Criticisms of Current Forms of Free Trade

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  • by Anup Shah
  • This Page Last Updated Friday, March 31, 2006

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[T]he emergence of capitalism represents a culture that is in many ways the most successful that has ever been deployed in terms of accommodating large numbers of individuals in relative and absolute comfort and luxury. It has not been as successful, however, in integrating all in equal measure, and its failure here remains on of its major problems. It has solved the problems of feeding large numbers of people (although certainly not all), and it has provided unprecedented advances in health and medicine (but, again, not for all). It has promoted the development of amazingly complex technological instruments and fostered a level of global communication without precedent. It has united people in common pursuits as has no other culture. Yet it remains to be seen when the balance sheet is tallied whether capitalism represents the epitome of “progress” that some claim.

Richard H. Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon, 1999), pp. 11–12

A form of globalization and global trading where all nations prosper and develop fairly and equitably is probably what most people would like to see.

It is common to hear of today’s world economic system as being “free trade” or “globalization”. Some describe the historical events leading up to today’s global free trade and the existing system as “inevitable”. The UK’s former Prime Minister, Margaret Thatcher, was famous for her TINA acronym. Yet, as discussed in the Neoliberalism Primer1 page earlier, the modern world system has hardly been inevitable. Instead, various factors such as political decisions, military might, wars, imperial processes and social changes throughout the last few decades and centuries have pulled the world system in various directions. Today’s world economic system is a result of such processes. Power is always a factor.

Capitalism has been successful in nurturing technological innovation, in promoting initiative, and in creating wealth (and increasing poverty). Many economists are agreed that in general capitalism can be a powerful engine for development. But, political interests and specific forms of capitalism can have different results. The monopoly capitalism of the colonial era for example was very destructive. Likewise, there is growing criticism of the current model of corporate-led neoliberalism and its version of globalization and capitalism that has resulted. This criticism comes from many areas including many, many NGOs, developing nation governments and ordinary citizens.

Simplistic Ideology; Rhetoric versus Reality

Free trade and free markets are essentially about making trade easier by allowing the market to balance needs, supply and demand. Within a nation, it can be a positive engine for development. With the Cold War over, politicians, economists and others have been promoting unfettered free trade and free market ideology, pushing it to an even wider international arena to facilitate international trade. (Though, as will be suggested below, the current system in its reality is hardly the free trade that the theories describe.)

While these are not new ideas, their resurgance in the last few decades has led to naming the ideology as neoliberalism. Richard Robbins, quoted above, also summarizes (p.100) some of the guiding principles of this ideology, which include:

  • Sustained economic growth as the way to human progress
  • Free markets without government “interference” allow for the most efficient and socially optimal allocation of resources
  • Economic globalization is beneficial to everyone
  • Privatization removes inefficiencies of the public sector
  • Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts.

Ideas such as markets being self-balancing to meet supply and demand, while increasing propsperity for those who participate freely sounds very appealing, in theory. However there are increasing concerns that go to the heart of the system itself such as,

  • What about the reality of the current form of globalization, compared to the theory?
  • How has it affected various segements of society around the world?
  • What has been the impact on the environment?
  • Is it even free trade?
  • How have the functions of power and politics (which cannot be ignored) affected the process of globalization? Have the old imperial powers just managed to (intentionally or unintentionally) devise a more sophisticated way of appropriating the world’s wealth?

Many in the developing world have been welcome to the ideas of globalization, but are wary of the realities as well. For example, on November 16, 2000, during a lecture at the British Museum Nelson Mandela said2, “We welcome the process of globalisation. It is inescapable and irreversible.…” However, he added, “…if globalisation is to create real peace and stability across the world, it must be a process benefiting all. It must not allow the most economically and politically powerful countries to dominate and submerge the countries of the weaker and peripheral regions. It should not be allowed to drain the wealth of smaller countries towards the larger ones, or to increase inequality between richer and poorer regions.” These types of concerns have given rise to many criticisms of the current form of globalization, and given a bad name to “free trade” and “free market capitalism” in various circles.

Robbins goes on to point out some of the assumptions that are made to support the neoliberalism ideology:

  • Humans are motivated by self-interest, greed etc, expressed best through pursuit of financial gains
  • Actions that result in greatest financial gains benefit society the most
  • Competitive behavior is more rational for individuals than cooperation, hence societies should be structured around this motive
  • Progress is measured by increased materialistic consumption and so ever more consumption should be favored.

There are elements in the above assumptions of what some have called “Social Darwinism” or others have described as “survival of the fittest”, in a literal sense, to human societies. Yet,

  • Cooperation is also often a survival mechanism as is competition, and sometimes these can go hand in hand or even overlap (e.g. cooperation within a species or group, but competition with others).
  • While there are no doubts elements of self-interest in human nature, there are also elements of cooperation due to the perceived need for a stable society in which to live.
  • (And cooperation also predates just modern civilization, and can also be seen in hunter-gatherer societies, as pointed out by anthropologists, such as Robbins, quoted above, and Jared Diamonds, author of Guns, Germs and Steel (W.W. Norton & Company, 1997).

    Side note about Guns, Germs and Steel

    It is interesting to note that Diamonds' book received a lot of attention in the mainstream and even won an award. His book was indeed an interesting read. His basic premise was that geography was the main determinant of how various societies developed, and why some were poor as a result, and others grew. Journals like Foreign Policy magazine (I forget the exact issue in 2001) liked this, perhaps because it placed less burden of criticism on current power and economic configurations and put all the blame not even on the poor, but where they live.

    Yet, it is interesting to note the heavy criticism of Diamonds' Guns, Germs and Steel in attempting to describe world history and his use of environmental determinism as to how we have arrived at where we have today.

    For an example of deep critique of his work, see for example, Eight Eurocentric Historians, by J.M. Blaut (Guilford Press, 2000), an award-winning professor of geography. For example, amongst other things, he charges Diamonds of employing

    • “bad science”
    • “wrong geography”
    • widely disputed and even discredited theories as fact
    • using theories that were “rejected forcefully by geographers before the middle of the twentieth century” (p.15).

    Blaut’s book is part of a volume called The Colonizer’s Model of the World.

    • He details how our understanding and interpretation of history is still influenced from colonial and imperial era thinking, which ultimately shows in various ways how Europe or people of European descent were somehow endowed with better qualities or better environment that led them to develop and others to stagnate.
    • His above-mentioned book, for example, looks at both conservative and Marxist historians that hold what he describes as a eurocentric view on world history; that ultimately historical advances progress to Europe, and in particular, northwest Europe.
    • In the first book in his volume, Geographical Diffusionism and Eurocentric History (Guilford Press, 1993), he details how prior to the beginnings of colonialism, various parts of the world showed similar levels of development that Europe had, including China, India, parts of Africa, and that they were not showing signs of stagnation, and some even showed signs of early market economies and even early signs of waged labor, just as Europe had.
    • He suggests instead, consistent with many in the third world especially, that colonialism and wealth plundered from the Americas was the prime reason that the west rose more rapidly than other regions.

    But on the issue of cooperation in earlier societies, there seems to be no criticism.

The implementation of overly simplified theories and ideologies are meeting growing criticisms. For example, former chief economist of the World Bank Joseph Stiglitz in his popular book, Globalization and its Discontents (Penguin Books, 2002), heavily criticizes the IMF for pursuing an ideology of neoliberal “market fundamentalism” which is overly simplistic, without paying attention to real human needs while also being influenced by, and meeting the needs of, the finance community. At the same time, Stiglitz makes a great case for market economics, but without the ideology, recognizing the complexities, and the roles society and democracy must play.

In addition, the definition of progress and success is measured in material terms, and other concerns such as environmental issues, or human perspectives of emotional richness or social well being, are not necessarily factored in. For example,

  • Different cultures also have a different meaning of progress and poverty, etc, as hinted to in the poverty section of this web site.
  • Exporting one culture’s definition via such an ideology can risk causing societal problems if not done in an open and democratic way. (See Stiglitz, mentioned above for more details of why institutions such as the IMF and World Bank are not doing this in a very democratic way, even if it is claimed so. Also, see for example, John Gray’s False Dawn: The Delusions of Global Capitalism, (The New Press, 1998). Gray was an influential conservative political thinker, influencing Margaret Thatcher and the New Right in Britain. Yet, he has argued that the current form of global capitalism is not a naturally occurring process, but an imposed Anglo-American political project. Where the market has become so detached from society and does not meet its needs, this project is doomed for failure he suggests. Those cultures that realize the market works best when it is embedded in society will, if given the chance by the powerful countries, be likely to succeed.)
  • Environmental concerns are typically not taken into account of directly. It is argued that the environment will benefit indirectly because the same process of individual greed will create markets that address environmental problems. Yet, this creates unnecessary jobs (which also uses more resources) because sustainable development that would not have to adversely affect the environment in the first place would be a more efficient form of development. This site’s section looking deeper behind consumerism and consumption3 highlights how economic interests do not match or deliver on environmental concerns or human needs and also leads to wasted labor.

The Empathic Civilisation4, Jeremy Rifkin, RSA Animate, May 6, 2010

These additional aspects are also described in this creative video by author and social thinker, Jeremy Rifkin. He argues that we are not necessarily driven by aggression, violence, self-interest and utilitarianism (which also results in narcissism and materialism), but that we are soft-wired towards sociability, attachment, affection, companionship and the drive to belong.

The lack of empathy to fellow humans, animals and the environment means we bring out the worst in us, rather than the best, he implies, as we are ultimately, all the same.

Furthermore, and very importantly, those who are wealthier tend to wield more economic and political power and influence. Hence,

  • Leaders and elite of powerful nations or segments of society are more able to exert their influences, if needed
  • This can happen not only in places where rule of law and strong institutions are lacking, but also the most democratic of societies
  • In more developed economies, such influence can be subtle, or appear to be distant because it may not affect the local society as much as it does to people half way around the world
  • Hence, what can be promoted in the interest of some political and business elite, may not necessarily be the same as society’s interests in general and it can also “distort” markets
  • As explained in the corporations section of this web site, the rise of corporations5 included giving them the rights that ordinary individuals have. This has allowed even more concentrated power and influence to be exerted.

The use of political influence includes using the military as well, if needed. Such use and abuse of power has been there throughout history. “Gun boat diplomacy” for example, was a common tactic by the British Empire to force open other countries to trade in terms favorable to the Empire. Military power has also contributed to the processes in the current forms of globalization as well. (See for example, the Institute for Economic Democracy6 for more details on this aspect.)

