CHAPTER ELEVEN

SOCIAL-ECONOMIC SERVICES

Energy Management, Planning and Zoning, Industry and Trade

In this chapter we discuss a variety of socioeconomic services and the transformation they faced across a selected number of countries in recent decades. We begin with governmental policies for the management and storage of energy (fossil fuels, solar and wind energy, nuclear energy, and so forth) and natural resources, and move forward to discuss planning and zoning as well as industry and trade. We will pay specific attention to water and other natural resources management policies. We also consider that industrialization in the modern world, and in its slipstream the intensification of international trade, has been among the prime explanations for the growth of government.

Major analytical and comparative questions are few. For example, how important has industrialization been in the development of the Western world? Is it of equal importance in the non-Western world? What policies have governments pursued to both support and constrain industrial development? Attention will be given to the role and position of international organizations (World Bank, International Monetary Fund, World Trade Organization) in relation to the impact of sovereign states. Finally, massive urbanization occurred in the Western world at the same time as industrialization. Living conditions in the rapidly growing towns and cities were such that local governments had to intervene and cater to expanding populations with housing, zoning, and public health policies. Some countries had such policies for centuries (for instance, the Netherlands since the late sixteenth century), but they became widespread from the late nineteenth and early twentieth centuries on. Also, industrialization required that towns had to be connected by roads better than the dirt roads characteristic of the premodern world. What government policies exist to spur investments in infrastructure (roads, canals, railroads)? For each of these three areas (energy management, industry and trade, and planning and zoning) we will discuss the structure, culture, administrative types, and recent reforms.

The chapter will then be concluded with another comparative look into segments of socioeconomic differences amongst nations and cultures. The sphere for comparison is again immense, and no complete or detailed comparison is possible in a single chapter—but it is still a glimpse into one of the most prominent and influential roles of the modern state, the role of managing our natural resources and hence contouring the terrain of planning, trade, and industrial progress.

Energy Management

In many places across the globe people depend upon a reliable energy supply from various sources (water, gas, oil, wind). Energy supply is one of those fairly recent “kids” on the block of government-run or government-regulated enterprises. Indeed, energy policy and management date back to the nineteenth century, and in various places around the world we have come to the point that we almost take it for granted. Should energy supply be regulated and managed by governments, by private companies, or by a mix of public and private providers?

Russia: The Kremlin's Bear Hug

After the Soviet Union collapsed in the early 1990s, most Western economists prescribed a wholesale “shock therapy” comprising price decontrol, a stable currency (made possible by small budget deficits), hard budget constraints on state-owned firms, and rapid privatization of state-owned enterprises (unless stated otherwise, information in this section from Black and Tarassova, 2003; Woodruff, 2006; Ahrend and Tompson, 2005; Goldthau, 2008). Thereafter, enterprises had been practically handed out to oligarchs who often stole much of the purchase price from the government or diverted it from the enterprise. The World Bank (2002) bluntly declared that the highly corrupt one-at-a-time sales of Russia's largest enterprises had been “universally regarded as a poor choice of a privatization strategy.”

Privatization of enterprises has both direct and indirect effects on economic performance, so a hostile business environment has undermined incentives to restructure privatized enterprises and create new businesses to generate extra profits. Against a backdrop of extensive corruption, organized crime, a punitive tax system, and an unfriendly bureaucracy, there was little evidence of productivity improvement in privatized firms compared to their “corporatized” (but still state-owned) counterparts by the end of 2000. However, there was some evidence of negative indirect effects in terms of internal changes in privatized firms.

First, oligarchs turned out to be major corrupters of government, so an already corrupt government became even more so. Second, rampant corruption with regard to privatization, massive transfers of wealth to a limited number of well-connected insiders, lack of any significant benefits to ordinary citizens from voucher privatization (which had been promoted as returning the country's wealth to the people), spiking poverty and unemployment, and dropping real wages for most of those who kept paying jobs prompted a political backlash against economic reform. Third, oligarchs joined forces with managers of privatized enterprises and corrupt government officials to oppose many institutional reforms cardinal to sustainable economic growth. The conventional wisdom stresses the importance of market-supporting institutions; absent such institutions and in light of the Russian experience, the World Bank has qualified its strong proprivatization stance.

Russia owned 26.6 percent of the world's proven gas reserves by 2005, and 6.2 percent of the world's proven oil reserves; it accounted for 21.6 percent of global gas production and for 12.1 percent of global crude oil production (British Petroleum, 2006). Regardless of takeovers, the Russian state did not manage to preside over domestic oil production wholly; the Kremlin has been able to “steer” the oil industry for political purposes only indirectly via tax incentives, export regimes, pipeline access, predetermined auctions on new fields, and the like. In the olden days, the Russian market had been dominated by 10 vertically integrated oil companies controlling 95 percent of Russia's crude production and more than 80 percent of its refining capacity. The Russian state now controls a significantly higher share of the domestic oil industry than it did during the 1990s. Still, state-controlled companies have accounted for around only 25 percent of the country's oil production and around 16 percent of its refining capacity due to a series of takeovers of private companies by state-owned Rosneft and Gazprom. Somewhat octopus-like, Gazprom owns a vast array of holdings in sectors such as banking, insurance, agriculture, mass media, and construction. Since Gazprom must closely coordinate its activities in all spheres with the authorities, it can sometimes be difficult to identify where the state budget ends and Gazprom's begins. Even company officials acknowledge that Gazprom operates in many ways as a quasi ministry. Regardless, the Russian domestic oil market is fairly competitive with prices determined by world markets and by the taxation policies of the Russian government.

Russia holds the world's largest gas reserves, emerging as the most important supplier to Western and Central Europe where it has covered up to 100 percent of imports for some countries. This dependence will become even more pronounced in the near future when depleted European resources need to be compensated by higher imports—also from Russia. Since exploration of gas fields and pipeline construction are extremely expensive and time consuming, producers and consumers engage in longterm contracts that usually cover 20 years or more and entail destination clauses to prohibit secondary trading. Based on these take-or-pay contracts the producer is able to invest in a multibillion-dollar project, as there is a constant and reliable return on investment. In addition, gas is a regional play transported almost exclusively via pipelines. If either the producer or the consumer wants to opt out (exit) and start dealing with an alternative contractual partner, he has to make a high additional investment to build a new pipeline. Given extremely high upfront costs it becomes very costly for any involved party to leave an established bilateral contractual gas relation. A quick look at the dense pipeline grid connecting Europe and Russia reveals that neither side can be interested in dumping all the money each has invested; nor do they have a real choice. Hydrocarbon sales account for a major part of state revenues; the total share of government revenues stemming from hydrocarbon sales has more than doubled during the past four years, amounting to almost 40 percent in 2006 (IMF, 2006). Oil and gas have made up about 20 percent of Russian gross domestic product (GDP) (World Bank, 2006). The heavily regulated Russian home market forces Gazprom to adopt aggressive pricing strategies in transactions with foreign markets (International Energy Agency, 2004).

Russia is a highly inefficient user of energy, using 3.2 times more energy per unit of GDP than the EU-25 (the 25 European Union member states), most of this as gas (accessed 2/2013). Domestic Russian gas prices are only a fraction of prices charged on foreign markets, amounting to only 17 percent of Western European gas prices in 2006; 29 percent when taking into account transit charges (www.ubs.com/investmentresearch). Gazprom earns virtually all its profits from exports to Western Europe although this market only accounts for 25 percent of total production. In turn, if accessible foreign markets are not attractive for some reason, Gazprom tries to render them more profitable and raises prices if it can. In case a country is unable to pay the new price, Gazprom accepts in-kind payments, including shares of national or regional gas providers or pipeline grids—assets it would otherwise have to buy as an integral part of its expansion strategy. Gazprom uses its control of the domestic pipeline grid to restrict third-party access, and by doing so it prevents independent producers from exporting gas. Private gas companies have therefore little incentive to invest in upstream projects. After heavily subsidizing its former Soviet allies throughout the past 15 years, Gazprom has increased gas prices in the Commonwealth of Independent States (CIS) countries and pushed to equalize them, net of transit fees, along with those it charges its Western European clients. This policy has resulted in several gas disputes with neighbors such as Ukraine and Georgia.

Germany: Renewable Energy Sources Come to the Throne

When it comes to corporate culture in Germany, Shonfield (1968) coined the term “alliance capitalism” to portray collaborative relationships between commercial entities; success has relied on concerted orchestration of large resources for common goals. The German Energy Supply Industry (ESI) has been embedded in that alliance, having had powerful ownership links with major financial and industrial interests in Germany. Already before 1990, the German ESI, one of the industrial pillars of Europe's largest manufacturing economy, had been partly privatized and later on opened to foreign investors. With its huge turnover, vast profits, and monopoly status, the ESI grew into the major cash cow of the German economy. Its political status was consolidated by links to state bodies at all levels, having shared revenues with German municipalities by way of generous concession fees (information in this section from Lauber and Mez, 2004; Schumacher and Sands, 2006; Huber, 1997; Jahn, 1992; Ristau, 1998).

Electricity regulation in Germany has hinged on a mix of public and private law. The Energy Supply Industry Act of December 1935 laid down the groundwork for a cheap and secure electricity supply, circumscribing the state's control of the sector for more than 60 years. The Monopolies Act has been yet another noteworthy law in that regard because it exempted electricity supply. Contracts for concessions, territorial boundaries, supply to special customers, technical conditions for feeding surplus electricity into the grid, reserve deliveries, and other arrangements have all been based on private law.

Numerous vain attempts at reforming Germany's energy sector came to a head during the Chernobyl disaster in 1986. Following reports warning of a climate catastrophe, Chancellor Kohl declared in March 1987 that the climate issue represented the most important environmental problem. Within two years, opposition to nuclear power increased to over 70 percent while support barely exceeded 10 percent.

