Globalization: An Alternative View

You don't have to see the world through the eyes of the market, says David Ransom.

Tanneries are pretty filthy places. To make leather from the hides of cattle they use chemicals which combine to form a toxic sludge that is virtually impossible to make harmless. Tanneries are common in southern Brazil, where cattle graze on grasslands that once were forests, and so there is a big sludge problem too. One might suppose that serious local ecologists - even if they were not vegetarians - would want to get the tanneries shut down.

José Lutzenberger, an agricultural chemist and visionary ecologist, thought otherwise. He took a fresh look at the tanning process. Why not prevent the chemicals from combining in the first place? Then recycle them - for some, like chrome, are expensive as well as toxic. The tanneries would thereby become cleaner and more efficient. The problem was less with the sludge than with the process. But you had first to accept that there was a problem, and then look at the process afresh to find the answer.

The world's economy resembles a tannery in this respect at least, that it is created by the all-too-fallible power of human ingenuity and produces a lot of sludge - both literally and figuratively. Too often people look at problems like unemployment or pollution and conclude with a shrug that nothing can be done - 'there is no alternative'. But when people are forced to this conclusion you can be pretty damn sure something's gone fundamentally wrong with the world's economy.

For a good while now we've had it hammered into our heads that there's an entirely new phenomenon, a 'globalizing' economy, that we must obey. A driverless machine2 assembles a thousand different parts from a dozen different countries to make a motorcar, or processes the bookings for European airlines in Bangalore. The long-delayed appearance of industrial societies in former European colonies like Malaysia, and around the 'Pacific Rim', is portrayed as nothing short of miraculous. A revolutionary new fuel - called 'market forces', and actually as old as the hills - suddenly seems capable of bringing us as close as we're ever likely to get to perpetual motion.

The evidence on which all this cultish fever relies is superficially convincing. The world's international trade has consistently grown faster than its economic output - more than twice as fast between 1985 and 1994.3 This means that an increasing proportion of what we consume is made somewhere else. The assumption here is that any kind of growth is good and that the cheaper things are the more efficiently they are being produced. Therefore an industrial machine that scours the world for the cheapest way of doing things is ultimately a boon to all. The only alternative is to revert to the kind of beggar-thy-neighbour protectionism that deepened the 1930s Great Depression and led to war - which is, of course, no alternative at all.

Which is where we have to ask: 'So what's gone wrong?' Well, the evidence is seriously misleading. The new 'global' economy is growing more slowly than the old 'Golden Age' economy did between 1945 and 1973 - when there were widespread attempts to protect national economies and promote industrialization through 'import substitution'. In the end this did not work very well.

But the globalizing, 'export-oriented' economy works no better. After the initial effect of removing trade barriers during the 1980s wore off, world trade began to slow down.So the benefits of being globalized seem short-lived at best. And whisper it not in Gotham, but economists already know that globalization will never solve the problems of unemployment in the North, poverty in the South or the North-South economic divide - it may even be responsible for aggravating them.3

The driverless machine is, of course, industrial capitalism. The invisible driver is in fact the urge to maximize profits and minimize costs. The biggest of these costs is you and me, the toilers whom capitalism calls 'labour'. So it searches out the cheapest labour it can find - these days largely in the South, which provides the majority of the world's industrial labour. The irony is that the cheaper things are, the more they are produced; but low wages and unemployment mean that we are less likely to be able to afford them.

Capitalism, assisted by modern technology, has a predilection for what's called a 'crisis of over-production' - ie waste. The global economy makes this worse. Leave aside, if you wish, the stupefying folly of 'over-producing' from non-renewable resources in vulnerable eco-systems. In strictly economic terms the gap between rich and poor widens and capital accumulates to the point where it no longer quite knows what to do with itself. Rich people valiantly spend what they can on luxuries, but the rich are too few to solve this crisis of overproduction and luxuries are useless to most of the world's people.

The remainder of this excess capital swills around in 'finance houses' and banks getting bored, casting about for something more lucrative to do. That usually means gambling, 'speculation' on whatever comes to hand: commodities, foreign exchange, bonds, stocks, shares, all kinds of 'instruments' created for just this purpose. These days, the temptingly volatile 'emerging markets' of the South and former Soviet bloc have become speculative playgrounds. Foreign-exchange transactions, for example, now amount to more than a thousand billion dollars a day, with only a small proportion relating to any 'real' economic activity at all.