Similar influences of power have given rise to disastrous policies of the International Monetary Fund (IMF) and World Bank, such as the Structural Adjustment Programmes that have forced poor countries to cut back on health and education expenditures for example, as discussed in detail on this web site. Such things, combined with the contentious rules of the World Trade Organization (WTO) form a backbone to today’s globalization. As J.W. Smith of the Institute for Economic Democracy suggests, this maintains unequal rules of trade and, ultimately, continues to deepen inequality, poverty and exploitation. (For more on this perspective, see this web site’s section on structural adjustment7.)

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Old mercantilism nicely dressed up today?

It is argued that the way the more powerful countries have been pushing for various policies implies that the globalization process is a continual repeat of mercantilist processes seen throughout history.

The wealth of the ancient city-states of Venice and Genoa was based on their powerful navies, and treaties with other great powers to control trade. This evolved into nations designing their trade policies to intercept the wealth of others (mercantilism). Occasionally one powerful country would overwhelm another through interception of its wealth though a trade war, covert war, or hot war; but the weaker, less developed countries usually lose in these exchanges. It is the military power of the more developed countries that permits them to dictate the terms of trade and maintain unequal relationships.

J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy8, 1994), p. 120.

In that context, the Cold War, for example, can be seen as battles over differences in how resources were going to be used to develop a country; most colonies that broke free around and after World War I and II were often trying to simply develop their nations. Because the imperial powers were to lose out, they would often cry “communism” and use that as justifications for military action or trade embargoes, overthrowing potential democratic regimes in favor of more “stable” dictatorships, and other malleable regimes.

Adam Smith, in his 1776 classic, The Wealth of Nations, (often regarded as a bible of capitalism) was highly critical of mercantilist practices of the wealthy nations:

Though the encouragement of exportation and the discouragement of importation are the two great engines by which the mercantile system proposes to enrich every country, yet with regard to some particular commodities it seems to follow an opposite plan: to discourage exportation and to encourage importation. Its ultimate object, however, it pretends, is always the same, to enrich the country by the advantageous balance of trade. It discourages the exportation of the materials of manufacture, and of the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets; and by restraining, in this manner, the exportation of a few commodities of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities. (Emphasis Added)

Adam Smith, Wealth of Nations, Book IV, Chapter VIII (Everyman’s Library, Sixth Printing, 1991), p.577

Reading the above, we could say that policies such as structural adjustment, certain types of rules and processes of the WTO, etc are also mercantilist. We are constantly told that we live in a world of global free trade capitalism, and yet we see that while free markets are preached (in Adam Smith’s name), mercantilism still appears to be practiced.

William Appleman Williams describes mercantilism at its zenith: “The world was defined as known and finite, a principle agreed upon by science and theology. Hence the chief way for a nation to promote or achieve its own wealth and happiness was to take them away from some other country.”

When the injustice of mercantilism was understood, it became too embarrassing and was replaced by the supposedly just Adam Smith free trade. But free trade as practiced by Adam Smith neo-mercantilists was far from fair trade. Adam Smith unequal free trade is little more than a philosophy for the continued subtle monopolization of the wealth-producing-process, largely through continued privatization of the commons of both an internal economy and the economies of weak nations on the periphery of trading empires. So long as weak nations could be forced to accept the unequal trades of Adam Smith free trade, they would be handing their wealth to the imperial-centers-of-capital of their own free will. In short, Adam Smith free trade, as established by neo-mercantilists, was only mercantilism hiding under the cover of free trade.

J.W. Smith, Cooperative Capitalism; A Blueprint for Global Peace and Prosperity9, (Quality Books, Inc, 2003), pp.4-5

Of course, today it is a bit more complicated too. We have, for example, products being exported from the poorer countries (albeit some facing high barriers in the rich nations). However, with labor being paid less10 than their fair wages in the poorer nations, wealth is still accumulated by the richer nations. While it might appear that free trade is taking place, the wealth that is accumulated by the richer countries suggests this is still the age-old mercantilism processes being played over again; a system that Adam Smith criticized so much.

The geopolitical and economic ramifications are far-reaching. The processes of fighting over control and dominance of wealth and power have continued well into this century, even when we are used to believing the older ways are gone. As mentioned in the geopolitics section of this site, and on the previous page on neoliberalism, wars throughout history have typically had trade, commerce, resources at their core, and political systems have been geared towards power play. J.W. Smith highlights well how, for example, the US broke away from British colonial rule, recognizing the unfairness and harshness in Imperial Britain’s policies. However, the U.S. has now taken on that role and is doing the same things that the British once did to others:

Shortly after the War of 1812 was fought to defeat British mercantilist trade practices, U.S. statesman Henry Clay pointed to the necessity of the United States developing a defensive capability by quoting a British leader,

[N]ations knew, as well as [ourselves], what we meant by “free trade” was nothing more nor less than, by means of the great advantage we enjoyed, to get a monopoly of all their markets for our manufactures, and to prevent them, one and all, from ever becoming manufacturing nations.

This is one of the most important aspects of history, and is conveniently ignored.

J.W. Smith, The World’s Wasted Wealth 211, (Institute for Economic Democracy, 1994), p. 123.

And with today’s more complex and sophisticated global system, it is perhaps harder to see these aspects at play, especially in those regions of the world that have benefitted from the current system. J.W. Smith also captures this aspect quite well:

Although in [the] early years the power brokers knew they were destroying others' tools of production (industrial capital) in the ongoing battle for economic territory, trade has now become so complex that few of today’s powerful are aware of the waste and destruction created by the continuation of this neo-mercantalist struggle for markets. Instead, they feel that it is they who are responsible for the world’s improving standards of living and that they are defending not only their rights but everybody’s rights.

This illusion is possible because in the battle to monopolize society’s productive tools and the wealth they produce, industrial capital has become so productive that — even as capital, resources, and labor are indiscriminately consumed — living standards in the over-capitalized nations have continued to improve. And societies are so accustomed to long struggles for improved living standards that to think it could be done much faster seems irrational.

J.W. Smith, The World’s Wasted Wealth 212, (Institute for Economic Democracy, 1994), p. 158.

S. Brian Willson, a U.S. Vietnam War veteran, now a peace activist highlights an aspect of this quite well, in terms of how some global problems end up being dealt with by power holders:

The most highly decorated Marine Corps General in U.S. history, Smedley D. Butler understood all too well the real nature of the U.S. Marine Corps and U.S. foreign policy in general when he concluded after his retirement in 1931 that during his 33 years as a Marine officer operating on three continents, he served “as a high-class muscle man for Big Business, for Wall Street and the bankers.… a gangster for capitalism” [Smedley D. Butler, America’s Armed Forces, Part 2, Common Sense, Vol. 4, No. 11 (Nov. 1935)]. But it seems that that understanding is easily forgotten. General A.M. Gray, former commandant of the U.S. Marine Corps, in 1990 identified threats to the United States as originating from the “underdeveloped world’s growing dissatisfaction over the gap between rich and poor nations,” creating “a fertile breeding ground for insurgencies which have the potential to jeopardize regional stability and our access to vital economic and military resources” (Marine Corps Gazette, May 1990). Gray understands the structural social and economic problems, but it apparently does not occur to him that the solution might be to directly address the injustices rather than perpetuate them with the use of military force.

S. Brian Willson, Who are the REAL terrorists? 13, 1999

The ramification of all this is that the current global system, which takes on various names such as globalization, free market capitalism, free trade, etc may not actually be the “free trade” or “free market” capitalism that people like Adam Smith started promoting some 200 years back, even though various power holders and major institutions may claimed it to be.

Adam Smith was highly critical of “big government”, which we often hear criticism of today (some very valid, for sure). However, less common is how highly critical he was of the undue power and influence of big business as well (which is briefly introduced on this site’s corporations14 section).

Neo-mercantilism may be a more appropriate name for the system, rather than free trade.

Side Note

This issue of the current globalization process being a continued mercantilist process of monopoly capitalism could be a significant point, on things like whether people are really anti-capitalist, or anti corporate-led globalization. It even raises the question of whether or not the current system can even be called “free trade.”

  • While many who support the current forms of globalization may genuinely believe that the globalization process is free trade, it seems to be more of the older monopoly capitalism, or mercantilism. Hence, one could still be anti corporate-led globalization but for a more cooperative or democratic capitalism.
  • This also raises questions on the difference between free trade in theory and what is trumpeted today as free trade.
    • A lot of criticisms from all angles of society seem to be directed more at the realities and the effects.
    • Because free trade is preached but mercantilism/monopoly capitlism is perhaps being practised, this suggests that the theory of free trade itself may still have some valuable insights to offer that shouldn’t necessarily be rejected automatically just because the phrase “free trade” has gained such a negative reputation in many segments of society. There are some decent points in the free trade theories — as well as valid criticisms.
    • This site too in places uses the term free trade in the more rhetorical sense, trying to look more at the reality. This is also partly because a lot of this section was written early on when this distinction was not made, though use of terms withstanding, the points made still hold.

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Growing criticisms

Globalisation is institutionalising a new balance of power between states that hardens the sovereignty of some while reducing the autonomy of the others. The worldwide free market accentuates the disparity between the centres of capital and the peripheries. The players with knowledge and power lay down the rules; the others fall into line.

Noelle Burgi and Philip S. Golub, The States we are in15, Le Monde Diplomatique, April 2000.

There is something to be said about markets and capitalism as being positive engines. But when comparing reality and theory, they are far apart. First we will look at some criticisms we often hear, then we will see some trends in critique of these criticisms from the likes of the Economist and suggest that the reality is far from rhetoric or theory.

Blind Allegiance to Ideology

As will be seen in the protests section on this site, there is growing vocal concern around the world at the negative impacts that the current form of globalization is having on people’s lives. The mounting criticisms against current neoliberal policies and ideology are in face of the existing realities versus the almost utopian theory.

Amongst a growing chorus of dissent are also some influential economists who have occassionally been heard in the mainstream. One example is Joseph Stiglitz, former Chief Economist of the World Bank, former Chairman of President Clinton’s Council of Economic Advisors and Nobel prize winner (basically a good authority on the issue!), and another is Paul Krugman a well-known economist who writes columns in the New York Times. On various issues, they too have been critical16 of numerous aspects of corporate-led globalization.