Electricity Feed-In Law for generation from renewables was only one of several measures taken in the late 1980s to create markets for renewable energy sources (RES-E) technologies. Those steps included the 100/250 megawatt (MW) wind program, the 1,000 solar roof program, and establishing a legal basis for utilities to pay higher costs for RES-E than were “competitive” in the distorted marketplace that ignored external costs for practical purposes. Under the 1,000-roof program, applicants received 50 percent funding of investment costs from the federal government plus 20 percent from the state (Länder) government between 1991 and 1995, equipping 2,250 roofs with photovoltaic modules that led to about 5 MW of installations (Staiss 2000, pp. 1–140 referenced in Lauber and Mez, 2004). In terms of wind energy, a program to subsidize 100 MW of wind turbines, which later was augmented to 250 MW, had been legitimated by the need to gain practical experience with different approaches under real life conditions.

The 1990 Feed-In Law required electric utilities to connect RES-E generators to the grid and to buy the electricity at rates of 65 percent to 90 percent of the average tariff for final customers. Generators were not required to negotiate contracts or otherwise engage in much bureaucratic activity. Together with the 100/250 MW program and subsidies from various state programs, the Feed-In Law gave considerable financial incentives to investors, although less so for solar power due to the latter's high cost (Hemmelskamp, 1999 referenced in Lauber and Mez, 2004). These incentives spawned markets, expanding wind-energy systems from about 20 MW in 1989 to over 1,100 MW in 1995 (Advocate General Jacobs, 2000). Due to an intense battle between politicians, conventional electricity generators, and numerous industries with vested interests, between 1996 and 1998 markets for wind turbines stagnated. However, when it became clear that feed-in rates would remain unchanged, the turbine market expanded apace and large firms entered into the business of financing, building, and operating wind farms. Turbines have been privileged under the construction code that has compelled local communities to appropriate zones for wind power, stressing public information; training in architecture has been reformed accordingly.

The Renewable Energy Sources Act of 2000 has repealed and supplanted its Feed-In Law precursor, endeavoring to double RES-E production by 2010. In many respects, the law brought improvements for generators in terms of rates and security. It also stated unequivocally that RES-E compensations should take external costs of conventional generation into account and support an industrial policy aiming at the long-term development of renewable energy technologies.

California: A Calamity Precipitated by Deregulation

A “utility consensus” prevailed between the 1920s and the 1970s when natural monopolies had dominated the United States and investor-owned electric utilities were regulated to substitute for competition. The regulatory approach espoused in the United States granted individual companies exclusive franchises to provide power within specific geographic areas as long as their rates were regulated by state regulatory commissions based on the cost of providing service including a reasonable return on investment. California's three investor-owned utilities were Pacific Gas and Electric Company (PG&E), Southern California Edison Company (Edison), and San Diego Gas and Electric Company (SDGandE). The California Public Utilities Commission (CPUC) was erected in 1911 to regulate these companies and guarantee service to customers at “just and reasonable rates” (information in this section from Duane, 2002; Hirsh, 1999; Clark, 2001; Clark and Lund, 2001; and Wolak, 2003).

The Public Utility Regulatory Policies Act (PURPA) of 1978 challenged “the monopoly control enjoyed by regulated utilities.” Section 210 of the act allowed “qualifying facilities” (QFs) that either were run on renewable energy sources or burned fossil fuel more efficiently through co-generation. PURPA had little impact in most states as industry-captured regulatory commissions protected monopolies' vested interests. Notwithstanding, California's aggressive response to PURPA yielded the largest number of nonutility-owned QFs in the country, which turned out to be an institutional precursor of the California crisis. Many of the new nonutility generating units were cheaper to build and operate than new large-scale utility facilities. Such extensive decentralization set the stage for further deregulation. The California experiment culminated in a series of legislative steps initiated by the CPUC but taken on by the California state legislature to deregulate and restructure electricity supply from 1992 to 1995.

Following passage in the 1996 legislative session of the Electric Utility Industry Restructuring Act (Assembly Bill [AB] 1890), two independent bodies were established in order to run the California system: (1) the California Power Exchange (PX), a single “transparent” market where all purchases and sales were compelled to go; and (2) the Independent System Operator (ISO), intended only to ensure transmission integrity by running the transmission system for the utilities that continued to own the transmission system itself.

The PX was structured as a day-ahead market where buyers and sellers would submit bid curves indicating how much power they would be willing to buy or sell at a series of prices. Sellers realized that the ISO would pay higher prices than the utilities would pay in the PX if there were a desperate need to buy more power to keep the grid operating. Sellers migrated from the PX day-ahead market to the ISO real-time market whenever it appeared that the ISO would need to buy power at the last minute the next day. Oftentimes the ISO had to buy power for delivery on the same day or even the next hour. By functioning as a market rather than a transmission system manager, the ISO ceded infinite market power to sellers. Buyers could gain from last-minute competition whenever there was surplus power in the market, but sellers were in the driver's seat under conditions of scarcity.

During the four-year transition from 1998 to 2002, the utilities were allowed to collect more revenues from ratepayers than was necessary to recover their past investments. AB 1890 also froze residential and small commercial customers' rates. Those safety valve provisions allowed utilities to recover costs higher than the frozen level, so they transferred billions of dollars to their parent corporations and affiliates from April 1998 to April 2000. Customers were allowed to shop around and change providers, but there was very little incentive to do so: Nonutility retail providers were bound to pay a Competitive Transition Charge (CTC) toward the utilities' standard costs, while existing utilities were apprehensive of long-term contracts with customers they may not be able to retain as soon as the transition period ended. The utilities sold off nearly their entire fossil-fired generation systems, one-third of the total generating capacity installed in the state. The $3.3 billion earned on the asset sales were fed by the utilities to their parent corporations (filling shareholders' pockets) rather than to ratepayers.

Competitors started to withhold power physically since this meant windfall profits in case the ISO called them with an urgent need for their power. Benign weather conditions that boosted low-cost hydropower onto the California market masked the growing threat of scarcity when economic growth and demand boomed. From May 2000 on, SDGandE customers reeled under doubled utility bills that threatened the regional economy. PG&E and Edison had been losing money due to the rate freeze, and in September 2000 were forced into bankruptcy.

On November 1, 2000, the Federal Energy Regulatory Commission took some mitigating measures, but its proposed remedies were too little and too late. During the system's free fall in the winter of 2001, the state stepped in through its Department of Water Resources (DWR) to buy power on behalf of the cash-strapped utilities, after sellers had insisted on a “creditworthy” buyer. The “shortages” that caused rolling blackouts were an institutional artifact of the market structure rather than a physical phenomenon. Three rolling blackouts, for example, occurred during a month when the daily demand for electricity was near its lowest annual level. First intended as a temporary measure, the bills continued to soar and the state DWR picked up the tab to keep the lights on. Based on an estimated original cost of $43 billion over the life of signed contracts, California committed to pay roughly twice the actual unmanipulated market value of electricity.

The state has faced a continuing fiscal crisis and insolvency as California taxpayers and ratepayers have been paying for the electricity predicament in mounting electricity bills, higher taxes, a weaker economy, poorer schools, more children without adequate health care, more crowded and dangerous roads, more crime, and closed parks. The public provides the money, whereas the private sector provides the monopoly power to keep the lights on; since no part of the system is owned or controlled by the public, for control is buried in an insular, patronizing bureaucracy, the system is highly unlikely to be responsive to public concerns. The California electricity market illustrates how deregulation might transfer wealth from consumers to generators and traders, improving neither efficiency nor social well-being; history and technical understanding demonstrate that it is an industry too susceptible to abuse to be left free of regulatory oversight.

India: A Public Leopard with Private Spots

Since 1991, the Indian economy has undergone a quiet economic revolution aimed at restructuring its basis. Liberalization evolved piecemeal and did not skip the power supply industry (information in this section from Jenkins, 1999; Chong, 2004; Reddy, 2001; Hansen and Bower, 2003; Joseph, 2010). Reforms with respect to power supply industries share some traits such as unbundling of vertically integrated utilities, change from public to private ownership, evolution of a competitive power market, and establishment of independent regulatory bodies. The main thrust has been to engender a vibrant power sector while minimizing government spending and protecting consumer interests.

British colonial administrators decentralized electricity infrastructure in India during the early twentieth century principally to support British industrial concerns and cater to ruling-class families in the major cities. The Indian constitution grants joint responsibility for managing the electricity sector to the central and state governments. The legal and regulatory basis for the management of the sector has derived from the Indian Electricity Act (1910), the Electricity Supply Act (1948), the Electricity Regulatory Commissions Act (1998), and the most recent one, the Electricity Act (2003). The sector has been fraught with ongoing theft and corruption, and the pricing structure has been garbled and biased due to vested interests of consumers, such as those in the agricultural sector who pay subsidized prices or nothing at all. The central government has generated approximately 30 percent of the Indian capacity over the last 10 years, all of which has been managed by three public companies erected after amendments to the 1948 Electricity Supply Act: National Hydel Power Corporation, National Thermal Power Corporation, and Nuclear Power Corporation.

The 1948 act had allowed states to create generating companies; by the late 1950s, all state governments established State Electricity Boards (SEBs). The 1998 act instituted an independent regulatory commission at the federal level and allowed each state to set up State Electricity Regulatory Commissions (SERCs). The 2003 act mandated each state to have a SERC, vesting them with responsibility for determining the tariffs to be charged to different classes of customers and the tariffs for and functioning of intrastate transmission. This World Bank-led phase of the late 1990s and early 2000s inaugurated an era of unbundling: SEBs have started to separate generation, transmission, and distribution functions and forge SERCs. Ostensibly separate from politics, these commissions still did not manage to change pricing.

