TWO COMMON MISTAKES ABOUT GLOBALISATION.
Ted Trainer, Social Work, Univ. of NSW.
This chapter argues that to two mistakes are evident in the critical literature on globalisation. The first is that globalisation is a policy option that more humane or sensible leadership could have avoided. I will argue that it is the inevitable state to which capitalist development leads and could not be escaped without replacement of the capitalist system. The second mistaken assumption is that globalisation could be acceptable if it was to take place within a socialist world system. My argument will be that ecological considerations show decisively that sustainable world order cannot involve a globalised economy. (This is not to reject globalised communications and information systems such as the internet.)
Could better policies and leaders have avoided the evils of globalisation?
Within the critical literature on globalisation and associated topics such as "economic rationalism", the "neo-liberal agenda" and the "Washington Consensus", it is often stated or implied that the problem is to do with policies and leadership. It is assumed that there could have been different leaders with more humane values and policies which would have avoided the undesirable consequences of globalisation. Thus the blame is often put on people like Thatcher, Reagan, Hawke, Keating, Clinton, and Howard, and "economic rationalism" is attacked for being irrational. The purpose of much of this literature and action is therefore to get our leaders to wake up to the mistakes they are making and to shift to more sane, just and ecologically acceptable policies. Effects of globalisation such as the run down of local industries, health services, education and welfare provisions are pointed to as evidence that the policies do not work and therefore that it is irrational to pursue them. However I want to argue that the policies in question are highly rational, efficient and effective, and that they are not options that previous leaders could have avoided or future leaders can change -- unless and until capitalism is transcended. If we do not sort these issues out clearly much of the energy going into resistance to globalisation will continue to be wasted.
In my view the most effective approach to understanding globalisation is to be found in the elaboration of basic Marxist theory given by Baran and Sweezy, (1966). Capitalism is essentially about investing capital in order to make profits, in order to have more capital to invest next year, in an endless spiral. It is, in other words, the drive to accumulate capital which determines most things about our society and its history, and the key players have no choice but to "accumulate or die". Baran and Sweezy discuss this fundamental problem of capitalism, i.e, of continually finding new investment outlets for all the capital that is accumulating. From time to time vast new opportunities have been opened up by technical and other developments, such as the Nineteenth century building of the American railways, and the introduction of the automobile. More recently "defence" spending has provided huge opportunities for highly profitable investment.
It should not need to be said that the existence of enormous unmet needs on the part of large numbers of people, of society in general and of the ecosystems of the planet is of no significance for the problem of surplus. The fact that there are many glaring areas desperately in need of capital investment is of no help in solving the surplus problem, simply because these are not ventures from which satisfactory profits can be made. In a capitalist economy capital will not be invested in them regardless of how urgent the needs are. Often needs can be met while yielding a clear but low rate of profit; e.g,, Middle East oil still costs less than $5 per barrel to produce so it could be sold profitably at low price to poor Third World people. However in a capitalist economy the oil will only be sold at the highest possible price, meaning that most of it is taken by the consumers in rich countries.
In the 1970s the remarkable long boom came to an end. It became increasingly difficult to find new fields in which the ever-increasing volumes of capital could be profitably invested. Daly and Cobb (1989, p. 452.) have estimated that the amount of capital per person available in the US for investment has been doubling every 20 years. With little increase in population and therefore in the number of consumers, near saturation of markets for many products (everyone who can afford a fridge has one), planned obsolescence having reached an advanced stage, and glutted export markets, the business world became increasingly concerned.
Globalisation is essentially the breakthrough that capitalism had to eventually come to in order to enable continued accumulation and growth in production sales, consumption, trade and investment. Pressure built up to eliminate the impediments to increased business opportunities. In the 1950-1970 period a great deal of economic activity was not open to corporations because it was carried out by public enterprises, or was restricted and regulated by rules set by governments. Thus there was much protection of local industry by trade tariffs, many markets were reserved for local traders and many rules put environmental, health and labour values ahead of profit. In many cases some of the income from more profitable sectors was used to cross subsidise less profitable sectors, e.g., rural railways. Many areas of the economy were either out of bounds to foreign investment, or governed by conditions limiting the freedom of action and the profits of transnational corporations.