As one example of the critique, consider this lengthy quote from the Nation magazine on Joseph Stiglitz:

Stiglitz, 58, is hardly the first person to accuse the IMF of operating undemocratically and exacerbating Third World poverty. But he is by far the most prominent, and his emergence as a critic marks an important shift in the intellectual landscape. Only a few years ago, it was possible for pundits to claim that no mainstream economist, certainly nobody of Stiglitz’s stature, took the criticism of free trade and globalization seriously. Such claims are no longer credible, for Stiglitz is part of a small but growing group of economists, sociologists and political scientists, among them Dani Rodrik of Harvard and Robert Wade of the London School of Economics, who not only take the critics seriously but warn that ignoring their concerns could have dire consequences. In his new book, Globalization and Its Discontents (Norton), Stiglitz argues that many of the complaints voiced by protesters in recent years — that IMF structural adjustment programs have caused widespread suffering; that free-trade agreements mainly benefit the rich; that privatization has proved disastrous in many countries — have a solid basis in fact. Unless the rules of global capitalism are radically altered, he warns, the gap between the world’s rich and poor, and hence the social conditions that have fueled instability in places like Pakistan, will not go away anytime soon.

… Asked once what developing countries should do with the annual reports the IMF prepares on member nations, Stiglitz recommended “picking it up, saying ‘thank you very much’ and dropping it straight in the garbage can.”

… To some degree, the mounting criticism from Stiglitz and other quarters has had an impact. IMF officials recently acknowledged the potential risks of capital market liberalization, and both the IMF and World Bank have begun speaking more openly about debt relief and poverty reduction. But while the rhetoric has changed, Stiglitz maintains that a doctrinaire ideology of “free-market fundamentalism” continues to shape policy. The IMF and World Bank are pushing developing countries to privatize their pension systems, for example, which is highly controversial in the First World. The IMF demanded fiscal austerity in Argentina, where unemployment had reached 20 percent and, in December, sparked riots that led to the government’s collapse. It preaches the gospel of free trade to developing countries--even though most Western countries built their economies by protecting certain industries and continue to subsidize some domestic producers. The blind push to privatize and deregulate has not only failed to fuel sustainable development, Stiglitz contends, but reflects an idealized vision of how markets function that neither economic theory nor concrete experience supports.

… Stiglitz has done more to damage the IMF’s reputation than any other living economist.

Eyel Press, Rebel With a Cause17, The Nation, June 10, 2002

In March 2003, the IMF itself admitted in a paper that globalization may actually increase the risk of financial crisis in the developing world18. “Globalization has heightened these risks since cross-country financial linkages amplify the effects of various shocks and transmit them more quickly across national borders” the IMF notes and adds that, “The evidence presented in this paper suggests that financial integration should be approached cautiously, with good institutions and macroeconomic frameworks viewed as important.” In addition, they admit that it is hard to provide a clear road-map on how this should be achieved, and instead it should be done on a case by case basis. This would sound like a move slightly away from a “one size fits all” style of prescription that the IMF has been long criticized for.

As mentioned on the structural adjustment19 page on this web site, and as many critics have said for a long time, opening up poorer countries in an aggressive manner can leave them vulnerable to large capital volatility and outflows. Reuters, reporting on the IMF report also noted 20 that the IMF “sounded more like its critics” when making this admission.

In theory there may indeed be merit to various arguments supporting global integration and cooperation. But politics, corruption, geopolitics, as well as numerous other factors need to be added to economic models, which could prove very difficult. As suggested in various parts of this site, because economics is sometimes separated from politics and other major issues, theory can indeed be far from reality.

Additional concerns and criticisms have from a variety of people for many years, and common themes include:

Increasing “Unaccountable” Concentration of Power and Decision-Making

There has been growing concern at the increasing corporate power 21 and their influence in the industrialized countries and international trade agreements, while their accountability is very small.

Side Note

Furthermore, some international organizations and treaties are leading to erosion of influential decision-making22 from publicly elected governments to privately owned corporations. For example

  • Some even call large transnational corporations and their drive to open up markets around the world as the modern form of colonialism23.
  • Specific policies such as structural adjustment are criticized for undermining national sovereignty24.
  • Argentina is a vivid example

    The BBC, in one of its Correspondent documentaries (October 13, 200225), reported on the 2001 Argentina crisis and its impacts.
    • When Argentina defaulted on its debt, it precipitated an economic crisis resulting in half population going into poverty. The defaulting on the $140bn debt led to massive capital flight. The peso was floated against the dollar. Money of savers had been barred from withdrawing their savings in an attempt at staving off a banking system collapse, leading to serious economic hardship on the population. But the freeze on savings for ordinary citizens had been judged by Argentinian courts to be unconstitutional.
    • Banks (national and international) had to give savings back to people.
    • However, the International Monetary Fund (IMF) pressured Argentina to overturn that ruling.
    • The IMF and banks suggested that the bank’s shareholders should not be responsible for the fault of the Argentine economy and its people. And yet
      • The banks hold billions of dollars, which the BBC reported, can be paid to the people easily.
      • The IMF has been responsible for a lot of economic prescriptions in Argentina as well, while corrupt leadership has seen Argentina’s assets sold away cheaply, and moneys embezzeled. All of this has been under the neoliberal economic programmes of the IMF/World Bank that for decades has been prescribed. Successive regimes in Argentina have all followed the same economic ideology even if the political ideology has differed. Some candidates voted in have even u-turned26 on their economic policies, sucumbing to IMF pressure.
    • Argentinians are understandbly very angry.
    • On all sorts of economic policies, the IMF and other international institutions have had a lot of say27 on how things must be done. Years of harsh structural adjustment and increasing debt have made things more difficult for ordinary citizens.
    • Protests and riots have occurred often. (The BBC even showed some people burning the American flag. These are not even terrorists, but the understanding of American influence in the IMF and elsewhere that affects the economy of Argentina is well understood, and maybe this is a more extreme example of why many around the world are angry at what they see as the American-dominated international system, often known as the “Washington Consensus”)
    • In 2004, the IMF admitted that it had made mistakes28 in the way it had dealt with the Argentine crisis, the BBC reported. While there is still massive debt for Argentina, the default had cut off lending until 2003. But, as the BBC noted, “The country repaid the [International Monetary] Fund more than $3bn (£1.6bn) in arrears earlier in March, clearing the way for a fresh $3.1bn loan.” What a painful irony that the harsh adjustment that the people of Argentina have had to go with to pay off debts result in the same money coming back!
    • (See for example, ZNet’s Global Economics29 section for far more details and other examples as well.)
  • The NAFTA section, later on this part of the web site, shows other examples of issues regarding sovereignty as well.

Environmental Degradation

The effect on the environment30 is argued to be detrimental due to the over-consumption/throw-away model of most developed nations not allowing for much sustainable development.

For more on this aspect, see also this site’s sections on

  • Environmental Issues31
  • Corporations and the Environment32

Eroding Worker’s Rights

The stability of jobs33, is feared to continue to fall as less regulation in the pursuit of “free” trade means that corporations can easily move from country to country in search of cheapest costs (and labor forces are often very expensive).

This also results in first world hostility to third world people in some ways, whilst also resulting in attempts at protectionist policies.

Brain drain from poor countries to rich countries

There is the phenomena of “brain drain” whereby the poor countries educate some of their population to key jobs such as medical areas and other professions only to find that some rich countries try to attract them away. The prestigious journal, British Medical Journal (BMJ) sums this up in the title of an article: “Developed world is robbing African countries of health staff” (Rebecca Coombes, BMJ, Volume 230, p.923, April 23, 2005.) In a way, this is a form of subsidy for the rich!

Some countries are left with just 500 doctors each with large areas without any health workers of any kind. A shocking one third of practicing doctors in UK are from overseas34, for example, as the BBC reports.

And yet, this is not just a problem Africa faces, but many other poor countries, such as various Asian countries, Central and Latin America, Eastern Europe, the Caribbean, etc. Other industries also suffer this issue. Yet, at the same time, it is understandable that individuals would want to escape the misery of poverty and corruption in their own country. A lot of the poverty and corruption results from structural adjustment programs and the current corporate globalization, which then contributes to this brain drain, thus twisting the knife in the back, so to speak, as some of what little rich countries allow the poor to spend on health is now lost to the already rich, and the poor have to bear the burden. (See this site’s section on structural adjustment35 for more on how the rich dictate to the poor how to structure their economies and run their countries.)

See also brain drain36 from this site for more details and statistics.

Protectionism For The Rich, Open Markets For The Poor

Another concern is that most developing nations complain that the western nations themselves are very protectionist37 but want the developing countries to completely remove barriers to free trade which would cause an imbalance in the favor of the industrialized countries. While there have been recent statements to address such concerns, nothing has really happened. This further suggests that the current world system being pushed is not “free trade” in the sense that is typically understood. For example,

  • Europe and North America have long been criticized of subsidizing their farmers billions of dollars and making it harder for poorer countries to export to these markets.
  • Aid to poor countries is dwarfed by the effects of First World subsidies, third world debt, and Unequal Trade
  • Recently in the I.T. industry in the U.S. and some parts of Europe, there has been a growing trend to “outsource” development efforts to poorer countries that have a well-educated, high technology, work force, such as India and China. On the one hand this has been because the rich countries have pressured the poor countries in past decades as well as recent years38 to open up their markets and liberalize further, but then protectionist policies result from the backlash39 in the wealthier countries as workers see the possibility of job losses and gain sympathetic senators and political leaders. For the poor countries this is hypocrisy, and for the ordinary workers in the first world, they risk their livelihoods. In the meanwhile, although companies point out they need to off source to remain competitive, in some circumstances they benefit either way, because higher costs of first world workers could be passed on to consumers if all companies face the same regulations and are forced to employ first world workers under certain conditions. This ties into the job stability issue raised further above.
  • There are many, many more examples, some of which are discussed in the following pages on this web site:
    • Foreign Aid for Development Assistance40
    • Deregulation or Protectionism?41

Prize-winning author and Indian activist, Arundhati Roy, also captures some of the stark contradictions implying that what is called free trade globalization is hardly free trade:

In the new era, Apartheid as formal policy is antiquated and unnecessary. International instruments of trade and finance oversee a complex system of multilateral trade laws and financial agreements that keep the poor in their Bantustans anyway. Its whole purpose is to institutionalise inequity. Why else would it be that the U.S. taxes a garment made by a Bangladeshi manufacturer 20 times more than it taxes a garment made in the U.K.? Why else would it be that countries that grow 90 per cent of the world’s cocoa bean produce only 5 per cent of the world’s chocolate? Why else would it be that countries that grow cocoa bean, like the Ivory Coast and Ghana, are taxed out of the market if they try and turn it into chocolate? Why else would it be that rich countries that spend over a billion dollars a day on subsidies to farmers demand that poor countries like India withdraw all agricultural subsidies, including subsidised electricity? Why else would it be that after having been plundered by colonising regimes for more than half a century, former colonies are steeped in debt to those same regimes, and repay them some $382 billion a year?

