Issue 36 / October - December 2001
Economic Globalization and the Quest for Profit
America emerged from the Second World War as the world‚Äôs leading economic and industrial power. When it decided to reject its isolationist past in order to rebuild former enemies and embark upon the Cold War with the Soviet Union, the seeds were laid for the current phase of globalization.
Other developments supported this trend, the most important being:
The invention of the silicon chip (1958-59). Subsequent improvements have so miniaturized computer components and compressed data that data transmission is now practically instantaneous. When combined with Web browsers, search engines, and the Internet, access to financial and other data can be exploited to its full potential. The U.S. Congress‚Äô approval of Internet commerce and the falling prices of home computers and phone calls was a boon for transnational corporations (TNCs). Now they can micromanage their far-flung operations, direct money to the best economic opportunity, avoid taxes and financial losses, cripple unions and labor gains, skirt environmental legislation, and find other ‚Äúcreative‚ÄĚ ways to increase profits.
The deregulation of financial capital (1973). This was signaled by abandoning the Bretton Woods system of fixed currency exchange rates, which had been maintained by America since 1944 and supported by its adherence to the gold standard, in favor of letting the market determine a currency‚Äôs value. Now that governments could no longer control the outflow of national currency, TNCs were free to move it as they wished.
Breaking the large banks‚Äô and insurance companies‚Äô monopoly on providing financial loans. With the rise of the bond market in the late 1960s, securitization of home mortgages in the 1970s, and ‚Äújunk bonds‚ÄĚ and the securitization of the international debt market in the 1980s, the current phase of globalization quickly blossomed.
These developments opened once-closed markets to millions of individual investors and mutual fund managers whose first concern is profit. As a result: ‚ÄúNot only can investors now buy and sell stocks and bonds from all over the world, not only can they now do that buying and selling from their home computers, but Internet brokerage sites are now giving them-for free-the information and analytical tools to make those trades, without ever having to call a broker. The more people do that, the more they will demand more information and analyses about different economies and companies, and the more easily they will move their money around, punishing the bad performers and rewarding the good ones.‚ÄĚ1
The underlying philosophy of increasing profits meshed nicely with a firm belief in social Darwinism. Developing and then applying ‚Äúeconomic‚ÄĚ Darwinism was a logical outgrowth. Just as individuals and species survive by adapting and becoming stronger, so companies survive by means of rapid adaptation.
This can take the form of corporate mergers or understandings, paying lower wages to and providing few if any benefits for overseas workers, and justifying everything in terms of increased efficiency. A new vocabulary has emerged for such activities: downsizing, outsourcing, streamlining, business restructuring or re-engineering, cost rationalization, retrenchment, redundancy, rationalization, risk minimization, profit alignment ‚Ä¶
Benefits and Drawbacks
Those who dream of vast legions of Chinese consumers assert that globalization will make China a more open society. First, they say, Beijing‚Äôs official monopoly on information will end because foreign and local investors must have access to the Internet. Internal dissident groups can use it to contact sympathizers and publicize their causes at home and abroad.2 Second, as China is drawn further into the world community, Beijing will have to adhere to international business law and treaties on workers‚Äô rights, working conditions, fair payment, and so on. It also will have to adjust to globalization‚Äôs driving economic philosophy of neoliberalization, which means liberalizing the economy, privatizing state-owned businesses and utilities, opening the financial and banking sectors, establishing transparency and accountability, and providing accurate financial data. Suppos-edly, such reforms will counteract China‚Äôs tendency to put politics and ideology above all other concerns. Third, those Chinese who work with foreign investors will learn about democracy, individuality, personal responsibility, human rights, governmental accountability, and how people in other countries actually live. In addition, foreign investment will open up new opportunities for Chinese entrepreneurs and those who want to improve their lives. They might even be paid above the normal hourly or daily wage, and thus can send money home to help their families.
Such arguments can be applied to many developing countries with only slight variations. These arguments sound great and really do have some merit, but reality sometimes does not conform to theoretical expectations. The following examples are by no means confined to the countries mentioned.
In Mexico, economic development is concentrated in Mexico City and along the northern border with America. The agricultural sector is largely ignored, despite the large numbers of people involved in it. Looking for debt relief, foreign investment, and entrance into the North American Free Trade Association (NAFTA), the government gutted Article 27 of its constitution, which made all communal land belonging to indigenous communities off-limits to foreigners and TNCs. It had to do this because America and Canada want access to Mexico‚Äôs untapped wealth, most of which is under indigenous-held land. The result was the Zapatista uprising on January 1, 1994, which continues to enjoy wide support, and a host of problems that drove the 71-year old ruling party from power in 2000.
In northern Thailand, villagers untouched by Bangkok‚Äôs modernization and development can see how their urban counterparts live thanks to television. Hoping to reap some of the benefits, some families sell their daughters to Bangkok‚Äôs brothels. Large sectors of Thai society and the government silently support this, finding an easy way out of this moral dilemma by saying that it is the girls‚Äô karma. The result is an out-of-control AIDS epidemic and a booming sex-tourism business based upon the unbelievable exploitation of young women. Neighboring Cambodia has the same problem, while many Russian women see prostitution as the key to the good life.
