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Globalisation: the human dimension
Despite Bush and Blair— and the unjust fare...
The global economy since 1800
Globalisation and economic security: Bangladesh perspective
Making globalisation work for all
Role of women in fostering culture of peace
Some current thoughts on the Chinese mining sector
Politics of oil, world security and globalisation
The loneliness of Noam Chomsky
Globalisation: the human dimension
Dr. Mizanur Rahman Shelley
Are the steadily expanding strands of intensifying globalisation leading to the dwarfing of humanity? Leaders of the world of our times are engaged in relentless promotion of increasing integration of the worlds economic and political systems: globalisation. The question is whether this pursuit of the high and the mighty is oblivious of the adverse impact it is having on billions of individual human beings.
Globalisation is primarily perceived and understood as an economic process. Nevertheless, like everything else in life it is more than mere economics. Beyond the economic and commercial planes, globalisation has at least three other equal, if not more important, dimensions. These are political, environmental and technological. The economic and the political dimensions of globalisation are interdependent, with the political component usually in the driving seat.
By contrast, the technological and environmental dimensions of the process have evident characteristics of autonomy. Technological globalisation have staged a fast march in bringing the world close together and transforming it into a “global village.” Thus, computers and e-mails, satellite communications and television have spanned the world of our times with information superhighways.
By and large, information and communications technology (ICT) has brought immense benefit to humankind and holds the promise of delivering ever-richer rewards. Although relatively less prone to political manipulations, ICT, too, may, and has, often resulted in the reduction of humanity. The rich-poor gap of the economic world is reflected in the digital divide. The masses of the poorer lands have only a minor fraction of global access and connectivity. As in the economic-commercial sphere, so also in the field of modern information and communication, there is a rich world surrounded by a poor world.
Globalisation: communications and technology
International communications have made gigantic strides towards development of integrated worldwide systems. Communications satellites are in increasing use and revolutionising exchanges of messages, information and knowledge on a worldwide scale. E-mail and the Internet have linked far corners of the earth in speedy, efficient and instantly responsive global networks.
Thus the world’s nations are connected by amazingly fast and effective information superhighways. Within regions and nations, ultra-modern electronic communications have built a greater sense of proximity and integrative matrices.
In this field, perhaps more than in any other, the process of globalisation appears to be moving faster towards comprehensive integration. The implications of the communication-revolution are many and varied. The amazing march of technology in the spheres of communications and transport has virtually annihilated time and distance. Remote corners of the earth can now be reached by electronic signals in matters of instance. Fast moving aircraft can link distant destinations in hours. The net result is a greater exchange between regions and nations, which are distant in time and culture. The impact of the process is both negative and positive. On the positive side it tends to introduce various peoples, cultures and ways of life to one another. This, in turn, is hoped to lead to a greater understanding of the human conditions under different sets of geographical and cultural circumstances.
Appropriately handled, the process may lead to greater understanding and amity among the nations and races of the world eventually resulting in the true and enduring integration of human kind.
On the negative side, progress towards globalisation of human relationships through faster and instant communications may be adversely affected if the process of recognition and understanding with one another is distorted and twisted. Such happenings can take place when the prosperity and progress of some societies, as projected by instant communications media to those less fortunate, lead to revolutions of rising expectations and rising irritations among the members of the comparatively backward social-economies. The point to be noted is that fast advance of communications and technology is a vigorous mechanism for globalisation in various dimensions: political, social and economic. However, globalisation in communications was not as dependent on the sea change in global politics in recent times as in the other dimensions.
Globalisation: environmental ecological dimension
Intensifying adversities resulting from global environmental deterioration and disturbance of the ecological balance have tended to accelerate the process of globalisation in this sphere in course of the recent decades.
Global environmental deterioration, principally resulting from the unsustainable patterns of consumption and production practices, the widening gap between the industrialised and developing countries intensifying the latter’s poverty and contributing to environmental degradation in their own context and the global character of the environmental problems facing all nations—climate change, ozone layer depletion, trans-boundary water and air pollution, contamination of oceans and seas—have all tended to affect countries of the world with adverse impact of these processes.
Despite many obstacles, the process of global unity in the face of the common and inescapable threat towards the healthy existence of the planet earth is being built up gradually and soundly. The high point was reached at the United Nations (World) Conference on Environment and Development (UNCED, Rio, June 1992)—the so-called Earth Summit. The assembled nations, represented by their government leaders and NGOs drew up and adopted an action plan, “Global Agenda 21,” to unitedly work to arrest global environmental deterioration. The work of the Rio Summit was continued in the summit at Johannesburg in 2002. In this global conference, poverty alleviation and environmentally sound and sustainable development were underscored as inter-linked processes.
Other milestones in the environmental globalisation process were represented by the Stockholm Conference (1972) and the Nairobi Conference (1982). The idea of putting environmental restraints on economic development of nations as broached at the 1972 Stockholm Conference was not welcomed by the developing countries, eager to achieve rapid economic growth. By the 1982 Nairobi Conference, their attitudes were transformed. They advocated and supported international steps for environmental protection and urged the technologically advanced and economically prosperous nations to provide funds for this purpose, a proposal which the industrially developed countries resisted. However, in 1987 with the WCED Report, the developed countries welcomed its proposals for both attempting to find co-operative solutions and to provide larger funding for the protection of the environment.
All this heralds a new dawn of possible development of innovative multilateral treaties to ensure environmentally sound and sustainable development on a global scale. Centrally managed environment funds may be established; general goals and specific protocols may be set; greater NGO participation in the cause of environment protection may be encouraged and ensured; mechanisms for resolving disputes may be fabricated and regular monitoring and appraisal processes can be built.
Globalisation in the environmental dimension in a substantial sense does not depend on action or lack of it by political authorities. The deterioration and degradation of environment as consequence of earlier human commissions and omissions is increasingly expanding the threat to healthy and civilised human existence. It is, therefore, also making unified action on a global scale a priority item on the agenda of human kind whether the political masters of the world of our times want to act or not. Nature may very well compel them to do what human urgings failed to persuade them to accomplish. One only hopes that the actions so compelled do not come too late.
Globalisation: political sphere
In recent times, there have been indications of moves towards integrative political systems on a global scale. These are the direct results of the titanic changes in global politics that took place during the late 1980s and early 1990s.
The political societies of the erstwhile Soviet Union and Eastern Europe in the 1990s, at least initially, experienced an apparently peaceful transition from a monolithic ideology-fabricated land-empire to a matrix of many democratic, sovereign states. As the Soviet Union crumbled from within, several of its European constituents became separate entities. All of its Asian components emerged as independent polities. Its East European satellites transformed themselves into apparently self-governing democracies. The transition was peaceful in the beginning. Tranquil circumstances, however, did not last long. For these new democracies of Eastern Europe, the old world ended but was not substantially replaced by a liveable new one.
Participatory democracy, without its economic underpinning, has proved to be an expensive adornment for them. In desperation some of these societies have descended into the mire of ethno-cultural hostilities and conflicts. In the erstwhile Asian republics of the former USSR also, sovereignty and democracy have not resulted in the realisation of politico-economically free and reasonably secure life. On the contrary, institutional vacuum, economic underdevelopment and the unfriendly lack of compassion of a market-friendly economy have all contributed to the intensification of age-old ethno-cultural and religious hostilities.
Ethnic, religious, colour conflicts in Eastern Europe, Central Asia and Africa have thrown millions into nightmares of blood and fire. Bosnia, Somalia, Rwanda, Azerbaijan, Armenia, Georgia, Kampuchea, parts of the South Asian subcontinent and Southern Africa are burning illustrations of these distressing phenomena.
Democracy and free market economy in true sense of the terms are obtained only in some countries of the prosperous North. The newly emerged democracies, by contrast, are democracies only in hope and not in being. In these polities, governance is inadequate and order in short supply. In some African countries governments have virtually ceased to exist. In conflict-ridden pockets of the Balkans, government and order seem to be existent because of strong international intervention. In such regions, human life itself is hostage to virtually insane men in arms. No wonder such societies cannot achieve either political order or economic well being for their helpless people.
Many areas in the post cold war-Eastern Europe and in drought-driven, tribal war riddled Africa are forecasting the shadows of a world caught in the web of incertitude, “an evolving polyarchy—a place without a dominant structure of cooperation and conflict—in which nation-states, sub-national groups, and transnational special interests and communities all (are) vying for the support and loyalty of individuals and conflicts (would have to be) resolved primarily on the basis of ad-hoc bargaining and a shifting context of power-relationships.”
No wonder that in such a situation, “Europe is confronting its worst refugee crisis since World War II,” and “the worst drought in decades, war and famine are forcing millions of Africans to leave their homes and seek refuge in neighbouring countries.”
Thus, political globalisation indicating the worldwide spread of participatory democracy as the standard system still remains largely incomplete and uncertain. The manifold problems of breakdown of order, ethno-religio-cultural antipathies manifest in violent conflicts and local wars and untold sufferings from economic miseries do not merely reflect the travails of transition. These also represent, in a large measure, the failure of the leading nations of our world to ensure simultaneous economic and political development of societies in political transition. There is also reluctance on part of the powerful and prosperous countries, to help meet and underwrite the cost of titanic transition.
As recent experience on a worldwide scale has shown moral exhortations to ensure human rights and democracy without proportionate sharing of the economic costs of introducing and sustaining, such systems lead to an emerging scene of frightening disorder.
It is in such grim and depressing context that the tragic events of September 11, 2001 and the following convulsive happenings unfolded. “Nine-eleven” marked the first-ever frontal attack on the US mainland. International terrorism took a heavy toll of lives in New York, Virginia (near Washington) and Pennsylvania, as US commercial aircraft hijacked by the Al-Qaeda terrorists crashed into the Twin Tower of the World Trade Centre and part of the Pentagon. The USA responded quickly and forcefully to this massive and unprecedented terrorist attacks. The consequent wars in Afghanistan (2001) and Iraq (2003) have changed the very nature and character of our world. The US and its allies, including many important Muslim states, are locked in a protracted war against terrorism perceived to be spearheaded by Islamic fundamentalists led by the Al-Qaeda leader, Saudi dissident Osama bin Laden. Humanity is caught in the midst of a war that is virtually globalised. Surely this is not a welcome happening. Political globalisation aims at globalising peace and harmony and not deadly war. Globalised wars against terrorism have impacted economic globalisation also. Economic and commercial globalisation is viewed as the core and essence of the globalising process. The west, especially its mighty and powerful nations, are relentlessly pushing for economic globalisation and trade liberalisation
Globalisation: economic and commercial dimension
Globalisation has become the refrain of the world’s economic life in present times. The growing integration of national economies, many believe, has transformed the mode and manners in which the world functions. National economies are undoubtedly becoming steadily more integrated as cross-border flows of trade, investment and financial capital increase. Consumers are buying more foreign goods, an ever-increasing number of commercial entities now operate across national borders, and savers are investing more than ever before in far-flung places.
