Contrary to the grandiose claims made by the ideologues, the neoliberal, open-door economic regimes imposed on the Periphery by Core capital - starting in the 1980s - have produced no economic miracles. Instead, the neoliberal policies have brought economic ruin or, at best, lack-luster performance to the countries they have touched most deeply.

Starting with the October Revolution of 1917, sections of the Periphery began to break away from, or attenuate their linkages to, global capitalism. After Second World War, this decentralizing movement embraced nearly all of Asia, Africa, and the Caribbean, who now joined Latin America to form the Third World. Several of these countries chose communism and severed their links to global capital. Others used their newfound sovereignty to re-structure their relations with global capital, using the power of government to develop indigenous capital. This was the Periphery's window of opportunity: its golden hour.

However, this window began to close, starting in the 1980s. For a variety of reasons, which included geopolitical luck as well as the still-strong expansive power of capitalism, Core capital staged a comeback both in the Core countries and in the Periphery. Taking advantage of the debt crisis, the World Bank and the IMF began to dismantle the developmental states in the Periphery. In 1994, shortly after the collapse of Soviet Union, Core capital created the World Trade Organization in order to deepen and police the neoliberal, open-door regimes it had imposed on the Periphery. After a hiatus of some three decades, power was once again centralized in the Core states.

The orthodox economists argued, as they had since Adam Smith, that these neoliberal regimes created the best bargains for all parties concerned. Free markets and open economies, so they argued, would direct production to countries where their unit costs were lowest; and if capital were mobile, it would flow copiously from the capital-rich to capital-poor countries. Indonesia, with cheap labor, would produce shoes; and United States, abundantly endowed with capital and skills, would design, finance, advertise and market them. In the neoliberal paradigm, the capital and skills of Core countries would fertilize labor from the Periphery. This was a marriage made in heaven: it would produce prosperity for everyone, and especially for the poor countries.

There was one problem with this marriage. It had been forced on the Periphery once before for nearly a century and a half, and it had only led to abuse and rape of their economies. Of course, the orthodox economists never saw any of this; they could only see their side of the ledger, which always showed profits. They could not see the abuse and rape because they lived in a world of toy economies with no economies of scale, no externalities, no monopoly power, no advertising, no racism, and no asymmetries of power. That is scarcely surprising: every system that produces abuse also produces its apologists. Always, it is the victims - if only because they are the victims - who must identify and analyze the abuse that penetrates their lives.

In order to identify the failure of neoliberal economics, we will compare the growth record of the Periphery in the two decades before and after 1980. First, consider the two decades preceding 1980 when nearly all countries in the Periphery protected their manufactures, regulated their currency markets, engaged in deficit spending, and their governments took on entrepreneurial roles. By the norms of neoliberal economics, they violated all the rules of good economic housekeeping. Yet, they recorded quite impressive growth rates under these interventionist regimes. The GDP of low-income countries grew at average annual rates of 4.6 and 4.5 percent during the 1960s and 1970s; the corresponding figures for the middle-income countries were 6.0 and 5.6 percent. There were no strong regional variations in the growth record for this period. Although growth in Sub-Saharan Africa faltered during the 1970s, there were nine countries in this region whose average annual growth rates exceeded 5.0 percent during this decade.[1]

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Over the next two decades, as the World Bank and IMF forced neoliberal policies upon them, the growth rates in the Periphery declined in proportion to their embrace of these policies. The neoliberal policies took their first toll in Latin America and Sub-Saharan Africa. Both regions suffered a precipitous decline in their GDP growth rates to 1.7 percent during the 1980s, producing declining per capita incomes. The growth rates in Latin America recovered during the 1990s to 3.4 percent per annum, though this was significantly below their pre-1980 levels. The growth rate for Sub-Saharan Africa improved only marginally during the 1990s, and it was unable to stem the decline in its per capita income.[2]

The collapse of Eastern Europe and Central Asia came next, with their rapid integration into global capitalism starting in the 1990s. Their economic decline was striking. Although the growth performance of these economies had been weakening for some time, they still managed to log an annual growth rate of 2.4 percent in their GDP during the 1980s. However, their precipitate transition to markets produced catastrophic results. During the 1990s, their GDP declined at an annual rate of 2.7 percent, more than wiping out the gains of the previous decade. It is doubtful if any economic region of comparable size has experienced a similar decline in its output. Soon, their fertility rates fell significantly below replacement levels, producing a declining population.[3]

The economic decline of the Middle East and North Africa since the 1980s has been nearly as steep as in Sub-Saharan Africa. Their GDP growth rates in the two decades after 1980 were significantly below those for the two preceding decades. As a result, the region's per capita income declined between 1980 and 2000. [4] This was not due to declining oil prices alone. The non-oil economies in this region shared in this decline; their GDP had grown at 2.9 percent annually between 1950 and 1980, but this declined to 1.5 percent in the two decades after 1980. This decline occurred at a time when the non-oil economies, barring Syria, were liberalizing their trade and payments regimes.[5]

Most countries in East and South Asia, which had made striking progress in the transition to neoliberal economic regimes, followed the same pattern. Their growth rates in the two decades after 1980 were visibly lower than in the two preceding decades. Notably, this group includes the most advanced countries in the region - Taiwan, South Korea, Singapore, Hong Kong, Thailand and Malaysia - as well as the poorer countries: Sri Lanka, Indonesia, Philippines and Pakistan.

There were few countries in the Periphery that escaped the declining trend in growth rates in the post-1980 period. India and China, the two largest countries in the Periphery with more than one-third of the world's population, nearly doubled their GDP growth rates in this period compared to their record in the three previous decades. Although both countries enacted market reforms since 1980, they were still amongst the most illiberal economic regimes in the world, whether one examines the extent of state ownership in their industries or their trade and payments regime.[6] A second group of countries - Myanmar, Laos and Vietnam - experienced dramatic upturns in their growth rates during the 1990s, without the benefit of a liberal regime.