Teaching radical economics: the Center for Popular Economics and its international institutes.

The various groups of protesters I who have demonsrrated at the & World Trade Organization (WTO) meetings in Seattle, as well as the World Bank and International Monetary Fund (IMF) annual meetings in Washington D.C. and Prague, have certainly attracted the notice of the mainstream media. However, mainstream publications such as the New York Times, Wall Street Journal, and The Economist have paid little attention to the economic ideas which lie behind the protesters' actions. When attention is paid, it is usually by op-ed columnists who dismiss the Seattle protesters as economic ignoramuses. (1) This combination of silence and dismissal is a grave disservice to the global community both because it ignores the demonstrators' serious economic critique of the goals adopted by the IMF, World Bank, and WTO, and because it ignores their critique of the ways in which mainstream economic theory is taught to future economists, businessmen, and citizens in general.

That the popular critique of IMF, World Bank, and WTO globalization policies is internally consistent and sound might be disputed, but there is no lack of famous economists who support and have supported such a critique. To rake a single example, examine the following passage:

I sympathize, therefore, with those who would limit rather than increase the economic entanglements between nations. Hospitality, food, culture, it is these things which should be international. But let goods be homespun whenever possible, and above all, let finance be primarily national. (2)

This militant Seattle protester went by the name of John Maynard Keynes, and also wrote these words sixty six years before the actual Seattle protests. It is rather ironic that the popular critique now takes Keynes's position, whereas the economic theorists who are Keynes's inheritors are diametrically opposed to any constraints on globalization. Although the ideological difficulty of abandoning the dogma of free trade and capital flows is part of the reason why the economics mainstream tends to support the World Bank, IMF, and WTO, another of the root causes lies in the pedagogy by which the economics profession reproduces itself and creates a top-level consensus that influences World Bank, IMF and WTO policies.

The pedagogy used in most college and university economics courses serves to reproduce the undemocratic, authoritarian nature of policymaking by the elites who favor globalization in its current form. Both in lectures and in principles textbooks, economics is presented as a hard science similar to physics or chemistry, and as a result a student looking for a good grade must proceed by way of rote memorization of the lectures and textbook in the hopes of accurately regurgitating the material in a standard exam. The type of give-and-take debate and search for contradictions which lies at the heart of most social sciences is missing from economics both at the level of discourse, where most journal articles are based on the scientific method (that is, economic models are mistakenly viewed as closed systems subject to one-way causation in a manner quite similar to lab experiments in the hard sciences), and more importantly at the level of teaching, where insights of a strictly conditional historical nature are el evated to the status of mathematical theorems which must be mastered. For example, the standard argument of the comparative advantage model that countries are better off with open trade is taken as a truism which applies under all conditions, when in fact it completely ignores the historical circumstances that create comparative advantage between different countries, as discussed in the next section.

In contrast, the method used by the Center for Popular Economics (CPE) for its international institutes (held every summer in Amherst College) aims to produce a popular critique of both current globalization policies and of the pedagogy that helps to reproduce such policies. A large part of the difference between the prevailing pedagogy and the CPE approach lies in the very nature of the circumstances under which the teaching takes place: institutes are not academic courses where students are coerced into memorizing and then regurgitating questionable material in order to get a good grade, but voluntary gatherings of social activists who wish to learn about the world economy and debate differences in perceptions with both the institute teachers as well as fellow participants. Nevertheless, CPE consciously tries to adopt a different pedagogical approach in these institutes. As a former institute instructor, I would like to review my experiences there and relate them to the different pedagogical approach that populist critics of mainstream policies should try to adopt.

OVERVIEW

CPE's international institutes last six days (from Sunday to Saturday morning) and contain plenaries led by selected speakers and brief workshops hosted by activists or researchers in particular fields. But participants spend the largest portion of their time in classes led by two teachers who are CPE staff economists. These classes have no more than 20 participants in order to give everyone room for expressing their views. In setting the structure for these classes, CPE consciously tries to be open to and adopt a variety of pedagogical approaches in order to maintain the participation which is at the core of successful teaching.