Arundhati Roy, Do turkeys enjoy thanksgiving?42, The Hindu, January 18, 2004

Bolivia For Sale43, Directed by Dylan Howitt. Produced by Christian Aid, Jan 2005

Christian Aid produced a video looking at how the current form of free market globalization affected Bolivia44. It is an example where the “playing field” became unequal by introducing privatization of key resources that the poor could not afford otherwise (e.g. water, which, under privatization saw bills skyrockets).

In other areas, such as natural gas resources, multinationals were able to make enormous profit while the nation saw little benefit.

The other aspect, which also questions reality vs. theory is that under the guise of free market economics, the result was monopolization by multinationals in many of these sectors that excluded the enormous poor population and led to the massive popular uprising and eventual ousting of the government.

Free Trade Agreements Often Say Very Little About Trade

Lori Wallach, Director of Global Trade Watch45 points out in a video clip (5 minutes, transcript46) that free trade agreements often include very little on trade. Many non-trade issues include patent laws, foreign investment, land purchase rights and many more. Furthermore, the way these agreements are enforced, they provide a kind of protectionism for large companies against poorer countries in particular:

Get the Flash Player to see this video.

Lori Wallach, Free Trade—How Free Is It?47, April 13, 2005, © Big Picture TV

Increasing Poverty and Inequality For the Majority

Also argued by many is that only the wealthy nations will benefit48, while the poorer ones will suffer the most in this. It will not just be poor people from developing nations, but poor people in industrialized countries too. For example, corporations will be freer to move around and avoid substantial taxes49.

The way that the global financial system is structured benefits the core, compared to the periphery. George Soros for example, is worth quoting at length:

The international financial system is broken down in the sense that it fails to provide adequate capital to countries that need it most and qualify for it.

Global financial markets suck most of the world’s savings to the centre, but fail to pump money back out to the periphery. Indeed, since 1997, there has been a reverse flow of capital from countries on the poor periphery of the world economy to those in the wealthy centre.

…In practice, of course, international financial markets never have been left to their own devices. Rich countries, led by the US, are in charge. Their primary task is protecting their own interests. When these nations get into trouble, their authorities intervene forcefully.

Countries that cannot borrow in international markets in their own currency lack that power. They must turn to the International Monetary Fund (IMF), and the fund is more concerned with international financial stability than with enabling developing countries to pursue the countercyclical policies needed to avoid recession.

George Soros, The Will to Act Can Save Global Financial System50, Business Day (Johannesburg), October 4, 2002 (Reposted by AllAfrica.com)

Inequalities and gaps between those who have and those who do not is already shown to be rising in these early years of globalization. Former Chilean President, Patricio Aylwin summarizes an aspect of this quite fiercely:

Only poverty has been truly globalized in our age. … The over-praised neo-liberalism and the omnipotent market is a mistaken vision and it is the root cause of some of the most serious problems that afflict us.

Patricio Aylwin, in an address at a U.N. Food and Agriculture Organization conference, November 2001, (quoted from this Yahoo! News report, 5 November 200151)

Neoliberal proponents, including the World Bank and IMF have reports suggesting that globalization is good for the poor.

  • While some points are obvious, such as that growth improves income for poor people, there are many unquestioned assumptions, some of which include the fact that IMF and World Bank are supposed to be the drivers of these policies (these economic policies and the group that has promoted and pushed them internationally are known as the Washington Consensus), and that the one policy fits all situations.
  • The World Bank for example, reported in March 2000 that globalization is good for the poor52. “Growth generally does benefit the poor and that anyone who cares about the poor should favor the growth-enhancing polices of good rule of law, fiscal discipline, and openness to international trade,” it noted.
  • However, there have been many criticisms about the report for making far too many assumptions and not considering many interrelated issues. (For an example of detailed critique, this following link points to a responding article from the Center for Economic and Policy Research, called Growth May Be Good for the Poor — But are IMF and World Bank Policies Good for Growth?53)

In reporting on the March 2002 UN Conference on Financing for Development in Monterrey, Mexico, the New York Times described feelings of some leaders on the effects of globalization:

Globalization, or the fast-paced growth of trade and cross-border investment, has done far less to raise the incomes of the world’s poorest people than the leaders had hoped, many officials here say. The vast majority of people living in Africa, Latin America, Central Asia and the Middle East are no better off today than they were in 1989, when the fall of the Berlin Wall allowed capitalism to spread worldwide at a rapid rate.

Rather than an unstoppable force for development, globalization now seems more like an economic temptress, promising riches but often not delivering, in the view of many of the leaders at the United Nations conference.

Joseph Khan, Globalization Proves Disappointing54, New York Times, March 21, 2002

Christian Aid weighs in on this with a more recent report noting that sub-Saharan Africa is a massive $272 billion worse off because of “free” trade policies forced on them as a condition of receiving aid and debt relief.55 They also note that:

The reforms that rich countries forced on Africa were supposed to boost economic growth. However, the reality is that imports increased massively while exports went up only slightly. The growth in exports only partially compensated African producers for the loss of local markets and they were left worse off.

The economics of failure: The real cost of ‘free’ trade'56, Christian Aid, June 20, 2005

A “Level” Playing Field That Gives More Advantage to the Wealthiest

Another aspect related to the above is how western nations, want their multinational firms to be treated the same as domestic firms in the foreign countries which they may enter. At first thought, this sounds fair and equitable. However,

  • When considered from the view that this would mean that a much more established multinational corporation would be able to get treatment that allows them to outsmart the smaller domestic firms, this this sounds less fair and equitable.
  • The discourse of “level” playing fields are those settings that allow the multinational corporations to dominate; hence, they are the massive proponents of such clauses in international trade and investment agreements. It is not level as such.
  • It would imply that the balance is actually tipped in the favor of these transnational corporations.
  • And, it would make it harder for a nation to help its industries develop (as throughout history, even during neoliberal eras, large government involvement has always been needed to nurture and protect growing industries.)
  • Most mainstream media is dominated57 by multinationals themselves, so the major source of information for the general public can also be subtly distorted.

Positive or Negative Form of Interdependence?

One of the arguments made for globalization is that the world should move further towards becoming interdependent on one another.

  • This way, no one will want to war with others, because they depend on each other to keep their economies alive. This sounds like a wonderful solution to prevent future horrors such as the previous two World Wars.
  • The argument probably bears some merits, if there was a truly free trade system which was fair. As argued above, the current global system appears to be more mercantilist.
  • Furthermore, what is often overlooked is that given the current international institutions in place (WTO/IMF/World Bank, etc) who would benefit from the interdependence within the framework of the current form of globalization? It is the large multinational corporations and their governments. The governments of more influential and powerful nations have the ability to impose certain types of interdependence and easily force dependence in their favor if needed, using economic or military pressure58. This helps explain why for some nations, even thought the Cold War has ended, their military budgets remain roughly the same.
  • In fact, as pointed out by the Institute for Economic Democracy59, many wars throughout history, hot or cold, have had trade, resources and related expansion at their core. History shows us that the more powerful nations have devised international economic agreements that promote more dependency upon those wealthier countries. In a twisted sense then, such an interdependency as implemented would be good for “stability” of the status quo. Real interdependency on the other hand, that deals with equity and cooperation as well, may have more likelihood of being good for all, but that would be less likely to happen because it would threaten to reduce the influence and power of the wealthier nations and multinational corporations.

    Far from some altruistic motive to see those in poor countries improve their lot and thus narrow the gap between rich and poor, globalisation therefore merely serves as an efficient, low-cost method for TNCs [transnational corporations] to take advantage of low taxes, weak regulations and vulnerable labour whilst penetrating the economies of developing countries.

    John M. Bunzl, The Simultaneous Policy, An Insider’s Guide to Saving Humanity and the Planet, (New European Publications, 2001), p. 48

  • For more about the dependencies of the developing countries and how it has come about, visit this site’s structural adjustment60 section.

Cultural Uniformity and Effects on Other Societies

There are other subtle, but important impacts, to peoples, societies and cultures. While the current form of globalization has its benefits such as helping open otherwise authoritarian or restrictive societies, the ways in which cultures and societies may be opened can also have an impact, as summarized from this following quotation:

In order for “free markets” to be “free,” the exchange of labour, land, currency, and consumer goods must not be encumbered by elements of psychosocial integration such as clan loyalties, village responsibilities, guild or union rights, charity, family obligations, social roles, or religious values. Cultural traditions “distort” the free play of the laws of supply and demand, and thus must be suppressed. In free market economies, for example, people are expected to move to where jobs can be found, and to adjust their work lives and cultural tastes to the demands of a global market.

Bruce Alexander, The Roots of Addiction in Free Market Society61, Canadian Centre for Policy Alternatives, April 2001

As mentioned in this site’s mainstream media section62, in India, for example, one important aspect of globalization, the liberalization of media, had seen some negative effects along side positive. For example, many women found that they faced more violence from their husbands, and lost more of their savings as their husbands bought things they saw on TV rather than save for their children’s education, for example. For companies, marketing got easier: in the past, in terms of demographics, it did not make much sense to talk about the “average Indian”. Now, with the introduction and dominance of a few large companies there is a significant proportion of Indians who fall into this category. While there appears to be more freedom of material choice, perhaps socially there is a reduction in diversity and an increase in conformity, as a result.

(Also check out this extensive speech63 from Noam Chomsky on many of these factors. While this speech was delivered in 1994, it is still relevant today.)

The rise in criticisms has created political opportunity for progressive critics of globalization, which, up to September 11, 2001, was certainly growing strongly. Side NoteFor a while following September 11 and the resulting War on Terror, criticism had been subdued somewhat, both as mainstream politics talked less about globalization and more about terrorism, but also as civil rights were beginning to be clamped down on more so under the cover of this “war on terror”. For more on this angle, see this site’s section on the war on terrorism64.

However, in addition to a rise in progressive criticism, there is also a risk that a reactionary backlash will gain ground from extremists on both the Left and the Right.