Globalisation is essentially an outcome of the build up of enormous pressure on the part of the corporations and banks and their international agencies to get rid of these barriers so that they can gain better access to the many fields of activity previously blocked to them. The mobility of the corporations has been the main tool used to pry open the doors. They can locate new plant or quickly relocate existing plant in those countries promising the freest access, the least regulation and the best tax holidays and the cheapest labour. This makes governments compete against each other to attract foreign investors, thereby bringing about a global reduction in restraints on corporate activity. Governments thus become not only compliant in the deregulation process, but major agents facilitating it, on the grounds that it is essential to "get the economy going again."
Finance has become the dominant area within the global economy, and within this field a great deal of the activity is simply speculation in the frantic quest for new investment outlets for capital. Strange (1980) provided an early discussion of speculative investment in commodities, real estate, exchange rates, stock markets and takeovers. More recently we have seen the emergence of futures and derivatives markets. These arenas often involve futile and self-defeating desperate gambles in an attempt to find a profitable source in which to place capital. Approximately 95% of the capital that flows internationally is now purely speculative, e.g., using expensive high speed computers to buy and sell currencies a split second after their exchange rates have changed. Much of this activity is can cannibalistic, enabling profit only from the carve up of assets of ailing corporations which can be taken over and dismembered. Much of it is "Ponzi" finance, based on the pyramid principle whereby the sale of an asset at higher and higher prices can proceed only as long as buyers believe they can sell it to another buyer, while all know that the asset can never produce enough wealth to pay for its purchase.
The gambling continues, most recently in IT stocks, but it is dwarfed in significance by the fact that the corporations and banks have in little more than a decade driven through the most radical restructuring of the economy that the world has seen in hundreds of years. They have succeeded in clearing away or rendering largely impotent many of the procedures and rules whereby twenty years ago governments controlled their own economies and regulated the behaviour of corporations. Greatly increased freedom has been given to market forces and to the freedom of enterprise, meaning the freedom of transnational corporations and banks to go where they like and do what ever suits them. Government regulation of corporate activities has been greatly reduced. In addition governments are selling off state enterprises, again making more profitable business opportunities available to the private sector. Because governments cannot tax corporations heavily or they will leave, and because corporations are able to avoid tax through transfer pricing, governments are under pressure to cut taxes and state spending on welfare and public services.
Thus many resources and markets especially in the Third World which were once kept for the benefit of local people are now free for the highest bidder or most "efficient" producer to take. Mexican peasants who once could sell their grain locally now cannot because the US giant Carghill is able to come in and sell at a lower price. The process has been greatly assisted by the advent of Third World debt and the rise of the IMF and the World Bank as the dominant directors of Third World "development". Because indebted countries must approach these institutions to be bailed out when impossible debt repayment problems arise, the Structural Adjustment Packages of the IMF and the World Bank have been able to force many nations to dismantle their economies and restructure them along the free market lines that are a delight to the corporations and banks (and shoppers in rich world supermarkets.)
Thus Third World development is increasingly being seen as a process of vast, systematic, institutionalised and legitimised plunder. (Goldsmith, 1997, Rist, 1997, Chossudovsky, 1997, Trainer, 1995a.) Third World countries have been developed into a condition in which their productive capacity, their land, labour, forests and fisheries now produce mostly for the benefit of a relatively few rich people elsewhere. (Third World elites are of course among the beneficiaries.) (For one of many excellent accounts see Chossudovsky, 1997.)
One consequence of all this is that Third World governments now have little or no influence on Third World development. What will be developed will be only what it suits the corporations to develop. The proposals of the Multilateral Agreement on Investment, now being recycled via the World Trade Organisation and the OECD, will virtually prevent governments from having any capacity to gear foreign investment to national needs, or to prevent development that is clearly against the national interest.
The core point here is that these actions should not be seen as options which national leaders could have avoided. They are developments that the now global capitalist system has inevitably led to, and requires. Nor indeed are they options which the leaders of the corporations can avoid. Korten (1995) documents graphically the fact that any CEO or board of directors who jeopardise profit maximisation in order to protect forests, health standards or worker's rights risks being dumped by shareholders, or risks a hostile takeover by a corporation that is willing to disregard these considerations in order to maximise the bottom line. Again it is a system which forces the corporate managers, think tanks, the OECD and WTO etc to work hard at breaking down the impediments to increased business turnover.
