge for Africa is of governance. African States have to develop their capacity to manage economic policy, educate their citizens, provide equitably public goods ... If these measures are not taken, natural resources and commodity bubbles will continue to exacerbate the problems of the continent.
AB: Is Africa poised to becoming an epicentre of the next geo-economic battle field?
Fukuyama: This is not like the Cold War. It is not a contest for strategic positions. It is a contest for commodities. If you don't buy them in Africa, you can buy them somewhere else. It doesn't lead to the same need for strategic control as during the Cold War.
AB: How relevant still is the neo-liberal democratic path to development? Is the Washington Consensus dead, as Britain's Prime Minister Gordon Brown claims?
Fukuyama: First of all, democracy is not something you want just for the sake of economic development. It is a good thing in itself. Democracy is desirable beyond developmental needs as it relates to the freedoms of the people to have a say in their countries. So it is not over. Concerning the International financial institutions such as the World Bank and IMF, they need to be stronger and be better funded...
AB: But their structural adjustment policies failed.
Fukuyama: They did not end happily. Now what you see is the IMF going back to its original function, envisioned for it in 1944, namely to provide emergency funding for countries confronted with temporary financial problems.
AB: African countries still find it difficult to attract foreign capital. Why is this so?
Fukuyama: That is a central challenge for Africa. It is up to Africa and the Africans to create the conditions where people want to work and live, where governments are more accountable, provide better services and are more democratic. I don't think it is the role of the international institutions to do that. It is to be largely done internally.
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|Title Annotation:||THE G20 AND AFRICA; Francis Fukuyama speaks aout global economy|
|Comment:||Neo-liberalism is still the best development model - Francis Fukuyama.(THE G20 AND AFRICA)(Francis Fukuyama speaks aout global economy)|
|Date:||May 1, 2009|
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