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Pressure by the wealthier classes to liberalize too quickly

Often, in countries trying to develop more, in order to maintain equality to some extent, and to offset inflation, various controls are often needed. However, this may often affect the consumption patterns of the wealthier classes. As the affluent members of society face some controls, they and the institutions and corporations that they own will increase the pressure on their government to remove or reduce these controls, increase liberalization (in industries other than their own, of course), open the economy to access a larger variety of goods and so on. Together with western nations encouraging this, it often occurs prematurely. When and if this happens, the majority often lose out. To keep up then, often, large debts are also incurred. (And as debt increases, the measures and “adjustments” made to repay them affect the poorer further.) As with the global financial crisis when major international institutions reduced their loans, capital flight65 is a risk.

Ha-Joon Chang, the assistant director of development studies at the prestigious Cambridge University in England has consulted for numerous international agencies at the UN, the World Bank, and the Asian Bank. He makes an observation worth quoting at length:

It would be wrong to describe the advance of neoliberalism in the developing world purely as an imposition from the outside. Neoliberal reforms in these countries had their local defenders from the beginning; over time their number has multiplied and their influence has increased. An increasing number of developing-country companies have carved out positions as subcontractors or intermediaries of transnational corporations (TNCs) based in the developed countries. Moreover, neoliberal reforms have created a vast army of a new professional class that derives a large part of its wealth and power from its ability to understand and articulate the idioms of neoliberalism. This does not simply include the “usual suspects”, such as fund managers, international lawyers, accountants and management consultants. It also includes those who are working for NGOs financed by the rich country governments and international financial institutions, journalists with foreign links, government officials with experience in the IFIs and, last but not least, academic economists.

Reflecting these developments in the international and national politics of money and power, neoliberalism has established a near-total worldwide intellectual dominance during the last 25 years. In political debate, critics of neoliberalism are routinely dismissed as “economically illiterate” or worse, as those who are trying to defend their “vested interests” to the detriment of society—even when they are, say, garment workers in Mexico resisting plant closure or urban poor in Indonesia protesting against cuts in food subsidies. In this way, serious debates are avoided and dissenters systematically excluded.

Ha-Joon Chang, Rethinking Development Economics, (Anthem Press, 2003), p. 2

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Defending Free Trade

In 2001, during the height of free market protests and support, the Economist argued in favor of free markets by looking at some of the points from whom they call “anti-globalists” (even though some of the criticisms they looked at were not necessarily from those against globalism per se).

Fair wages for the poor will eventually be bad for everyone

In an Economist article, Globalisation and its critics66, September 27 2001, the following is offered in discussion of the issue of quest for profits, regulation, fair wages, etc:

For example, suppose that in the remorseless search for profit, multinationals pay sweatshop wages to their workers in developing countries. Regulation forcing them to pay higher wages is demanded. The biggest western firms concede there might be merit in the idea. But justice and efficiency require a level playing-field. The NGOs, the reformed multinationals and enlightened rich-country governments propose tough rules on third-world factory wages, backed up by trade barriers to keep out imports from countries that do not comply. Shoppers in the West pay more—but willingly, because they know it is in a good cause. The NGOs declare another victory. The companies, having shafted [British slang for something like “betrayed”] their third-world competition and protected their domestic markets, count their bigger profits (higher wage costs notwithstanding). And the third-world workers displaced from locally owned factories explain to their children why the West’s new deal for the victims of capitalism requires them to starve.

What is wrong with this? The answer depends on how you look at it. From one perspective, the economist is right; if we do manage to get fair wages for the exploited, then we risk affecting everyone due to passing on these extra costs to consumers. But, does that suggest we should therefore resign ourselves to continue this exploitation? After all, it does pay those people, even if it is a small amount.

Well, in short, NO! Yet, that is what the Economist and possibly extreme versions of the “liberalism” ideology seem to hint (although it may be politically incorrect to actually ever say it explicitly).

So how can this seemingly be right and seemingly be wrong? Well, it is the range of discourse within which a point is made that affects how you view this. That is, the assumptions, etc affect perspectives:

  • If we talk about these wages within the confines of the current implementation of the globalization system, this is perhaps how it has to be.
  • However, let’s just take a tiny step outside and just ask some simple questions such as: why do these corporations have to go outside their own region? why should the poor produce sneakers or other products mostly for export? What good is that going to do them to earn so little money? What good is that money going to do when there is not much else to buy? And so on. We start hitting a major difference in perspective that is at the heart of this.

That is, when we start asking things like why the poor don’t create their own industries, rather than be an extension of multinational’s, then we start to hit a key issue. For example:

  • The poor countries ideally have to build their own industries, with their own internal markets etc.
  • With that, they will have their own distribution networks. Right now, they are a source of cheap resources (such as all those cash crops, the export-oriented economies—or mostly resource export-oriented, etc). With poorer nations selling resources and commodities elsewhere such as to wealthy nations, while buying from them the finished products made from those resources and commodities means the poor pay more than what they got! If products can be easily produced within the same region, it leads to better growth in those regions due to multiplying and circulation of wealth. It is worth quoting J.W Smith, again, on what was mentioned on this site’s structural adjustment page:

    [I]f a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor and, other costs moves through the economy as each recipient spends it. Due to this multiplier effect, a hundred dollars worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor. (Emphasis Added)

    Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for the product. [Such control of tools of production is a strategy of a mercantilist process. That control often requires military might.]

    J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy67, 1994), pp. 127, 139.

  • A multiplier effect of their money would be created as it circulates around their economy, not around someone else’s (i.e. the TNCs, and other countries)
  • Wealth in the poor country would be created more rapidly.
  • Much of the production and distribution we now see are wasteful of resources, capital and labor in this way because they are largely owned by foreign investors, or influenced heavily by foreign actors. Poorer countries are dependent on export-oriented economies, and much of the production flows to the wealthier regions. (And the effort that goes into maintaining these disparities and keeping real competition from the poor countries at bay is also wasteful.)
  • Addressing this could eliminate much in terms of environmental degradation from distribution (although perhaps be offset by new local (national or regional) industries, which must be countered with alternative/sustainable/less wasteful use of resources, etc.)
  • Free—but somewhat managed—trade between like nations, within regions etc would be beneficial to all involved. “Free” trade in its current form between unequal nations is itself unequal and continues inequality as a result.
  • Furthermore, the freeing up of labor in wealthy countries through elimination of wasted distribution and wasted capital, combined with efficient job-destroying technologies that we have today, means there would be more unemployment—but that should be used to society’s advantage: we should share remaining productive jobs—that would reduce the workweek for all. This is detailed much more in this web site’s section behind consumption and consumerism68.

Of course, other issues will arise and the above glosses over numerous other issues (which links below will address in more detail, or point to sources with much more detail.) Local populations will have to continue to demand fairness and just actions from the new “capitalists” in the poor countries—such as demanding wages are fair, that environmental and other social standards and concerns are observed and respected, there is no concentration of ownership in land, technology, money and so on, like there currently is in the global sense (which also needs to be addressed).

Some might fear these suggestions, thinking they are communist or something, but they are not. These are all capitalist theories. There is nothing anti-capitalist about this. Instead, it is addressing a key issue of enhancing rights (economic rights) to all. Of course, this is not saying that there should be no international trade whatsoever, but that at least for the development of the current third world, the international setting should be something along the lines of the first world assisting by trading tools that help create industry (what some call tools of production) in those countries. Adam Smith, Henry George and others have all pointed to aspects of this. Of course, politics has meant that some of these theories have been distorted from original intent, or there may even be problems within the original theories. J.W. Smith for example, highlights well that philosophically much of this is possible:

Elimination of poverty is simple:

The impoverishment of the developing world is understandable once one learns how “plunder by trade” locks the world into violence and war.

Eliminating poverty is not philosophically complicated; Eliminate the monopolization of land, technology, and finance capital and equalize pay for equally productive work, both within internal economies and between trading nations. Once all nations and all people have access to technology and their labor is paid equally for equally productive work, the buying power of labor in different nations, and within nations, will equalize. Eliminating those monopolies will instantly distribute a share of the wealth to all members of society even as economic efficiency increases and produces more wealth. This is a more cooperative and democratic capitalism that will assure all rights for all people.

J.W. Smith, Institute for Economic Democracy69

(J.W. Smith quote above, describes in detail over 800 years of history of “plunder by trade” that is mentioned above, and how at the world level, the subtle monopolization of land, technology, capital etc have all come about, including the waste of wars and other factors to maintain such systems. Furthermore, he provides details on how society has unwittingly supported what has amounted to plunder of the poorer regions of the world.)

(For more about the waste aspect, also see the latter parts of this site’s section on behind consumption and consumerism70, especially the page on waste.)

So, one might naturally ask, if it is this “simple” why haven’t the poor done this? There is in some respects, a simple answer but one that demands a lot of explanation! The simple answer to this can be found in in things like politics, greed, dominance-politics, etc. For example, international economic institutions like the World Bank and IMF, with the influence of economically and politically powerful nations, have been able to push through policies, which are known to be destructive (as even admitted by former Chief Economist of the World Bank and Nobel prize winner. (See this web site’s section on Structural Adjustment Policies71 or SAPs, for more including links to article from Joseph Stiglitz (that former Chief Economist) and others on how SAPs creates poverty and destroys any real chance of developing one’s own nation.)

In fact, instead, things like SAPs open up poor countries economy for “Foreign Direct Investment”, for “constructive engagement” etc. But these are often “constructive” for the multinationals, not always for the host country, because there is “investment” to create sweatshops, “constructive engagement” to extract resources, and so on. There is little “constructive investment” in helping these countries build their own industries. So, such investments might look like they create jobs in the poor countries, but compared to the real potential of what the poor countries could achieve, this is very little, and much potential for poverty alleviation instead is lost. And while some mainstream commentators may not like to talk about it, the effects of colonialism etc are still felt—the same countries are still poor; their resources are still plundered away (instead of through force it is now largely through unequal trade). (See also this site’s section on corporations and human rights72 for more on this issue of constructive engagement.)

Furthermore, the above argument from the Economist lends well to corporations who do not actually wish to engage in competition that will threaten their current success:

  • Because people everywhere are pretty much equally productive, then factors like access to industry, technology, education etc can enhance that productivity.
  • Structural Adjustment is almost an assault on such things, and the poor are not only poorly paid for the work they already do, but are denied technology, industry, education, health etc, to build their own industries and economies.
  • Furthermore, you get companies closing off in the first world and establishing in the third world, where they can say they are being “constructive” because they bring technology, know-how etc. However, this is a con; it is not to really and effectively help the poor build their own industries, their own buying power, and their own wealth. Instead, it is a way for companies to reduce costs but with social effects on all sides—the workers of the wealthy country lose out, while workers of the poor get exploited. Because on both sides then ordinary people lose out, and the poor cannot build their own industries etc, as a result, the threat of real competition leads to what J.W. Smith describes aptly as capital destroying capital73.

