Criticisms of Current Forms of Free Trade
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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 Primer 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.
On this page:
- Simplistic Ideology; Rhetoric versus Reality
- Old mercantilism nicely dressed up today?
- Growing criticisms
- Blind Allegiance to Ideology
UnaccountableConcentration of Power and Decision-Making
- Environmental Degradation
- Eroding Worker’s Rights
- Brain drain from poor countries to rich countries
- Protectionism For The Rich, Open Markets For The Poor
- Free Trade Agreements Often Say Very Little About Trade
- Increasing Poverty and Inequality For the Majority
LevelPlaying Field That Gives More Advantage to the Wealthiest
- Positive or Negative Form of Interdependence?
- Cultural Uniformity and Effects on Other Societies
- Pressure by the wealthier classes to liberalize too quickly
- Defending Free Trade
- Effects on political parties and political diversity
- Will Corporations Rule the World?
- Increasing charities are a sign of fundamental, structural flaws.
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
interferenceallow 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 said,
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).
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 consumption highlights how economic interests do not match or deliver on environmental concerns or human needs and also leads to wasted labor.
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
- As explained in the corporations section of this web site, the rise of corporations 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 Democracy 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 adjustment.)
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.
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:
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.
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 less 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:
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:
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 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 corporations section).
Neo-mercantilism may be a more appropriate name for the system, rather than free trade.
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 critical of numerous aspects of corporate-led globalization.
As one example of the critique, consider this lengthy quote from the Nation magazine on Joseph Stiglitz:
In March 2003, the IMF itself admitted in a paper that globalization may actually increase the risk of financial crisis in the developing world.
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 adjustment 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 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:
Unaccountable Concentration of Power and Decision-Making
There has been growing concern at the increasing corporate power and their influence in the industrialized countries and international trade agreements, while their accountability is very small.
The effect on the environment 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
Eroding Worker’s Rights
The stability of jobs, 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.
Protectionism For The Rich, Open Markets For The Poor
Another concern is that most developing nations complain that the western nations themselves are very protectionist 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,
Increasing Poverty and Inequality For the Majority
Also argued by many is that only the wealthy nations will benefit, 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 taxes.
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:
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:
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 poor.
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?)
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:
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
levelplaying 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 dominated 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 pressure. 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 Democracy, 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
stabilityof 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.
- For more about the dependencies of the developing countries and how it has come about, visit this site’s structural adjustment 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:
As mentioned in this site’s mainstream media section, 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 speech 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 terrorism.
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.
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 flight is a risk.
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 critics, September 27 2001, the following is offered in discussion of the issue of quest for profits, regulation, fair wages, etc:
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:
- 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.
Freetrade 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 consumerism.
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:
(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 consumerism, 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 Policies 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 rights 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
constructivebecause 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 capital.
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:
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 poverty 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?, September 27, 2001, there is the following mentioned in addressing the impact on culture:
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.
(Thomas Friedman is a popular columnist in the New York Times, and a very staunch advocate of the current form of globalization.)
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
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 expansion 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 dumping.
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 struggle 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 familiar, September 27, 2001, there is the following in describing similarities and differences in the 1920s for globalism and today where:
One can only respond to this by saying that later on, when we look at the protests 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 struggle 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 planet, 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 warming 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 prices, 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:
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 consumerism, 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
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-globalistsin 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:
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:
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:
- Poverty 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 consumption 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 media 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 democracies from the Middle East section on this site (while slightly on a different topic, a lot of relevant information as well.)
- Noam Chomsky Archive 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 Democracy 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 First 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.
- ZMagazine provides a vast number of articles on all sorts of issues. In particular, look at their Global Economics 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.
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 Thatcherpolicies 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
- 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 ridicule by the
respectableinstitutions 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 Organisation is worth quoting at length concerning the effects on political parties and electorates of the drive for over-competition:
Will Corporations Rule the World?
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 backits 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.
rollbackhappens both in the North and the South.
- The South has been
structurally adjustedto 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 SAPs 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.)
- The South has been
- Yet governments will still be required to provide repressive functions to
keep the rabble in lineso 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 expansion 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 suggests. (See also the corporate welfare and evasion of responsibilities 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 reported 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.
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:
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