Why do almost all our politicians go along so eagerly with the corporate free market agenda? The answer is essentially because they have to. If you thought they were stupid or evil, and had other options which they failed to take, I do not think you understand the situation and I think you will be inclined to support mistaken strategies. Yes most politicians believe unquestioningly in the free market ideology, but little difference would be made even if they did not. Consider what would happen if our Prime Minister suddenly said, "We are going to increase funds for our hospitals, the aged care system and for education. We are going to restore workers conditions and raise pensions. And we are going to make sure that the environment is protected. From here on foreign investors will have to plant two trees for every one exported as woodchips." What would happen?
Moody's would instantly drop our credit rating. Foreign investors would realise Australia was not a good investment prospect and capital would be more costly to borrow to invest here. Production costs would jump, meaning that new foreign investors would refuse to come in and create jobs and exports, and that existing foreign investors would move out. Taxes would have to rise significantly to finance the better hospitals etc., again meaning corporations would leave to relocate in areas where they could go on paying no tax. (Half the transnationals with branches in Australia pay no tax here.) The cost of goods produced in Australia would rise. This in turn would mean that our exports would be dearer and we would lose export markets, when we are already heavily in debt and vitally dependent on exporting to pay for all the imports we now need (...since globalisation relocated about half our own manufacturing in the cheap labour areas of Asia).
In other words, for our Prime Minister to try to do any of the things mentioned above would be to commit economic suicide for the nation because we are now locked into the global economy which gives the corporations the freedom to go wherever and do whatever suits them while our welfare depends on whether or not we can bid below all other nations competing for the corporations to locate plant on their soil.
Again this is simply the state that capitalism has inevitably moved to, driven by the imperative to accumulate and therefore to seek increased investment opportunities and profit maximisation and increased access to resources and markets, and therefore to work for the dissolution of all forms of regulation (...except of course those state controls which facilitate increased corporate penetration.)
The problem therefore is not one that can be solved by calling for leaders with more humane values and policies. It is a direct consequence of the fact that we have a capitalist economy. Even saintly leaders could not make this system work without causing the inequality, impoverishment and social and ecological destruction now accelerating around us. It is therefore quite mistaken for critical groups to regard economic rationalism as an irrational policy inflicted on us by stupid and/or heartless leaders, which we could avoid simply by electing more humane leaders. Economic rationalism has not failed; it works superbly well. But it does not and was never intended to work for you, for people in general, for the society or for the good of the environment. It does work well for the rich and for capitalism. There can be no satisfactory solution to the problems associated with globalisation until a totally different economic system is established. Unfortunately many well-intentioned people critical of globalisation are proceeding as if that is not the case.
Is a humane and ecologically sustainable globalisation possible?
It is commonly assumed, especially among people who are well to the left, that globalisation is not the problem: the problem is the way globalisation works out within a capitalist economy. In other words they are confident that globalisation would be very desirable in a socialised world order. However when the basic "limits to growth" analysis of our situation is understood it becomes clear that this is a seriously mistaken assumption. If we look at the resource and ecological implications of our affluent, industrial-consumer way of life we realise that it is so grossly unsustainable that a viable world order will have to be based on per capita energy and resource use rates that are a minute fraction of present rich world figures. There would therefore be far too little energy to enable the large scale international movement of resources and goods that globalisation involves. Following is a brief summary of some of the most coercive elements in the general "limits to growth" case. (For more detailed accounts see Trainer, 1995, 1989, 1999.)
Rich countries, with about one-fifth of the world's people, are consuming about three quarters of the world's resource production. Our per capita resource consumption is about 15-20 times that of the poorest half of the world's people. World population will probably stabilise around 10 billion, somewhere after 2060. If all those people were to have Australian per capita resource consumption, then annual world production of all resources would have to be 8 to 10 times as great as it is now. If we tried to raise present world production to that level by 2060 we would by then have completely exhausted all probably recoverable resources of one third of the basic mineral items we use. All probably recoverable resources of coal, oil, gas, tar sand and shale oil, and uranium (via burner reactors) would have been exhausted by 2045. (Trainer, 1995.)