Two kinds of economic institution are key players in this bizarre game. The first is our old friend the Transnational Corporation (TNC). TNCs control two-thirds of world trade, and almost half of this share travels between different parts of the same TNC.4 So TNCs are quite logically the chief advocates of 'free trade' and globalization. Because many of them are richer and more powerful than mere national governments they usually get their way. A detailed study of the European Union, for example, shows just how much the corporate lobby has shaped its policies.5

But despite their brash free-enterprise ethos, TNCs rely very heavily indeed on the state. When a TNC thinks of setting up a plant it holds an auction, commanding competitive bids from national states with offerings of tax-breaks, grants, roads, power supplies, a compliant, 'flexible' labour force, a 'sympathetic' regime. Huge public subsidies prop up TNCs everywhere.

At least some of the things TNCs make are useful. Not so the finance houses and banks, where so much surplus cash now sloshes around that they've become richer and more powerful than TNCs. They can bring catastrophe overnight to an entire country, like Mexico in 1995, or to the majority of the world's people through 'Third World' debt. They can even wipe the smile off the face of the Southeast Asian Tigers, as they are doing in Thailand today.

The world's financial system would not work at all unless, when it collapses - as it regularly does - the state then extracted tribute from the people for these finance houses and banks. It is the people, of Mexico after the 1995 'crash', or the United States after the Savings and Loans fiasco of the early 1990s, that end up paying the price of speculation.

Because these institutions have grown so bloated, and because globalization is all about paying no taxes, states are becoming virtually bankrupt. As with self-serving individuals, you get the impression that capitalism has only the dimmest notion of where its own best interests might lie. The evidence of history suggests that when 'finance capital' gains the upper hand then the game is nearly up.2

There are quite simple and obvious alternatives - it's just that the globalizers are opposed to every single one of them and do their damnedest to defame and distort them. The simplest would be to impose a tax on the transactions of foreign-exchange markets, which could generate maybe three trillion (thousand billion) dollars a year. Such a 'transaction tax' would be no more difficult to collect than profits, while having the entirely beneficial effect of calming feverish speculation and forcing governments to work together internationally.

But international paralysis is the order of the day. We have a dispiritingly broke and meek United Nations. We have a World Bank and an International Monetary Fund run like TNCs by a hierarchy of rich-state shareholders. More resources to this lot? First let them argue for a transaction tax.

We have a brand-new World Trade Organization (WTO) charged with refereeing the globalization game. Small groups of 'experts', against whom there can be no appeal, adjudicate on trade disputes. They proclaim, for example, that right is on the side of the big, chemical-intensive plantations owned by the likes of Chiquita and Dole in Central America, and against the livelihoods of whole island-nations in the Caribbean who supply bananas under preferential terms to the European Union. 'Distortions' of free trade could eventually include almost anything, from public health, to education or transport services. Things that are 'public' (ie that you don't pay for directly), are deemed not to be legitimate, an unfair subsidy. Things that are 'private' (ie you do pay for them) are much more kosher. Other non-private matters, like decent air to breathe or reasonable conditions of work, are considered irrelevant to trade. The WTO's current preoccupation is with a multilateral investment agreement (MIA) to enforce the interests of global investors.6

The truth is that our 'multilateral' regime is in a mess, totally ill-equipped to meet the challenges of the next century (let alone millennium). World government has to be reordered, or perhaps established for the first time. As this is done we should remind ourselves that democratic government is not the same thing as the state bureaucracy. The latter has, by and large, aligned itself with globalization, set itself against the people and lost all political credibility. The former has to represent the people's will or it is worthless.

So, given the resources, what should be done and by whom? Take one, small example that's particularly close to some of our hearts. We know from the UN that we need $50 billion - mere loose change - to wipe the shameful spectre of absolute poverty from the face of the earth. Governments offered this pledge to the UN Social Summit in Copenhagen but have not yet redeemed it.

Absolute poverty cannot be 'eradicated' by the judicious application of superior wisdom and cash from on high. The 'deep roots' of poverty lie in depriving the landless of their land, the homeless of their homes, and the workless of their jobs. The remedy lies with people reclaiming the power and dignity that should never have been taken from them in the first place.