In fact, Adam Smith, who criticizes both big government and concentrated big corporations in his 1776 classic The Wealth of Nations, what some regard as the free trade/capitalism bible, is worth quoting here:

Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their good both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.

Adam Smith, The Wealth of Nations, Book I, (Everyman’s Library, Sixth Printing, 1991), pp. 87-88

There are numerous other political factors, and geopolitical/military factors as well, related to the historic struggle and control for resources, and the wars that have revolved around that to maintain such disparities. (The poverty74 section on this web site introduces many of these angles, with many links to other sites and sources.)

The Economist article doesn’t really consider political aspects in this, and instead uses only some aspects of these capitalist theories, which, contrary to what seems to be popular belief, are not magical or natural forces without alternatives! Regardless of whether or not the theories themselves are sound, or not, or partially, (which is a huge topic unto itself!), they are heavily manipulated by political interests as has always happened throughout history. Hence, while in theory there may be many good points, in reality politics (power play) leads to supporting only those aspects of those theories that fit one’s “interests” and so rhetoric and reality are far apart.

Effects or Influence on Culture?

In the Economist article, Is globalisation doomed?75, September 27, 2001, there is the following mentioned in addressing the impact on culture:

But what about the view that globalisation is a kind of cultural conquest? This too is plainly wrong. Under a market system, economic interaction is voluntary. This is the market’s greatest virtue, greater by far than its superior productivity. So there is no reason to fear that globalisation itself threatens traditional non-western cultures, such as Islam, except in so far as individual freedom threatens them. McDonald’s does not march people into its outlets at the point of a gun. Nike does not require people to wear its trainers on pain of imprisonment. If people buy those things, it is because they choose to, not because globalisation is forcing them to.

What does free choice in this context mean? In a narrow “range of discourse”, yes, this is a choice one makes. However, in a wider sense, it is not really that much of a choice, because in a wider discourse and debate we would see that other real choices have been denied. For example, think of all those “non-choices” because there is no internal market allowed to develop, as suggested above; no industry of their own for their own people etc. The WTO, IMF, WB, SAPs, etc. have all help create economic policies have in effect limited the possible choices a nation/region/peoples can make. Hence, within the confines of a limited choice, you have a choice.

There is also the interesting point about McDonalds not using a gun. Again, this depends how you look at it. Of course, McDonalds does not have an army, so in that respect, they are right. But it is of course oversimplified.

For globalism to work, America can’t be afraid to act like the almighty superpower that it is.… The hidden hand of the market will never work without a hidden fist — McDonald’s cannot flourish without McDonnell Douglas, the designer of the F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies is called the United States Army, Air Force, Navy and Marine Corps. — “What the World Needs Now”, by Thomas Friedman, New York Times, March 28, 1999.

Karen Talbot, Backing Up Globalization with Military Might76, Covert Action Quaterly, Fall-Winter 1999

(Thomas Friedman is a popular columnist in the New York Times, and a very staunch advocate of the current form of globalization.)

Yet, “war” or, using the old phrase of “gun boat diplomacy”, can be conducted in many ways — political, economic, and military. That is, the “gun” has been used by a company’s parent country (part of the foreign policy to help enhance one’s own country). These means have included military, IMF/WB, WTO or some other means. The historic plunder by raid or, now increasingly, by trade, has led to the same effects for the poor. As pointed out in the structural adjustment page, there is immense dependency created upon the poor. Hence, their choices are limited, but within those confines, they have a “choice”.

Defense Secretary William Cohen, in remarks to reporters prior to his speech at Microsoft Corporation in Seattle, put it this way, “[T]he prosperity that companies like Microsoft now enjoy could not occur without having the strong military that we have.” … “The defense secretary is making the case that conflicts in faraway lands such as Bosnia, Korea and Iraq have a direct effect on the U.S. economy. The billions it costs to keep 100,000 American troops in South Korea and Japan, for example, makes Asia more stable—and thus better markets for U.S. goods. The military’s success in holding Iraq in check ensures a continued flow of oil from the Persian Gulf,” concluded the Associated Press dispatch reporting on Cohen’s Seattle appearance [February 18, 1999].

Karen Talbot, Backing Up Globalization with Military Might77, Covert Action Quaterly, Fall-Winter 1999

As mentioned above, one cannot separate politics from economics; to do so would be naive. Politics in this respect includes institutional abuse of power, which affects the purpose for which economic policies are carried out, as well as their effectiveness. (See also the military expansion78 page on this site for far more on the economic links and purpose of military expansion, and how this has a direct effect on people’s “choices” far away from us.)

Because most of us in the wealthy world are fortunate to have far more choice, and our politicians keep reminding us that, we instinctively think that what we are therefore doing in other countries has to be offering them a choice as well, because we as individual people are decent at heart. Yet, we often don’t see that our own leaders and institutions will be involved politically around the world to help enhance our national interests which may or may not be in the interests of others. A classic example of this is food charity in non-emergency situations, which has increased world hunger, as detailed on this site’s section on food dumping79.

This is a good example of the ideology of neoliberalism taken to an extreme and shutting off the complexities from the discourse. It is naive to assume that politics isn’t a factor. In that light then, choice can be seriously affected.

So, in a way, that people choose the products they purchase, etc. But that choice is not as free as it initially seems; it happens in the surrounding context; what choices have been made available, what choices have been denied or forced out the market (by both market and non-market forces). The Economist used the example of McDonald’s and Nike, two global cultural icons, but didn’t mention any brands from developing nations. It could be argued that they are not mature enough but it can also be added that various international policies, under the name of free markets, have prevented them from competing even-handedly with the established powers. There’s also the geopolitical angle which can be seen on the resource struggle80 page on the Middle East section on this site. While in a slightly different context, the support of dictators, overthrow of democracies etc is discussed here with links to numerous sources and books for more details.

Is Globalization in its current form imposed on the poor?

In another article by the Economist, All too familiar81, September 27, 2001, there is the following in describing similarities and differences in the 1920s for globalism and today where:

One resides in, as he [Harold James, author of The End of Globalisation: Lessons from the Great Depression, Harvard University Press (June 2001).] writes, “the difference between an order imposed by treaties and an order built in sustained reflection about appropriate policy — and the gains to be derived from it.” In the 1920s internationalism was imposed; after the 1960s it developed, in the main, spontaneously, “as a result of calculations about advantage”. That seems right, though today’s anti-globalists would deny it. In their view, the Washington consensus is also imposed, selfishly and undemocratically, on unwilling victims. If that were true, the portents really would be bleak.

One can only respond to this by saying that later on, when we look at the protests82 page, we will see that protests at the effects of the current forms of globalization have occurred around the world for years. Many people, not just what the Economist defines as anti-globalists, but many others have protested because they face the brunt of these policies, and can often see right through them, by virtue of being the recipients of these. (Just as people of ethnic minority will see through policies that are racist, for example, whereas the instigators of that policy may not realize, and where it genuinely may not have been the intention for the policy makers to be racist.)

As mentioned above, SAPs, and other such policies are imposed on the poor. For the wealthy, it might not need to be so imposed, as it is beneficial to them and therefore there may be less need to impose it in the same way, so to speak. (Though some will even point out that in the wealthiest of nations, there are similar policies causing high disparities within those nations as well.) Just because in one culture or a class of people we might not see so much imposition, doesn’t mean that there isn’t that imposition in other cultures or classes (from that dominant culture or class). The previously mentioned page on the resource struggle83 in the Middle East section on this site, while in a slightly different context, talks of the support of dictators, overthrow of democracies which has gone in hand with globalization, and from that perspective can be seen as examples of imposition.

Economics helps the environment

In the Economist article, Economic man, cleaner planet84, September 27, 2001, the point is made that economic theories, market systems etc are good for the environment.

The title of being economical meaning better environment is almost too obvious. Indeed, “Shocking as it may seem to most anti-globalists, market forces can help the environment”, says the Economist. Of course, market economies may help create incentives for doing various things too, including incentives to reduce environmental degradation, if appropriate policies are in place, if concerns of people are respected by the large pollution-causing industries, and so on.

But as well as helping, it often does not. climate change and global warming85 is perhaps the ultimate example where markets have contributed to this problem rather than help the environment. The U.S., the ardent promoter of free markets has also historically been hostile against the Kyoto Protocol to deal with threat of climate change and global warming. For a long time it refused to accept what its own scientists had told the world. Numerous cases appeared where big business interests of the threat of profit loss was found to be influencing decisions affecting the planet. The value of the planet’s biodiversity has rarely been factored into prices86, for example, even though the price signal is very important to our functioning economies. To be fair, in these examples, maybe it could be argued that this was a failing of free markets because they weren’t really free markets: free markets perhaps unleashed powerful forces (because they helped some entities become unduly powerful and influential beyond their democratic accountability) and it was these entities that are the problem, not free markets per se.

But, as stated before, power politics directs economic functions, because while economics can be about how best to use money, politics is about the control of that money. Given the earlier points made about political influence, the following also highlights this very well:

In 1991, then Chief Economist for the World Bank Lawrence Summers, (and US Treasury Secretary, in the Clinton Administration, until George Bush and the Republican party came into power), had been a strong backer of structural adjustment policies. He wrote in an internal memo:

Just between you and me, shouldn’t the World Bank be encouraging more migration of dirty industries to the LDCs [less developed countries]?… The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that… Under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City… The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-five mortality is 200 per thousand.

Lawrence Summers, Let them eat pollution, The Economist, February 8, 1992. Quoted from Vandana Shiva, Stolen Harvest, (South End Press, 2000) p.65; See also Richard Robbins, Global Problems and the Culture of Capitalism (Allyn and Bacon, 1999), pp. 233-236 for a detailed look at this.

Even what appeared in an Economist article, by a foremost pusher of Structural Adjustment, neoliberal globalization, etc we see that politics can affect markets to help or worsen environmental issues.

Furthermore, this gives a further excuse for corporations to prevent refitting factories in the first world with the costly environmentally oriented measures and protections (put in by democratic governments and environmentally oriented citizen pressure — not necessarily free markets by themselves), and move elsewhere where regulations have been reduced or removed. As a result, we may see a relatively cleaner environment in the industrialized world, but it is not all explainable by those nations and their industries being cleaner.