Petroleum is especially limited. World oil supply will probably peak by 2010 and be down to half that level by 2025, with big price increases soon after the peak. (Campbell, 1997, http://www.dieoff.org, http;//www.Hubbertpeak.) If all the people we will probably have on earth by 2025 were to have Australia's present per capita oil consumption world oil production would have to be 15 times what it will probably be then.
There is a very strong case that it will not be possible for any other energy sources to replace oil (see http://www.dieoff.org) and that the common assumption that renewable energy sources such as the sun and the wind can sustain industrial affluent society is mistaken. (Trainer, 1995a, 1995b.)
The petroleum situation is therefore quite alarming, especially given Australia's very high dependence on liquid fuel for food production, transport and exporting. Yet virtually no attention is being given to the problem by the media, academia, government or the general public.
If all the expected 10 billion people were to use timber at the rich world per capita rate we would need 3.5 times the world's present forest area. If all 10 billion were to have a rich world diet, which takes about .5 ha of cropland to produce, we would need 5 billion ha of food producing land. But there is only 1.4 billion ha of cropland in use today and this is likely to decrease.
Recent "Footprint" analysis estimates that it takes at least 4.5-5 ha of productive land to provide water, energy, settlement area and food for one person living in a rich world city. (Wachernagel and Rees, 1995.) If 10 billion people were to live as we do in Sydney where the footprint is probably closer to 9 ha per capita, we would need about 90 billion ha of productive land. But that is 12 times all the productive land on the planet.
The Intergovernmental Panel on Climate Change has concluded that in order to stop the carbon content of the atmosphere from rising any further we must reduce the use of fossil fuels by 60-80%. If we cut it by 60% and shared the remaining energy among 10 billion people, each of us would get only 1/18 of the amount we now use in Australia per capita. Most people have no idea of how far beyond sustainable levels we are, and how big the reductions will have to be.
The foregoing argument has been that the present levels of production and consumption are quite unsustainable. They are too high to be kept going for long or to be extended to all people. But we are determined to increase present living standards and levels of output and consumption, as much as possible and without any end in sight; i.e., economic growth is our sunpreme goal.
Few people seem to recognise the absurdly impossible consequences of pursing economic growth. If we have a 3% p.a. increase in output, by 2060 we will be producing 8 times as much every year. (For 4% growth the multiple is 16.) If by then all 10 billion people expected had risen to the living standards we would have then, the total world economic output would be more than 100 times what it is today! Yet the present level is unsustainable. (For a 4% p.a. growth rate the multiple is 220.)
These sorts of numbers are far beyond magnitudes that plausible assumptions about technical advance could make sustainable. The technical fix" optimists mostly talk about the possibility of reducing resource use or environmental impact per dollar of GDP by a factor of 4 to 10. However the above figures indicate that factor 100 reductions would not be sufficient, and even these would have to be doubled every 23 years if we insist on 3% p.a. economic growth.
These are some of the main limits to growth arguments which lead to the conclusion that there is no possibility of all people rising to the living standards we take for granted today in rich countries like Australia. We can only live like this because we are taking and using up most of the scarce resources, and preventing most of the world's people from having anything like a fair share. Therefore we can't morally endorse our present affluent-industrial-consumer way of life. We must accept the need to move to far simpler and less resource-expensive ways. We can have our present "living standards" only because we are grabbing most of the world's wealth. We must therefore face up to dramatic change from the present commitments to affluence, market forces, the profit motive and growth.
The alternative; The Simpler Way.
If the foregoing limits to growth analysis is basically valid some of the key principles for a sustainable society are clear and more or less indisputable. (For a detailed discussion see The Conserver Society, Trainer, 1995a.) Material living standards must be much less affluent. There must be small scale highly self-sufficient local economies enabling most of the things we need to be produced by local labour from locally produced resources. There must be mostly cooperative and participatory local systems. There must be much use of alternative technologies, A very different economic system must be developed, one not driven by market forces or the profit motive, and in which there is no growth. Indeed for a long time the goal must be to greatly reduce the amount of production and consumption going on.