So the eradication of absolute poverty means that those communities where the poorest people live must have political power. In rural communities this almost always involves land reform, restoring local food production, restraining the power of landowning élites and showing 'agribusiness' the door. In urban communities it means forming trade unions, co-operatives, civic groups, and it means redefining the nature of work. In both it means strong, active local democratic control.

The 'deep roots' of poverty are no different from the 'deep roots' of the larger economy. Local communities know well enough that powerful national and international interests are ranged against them. So they work together and seek to be a part of larger communities, cities, regions, nations ­ a larger humanity. The poorest, most oppressed communities are often also the most outward-looking, because they have no choice.

Some material needs we share and are thus universal: secure homes, sufficient food, pure water to drink and air to breathe. Such things relate to our common humanity and don't change very much over time or place. Virtually everything else of any importance is unique to us, to the people we know, to our languages, beliefs, cultures. Such things change all the time and belong to the diverse local communities where we live. Properly understood, an economy - the Greek word means 'household management' - is local, not global. As with the eco-system, so with an economy: the well-being of the parts depends upon the diversity of the whole.

Economic globalization has got it almost precisely the wrong way round. It imposes uniformity where there is diversity, and pleads pragmatism where universal principles should apply. Which is why 'economics' can never belong to 'market forces', which are not 'free' but presided over by a minority whose wealth, power and arrogance removes from them all common understanding. Diverse, local economies cannot prosper unless they meet the most basic and universal human needs - secure homes, sufficient food and freedom of cultural expression for all.

So we must learn new economic languages. One of them is already spoken by the UN Development Programme. Every year it publishes a 'Human Development Index'. This expresses well-being in terms of literacy, nutrition, gender, health, all the things a crude measure of material wealth like 'Gross National Product' (GNP) studiously ignores.7 Another is the 'Index of Sustainable Economic Welfare' (ISEW), which includes the environmental cost of economic activity and 'non-monetary' benefits like childcare. Using this index one discovers, for example, that although GNP may have doubled in Britain since 1950, the ISEW has scarcely improved at all.8I suspect that for most people the ISEW is closer to the truth.

If economic soothsayers don't speak these languages, don't listen to them.

Fair-trading principles, eco-friendly production methods, co-operative working practices are all there, in operation, for us to make use of if we wish to. In publications from Worldwatch, the Club of Rome, the New Economics Foundation, literally dozens of institutes and think tanks, we can find a vast richness of more equitable, sustainable and inviting agenda waiting to be implemented. We can find these too in the creativity and potential of millions of people around the world who are today hemmed in by poverty, frustrated aspirations and wasted talent.

But, as the commentator Tom Athanasiou observes in his recent book: 'Our tragedy lies in the richness of the available alternatives, and in the fact that so few of them are ever seriously explored.'9

There are knots to be untied here, and most of them concern the importance we place on our common humanity. This is the missing link, the spring for the political will to challenge 'market logic' and explore alternatives - and it is a universal, internationalist value. We don't have to take to the hills of isolation or retreat into parochialism.

The earth would be uninhabitable if everyone became as dependent on private motorcars as Americans. Globalizers - or globalonists, if you prefer - say: 'So we live in an unequal world. Make the most of it!' Internationalists say: 'So the private motorcar is doomed. Make something more useful!' The world's people are, in one way or another, impoverished. Globalizers say: 'Compete. Make yourselves cheap!' Internationalists say: 'Unite. Make yourselves powerful!'

1 This is my best recollection of an informal talk given by José Lutzenberger in London.
2 The image is William Greider's in One World, Ready or Not: the Manic Logic of Global Capitalism, Simon and Schuster, New York, 1997.
3Trade and Development Report 1997, UN Conference on Trade and Development (UNCTAD), New York and Geneva, 1997.
4Human Development Report 1997, UN Development Programme (UNDP), OUP, New York and Oxford, 1997.
5Europe Inc: Dangerous Liaisons Between EU Institutions and Industry, Corporate Europe Observatory, Amsterdam, 1996.
6 For the best commentary on the dismal developments at the WTO see Third World Network Features and the contributions by Martin Khor in particular.
7 You can find it in the annual UNDP Human Development Report.
8 See, for example, Colin Hutchinson, Building to Last: the Challenge for Business Leaders, Earthscan, London, 1997.
9 Divided Planet: the Ecology of the Rich and Poor, Little, Brown and Company, Boston, 1996.