The three Public Sector Units (PSUs) were able to sell electricity to the states alone; when SEBs faced shortages, the proportion allocated became a bone of contention. SEBs insolvency, combined with politicians' inability to commit to policy reforms at a time when consistent and reliable electricity was most needed and poor quality electricity, prodded industrial consumers to exit the state-run sector and set up their own on-site facilities to generate power. Private electricity companies came about owing to the 1991 legislative amendments that had permitted private investment, including foreign investment, in electricity generation plants. Industrial groups were allowed to build their own captive power plants to produce electricity for their own consumption.

Over the past decade, the Indians have aggressively solicited international independent power producers (IPPs) in order to persuade them to invest in new generating capacity. IPPs have been reluctant to do so mainly because most SEBs had a history of not paying for power in a timely manner. Foreign firms have been dissuaded by their past experience of dealing with India's multilevel and ineffective bureaucracy, high taxes, and unremunerative tariffs. Problematic and insolvent SEB was a leitmotif in the emblematic Enron mishap. In June 1992 Enron had started to build a power plant in Dabhol, in the western Indian state of Maharashtra. In 2000 the plant began supplying the Maharashtra SEB. Pricing issues arose immediately as the charge for the power supplied by the Dabhol plant was higher than what the Maharashtra SEB paid to the state-run facility. In December 2000 the Maharashtra SEB stopped purchasing power from the Dabhol plant. Back then, generators could only sell directly to SEBs within a single-buyer model that enabled them to sell solely to a given state with no option for cross-border generation. The corollary has been a shutdown of the plant in May 2001 while Enron has cited over $1 billion in lost costs.

The ironic outcome of ongoing theft and corruption plaguing the electricity sector has been enhanced by electricity generation by the private sector and new opportunities for private distribution. Instead of hinging upon ineffective and unreliable SEBs, industrial actors have chosen an exit strategy and started to generate their own captive power. This has been a further upshot of the open access clause in the 2003 Electricity Act that took away the authority of the SEBs to veto the transmission of electricity through their lines, allowing instead any surplus electricity generated by these captive power plants to be sold to the grid. As a result, multiple generators and distributors compete for customers in a bulk market. The detracted authority of SEBs has fostered a parallel economy, which has emerged alongside the state sector. This “dual-track economy” by which market-based electricity is introduced alongside the state-run sector allows politicians to promote market development without jeopardizing the support of a key political constituency.

Not always do partial reforms hinder the adoption of further reform. This is true chiefly in sectors where some groups have an exit option: Partial reform in the Indian electricity sector rather boosted further privatization and sparked competition in the market. The politically feasible Indian modus vivendi preserved the state sector in the electricity market (each state has been left to decide subsidy issues), allowing industrial consumers to exit and fend for themselves. An emergent market-based electricity sector has been a welcome collateral effect of that process.

Planning and Zoning

Planning and zoning are closely related to resource and energy management. For example, managing available water resources is extremely important in urban areas. In Chapters 2 and 3 we discussed how the landmass of the earth has become almost completely circumscribed by jurisdictions from the national down to the local level. In a situation where there is no longer common land, planning and zoning have become major government responsibilities.

Zimbabwe: Land Reform in a Ruptured Ex-Colony

Land reform has been brought back to the fore of the developmental agenda in the last two decades, owing to resurgent interest in land distribution as a means to alleviate poverty and better rural livelihood. Recent land occupations, extensive land reform, and agrarian change in Zimbabwe epitomize Africa's land question (information in this section from Chigumira, 2006; Chaumba and others, 2003; Chaumba, 2006; Wolmer and others, 2003). Upon becoming independent in 1980, Zimbabwe (formerly Rhodesia) inherited racially skewed land distribution. About 6,700 white-owned farms and a number of large agroindustrial estates occupied over a third of the country's land area, much of it areas of higher agricultural potential. Prior to independence, white settlers had occupied the more fertile land suitable for rain-fed agriculture, while the natives had to settle for less fertile and unproductive communal areas. That disparity had been an upshot of colonial legacy of massive land expropriation by the white settler minority.

Land reform was constrained by the constitutional provisions of the Lancaster House agreement signed in 1979. All prospective agrarian reform was designed to increase farming efficiency through careful planning. Soon after independence, the government turned a blind eye when masses of squatters occupied abandoned and vacant land, asserting their claims on ancestral land and rejecting the colonial state's technical prescriptions and proscriptions on access to and use of land. That transitional window of opportunity to dissolve colonial arrangements closed as soon as the Rhodesian-style top-down, interventionist, and technically driven approach to resettlement planning took hold again. Throughout the 1980s, political posturing around land issues and reform of traditional institutions alongside well-orchestrated bureaucratic and technocratic response, informed by modernist views of development, stymied resettlement.

The government of Zimbabwe embarked on the Fast Track Land Reform Program (FTLRP) in July 2000 to redistribute land to the “land hungry” after countrywide, large-scale “occupations.” This program needs to be understood in broad political, economic, and institutional context. From the 1990s onwards, frequent droughts afflicted Zimbabwe, aggravating rural poverty. The political euphemism of the reform was “Land is the Economy and the Economy is Land.” The program was based on compulsory acquisition of land for resettlement purposes from the white commercial farming sector, private companies, and absentee landlords, without paying compensation.

To increase agricultural production and reduce rural poverty, the FTLRP cast two models for resettlement, namely the A1 and A2 models. The A1 resettlement model has been a village type of resettlement where peasants have been allocated homestead areas, arable land, and grazing areas as distinct blocks of land in a particular area, and grazing has become communal. Roads, water sources, and natural resources have been common property to be shared by those in the scheme. That model has targeted landless people in order to decongest communal areas, and 20 percent of the land was reserved for war veterans.

The A2 model aimed to increase the number of black indigenous commercial farmers; it resembled a self-contained unit where an individual farmer has occupied a farm and was fully in charge of it. The farmer received no state funding. All citizens of Zimbabwe could apply to be resettled according to this model, provided they had entrepreneurial skills, some form of agricultural experience, and financial resources. Politically, the government was in dire straits after its draft constitution had been rejected at the February 2000 referendum. In the aftermath, the government amended the constitution in April 2000 to allow for compulsory acquisition without having to pay compensation.

For the first time since independence, the ruling party, Zimbabwe African National Union-Patriotic Front (ZANU-PF), faced a strong electoral challenge in the form of the Movement of Democratic Change (MDC) at the 2000 general elections that followed the referendum and the 2002 presidential elections. This prompted commentators, the media, and scholars to view FTLRP as a political campaign to preserve the status quo that did not have the rural poor in mind. Large-scale occupations of white-owned commercial farms across the country spearheaded by the War Veterans' Association with the tacit support of government were initially cast as political “demonstrations” against the government's and donors' failure to address the charged “land question” after 20 years of independence, and anger at the rejection of the new constitution. Explanations of the farm occupations have tended to cast them as either spontaneous rejection of the bureaucratic process of land reform or a state-orchestrated process. There were nonetheless further motivations for farm occupations: top-down directives to bolster support for ZANU-PF in its rural heartlands, localized desires to restitution of ancestral land, and opportunist poaching, to name a few.

On invaded farms, invaders engaged in illicit activities that rapidly became normalized under the government aegis. They closed farm roads, cut down trees, stole and mutilated cattle, started fires, looted property and sugar cane, and even ordered farmers, farm workers, and neighboring villagers to attend political rallies while defying police orders and appropriating police vehicles.

The program has been condemned internationally, regionally, and locally for land occupations, lack of rule of law, disrespect for property rights, and inadequate planning and financial support. In response to the FTLRP, the United Nations Development Program (UNDP) sent two mission teams to assess the situation and propound a sustainable program. An alternative land reform program termed the Zimbabwe Joint Resettlement Scheme was also proposed by the Commercial Farmers Union and the private sector. The government accepted the UNDP initiative in September 2001, but only prima facie as it was unwilling to honor the agreement, and farm “occupations” continued undisturbed.

The FTLRP has taken its toll on Zimbabwe. Due to loss of production on many resettled farms, Zimbabwe has shifted from being a net exporter of food grains to a net importer. From 1995 onwards, Zimbabwe's GDP had already been in a downward spiral alongside additional key economic indicators. From 2000 to 2004, things went from bad to worse with plummeting foreign currency inflows that left the Zimbabwean industries unable to import raw materials for the production of agricultural inputs. The corollary was a shortage of agricultural input including fertilizers, agrochemicals, seeds, and equipment. Aside from political upheavals, the FTLRP caused an economy already in the hole to sink deeper.

New Zealand's Resource Management Act: A Spearhead of Sustainable Development

Sustainability had been looming large in the preceding two decades at United Nations conferences and learned symposia, but hitherto no modern nation espoused it unequivocally as an underlying principle of the people's relationship with their natural environment (information in this section from Burton and Cocklin, 1996; Memon and Thomas, 2006; Berke and others, 2006; Perkins and Thorns, 2001; Kerr and others, 1998). New Zealand ventured into uncharted waters when it adopted the Resource Management Act (RMA) in 1991 in the midst of a 15-year period of neoliberal dominance in the form of a conservative National Party government traditionally backed by farmers and businesses. The RMA had been among the first planning legislation in the world to attempt the principles of sustainable development, and it substantially changed the basis of urban planning that prior to 1991 had derived from the provisions of the Town and Country Planning Act 1977 originally hailed from Britain.

For over two decades the RMA has been the principal legislation governing the use of New Zealand's land, air, water, ecosystems, soils, geology, and the built environment. It repealed 59 erstwhile statutes and was intended to provide a framework for simplifying environmental management. The raison d'être entailing new legislation had been overlapping responsibilities of different agencies, lengthy and complex consent procedures that curbed public involvement, and poor accountability.

