Thursday, March 17, 2011

IN DEPTH

IN DEPTH provides media analysis of selected media issues that has international relevance.

Globalisation

Globalisation and its impacts -   the present scenario
 
The term ‘globalisation’ understood as the trans-boundary movements of capital, people, goods, information and culture burst into intellectual awareness in the late 1980s and the 1990s. Initially portrayed as its proponents – large capital, its powerful state backers and the international financial organisations – as a new and irresistible process beneficial to all, it soon became evident that it was neither new and irresistible process nor beneficial to all. The incessant financial crises of the 1990s were but the most visible manifestation of all its ill effects. The East Asian financial crisis of 1997-98 in particular, shook world confidence, since East Asia has been the only consistent success story of development in the post-war world and especially of the previous few decades. Concomitantly more voices of opposition to actually existing globalisation became louder and more insistent. The characteristic features of the present phase of economic globalisation are the minimizing of the role of the nation state in economic and social concerns; the continued differentiation of national economies into developed and underdeveloped, now characterised as efficient and inefficient, competitive or non-competitive; and the characterization of all forms of economic intervention as market distortion and ‘rent-seeking’, resulting in inefficiencies. The free market, deregulation and competition are touted as the panacea.
Globalisation, with its compulsion towards fierce competition, has brought about drastic changes in industrial organisation and management, with severe consequences for the working class. As governments increasingly compete for footloose enterprises and capital, the interests of workers are relegated to the second place. ‘Competitiveness has become another word for cutting labour costs.
The whole ideology of competitiveness serves to divide and rule workers, both domestically and internationally. Its real purpose is to facilitate acquiescence to the redistribution in income from wages to profits and to an economy which is increasingly incapable of producing positions of material comfort for all but a shrinking minority. When taken into its logical conclusion, the competitiveness strategy leads to a reduction of workers living standards to the lowest common denominator internationally. (Paul Burkett, quoted in Bina et al. 1996).
Thus the major outcome of the economic globalisation agenda world wide has been creating inequality to a new high and widening the gap between the rich and poor.
There is a basic need to recognise that despite the big contributions that a global economy can undoubtedly make to global prosperity, we also have to confront...the far reaching manifestations of inequality between and within nations. The real debate associated with globalisation is, ultimately, not about the efficiency of markets, nor about the importance of modern technology. The debate is about inequality of power.(Amartya Sen, Observer 25 June 2000).
The World Development Report of 2006 expatiates on the widening inequalities and relates the cause of its origin to the characteristics of the market. With imperfect markets, inequalities in power and wealth translate into unequal opportunities, leading to wasted productive potential and to an inefficient allocation of resources. Markets often work imperfectly in many countries, whether because of intrinsic failures—such as those associated with asymmetric information—or because of policy-imposed distortions. Microeconomic case studies suggest that an inefficient allocation of resources across productive alternatives is often associated with differences in wealth or status. (WDR 2006). The World Development Report continues, ‘If capital markets worked perfectly, there would be no relation between investment and the distribution of wealth: anyone with a profitable investment opportunity would be able to either borrow money to finance it, or to sell equity in a firm set up to undertake it. But capital markets in just about every country (developed and developing) is very far from perfect: credit is rationed across prospective clients, and interest rates differ considerably across borrowers and between lenders and borrowers, in ways that cannot be linked to default risk or other economic factors affecting expected returns to lenders.’
This analysis does not speak about the millions of poor who walk miles of distances every day to get a pail of water, the poor farmers who look at the sky in hope and pray raising their hands to get a good shower, billions of poor citizens who does not even have a slum dwelling to sleep, and millions of mothers who weep at their fate to see their malnourished children fighting with epidemics and contagious diseases. How can these poor people borrow money and make a profitable investment.
It is estimated that that about half of the world’s population lives on less than two dollars per day, with most of those either chronically malnourished or continually concerned with where their next meal will come from. Many have no access to clean water (1 billion), electricity (2 billion), or sanitation (2.5 billion). The other half of the world’s population—about 3 billion people—live in rural areas. Most of them are producing food for themselves and/or to sell to others. Many rural inhabitants live in difficult conditions, but those with access to land can usually provide food for their families. The coexistence of surplus food and hunger also occurs in the third world. India is one of the success stories of the “green revolution,” where a combination of improved varieties and a number of agronomic techniques led to much greater national food production. However, India now has “excess” food at the same time that it has widespread hunger.
In general, people are chronically hungry because they are poor and don’t have enough money to buy food. It is as simple as that! Under capitalism, food is just another commodity—like a pair of shoes, a television, or an automobile. People have no more legal right to food than they have to any other commodity. 

