November 18th 2000


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Articles from this issue:

QUARANTINE: Apples decision set to rile city electorates

EDITORIAL: IVF unlimited - time to call a halt

CANBERRA OBSERVED: Vote rigging - the ripples widen

NATIONAL AFFAIRS: DonÂ’t bank on the banks

THE MEDIA

LAW: International Criminal Court - Parliament by-passed

Letters

Straws in the Wind

INTERVIEW: Democracy needs a "virtuous" society - George Weigel

ECONOMICS: Globalisation - what it is, what it isnÂ’t

ASIA: Taiwan enters uncertain waters

COMMENT: Australia before multiculturalism

Reading the trends

AD 2000 and the sky isnÂ’t falling

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ECONOMICS:
Globalisation - what it is, what it isnÂ’t


by Bob Browning

News Weekly, November 18, 2000
Bob Browning explains that the choice for the world economy is not Wall Street or Albania - although some zealous advocates of globalisation continue to speak in such terms.

F ailure to give uncritical support to "globalisation" risks provoking accusations of being against capitalism, the market and international trade.

Neo-liberals would do everybody a good turn by making it clear what precisely they are promoting when they claim that "globalisation" is in everybody’s best interests. Globalisation is a very general term. It covers a host of developments, processes, policies and outcomes - some good, some bad. Demanding the whole package be accepted - and with enthusiasm - obviously arouses suspicion.

Free trade
When pressed to be specific, neo-liberals claim that what they are essentially on about is free trade. But what do they mean by that? Do they mean what the powerful trading countries say others countries should, or must do? Or do they mean what the United States, Europe, and other powerful trading powers are actually doing. The latter - as many Australian primary producers are well aware - involves quite a lot of protection of politically sensitive domestic industries.

Advocates of "globalisation", as driven by the neo-liberal so-called Washington Consensus, also claim it is about spreading democracy - about extending liberty to more people, freeing up entrepreneurial initiative, and facilitating individual development. But is it? The reality often amounts to helping some people more than others. Privileged minorities are being handed a laissez-faire licence to take the lion’s share of the benefits of economic growth.

Globalisation as most people are actually experiencing it - not as theoretically described by corporation-funded think tanks - is making governments and major political parties less responsive to electorates. Political parties increasingly depend on corporations for electoral funding. Governments increasingly depend on the decisions of foreign corporations, financiers, fund managers and rating agencies for direct investment and economic survival. Who votes the new Ă©lite authority to determine the fate of nations and peoples? What legitimation exists for the new regime? Whatever the alleged justification, it can hardly be called democratic.

Globalisation, or a least a key feature of it, involves shifting power away from governments to the market. This means transferring political as well as economic power to bankers, fund managers, financial speculators, and the CEOs of mega-corporations. Many of the new financial and corporate elite reward themselves with salary packages of princely proportions while adopting chain-saw attitudes to their workers’ welfare and what they owe the community by way of social responsibility.

The power that democratic citizens once exercised through electoral and political processes is being eroded. It is being replaced by the allegedly greater power they can wield as consumers through so-called freedom of choice in the market. The allegedly increased economic power of individuals replaces political power, and is allegedly more beneficial.

Consumer-oriented

According to its advocates, globalisation is a consumer-orientated economic strategy advanced by competition in a free market. In their view, free trade is good because it reduces the power of the state to interfere with civil society and individual freedom. And free trade is good because it increases benefits for consumers.

If so, how does this square with the growing market power and competition-suppressing capacity of the mega-corporations? Promises of consumer benefit hardly square with the world most consumers are coming to know. Multinational retail and manufacturing conglomerates are fast gobbling up small businesses.

Small business is competitive, job-providing, and socially beneficial in helping develop independent individuals, communities and responsible citizenship. It has also been an important vehicle for the upward social mobility and integration of migrant populations in countries like Australia, Canada and America.

This aspect of globalisation has become a significant factor even in the United States, the epicentre of the Washington Consensus. Commenting on the number of conservative Republicans swinging towards consumer-advocate Ralph Nader’s campaign in the US presidential elections, leading New York Times columnist William Safire noted:

"Another segment of Nader's Republican support comes from small-business owners and employees. They see both Republican and Democratic leaders acquiescing in the most competition-crushing mergers of corporate giants. Years ago, the GOP was the champion of trust-busting and the protector of diversity in the marketplace, but now smaller entrepreneurs, mom-and-pop businesses and farmers have no political home. Nader is their way of sending fat cats a message."

