GLOBALISATION: A Summary.
The term "globalisation" refers mainly to the emergence since the 1970s of a new economic structure for the world. Its main features are,
Much greater FREEDOM FOR MARKET FORCES, freedom from government control and regulation, is the best way, and is in any case inevitable. This ideology is sometimes labelled the "Neo-Liberal Agenda", the "Washington Consensus", or in Australia, "Economic Rationalism".
DE-REGULATION, i.e., the elimination of all the protection, subsidies, rules whereby governments used to restrict what corporations could do, increasing their freedom of access to resources, markets and business opportunities.
PRIVATISATION. Governments are selling public enterprises to corporations, such as electricity supply systems.
Increasingly, production for sale in a SINGLE, integrated world market, (as distinct from production within each national economy mostly for sale within that economy). Hence increasing emphasis on competing against all others to export into the global market, and increasing dependence on success at this.
Gobalisation is probably the most important change that has occurred in the world over the past several hundred years. It involves the rapid and vast takeover by corporations and banks of the worlds resources, markets and wealth. They are increasingly able to determine national economic policy and development, whereas governments used to have full control over such things. Globalisation is enabling the corporations to take what others had, especially the resources, land, forests and markets in the Third World that were protected and preserved for local people. It also enables them to take the business that made it possible for people to make a small living in markets that big foreign firms were not allowed to enter. Globalisation involves an unprecedented transfer of wealth to the corporate rich, and rapid increase in the wealth of that class and the higher professional and technical groups who serve the corporations.
This takeover is being made possible because the supreme principle is now to "free market forces", i.e., to eliminate arrangements which preserve some resources or markets for the benefit of particular people or industries or regions, or which give governments the power to prevent private firms from doing socially undesirable things. Big corporations can produce more cheaply and make more profit on an investment. Therefore when they are allowed to come into a country they will quickly capture the existing markets and put local firms out of business and make local people unemployed. Governments once prevented these outcomes by regulating, protecting and subsidising, and restricting the operations of foreign investors. But now the dominant ideology says that all should be free to compete on "a level playing field" for the available markets and resources, meaning that governments are not supposed to assist some firms or regions or industries. These actions would "interfere with the freedom of trade", would "distort market forces."
The power corporations have to get their way is partly due to, their mobility (they can move their investments quickly to the countries which offer the lowest wages and least restrictions on their activities), and their ability to avoid tax. They will locate in the countries levying the lowest taxes. This is also made possible by their use of "transfer payments" (rigging the invoices on shipments between their plants in different countries to appear to make no profit in high tax countries). Thus in one recent year half the corporations with branches in Australia paid no tax at all! (See evidence at GLOBALISATION Documents; Tax Evasion by Corporations.) All governments must now compete against each other to reduce taxes, or the corporations will not invest in their countries.
What are the arguments for globalisation?
Conventional economists argue that regulation, protection and subsidies mean inefficiency, because goods cost more and investment, capital flows and trade are inhibited. This is true. Globalisation will indeed mean cheaper goods in Australian supermarkets, and more trade opportunities for our firms (especially in our agricultural sector) to win overseas. It will mean that capital will be freer to flow to where it can be most "productive", i.e., make most profit. All these claims are true, but there are much more important considerations, including the vulnerability that comes with dependence on success in the competitive global economy, and the enormous harm that globalisation is doing to millions of people and to many national economies through the elimination of protection, subsidies, markets and livelihoods.
Another argument is that freedom is in principle desirable and that it is best if individuals and firms are free from government controls and can buy, work and produce what and where they choose. But this is not true in general; a satisfactory society is not possible without a great deal of regulation and restriction of freedom (e.g., the freedom to drive on any side of the road, and the freedom of the rich to take/buy more than their fair share.) The problem is to find that level where much freedom is possible while maintaining rules to ensure that justice, morality and other social values are respected.
It is also sometimes argued that the market is the "natural" way for humans to exchange things. The market is not natural; it is a product or choice of a particular society. (It is actually a most unusual way for humans to organise an economy. See on Polanyi.) It is only the way our society chooses to organise exchange. It did not exist in tribal society and it has been constructed, shaped, maintained and protected by governments. (See GLOBALISATION Documents; The Role of the State.)
The harmful effects.
Globalisation heaps great benefits on a few people, including those able to shop in rich world supermarkets, those with high skills, and especially the few who own most capital, but it is impacting severely on most people on earth, devastating the living standards of the poorest, and damaging social cohesion and the environment. Even in the richest countries globalisation and the neo-liberal agenda are having severely damaging effects on the welfare of middle class and poorer people, social cohesion and on national sovereignty. People are now much less secure and more stressed and anxious than decades ago.
