The Monfort Plan: Capitalism redefined

It is not often we let authors present their own book, here on The Road. This time, I make an exception. It is not often we stumble upon books with new and positive ideas, after all.

When Jaime Pozuelo-Monfort told me about his new book, "The Monfort Plan" (available on Amazon and via Wiley Finance), I asked him two things: to summarize his book, and to answer a number of questions I have in an interview. Today, we feature Jaime's book summary:

The Monfort Plan (Wiley Finance, April 2010) presents the new architecture of a redefined capitalism. This summary piece introduces the five year action plan and explains why a new architecture may be needed in today’s environment.

Today’s capitalism is based on a vintage architecture that dates back to the 1940s and the American effort to pull the world away from Nazi Germany and Soviet communism. It was then when the four institutions of this old architecture were designed: the World Bank, the International Monetary Fund, the United Nations and the GATT. The old architecture designed by the Bretton Woods elites served a purpose: it contributed to the economic resurgence of Western Europe and brought peace to a continent that had fought wars for centuries.

Subsequent to the design of the new architecture the Truman Administration proposed and implemented the Marshall Plan, the plan for the economic recovery of 17 countries in Western Europe. The plan enabled the vision of Jean Monnet to come up with a European Community of Coal and Steel, the parent of the European Union. These were times of courage and vision. The great changes of the 1940s and 1950s were precipitated by the devastation of the two World Wars and the economic collapse of the Great Depression. The environment set the basis for thirty years of phenomenal economic growth on both sides of the Atlantic.

The second half of the twentieth century had two flavours that modeled the world's geo-political pattern of both Hemispheres: the cold war and the emergence of neoclassical economics fathered by Milton Friedman and Alan Greenspan and implemented by Ronald Reagan and Margaret Thatcher. Neoclassical economics brought about an increasing mathematical sophistication where economic sub-fields such as financial economics prospered thanks to the work of gifted mathematicians such as Merton, Black or Scholes. Monodimensional utility functions prioritized profit maximization over other variables such as human dignity or environmental sustainability. Academia was captured in the allure of models. Our economic policy-makers were constrained by mathematical models that worked on paper.

We continued to live in the world of the nation-state that defends a realist foreign-policy agenda based on the welfare of its citizens and the non-cooperation of states. Priorities were national but not global. A silent cold war was fought in the Northern Hemisphere, with cruel civil wars taking place throughout the Second World War, aggravated by the supplies of either side.

Major changes have to be brought on board if the great evils of our time persist. Today’s world continues to be a world dominated by extreme poverty and inequality. Today’s world maintains a status quo where a vintage architecture works for the developed world. We are reluctant or unable to move forward because we are afraid of losing the privileges the old architecture awarded to the victors of World War II. We are unwilling to reform because our political elites are afraid to lose popular support if they remove agricultural subsidies, or give up representative power at the Bretton Woods Institutions.

When approaching the geo-political environment of a world in desperate need of creative policy-making it is easier to propose a radically different new architecture, designed to cope with the challenging and increasing problems of the planet, than it is to reform the current architecture. Today’s crisis opens up a window of opportunity where intellectual exercises that propose new ideas ought to be considered by our political elites. But this will not happen. There is a gap between the world of creative policy-making and the inability of our political elites to embrace change and reform. Our political elites continue to live in the world of the nation-state, where citizens reward myopic policy-making that prioritizes our interest over that of the vulnerable.
The reality is that there is only one way out of the crisis with many possible final destinations: we have to incorporate the extremely poor countries to a new order where we undertake reform conducent to the elimination of the great evils of our time.

The Monfort Plan proposes a five year action plan to redefine capitalism and eradicate extreme poverty. The Monfort Plan also presents the team of one hundred Expert Dreamers that could be brought on board to implement the action plan. The action plan gives specific detail on how to accomplish change starting in six countries of Subsaharan Africa that have shown their determination to build up a basis upon which they can prosper.

The Monfort Plan reviews and identifies today’s vulnerabilities and explains why the current order is perpetuated. It then proposes an Axis of Feeble that has to be defeated. In order to do so reform has to be brought on board of six areas, namely agriculture, trade and labour rights, extractive industries, small arms trade, international financial architecture and brain drain.

In the book the lessons from the success of the Marshall Plan are drawn. The action plan proposes a new Marshall Plan for Africa, called the Annan Plan that would boost agricultural productivity on Subsaharan African soil. It also proposes four new organizations that would universalize microfinancial services for the extreme poor in order to deliver, through the microfinance network, global public goods including universal healthcare, education, water and sanitation.

The Monfort Plan also proposes innovative financing that could contribute to creating the Poor’s Endowment able to finance the delivery of global public goods through the microfinance network over the next forty years.

The action plan seeks to replicate the success of the European Union in the development space. By creating a supranational organization that accepts new members on an ex-ante conditionality clause, developing countries could have a phenomenal incentive to embrace reform in order to join a new architecture that will deliver global public goods for free to all the extreme poor for for the next forty years, or until the poor leave extreme poverty behind. Economic growth per se is a necessary condition to pursue global prosperity, but in itself does not suffice.

We need to become, one more time, men and women of stature and embrace the vision of the great men of the twentieth century. We need to become disciples of Marshall and Truman to defeat, once and for all, the great evils of our time. There is a window of opportunity. There is no other exit out of the crisis. Let the Glorious Forty begin.

Read on: our interview with Jaime.

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