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World Affairs
Growing Discontent With Globalisation
Ismail shariff
Globalisation to some has come to mean neo-colonialism or the exploitation of the developing countries by the dominant powers. One must go back to its origins to realise that in effect globalisation is an offshoot of colonialism.
The year 2001 can rightly be classified as a year in which globalisation ceased to be an academic issue and took to the streets. The mass anti-globalisation demonstrations, which began in Seattle at the end of 1999 and intensified at the meetings of the International Monetary Fund (IMF) and the World Bank in Washington and Prague, reflected a growing discontent over who was benefiting from the increasing integration of the world economy - the professed objective of globalisation. Global leaders, at that time from President Clinton to the heads of the IMF and the World Bank, rushed to defend the benefits of global integration, but also acknowledge that the poor needed to be incorporated in the process. Until this time, as Jerry Manders, in a feature article, ‘The Dark Side of Globalisation - What the Media Are Missing’ (The Nation issue 715.2001) rightly pointed out, though economic globalisation involved arguably the most fundamental redesign and centralisation of the planet’s political and economic arrangements since the industrial revolution, the profound implications of these changes have barely been exposed to serious public scrutiny or debate. Despite the scale of the global reordering, neither our elected officials nor our educational institutions nor the mass media have made a credible effort to describe what is being formulated, to explain its root philosophy or to expose the multidimensionality of its effects. Ironically the occasional descriptions or predictions about the global economy that are found in the media usually come from the leading advocates and beneficiaries of this new order: corporate leaders, their allies in high levels of government and a newly powerful centralised global trade bureaucracy. The vision they offer us is unfailingly positive, even utopian: Globalisation will be a panacea. Meanwhile the diverse opposition to globalisation is lumped together in one ball - whether they are environmentalists, or human rights advocates, or small businesses, or small and indigenous farmers, or people trying to sustain the vestiges of democratic governance; they are all combined into a single category, ‘protectionist’, so as to be summarily dismissed. As a result, we are left with a public relations climate that is exceedingly shallow and partisan. Worse, we are left with a corporate protectionism that does not act to protect jobs, communities, democracy or the natural world, but rather, from all indications so far, has only worked to protect, expand multinational freedom, to circumvent democratic control and to establish an effective transnational corporate empire.
Given this perception, in more ways than one the critiques of globalisation have been less focused on governments than on multinationals including international institutions. Critics like Naomi Klein, author of the best-selling book, No Logo, makes a convincing case to illustrate the point that multinationals exploit workers around the world by shifting production to the cheapest locations. Likewise, the other observers of the directional thrust of globalisation claim that the big companies try and exploit trends in popular culture for their own ends, creating brands which falsely appropriate the values of youth culture. Furthermore, they reiterate the fact that new international rules are needed to curb the excesses, and that new global organisations of students, workers, and consumers must work together to resist their dominance. But attempts to regulate the activities of the multinationals have run into difficulties, for example the Code of Conduct on issues like child labour, of the International Labour Organisation (ILO) runs counter to the interest of the Third World countries; for the Third World countries strongly object to incorporating labour standards into future trade negotiations, which they see as thinly disguised protectionism.
Meanwhile multinationals continue to extend their global reach by mergers and acquisitions. The year 2001 was a record year for cross-border takeovers (as the global economy was slowing down), especially by European companies buying into the fast-growing telecom, and financial services sectors. Also it is a fact that the general perception of the multinational corporations (MNCs) revolves around giant corporations like the IBMs, Toyotas, General Motors, General Electric, many of which are based in the developing countries such as India, South Korea, Venezuela, Nigeria, Egypt, to name a few. As such in the mid 1990s, there were more than 10,000 MNCs with over 90,000 foreign subsidiaries in the developing countries, though much smaller than those in the developed countries.