There is now a huge critical literature documenting the devastation globalisation has brought, especially to the Third World. These effects are the result of the transfer of wealthy, especially markets, from the many whose access was protected by governments, to the corporations now free to get that wealth because protection and regulation has been removed. (See GLOBALISATION Documents; Nature and Effects, and Inequality.) (Poverty levels in China and India are now claimed to be falling, but this is because those countries have been among the winners in globalisation. Poverty in other regions, especially Africa, is increasing.)
In future governments will be much less able to prevent corporations from doing many socially undesirable things, because such efforts will be identified as interfering with the freedom of trade and investment. There have already been several cases where governments have been prevented from blocking some action a corporation wanted to take but which was not in the countrys interests (and fined hundreds of millions of dollars for trying to do so.) This means governments will have little control over what is developed. What gets developed will be whatever corporations want to develop, and they only ever develop things that maximise their profits and they never develop what is most needed. (See Summary and Documents.)
Also note that freedom to invest and trade means that corporations will be able to come into your country and take (buy) resources and sell them to rich people far away even though you might want to preserve them for your own firms or people. If your government tries to stop this it will again be charged with interfering with trade and investment and your country will face heavy sanctions from all other countries (because of the World Trade Organisation etc. agreements your government has entered into, i.e., has had to accept in order to be able to trade with the others.) Thus the worlds resources are more readily accessible to the corporations and rich countries. Canada has faced this threat regarding export of its water to the US.
Another consequence of globalisation, which makes all regions compete against each other for sales in the one global market place, is that wages and working conditions everywhere are driven down towards the level in the lowest paying countries. If any one country asks for higher wages the corporations will move to a country with lower wages. Thus wages everywhere are driven down towards the level in the lowest paying countries. Therefore all are locked into a competitive "race to the bottom."
All people are therefore increasingly insecure in their employment and their social conditions, such as health and aged care provision. Even in the richest countries job security is poor and deteriorating. Governments do not want to take on the cost of good health and aged care for all (that would mean raising taxes, which would scare corporations off), so people must make their own arrangements now. Above all working conditions are increasingly "flexible", i.e., employers are much freer to take on and dump workers without obligations. They are less bound to pay more on weekends, or pay for overtime, there is much use of casual labour, and there are fewer problems re unfair dismissal claims. In other words globalisation means working conditions are being driven down to suit global capital. If your government does not do this investors will go somewhere else.
Globalisation therefore revises the social policies of all countries to be more favourable to the interests of the corporations and banks. The guiding principles for social policy and development are increasingly what will assist corporations to increase sales, increase competition, and increase scope for market forces. The supreme principle is to get rid of the social controls and regulation that might have ensured that resources and wealth flow to where they are most needed rather than to the rich who can pay most for them. Obviously any regulation will divert wealth away from corporations, e.g., to pensioners or the environment, or allow them to get less of it, so the banks and corporations want as little regulation as possible. Governments are turning away from governing in order to bring about desirable social outcomes, and turning to just making sure that things are left to market forces and competition.
Why has globalisation occurred?
Important factors enabling closer international connections have been the development of shipping, enabling goods to be moved all around the world more cheaply, and especially computers. The collapse of the USSR reinforced the shift to the dominance of the free market ideology, because it was taken to show conclusively that planning and regulation by governments does not work.
However the main causal factor behind the emergence of globalisation has been the constant accumulation of capital, setting corporations the increasingly difficult problem of continuing to find profitable investment outlets. This is the "Problem of Surplus" which Baran and Sweezy focus on in Monopoly Capital (1966) as the basic factor driving capitalism. It has led to the gigantic push to break down the barriers previously restricting access to potentially profitable fields.
In Marxist terms globalisation is the situation to which capitalism inevitably moves because this ceaseless drive to accumulate more and more capital leads to increasing pressure to get rid of the barriers blocking access to more fields for investment.
The deregulation of world trade has proceeded furthest. They are now pushing to get greater freedom for foreign investment, greater access to the provision of services such as electricity, and to eliminate the power of governments to choose from which sources they will purchase. What happens when governments transfer to corporations control of the supply of basic services such as water? In Bolivia the government sold water supply to corporations, which immediately increased the price and cut supply to poor regions where they could not make much profit. This is precisely what you can expect when a vital service is left for corporations to run only by reference to what will maximise their profits. The subsequent riots and deaths forced the government to reverse this Bolivian decision.