Whether all of this is for good or ill is a topic of heated debate. One positive view is that globalisation is an unmixed blessing, with the potential to boost productivity and living standards everywhere. This is because a globally integrated economy can lead to a better division of labour between countries, allowing low-wage countries to use workers in more productive ways. It will allow firms to exploit bigger economies of scale. And with globalisation, capital can be shifted to whatever country offers the most productive investment opportunities, not trapped at home financing projects with poor returns.
Northern critics of globalisation take a pessimistic view. They predict that increased competition from low-wage developing countries will destroy jobs and push down wages in today’s rich economies. There will be a “race to the bottom” as countries reduce wages, taxes, welfare benefits and environmental controls to make themselves more “competitive.” Pressure to compete will erode the ability of governments to set their own economic policies.
The pace of global economic integration—the widening and intensifying of international linkages in trade and finance—has accelerated over the past decade. During 1985–94, the ratio of world trade to GDP rose three times faster than in the preceding 10 years and nearly twice as fast as in the 1960s, the celebrated “golden age” of rapid world growth and trade expansion. Over the same period, foreign direct investments doubled as a share of global GDP while the share going to developing countries rose to more than a third.
The pace of integration, however, in developing countries has been very uneven. Though in aggregate, developing countries kept pace with the world rate of trade integration, the ratio of trade to GDP fell in 44 of 93 developing countries in the past 10 years. The distribution of foreign direct investments was also skewed: eight developing countries accounted for two-thirds of foreign direct inflows in 1990-93, while half of all developing countries received little or none.
Globalisation as underpinned by liberalisation in the world economy carries important benefits: improved resource allocation, heightened competition as a spur to achieving world standards of efficiency, wider options for consumers, the ability to tap international capital markets, and exposure to new ideas, technologies, and products. But globalisation also demands more of governments. As firms in developing countries face more intense international competition, their need for clear rules, a stable environment, access to imports, efficient infrastructure, and freedom from red tape increases. Greater reliance on private sources of finance makes it essential to retain the confidence of international capital markets.
Not all countries have risen to the challenges of globalisation, and some developing countries are lagging behind in the field of integration.
Disparities in the level and speed of integration and foreign direct investments to GDP are closely associated with differences in growth rate. The quarter of developing countries that integrated most quickly over the past decades grew nearly three percentage points faster than the slowest integration quarter. Many low-income countries are among the least integrated, and some became even more marginalised during this period. But other low-income countries—including some of the largest—were among the fastest integrators. The quality of policies is critical to the speed of both integration and growth, and there also appears to be a mutually reinforcing relationship between the two. Policy reforms designed to increase an economy’s growth and stability are likely to influence a country’s speed of integration both directly and through their effect on growth. Examples include policies that ensure macro-economic stability and realistic exchange rates, and investments in telecommunications and transport infrastructure.
Two questions are often asked by policy makers in countries that aim to promote growth by opening to the global economy:
(i) Will trade liberalisation work? Though some important external obstacles remain on the path to increased exports from developing countries such as the proliferation of antidumping initiatives, trade barriers facing developing countries are lower now than at any time in post-war history. They are much lower now, for example, than during the 1960s, when countries in East Asia began penetrating world markets. In fact, internal obstacles to export growth, such as excessive transport costs, bureaucratic red tape are sometimes as important as external ones.
(ii) How can commodity-reliant countries enhance productivity and diversify exports? Many slow-growing, lagging integrators rely on primary commodities for exports, but so do (or did) many countries that are now fast-growing, strong integrators.
Until the sudden and stormy downslide of the hitherto “strong and fast growing” economies of South East Asia and Far East during the late autumn of 1997, the experience of fast-integrating developing countries provided many powerful, practical lessons in how countries could expand their engagement with the world economy in order to enhance growth.
The disastrous happenings in the economies of South Korea, Malaysia, Indonesia and Thailand manifest in the enormous erosion of the value of their hitherto strong currencies, climactic crashes in their hitherto vigorous and lively stock markets and the near collapse of their banking system brutally exposed hazards of fast globalisation without simultaneous and sound development of core institutions and structures in the financial and economic spheres.
Many of these countries with large measures of foreign direct investments did not apparently take adequate care to build up matching, and strong institutional structures that would enable them to survive and prosper in a global situation. They took advantage of the globalisation process and their hitherto strong and stable currencies to indulge in short-term borrowing from international and foreign private sources to make up for their massive current account deficit. The result has been disastrous. International organisations and better-off economies desperately tried to stop the downslide by providing billions of dollars of emergency loans. The conditions under which these rescue packages were made available were rigorous and stiff. These economies—once regarded as model of globalised growth—suddenly found themselves reduced to the status of virtual “international beggars.” It may be noted, however, that in the post-crises years they have competently rallied round and are coping ably in the context of global, political and economic uncertainties following 9/11.
There is no doubt that the countries themselves had their share of the fault in bringing about the 1997 disaster. As the Malaysian Prime Minister Mahathir Mohammad said in a summit meeting of South East Asian States in December 1997, “the government, the people and the private sector all share responsibilities for the current economic crisis. We have to admit that we are now poor. The road to recovery is going to be long and hazardous.”
One has to remember that the international community, especially its economically strong members cannot deny that they too had a role in the entire sorry development. They were careless and did not build and strengthen the international and national structures that would ensure globalisation without unnecessary pain and disastrous happenings causing untold miseries to people trapped in unprecedented economic convulsions.
The need for this has been underscored even by international currency speculators such as George Sores who was initially blamed among others by Mahatir Mohammad as the principal “culprit” causing the downhill-run of South East Asian currencies, including the Malaysian ringgit, the Indonesian rupiya and the Thai bath.
An interesting aspect of these recent developments is revealed by the steadiness of those economies such as China and India, which responded to globalisation on their own terms and in a relatively cautious and conservative manner. They did not blindly pursue the golden deer of fast growth rate of economies. In fact, China has taken measures to bring down its growth rate within ten percent to arrest the “over-heating” of the economy.
Other poorer countries such as Bangladesh were spared the severe beating of global and cold winds which caused unprecedented depredations to growing economies which did not prepare their core institutions and structures soundly enough to withstand the onslaughts of a competitive global market economy that knows no compassion.
Globalisation is a process that countries like Bangladesh cannot ignore or escape. Already measures and steps, sometimes initiated by inner urges and more frequently by pressures from multilateral and bilateral donors who propel and guide the country’s aid-dependent economy, are in progress to ensure integration into the global setup. Liberalisation of trade has expanded significantly. International standards are being sought to be strictly adhered to. The impact of such measures on domestic industrial growth and economic development is still uncertain. Foreign direct investments have been increasing but at a slow rate. The economy shows no sign of faster growth. Institutional and procedural weaknesses and inadequacies haunt the society and economy of Bangladesh. These have to be recast and straightened before globalisation can have meaningful and positive impact on the growth and development of this apparently poor but potentially resourceful society.
Heart of the process: human dimension
To conclude, the process of globalisation can achieve the desired objectives only when the advocates and exponents of the process realise and act upon the truth that what matter in the process are societies and not merely economies. A holistic and integrated view and approach is essential. South East Asian societies and South Korea are paying the heavy price of non-integrated globalisation which concentrated merely on economies and not on societies. Societies are composed primarily of people and not commodities and manufactures alone. The peoples and their institutions have to be initiated into the true meaning of globalisation before economic globalisation can bear the desired fruits of an equitable and prosperous global village where the market serves as well as brings forth the common good.
The problems of globalisation emanate from the inability of its organisations and leaders to acknowledge and act upon the centrality of the human component in the processes concerned. The failure of the WTO Conference in Cancun in September 2003 can be directly traced to this inability. One has to go back to the wisdom of poet Rabindranath Tagore. Replying to western criticisms of obscurity in his timeless play, Raktakarabi, he wrote in the Visvabharati Quarterly in October 1925: “There was a time when, in the human world, most of our important dealings with our fellow-beings were personal dealings, and the professional element in society was never hugely disproportionate to the normal constitution of its life. Therefore, naturally in the tradition of literature which is the ideal expression of man’s life, interactions of human relationship have so long occupied the most important position.
“Today another factor has made itself immensely evident in shaping and guiding human destiny. It is the spirit of organisation, which is not social in character, but utilitarian. Naturally, in all organisations, variation of personality is eliminated, and the individual members in so far as they represent the combination to which they belong give expression to a common type and very little to their uniqueness of individuality.
“But the personal man is not dead, only dominated by the organised man. The world has become the world of Jack and Giant—the giant who is not a gigantic man, but a multitude of men turned into a gigantic system.”
If globalisation and trade liberalisation are to succeed in achieving their essential purpose these need to gear themselves to the hopes and aspirations, wants and requirements of individual human beings who compose societies, developed or developing. “The personal man” must be given central importance. Otherwise, people all over the world will continue to engineer massive resistance against the process of globalisation that divorces itself from the all-important human dimension.
Social scientist and littérateur, Dr. Mizanur Rahman Shelley is the founder chairman of the Centre for Development Research, Bangladesh (CDRB), overseas director of the American Institute of Bangladesh Studies (AIBS) and editor of the quarterly “Asian Affairs.”
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Despite Bush and Blair— and the unjust fare...
Enam Ahmed Chaudhury
The new millenium, instead of propelling civilization and collective human endeavour for universal advancement to greater heights, has signaled collapse of the cherished human values of ‘faith, reason and Justice’. This phenomenon in the world scenario is unfortunately caused by the selfish, arrogant and unethical initiatives of the high and the mighty.