To take one example, specific role-playing exercises drive home the effects that corporate capital mobility has on different communities around the globe, and how such capital mobility creates a race to the bottom, where local governments compete with each other to attract corporate investment by lowering wages, cutting or eliminating corporate profit taxes, loosening workplace safety and environmental regulations, and creating an unfriendly climate for labor unions. Some participants take up the roles of workers and city councillors for cities in the northern U.S., the U.S. Sun Belt, and developing countries such as Mexico. Other participants take the role of the corporation whose investment these cities are trying to attract, and often end up getting significant practice in the art of dividing and ruling. When time permits, we repeat the process under different circumstances, including an international minimum wage, international cooperation between labor unions, and a uniform code for environmental and wor kplace safety regulations. Another role playing exercise involves small groups representing different constituencies in a developing country such as organized labor, students, informal sector workers, aboriginal inhabitants, even business elites. Each group gives a brief presentation on how it would be affected by the standard structural adjustment programs of the IMF and World Bank, which the teachers had previously presented in non-technical detail.

Because most CPE institute participants are social activists with outspoken views, generating debate is easy. Often the problem is to make sure each participant leaves enough time for his or her colleagues to express their views, rather than trying to draw out opinions. In this context, free discussion is usually reserved for policy alternatives to the standard World Bank/IMF package, for ways to make political activism in favor of these policies more effective, and for ways by which developing countries and their poorer citizens can obtain a greater voice in the world economy. In these discussions the "teachers' problem," if it can be called that, is to help crystallize areas of agreement and disagreement without raking up too much time themselves.

Of course, there are portions of the institute, such as the sections on exchange rates and international capital flows, in which there are few alternatives to having the class revolve around a lecture format, since both areas are less well-known to laymen than is international trade or foreign investment. Yet even here, the instructors are careful to avoid the technical jargon and graphs which are the bane of most college economics courses. A CPE institute hardly ever uses in-class graphs. Statistical graphs, for example, are relegated to handouts which are used as aids but are not explicitly examined in the class. Also, our emphasis is on presenting the mainstream case for unregulated free trade and capital flows in as non-technical a manner as possible and then letting the participants themselves come up with their own criticisms. Only after the mainstream position has been fully established do the instructors open a debate with and between the participants as to the best policy alternatives to neoliberal g lobalization policies. The next pages will look at the day-by-day institute process in more derail.

DAY ONE

The first priority of day one is to introduce the two instructors and to get the participants acquainted with each other. One standard method is to divide the class into pairs and then have the pairs introduce themselves to each other and engage in standard conversation. When the class comes back together, each member of the pair introduces the other in detail. While this introduction will not by itself be enough to have a class member's identity be fixed in the minds of the other participants, it is a start which will be built on as each participant contributes to debate.

In the July 2000 institute, my fellow instructor and I were fortunate not only in having a member of Jobs With Justice among the participants (there are usually participants from organizations such as Jobs With Justice and United For a Fair Economy at each institute), but also five participants who had traveled from South Africa and who are members of the Congress of South African Trade Unions (COSATU) or the Federation of Unions of South Africa (FEDUSA). (3) CPE staff economists not only do instruction work, but many also do field work abroad, including several who have done economic policy research for COSATU in South Africa. The institute was thus a fairly diverse group, with one black American, two Hispanic Americans, two black South Africans, two white South Africans, and one South African of Indian descent. The class was evenly split gender-wise. At CPE, such diversity is not just window-dressing, but also serves the important function of providing distinct and often contradicting points of view in deba te, as we were to see days later. The instructors then laid down some ground principles for debate--the most important being for participants to be concise in order to leave as much time as possible for the other participants.

The starting point of the institutes is the debate on the nature of globalization, where the two dimensions of globalization are first, its visible flows of goods, services, and capital between countries and the international character of production; and second, the associated effects on society that the visible elements have over time. (4) Among the associated effects of globalization frequently mentioned during the debate are: the race to the bottom," whereby firms which require low-skill labor systematically look for countries and regions which pay the lowest wages, and the "climb to the top," by which firms seek a combination of a highly-skilled workforce, effective infrastructure, and already established firms and industries which would reduce startup costs. (5) Also among the main effects is the neoliberal convergence, which argues that the combination of free capital mobility, trade, and international investment will help developing countries grow. According to this view, such economic freedom will eve ntually allow developing countries to achieve a standard of living comparable to that of the industrialized countries, in contrast to the critical argument of uneven development, which states that globalization deliberately ignores the poorer and more politically unstable regions of the globe.