Three unresolved policy dialogues have been directly implicated in the management of water in New Zealand, not unlike other former British colonies. The first one concerns intergovernmental relations both hierarchically (between national, regional, and local jurisdictional authorities) and laterally (between regions and between localities in the same region). The RMA has laid down a national environmental policy whose implementation has been largely devolved to regional and local governments. The second policy dialogue concerns the relationship between governments and markets. The RMA supplanted the customary use principles that had relied on traditional common law doctrines. It enabled experimentation with market-based methods of water resource allocation and reallocation, following close on the heels of a decade in which privatization had become commonplace in New Zealand after the government had ceded ownership of most of its resource base. The third policy dialogue had to do with appellate court decisions that brought to the fore unresolved issues between the New Zealand government and the Māori people regarding ultimate title to and authority over all natural resources, including water. The RMA has set forth devolved intergovernmental arrangements whereby the central government was supposed to establish national goals and policies to be carried out by subnational governments. District councils were required to adopt plans intended to promote sustainable management of natural and physical resources.

The RMA was an attempt to do away with zoning, assuming that the governing bodies closest to resources were the most appropriate to govern the use of those resources, and that it was more efficient to focus on adverse environmental effects of some activities rather than the activities per se. Central government had set policy while casting national environmental standards whereas local government agencies had latitude in choosing any policy mechanism they considered most befitting. Since the RMA had embraced the principles of environmental impact assessment, plans established an effects-based policy framework against which development proposals and permit applications would have been assessed. To maximize flexibility when applying for development permits, rather than prescribe activities, heed was paid to prospective effects by postulating predicted outcomes premising environmental “bottom lines” would have been met. This assumption, however, has not been without its flaws. The law had elaborated the meaning of “effect:” any positive or adverse effect; any temporary or permanent effect; any cumulative effect regardless of scale, intensity, duration, or frequency; and any potential effect, whether it was of high or low probability. The assessment of effects should have included visual and physical disturbance, socioeconomic and cultural effects, and information as regards alternatives and mitigation methods.

Furthermore, the term “sustainable development” is a contestable one and capable of various definitions and interpretations. The act has not clarified what sustainable development might mean, and thus far, there is no articulate policy vision from central government. Instead, communities should have decided for themselves what it meant in line with one of the fundamental tenets of sustainable development; that is, to make decisions as close to the issue as possible.

The RMA professed the need for local government to extend the degree of public involvement and participation in the planning process; its appendix has specifically directed regional and local authorities to consult with the leadership of local Māori groups that might have been affected by policies and corresponding plans. Absent national guidelines, regional and local governments have demonstrated diverse perspectives on the issue of how free they were to overrule Māori objections to resource consent applications.

Courts have been obfuscating matters further rather than resolving them. A court ruling, for instance, made clear that it was the obligation of the project proponent and not the governmental authority to identify germane Māori groups and initiate consultation with them concerning the consent application. Such a stipulation has lent itself to inadvertent if not sheer abuse because, akin to other common law nation-states of the Pacific Rim, Māori groups tend to be less well off than the average population. Māori groups can rarely afford to participate at all in resource consent proceedings to bring their views forward, and when they do participate, they cannot hire the kind of technical expertise that development proponents have at their disposal to convince government decision makers.

Cooperative planning predicates committed subnational governments willing to comply with national planning legislation, but at the same time those governments may not have the capacity to do so. If the central government funds its central agencies insufficiently, subnational governments are unable to meet national mandates or implement national policies accordingly. Such deficiencies have been evident in some local authorities where relationships between Māori people and the (nonindigenous) local community have been strained.

Inasmuch as the RMA represents, prima facie, a radical change to land-use planning, practically not much has changed on the ground. Planning and resource use have always been the centerpiece of local politics—where outcomes are determined. The failure of central government to provide policy direction and advisory support as well as adequate funding for its agencies has brought to bear on implementation when it came to the stipulations laid down in the RMA. Regions and districts have therefore varied in terms of planning processes and outcomes contingent on patterns of local political culture, economic activity, population shifts, ethnic composition, and mobilization of local groups through both “not in my backyard” and other types of organizations.

Brazil: Frontiers, Landlords, Squatters, and a Vacillating Government

Early in the 1960s, the Brazilian government initiated a huge development program to integrate the Amazon region into the national economy (information in this section from Mertens and others, 2002; Alston and others, 2000; Alston and others, 1999a, 1999b; Cullen and others, 2005; Dias Martin, 2006; Pacheco, 2009) and to address political pressures for land reform. The Land Statute of 1964 proposed expropriation as a major part of the land reform it put forth. This Estatuto da Terra called for better distribution of land through appropriation and indemnification of unproductive properties and their distribution to rural workers. Until 1985, the basic instrument of land reform was colonization projects on government land, especially in the Amazon. The Landless Workers' Movement—Movimento dos Trabalhadores Rurais Sem Terra (MST)—spearheaded occupations as they hinged on constitutional provisions that allowed for confiscation of private property in case it was not cultivated or when the owner was in violation of labor or environmental regulations.

Various Brazilian constitutions (and the most recent one of 1988) abrogated the rights of titleholders and gave squatters preferential privileges. Not only could squatters occupy and claim government land, but they were also allowed to occupy up to 50 hectares of vacant private land. Squatters could obtain title through adverse possession, if they occupied and developed their lots for five consecutive years without opposition from owners. In case owners protested that occupation and had the squatters evicted, squatters had the right to be compensated by landowners for any improvements they had made.

The National Institute for Colonization and Agrarian Reform (INCRA) was founded in 1971 to administer formal colonization projects on behalf of the federal government. A parallel state agency, ITERPA, was established by Pará (the eastern Amazon state, the second largest in Brazil) in 1975 to coordinate settlement and process title applications. INCRA furnished the constitution with provisions whereby tracts with more than their legally required 20 percent forest reserve were regarded as unproductive. Extensive uncultivated land on a property was presented before courts as cause for suspending claims of aspiring titleholders. Between 1970 and 1985, the population of Pará grew from 2.2 million to 4.3 million owing to migration to the Amazon frontier.

In 1985, the Brazilian government implemented the National Plan for Land Reform (PNRA) to redress extremely high levels of land ownership concentration. Unlike previous failed attempts, for the first time expropriation of private land was to be the main instrument by which to obtain land for settlers. Under the new policy, the government's land reform agency, INCRA, was to expropriate private land that was not being put to beneficial use. Once expropriated, the agency was to create a settlement project and enroll families of landless peasants it had previously registered in a cadaster. Families were expected to wait until their time came to be assigned land. In practice however, landless peasants realized that implementation was extremely slow and that individuals and groups could expedite the process to their advantage by invading land that met INCRA's criteria for expropriation. Invasions had often escalated into a conflict with landowners, which led INCRA to expropriate farms and settle the squatters on them as a means to solve the problem.

During the late 1980s, the process of invasion and expropriation evolved slowly and unsystematically with separate groups invading farms throughout the country, sometimes successfully and sometimes not. Incongruity between civil law, which has provided for the sanctity of title and has been enforced by the courts and the police, and constitutional law enforced by the federal government that added a beneficial-use requirement as a condition for title enforcement, has engendered absurd sticking points. Responsibility for enforcing constitutional law and implementing land reform policies has lain with INCRA, whereas responsibility for civil rights has been vested in courts and enforced by the police. Squatters had repeatedly invaded an allegedly unused tract of private land and then lobbied INCRA to intervene on their behalf. INCRA checked whether the farmer had clear, legal title and whether the farm had been used productively (usually whether it had been cleared of forest). INCRA could expropriate land and hand it over to squatters whenever a farm was deemed unproductively used.

Burgeoning empirical evidence suggested that compliance with the beneficial-use requirement of the constitution intensified deforestation, since squatters were less likely to invade and resist eviction from farms that had been largely cleared of forest. Farmers had a penchant for deforestation in order to secure their property rights because INCRA was less apt to expropriate farms that had met the social-use criteria stipulated in the constitution. Ultimately, the PNRA set up rather ambitious goals such as that of settling up to 1.4 million families in five years. Yet after five years only 90,000 families had been settled and very little progress was achieved in terms of land regularization and titling. Brazil still holds the largest continuous tropical forest in the world, but it has also lost the greatest extent of forest compared with its tropical counterparts.

The Brazilian government could not get away with its modus operandi, which has caught the attention of environmentalists. Many nongovernmental organizations (NGOs) dealing with agrarian reform and conservation had been born, revived, and greatly strengthened by the time the Brazilian military government went down in 1984. Poor land stewardship on the part of farmers became a unifying theme for both the land reform movement and Brazil's environmental movement. Environmental aspects have been addressed through pilot projects under the National Environment Fund that promoted agricultural practices that diminish deforestation but foster livelihood. Some environmental groups have questioned whether rural poverty could be solved within the confines of settlements. In light of progressive degradation of land occupied for agrarian reform, Brazil's National Environment Council decreed in 2001 that areas under consideration for agrarian reform should be licensed environmentally prior to settlement. Environmentalists and land reform groups have started to collaborate, adhering to a landscape-planning perspective that has taken into account multiple land use options. Organized land reform groups have taken on technical assistance to orient land use on settlements in a way that respects environmental objectives and have sought to establish means to legally challenge land titles irrespective of the percentage of uncultivated land.