To back up my sweeping observation, I would like to take recourse to a few quotations from utterances of a few knowledgeable persons, well-known for their objectivity and penetrating insight into global affairs. In a recent speech in the United Nations, Malaysia’s statesman-leader Mahathir Mohammed commented on the UN - “This Organization is today collapsing on its clay feet, helpless to protect the weak and the poor.” In the words of Noble laureate Professor Amartya Sen - “Globalization has, so far, created massive levels of inequality and poverty”, Donald J. Johnston, Secretary General of the OECD, talking on the role of the industrialized countries in the much-advocated free-trade regime, says, they “impose tariffs on imported farm products that are eight or ten times higher than those levied on industrial products, which effectively rigs the trade game”. Professor Joseph Stiglitz, the out-spoken economist holding no brief for any camp, believes that the so-called ‘Washington Consensus” - the trinity of globalization namely trade liberalization, privatization and fiscal austerity do not offer a positive outcome unless a number of difficult and some unattainable conditionalities are met. Castigating the role of the Bretton-Woods institutions, Professor Stiglitz has argued that the Asian financial crisis could have been averted had the countries concerned avoided the IMF-policy prescription. In a recent pre-Cancun visit to Dhaka, Professor Stiglitz also said that the off-trajectory impacts of globalization have sparked another fundamental question - the probability of globalization threatening the economic security of weak states, like the least developed ones. Pointing an accusing finger, UN Secretary General Kofi Annan, recently said, “Wealthy nations pandering to powerful lobbies were behind the collapse of trade talks in Mexico.” And the Commonwealth Secretary General Don McKinnon said in Dhaka on October 7 that the international trading system governed and controlled by the rich and powerful countries is simply “unjust”.
The march of civilization, which started off from the banks of the Tigris and the Euphrates, of the Nile and the Indus and the Hwang-ho five thousand years ago is facing its greatest challenge and threat in the beginning of the twenty first century. The earliest law of the world, the codes of Hammurabi of the modern-day Iraq and the most ancient artifacts of human heritage in the museums of Baghdad, have been literally bombed, smashed, burnt and looted by the aggressors in the United States-led brutal invasion and destruction of Iraq.
To begin with, one cannot but observe the systematic way in which the United Nations has been subjected to contempt and reduced to irrelevance by the powerful. Without allowing the UN to act for truth and justice, attempts have been made to utilize the organization to suit one’s own interest. However, the bi-polar world so far acted as a balancing deterrent to stop any indiscriminate and wanton acts by any self-seeking power.
As the United States emerged as the lone super power at the end of the cold-war, situation changed for the worse culminating in the barbarous attack on Iraq in flagrant violation of the UN charter and the Security Council resolution. By making Iraq starve and decimate under a decade -long UN sanction, the USA had systematically planned to launch the invasion for quite some time. UN resolution no. 1441 of 2002 had no provision for automatic military intervention, but USA, in the name of pre-emptive strike, WMD destruction and regime-change, took the decision to aggress. Abetted and aided by Blair’s Britain, history’s most heinous, vicious mind-less and fierce military action was launched against almost unarmed or rather, disarmed Iraqis. Bush and Blair not only rejected UN resolution, they violated the provision of chapters 6 and 7 of the UN charter and all codes of civilized conduct, and held the Security Council in utter contempt. What do we have in Iraq now ? No chemical or mass destruction weapons were found, detection of which was the primary excuse for the inhuman attack. The country is now under US-British colonial occupation, the common people subjected to abject misery, and every passing day bringing in more deaths and destruction. In Palestine, the Security Council is prevented from taking a firm position for peace by the repeated threat and application of US Veto in support of Israeli State terror. Bleeding continues in Kashmir, and no solution of the problem is in sight. UN resolutions cannot be implemented. UN and the Security Council are pressurized by the US-UK axis through means, even foul. The detainees of Guantanamo, held in the wake of United States’ military conquest of Afghanistan, are being so ill-treated in violation of established norms and practices that Justice Richard Goldstone, former prosecutor at the UN War Crimes Tribunal, unambiguously proclaimed - the next President of the United States will have to apologise for Guantanomo. UN has been rendered ineffective by the mighty, and the bleak scenario is aggravated by the growing inability of the international community to respond to the needs of challenge to change the pattern with any unity of purpose.
Whose purpose the Bretton-Woods institutions serve? Though, once, he himself was the World Bank Chief Economist (and perhaps that provided him the opportunity to know the institutions well), Professor Stiglitz urged countries not to globalize at the dictate of the international financial institutions. Their prescriptions, generally speaking, have not helped the needy countries aspiring for development. Malayasia, for example, fared better than its neighbours because it acted against the advice of the IMF. Within the first decade of globalisation, real income of sub-Saharan countries shrank by at least 2%. The debt crisis in Latin America and the South East Asian financial crisis leading to the subsequent meltdown of the “Tiger economies” have made us, not without reasons, skeptical about globalisation. Professor Stiglitz has demonstrated from a policy perspective that globalisation can turn into a Zero Sum game with distinct winners and losers, and that redistribution of gains is often an impossible political process. These redistribution road-blocks, he argues, make globalisation threaten the economic security of a state.
The world trading system which is attempted to be introduced by the mighty, is primarily meant for them to be richer at the cost of the poor. As Kofi Annan recently pointed out “Last month’s setback in the trade talks at Cancun is the latest, but by no means the only example showing how the priorities of the developing world can be brushed aside when the Northern governments have powerful producer lobbies to placate. The talks failed because the concerns of the rich nations have trumped those of the poor ones”. The developing countries have their priorities - trade disparity, poverty, unfair global competition, Aids, mal-nutrition, law and order. The rich countries’ sole concern has been to maximize gains everywhere, and that too, at the cost of the poor. Some rich nations often cite terrorism, weapons of mass destruction (WMD) corruption and crime as their top priority, but what do they really do to tackle even these problems ? The whole world agrees that terrorism is totally unacceptable, that it should be fought tooth and nail, and be eliminated. But you cannot fight terrorism by patronizing Israeli State terrorism as US does in Palestine or by putting captives inside animal cages in Guantanamo. If they are sincere, they have to seek and meet the causes that breed terrorism and acts of suicide-bombing. Mass destruction is caused by advanced weapons used by the militarily powerful countries, as it happened during aggression of Iraq. WMDs were used by USA and Britain, and not by the Iraqis. Corruption and crime are primarily caused by poverty, though other reasons are there. Balancing trade can most certainly help amelioration of poverty and thereby decrease crime and empower nations to take more effective steps against crime and corruption. Human rights violations happen in the poor developing countries but these are pea-nuts when compared to the mega-ones committed by US and Britain in occupied Iraq, and by Israelis in the devastated Palestine and in the refugee camps.
Having said all these , it is not in human nature to give up. We have reasons to feel sad but not to despair. We feel that we have seen a ray of hope in the failed meeting at Cancun. It was evident that the poor and the weak among nations realized that the only way they can make their voice heard was by speaking from a common platform, formed on the basis of HCF (the highest common factor). In the international front, that’s the only way in which justice and fair-pay can be ensured, or at least pursued.
The United Nations can be reformed and made more effective. I agree with Dr. Iftekhar Chowdhury (Bangladesh PR to UN) that ‘the UN needs reform that would make it stronger, more representative and participatory - capable to take decisions of global relevance, and to intervene in conflicts’. The consensus and the vision expressed in the Millennium Declaration is in tatters now, but it is out of the ashes that a new life can begin. I agree with Shamshad Ahmad (Pakistan’s PR to UN) when he advocates that “ a global peace force should be established to act on the authority of the Security Council or in its absence, of the General Assembly for maintenance of peace. Similarly, a global police force could be created to intervene in civil conflicts and to help post-crisis stabilisation measures. The current Iraqi situation could be an appropriate case for such deployment under UN authority. In fact, there is no other way in which any progress can be made in Iraq in any direction. No peace, stability and economic progress can be achieved by the US-British occupation forces who are there to pursue their own imperialist designs and national agenda. US-British occupation forces should be withdrawn and UN authority established there; and that is the only way to make a start. In the occupied territories of Palestine also UN forces could maintain peace so that the road-map, now being totally disrupted by attacks and counter-attacks, can be pursued.
The international Financial Institutions should be made more responsive to the needs of aid-seeking countries. They talk about good governance and democracy, but in the institutions themselves they do not practice a democratic and participatory decision-making process. They should not impose decisions on recipients of their aid and cooperation at the behest of interested rich nations. Despite phenomenal growth in total wealth over the last two decades, now there are some regions of the world such as sub-saharan Africa and central Asia, where the absolute number of people living in poverty has increased. During the last three decades, the per-capita income (after adjustment for inflation) in thirty poorest countries of the world has actually fallen. These are not signs of any success. The trade-talks will hold the key to global economic progress. It is not unlikely that the conclusion of Doha ‘development round’ of trade talks aimed at liberalising global commerce will have to be extended beyond ‘January 1, 2005 deadline. But then let the developing countries make adequate preparations and let the rich countries be prepared to grant the required concessions. After all, how can one talk about “free trade” when protectionist measures and dumping practices are taken recourse to by the rich countries themselves. The US doles out 3 billion dollars in subsidies to its cotton farmers, thereby totally destroying the prospects of cotton market for the west African cotton growers and subjecting the cotton-growing countries of Africa to perpetual poverty. It is expected that the Cancun failure will make rich countries realize that in any negotiation there should be “give and take”, and not imposition of decisions. The threat of bilaterism (signifying that the weaker party will suffer more) should not discourage the poor or disadvantaged countries and make them agree to any type of multi-lateral agreement which do not serve their interest. They should rather try to unite and forge powerful regional bodies or interest - protection groups. Cancun’s collapse should make the rich countries realize that there is no point in pushing poor countries too far on the” Singapore issues” and giving too little in other spheres. The poor countries have realized the effectiveness of unity and of being in a state of preparedness. And this is what they should relentlessly pursue. It seemed that G-21 left Cancun ‘determined to stick together and fight another day.’
It is true that “globalisation of knowledge and information today bind us together” in a new spirit of understanding and compassion, but it is also true that presence of information asymmetry in markets do not offer equal benefits to all concerned. “The invisible hand is not necessarily even-handed. It can strangle the less-informed or the disadvantaged ones” This realization has been there now among the poor countries and so, given support, corrective measures can be initiated meaningfully.
In the ultimate analysis, good-will and understanding should prevail. There are people all over the world who want peace, justice and progress. USA, Britain and Israel are no exception. We have heard the thunderous voice of hundreds of thousands of people in Trafalgar Square, we have seen Israeli pilots refusing to bomb innocent Palestine civilians, we have noted the views of innumerable conscientious people in the States. Everywhere in the world there are well-meaning people -people determined to earn peace and make progress. Bush, Blair, Sharon and Bin-ladens are transient actors in the world theatre. And this forms the basis of our indomitable hope.
The views expressed in the article are author’s own.
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The global economy since 1800
M. Shahid Alam
This is a short history of the global economy since 1800. It is about the system of global capitalism that took shape once the British economy went ‘underground’ and began to draw its energy and, increasingly, its raw materials from mineral resources.