The institute participants are brought in with a discussion of what social values should be espoused by the global economy, since the economy is made up of people and their connecting social relationships, and not the relationships between numerical aggregates that too many economists believe are the real objectives of development. The debate about development is central to the first day. Participants are asked and prodded into coming forward with their own beliefs as to what constitutes effective and equitable economic development, and their views are preserved in the form of a written list which is kept for future reference.

The last part of the day is reserved for a discussion of capitalism. Capitalism as a system is nowadays hardly ever mentioned by mainstream economists because of the unspoken belief that there is no better system and that to allow capitalism to work in an unconstrained manner is the best policy for developing countries. CPE economists, on the other hand, believe that capitalism is central to the globalization debate. Their criticism of globalization primarily concerns its social effects within the context of a capitalist global system where the accumulation of profit for the sake of shareholders--both active corporate executives and passive external shareholders--is the primary motive for investment and the expansion of markets. Particular attention is paid to the cycle of capital accumulation: the purchase of labor and material inputs, the production process whereby these inputs are transformed into new products, the advertising and retail process where these products are sold on international markets, and t he financial process where the profits from these sales are used to finance new investment and production. At this point a frequent exercise in the institute is to divide the participants into groups and to discuss what specific aspects of globalization help in the accumulation process for a U.S. corporation faced with a series of internal problems, for example, high labor or material costs, union militancy, markets of insufficient size, and insufficient access to finance or investment outlets for accumulated profits. Not surprisingly, most participants come up with a list which, when expanded to the overall world economy, is nor much different than the policies favored by the IMF, World Bank, WTO, and other organizations which embody mainstream policies. CPE economists argue that this congruence is not just mere coincidence but the natural result of the political controls that corporations in industrialized countries have over the main international organizations.

DAY TWO

Having discussed the nature of capitalism and globalization, the institute then moves on to discuss their individual elements, starring with a discussion of international trade. The instructors begin by presenting a simplified form of the comparative advantage model found in most principles of economics courses. The model is still the main theoretical justification for free trade in the eyes of most businessmen and politicians, who are usually more focused on the profits or votes obtained from securing free trade agreements with other nations. It is left up to the participants to criticize this model. What they are usually able to grasp is that the comparative advantage model has massive shortcomings, including the assumption of fixed and independent levels of technology and productivity, the belief that the level of labor employment will not be affected by changes in the trade structure, and the unfounded assumption that any benefits from free trade will be equally distributed. Only after the class has had a hand m criticizing the main argument behind free trade do the instructors move on to more sophisticated and recent justifications for free trade, which the participants are also encouraged to criticize. (6) As always, the critique of free trade leads to discussion of individual cases within countries. The South African participants, for example, pointed out how numerous manufacturing industries in South Africa have been hurt by the ANC government's decision to wholeheartedly support neoliberal policies, including a reduction of trade barriers which has flooded the country with low-cost imports and has thus made it more dependent on foreign manufactures and more dependent on a narrow range of traditional exports (diamonds and minerals, in South Africa's case) in order to finance the purchase of such imports.

The discussion of trade leads the way to a discussion of what fair trade would look like in comparison to the free trade advocated by mainstream economists. Frequent proposals for reform put forward by participants include an international minimum wage, a set of internationally agreed-on minimum environmental standards for production, and international work-safety regulations. All of these restraints would be enforced by internationally sanctioned trade restrictions on countries found to be in violation of such standards, as well as compensation for individual workers employed in such countries' export industries, but not of their corporate managers. From here students move easily into contrasting such proposals for fair trade with the current system of international regulations set up by the WTO and its predecessor, the General Agreement on Trade and Tariffs, for the effects of this system are to reduce national sovereignty over trade decisions.