On the part of the international agencies both the World Bank and the IMF have mounted a strong defence of their policies saying that economic globalisation requires more cooperation and the necessary institutions to organise it. However, the annual meeting of the IMF and the World Bank, held in the Czech capital Prague in September, 2001, was marred by large demonstrations outside the conference centre. The protesters claimed that both organisations are actually worsening the lives of many poor people in the developing countries. The IMF’s new managing director, Hans Kohler, tried to answer the critics of globalisation in his opening speech. He said, "I am aware of the critical debate about globalisation, and many questions raised have to be of concern to all of us". He further went on to say that, "I also want to be clear: If the IMF did not exist already, this would be the time to invent it". And James Wolfensohn, the president of the World Bank, told the conference that, "I have certain sympathy with the protestors outside these walls, young people are demonstrating against globalisation. I believe deeply that many of them are asking legitimate questions, and I embrace the commitment of a new generation to fight poverty". Also, in October 2000, the United Nations held a week long special session to take stock of progress - or the lack of it - since a 1995 UN conference hosted by Denmark at which nearly 120 heads of states and governments pledged to eradicate poverty. Delegations were presented with the UN reports indicating that the number living in absolute poverty or less than a dollar a day - had actually grown, to 1.2 billion from about 1 billion in 1995. The UN Secretary-General Kofi Annan urged member nations to recommit themselves to battle against ‘human misery’, growing beyond a proposed goal of halving the proportion of people in extreme poverty by the year 2015. In a summary note the Swiss President Adolf Ogi, host of the session, said that, "While grinding poverty continues, not a day goes by without our hearing of another merger, the birth of a new giant of the economy and the disappearance of thousands of jobs due to the unmerciful onslaught of global economy". In retrospective, none of this is new. Two decades ago, multinationals were already widely denounced as big, irresponsible, monopolistic monsters. But then they went through a period of being sneered at as yesterday’s clumsy conglomerates, before being lauded in the 1990s as the harbingers of foreign capital, technology and know-how. Yet now the hostility has returned. One explanation is the sheer speed at which multinationals have recently expanded abroad. This has made them the most visible aspect of globalisation, buying some local firms and driving others out of business. Even to rich, developed and well-run countries, their sheer size can seem threatening. Thus the Irish sometimes fret about the fact that foreign firms account for almost half of their country’s employment and two-thirds of their output; and Australians point nervously to the fact that "of the ten biggest industrial multinationals each has annual sales larger than their government’s tax revenue". Such clout needs to be used with care, if it is not to be seen as a threat to the national sovereignty of not only the developed but more so of the developing countries. For example, countries’ freedom to set taxes as they wish is threatened by the ability of multinationals to shift profits, or operations, from one country to another. Nike, Shell, Monsanto, McDonalds and the now-defunct Enron: Each has recently made errors of judgement that have brought about a united opposition at home and abroad. Thus those in the natural resource and mining business often cosy up to whichever regime is in power, however nasty, in order to protect their investment. Those manufacturing consumer goods frequently jump to whichever country offers the best deal on labour cost at that moment, and as such the operations of the MNCs in the developing countries have been criticised on many grounds. Perhaps the most significant criticism revolves around the sheer size and power of the MNCs. Of the 187 countries of the world, many MNCs are wealthier than the countries in which they invest. They hence have enormous bargaining and corrupting power to ensure that they extract the best entry and operating terms from poor, weak governments of the developing world.
Thus as the third non-state actor and entity the multinational corporations, not only own and manage, but also play a significant role in the economic fate of the developing countries. Although MNCs project themselves as a recent phenomenon, in reality control of the economic assets of countries of the Third World has been practiced for centuries either through direct control or through joint collaborations. For example, during the eighteenth and nineteenth centuries, imperial powers carried out extensive investments in their colonies, often under joint imperial and counterpart ownership or managements, like the British East India Company. However in the twentieth century, private corporations under the label of multinational firms, such as Singer Sewing Machine, IBM, Delmonte, Nestle, IBM and numerous others have succeeded in greatly expanding their scope of foreign control of economic assets. Thus the development and expansion of the MNCs, were unprecedented in the second half of the twentieth century though they were a by-product of international commercial and financial practices established much earlier. Nonetheless, the growing significance of the MNCs in shaping the economic fortune of the world in general and the developing countries in particular derives mainly from their enormous economic base. For example, as of 2000, the gross annual sales of Exxon Corporation, Royal Dutch/Shell Petroleum, IBM, and General Motors were each over $100 billion, exceeding the gross domestic product (GDP) of most of the countries, shown below:
| States/GDP | MNC/Sales Revenue | ||
| Between $100 - $199 billion | Sales revenue in billions of dollars | ||
| Denmark | $172 billion | General Motors | $168 billion |
| Thailand | $167 " " | Ford Motor Corp. | $146 " " |
| Norway | $145 " " | Mitsubishi | $140 " " |
| Hong Kong | $143 " " | Royal Dutch | $128 " " |
| South Africa | $136 " " | Exxon | $139 " " |
| Saudi Arabia | $140 " " | Wall Mart | $120 " " |
| Revenue $60 - $99 billions | |||
| Israel | $97 billion | General Electric | $91 billion |
| Greece | $94 " " | IBM | $84 " " |
| Malaysia | $91 " " | AT & T | $87 " " |
| Singapore | $97 " " | Mobil | $83 " " |
| Ukraine | $84 " " | Daimler-Chrysler | $92 " " |
| Columbia | $82 " " | British Petroleum | $74 " " |
| Philippines | $79 " " | Volkswagen | $76 " " |
| Between $30 - $60 billion | |||
| New Zealand | $64 billion | US Postal Service | $66 billion |
| Peru | $61 " " | Uniliver | $62 " " |
| Egypt | $54 " " | Sony | $66 " " |
| Hungary | $46 " " | Nestle | $52 " " |
| Algeria | $44 " " | IRI | $51 " " |
| Romania | $41 " " | Toshiba | $52 " " |
| Morocco | $36 " " | Honda Motors | $54 " " |
Source: Data from the World Bank Development Report 2000, Oxford University Press.