The progressive substitution of minerals for plants, as the economy’s source of energy and raw materials, transformed the dynamics of capitalism. It opened up vast new sources of energy and raw materials, freeing the economy from the narrow resource constraints of an organic, plant-based economy. The new cheaper, more abundant energy produced dramatic reductions in the costs of transportation; a growing volume and range of goods could now enter long-distance and international trade; and this rapidly created the basis for an international division of labor. But the resource substitution also deepened the logic of uneven development. On the one hand, the mineral-based economy created several positive feedbacks that strengthened the already existing tendency towards the division of trading areas into Core and Periphery, or concentrations of high and low value-added activities. In addition, it augmented the military power of the states that pioneered these new technologies. Together, these tendencies — markets, energy substitution and force — created the modern global economy, increasingly integrated but also deeply divided into a Core and Periphery.
The history of the new mineral-based global economy falls into three phases, defined with reference to the degree of global centralisation of power. The first phase, lasting from 1800 to 1913, concentrated power — and, with it, capital, technology, science and manufactures — in a small number of Core areas, notably Britain, France, United States and Germany. Conversely, the greater part of the Periphery — nearly all of Asia and Africa — lost their sovereignty to a few Core countries, were forced to open their economies to Core capital, specialised in primary goods, and scarcely experienced any improvements in the living standards of the indigenous populations. The global economy slowly entered a second phase in the late 1940s, although this process was initiated earlier with the Russian Revolution of 1917, when power was decentralised from the Core to the Periphery. On the level of the economy, this decentralisation reversed the earlier concentration of manufactures in the Core countries, and produced dramatic acceleration of growth in the dependent Periphery. Starting in the 1980s, however, power was again re-centralised in the Core countries. Already, by the mid-1990s, this re-centralisation had exceeded the previous peak in the global centralisation of power attained during the late nineteenth century. This article will examine these three movements of the global economy, though the emphasis will be on analysing the dynamics of the third movement.
It is important to begin by laying out, if only briefly, the different logics underlying the organic, land-based economy that held the centre of the stage before 1800 and the inorganic, mineral-based economy that has been developing since that date.
In the old agrarian system, two factors perennially constrained its capacity for economic growth. This system drew nearly all its energy from plants, the source of our food, fuel, fibre and other raw materials; this constrained the supply of energy since the land necessary for growing plants was available only in finite quantities. In addition, this system only used organic instruments, men and animals, for converting the energy captured by plants into mechanical energy. These organic instruments did not favour growth since their upkeep required large amounts of land, and their efficiency at converting energy could scarcely be improved upon. As a result, once all accessible land had been brought into use, the agrarian system grew by improving the organisation of work, primarily through division of labour, inventing machines that enhanced the efficiency of work, or improving the quality of existing lands. The division of labour offered the best prospects for growth, though this was limited — as Adam Smith so famously noted — by the extent of the market, or transportation and institutions of exchange. Most importantly, once all the land was in use, the limits on growth pressed harder. It was land, or its ability to fix solar energy through plants, that appeared to impose the final constraint on growth in this organic economy.
The new inorganic economy that developed after 1800 transcended the dual limits that constrained growth in the organic economy. It drew its energy and raw materials increasingly from stocks of minerals, and since these stocks were quite large relative to the rate at which they could be drawn down, this virtually lifted the cap on energy flows available to the economy. More importantly, the energy from fossil fuels was converted to mechanical energy by machines: the steam engine and, later, internal combustion engine. Once these machines outstripped the organic instruments for converting energy to work, they found growing applications in transportation, manufacturing, and, eventually, agriculture. In time, the cheaper energy, when combined with advances in science and technology, produced cheaper inorganic substitutes for organic raw materials. This was in addition to the use of fossil fuels, which began at an earlier date, in heating homes, lighting and smelting.
This energy revolution created a variety of positive feedbacks. First, the fossil fuels freed land from producing fuels and fodder; the development of inorganic substitutes for organic raw materials had the same effect. In other words, even as the new economy expanded, it released land that could be used for producing more food and organic raw materials, and we can expect this to reduce the industrial economy’s propensity to imports of food and raw materials, at least during the early stages of this development. Second, the cheaper energy reduced the costs of manufacturing and transportation; in turn, the cheaper transportation produced cumulative cost reductions in manufacturing through wider markets, greater division of labour, technology spill-overs, and other linkages. These cumulative cost-reductions and, in part, their localised effects, created a tendency to concentrate the world’s manufactures in countries — the Core countries — that took an early lead in harnessing the new energy. Conversely, the rest of the world, the Periphery, specialised in producing food and raw materials, still using the old source of energy. Finally, the new energy per se stimulated endless innovations in production technology. Since large and increasing amounts of energy could now be concentrated at one point in space, this led to the development of larger, faster and more powerful machines for use in transportation, manufacturing, mining, construction and, eventually, agriculture. This constituted a third source of cumulative growth in the industrial economy.
The energy revolution had created new economic dynamics. Unlike the muscle-driven, plant-based, land-constrained agrarian economy, the industrial economy increasingly drew upon minerals for its energy and raw materials, employed engines to convert fossil fuels to mechanical energy, and used this energy to mechanise work in manufacturing, transportation, construction and agriculture. The productive capacity of the industrial economy was not constrained by energy, as in the old agrarian economy, but by its ability to deploy machines that converted energy to work. The engine of growth in this economy was capital accumulation, since this determined how fast it could expand the stock of energy-converting and energy-using machines available to the economy. As a result, capitalists replaced landlords as the central actors in the new industrial economy.
These profound changes created new classes and class conflicts. The new energy-converting and energy-using machines downgraded the workers in the manufacturing sector even as they pushed it to the centre of the economy. Of course, the workers were still needed, but the new machines diminished their importance. Now the workers could not own their machines, which were too expensive compared to what they were able to save individually. The craftsmen, artisans, and even peasants, became labour, hired by capitalists to tend the machines, fix them when they broke down, or perform tasks that had not yet been mechanised. The machines — and their capitalist proprietors — now employed the workers. In addition, since the new energy created concentrations of factories, it also assembled great masses of workers in one workplace. These conditions favoured the growth of class-consciousness on both sides of the production process.
The industrial economy deepened the polarising tendencies in the agrarian system. Formerly, due to the greater economies of scale in manufactures compared to primary goods, there was a tendency for manufactures to be concentrated in countries that acquired the biggest markets, whether by chance or force. By reducing the costs of manufactures and transportation and creating mineral-based substitutes for raw materials, the energy revolution strengthened this tendency. In addition, both directly and indirectly, the energy revolution added to a country’s military power by stimulating prosperity, reducing the cost of arms and armaments, and improving military technology as inventors drew upon the general advances in the economy’s technical capabilities. In time, the development of steamboats, better prophylactics against tropical diseases, and the development of rapid-firing weapons sealed the fate of Africa and Asia; they were colonised or converted into open-door countries. The white-dominated Periphery in Europe and Latin America had the protection of membership in the European family of civilised nations.
The first countries to adopt the new energy system would have a near-lock on the global economy. It created a set of cumulative forces that concentrated manufactures, capital, technology and power in the countries that took a lead in the energy revolution — the Core countries. Simultaneously, the new energy system created a Periphery, economic regions that were restructured by Core capital to supply food, agricultural raw materials and minerals to the Core. In varying combinations, military force, markets and racist ideologies brought about this restructuring. It is the story of this global economy that we narrate in these pages.
In his Wealth of Nations, Adam Smith (1776) does not once refer to any of the early signs of an industrial revolution—the harnessing of waterpower, the use of steam engine in mines, or the rise of factory production. Although he was greatly impressed by the power of division of labor in manufacturing, he believed that diminishing returns to capital and labor, in the presence of fixed amounts of land, would eventually lead the economy into a stationary state. This remained the vision of classical economists even as late as the middle of the nineteenth century.
Amongst classical economists, Karl Marx (1848) alone took serious notice of the industrial revolution. In graphic passages, he describes the quickening pace of history, the tremendous expansive power of capital, its constant search for new markets and new technologies, and how this was pushing small-scale producers into the ranks of workers, and unleashing profound changes in the economic and social landscape of pre-capitalist societies everywhere. These transformations had produced two great classes, capitalist and workers, constantly at odds with each other. At the global level, this expansive dynamic was destroying pre-capitalist societies and binding them into a single system of global markets. Although Marx did not worry too much about the origins of capitalism—he saw its precursors in the burghers of medieval towns, the growing commerce stimulated by the discoveries, and the system of Atlantic trade—he was reasonably certain that the system he was describing was fully developed or nearly so. Indeed, it was ready for another epochal transformation, and he might even live to see that happen in his own lifetime. As it was, Marx underestimated the durability of the system he was analyzing.
Class contradictions are central to Marx’s analysis of capitalism. The two great classes spawned by industrial capitalism, capitalists and workers, had opposite interests. The capitalists were driven by competition to accumulate, innovate, and expand their market shares; this produced concentrations of capital and deepening business cycles. By the same logic, they sought to drive down wages and lengthen the workweek; this pauperized the workers. At some point, Marx predicted, even in his own lifetime, these two tendencies would produce a proletarian revolution. Led by the communist party, the workers would overthrow the capitalists, abolish markets, socialize ownership and production, and lay the foundations of a new social formation.
History did not oblige Karl Marx. There would be no proletarian revolutions in the advanced industrial countries, where capitalist contradictions were most ripe for the overthrow of capitalism. The workers stirred in less likely places, but were easily suppressed. On the whole, the class contradictions were contained, as capitalist growth created a middle class, and rising labor productivity began to translate into higher wages for production workers. In time, when the workers organized, it was not to overthrow the system but to demand higher wages and better working conditions. Slowly, capitalists acceded to these demands, as unionized power expanded, workers gained voting rights, and labor parties gained ground at the ballot. The emergence of the Soviet Union, the first worker’s state, pushed Core capital towards greater accommodation with their working classes. In addition, since there was little industrialization in the Periphery yet, their concessions to labor did not dampen the international competitiveness of Core capital. Finally, with help from compulsory schooling and the media, the system succeeded in socializing the workers as citizens, endowed with rights and the illusion that they were free to move up the social ladder through education, thriftiness and hard work.
The challenges to Core capital came from two sources not anticipated by Karl Marx: the rivalry of countries seeking entry into the Core, and attempts by the Periphery to overthrow the Core’s hegemony.
The outward expansion of Core capital was a central result of Karl Marx’s analysis of capitalism. He never worried that anything short of a proletarian revolution could reverse this expansion; it would penetrate all parts of the world, and transform and launch them on development trajectories similar to those traveled by the Core countries. Karl Marx had not foreseen that the global expansion of Core capital, in and of itself, might generate contradictions that would reverse for several decades the capitalist penetration of the Periphery. We are indebted to Vladimir Lenin and the neo-Marxists for drawing our attention to these contradictions.