In fact, what CPE instructors always try to point out at the conclusion of the international trade discussion is that such trade occurs usually not in the type of competitive market setting which most economics professors assume as the norm, but in a setting decided on by different subsidiaries of multinational corporations. The increasing domination of corporations in international trade has resulted in an ever more-finely subdivided system of international production, cemented by the continued growth of foreign direct investment in both industrialized and developing countries. The reasons for the increasing subdivision of production were covered in the previous discussion of capitalism. To drive home the effects of such subdivision, instructors turn again to the type of bargaining role-playing previously discussed. One group of participants takes the role of the board of directors of a corporation in the process of deciding whether to move production out of a city in the northeast U.S., and if so, whether to move production to Mexico or a city in the southern U.S. Other groups rake the role of workers or city councilors in the northeast, southern, and Mexican cities. All come up with competing offers to the board of directors in order to keep jobs in their home cities. This bargaining game illustrates the "race to the bottom" aspect of globalization policies. It can also illustrate, however, that the race to the bottom does not have to come about if either workers organize on an international basis, or if there are internationally agreed guidelines for foreign investment set by member governments.

Foreign direct investment in developing countries usually, but not always, tries to rake advantage both of unskilled work forces earning lower wages, and of lax government regulation and taxation. It comes as no surprise that one of the results of these characteristics is the gender segmentation of labor markets and the predominantly female aspect of production in maquilas and export processing zones. Although this segmentation is explained by many analysts as caused by the lack of male inclination to work in the type of industries (electronics, textiles, garments) often targeted for foreign investment in developing countries, there is usually little disagreement in participant discussion that women, tend to be favored because both young single women and married, previously housebound women tend to have less experience in labor organizing and are at least initially less assertive. This difference in experience also accounts for the wage gap between genders that foreign corporations try to take advantage of. The gender aspect of export industry employment is one element 'that contradicts the mainstream argument that wages are not an important aspect of foreign direct investment. Though most such investment takes place between industrialized countries, it seems quite evident that production which depends on low-skill labor can and will be relegated to. those regions in the globe which, other things being equal, offer the lowest wages, regardless of what, social relationships produced such low payment for labor. Although some countries, like South Africa have large and influential trade unions in most industries, many, other regions such as Central America and Southeast Asia have little such organization and, not surprisingly, tend to attract a high proportion of foreign investment in low-skill industries.

DAY THREE

The third day bears more of a resemblance to a college course, for it covers the seemingly abstruse topics of exchange rates, foreign currency markets and international capital flows, topics which are very important in understanding the world economy but which most of the institute participants know the least about, for many people often decide that this aspect of the world economy is beyond them in terms of conceptual difficulty. The first part of the day is spent on a non-technical description of how exchange rates are determined and of how they are tied to another key aspect of policy in developing countries: the total reserves of hard currency (usually U.S. dollars) available to the domestic government. These reserves must be kept large enough so that developing countries can pay for imports, service foreign debts, and finance capital flight by the richest individuals in the economy. Maintaining a large enough reserve is in fact a difficult undertaking in view of mainstream globalization policy's unyieldi ng position that individuals be free to invest their capital. Capital mobility results in potentially unstable financial systems, especially in developing countries where foreign investors are less informed about the overall soundness of banks and other financial institutions.

Any actual or foreseen event that diminishes confidence, such as the failure of a single large bank, can trigger a panic in which both domestic residents and foreign investors take their capital out of the country by exchanging the local currency for "hard" currencies such as U.S. dollars, the hard currencies being provided precisely by the reserves held by domestic country governments and central banks. Sooner or later, the government may well run out of foreign currency reserves to meet such demands, after which it will have no choice but to let the excess demand for foreign currencies do what it normally does in most markets-drive up the value of the foreign currency (U.S. dollars) in terms of the domestic currency. This devaluation of the foreign currency, since it drives up the price of imported goods, leads to inflation that tends to accelerate the loss of confidence and capital flight, so that only a full-scale restriction of credit in the economy and government financial retrenchment--both leading to a recession--can slow inflation and thus restore foreign confidence in the economy. This is exactly the scenario that played out in various Latin American countries in 1994 and in the East Asian economies from 1997.