Laos: The Desperate Ecocide of the Poor

The Lao People's Revolutionary Party (LPRP) was founded on March 22, 1955, four years after the Indochinese Communist Party had dissolved; its name was changed at the Second Party Congress in 1972. The economic reforms of the 1980s known as the New Economic Mechanism (NEM) signified a policy change that undertook to replace the socialist command-and- control economy with a market one. Alongside an “open door” policy toward both the domestic private sector and foreign direct investment (FDI) and supporting legal and regulatory framework for these measures, NEM sought to privatize most state-owned enterprises (information in this section from Ducourtieux and others, 2005; Ducourtieux and Castella, 2006; Stuart-Fox, 2005; Lestrelin, 2010; Lestrelin and others, 2011; Fujita and others, 2006; Rigg, 2006; Vandergeest, 2003). Laos suffers from high levels of poverty but enjoys remarkable ecological wealth. Since 80 percent of the population relies on agriculture for a living, land use planning comes to grips with challenges of sustainable development.

Embracing precepts of market economy in 1986, the government dismantled collectives and state farms, giving tax breaks instead as an incentive for private farmers to make productive use of their agricultural land. In 1994, the Focal Site Strategy established “integrated rural development clusters” in the most deprived areas of the country in order to create “growth zones” or “development poles” that became “centers of change and learning” facilitating transition from subsistence to market. Villagers were drawn down from the hills, sometimes involuntarily, and settled in areas where land was scarce and the best land was already claimed. The government provided for communal forest lands through legislation that defined official village boundaries and transferred their management to individuals. The government began to issue land title deeds to private landholders in the mid-1990s to ensure formal rights to land while promoting its productive use.

Being apprehensive of upland deforestation and shifting cultivation, the policy demarcated forest conservation areas throughout allocation of agricultural land. The Laotian state catered for a protected area system of 18 National Forest Reserves covering 28,200 square kilometers that were expanded later to 20 areas accounting for some 30,000 square kilometers or 12.5 percent of the country. The Land and Forest Allocation policy was consolidated by the Forestry Law in 1996. It recognized communities' and individuals' rights to use and manage lands particularly in rural areas and distinguished village land into agricultural and forest land whether wooded or not. The land zoning system set forth by the law classified forested land in villages into five categories:

• “Protection forest” where human activities are prohibited to prevent soil erosion and related natural disasters, and protect water sources and national defense areas;
• “Conservation forest” where human activities are prohibited in order to preserve fauna, flora, biodiversity, and areas of cultural, educational or scientific interest;
• “Regeneration forest” reserved for natural reforestation of young fallow forests;
• “Production forest” where there is limited permission to log forest products;
• “Degraded forest” allocated for tree plantation, livestock farming, or permanent agriculture but allowing no shifting cultivation.

Forestless land has also been further subdivided into farming areas composed of field farms without rotation (such as rice fields, gardens, and other cash crops) and pastureland. The classification of the Land Use Planning and Land Allocation program (LUPLA) has become the main “area-based” instrument outlining rural development and natural resource management in Laos. Land tenure security enabled farmers to invest in their land and encouraged communities to protect the forest by managing the area in a sustainable manner and removing large portions of the village's land from the slash-and-burn cycle to turn them instead into controlled reserves. That reallocation was also supposed to boost government's revenues owing to property taxes.

The program has proven ineffective or even counterproductive to the political aims of poverty alleviation and environmental preservation; the traditional land tenure prior to reform may have been better capable of carrying out the political goals mentioned. LUPLA aggravated local land tenure disparities because early settlers and local elites exploited their social position and influence within the village to register large tracts of land to the detriment of less established and powerful residents. Non-elites remained largely excluded from crucial stages of zoning and planning because land allocation tended to freeze existing disparities in access to land resources as a function of the bargaining power of each individual household.

Land allocation artificially accelerates rotations that lead to soil degradation in terms of increased weeding at the cost of other economic or social activities, reduced yields, greater agricultural risks, and worse poverty for slash-and-burn farmers. Forest industries have been allowed to make deals with local administrations to classify zones worth exploiting as production forest while farmers have been turned away in exchange for a symbolic compensation of 2 percent of the value of the wood cut. Reallocating land and forest has become the primary cause of displacement and impoverishment in Laos, inducing out-migration due to the loss of livelihood. The poorest farmers who had been evicted from the countryside in droves were barely absorbed by other economic sectors. Village boundaries were cast hastily, and not through mutual consent that could resolve conflicts over resources.

The neo-Malthusian model posits a “downward spiral” of poverty and environmental degradation: Population growth, limited access to land, and lack of resources to invest in conservation drive the rural poor to intensify their pressure on the environment. Degradation further limits natural resources and increases poverty. Although its scope and antecedents are a bone of contention, deforestation in Laos continues hand over fist. LULPA has been criticized for its negative impacts on rural livelihoods such as agricultural land pressure, decreased food security, worse poverty, cultural trauma, and uncontrolled migration. Limited local participation has been hardly conducive to sustainable land zoning, planning, and allocation. Land use planning failed to advance sustainable development and public participation as a means to settle individual differences with respect to social and environmental values.

Industry and Trade

Whatever their size, the states of sedentary societies have been involved in the economy from the beginning. The nature of that involvement was extractive since states levied taxes on produce, craft, industry, and trade. For most of history, states governed an agricultural economy, but in the past two centuries or so the emphasis shifted in Western countries to industrial production and—more recently—to the service sector and information exchange. In the process states and their governments no longer just extract resources from society, but actually and actively shape the economy by means of regulation driven by specific political beliefs. Initially, these beliefs centered on strong state intervention embedded in the idea of social and bureaucratic engineering. In the past three to four decades the role and position of the state has been moving toward establishing conditions for the liberalization of industry, trade, and the economy in general. Especially with regard to industry and trade, we really live in a globalized world.

Morocco: Liberalization of Trade and Tariff Reforms

After it regained independence in 1956, Morocco's economic development strategy was based on import-substitution industrialization and agricultural self-sufficiency in a highly protected domestic market that imposed high tariffs and quantitative restrictions on imports (information in this section from Currie and Harrison, 1997; Dennis, 2006a, 2006b; Migdalovitz, 2010; Philippidis and Sanjuán, 2007; Cammett, 2007; Crombois, 2005; CIA Fact-book, 2012; Löfgren and others, 1999). During the 1970s, the Moroccan government expanded growth through high levels of public spending financed by receipts from phosphate exports and foreign borrowing. The balance of payments crisis in 1978 brought in its wake a stabilization program supported by the International Monetary Fund.

Following a second crisis in 1983, authorities took emergency measures whereby all imports were subject to licensing. In consultation with the World Bank and with the support of a Trade and Industrial Policy Loan, the government introduced structural adjustment measures designed to eliminate the bias against export activities, liberalize the import regime, and enhance the allocative role of the financial sector. Quantitative restrictions, the principal instrument of protection for domestic goods, were dismantled piecemeal. Since existing quotas had been transformed to tariffs, tariff reductions went ahead quite sluggishly. From 1983 onward, changes to the industrial code were undertaken to promote exports, and the exchange rate was devalued. In the reform process, most goods were gradually transferred from List B (imports requiring prior authorization for import) to List A (imports requiring no prior authorization). List C of all prohibited import items was abrogated in 1986.

Trade reform substantially reduced coverage of import licenses (quotas) from 41 percent of all imports in 1984 to only 11 percent of all imports in 1990, but the major attainment of the tariff reform was to shrink dispersion in tariff protection within manufacturing sectors. Although average tariffs declined only slightly from 32.5 percent in 1984 to 28.6 percent in 1990, the maximum tariff fell from 165 percent to 45 percent during that period. Average import penetration hardly increased at all due to domestic contraction and devaluation, but the extent to which different manufacturing sectors had been affected varied tremendously. In textiles, clothing, leather products, and beverages and tobacco, significant reductions in both tariff and quota coverage led to dramatic increases in import penetration. However, Morocco has demonstrated mixed progress in tariff liberalization. While average most-favored nation (MFN) rates had been liberalized from 65 percent in 1993 to 21.7 percent in 1997, later on tariff rates increased, remaining around 30 percent in recent years. Morocco has clearly faltered as regards trade liberalization in general and tariffs in particular.

Morocco has had the most restrictive MFN tariff regime in the Middle East and North Africa (MENA). MENA is one of the most trade-restrictive regions in the world; that places domestic Moroccan producers, including exporters, at a competitive disadvantage by denying access to cheap imports and inflating final prices of imported goods to consumers. Still, export-processing zones combined with a network of preferential trade agreements have cut actual tariffs faced by some producers.

After many years of inward-looking economic policies, Morocco has embraced trade-led growth through regional and preferential free trade agreements (PFTAs). Morocco is a member of the Arab Free Trade Area (AFTA) and has bilateral trade commitments with countries in MENA, but its principal trading relation lies with the European Union (EU) under the European Free Trade Association. Moroccan-EU trade relations are under the aegis of the Euro-Mediterranean Partnership, a series of bilateral association agreements between the EU and MENA countries. The Moroccan-EU Association Agreement has been in force since 2000 and promised free trade of industrial products by 2012, but most trade covered in this agreement had already inured by previous accords, while progress in services, agriculture, and investment has been partial at best.

Morocco also lags behind in terms of industrial upgrading. Industrial upgrading refers to different processes such as increasing the skill content of local production (people and factories alike), moving into market niches that are relatively insulated from competition on global markets, and expanding the range of activities in a given value chain carried out within a firm or a cluster of firms. The Multi-Fiber Arrangement (MFA) imposing quotas on the amount developing countries could export to developed countries had governed the world trade in textiles and garments; in 2005 it was rescinded and world markets were tightened. Competition from China makes exports of higher value-added manufactured goods, improved efficiency, and reduced speed to market essential for countries such as Morocco that can no longer compete on the basis of low wages. The private sector in Morocco that has always cultivated close ties with the monarchy prodded the government into action in terms of upgrading processes, but it seems that the state rather than business associations should serve as the locomotive of such an all-encompassing process.