The neo-liberal panacea to poverty
The answer of the governments of the core capitalist countries—as well as the various international organizations such as the IMF and World Bank—to almost all problems of development, including poverty and hunger, is a one-size-fits-all approach. Disregarding the needs and desires of a country’s people and its concrete situation, this general approach begins with eliminating tariffs and other trade barriers on goods and allowing the free movement of capital into and out of countries.
The neoliberal theory tells that the removal of barriers to the flow of goods and capital permits a country to concentrate on developing the areas in which it has a “comparative advantage.” That is to say, the country should focus on mining, growing, or manufacturing the products for which it has an advantage due to climate, natural resources, a skilled labor force or other factors. Then it can purchase whatever else it needs with the currency earned by exporting these products. In addition, the theory goes, these steps overcome one of the main hindrances to development of the countries of the periphery—a lack of investment capital to build factories, communication systems, roads, and ports. It follows, according to the neoliberal logic, that making conditions more attractive to foreign corporations (for example, by allowing them to repatriate all of their profits) means that they will invest more, leading to greater economic development and prosperity. Markets for goods and capital, freed of government control, will work in ways that magically create optimum conditions for all—a win-win situation with no losers!
There are lot of problems with the neoliberal market-oriented “free trade” approach. However, one in particular has haunted countries in the periphery for a long time, even before the recent push for them to open up completely to foreign capital. The very process of investing capital from the core in the periphery tends to generate debt and currency crises—caused by excessive borrowing by the periphery countries as well as the repatriation of profits on invested capital to the countries of the center. Many countries are continually short of sufficient foreign currency to escape their predicament. This causes them to stimulate export-oriented industries and agriculture in order to earn foreign currency to pay off loans or allow the movement of capital out of the country. Government programs stimulate the growth of crops with export potential, such as oranges, cotton, soybeans, specialty vegetables, tropical fruits, and coffee because of their potential to earn hard currencies.
Another part of the neoliberal approach, encouraged or mandated by the IMF and World Bank, is to decrease government budgets. This is usually accomplished by eliminating subsidies that help the poor, such as those for fertilizers and food, and by privatizing various governmental functions.
Rarely mentioned, of course, is the fact that the wealthy capitalist countries developed by protecting industries and only later—as their economies strengthened and capitalists required greater access to other markets and resources—called for less restrictive trade with other countries. Also rarely discussed is the fact that U.S. agriculture developed with massive government involvement—beginning with capturing land from native peoples and transferring it to European immigrants, and going on to develop transportation infrastructure, irrigation, research, extension, subsidies for farmers, export incentives, and so on. Not the least concerned with the hypocrisy of the situation, governments of the wealthy capitalist core continue to use a variety of means to protect and favor the businesses of their countries while espousing free trade and free markets.

The case of the victims
There are numerous examples how neo liberal policies and unethical trade practices have hurt the millions of poor peasants.
According to the advice of the World Bank and other aid organizations, the government of Malawi cut the subsidies to agriculture and also devalued their currency which led to a five-fold increase in the cost of imported fertilizer—putting it out of the reach of most farmers. This reduced the productivity and resulted in a widespread hunger.
Another is the case is that of Ghana. In Ghana, the government, “pressured by its Western creditors to keep its fiscal house in order, doesn’t supply fertilizer subsidies, crop-price supports, or any other equivalent of cheap financing...” (Wall Street Journal December 3, 2002). With the relatively high prices of fertilizers, which need to be imported, a lack of subsidies means that farmers use little or no fertilizer, thus food production and opportunities for earning extra income are well below easily attainable levels.
Ethiopia also had a similar experience, when they cut the subsidies to fertilizers taking advice from the free market gurus and the funding agencies. As prices received by farmers fell dramatically in response to a glut on the market, there were few storage facilities to allow farmers to store grains and wait for prices to rise. Funds were not available for those wishing to build grain storage structures. Farmers responded in a completely logical way to record low prices in 2001. They reduced the amount of land they planted the following year. This decrease in planted area, together with unfavorable weather in 2002, created conditions for widespread hunger and even starvation in 2003.
The Philippine government’s experience was also similar. The free trade demanded imports of rice and corn and it created widespread misery among farmers. The Philippine agriculture was weak, not only in comparison to the highly subsidized U.S. farms, but also relative to the agriculture of China, Taiwan, Thailand, and Vietnam. Philippine farmers produced vegetables, poultry, and beef for profitable export, but they could not compete internationally, and even their domestic markets have been swamped by imports.

The case of the rich nations
The case of the capitalist countries is different. The subsidies they give to agriculture  in result in overproduction and artificially low prices on the world market, making it difficult for countries in the periphery to earn foreign exchange by selling the agricultural commodities they produce. It is estimated that the average U.S. farmer receives an annual subsidy of over $20,000 while the average Mexican farmer receives about $700 (Business Week, November 18, 2002). In America 25,000 cotton farmers received more than some $3 billion in subsidies than the entire economic output of Burkina Faso, where two million people depend on cotton.  About $1.7 billion goes in a year as subsidies to U.S. companies that purchase domestically grown cotton. Subsidies to U.S. corn farmers without any system of supply management, stimulating production and allowing the crop to be sold under the cost of production, plus aggressive marketing by transnational corporations, harms Mexican and Filipino farmers. European protection for its sugar beet farmers and U.S. sugar quotas hurt sugar cane producers in Africa and Latin America.




References

  1. Bina, Cyrus et al. (eds), 1996, Beyond Survival: Wage Labour in the Late 20th century, New York: M.E.Sharpe.
  2. The Economist, 2002, Globalisation, London, Profile Books
  3. Nixson Frederick, 1996, Development Economics, London, Heinemann.
  4. Jomo K.S., Jin K.K (eds), 2003, Globalization and its Discontents, Revisited, New Delhi, Tulika Books.
  5. Farbey A.D., 1998, How to Produce Successful Advertising: A Guide to Strategy, Planning and Targetting, London, Kogan Page




1 comment:

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