On this site’s section on consumption and consumerism87, it has been detailed how many industries use resources efficiently to produce profits. However, if measured from an angle of how well the environment has faired, the efficient use of resources has led to a lot of environmental degradation. Measures like GDPs don’t fully factor in such angles (and are treated as “externalities”). Hence, as described on that section, there is a lot of waste in the economy that isn’t accounted for.

What we are seeing here then is economists, politicians, business leaders, etc offering such critique as the above but falling back to their theories, while “anti-globalists” are generally (not always) critiquing the realities. So, in some respects, sometimes, neither are really talking to each other. And yet, there is some critique to be made of some of the “anti-globalists” too:

First though, it should be pointed out (as we will also see later on in the protests page in this section of this web site) that “anti-globalists” are not necessarily against globalism and internationalism.

  • That is, they are not “anti-globalists” in a strict definition of that term.
  • More accurately, it would seem that they are mostly against the current forms of globalization due to the observed (and in many cases, predicted) effects.
  • This means that some, especially many in academic and intellectual circles, including many from the developing world, may be for capitalism, or at least market-based economies to varying degrees.

While capitalism could be argued as a good way (some may say the only, or the best), there are many forms of capitalism. So, at the least, the current form which is seen as overly corporate-led and/or over competition oriented (i.e. destructive rather than healthy competition) may be criticized, and people may in effect be demanding a more cooperative or democratic capitalism. As mentioned above, it is even suggested that the current form of globalization is a more predatory form of capitalism, such as mercantilism/imperialism, but just nicely dressed up.

But there are also other types of “anti-globalists”. For example (and not limited to)

  • Some many indeed be anti-internationalism, isolationist, xenophobic, etc.
  • Others, notably extremist/alarmist environmentalists are often anti international trade for often legitimate (sometimes alarmist) environmental concerns.
  • Other forms of extremism may want to go to pre-agricultural civilization (Although the insights into how pre-agricultural civilizations really lived etc are interesting, and useful to learn from and even apply, but conclusions to go back to it is an extreme conclusion).
  • Others wish to do away with capitalism and may prefer instead communism, anarchism and so on. These all have some valid points and also some questionable ones, just as the current system has such a mix.

Other protestors see the current system being so bad for the poor around the world, and most people in general, that they are passionate enough to raise their voice. But, because it is difficult to read into so many issues it is hard to always offer alternatives that take in all these aspects. Hence, such people may either only offer critique (which is still valid, even if there was somehow no alternative) or may go with whatever organizations they turn to offer them.

Others will also critique capitalism to the core, which may be very valid, while others will critique different aspects.

The point is that not all anti-globalists will even agree on the points above which the Economist tends to say either most, or indicate that all, “anti-globalists” have as certain beliefs. It is easy to try to break complex issues into more tangible black and white issues, which is a problem, as discussed in the mainstream media section on this site, as well as the protests page later on here. It is a problem because it affects the debates, which in turn risks polarization and animosity, rather than dialogue and understanding. It also influences a large segment of society’s views and opinions.

Of course it is hard to quantify and views and perspectives will continue to change. But one thing noted here is that in all those articles from the Economist, many critiques from developing countries were not included. Some of these critiques are very, very good, and differ with those from the North in various ways. One can go on and on to show differences, various perspectives, etc. The point then is multi-fold — that for protestors/activists etc, to read as widely as possible and from diverse cultures as well, not just widely within one culture, and for mainstream to listen in detail to these voices, especially from the South. (And, not just governments and other political/business leaders from the South, as many have their education in the Western universities, that teach the same theories. Of course, that is not to say because they got that education they have no credibility, but just that diverse perspectives need to be understood. The education can have an effect on perspectives, such that talking to someone else from another part of the world but who may have studied at the same or similar university, might have the same perspective.)

Another aspect all this touches upon is hinted to when I mentioned the narrow “range of discourse”. This occurs from cultural and ideological premises etc and is an issue for all societies. In the West, there is a common culture, even though there are differences between countries, and a common ideology to varying degrees is of liberalism, (from where we get powerful concepts such as individual rights etc). An ideology can be taken to an extreme, liberalism being no exception. Individualism can be at the expense of society, rather than combined, for example. In such contexts then, differing explanations can occur.

As a small example, what the Economist doesn’t recognize here are complex things such as excessive and concentrated property rights and monopolies (in a global sense) combined with all the waste that accompanies this in order to maintain the inequalities this results in.

As a result, when the range of discourse debated is limited in the mainstream, it can affect the views of society in general. If the education system itself has this problem as well as mainstream publications, then we get a strange situation where many “educated” people are more “indoctrinated” (paraphrasing Noam Chomsky) into these views more easily than those who are not. Noam Chomsky offers an explanation of why this may be so; that they are more exposed to other aspects of mainstream politics, media, newspapers, publications that fortify each other. (Of course, those without appropriate education risk getting criticized for talking about economics) In addition, this glosses many issues, but the links below provide more insights, as does this quote:

One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story. In most textbooks and classrooms, not only are these three fields of study separated, but they are further compartmentalized into separate subfields, obscuring the close interconnections between them.

J.W. Smith, The World’s Wasted Wealth 288, (Institute for Economic Democracy, 1994), p. 22.

Dr. Nancy Snow, an assistant professor of political science describes one of her previous jobs as being a “propagandist” for the U.S. Information Agency. She is worth quoting here, in discussion of propaganda and belief systems, which are an integral part of political aspects of economics:

The USIA [United States Information Agency] targets the educated elite [in other countries], despite some negative sentiments, because propaganda is thought to be most effective on the small minority of powerful influential peddlers. As Noam Chomsky explains, “One reason that propaganda often works better on the educated than on the uneducated is that educated people read more, so they receive more propaganda. Another reason is that they have jobs in management, media, and academia, and therefore work in some capacity as agents of the propaganda system — and they believe what the system expects them to believe. By and large they're part of the privileged elite, and share the interests and perceptions of those in power.”

Nancy Snow, Propaganda Inc; Selling America’s Culture to the World, (Seven Stories Press, 1998), p. 31

I am only scratching the surface here, of a very deep and large subject matter; the critique or understanding of the culture and ideology of neoliberalism and how this impacts the way various issues such as poverty, economics, other cultures, etc, are understood and articulated to others. I have hardly touched on this topic on this site, although a section will come soon. However, the following links cover aspects of this issue, as well as provide a lot more depth and perspective than what I have offered here in terms of critique:

  • Poverty89 section on this site, which includes pages on SAPs, food dumping, hunger causes (related to economic policies and the issue of choice etc)
  • Behind consumerism and consumption90 looks at the waste in the current system and how elimination of waste and addressing related issues would actually allow more rights to all around the world while also reducing environmental degradation, etc.
  • Mainstream media91 on various factors that lead to a concentrated ownership in the media which then affects the range of views we get.
  • Struggle for Resources; Supporting dictators and overthrowing democracies92 from the Middle East section on this site (while slightly on a different topic, a lot of relevant information as well.)
  • Noam Chomsky Archive93 provides many articles and online books written by Noam Chomsky, a prominent political analyst. He is a professor of linguistics at MIT.
  • Institute for Economic Democracy94 provides a detailed account of the last 800 years or so of the battles over the control of resources and the causes of poverty world wide (as well as ideas on how to solve them based on a more democratic and cooperative form of capitalism). There is much deep criticism of the current forms of free trade here, and in detail points out how the rich nations today never got their wealth by following Adam Smith principles, but instead followed protectionsit policies, while preaching Adam Smith to everyone else.
  • Food First95 has published many books and articles that describe the political, economic and social aspects of hunger, poverty, and related development issues.
  • Peter Gowan, Global Gamble, (Verso Press, 1999), has much on political economies, and good insights into the ideology of liberalism.
  • ZMagazine96 provides a vast number of articles on all sorts of issues. In particular, look at their Global Economics97 section which offers many articles from various people around the world.
  • Walden Bello, Shea Cunningham, Bill Rau, Dark Victory; The United States and Global Poverty, foreword by Susan George, (Food First, Pluto Press, 1994, 1999) is a great book on the impacts of Structural Adjustment on the majority of the poor nations.
  • Richard Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon, 1999) has a detailed look at the success and problems of capitalism, covering a multitude of issues.

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Effects on political parties and political diversity

Globalization in its current form, which is overly corporate-led, as mentioned above, reduces decision-making capabilities from peoples and governments and places more influence on corporations. If there are concerns or attempts to legislate regulations, the opened up markets mean that corporations can simply threaten to move elsewhere, because globalization in its current form has allowed them to be “free” to do so. It then means that even if a government has good intentions, it cannot always implement them. Or, as is often common, corrupt government officials often have much to gain by opening up their economies even if it is detrimental to most people.

In the mid-1990s, Europe saw a wave of social democratic parties come to power, such as UK’s Tony Blair and the Labour Party, the Green coalition in Germany, social democracy in France and similar happenings elsewhere. Yet, when looking at their policies, they have been almost the same as their former right wing counter parts. Take just the following as an example:

  • Tony Blair has been considered by many commentators to be another Thatcher (or even worse, as he has gone further in some policies). In that respect, the New Labour approach seems similar to the “Old Thatcher” policies from an economic and political perspective.
  • In the United States, (ignoring the debacle of the 2000 elections and what would in other countries be labeled all sorts of things, from fraud, to illegitimate, to a farce etc!) the actual policies of Gore and Bush were very similar — they only diverged on how to carry them out. And, if their foreign policy claims during their election campaign are anything to go by, they even openly agreed on the same policies, without any debate between each other at the televised “debates”!
  • In Germany, Oskar Lafontaine attempts to control corporations by increasing their taxes and giving the population a break by reducing theirs, resulted in so much ridicule98 by the “respectable” institutions and mainstream press, such as the Financial Times and others, as well as threats from major corporations to pull out etc., that he was forced to resigne. People lost out.

John Bunzl, of the International Simultaneous Policy Organisation99 is worth quoting at length concerning the effects on political parties and electorates of the drive for over-competition:

By their inability to deviate from these policy constraints, governments of whatever party and their electorates must now submit to what are, effectively, permanent political conditions. Conditions in which whatever party elect, the policies we receive inevitably conform to market and corporate demands and not necessarily to what the electorate desires.

Certain electorates around the world still generally believe they live in truly democratic countries, a misapprehension which is leading to a marked and increasing mis-match between voter expectations and political-economic reality. Voters are led to believe that in selecting a particular party they are voting for a particular political approach. But they become confused when, once in power, their party fails to deliver what they might have expected.