The participants are brought into this process through another role-playing exercise. The class is divided into various groups representing a developing country economy and asked about how devaluation of the domestic currency would affect them. These groups represent workers in the tourism industry industrial capitalists, employees of non-governmental organizations that work with poor urban communities, workers in industries competing with exports from the U.S., and U.S. tourists currently inside the developing country. A discussion then follows of the effects of devaluation and of the steps that governments take to prevent devaluation from happening again. The South African participants pointed out that their economy has been hurt far more by the measures that their government has taken to prevent possible depreciation of the Rind: high domestic interest rates, lack of access to credit, and lower government expenditure than necessary for the economy. This is a familiar story in most developing countries wher e the cure-economic stagnation--proves as bad or worse than the original disease of currency devaluation followed by inflation.

The day concludes with a discussion of how the orthodox policies favored by the IMF have made the position of developing countries worse. In order to keep the discussion non-technical, the instructors often focus on a particular country which suffered after following IMF-favored policies--Thailand, Malaysia, Indonesia, South Korea, Chile, Mexico, Venezuela, Argentina, and Russia, among others. This discussion is presented as point-counterpoint with one instructor setting out the IMF's position, the other presenting a derailed critique, with other participants being encouraged to step in. Suffice it to say that the IMF's penchant for capital mobility as well as for tight credit to slow inflation (imagined or otherwise) have a high probability of leading to disaster. With domestic credit for physical investment hard to come by, the foreign capital that is drawn into the country is often channeled into speculative activities such as the stock or real estate markets. This financial speculation leads to an unsust ainable increase in asset prices and then to a sudden drop and financial collapse as individuals realize that the firms that have issued the overvalued assets have no means to repay these obligations over time. Thus, the international capital mobility so favored by the IMF leads to recurring financial crises and to start-stop economic growth, whose long-term consequences are uncertainty and recurring capital flight-thus returning developing countries to the fearful possibility of a devalued currency.

DAY FOUR

The fourth day moves away from the piece-by-piece perspective of the previous two days to consider the effects of the entire package of mainstream globalization policies when imposed on developing countries by their own governments, either because they have been advised to do so by mainstream economists (most likely from the U.S. or trained by U.S. economists) or because they need financial help from the IMF and World Bank and must therefore abide by the conditions set out by those institutions. The IMF's conditions, as we've just seen, entail restriction of domestic credit and reductions in government expenditure, both usually leading to a recession and possibly to extended economic stagnation. The World Bank's structural adjustment programs (SAP's) are more long-term in their objectives: hard currency loans in exchange for general government deregulation, including privatization of state-owned enterprises, elimination of government subsidies and price controls, as well as of financial restrictions such as i nterest rate ceilings for large deposits.

This list of measures is presented in detail by the institute teachers (perhaps again role-playing as IMF or World Bank economists). The class is then divided into groups representing various different families in a developing country's economy. These groups include unionized workers in both export and import-competing industries, poor informal sector workers, poor rural farmers, indigenous families, as well as also rich farmers and industrialists and both low-paid and well-off government employees. During the ensuing brief presentations, it comes as no surprise that families that are well-off due to holding either a lot of wealth in the form of land or financial assets or government influence are either benefited by IMF/World Bank policies, or at worst suffer much less than poor households. In addition to this class dimension, race and gender also emerge in the debate, it being no coincidence that non-white families as well as women tend to predominate in the ranks of the poor. The discussion can also shade off into politics, since it becomes apparent that to openly impose orthodox globalization policies in developing countries requires either the imposition of dictatorship or at least temporary dishonesty on the part of the government, which could hardly hope to be successful in general elections if it openly espoused such policies. The South African participants observed that this too is happening in their country, where the ANC government's economic policies belie its left-wing electoral rhetoric.

DAY FIVE

The last day is left to an open discussion, facilitated by the teachers, on alternatives to mainstream globalization policies, generally in three areas: (1) social and economic policy in developing countries, (2) the redesign of the international economic system, malting it fairer to developing countries as well as eliminating the race-to-the-bottom class bias which characterizes most liberalization policies, and (3) what political changes would be necessary in the industrialized countries, especially the U.S., in order to have any hope of implementing alternatives to mainstream policies as well as to capitalism as an overall social system. Before the discussion begins, however, the class does a traditional CPE activity where a time line for the twentieth century, or just the post-1945 period, is drawn up on a long sheet of poster paper and members of the class volunteer as many important historical events as they can remember, with particular attention being paid to events outside of Western Europe and North America. Besides giving individual participants the opportunity to learn historical facts they may not have previously known, the exercise is designed to make participants aware that the political ascendancy of mainstream globalization policies was not an automatic and inevitable process, and that there are ways to transform modern globalization for the better, provided critics can come up with an organized agenda for alternative policies.