In Ecuador, Amazonian Indian tribes and other affected peoples sued Texaco in an American court (1993) to force it to clean up the contamination it left behind. Texaco, which no longer operates in Ecuador, dumped ‚Äú4.3 million gallons per day of toxic oil waste water over a period of 20 years ‚Ä¶ [but] claims the dumping caused no appreciable damage.‚ÄĚ It also left behind more than 300 open waste pits contaminated with heavy metals and other carcinogenic compounds. ‚ÄúIn their lawsuit, the plaintiffs cite a wave of deadly cancers, skin lesions, birth defects and other abnormalities among the areas indigenous peoples, and massive die-offs of plants, crops, and animals from air and groundwater pollution as well as poisonous ‚Äúblack rain.‚ÄĚ In some villages near polluted water sources, the rate of cancer is 100 times higher than the historical norm.‚ÄĚ The case has yet to be resolved.3 There are similar problems with Shell in Nigeria, Nike in Indonesia, Union Carbide in India, and Rio Tinto in Papua New Guinea.
Areas of Concern
Agriculture. The Green Revolution of the 1960s globalized agriculture and introduced the concept of ‚Äúcash crops.‚ÄĚ It also brought the promise of higher crop yields, reduced malnutrition, and rural development. However, along with it came traditional crop varieties and farmers displaced by agribusiness and hard-currency-earning cash cops, expensive imported fertilizers and pesticides, increased land distribution inequity, foreign corporate patenting of seeds and crop strains developed by local farmers over the centuries, and the diversion of financial and natural resources to agribusiness.
All of this undermined local agriculture, a devastating blow to indigenous farmers. Even worse, the Food and Agriculture Organization says that about 75 percent of all plant species have become extinct. In more than 80 of the 154 countries surveyed in 1995, this loss was attributed to ‚Äúthe spread of modern, commercial agriculture and the introduction of new varieties of crops.‚ÄĚ4
Medicine. On February 1, 2001, America threatened to complain to the World Trade Organization about Brazil‚Äôs national and highly successful AIDS treatment program. By producing local and cheap generic drugs and delivering them for free, Brazil has halved its AIDS victims‚Äô death rates and substantially reduced treatment costs. On April 19, 2001, after a protracted battle in South African courts, several pharmaceutical TNCs dropped their quest to block the South African government‚Äôs plan to import cheap generic drugs to treat its AIDS victims. Cilpa, an Indian company that produces cheap generic drugs for AIDS victims, routinely faces pressure from pharmaceutical companies and their governments to cease and desist.
In each case, the charge is the same: violation of the intellectual property and patent rights held by Western pharmaceutical companies. That these same companies are among the richest in the world, and that their clients are among the poorest countries in the world, is rarely mentioned. Prices have been reduced as a result of such negative publicity, but many victims in Asia and Africa still cannot afford the medicine they need to survive.
In the Amazon, researchers have discovered many plants and herbs with medicinal value from the indigenous peoples. However, most of them sell the data to the large pharmaceutical companies and both become rich. The Amazon‚Äôs people do not benefit; in fact, their situation deteriorates as even more TNCs descend upon them.
National Sovereignty. The rise of 24-hour computerized and almost instantaneous financial transactions and currency speculation makes it hard to know who is in control. Governments face an impossible situation: ‚ÄúCentral banks and elected governments [are] regularly compelled to choose between [their obligations to domestic economies and the new force of the global market] ‚Ä¶ This was often a ‚Äėno win‚Äô choice for political leaders since yielding to the market‚Äôs idea of ‚Äėsound economic policy‚Äô frequently required them to depress their own economies, increasing unemployment or cutting social spending.‚ÄĚ5
George Soros, perhaps the best known of all individual and institutional currency speculators, has humbled governments with this strategy. Working together, they humiliated the Bank of England in 1992 and destroyed Europe‚Äôs Exchange Rate Mechanism in 1993. Malaysian Prime Minister Mohamad blames Soros for the Asian economic crisis of 1997-98. No individual currency speculator can do much on his or her own, but when big players like Soros begin to move, others jump on the bandwagon. The results show who is really in charge of a nation‚Äôs economy and, to a certain extent, social policy.
Structural adjustment programs (SAPs) are another controversial matter. In the 1980s, America began tying its aid to World Bank and IMF economic prescriptions and reforms (reducing inflation, promoting exports, meeting debt-payment schedules, and decreasing budget deficits) and to facilitating increased American trade and investment.