Contrary to the mythical accounts of orthodox economists, we observe an intimate connection between the capital and the state at least in the rise of capitalism in Western Europe. In the new age heralded by the energy revolution, capital in the Core countries would use the expanded powers of the state to try to acquire exclusive control over markets and resources in the Periphery. Starting in the nineteenth century, this produced a new wave of direct colonization of societies – in Asia, Africa and Caribbean – that did not have the protection of membership in the Western “family of nations.” At least for a while, the parceling of the world into colonies proceeded quite smoothly. There was plenty of real estate for everyone.
The first challenge emerged when powerful new entrants into the Core – Germany, Italy and Japan – were seized with empire envy. The old timers, Britain, France and Netherlands, had appropriated all the real prizes in Africa and Asia. Miffed, the newcomers decided that their best chance of gaining an empire was to take it from those who had one. In time, as Britain’s hegemonic control weakened, this produced two fratricidal World Wars, fought mostly amongst Western countries at the Core. According to an African proverb, when elephants fight, the grass gets trampled on. In this case, whether by good or ill luck, the grass would have a chance to grow.
Industrial capitalism spawned powerful cumulative processes—operating through markets, military power and racist ideologies of domination—which concentrated capital, manufactures, technology and power in the Core countries. The dependent Periphery in Asia, Africa and the Caribbean, regions that lost their sovereignty, specialized in the production of primary goods for export.
The centralizing tendencies of Core capital acted strongly and quickly. By 1913, according to Bairoch (1982: 296, 304), two-thirds of the world’s manufactures were concentrated in four Core countries: Britain, United States, Germany and France. In 1750, their combined share had stood at less than a tenth. At the same time, the Core countries reduced vast areas of the world—nearly all of Asia, Africa, Central America and the Caribbean—to colonies, open-door countries or dependencies, which were converted to the production of primary exports. Those parts of the Periphery that enjoyed various degrees of political autonomy were luckier. By 1950, many of them had developed indigenous capital, skills and manufactures.
The contradiction between the Core and dependent Periphery was on display, most transparently, in the widening gap between the living standards of the two economic areas. According to Bairoch (1981), Britain had roughly the same per capita income as Asia in 1800; but, in 1950, it had gained a lead of close to six to one. Africa suffered a similar decline in its relative position. On an average, the sovereign parts of the Periphery did not face a decline in their relative position during this period.
Once again, history had dashed the great hopes of Karl Marx. Core capital had penetrated the Periphery—in fact, its political penetration of the dependent Periphery was nearly complete—but failed to transform its productive potential. Instead, the global expansion of Core capital had polarized the world, dividing it into two unequal moieties, the Core and the Periphery, connected by the disequalizing impact of trade, imperialism and racist ideologies. In the words of Andre Gunder Frank, capitalist development at the Core produced underdevelopment in the Periphery. It is important to note that this inverse dynamic was strongest in the relations between the Core countries and the dependent parts of the Periphery.
The prospects for growth in the dependent parts of the Periphery were dim as long as they could not structure their economic relations with Core capital. Yet, the system itself offered a break. Help came when the elephants got into fights—big fights, better known as World Wars. These wars battered the strength of the elephants, creating opportunities for indigenous capital in the Periphery. When these wars directly involved major countries in the Periphery—Russia in the First World War, and China in the Second World War—they created openings for the emergence of radical political movements. Thus was born the October Revolution of 1917, amidst the chaos of Russian defeat during the First World War, producing the first systemic challenge to Core capital. Ironically, the challenge had come from the Periphery.
The October Revolution of 1917 began a temporary reversal in the global concentration of capital, power and manufactures. It gave an impetus to liberation movements—in the colonies and open-door countries—that were already challenging this concentration, even pushing some towards radical solutions. The Soviet Union stood as the vanguard, the one great ally, of liberation movements seeking to roll back the colonial empires and weaken the polarizing dynamic of global capital. When the elephants fought again twenty years later, these decentralizing movements were poised for major victories.
Most importantly, the Second World War battered the major colonial powers, those who won no less than those who lost. Of course, the defeated powers, Italy and Japan, instantly lost all their colonies. The victorious colonial powers, Britain, France, Belgium and Netherlands, found that they had lost too much of their former strength to successfully defend their empires, especially as the liberation movements gathered steam. In most cases, they decided to pull out of their colonies before the anti-colonial movements turned violent; this also offered the best opportunity of preserving their economic interests and influence in the former colonies. A massive decentralization of power followed, larger, more dramatic and deeper than the one that marked the dismantling of Spain’s American empire in the 1820s.
This was a window of opportunity for the Periphery, especially the former colonies and open-door countries who were now free to restructure their relations with Core capital. Several tried collective ownership and planning, and insisted on a radical break from global markets. By the 1970s, nearly a third of the world’s population lived in communist countries. Many more did not reject markets as such, but adopted a variety of interventionist measures to develop indigenous capital, manufactures and skills. Starting in the 1950s, the former colonies jettisoned the colonial doctrines of laissez faire, free trade, balanced budgets, and private ownership. In their place, they introduced interventionist policies to accelerate the pace of development.
This decentralization produced some dramatic results. The share of the Periphery – Africa, Latin America, and Asia minus Japan – in world manufacturing output had shrunk to 6.5 percent in 1953 from a dominant share of 73 percent in 1750. After two centuries of decline, this share began to increase in the 1950s, and rose to 12 percent in 1980. In addition, the growth rates in the Periphery accelerated dramatically. The per capita income in the largest colonies and quasi-colonies, containing some 50 percent of the world’s population, grew at an average annual growth of 0.5 and -0.27 percent over 1900-1913 and 1913-1950; the same growth rates for the sovereign countries in the Periphery were 1.61 percent and 1.34 percent. Over 1950-1992, the growth rates in the former colonies and quasi-colonies had jumped to 2.96 percent, ahead of the 2.58 percent recorded for the always-sovereign countries in the Periphery.
The retrenchment of Core capital would not last. Starting in the 1980s, the IMF and World Bank began to dismantle the developmental states as their mounting international debts pushed them closer to bankruptcy. A decade later, the communist regimes began their transition to markets. In 1994, the creation of WTO institutionalized the interests of Core capital.
It is tempting to take the position that this recentralization was inevitable. An underdeveloped Periphery could not long resist the expansive power of the Core countries once the latter had recouped their war losses and regained their growth momentum. Yet, the communist revolutions and the liberation movements in the Periphery came quite close to dislodging global capitalism. On closer examination, the argument that revolutions in the Periphery were incapable of overthrowing Core capital is not as watertight as it appears. In this case, Core capital had geopolitical luck on its side.
The challenge from the Periphery was quite massive. The Soviet Union, which mounted the systemic challenge to global capitalism, was a great power itself. Its industrial and military strength expanded rapidly in the decades following the Revolution, and, at the end of the Second World War, it had emerged as one of the two superpowers dominating the world. In 1950, the communist regimes in Soviet Union, Eastern Europe and China stretched continuously from the Danube and the Balkans to the Pacific, together controlling the upper half of the Eurasian landmass; they also contained nearly a third of the world’s population. In addition, communist parties were active in many Third World countries. At this point, many fully expected the tide of communism to roll westward into a Europe devastated by war, and southward into impoverished Asia and Africa. If, instead, Core capital successfully blocked the communist advance and the Soviet Union itself collapsed in 1990, there was nothing inevitable about these outcomes.
If Core capital overcame the communist challenge, this was, at least in part, a fortuitous outcome of the system of nation states. The fact that United States was the hegemonic power during this crucial period was a geopolitical accident; there was nothing in the logic of capitalist system per se that produced this result. Yet, this accident was of vital importance to the outcome of the contest between Core capital and the communist regimes and nationalist liberation movements in the post-war years. Imagine this contest with Britain still as the leading Core country.
United States brought several vital advantages to this contest. The most important was size. It had vastly greater resources than its predecessor, Britain, had at its height. United States produced 44.7 percent of the world’s manufacturing output in 1953 and 27 percent of the world’s output in 1950; compare this to Britain’s peak share of world manufacturing output of 20 percent in 1860, and a share of 8.5 percent in world output in 1870. American capitalism too was in some ways unique; it had a huge industrial working class but they possessed little class-consciousness. As a result, organized American labor joined enthusiastically in the fight to undermine workers’ movements overseas. Capitalism—‘free enterprise,’ in the American lingo—occupied a place in this country’s emotional life that normally belongs to religion, inseparable from its national existence and history. The communist challenge evoked very strong emotional defenses. Finally, the great distance of United States from the theatres of war in Europe ensured that it would emerge from the two World Wars with all its industrial assets in one piece.
The American strategy for containing communism required the commitment of massive resources. The first component of this strategy was to put the war-devastated economies of Western Europe and Japan back on their feet; some of these economies had lost more than half of their pre-war production capacities. The Marshall Plan was the centerpiece of these efforts. The United States injected $11.8 billion into Western Europe between 1948 and 1952, equal to $120 billion in 1997 prices. In the words of Duignan and Gran (1997), this amounted to the “greatest voluntary transfer of resources from one country to another.” This injection of capital financed technology transfers and the import of vital machinery, spare parts, and raw materials, all of which put Western Europe’s industries back on their feet by 1952. In addition, the Marshall Plan pushed Western Europe towards economic and political cooperation, helping to lay the foundations of a united Europe. United States played a similar role in the recovery of Japan.
The second focus of America’s containment strategy was a massive military buildup. During the Cold War, the military spending of United States remained roughly proportional to its share in the global economy. In 1986, this share was 28 percent of the world total and 65 percent of the NATO total. It is even more remarkable that the Soviet Union, according to CIA estimates, outspent the United States. In 1986, the military expenditures of United States and Soviet Union were $365 billion and $374 billion respectively. Since the Soviet GDP was only 38 percent of the US GD in 1986, this must have placed their civilian economy under considerable strain. Many experts maintain that this was an important factor in the eventual collapse of the Soviet Union.
The containment strategy had a third focus. On the one hand, it consisted of massive efforts to install anti-communist governments in the Periphery, prop them with military and economic assistance, and use them to eradicate radical movements in their own countries. The White House led these efforts with support from several agencies including the United States Agency for International Development (USAID). The Central Intelligence Agency (CIA) carried out the opposite task of overthrowing or destabilizing governments that were ‘unfriendly’ to United States. A single statistic bespeaks better than many tomes the power of this Agency: it spent $26.6 billions in 1997.