Once in power, therefore, politicians of whatever party effectively have no choice but to remain confined within the policy parameters dictated by global markets and competition. Now subject to pseudo-democracy, the simple conclusion we must reach is that it no longer matters much for which party we vote. This predicament and resulting voter ambivalence consequently presents our political parties with a distinct problem: how to make themselves and their policies different from those of other parties when in fact the markets allow no such differentiation. How can they maintain to the electorate the illusion that they have the power to improve society, or preserve what is best in society, when the markets preclude such “value judgements”? In a vain and desperate attempt, they are forced to employ increasingly elaborate rhetorical tricks and stunts commonly known as “spin”. Hence the rise to prominence of Spin Doctors. For centre-left governments, attempting to reconcile their traditional social democratic values with free-market realities is resulting in the most pathetic exercises in rhetorical hair-splitting in an attempt to distract traditional left-of-centre supporters from the reality of having to submit to the liberal dictates of world markets. (Emphasis added).

Since our politicians and their parties must now position themselves according to what free-market competition dictates and not necessarily to what the electorate desires they have, to a great extent, ceased to represent a mechanism through which political choice can be expressed. Instead they have become puppets of the quasi-dictatorship serving principally to preserve among the electorate the false illusion of political choice; the false illusion of democracy. …

The electorate too, has been infected by this paralysis. Voters are not stupid. They understand only too well what competition means. … Whist they may not be able to precisely identify what is argued here, they certainly know that their nation cannot ignore world markets on the wider international economic environment. They know that their jobs depend to an increasing degree on their nations’s competitiveness in world markets. … real political choice … is abandoned to the unstable and insecure forces of competition whilst believing its fate to be inevitable, unavoidable or simply, perhaps, as just “a sign of the times”.

John M. Bunzl, The Simultaneous Policy (Simpol), An Insider’s Guide to Saving Humanity and the Planet, (New European Press, 1999), pp. 17 - 21

Prize-winning author and activist from India, Arundhati Roy, also captures this in an article that made front page of the Indian daily, The Hindu:

No individual nation can stand up to the project of Corporate Globalisation on its own. Time and again we have seen that when it comes to the neo-liberal project, the heroes of our times are suddenly diminished. Extraordinary, charismatic men, giants in Opposition, when they seize power and become Heads of State, they become powerless on the global stage. I’m thinking here of President Lula of Brazil. Lula was the hero of the World Social Forum last year. This year he’s busy implementing IMF guidelines, reducing pension benefits and purging radicals from the Workers' Party. I’m thinking also of ex-President of South Africa, Nelson Mandela. Within two years of taking office in 1994, his government genuflected with hardly a caveat to the Market God. It instituted a massive programme of privatisation and structural adjustment, which has left millions of people homeless, jobless and without water and electricity.

Why does this happen? There’s little point in beating our breasts and feeling betrayed. Lula and Mandela are, by any reckoning, magnificent men. But the moment they cross the floor from the Opposition into Government they become hostage to a spectrum of threats - most malevolent among them the threat of capital flight, which can destroy any government overnight. To imagine that a leader’s personal charisma and a c.v. of struggle will dent the Corporate Cartel is to have no understanding of how Capitalism works, or for that matter, how power works.

Arundhati Roy, Do turkeys enjoy thanksgiving?100, The Hindu, January 18, 2004

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Will Corporations Rule the World?

For all the vivid examples of modern corporate power, such as the annual income of Motorola being equal to the annual income of Nigeria's 118 million people, it is folly to believe that big business on its own is shaping the new world order. This allows the argument against globalisation to be depoliticised, reducing it to single issues of “ethical trading” and “codes of conduct”, and inviting its co-option. Above all, it misses the point that state power in the west is accelerating.

John Pilger, The state is more powerful than ever; the view that big business alone shapes the new world order is wrong101, 9 July 2001

A common perception is that due to the enormous influences and power of many major multinationals, corporations are therefore going to “rule the world”; that corporations will reduce the need for a government and will dismantle the state. Yet, this is not completely true.

  • Corporations still require the state to provide them the environment conducive to their needs.
  • The state may reduce its functions and obligations and thus “roll back” its commitment to its people, but that doesn't mean that they won't be needed and become obsolete.
  • Such rollback will also enable decision-making (and therefore control) to be further concentrated.
  • This “rollback” happens both in the North and the South.
    • The South has been “structurally adjusted” to open up the economy and roll back the functions of the state, and even concentrates further the decision-making. That is, these IMF-, World Bank-prescribed policies have reduced democracy. (See this web site's section on SAPs102 for more.)
    • In the North, in countries ranging from New Zealand, to the United Kingdom, and most aggressively in the United States, the functions of the government have been constantly rolled back. Less is spent on health, education etc, while more on military, policing and so on. (See Walden Bello, Dark Victory, (Food First, 1994, 1999 Second Edition) for more on this.)
  • Yet governments will still be required to provide repressive functions to “keep the rabble in line103” so to speak, as described by Noam Chomsky.
  • They will also be required to help create or open up markets, or even provide military support for such things (as described in the military expansion104 section on this site).
  • Also, an interception of society's wealth is sometimes provided to large businesses to just survive. Western nations provide a lot of protectionism to their industries, while forcing the poor countries to completely open up. If there was true free trade and fair competition, many wealthy western corporations might not be able to survive, as John Pilger suggests105. (See also the corporate welfare and evasion of responsibilities106 section on this site.

So, while corporate influence increases and continually drives many aspects of our lives, from influencing and even buying elections, public policy and so on, they still require a government that functions to serve their needs as well. International institutions such as the IMF, World Bank, and World Trade Organization, are also needed. The irony is that by often using tax payer money, the tax payer unwittingly supporting a process that is leading to more exploitation of tax payers. For the poor countries, the multinational corporations of the west are seen as further extensions of those western nations.

As the post September 11, 2001 corporate scandals have shown in the U.S., even U.S. multinationals are not exempt from all issues. Corporate accountability has come to the fore especially for shareholders due to accounting and other scandals (though there are still concerns of corporate welfare going on by using the war on terror as an excuse -- sometimes legitimate, sometimes not). As one example, the L.A. Times reported107 that “In a setback for multinational corporations, a federal appeals panel ruled [18th September 2002] that they can be held liable in U.S. courts for aiding and abetting human rights violations committed by others abroad.” A number of multinationals have been accused for gross human rights violations around the world, as briefly discussed in various sections on this site, and as that L.A. Times provides an example of.

It is possible therefore, that with the drive for real democracy and accountability at all levels of society that the interests and influences of big multinationals and others that are currently regarded by many as having a negative impact may perhaps be checked appropriately, though history has shown that this is no easy task. The above example from the L.A. Times is just one small step.

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Increasing charities are a sign of fundamental, structural flaws.

We hear more and more about philanthropic organizations set up by mega-successful business elites, where millions of dollars are donated to seemingly worthy causes. However, the fact that such donations are needed also serves as an indication that development policies and globalization policies in their current form are not sustainable. The following quote summarizes this notion quite well:

It is all very well for Bill Gates to charitably donate $750m to pay for immunization programmes for certain diseases, as he recently announced he would do, and for James Wolfensohn to urge transnational companies setting up in poor countries to contribute financially directly to local education services. Societies which depend on such largess to meet their basic health and education needs are neither sustainable, democratic nor equitable — yet new dimensions of power are ceded to large companies.

Brendan Martin, New Leaf or Fig Leaf? The challenge of the New Washington Consensus108, Bretton Woods Project, March 2000.

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Where next?

Online Sources:

(Note that listed here are only those hyperlinks to other articles from other web sites or elsewhere on this web site. Other sources such as journal, books and magazines, are mentioned above in the original text. Please also note that links to external sites are beyond my control. They might become unavailable temporarily or permanently since you read this, depending on the policies of those sites, which I cannot unfortunately do anything about.)

  1. Global Issues: “A Primer on Neoliberalism”, Last updated: Sunday, August 22, 2010, http://www.globalissues.org/article/39/a-primer-on-neoliberalism
  2. 'Oil and Gas Report', Sector Reports, United Nations Environment Programme, Department of Technology, Industry and Economics, August 2002, http://www.uneptie.org/outreach/wssd/sectors/oil-gas/oil-gas_sum.htm
  3. Global Issues: “Consumption and Consumerism”, Last updated: Sunday, January 05, 2014, http://www.globalissues.org/issue/235/consumption-and-consumerism
  4. http://www.youtube.com/watch?v=l7AWnfFRc7g
  5. Global Issues: “The Rise of Corporations”, Last updated: Thursday, December 05, 2002, http://www.globalissues.org/article/234/the-rise-of-corporations
  6. http://www.ied.info
  7. Global Issues: “Structural Adjustment—a Major Cause of Poverty”, Last updated: Sunday, March 24, 2013, http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty
  8. http://www.ied.info
  9. http://www.ccus.info/books/cc/intro.shtml
  10. J.W. Smith, Economic Democracy; Political Struggle of the 21st Century, (1st Books, 2002, Second Edition), Chapter 1. (This link is to an online reposting of that chapter), http://www.ied.info/books/ed/externaltrade.html
  11. http://www.ied.info/books/www/
  12. http://www.ied.info/books/www/
  13. http://www.globalresearch.org/view_article.php?aid=629434260
  14. Global Issues: “Corporations”, Last updated: Monday, January 07, 2013, http://www.globalissues.org/issue/50/corporations
  15. http://mondediplo.com/2000/04/07golub
  16. James L. Phelan, 'Renowned U.S. Economists Denounce Corporate-Led Globalization', Grassroots Globalization Network, 18 November 2001, http://www.earthisland.org/ggn/ggn_article2.html
  17. http://www.thenation.com/docPrint.mhtml?i=20020610&s=press
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Author and Page Information

  • by Anup Shah
  • Created: Monday, September 07, 1998
  • Last Updated: Friday, March 31, 2006

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Document Revision History

DateReason
September 6, 2010Added a video clip about empathy and its relation to some assumptions about free markets
July 2, 2007Added a video clip about how free trade agreements often include little on trade itself
March 31, 2006Small note added on pressure to reform from within developing countries as well as externally
June 20, 2005Added a note on the brain drain phenomenon affecting poor countries and a note on the cost of free trade to Africa
May 06, 2004Added a bit more about protectionism and its contradictions, and about the IMF admitting it made mistakes in how it dealt with Argentina
February 09, 2004More about free trade actually being rhetoric for mercantilism
January 22, 2004More about impacts and contradictions of corporate globalization

This print version has been auto-generated from http://www.globalissues.org/article/40/criticisms-of-current-forms-of-free-trade