This possible agenda is where the debate is the most lively, as it becomes clear that there are differences in perception between the white and minority participants, and between U.S. and foreign participants as well, particularly when it comes to criticism not just of U.S. government policy, but also of the perceptions that most white Americans have of developing countries. Regardless of such differences, the general consensus of these discussions (of which I have taken part in three, including the last summer 2000 institute) is that equality of opportunity across race and gender lines is inextricably related to the possible alternatives to capitalist social relations, whose political extension is the modern corporation, inherently undemocratic in its distribution of votes and policy-making power according to wealth rather than majority opinion.

CONCLUSION

In CPE institutes, focusing on both the U.S. economy and the international economic system as described here, there are no solid theorems or propositions that participants must learn and recite as if they were becoming adept at scripture or taking a civil service exam. Rather, the focus is on bringing out open-ended debate which can lead to different conclusions depending on the composition of the group of participants. CPE's approach is, of course, not perfect. For example, the presence of participants who are sympathetic to capitalism as a social system as well as to mainstream globalization policies would make for more exciting and productive debate, but such participation is precluded by CPE's prior commitment to activists who espouse a critique of such policies. Furthermore, there is not enough time to give fully detailed coverage to individual issues such as international capital flows and foreign investment, though the institute teachers do mention academic sources that participants can turn to. The ti me constraint not only hampers the teachers' desire to cover globalization policies as thoroughly as possible, but it is also occasionally annoying for participants who wish to continue discussion on a particular subject before moving on.

Nevertheless, the approach taken in the institutes serves as one more example of the gulf that lies between the standard academic teaching of economics and how critics of today's social system teach economics. Mainstream economics, as it is taught today, with heavy emphasis on graphs and mathematics, feels very similar to an arcane branch of applied mathematics rather than a social science. It is not surprising that many undergraduate students decide to avoid further economics courses after a single semester, for they are given an incorrect impression that economics is a complicated and obscure subject which is better left to experts. The task of critics of mainstream globalization policies is not just to reform the current economic system, but also to overturn the ideological basis of standard economics which, through an incorrect application of the scientific method, makes economics look like a technical branch of knowledge not subject to debate. An open seminar system such as the one used in CPE's institut es is one of many steps in this direction.

NOTES

1. NY Times columnists Thomas Friedman and Paul Krugman are the most well known in this respect. See, for example, Thomas Friedman, "Senseless in Seattle," NY Times Op/Ed, Dec. 1, 1999, and Paul Krugman, "A Real Nut Case," NY Times Op/Ed, April 19, 2000.

2. John Maynard Keynes, "National Self Sufficiency." Yale Review, 1933.

3. Part of the funding for the individual participants (in addition to their own payments) comes from organizations such as Jobs With Justice and COSATU. CPE also uses internal funds to provide scholarships to those participants who might otherwise be unable to pay for the costs of the institute.

4. For example, the migration of labor between countries is seen by CPE and many critics of globalization as being an effect rather than a part of globalization's primary aspects.

5. Much of the following discussion is drawn from CPE's curriculum for the international institute as well as from the writer's own recollection of the most recent institute.

6. For example, economies of efficiency from more centralized large scale production, ignoring that such centralized production naturally gives rise to oligopolies and similar inefficient and bureaucracy-ridden market structures; or the belief that free trade is necessary to have access to new technologies, though it is unclear why developing countries that are specializing in a narrow range of products under free trade would need new technologies.

ANDRES CARBACHO - BURGOS is an assistant professor of economics at Southwest Texas State University and a staff economist at the Center for Popular Economics, based at the University of Massachusetts at Amherst, where he also obtained his Ph.D. in economics. He is currently doing research on the effect of neoliberal globalization policies on the largest Latin American economics, Argentina and Brazil in particular, and on the theory of development economics and growth as applied to Latin America.