The vast economic and military resources of United States allowed it to maintain a firm hegemonic grip over the global capitalist system. On the one hand, it created the NATO (North Atlantic Treaty Organization) to institutionalize its military dominance over the Core countries in Western Europe. In a similar move, Japan was converted into a military protectorate. In the economic arena, United States sought to stimulate economic growth in Western Europe and Japan by providing them relatively free access to its own vast markets. In other words, the United States employed its dominant hegemonic position to eliminate military conflicts among Core countries and, in addition, replaced their economic rivalries with various cooperative arrangements, including the European Common Market (ECM) and the Organization for Economic Cooperation and Development (OECD). Freed from their old conflicts, with declining trade barriers, and better management of business cycles, the Core countries went on to experience a golden period of growth between 1950 and 1973.
Core capital slowly regained its intellectual confidence and political muscle as it grew and expanded, at home and abroad. On the economic front, this was visible in the assault by neoclassical economists on Keynesian macroeconomic policies, the regulation of industries, the welfare state and social security programs. Politically, Core capital gained control over the levers of power with the election of Prime Minister Thatcher in 1979 and President Ronald Reagan in 1980, two right-wing warriors. The conditions were now ripe for Core capital to stage a comeback.
We can agree on the factors that contributed to the collapse of communism but still disagree on their relative importance. First, and I think foremost, there was the geopolitical luck that placed the vast resources of the United States in the fight to contain communism. This not only stopped the spread of communism: it pushed the Soviets into a debilitating military rivalry even as they failed to match the growing affluence offered by the Core countries. In addition, the communist states were disadvantaged in their ideological battle against Core capital. The Core countries captured the high ground on democracy and freedoms, even while they sterilized the impact of these rights with money-driven elections, media manipulation, and schooling. On the other hand, the communists practiced inflexible planning, rejected political competition, and stamped out dissent with police methods. They denied workers a sense of ownership in their workplace, and when they also failed to deliver prosperity, they had no chance of surviving. It was too late when the Soviets undertook reforms in the late 1980s; this only deepened the feeling that the system was indeed rotten, and hastened its collapse. China avoided this catastrophic end by starting early on their economic reforms and delivering rapid economic growth. However, their reforms too led to the same destination: the dismantling of communism.
The end of developmental states came about differently. They had created hothouses for the growth of indigenous capital in the Periphery, a prospect that could not have pleased the Core countries. Since Core capital could not block the progress of developmental states, they sought to penetrate them with official loans, military agreements, private investments, technical assistance, and access to the best graduate schools in the Core countries. In time, this would produce results. Core capital penetrated the key sectors of the developmental states, integrated their elites into the lower rungs of the Core hierarchy, and oriented their most talented graduates into Core labor markets. Once started, this process worked by undermining the developmental states.
Several forces inside the developmental states produced similar results. In their anxiety to deliver growth on the cheap—without painful reforms—the nationalists would seek loans from the Core countries, regardless of the hidden costs, until their debt servicing placed them at the mercy of the lenders. In their search for easy profits, the indigenous bourgeoisie forged links with Core capital—as subsidiaries, suppliers, and distributors—and, once these ties multiplied, they would lobby for the removal of barriers against the penetration of Core capital. Finally, as some developmental states created the infrastructure and skills that would make them increasingly competitive in manufactures—threatening the Core countries with competition in their own markets—this would invite predatory investment from Core capital, eager to ensure that they owned the new industries developing in the Periphery. The strikes against developmental states were mounting.
The dismantling of developmental states began in the early 1980s, well before the end of the Cold War. It was triggered by the cumulative impact of the two oil crises of 1974 and 1979. Unable to pay their higher import bills, the oil-importing developmental states took out variable-interest loans from foreign banks secured by sovereign guarantees. When interest rates rose in 1981, and some of these countries faced bankruptcy, the IMF and World Bank—the watchdogs of Core capital—stepped into the breach, offering new loans to stop them from defaulting on their old ones. At first, the borrowers were required to stabilize their economies, which translated into cuts in their social spending. This was the thin end of the wedge. In time, the conditionalities were expanded into “structural adjustment programs”—a code word for eviscerating the developmental states—which required eliminating trade barriers, freeing exchange markets, privatization, and national treatment of foreign investments.
The age of neoliberal economics had arrived. This was the new consensus forged in the 1980s by a cohort of orthodox economists, many connected to the World Bank and IMF. For several years, they had been developing a doctrinaire neoclassical critique of developmental states—supported by several generously funded, country-by-country assessments of the inefficiency of interventionist policies in the developmental states. Their vision, appropriately dubbed the “Washington Consensus” by John Williamson (1994), would tilt the playing field in the Periphery to favor Core capital. In this new regime, the reformed states would guarantee national treatment to Core capital, enforce property rights—effectively, those of Core capital—balance their budgets, and help in the provision of human capital. Core capital would step in to capture the commanding heights—the financial sector, utilities, communications—and any industry that offered handsome profits.
The end of the Cold War produced a push to institutionalize the interests of Core capital in a new global framework. In 1994, this led to the creation of the World Trade Organization (WTO), which bound all its members to a single set of rules—neoliberal rules—on trade, exchange markets, foreign investments, government procurements, property rights and investments. The WTO forced all countries to accord “national treatment” to imports and foreign capital in every sector of the economy, including services, thereby preparing the ground for rolling back the gains of developmental policies. All this was a signal departure from the General Agreements on Trade and Tariffs (GATT)—the trade regime displaced by WTO—which granted developing countries the right to impose protectionist trade and payments regimes.
By the late 1990s, Core capital had reversed much of the decentralization of power that had occurred since 1917. At no period during the past two centuries did Core capital—not even during its previous peak in the late nineteenth century—operate with so much freedom in nearly every country of the world, or make deeper inroads into the Periphery. In effect, the WTO bound the Periphery to the old open-door treaties minus extraterritoriality; though in other respects the WTO was more invasive than the open-door treaties, especially in the enforcement of property rights, the penetration of services, and opening up government contracts to foreign bids. In addition, the private agglomerations of Core capital in the 1990s were now incomparably greater—compared to most countries in the Periphery—than they were a hundred years back. This increased the capacity of Core capital to crowd out, co-opt and absorb indigenous capital in the Periphery. Was this the Valhalla of Core capital, the dream of the prophets of laissez faire?
The swift and easy recentralization of the global economy created a paradoxical situation. United States still commanded a massive military force while the combined military strength of its main adversaries was less than a third its former size.[16] This led to calls to downsize the military, an intolerable prospect for the industries whose profits depend on military contracts. This had to be remedied.
The refurbished power of Core capital was creating some domestic problems too. On the one hand, Core capital was eroding the social gains made by workers, consumers, and environmentalists since the 1930s. More importantly, the labor force in the Core countries was beginning to face competition from the growth of industrial production and advanced skills in some countries at the Periphery. They were also losing jobs as Core capital relocated to the Periphery, a process being accelerated by the internet revolution. In addition, Core capital was using its muscle to import cheaper skilled workers into the markets of Core countries. Faced with a sustained decline in their living standards—the first in the history of industrial capitalism—a growing number of people in the Core countries were gravitating towards anti-Corporatist, anti-globalization movements. This too had to be remedied.
These problems would be solved by inventing new enemies. It was in this context that Bernard Lewis (1990) first invented the “clash of civilizations” between the West and Islam. He argued that the Islamist opposition in the Middle East represented “a mood and a movement far transcending the level of issues and policies and the governments that pursue them. This is no less than a clash of civilizations – the perhaps irrational but surely historic reaction of an ancient rival against our Judeo-Christian heritage, our secular present, and the worldwide expansion of both in 1990, that the West was engaged in a veritable clash of civilization with Islam.” Three years later, Samuel Huntington (1993) generalized this thesis into a historical principle. At the end of the Cold War, he prophesied, the world is entering a new age, whose conflicts will occur along the fault lines of civilizations, mostly between the West and Islam, and the West and China.
The Clash thesis set up the military machine for capture by powerful special interests and voting blocks within United States. Quickly, the Israeli lobby, Christian fundamentalists, the oil interests, and military contractors joined forces. Each would pursue its specific goal—eliminating threats to Israel’s hegemony, Christianizing Islamic societies, capturing oil profits, resisting military cuts—by mobilizing America’s redundant military to re-colonize the Middle East. It was not hard selling this imperialist project to Americans. The Arab regimes were easily painted into a corner. They were tyrannies, they possessed weapons of mass destruction, they were an imminent threat to American lives, they opposed Western values, and they threatened Israel. A great nation, the greatest there has ever been, would have little difficulty manufacturing a clash of civilizations when it needed one.
M. Shahid Alam is Professor of Economics at Northeastern University, USA. His last book, Poverty from the Wealth of Nations, was published by Palgrave in 2000. He may be reached at m.alam@neu.edu.
Visit his webpage at http://msalam.net. © M. Shahid Alam
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Globalisation and economic security: Bangladesh perspective
Dr. Hafiz G. A. Siddiqi
The second wave of globalisation has put unprecedented pressures on small states like Bangladesh. The World Trade Organisation (WTO) is helping in articulating the globalisation process by its new rule-based world trading system. These rules are framed in a way that favours the economically powerful countries at the cost of economically weaker countries that lack bargaining power. The concerns of the least developed countries (LDC) are in most cases not included in the agenda in the ministerial-level conferences as has been demonstrated many times, and very plainly in Seattle and Cancun. Apart from the controversies between free trade versus fair trade, the rules of the games that deal, for example, with the withdrawal of subsidies, dismantling of non-tariff barriers, intellectual property rights, using non-trade issues to manipulate market access, dispute settlement process, meaningful participation of LDCs in the WTO-sponsored meetings, etc. are also matters of concern for the LDCs. The negative effects of all these factors can cripple the economy of a country like Bangladesh. Its economic security may be in jeopardy if it cannot cope with the external interventions. It is, however, recognised that the concept of economic security is a complex and multi-dimensional one. For the sake of brevity, economic security is defined here as a condition in which a country enjoys the freedom to choose, design and implement development policies and plans that, according to its belief, will empower itself to alleviate poverty both in absolute and relative terms, reducing the gap between the rich and the poor, and will also enable it to follow a road map for economic prosperity according to its own priorities. This situation includes an ability to absorb the economic shock created by the recession in the rich countries like USA. The economic security of a country should also include an ability to survive economically if its access to large markets is withdrawn or denied. For example, in the case of Bangladesh, it refers to the ability of Bangladesh to survive economically if the EU and US decide not to import apparels from Bangladesh.
