New Internationalist

Just Do It!

Issue 296

Just do it!
You may think your bankrupt government is powerless to act – but
Richard Swift argues that the options are there if the political will exists.

It’s old news by now. A new government is elected on some vague platform of happiness and security for all – and the unsuspecting voters are in for a surprise.

The Finance Minister proposes lowering capital-gains and company taxes to help attract investment. The Labour Minister pushes through legal changes to make the labour market more ‘flexible’. The Environment Minister backtracks on election promises for tougher regulations on CO2 and other emissions. The Social Security Minister regretfully details budget cuts to programs supporting the most vulnerable. The Health Minister announces a series of cutbacks to community-health programs. Thousands of public-service jobs are shed, the work either no longer ‘necessary’ or contracted out to private-sector firms. Budget deficits are too high and the international bond-rating agencies just won’t wear it.

Government expenditure as % GDP
Source: World Development Report 1997, World Bank.

The nation-state has to reinvent itself. Its main purpose must now be the defence of the global free-trading system. The well-being of its citizenry is dependent on its willingness to remove obstacles to the free flow and profitable use of capital. Governments who act against this compelling logic are asking for trouble.

It is certainly true that the playing field for government action has changed. But the idea that the nation state must lie back and enjoy the assault of globalization has more to do with ideology than reality. It is political will which is the issue here. Governments can act to alter the terms on which their societies are integrated into the international economy.

The most dramatic increase in economic globalism is not in the sphere of production – still relatively national or regional – but in the financial, speculative sphere of short-term capital movements. This is in effect a casino economy featuring capital flight, tax havens, bank secrecy, speculation on currency and commodity markets, rogue traders. According to UN figures the amount involved in illegal trade is $750 billion a year – more than twice global foreign direct investment by multinationals in 1995.

Keeping an eye on the casino economy in the Shanghai stock exchange.
HARTMUT SCHWARZBACH / STILL PICTURES

Such issues should not be and need not be immune from public exposure and regulation. This needs to happen at different levels. But, even when multilateral action is called for, the initial impulse must come from citizens bringing pressure to bear on their own governments.

Even such mainstays of the global order as the World Bank are beginning to have doubts about the ‘weak government’ idea pushed by the ‘let’s leave it all up to the market’ crowd. In its 1997 World Development Report the Bank worries that weakened political authority and widespread corruption are undermining such cornerstones of the corporate economy as ‘the sanctity of property’ and ‘respect for contracts’ – particularly in the Third World.

Ironically it is those states that have kept out of the arms of the Bank and other globalist entanglements that have some of the most efficient state structures. In an Africa overburdened by a corrupt and despotic state Eritrea stands out for its administrative coherence, lack of corruption and insistence on not surrendering economic sovereignty. Kenya, on the other hand, has been the point of entry for globalism into sub-Saharan Africa and is saddled with a government renowned for its patronage, corruption and intolerance. It is unsafe to walk many of Nairobi’s streets. But you can stroll through Asmara (Eritrea’s capital) any time of day or night.

Most of the world’s governments are now insolvent, facing a cash crunch to pay both current bills and past creditors. This leaves them vulnerable to the demands of creditors and investors. Policy prescriptions are dictated by anyone from the local business-page columnist to the International Monetary Fund. Cut spending. Cut taxes. Reduce wages. Privatize. Reward wealth. Punish poverty.

But there are other options. Current economic policy concentrates on trimming spending while leaving the revenue side to stagnate. This need not be so. There are many options within the present tax structure for greater fairness: a more progressive tilt to income taxes, revival of corporate and capital-gains taxes, wealth and inheritance taxes. These are traditional taxes that would help reverse the extreme polarization of wealth and poverty that has been taking place almost everywhere since the 1980s.

Walking away from globalist entanglements: peace and quiet on the streets of Asmara, Eritrea.
SEAN SGRAGUE / PANOS PICTURES

The tax system has, however, lagged behind globalization; sales taxes, for example, are based on national markets. Meanwhile, global electronic commerce is expected to reach $600 billion by the year 2000. Most of this goes untaxed. A tax on the digitalized flow of information – a ‘bit’ tax – could be levied through the telecommunications system. This could be combined with a tax on foreign-exchange transactions estimated to be about $1.2 trillion a day. This has been dubbed the Tobin Tax after Noble Prize-winning economist James Tobin, who is one of its chief advocates.