The growing power and scope of transnational corporations is mostly a result of the Washington Consensus - a set of neo-liberal style rules which the big trading countries, especially America, impose on weaker economies, allegedly for their own good. The big traders fund and dominate inter-government international agencies like the World Trade Organisation and the International Monetary Fund.

The corporatising aspect of globalisation narrows rather than widens consumer choice. It comes with cost-cutting, profit-maximising, and service-restricting practices. Contrary to theory and ideology, the big corporations become price-setters not price takers. Consumers are kept at arms length. The queue, whether physical or telephonic, is an increasingly common device for keeping post-purchase consumers in their place. Telephone "answering" services answer consumers if they are lucky and prepared to sacrifice time and emotional stability.

The impact of cost-cutting, allegedly in the cause of efficiency and consumer benefit, extends to the erosion of community as well as consumer infrastructure. Linked to privatisation it results in the rationing of such essentials as health care, affordable education, social security and welfare.

Globalisation is too general a term for effective discussion. It covers a host of different processes. It is not just a matter of free trade and technological progress. Apart from the good things, radical changes are occurring to the distribution of power and wealth in countries and of countries. Mega-corporations are extending their power and scope while reducing their social responsibility. The efficacy of community and family structures, democratic institutions and national sovereignty is being eroded. Instability, insecurity and stress - allegedly short term and beneficial - is being inflicted on large numbers of people.

But compare this reality with the neo-liberal descriptions of it. Consider, for example, how one leading US think-tank justifies the Washington Consensus. Under the heading "Globalization Facts and Consequences", the Institute For International Economics (IIE) recently claimed that 20th century "losers" had one thing in common:

"Virtually all of them rejected international economic links, either explicitly (the old Soviet Union, the new Burma) or implicitly (most of Africa). What do 20th century winners have in common? They embraced the international economy: Japan, Korea, Taiwan, Spain, Ireland, Greece. What do 21st century starters have in common? They are joining the international economy as fast as they can: Chile, Argentina, Brazil, Mexico, China, India, Poland."

The IIE went on to claim that between 1900 and 2000, world per capita GDP had rocketed from $680 to $6,500. "Is this the curse of globalisation?", it challenged.

In both cases the IIE focussed attention on economic growth only, without any reference to the erosion of national sovereignty, democratic participation, consumer choice or social justice. It expressed economic growth only on a gross national product and per capita basis. It attributed all the positives to "joining the international economy". What does "joining the international economy" actually mean?

Realising that it could not completely ignore how the benefits of growth are being distributed, the IIE went on to claim:

"It's not true that the gap between rich and poor countries is getting wider everywhere. Poor countries that joined the international economy have narrowed the income gap with the OECD. For example, the ratio between US and Chinese GDP per capita levels dropped from 12.5 in 1980 to 6.2 in 1995.

"Nor is it true that growth leaves poor people behind. Based on panel data for 80 countries over 40 years, income of the poor rises one-for-one with overall growth."

The IIE specifies "financial openness" as one of the essential elements of globalisation and claims that "financial openness is correlated with democracy, civil liberties, and social expenditure as a percentage of GDP".

It is interesting to compare the IIE’s treatment of globalisation as prescribed by the Washington Consensus with one that appeared in Foreign Affairs (May/June, 1998). It claimed that Wall St had become disproportionately powerful in Washington and therefore around the world through agencies like the IMF and WTO.

In the sense which most people use the term, Wall St refers to the big financial firms that have their headquarters in New York's financial district. In his best selling novel Bonfire of the Vanities, Tom Wolfe satirised Wall Street’s financial operators as "masters of the universe". According to Foreign Affairs their self-interest in a world of free capital mobility should be obvious. Globalisation extends the reach of its financial operations, magnifying turnover and profits in the process.

It is not a matter of being for or against "globalisation". Globalisation covers the good and the bad. It is a matter of being clear and up front about what aspects of globalisation advocates are really supporting and whose interests they wish to advance.




























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