Globalisation
It is to be noted that there are differences between the first and second wave of globalisation. For the economically weak countries the threat is more in the second wave of, or current, globalisation. Globalisation is not merely internationalisation of business through expansion of trade. It has some additional dimensions. At the end of the 19th century, the world was highly integrated economically, through mobility of capital, information, goods, and people. Capital moved freely between states. Markets became inter-connected as a result of improved communication. The first transatlantic cable was laid in 1866. There was regular transatlantic steamer service from 1838. Trade volume as a percentage of GDP was large, although protectionist policies were pursued in many cases. Above all, people moved freely without passport and visa in search of freedom, security and prosperity. Such flows eased the desperate poverty of, among others, Ireland and Norway. (See Harold James, The End of Globalisation, p.10-11). But at that time a regulatory body like the WTO was conspicuously absent. Consequently, the individual small states did not suffer the harmful hegemony of one or two superpowers.
The second wave of globalisation that started in the late 1980s has specific characteristics that are problematic. Much-hyped free trade is the cornerstone of this globalisation, although in reality trade is neither free nor fair for the smaller states. For all practical purposes, WTO decides, as an indirect proxy of the powerful trading partners, the degree of freeness or fairness in trade the economically weak nations will enjoy. For this reason, the smaller states suffer from economic insecurity. In the first globalisation, the integration was only in the manufactured goods and finances. The current globalisation includes not only trade in manufactured goods and money, but also services like banking, insurance, legal practices, agriculture, intellectual properties, etc. and will soon cover education. On the other hand, free movement of unskilled or semi-skilled labour (comparable to the free movement of people that existed in the first wave of globalisation) is not included in the WTO negotiations due to the opposition of the developed countries. This certainly further reduces economic security of a country like Bangladesh.
The World Bank predicted that the elimination of trade barriers to manufactured goods, agricultural products, and services would boost global income by more than $500 billion. But how much of this amount will come to the poor countries? Most people fear that the gains of the poor countries will be disproportionately smaller than that of the rich countries. While absolute income in the poor countries may go up marginally, the relative income and consumption gap between the rich and poor will continue to widen. This means that, if escape from poverty is a condition of economic security, the current process of globalisation will jeopardise the economic security of the economically weak countries including Bangladesh. This may be clear if we review the WTO’s discriminatory policy of removing trade barriers. The smaller states are required to eliminate/dismantle all kinds of tariff and non-tariff barriers. But in real life, the rich countries do not actually go for reciprocal removal of trade barriers. A glaring example is the case of agricultural subsidies given by both the US and EU. On the other hand, take the case of Bangladesh. In response to the World Bank/WTO pressure, Bangladesh has dismantled most of the trade barriers. But Bangladesh’s experiences demonstrate that drastic reduction of tariff barriers without reciprocity will result in the flooding of the domestic market with cheaper imported goods that will in turn cause closure of many domestic industries. This happens because competition is allowed between unequal partners. Unless a level playing field is ensured, the so-called free competition created by the pressure of globalisation, instead of ensuring economic security, will increase the economic insecurity of the smaller states like Bangladesh.
What should Bangladesh do?
To ensure economic security, Bangladesh has to have a clear road map to achieve at least three goals. The first is getting free access to global markets (in addition to the US and EU markets) for an increasing number of goods and services. This access is not only for manufactured goods like textiles and readymade garments (RMG), ceramics, medicines, processed foods, electrical appliances, etc. but also for skilled, semi-skilled and unskilled manpower (this may be construed as export of services). This is actually adding new products/services to the export basket. If the rich industrialised countries grant market access, Bangladesh can export well-trained professors, engineers, doctors, nurses, paramedics, software engineers, etc. for which demand exists in all developed countries. Success in such product diversification will certainly reduce the vulnerability of the economy of Bangladesh. The second goal is capacity building. It is to develop and increase domestic manufacturing and supply capacities to meet international demand, in line with increasing market access. It must acquire the capacity to increase both domestic and export demand. This supply capacity must include development of educational and training institutions capable of producing skilled and semi-skilled personnel for export. The third goal is increasing bargaining and negotiating power. Bangladesh must increase its negotiating and bargaining capacity to influence the decision-making process at the ministerial meetings of the WTO, and similarly increase its negotiating capacity to maximise the benefits from regional (SAARC) and bilateral agreements, particularly with India and USA.
RMG industry and economic security
A small country may suffer from economic insecurity for various reasons. The case of RMG is chosen here as an example because this industry has become very critical for the economy of Bangladesh. The RMG industry is the most globalised industry. The outsourcing process of the high-cost countries tends to exploit the cheap labour in the sweatshops of the low-cost countries. In the process, the world trading system instituted by the WTO tends to prepare the way for globalisation of sweatshops. Rapid expansion of the RMG industry and too much dependence on this single industry has rendered the economy of Bangladesh highly vulnerable. In fact, given the limited ability of Bangladesh to develop other export-oriented industries, the economic security of Bangladesh depends largely on the future of this industry. The implication is that Bangladesh must do something to reduce such insecurity. To reduce economic insecurity, Bangladesh needs to implement certain strategies. In case of the RMG industry, Bangladesh should take at least the following steps.
Market diversification
Currently, Bangladesh depends on only two markets, namely the US and EU. More than 96% of its apparels are shipped to these two markets. This has made Bangladesh very vulnerable. The only way to reduce such vulnerability is to diversify markets. Market diversification primarily calls for trade creation. It aims at identifying and penetrating into new markets. For this, it is necessary to take proactive steps to access new and potentially large markets. In the case of the RMG industry, market diversification or developing forward linkages demands taking over from the foreign buying houses the major marketing activities by the Bangladeshi manufacturers and exporters. For trade creation, the particular targets should be Indian, Japanese, ASEAN and Middle Eastern markets. Besides, Bangladesh must explore markets in China and Russia because both these countries import large quantities of apparels. China, with its fast growing economy, will have a large number of consumers with increasing disposable income with a tendency to prefer imported items. Besides, it is likely to become a high-cost country in the future because wages in China will increase rapidly, and due to high wages, it will go through the similar process of relocation of the RMG industry as Japan, South Korea and Taiwan have experienced. In the near future, perhaps ten years from now, labour-intensive CMT operations will be shifted from China to some other countries including Bangladesh. The domestic demand for low-priced RMG in China probably will be met by imports and thus, for Bangladesh, China will be a large market with very high potential. Strategic alliance with Chinese retailers will be a viable option.
Like China, Japan is also potentially a very large market for Bangladeshi apparels. As the second largest economy of the world after USA, Japan imports a huge quantity of garments, particularly from China. Some 80% of its total apparel import requirements are met by China, whereas the rest 20% are imported from a number of other countries including UK, Turkey, USA, Vietnam, India, Sri Lanka and Pakistan. With proper marketing efforts Bangladesh can penetrate into the potentially large Japanese market. It may be mentioned that Japan has already granted duty-free status and GSP facility, and there is no quota restriction for Bangladesh.
Similarly, Australia, Russia, the ASEAN region and Middle East also are likely to be a large market for Bangladesh. Recently, Australia has agreed to grant duty-free and quota-free entry of apparels made in Bangladesh, if it meets rules of origin requirements.
Regional cooperation/SAPTA/SAFTA
Regional cooperation increases bargaining power and strengthens economic security of the member countries. The successful trade blocs demonstrate that intra-regional trade can be increased rapidly and substantially through preferential trading arrangements. Regional integration can benefit the members through trade creation and trade diversion at the cost of non-members. In Asia, ASEAN countries export garments to each other. Even the new members, Vietnam and Cambodia, export garments to some other members of ASEAN. Its intra-regional trade is currently about 32%. Do SAARC countries offer similar promise to Bangladesh? Yes, there is potential, although the past success of SAARC is not impressive. Anyhow, market potential for Bangladeshi RMG and other exportables in the SAARC region, most importantly in the Indian market, must also be explored. However, there are many constraints that work as deterrents for Bangladesh to get access to the Indian market. Political animosity among the members, particularly between India and Pakistan, has contributed to such lacklustre progress. Unless India and Pakistan, the two nuclear powers in South Asia, decide to forget their political animosity, it is difficult to anticipate a turn-around in the near future. Unless the political leadership of these two countries agrees to cooperate, substantial increase in intra-regional trade cannot be expected.
What Bangladesh can and should do is to develop and sustain good trade relations with India through bilateral trade agreements. Bangladesh should re-shape and articulate its bilateral trade agreement with India. Sri Lanka has bilateral trade agreement with India. Bangladesh has already signed the Ganges Water Treaty with India. Nepal and Bhutan, the other two members of SAARC, also have bilateral agreements with India. Besides, Bangladesh may seriously examine the viability of gas export to India with the technical help of the international oil companies that are already operating in Bangladesh. If gas export is economically viable, this will not only reduce the current trade imbalance between India and Bangladesh, it is also likely to create opportunity for RMG export to India. While negotiating SAPTA in the past, RMG was excluded from the list of items that would have been granted relatively easy access to the Indian market. In future negotiations, Bangladesh should insist that as long as RMG is produced in Bangladesh with fabric/yarn imported from India, within the Rules of Origin defined under SAARC Cumulation, Bangladesh must have quota-free and duty-free access to the Indian market. Gas export, if found feasible, may be used as a bargaining chip to export RMG and other products to India. In addition, it may invigorate its initiatives to revive the proposed South Asian Growth Quadrangle (SAGQ), a proposed sub-regional cooperation between four SAARC members, namely Bangladesh, Bhutan, part of India and Nepal. The operation of SAGQ is likely to increase trade opportunities between Bangladesh and India. Furthermore, expansion of transit facilities through Bangladesh is likely to work as a good argument for easy access of Bangladeshi products to the Indian market. All these may help get fair access to the Indian market for the apparels produced in Bangladesh. Through SAPTA, Bangladesh should try to increase its apparel exports to Pakistan and Sri Lanka too. It may be noted that the formation of regional and sub-regional cooperation is encouraged under the present globalisation-driven WTO system. If the steps suggested are taken properly, Bangladesh will be able to ensure its economic security.
Pursuing prudent business diplomacy
The benefit of trade relations is positively correlated with the quality of diplomatic relations between the trading partners. Particularly, the quality of economic diplomacy determines market access and the volume of trade that occurs between the countries. Bangladesh may not enjoy the special and differential treatment within the framework of the WTO if it fails to pursue prudent economic diplomacy with a particular importing country. It is already evident that the articulated economic diplomacy that Bangladesh maintained with the EU has paid a high dividend in the form of duty-free and quota-free access to the EU. Similarly, because Bangladesh maintains good diplomatic relations with USA, it has easy access and a guaranteed market in the US through large quotas. Another example of the benefit of maintaining good economic diplomacy is the quota- and duty-free status that Bangladesh has recently been granted by Canada and Japan. If Bangladesh wants to get free market access to India, China and Russia, it will have to pursue prudent economic diplomacy, otherwise it will be subjected to various NTBs even after 2004 when all countries will be required to allow other countries free access to their markets.