Given the growing economic power of the MNCs, the developing countries of Africa, Southeast Asia and most of Latin America find themselves at the mercy of these growing economic forces, more so than the developed countries. In spite of this status-quo, the MNCs no doubt do provide investment, technology, and a ready market for exports, which in their absence would have been difficult, if not impossible for the developing countries. However, the fact remains that the MNCs frequently threaten traditional cultures, foster economic inequality, weaken existing social structures and above all deliberately attempt to expropriate these countries of their economic base. This fact has been more evident, particularly if we look back at history since the Second World War. We can see that during this time period the economic growth had expanded five-fold, international trade had expanded by roughly fifteen times and foreign direct investment had been expanding at two to three times the rate of trade expansion according to the World Bank Report 2000, Entering the 21st Century, (Oxford University Press, 2000). Yet, tragically, while the Bretton Woods institutions have met their goals, they have failed in their purpose of bringing prosperity to the people of the world. The world has more people today than ever before (more than a billion people in the developing countries, 1/5 of humanity) unable to obtain the most essential elements of social sustenance - food, clothing, jobs, and education. Three million children are dying every year, one-half million women, 99 per cent of them living in the developing world die at childbirth. 900 million are illiterate, 100 million are without shelter, radios, TV and other amenities taken for granted in the developed world. All these problems are prevalent in the so-called developing countries, mainly due to policies enacted over the years to favour the developed countries. In a specific reference to this state of affairs, in his book, The Work of Nations, former US Secretary of Labour under President Clinton, Robert Reich, explains that, though the economic globalisation of the Bretton Woods institutions advanced so successfully and has served the interest of the wealthy classes, from a sense of personal and national interest and thereby from a lack of sense of concern for, and obligation to their less fortunate inhabitants of the developing world, it has not been successful. A thin segment of the super-rich at the very lip of the champagne glass have formed stateless alliances that defines global interest as synonymous with the personal and corporate financial interests of its members, perhaps at the expense of the impoverished South or the so-called developing countries. In the light of the above, the emerging occasional descriptions under the guise of globalisation, or the predications about the global economy once again favouring the corporate leaders, their allies around the world including the new powerful centralised global trade bureaucracy called the World Trade Organisation (WTO), the vision they offer us unfailingly not only resembles the past in its positive even utopian outcomes: it seems globalisation will be a panacea only for the developed countries of the North.
It is true that at the end of the Cold War, the certain victor was capitalism, and it won globally. But from a historical perspective this is neither the first victory of capitalism nor the first era of globalisation. The Economist, in its ‘1997 World Economic Survey’, observed that, by most important measures, the world was more closely integrated before 1914 than it is now, in some cases much more so. Everyone now recognises that the first period of globalisation confirmed the economics of Adam Smith: The economy, left alone, will produce the greatest wealth of nations and in the long-run the state will wither, or be pushed away, as though by an ‘invisible hand’; perhaps less appreciated, is that it has also confirmed Karl Marx, in a most particular way: every system of power tends to develop its own ideology, and ideology guides and rationalises the government policies that impose and sustain the system of power.