Why have politicians scrambled to bring these changes in? Almost all governments have been enthusiastic to globalise their economies. At first it seems that they have eagerly done precisely what suits international capital and betrayed the interests of their own people, who typically oppose the changes. How can this be explained? Firstly they all accept the dominance of the neo-liberal economic ideology, whereby whatever promotes more GDP, investment, trade, etc. and whatever increases the role for market forces must be good without any need to question the social effects. (In general governments function mostly in the interests of the business class. For example their top priority by far is to maximise business turnover or economic growth, not to help the poorest or maximise the average quality of life.)
However, even if a government objected to globalisation it now has no choice but to go along with it and try to make sure its country is among the few winners. In the very competitive world economy any government must strive to make the country attractive to corporations, which means offering more favourable conditions than all the others are offering, such as low taxes on corporations, subsidies and tax holidays, (e.g., set up a factory here and you need not pay any taxes for many years.) If a government wanted to make corporations replant forests, pay full taxes, provide high safety standards etc., foreign investors would leave, the national credit rating would be reduced and therefore higher interest would have to be paid on loans to invest there. Most importantly, the countrys production costs would rise, meaning that it would be less able to compete in the global export market, on which all are now highly dependent for income. In other words it is not that the politicians are foolish; they have no choice but to go along with what suits the corporations and banks or their national economy will suffer.
" no government today can follow policies that are not approved by the capital markets."
It is difficult to imagine how this increasing stranglehold could ever be broken now, given that people in rich countries are in general not discontented with the situation, despite the protest expressed within the World Social Forum (and a large academic literature.) Yet by 2005 a remarkable surge of reaction against globalisation and the neo-liberal agenda in Latin America had become obvious. This could represent a significant turning point. The crucial factor is whether or not ordinary people will go on tolerating what their governments and the global economy are doing to them.
How have they been able to get these changes through?
Where people have known about these proposed changes (as with the introduction of NAFTA), the majority has usually rejected them, but governments bring them in anyway. However governments have brought in the changes largely by secrecy and deceit, concealing proposals from the public. (See GLOBALISATION; Documents; How They Get The Rules Established.)
Globalisation should be understood as a triumphant, brazen grab by the corporate rich for even more wealth and power, legitimised by the free market ideology. It involves the massive transfer of markets, resources, firms, forests and wealth from ordinary people to a small number of giant banks and corporations. Because the laws protecting little people are being swept away the corporations are now able to come in and take the markets and businesses those people once had. Much of the foreign investment in the Third World is only taking over Third World firms. The worlds capital is now owned by about 2% of the worlds people. Yet the effort continues to establish more new rules whereby governments and people have even less power to interfere with what the corporations want to do.
It is not possible to have a sensible, just or ecologically sustainable economy without a great deal of regulation, so that the rich and powerful can be prevented from grabbing everything, and so that society can make sure that the right things are done. The more that market forces are freed, then what is done will increasingly be what is profitable to the rich.
All these alarming effects, especially the deprivation of the Third World and the destruction of the environment and of social cohesion, have come suddenly, since about 1970. They will intensify in the years ahead. They represent by far the greatest and most rapid transfer of wealth the world has ever seen, achieved quietly and "legitimately" through the introduction of new rules for the conduct of the global economy. No surprise that inequality is now accelerating. (See Inequality.)
Unfortunately most people critical of globalisation are only working for a re-regulated capitalist-consumer society. They do not understand two crucial points. Firstly, the capitalist system inevitably, unavoidably moves in the direction of globalisation, i.e., when the driving force in a society is the quest for constantly increasing profit, then whatever interferes with this will eventually be eliminated, those with most power in the market will take more and more of the wealth and there will inevitably be a deterioration in equality, social conditions and the environment. The second theme is the "limits to growth" analysis which shows that a sustainable world order must be based on simpler and more frugal living standards, in small scale, highly self-sufficient and localised economies, in which we can work mostly in cooperative ways, and live simply. It is therefore clear that a sustainable and just world order cannot have a globalised economy, if only because there will not be enough energy for much international trade. People will mostly use things produced locally by small local firms using local resources. (For a detailed account of The Simpler Way, see The Alternative, Sustainable Society.)
Chossudovsky, M., (1997), The Globalisation of Poverty, London, Zed Books.
Dalton, G., (Ed.), (1968), Ancient, Primitive and Modern Economies, Boston, Beacon Press.
Hawken, P., A. B. Lovins, and H. Lovins, (1999), Natural Capital, London, Little Brown.
Trainer, F. E. (T.), (1999), "The limits to growth case now", The Environmentalist, 19, 19, 4, Dec. 325 -336.
United Nations, (1996), Human Development Report, New. York.
The Simpler Way: Analyses of global problems (environment, limits to growth, Third World...) and the sustainable alternative society (...simpler lifestyles, self-sufficient and cooperative communities, and a new economy.) Organised by Ted Trainer. http://socialwork.unsw.edu.au/tsw/