The ending of the MFA also entailed Morocco to diversify economically, one of the upshots of which has been the free trade agreement (FTA) between the United States and the Kingdom of Morocco signed in March 2004. Supporting the U.S.-led coalition in the wake of the Iraqi invasion of Kuwait and in light of its hardline policy on “global terror,” the close ties with the United States that Morocco enjoyed as a moderate Arab state have strengthened during the last years. In 2004, President Bush designated Morocco a major non-NATO ally. Being a part of NATO's Mediterranean Dialogue, Morocco had hosted NATO military exercises and joined NATO's Operation Active Endeavor monitoring the Mediterranean Sea for terrorists. Morocco has become the second Arab country after Jordan and the first in North Africa to sign a PFTA with the United States.

Trade liberalization has had detrimental effects concerning the rural poor. Large portions of Morocco's gross domestic product (18.8 percent) and its labor force (44.6 percent) still depend on agriculture and are vulnerable to rainfall fluctuations; only 19.8 percent of the labor force works in the industrial sector. Agro-food liberalization brings potential trade and growth gains to Morocco. Nonetheless, additional “gains” to Moroccan agro-food markets from the enlargement of the EU and the inclusion of multilateral tariff reductions are offset by losses: While Morocco's specialization in “typical” Mediterranean vegetable, fruit, and nut products reaps gains, the crop sector that sustains many of the rural poor contracts. Trade liberalization disfavors the rural poor, especially in rain-fed areas; governments should thus undertake proactive measures to upgrade the rural labor force in terms of their skills and resources. Furthermore, Morocco has a rigid labor market that makes it extremely hard to lay off permanent workers and hire a temporary, low-skilled workforce. Those barriers to entry experienced by firms on top of red tape and corruption impede Morocco's structural adjustment.

The Czech Republic: Cars, Motors, and Foreign Direct Investment (FDI)

Privatizing state-owned enterprises (SOEs) was considered one of the most important issues at hand when post-communist economic systems needed to be transformed into market-based systems. When it came to East-Central Europe, privatizing most economic activities (i.e. industry, agriculture, services) while developing a solid private sector was the centerpiece of all economic transition plans (information in this section from Pavlinek, 2002a, 2002b; Estrin and others, 2000; Armstrong, 2002; Arnold and others, 2007; Rugraff, 2010). The Czech Republic was not an exception; within a few years after the end of the communist regime in 1989, the government of the former Czechoslovakia privatized many SOEs, liberalized prices and wage setting, and opened the country to foreign trade and foreign direct investment (FDI).

The Czech Republic had been part of the Western, industrialized, Austrian-ruled part of the Austro-Hungarian Empire; after its separation from the Slovak Republic in 1993 the new Czech Republic was seen as one of the more promising economies in Central Europe. The Czech Republic has been one of the most successful Central and Eastern European countries in terms of the stock of FDI per capita. Many of the world's most prominent multinational companies have established themselves in the Czech market, as the Czech Republic has astutely availed itself of its pivotal location at the heart of Europe.

The Czech motor vehicle industry has been the icing on the FDI cake. During the Communist period, Czechoslovakia developed a carmaking tradition with the companies Skoda, Tatra, and BAZ, but the quality of motor vehicles and components was low compared with Western standards. Motor vehicle companies reflected political priorities and did not correspond to the criteria of economic efficiency to be found in mature market economies. Moreover, when the Czech Republic disintegrated from its former political and economic allies, it paid a price of losing important commercial and industrial ties. On the other hand, breaking those links has been conducive to stabilizing the country's economy and reorienting its trade.

FDI was part and parcel of the endeavor to compensate and supplant those lost ties, but not from the very outset. Initially, the privatization project purported to transfer ownership to the population either directly through stock ownership or indirectly through investment funds in order to set up so-called people's capitalism. Owing to the cheap value of national assets, the problem of the former German minority, and nationalist attitudes on the eve of the splitting of the federation, key political leaders disapproved of the entry of foreign capital into Czech companies and refused to endorse even joint ventures. In 1992 the government had decided not to provide any tax incentives for foreign investors despite perceived lack of domestic capital, but after the elections a new one was set up. The new government had encouraged as many large companies as possible to participate in its voucher privatization scheme, but absent legal and institutional framework to support such transfer of ownership, that “Czech way” of privatizing failed to bring about structural adjustments and rather confounded economic difficulties in the second part of the 1990s. During the second stage (1992–1997), foreign investors were not offered any incentives to invest and domestic investors were preferred for the most part. The concluding phase after 1997 has been underlain by strong governmental incentives and support for FDI such as corporate tax relief, zero customs duty on imported equipment, special job creation grants, job training grants, and low-cost development land.

Foreign-owned firms and joint ventures introduced new management practices, work organization, and quality control. Measures were taken to cut costs and increase labor productivity by minimizing unnecessary waste and making better use of the workday. The previous socialist work organization and shop floor practices gave way to capitalist ones. Planned organization of production superseded the anarchy of production associated with state socialism. Much of the authority enjoyed by workers under the socialist system was curtailed. More efficient horizontal and vertical organization of the workplace enhanced the authority of the foremen and prompted managerial control. Western production concepts and management practices such as just-in-time were also instilled. Not only has productivity increased but also other parameters pertaining to production have been improved; personal accident rates, for instance, dropped off overwhelmingly.

In no other setting have those proceedings had more bearing than in the automotive industry where they have saliently taken hold. A motor vehicle is a sophisticated product that is made up of thousands of parts and components: A small car is made up of 15,000 parts, and a luxury car necessitates between 25,000 and 30,000 parts. The motor vehicle manufacturers do not possess the know-how to internalize all operations, so they generate de facto vertical spillovers by buying products from suppliers. When manufacturers invested in the Czech market (through either ownership or joint ventures), they did so chiefly in local component suppliers in order to internalize their production and chain of supply, so those component companies have been upgraded. Unlike low-technology and laborintensive industries such as footwear, clothing, or furniture, in the motor vehicle industry the quality of the final product depends not only on the quality of the different parts and components, but also on the motor vehicle manufacturers' capacity to coordinate their production process with that of their suppliers. Motor vehicle manufacturers are therefore stimulated to exchange information, management practices, and know-how with their suppliers. Apart from management methods and technology transfers, multinational foreign partners have provided Czech component suppliers with access to their worldwide sales and distribution networks.

Volkswagen has been the quintessential propitious partner: In the original partnership deal with the Czech government, Volkswagen committed to source out from Czech suppliers and to develop the component industry further. Volkswagen encouraged local production of less sophisticated and less expensive components while taking advantage of their bargaining power vis-à-vis small and medium-size companies. The local sourcing ratio in the Czech Republic has been among the highest in developing and transition economies.

Preparing for the country's accession to the EU in May 2004, the Czech Republic liberalized services to become more receptive to foreign entries. FDI inflows into the services sector are associated with improved availability, range, and quality of services, which in turn contribute to improved performance of manufacturing firms using those services as inputs. FDI has jump-started the Czech manufacturing industry not only directly but also by ameliorating its ancillary service industry.

Canada: Trade Agreements with the Northern Empire

A country's trade and the relative size of its exports and imports rest on many variables such as exchange rates and overall economic growth in its trading partners, to name but a few (information in this section from Schwanen, 1997; Trefler, 2004; Gaston and Trefler, 1997; Clausing, 2001). Often market reforms come about in the wake of major macroeconomic disturbances, so it is hard to single out the impacts of macroeconomic shocks, market reforms, and trade liberalization, and even more so in developing countries where trade liberalization is typically part of a larger package of market reforms. Since it is easier to assess trade liberalization policies in industrialized countries where free trade experiments are more common, the Canada-U.S. Free Trade Agreement (CUSFTA) might prove to be apposite.

The Canadian federal government has implemented three major trade agreements since 1989: CUSFTA, the North American Free Trade Agreement (NAFTA, 1994), and the liberalizing measures flowing from the Uruguay round of multilateral trade negotiations that created the World Trade Organization (WTO, 1995). For Canadians, NAFTA was not so much a new agreement but rather extended a prior one that had been in place since January 1, 1989, and was merely supplemented later on with Canada-Mexico trade flows.

During the 1988–1995 period Canada's export performance was a bright spot in an otherwise floundering economy. It was hard therefore to distinguish those jobs that had been lost to the FTA tariff cuts from those lost to other factors such as the recession, the Bank of Canada fight against inflation that had led to high interest rates and a strong Canadian dollar, deindustrialization, and deteriorating labor costs and productivity in Canada relative to the United States. Alongside growth in export, import had also been on the rise over that period, in contrast to the experience of the Great Depression of the early 1930s and the more recent recessions of 1970, 1975, and 1982, when the share of Canada's demand satisfied by foreign goods had dropped. Canada had witnessed an upward trend in trade as a share of GDP since the mid-1960s, but it accelerated following CUSFTA and NAFTA.

The FTAs have been under attack from the very outset regardless of substantial evidence of increased trade due to the agreements, particularly for those goods undergoing the largest tariff liberalizations. The call to renegotiate or even abandon the agreement rallied support especially after the 1993 electoral defeat of the Conservative party that had engineered the agreement.

Numerous empirical studies were undertaken to weigh the effects on trading patterns, productivity, employment, FDI, and so on; findings have often been discrepant. Taking into account the effects of both CUSFTA and NAFTA between 1989 and 1995, Schwanen (1997) found changes in Canadian trade patterns. Trade with the United States had mounted much faster in liberalized sectors in comparison with nonliberalized ones. Gaston and Trefler (1997) found to the contrary that both export and import had contracted for most of the FTAs period, whereas employment had contracted in every tradables-sector industry.