Contrary to Smith and Marx’s way of thinking, it is not very hard to understand what happened in pre-1914 globalisation that seems to echo very much, the present. The operative word then was imperialism that led to exploitation through colonisation. At present it is exploitation through neo-imperialism or through global capitalism. So in a way global capitalism has effectively taken the place of colonisation to continue to exploit the developing countries for the benefit of the few developed ones. As a result, it is within the realm of logical conclusion to observe that the on-going ideology of globalisation perceived from any angle is nothing but another name for colonial domination which still opposes as in the past, the redistribution of wealth or status to place all people and nations on an equal footing.
If in the process of understanding the scope and significance entailed by the word globalisation, we venture to ask the question as to what is globalisation, we may end up with a multitude of answers. From these diverse responses we can discern one common pattern or what may be called the operative definition of globalisation. Globalisation has come to mean a complete reordering of international priorities, strategies, and values as all states are drawn even more tightly in the interdependent global economic, technological, communications, cultural and ethical web. But in a more realistic sense, at least to me, globalisation can be defined in no more than one word, ‘neo-colonialism’. In order to understand the origins of the on-going process of globalisation, it is imperative to understand the historical context from where its origin started. From the middle of the fourteenth century through the first half of the twentieth century, European powers under the guise of nation states sought to extend their political and economic influence throughout the world. This process of gaining control over other territories and nations in distant lands was referred to as imperialism and the establishment of direct control over the conquered or dominated territories was called colonialism.
It is no secret that throughout modern history European states pursued imperial policies for more economic than political reasons. Economically, European empires sought to acquire raw materials, markets for export commodities, a source of cheap labour and to secure markets for their manufactured goods. In particular, they sought to establish trade routes that would be commercially beneficial to the imperial states.
On the political front major powers competed for hegemonic leadership within the European continent by extending their control over foreign territories. Indeed, during the eighteenth and nineteenth centuries a major criterion of a nation’s power was the number, size and location of colonial territories. Thus Britain, France and the Netherlands were actively engaged in extending their imperial control over territories throughout the world. For example, the British through its East India Company established control over the Indian subcontinent and South Africa, the Dutch in Indonesia, Sri Lanka, and various territories of South America. The French on their part sought territories in North America, and in the Caribbean in the eighteenth century and then extended their influence to Africa by establishing trading outposts in such territories as Mauritius, Madagascar, the Seychelles and Senegal. It was only in the aftermath of the Second World War, that the colonial system began to disintegrate. Actually the process of decolonisation began in 1947 when the British relinquished their hold on the Indian subcontinent. The decolonisation process greatly accelerated in the late 1950s and during the 1960s, when more than 60 countries achieved political independence, three-fourths of them in Africa alone. More than a hundred developing countries from Asia, Africa, the Pacific and the Caribbean have joined the community of nations as a result of post-Second World War decolonisation. Today actually only Great Britain, to the chagrin of the Spanish and the Argentinians still controls the Rock of Gibraltar and the Falkland Islands as remnants of her post-colonial hegemony.
Thus having lost control over greater parts of the world resources the rulers of the colonial past, in the name of globalisation seem to have been successful in replacing the nation states with what is called multinational corporations to continue to exploit as before, from raw materials for exports and a source of cheap labour, to readily available markets for their manufactured goods.
Therefore from the point of view of Western powers nothing has changed except the vehicle of exploitation from colonisation to the so-called multinational corporations. While shielding the ulterior motives behind the MNCs, they successfully take pride in heralding the positive economic impact of the MNCs, on the developing countries while at the same time ignoring their negative impact on the same countries.
Looked at from any angle, globalisation represents the same old order with new means of control, new means of oppression, new means of marginalisation. In view of these concerns, it is dangerous for developing countries to embrace globalisation. Its negative consequences are seldom mentioned, instead, lack of economic development is blamed on bad government, corruption and cronyism. A blind acceptance of an ideology is unacceptable, naive and downright dangerous from the point of view of developing countries.
Critics of globalisation in general are not isolationists but are for better and an equitable globalisation. They not only want to bring forth the negative aspect of globalisation, but also want to negotiate with those who favour this unfair arrangement. The critics turning to labour while agreeing to the International Labour Organisation’s (ILO) labour standards as reasonable, protest vehemently to the principle that wages should be equalised around the world without regard to the level of poverty and unemployment, as being downright protectionist.