It is to be noted that even in this age of globalisation and free trade, non-compliance with WTO rules and use of NTBs are very common. Although the application of NTBs is usually not permitted under WTO rules, some importing countries use them on technical or political grounds. For example, the use of non-trade issues, like human rights violation or absence of democracy in the exporting country. Labour standard or eco-labelling requirements may also work as NTBs. While Bangladesh has resolved the problem of child labour and eco-labelling, it is still struggling with the US demand for granting the factory workers in the Export Processing Zones the right to form trade unions. Bangladesh has sought duty-free access to the US market, but it has not yet been granted. To gain better insights of good diplomacy, Bangladesh must find out why CBI countries, Turkey and Israel-Jordan joint venture firms located in Jordan, got such privileges. At the diplomatic level, it is quite natural for the US to expect something from Bangladesh in return for granting duty-free access. The case of Turkey may be referred to in this context. Its quotas were increased substantially after it allowed the US and the allied forces to use its air bases to bomb Iraq. Similarly, Pakistan’s export of apparels increased after it cooperated with the US to fight against terrorism in Afghanistan. Vietnam, perhaps, presents a more interesting example. Vietnam and USA were not on good terms for a long time because of the ideological difference between them. But after normalisation of diplomatic relations, Vietnam’s apparel exports to USA have been increasing rapidly. All these imply that in the absence of prudent business diplomacy, other measures like development of backward and forward linkages, full implementation of cost reduction strategies, product and market diversification, etc. may not enable Bangladesh to achieve its goal: to retain its leadership, at least a respectable position as an exporter of apparels in the global markets, in the post-MFA regime.
The role of WTO
Increasing economic integration (globalisation) has led to a profound political and social revolution. The traditional sovereignty of the nation-states is being eroded. The WTO, along with the World Bank and IMF, are imposing many economic policies (reforms and restructuring) on many countries against their will.
The world trading system is almost centrally controlled by the WTO, an organisation dominated by rich industrial countries led by the USA. The nature, structures, composition and operating procedures of WTO are not democratic. The smaller states, although theoretically voting members, do not get opportunities to have their agenda included in the top-level meetings of the WTO, as we have seen in Seattle and Cancun. As a result, the decisions taken and the rules and regulations framed and implemented by WTO mostly favour the rich countries.
However, some changes have begun to emerge after Seattle. The LDCs have created some pressure to change the behaviour of WTO, but their success is not yet visible. The failure of the WTO ministerial meeting at Seattle in November, 1999 gives some indication of the problems facing the globalised world. In the Seattle meeting, the major industrial states failed to draw up a realistic agenda. Many developing countries interpreted this as a ploy of new protectionism. The demonstrators of Seattle, Washington DC, Philadelphia, London, Prague and Genoa called WTO “a tyrant’s watchdog, at the portals of the new, improved, post-colonial, multi-cultural, genetically modified, low-fat imperialism”. (See The Battle of Seattle: The New Challenges to Capitalist Globalisation, 2002, p.21). At Seattle, WTO was exposed as secretive and wholly undemocratic in its internal practice; the elite nations met in the “green rooms” for important decisions while the poor nations were symbolic window dressing”. (Ibid, p.5). The WTO, as the conduit of capitalist globalisation, subordinates all interest groups to the universal interest of capital. The world trading system is such that it integrates low-cost countries with the high-cost countries in a way that automatically makes the small countries totally dependent on high-cost countries. This makes the small nations’ economic security vulnerable. Without appropriate reforms in the structure and operation of WTO, the economic security of Bangladesh will be threatened because eventually it will be forced to specialise in the supply of “indentured” labour. It will never be able to free itself from the low-level poverty trap.
Bargaining and negotiating capacity building
Capacity building does not merely mean an increase in the production capacity. It refers to bargaining capacity and negotiating skills as well. A small individual state on its own does not have any capacity to influence the decision that is taken at the ministerial meeting of the WTO. To increase their bargaining capacity, the small nations may form special pressure groups and try to put forward their demands jointly. The Cancun meeting failed partly due to the unity of the developing countries. They showed some bargaining clout. But the failure of Cancun or Seattle did not necessarily mean the victory of the “united” poor countries. The LDCs did not get any benefit or assurance of future economic security due to this failure. There is no sign that they will gain some bargaining clout in the near future. Only a small number of economically powerful countries will continue to exploit a large number of helpless, poor countries.
The failure at Cancun did not create any hope of genuine distribution of the gains of globalisation on the basis of equity and justice. Even the process of dispute settlement at the WTO level works against the interest of the poor countries. The economic security of a poor country like Bangladesh will remain vulnerable as long as the stronger states do not treat the weaker states on the basis of equity and fairness. If the stronger nations stick to their old attitude — “All men are equal, but some men are more equal” — then the economic security of the small states including Bangladesh cannot be ensured.
The writer is Vice-Chancellor of North South University.
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Making globalisation work for all
Joseph Stiglitz
As recently as the 1990s, globalisation was still viewed with enormous optimism. ‘Globalisation American-style’ was to bring unprecedented prosperity to all countries in the world. Flows of capital had increased six-fold. There were new trade agreements that were being heralded as introducing a new era, and economists talked about what these would do for jobs, for prosperity in the US. But by the end of the decade, all of a sudden globalisation appeared to look quite different. The WTO meeting in Seattle was supposed to open up a new set of trade negotiations. Instead of a new round, there were unprecedented riots - on a scale the US had not seen in 20 years. If trade agreements were bringing prosperity to developing countries, they did not seem to know it.
There were some very good reasons for much of this unhappiness. A study done by the World Bank pointed out that the poorest region in the world - Sub-Saharan Africa - was actually worse off by about 2-3 percent than before. But even before the study was released, it was evident that there were a large number of problems. Most visibly, there was crisis in East Asia, followed by the global financial crisis of 1998.
On the other hand, globalisation did have some successes, particularly in the initial growth of East Asia. In the preceding three decades, countries like Korea saw their per capita incomes increase eight-fold. Poverty was almost eliminated, literacy had become universal, health standards had been improved, life expectancy had increased - all these gains were based on globalisation. But this ‘globalisation’ was very much defined in their own terms.
The growth of these countries was based on export-led growth and absorbing knowledge (particularly technology) from the most advanced industrial countries. The Asian example proves that when globalisation is properly managed, it can bring enormous benefits, bringing not only economic growth but even well-distributed growth. But when it is not well managed, when it is not done selectively, it can have very adverse effects.
The end of the Cold War opened up new opportunities to try to create a new, global economic order - a global economic order that was based more on a set of principles, on ideology, on ideas of social justice. The world had the chance to set up a level playing field. We missed that opportunity. I think most people - policy makers, academics and most of the public alike - did not have a clear enough vision of what we wanted or what should have been created.
But the commercial and financial interests did have a vision of what they wanted. They wanted to seize this new opportunity to expand - to create a world that would open up new markets for themselves, for the corporations of the advanced industrial countries. And they used the US government to advance that perspective. So what happened was that the US - and Europe participated in this to some extent - used its economic power, its position as the sole economic and military superpower. It used its position to create a set of policies, in the area of trade in particular, that were grossly unfair. And we are now reaping some of the consequences.
The economics behind the inequities are fairly easy to understand. Asymmetries were incorporated into trade agreements, so that the developed countries could demand that the developing countries take away their trade subsidies, take away their trade barriers, all for the goods in which the industrialized nations had a comparative advantage. And then developed states did not reciprocate.
Manufactured goods, which had been the center of the discussions in trade for the preceding 50 years, were an increasingly small part of the American economy. Employment in manufacturing is now down to 14 percent of the American labor force. So it just is not as important - services are the dominant sector, and so it is quite natural that America wanted to focus the discussion on that area.
But what were the services that were on the agenda? For the most part, financial services, in which the United States has the comparative advantage - one could call them the US’ new export industries. The services that were not on the agenda were maritime services, construction services, services that are intensive in unskilled labor- that is, those services in which America did not excel. And the US remains extremely protectionist in those areas.
Because globalisation was driven by what I call a ‘special privilege’ agenda, the fundamental problems underlying globalisation were not addressed. And it is the global financial system that creates the most trouble. There were six financial crises in a period of six years, and these were not the first crises. What is particularly disturbing is that while we were talking about how wonderful the globalized financial system is in addressing the problems of risk, the developing countries were left to carry the burden of interest rates and market volatility. This has had enormous consequences for the developing countries. In Latin America, in the beginning of the ‘80s, many countries sank into a debt crisis. They may have defaulted on their loans, but they were still forced to carry the burden of interest rate volatility.
There is a second major problem with the current globalised system. The global reserve system has enormous peculiarities and is the underlying source of much instability. One source of concern is that the United States is effectively borrowing money from much poorer countries. To put it another way, the US today has an enormous trade deficit - running at $600 billion a year, borrowing more than $1.5 billion a day. To put it another way, it means that the richest country in the world is unable to live within its means. Meanwhile, the US is content to lecture the poorer countries about why they should be living within their more limited means.
There are some more lessons that I think ought to emerge from the instabilities over the past ten years. The first is that capital market liberalization and trade liberalization can expose markets to enormous risks. Thus one needs to carefully craft these policies to sequence and pace reforms. Otherwise one can have enormous costs without benefits. A second, related, issue is the fundamental problems in the distribution of risk in the global reserve system that I referred to earlier - larger states need to assume more responsibility and alleviate burdens on developing countries.
Globalisation entails the closer integration of the countries of the world, and that means there is going to be more interdependence. Our welfare, our well-being, will depend on others, and it will depend on how globalisation is managed. America, as the sole superpower with the strongest economy, has to be willing to play a special role. There are reforms that would make globalisation work better, work better both for developed countries and for the developing countries. It is imperative - if we want a better and more equitable world, or even if we just want a safer world - that we undertake these reforms.
Source: The Internet. Joseph Stiglitz is a Nobel Laureate in Economics, former Chief Economist at the World Bank, and Professor of Economics and Finance at Columbia University. This article is adapted from a speech he delivered on October 10, 2003 at a conference on “Future of Globalization: In Light of Recent Turbulence” organized by the Yale Center for the Study of Globalization and the World Bank, held at Yale University.
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