Researchers pointed the finger at the recession on both sides of the border rather than at the FTAs. Five years into effect, Canada lost a staggering 390,600 jobs in the tradables sector. Correspondingly, between 1988 and 1993 high- and low-tariff industries experienced employment cuts of 24.2 percent and 14.8 percent respectively. Despite the fact that heavily unionized industries experienced shallower tariff cuts, they still lost a disproportionate number of jobs, 19.8 percent compared with 15.2 percent for less-unionized industries. This explains why the Canadian Labor Congress has been the most vociferous opponent of FTAs.

In perfectly competitive markets, lower protection stimulates imports and decreases demand for domestic labor, which in turn reduces earnings and employment. In imperfect markets, on the other hand, trade and protection can affect strategic interactions between firms, bearing on firm performance and subsequently on earnings and employment. It has been suggested that FTAs tariff cuts account for no more than 15 percent of job losses, but the measures against inflation taken by the Bank of Canada (coinciding with the 1986—1988 FTA negotiations) may account for more than 85 percent of jobs lost. The Bank of Canada had raised the spread between Canadian and U.S. interest rates and strengthened the Canadian dollar, measures that were denounced by Canadian businesses for engendering recession. North American structural change has had a pervasive effect owing to the strong relationship between Canadian earnings and employment and U.S. industry employment levels.

Canada's exports to Mexico rose by 39 percent (in Canadian dollar terms) during the 1993–1995 period, nearly the same growth as in the two years preceding NAFTA. Increase was slightly faster than that of Canada's exports to the United States over the same period, but exports to non-NAFTA countries rose even more rapidly. Granted that U.S. exports to Mexico rose only by 11 percent in U.S. dollar terms between 1993 and 1995 and Mexico's imports from all sources dropped precipitously in 1995, Canada's performance in the Mexican market was impressive. In May 1995 Mexico raised tariffs on a large number of goods imported from non-NAFTA countries to 35 percent, an increase that Canada and the United States have been spared. Canada's imports from Mexico rose by 44 percent between 1993 and 1995, considerably more than imports from U.S. or other sources (33 percent each). Already before NAFTA, most Mexican products faced low barriers in Canada.

According to theories of intra-industry trade, adjustment patterns to trade liberalization hinge upon determinants such as economies of scale and differentiated products (Feinberg and Keane, 2001). It has been found that firm characteristics account for adjustments and production-location choices of multinational companies rather than the attributes of the industry. Canadian tariffs had a small impact on U.S. multinational company sales into Canada, as opposed to the conventional wisdom expressed by free-trade opponents averring that free trade with the United States would “hollow out” Canadian industry. Such findings implied that government action designed to protect vulnerable sectors from trade liberalization might have been altering patterns of domestic competition rather than helping entire industries (Feinberg and Keane, 2001). Clausing (2001 ) suggested that there had been very little evidence of trade diversion from non-member countries; Gould (1998) similarly noticed that trade with countries outside North America had also grown following NAFTA. In light of their findings that FTA gains had not been at the expense of other countries, both researchers advocated forging ahead with free trade worldwide.

Mexico: The Poor Cousin of NAFTA's Triad

From the mid-1980s until 2002, the value of the world trade more than quadrupled and foreign investment increased by a factor of 15. The WTO came into being in the 1990s during the heyday of global, regional, and bilateral agreements such as NAFTA (North America Free Trade Agreement) (information in this section from Gallagher, 2004; Esquivel and Rodríguez-López, 2003; Hanson, 2003; Moreno-Brid and others, 2005; Ramirez, 2003; Lederman and Maloney, 2003).

Between 1940 and 1985, Mexico had protected its industrial sectors through a set of tariff and nontariff barriers in order to create new industries and foster those already existing, virtually operating as a closed economy. In 1985, against a backdrop of falling oil prices and a debt crisis, Mexico started to liberalize its trade by joining the General Agreement on Tariffs and Trade (GATT) that both cut tariffs and eliminated many nontariff barriers.

In 1989 Mexico made it easier for foreigners to own assets in the country and began integrating itself with the world economy, becoming one of the more open economies in the world by the end of the previous millennium. The United States, Canada, and Mexico signed NAFTA in December of 1992, and it came into effect on January 1, 1994. This agreement was the first asymmetric free trade agreement in terms of the income levels of the participating countries. NAFTA culminated a radical change in the country's development strategy, serving not only as a trade-boosting venue but also representing a shift toward the so-called Washington Consensus (in Williamson's meaning; see previous chapter) which apart from trade liberalization had prescribed scaling down state intervention in the economy.

The aim of that policy shift had been twofold: First, it was assumed that together with drastic macroeconomic reforms and rapid, unilateral trade liberalization NAFTA would encourage local and foreign investment in the production of tradable goods so as to exploit Mexico's potential as an export platform to the United States. Such ventures were supposed to set the Mexican economy on a noninflationary, export-led growth path driven by sales of manufactured goods mainly to the United States. Secondly, the government of President Salinas (1988–1994) had a politically decisive objective to impose via NAFTA international, legal, and extralegal constraints that would deter any attempt by subsequent governments in Mexico to return to trade protectionism.

NAFTA was implemented in its entirety only in 2009, but from the very outset the agreement had already been associated with significant, long-lasting effects on economic growth, trade and investment flows, employment patterns, wages and salaries, environmental standards, and labor law throughout North America and particularly in Mexico. Evaluating the economic and social impact of NAFTA on the Mexican economy has been difficult in view of its phased implementation and the need to disentangle the effects of NAFTA from those of non-NAFTA factors. That enmeshment of factors resonated in the dispute around the 1994–1995 peso crisis. Critics of NAFTA argued that it had ballooned the Mexican trade (and current account) deficit in the early to mid-1990s, while others cast aside those allegations. Either way, apart from political and social upheaval, the peso crisis led to a drop in real GDP of 6.2 percent in 1995 (almost 8 percent in per capita terms)—the worst plunge in economic activity since 1932.

The maquiladoras were a key element of Mexico's industrial strategy. Those labor-intensive, in-bond export-processing plants that had been mushrooming since 1966 along the northern border were offering tax-free access to imported inputs and machinery as well as exemption from sales tax (now VAT) and income taxes. The sales of these maquiladoras on the domestic market had been limited to a low percentage of total sales in order to prevent them from overflowing the local market. In 1988 exports had been equivalent to 49.7 percent of the total value added by the manufacturing industry; in 1994 this figure climbed to 71.9 percent, and by 2003 it had even exceeded by 61 percent the manufacturing industry's value added. It has nevertheless been impossible to ascribe such telling numbers to NAFTA alone. Mexico's domestic market had collapsed in 1995 (“the tequila crisis”) while the peso depreciated vis-à-vis the U.S. dollar. Although depreciation had tapered off by 2004, the real exchange rate was still 7 percent lower in relation to the level 10 years earlier.

From 1985 to 1994, Mexico had ranked fifth among countries with the largest increases in their share of manufactured exports; during the period 1994–2001, it moved to second place, just behind China. The maquiladoras were a key force behind this export drive. In the early 1990s they provided more than half of Mexico's total exports of manufactured goods, and more than 40 percent of Mexico's total exports. Other important actors behind the boom were those foreign firms that had already been well established in Mexico alongside enterprises that arrived as part of the vast inflow of FDI triggered by trade liberalization, NAFTA, and privatization. The manufacturing industry absorbed 53 percent of all FDI inflows to Mexico during 1994–2004 with investment concentrated in three subsectors: metal products; chemical products; and food, beverages, and tobacco (48 percent, 16 percent and 18 percent, respectively).

Wage inequality in Mexico increased sharply from 1980 to the mid-1990s, and then it did not change for a long time. This prima facie zero effect since the mid-1990s has been the result of two countervailing forces: Technology was responsible for the sharp increase in wage inequality in Mexico in the pre-NAFTA period. Absent technological change, trade liberalization would have reduced the wage gap in an unskilled-labor-abundant country such as Mexico.

Prior to NAFTA, the effects of technological change on the wage gap had outweighed those of trade liberalization, increasing wage inequality. In the post-NAFTA period, the effect of trade liberalization on the wage gap was almost zero, but technological change again pressed for an increase in the wage gap. Not unlike other developing countries, technological change has pressed for an increase in returns to skills, while trade liberalization has benefited low-skilled workers. These two effects work in opposite directions, so wage inequality depends on the relative magnitude of both effects.

Many researchers have pointed to the fact that trade liberalization and NAFTA have been helpful in terms of technological transfer and technological progress, but it was not even nearly enough to bring Mexico on par with its North American counterparts. Mexico still suffers from low levels of innovation effort; its private sector, universities, and public policies interact inefficiently and cannot beget economically meaningful innovation.

With respect to the U.S.-Mexico border, Fernández-Kelly and Massey (2007) have argued that NAFTA represented the latest attempt to tear down barriers to capital mobility while circumscribing workers. During the 1970s, North American banks had been awash in petrodollars, which they were more than happy to lend to Latin American governments. Being in a pickle, many countries had been unable to repay these loans, so U.S. banks and federal officials used NAFTA to transform risk into opportunity for capital investment. European markets have been consolidated through multilateral policies designed to harmonize social policies, equalize economic infrastructures, and guarantee workers' rights and mobility within the trade zone. Such provisions have been missing in NAFTA since its U.S. backers have insisted instead on restrictive border policies and a unilateral right to prevent Mexican workers from migrating. NAFTA enabled financial institutions and manufacturers to invest and make profits in Mexico, so it had more to do with controlled trade rather than free trade.