Developed countries erect obstacles to free trade - in particular, barriers to trade in agricultural products. When the West, under the guise of globalisation, pushes the developing countries to open their markets to their manufactured goods and service industries, they are at the same time erecting barriers of entry into their markets. This is tantamount to not allowing the developing countries to export what they produce, that is the agricultural products in which only they have any comparative advantage. This comparative advantage of the developing countries in agricultural products has been deliberately turned into comparative disadvantage, either by establishing outright barriers under the pretext of health and sanitation or through heavy subsidisation of the developed countries’ own agricultural industry in general. As such the Organisation of Economic Cooperation and Development (OECD) countries provide subsidies to their farmers up to 80 per cent whereas the US provides subsidies to farmers from price support to outright grants to the tune of over $ 4.5 billion a year. Thus globalisation the way it is being unleashed, encourages unequal distribution of power and wealth, once again in favour of the West at the expense of the East and South.
Maintaining respect for traditional, local and natural cultures is not something that is easy for economists to deal with. It is imperative that we do not only maintain, but also nurture our international public good that values the diversity of cultures rather than let it be destroyed by the relentless homogenising process in the guise of globalisation.
Furthermore, modernisation and dependency theorists of economic development differ totally on the role of foreign multinational corporations, in a nation’s political economic development. Modernisation theorists believe that foreign investments represent a net gain for the recipient and are often the key to development. Poor countries lack money, technology, managerial skills, and access to foreign markets, and MNCs can provide all those assets. Whereas dependency theorists, in contrast, see MNCs as neo-colonial powers that promise but do not deliver those assets. Once entrenched, they suck out as much wealth as possible and corrupt the political process to keep the country poor and docile. In reality between the modernists and the dependency theorists, the dependency theorists come closer to the reality of the MNC’s operation than the modernists. For example when a developing country imposes restrictions and absolute limits on how much profit can be taken out of the country, an MNC, invariably gets around the limit and any restriction through transfer pricing or through changing enormous amounts on the equipment and components imported for its investment from other subsidiaries, the MNC does in reality pay more, for it is paying itself. In reality, it is simply a method to transfer profits out of the country and evade paying taxes. Invariably, as a result, the MNCs send home money that otherwise might have been spent on much cheaper components from indigenous businesses. Thus by manufacturing their accounts to make it look as if their venture is losing money, the MNCs often end up paying little or no taxes to the developing host countries.
In a way, many of the MNCs’ foreign direct investments (FDI) are seen as ‘special staffers’ in which little if any income trickles down to the host countries or their peoples. Instead, invariably the MNCs’ investments act like a sponge that soaks up local capital and expatriates it. A case in point, American MNCs’ investmenting in Latin America between 1958-1998 acquired 80 per cent of their finance from loans and earnings. In this modus operandi, the MNCs minimise their own exposure to their returns.
When all is said and done, the MNCs one way or the other often dominate the most advanced sectors of the developing countries, thus controlling any significant domestic development. Sunkel indicated in ‘Big Business Dependuid’, Foreign Affairs, 1998, that once they penetrate successfully in a developing country an MNC often gobbles up "in a Re-Po man style," other local businesses, who can hardly compete against the MNC, and as a result many are bankrupted or bought out by the MNCs. Thus unemployment rises because local firms are often much more labour-intensive compared to the MNCs. It is true that MNCs can offer more money and benefits, and better facilities to indigenous workers. In a way the MNCs create new socio-economic classes that indent existing gaps between the developed and the developing countries. They end up demanding foreign luxury goods that further drain wealth from the economy and skew the socio-economic balance.
As for the question of Foreign Direct Investment (FDI) in the developing countries it must be put in a realistic perspective. About 68 per cent of the MNCs’ direct investments are within the developed countries.
Indeed it is clear that five countries - China, Brazil Mexico, Singapore and Argentina (which is now indebted by $140 billion and cannot service the debt and has defaulted on her obligations) account for more than half of the accounted investment in the developing countries.
In the final analysis, there are many valid concerns about the ongoing process of globalisation. Before we can defend it by heralding its benefits we must make this process equitable beyond reproach. For this to happen, in the words of Stanley Fisher, the ex-Deputy Director of the International Monetary Fund (IMF), the policy-makers of the advanced countries and the international institutions must manage the process well and bring the developing countries into the process of globalisation.
Therefore, the fact remains, that both sides need to recognise their mutual importance. There is no doubt that international economic relations in general and trade in particular are binding the world increasingly in a common destiny. The world communities as a whole must understand that a more just international economic order based on equitable trade and mutual interdependence is not only possible but also essential. Such a new order should be based on the fundamental principle that each nation irrespective of its economic status is intimately bound to the development of every other nation in the globe. In a way the future of mankind is linked more closely today than ever before.