The alternative way is well described as The Simpler Way. We can all live well with a much smaller amount of production, consumption, work, resource use, trade, investment and GNP a than there is now. This will allow us to escape the economic treadmill and devote our lives to more important things than producing and consuming.
In recent decades we have gone beyond theory and literature on the form that a sustainable society must take. We now have a Global Eco-village Movement in which many small communities and groups are pioneering the development of lifestyles, technologies and social arrangements that might enable humans to live in just and sustainable ways. A recent publication by the main coordinating agency, the Gaia Trust, lists 57 Eco-villages in Europe. (Grindheim and Kennedy, 1999.) The US Communities Directory for 2000 lists more than 650. (Federation of Intentional Communities, 2000.)
It is my firm belief that the fate of the planet depends on the future of the Global Eco-village Movement, and that there is nothing more important for us to do now than to help the Movement flourish.
The most important and difficult areas for Eco-village development are the dying country towns and the suburbs of existing cities. We have to work out how these can eventually be converted into highly self-sufficient, cooperative local economies which are largely self-governing, drawing many of their resources from local gardens and forests and producing many of the basic items they need. The most promising beginning point would seem to be the establishment of cooperative community gardens and workshops, especially enabling unemployed, handicapped, retired etc. people to begin producing for themselves some of the things they need. The vision here is to eventually have developed new economies within the old system via long term grass roots effort which spreads out from the humble community garden and workshop beginning point. (This project is detailed in Chapter 6 of What Is To Be Done -- Now?)
The Implications for Globalisation?
The main implication of these considerations for economic globalisation is therefore that little of it will be possible! Whether the economy is capitalist or socialist, there will not be anything like the amount of fuel necessary to sustain international trade on the present scale. This will dramatically impact on the role of transnational corporations, indeed on their very existence.
Globalisation in the sense of extensive and highly integrated communications network is not necessarily threatened by the limits to growth analysis. It will be possible to produce considerable quantities of energy from renewable sources, although nowhere near enough to meet present demand, and these should sustain at least a modest satellite and computer infrastructure.
It is likely that globalisation is clearing the way to another boom in the next few years, because it is getting rid of much of the regulation previously restricting corporate access to profitable business opportunities. If so the possibility that limits issues will be attended to will remain low for some time. However we are very likely to see the start of immense and probably terminal difficulties within 10 -20 years triggered by the coming oil problem. Then there will be much greater probability that people will attend to the argument that a transition to The Simpler Way must be made. The crucial task we in the Global Ecovillage Movement must perform by then is to have built the impressive examples of alternative settlements and economies and lifestyles which will show that a workable and attractive alternative is available. Our chances of success are not at all promising, but the limits to growth analysis indicates that there few if any other strategic options option to us at this point of time.
Campbell, J., (1997), The Coming Oil Crisis, Brentwood, England, Multiscience and Petroconsultants.
Chossudovsky, M., (1997), The Globalisation of Poverty, London, Zed Books.
Daly, H., and J. Cobb, (1989), For The Common Good, London, Green Print,
Goldsmith, E., (1997), "Development as colonialism", in J. Mander and E. Goldsmith, The Case Against the Global Economy, San Francisco, Sierra.
Korten, D. C., (1995), When Corporations Rule the World, West Harrtford, Kumarian Press.
Rist, G., (1997), The History of Development, London, Zed Books.
Trainer, T. (F. E.), (1995a), The Conserver Society; Alternatives for Sustainability, London, Zed Books.
Trainer; F. E. (T.), (1995b), "Can renewable energy save industrial society?", Energy Policy, 23, 12, 1009-1026.
Trainer, F. E. (T.), (1999), "The limits to growth case now", The Environmentalist, 19, 19, 4, Dec. 325 -336.
Trainer, F. E. (T.), (In press), What Is To Be Done -- Now?
Wachernagel, N. and W. Rees, (1996), Our Ecological Footprint, Philadelphia, New Society.
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://www2.arts.unsw.edu.au/tsw/