Both taxes are controversial with the partisans of free-market globalism, who maintain they are impossible, undesirable or both. Yet, given the political will, the creative use of monitoring technology, diligent enforcement and a minimal level of international co-operation they could be an important source of public finance worldwide. A modest one-per-cent tax on currency transactions would yield $2.50 trillion a year, mostly from people who could well afford to pay. A bit tax of just one cent per megabit would yield, for a smallish developed country like Belgium, some $10 billion annually. Other potential sources of revenue include the currently untaxed sale of stocks, bonds and commodities futures.

Apart from finance, corporate globalism’s other ‘big stick’ is job blackmail – threatening job losses. Re-thinking employment policies would help undermine this power. ‘Full employment’ (full-time jobs for everyone, whether producing weapons systems or fast food) is no longer either possible or desirable. There is already too much junk. The global eco-system can’t take producing more of it. Some people work too much, others not at all. Real needs, like taking care of those who can’t take care of themselves, are not and will not be met by a profit-driven private sector.

We need to use the economic surplus generated by an overheated economy to do things differently. Work must be divided so everyone has a fair share. A social wage is needed to underpin income and reduce the drive to do unnecessary and destructive work. This also has the potential to free up human activity to do the caring for the environment, for the community, for the socially marginalized that is so desperately needed. This new idea of work could significantly reduce government subservience to the heavy hand of job blackmail by trans- national corporations, with their perpetual promises to deliver or take away prosperity.

Sounds good on paper, but ‘get real’. Yet political will is again the key. What seems ‘realistic’ to a politician one day can change dramatically and quickly. The peoples of France and South Korea have recently proved that it is possible to ‘just say no’. Large mass movements in both countries have forced governments to back down from the globalist’s cost-cutting agenda.

Millions of people, from Seoul to Kwangju, mobilized in opposition to President Kim Young-Sam’s policy of Sekehwa – ‘total globalization’. On the other side of the world, the streets from Grenoble to Bordeaux echoed with the chants of ‘nous nous sommes battus pour la gagner, nous nous sommes batterons pour la garder’ (‘we fought to win it, we will fight to protect it’) as millions rallied to the defence of the social protections of working people. In both cases what the governments thought of as ‘realistic’ changed in a couple of months. The French managed to toss out their unpopular right-wing prime minister, Alain Juppé, and the new socialist government has increased corporate taxes to meet the criteria for entry into the single European currency. The Koreans were able to re-write their country’s labour laws, overturning a good deal of what was one of the most repressive anti-labour codes in the world.

While much draconian legislation was defeated or withdrawn, neither government has abandoned its overall commitment to corporate globalization. This shows clearly the limits of the ‘just say no’ strategy – as US anti-drug warriors can attest. The movement against globalization needs to develop a policy tool kit with fresh ideas on such issues as taxation, work and the environment. A program appropriate to the new technological era of global power needs to be forged. The old-style defence of the traditional welfare state, underpinned by full-employment growth economics, is no longer enough.

In their 1997 World Development Report the World Bank makes much of the need for states to foster participation and reduce the distance between government and people. Their vision promises everything to everybody but is technocratic, controlled and top-down. Orderly conferences, not noisy rallies, are what they have in mind – they would not be comfortable with the sentiments expressed on the streets of Seoul and Paris.

But they do have a point. The state has squandered much goodwill and public confidence through arbitrary policies, corrupt practices, kow-towing to the powerful and ignoring the vulnerable. If government is to try to gain a grip on the speculative forces that are sweeping the globe it can only do so as a creative, democratic force with widespread popular support. The national economy only yielded labour rights and entitlements for all through hard social struggle. The same will be true of the international economy. The exercise of popular power over the nation state is an essential part of any such struggle.

Richard Swift is a co-editor of the NI.

The real issue for government is whether the machinery of the state can be harnessed to truly democratic ends.

There is much to do;
25 years of globalization may have increased the number of ‘democratic’ states, but reduced their options. Economic orthodoxy has become pervasive, narrow and divisive. This, in turn, has led to the centralization of state power. In particular, many governments in the South – where the task is arguably greatest of all – have been reduced by ‘structural adjustment’ to an incapacitated, frequently corrupt and discredited shell.

[image, unknown] Contents


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