However, they generally entail ‚Äúsevere reductions in government spending and employment, higher interest rates, currency devaluation, lower real wages, sale of government enterprises, reduced tariffs, and liberalization of foreign investment regulations‚Ä¶. But while government balance sheets may improve, SAPs have failed to establish a base for sustainable, balanced economic development ‚Ä¶ [and] have bankrupted local industries, increased dependency on food imports, gutted social services, and fostered a widening gap between rich and poor.‚ÄĚ6
In addition, they tend to keep poor countries in debt, for new loans are needed to pay off exisiting debts and to qualify for future loans. Despite this, they remain the usual ‚Äúcure‚ÄĚ for countries seeking international financial aid and investment. This could change if anti-SAP protests continue, and if demands that lending institutions become more transparent and make allowances for social policies succeed.
Political Development and Human Rights. Decades of Western investment in oil-rich Middle Eastern and resource-rich African countries appears to have strengthened dictators of all persuasions. Instead of supporting human and religious rights in Chinese-occupied Tibet and Sinkiang, not to mention in China itself, American business interests persuaded Washing-ton to grant China permanent normal trade relations on September 19, 2000. Thus, China‚Äôs violations of human, labor, and religious rights no longer has to concern the American business community. Unfortunately, this seems to be the rule rather than the exception.
Global capitalism, based upon unfettered consumerism and the idea that continued profits through continued growth leads to ultimate happiness, now runs the world‚Äôs economy: ‚ÄúThe culture-ideology of consumerism is the set of beliefs and practices that persuades people that consumption far beyond the satisfaction of physical needs is, literally, at the center of meaningful existence and that the best organized societies are those that place consumer satisfaction at the center of all their major institutions.‚ÄĚ7
If this is true, human unhappiness is sure to increase. Poor people viewing the ‚Äúreal‚ÄĚ lives of the rich through foreign television programs or movies see a lifestyle and possessions forever beyond their rich. Workers face constant job insecurity. Rural migrants in cities have their hopes dashed when they cannot find jobs. The media report the rise of sweat-shop and child labor, environmental devastation, a loss of corporate accountability and responsibility to their home bases, a hollowing of hard-won labor gains by threats of relocating overseas, and declining taxes as TNCs juggle their books.
Even those who benefit cannot feel secure. Their job might be outsourced in the interest of higher profits, abolished by corporate streamlining, or lost because they cannot acquire new skills fast enough. Shareholder dissatisfaction can destroy their companies, and job-related demands upon their time can make a normal family life and friendships impossible.
In sum: ‚ÄúGiven their narrow premise, market economists never attempted to calculate all of the collateral damage that could also be attributed to the liberalization of finance-the capital investments destroyed when viable factories were abruptly abandoned, the economic output lost when economies grew more slowly, the public welfare costs from rising unemployment or declining wages, the instability for companies and nations caused by the sifting money values.‚ÄĚ8
Economic globalization does have its good and bad points. But its emphasis on always-increasing profits as the way to ultimate happiness and meaning in our lives is misguided, for how can what is transient give lasting satisfaction? It has nothing to offer those who fall behind but dreams that will be fulfilled ‚Äúsometime in the future.‚ÄĚ And one day they will demand the fulfillment of those dreams...
1 Thomas L Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: Anchor, 2000), 71. 2 China‚Äôs first ‚Äúcyber-dissident‚ÄĚ was tried in Shanghai on December 4, 1998, ‚Äúon charges of subversion for having given the addresses of 30,000 Chinese computer users to VIP Reference, a journal that Chinese dissidents publish in the United States.‚ÄĚ Ibid., 68. 3 Cristobal Bonifaz and Joseph C. Kohn, ‚ÄúAmazon Tribal Leaders Blast U.S. Judge For Blocking Texaco Pollution Case,‚ÄĚ 31 May 2001. Online at: www.amazonwatch.org. 4 The State of the World‚Äôs Plant Genetic Resources for Food and Agriculture, Chapter 1: ‚ÄúThe State of Diversity,‚ÄĚ (Leipzig: 1996). Online at: http://web.icppgr.fao.org/ wrlmap_e.htm. 5 William Greider. One World, Ready or Not (New York: Simon & Schuster, 1997), 242. 6 Carol Welch and Jason Oringer, ‚ÄúStructural Adjust-ment Programs,‚ÄĚ Foreign Policy In Focus, vol. 3, 3 (Apr. 1998). Online at: www.foreignpolicy-infocus.org/briefs/ vol3/v3n3sap.html. 7 Leslie Sklair, The Transnational Capital Class (Oxford, UK: Blackwell, 2001), 4-5. 8 Greider, One World, 250.
Bales, Kevin. Disposable People: New Slavery in the Global Economy. Berkeley and Los Angeles: University of California, 2000. Barnet, Richard J. and John Cavanagh, Global Dreams: Imperial Corporations and the New World Order. New York: Touchstone, 1995. Korten, David C. When Corporations Rule the World. 2d ed. Bloomfield, CT: Kumarian Press, 2001. Madeley, John. Big Business, Poor People: The Impact of Transnational Corporations on the World‚Äôs Poor. New York: Zed Books, 2000.