Privatizing Mexico's collective farms under neoliberalism and eliminating agricultural subsidies under NAFTA also increased the number of displaced peasants seeking economic opportunities elsewhere. Those processes culminated in a tide of migrants who continued to arrive at the border and cross into the United States. When security measures became harsher (especially after 9/11), they did not return to Mexico in the same numbers as before. After 1986, unauthorized migrants reduced cyclical movements to spare themselves the greater costs and risks of reentry and settled in the United States instead. As the inflow of undocumented migrants has continued unabated, many are too apprehensive to return to their home country in fear of detention upon reentry to the United States, so the number of illegal and semilegal Mexican immigrants abiding in the United States has soared rather than stagnated. Such illicit migrants and their children have been increasingly at risk of forming a new Latino underclass of people with few rights and avenues for successful integration into the larger American society.

Borders force workers to remain fixed in space, hemming in the most vulnerable sectors of society while becoming permeable for those in positions of power. When it comes to Mexico, NAFTA and the macroeconomic reforms accompanying it have been neither the panacea claimed by its supporters nor the disaster predicted by some of its opponents.

Comparing Energy Management, Planning and Zoning, and Industry and Trade across Nations

In this chapter, several socioeconomic reforms taking place in different parts of the world have been vetted. Reforms that concern energy management, spatial planning, trade, and industry permeate every citizen's life in one way or another. Traveling across borders and cultures, reforms, processes, and outcomes seem to diverge since culture forges institutions; those, in turn, underlie processes, behaviors, and reforms, point the direction, and project future developments. Variance notwithstanding, few thrusts can be traced from which some common ground and conventional wisdom may be carved out at least tentatively.

The “Washington Consensus” has been a shorthand for the shared views of international organizations such as the International Monetary Fund, the World Bank, U.S. Treasury, and the OECD portrayed as the best means to reach a long-term economic growth desideratum; privatization and deregulation have been among its rudiments. When it comes to the energy sector, such directives may not hold water. Electricity generation has some technological traits that do not favor decentralization and deregulation. Electricity needs to be consumed once it is produced, so shortages cannot be alleviated through storage. Moreover, the interconnectedness of the electricity grid means that shortages on any part of the grid could threaten the stability of the entire system, of which the California case has served as a case in point. When the electricity system of California was decentralized and deregulated from the mid-1990s, many new generators took on opportunistic behaviors. Since any generator controlling any amount of generation capacity necessary to meet the demand at a given moment can threaten to black out the entire grid by withholding power from the market, he can demand an infinite price for the last (necessary) units of electricity because all consumers' demand will go unmet if that price is not met. The California grid has not been successfully dovetailed. In the aftermath of this legislative and institutional experiment, California citizens picked up the tab, so they now pay much more money in real terms for less reliable and less responsive electricity supply (Duane, 2002).

India has been in many respects an antipode of California. It started to restructure its electricity sector in the late 1990s via devolution and delegation from federal to state level. From 2003 onwards, a process of unbundling generation, transmission, and distribution functions has been carried out. Due to political and institutional sensibilities, the private sector has not been allowed to impinge upon entrenched vested interests of the public sector. Market-based electricity has emerged piecemeal alongside the state-run sector. By fostering this parallel economy, the Indian government has not stifled private initiative altogether, but has rather left some room for innovation and thrift vis-à-vis its obsolescent, inefficient, and corrupt state-run sector. Russia represents a case of privatization gone sour. Corrupt polity, hostile business environment, and unfriendly bureaucracy have not left much chance to restructure either the whole energy sector or the firms involved. Germany has managed from the late 1980s on to encourage and integrate into its grid renewable energy sources (RES-E). Incentives have been given to investors, federal and state levels have communicated and collaborated with local communities, public information has been issued, and even training programs for architects have been reformed. The German case exemplifies that it is still possible in the presence of vested interests, such as those of certain industries and conventional electricity generators, to successfully inaugurate a substantial reform, provided that politicians, bureaucrats, businessmen, and the public at large are highly committed and willing to cooperate.

In Zimbabwe, Brazil, and Laos land reforms have been issued to achieve roughly the same goals of redistribution and poverty alleviation among the “landless,” but new settlers have lacked savvy, know-how, resources, and technology to make the most of their land. Having to make do with what they have, they are caught in a vicious cycle of ecocide in which they are overexploiting their land either by cultivating it until its fertility diminishes or they are lured by opportunists to deforest their land and sell the woods for pennies, a small fraction of their market value. As time goes by, the land and its occupants become poorer and poorer. Massive land degradation has been evident in Laos during the last two decades, but deforestation has been even more alarming, especially for environmentalists from all around the globe. Many NGOs have been active in Brazil and Laos not only for the sake of the rain forests per se, but also because of “hot spots”—delimited areas populated by very high density of biodiversity including endangered species. In Brazil, there has been some progress, as settlers, environmentalists, and government started to join forces to diversify land use and protect the remaining forest by reducing institutional incentives to cut it down. New institutional mechanisms aiming at spatial planning while preserving the environment have been forged. In Laos, NGOs and environmentalists succeeded very little. The power structure in Laos has not changed much since the seventeenth century. Even during French colonialism (1893–1945), new institutions supplemented existing ones rather than supplanted them. When land was reallocated traditional elites looted large tracts of land for themselves, ripping off non-elites and excluding them from crucial stages of zoning and planning. The land reform purported to protect the forests and alleviate poverty, but absent other economic sectors to absorb the poorest farmers evicted from the countryside, it had opposite outcomes such as soil degradation, displacement, and impoverishment.

Land reform in Zimbabwe was comparable to that of Laos in terms of its outcomes of further impoverishment and land degradation. An epitome of a postcolonial mess, that reform encapsulated top-down dictates, grassroots pressure, political and social uprising, and a government that turned a blind eye to illicit action in order to contain clamor and frustration. The international community and Zimbabwe's private sectors ventured to intervene and offer some guidance and assistance, but Zimbabwe's government refused to defer, and the economy, already in dire straits, continued to wane. The Resource Management Act (RMA) enacted in 1991 in New Zealand has represented a disparate planning and zoning reform in a very different terrain, but not in terms of disappointing outcomes. Although New Zealand is a developed country and not a developing one, very little has changed on the ground. The case of New Zealand's state-of-the-art law for sustainable development illustrates how a law can become a dead letter when central government fails to impose clear guidelines and adequate advisory support for implementation and to fund its subsidiary and local agencies. Mechanisms for consultation and deliberation with local and indigenous people have been wanting; courts have obfuscated matters even further as they have been vacillating rather than offering clear directives or guidelines. Rather than a wholehearted endeavor, the RMA remained nothing but lip service paid by the government of New Zealand to its constituencies, mainly to the country' s indigenous people—the Māoris.

The theme of an open, competitive economy alongside free trade resonates in all the reforms presented in the last section. For many years, Morocco, the Czech Republic, and Mexico had been closed economies based on import-substituting industrialization before succumbing to circumstances. In Mexico and Morocco, a deficit and a balance of payments tipped the scales, while the Czech Republic had to restructure its economy and move from communist command and control to a market-based economic system. Once more, cultural and historic differences unfolded as processes and outcomes took very different forms and routes.

The Czech economy had taken off after a lame start and privatization fiasco and within a few years became a success story. Its past as part of the western, industrialized, Austrian-ruled part of the Austro-Hungarian Empire as well as its long history of vehicle manufacturing were definitely in its favor. Morocco and Mexico have made some economic advances but are still lagging behind for very much the same reasons. Mexico has managed to attract foreign direct investment inflows and expand its trade, particularly its export. In spite of technological transfer from its North American counterparts owing to NAFTA, Mexico has suffered from low levels of innovation efforts due to inadequate private sector, universities, and public policies. In these respects, Mexico has been a far cry from its NAFTA partners. Morocco has a unique preferential free trade agreement with the United States and also trades with the European Union and Arab countries. Still, poor human capital, a centralized economy characterized by favoritism of 500 powerful families by the royal court, and an undemocratic polity hinder further economic development. Contrarily, Canada has been a democratic, prosperous, federal state that has adapted itself to the new contingency quite easily, although it underwent extensive recession similar to that experienced by its southern neighbor, the United States, and by almost the rest of the world. Canada has managed to pull through recession and NAFTA; despite vociferous aversion especially from unionized workers, the Canadian industry was not “hollowed out” and continued to thrive.

Every reform has its winners and losers. In Canada, low-skilled displaced workers find it harder to attain new jobs as low-tech industries migrate to developing countries; this process is facilitated by footloose capital. This is an adverse byproduct of structural reforms that engender structural unemployment (as opposed to frictional unemployment), because certain types of jobs disappear altogether from the market.

Yet those unemployed in a developed country fare much better than their counterparts in developing countries where there is no governmental safety net whatsoever. In Morocco, the rural poor have been the most evident victims of the reform, but the government is reluctant to accommodate the disfavored workers by upgrading their resources and skills. By the same token, poor Mexicans' fate has taken a turn for the worse. Poor agrarian workers displaced by the sweeping wave of neoliberal reforms find it harder and harder to look for opportunities across the north border—U.S. border policies are more restrictive than ever. When they do venture to cross the border they no longer circulate back and forth, but rather stay in the United States undocumented, illegal, and afraid of being caught. Those unregistered and deprived-of-rights immigrants are increasingly at risk of forming a new Latino underclass in the United States. Land, industry, and trade reforms impair the most vulnerable sectors of society; this common trait resonates in all the reforms mentioned previously. Even in the rich state of California, it is not difficult to imagine how indigent families strive to pay soaring electricity bills since no one can spare electricity altogether. In democratic, developed countries the highly skilled and educated, those who possess high human capital, hold sway. In developing countries, rulers, elites, and their affiliates are the lucky ones.

The whole world has been swept by the neoliberal zeitgeist of our time. NPM and the Washington Consensus are the magic words; open economies, privatization, deregulation, and free trade are the prescribed trajectories. No part of the world has been immune, no one has been spared from reform; it permeates piecemeal but persistently to country after country and to sector after sector.