Globalization and Poverty - Essay Example

GLOBALIZATION AND POVERTY Two volatile contradictions simultaneously intersperse in the world today the competition among highly industrializedcapitalist nation-states, and (2) the ill effects of globalization on developing and underdeveloped societies, or the North-South divide. The bickering among the capitalist nation-states is still largely in the economic realm. In the medium-term, it is still doubtful whether their contradictions would erupt on to the military level. The economic gap between North-South divide, however, keeps on widening. The political and military repercussions of this schism can significantly change the complexion and direction of inter-capitalist competition. Globalization The end of the Cold War and the powerful wave of Globalization vastly reconfigured the world order. We have seen the end of the old colonial world and the rise of Islamic militancy in the mid-90s. Post-Cold War globalization served to unleash many pent-up social contradictions previously held hostage by the Cold War, like racial and ethnic clashes both within the North and South alike. The most profound changes, however, are in the economic realm. Globalization-the accelerated expansion and heightened contradictions of international capitalism-is bound to intensify even more within the decade. (Hirst & Thompson, 2000) Vicious international competition among highly industrialized capitalist nation-states animates the world order. Economic globalization was mainly corporate-led. Incessant retooling of knowledge-based or high-tech corporations, including the mighty armaments industry and the rest of the multinational corporations in industrialized countries, keeps on accelerating the pace of globalization even more. Big corporate interests are more and more taking over the foreign policy directions of their respective governments. Alongside globalization is the concept of "neoliberalism". Neoliberalism has the same essence as the classic liberal economics. The latter was in vogue between the Industrial Revolution around the early 1900s and Keynesian economics around the 1930s Great Depression. Laissez faire ("free competition", to some) is at the core of both classical liberalism and neoliberalism. Laissez faire oppose Keynesian solutions that require vigorous state economic intervention. (Fischer 2003). Neoliberalism, ironically, is forced to adopt Keynesian solutions through the active manipulation of interest rates to keep inflation at bay. Furthermore, the US government as well as the Western European states actively subsidize their agricultural sectors, and even intervene politically in rearranging trade and financial mechanisms in their favor. These totally negate whatever "liberalism" or "free competition" there is in neoliberalism. Revolution in Productive Forces, Trade Wars, Uncertainties in the World Financial System The Second Word War and the military requirements of the Cold War ironically kicked off the revolution in science and technology, specifically in the fields of electronic computing, communications, air and space transport, biological warfare, and nuclear technology. Capitalist production techniques immensely benefited from these developments. The technological race seethes with greater intensity. A war over the control and monopoly of knowledge-intensive capital-especially information-communications-technology (ICT) and biotechnology-still rages among capitalist firms and nation-states. New, better, and increasingly cheaper commodities now flood the world market. The fight to open up more markets is the order of the day, not only to realize greater profits, but to stave off the increasing pressures of capitalist overproduction. (Robertson, 2003) Quite predictably, protectionist trade wars erupted between the large markets in northern America, Europe, and Asia. In an effort to secure commodity markets, tariff-cutting regional free trade associations sprouted along the continents, such as the North American Free Trade Agreement (NAFTA), the European Union, and closer to home, the ASEAN Free Trade Agreement of 1993 (AFTA). The AFTA, for example, promises to reduce tariff rates to a maximum of 5% among its members. The Association of Southeast Asian Nations or ASEAN comprise AFTA. China is also being coaxed by the ASEAN to gobble up AFTA through the Free Trade Agreement (FTA), which promises to be the world's largest free trade arrangement that would cover 1.7 billion consumers. The mad corporate scramble for markets requires political intervention and badgering from the most powerful nation-states. The US government eased out the loose General Agreements on Tariff and Trade (GATT) regime in favor of the formidable World Trade Organization (WTO). In the final analysis, the WTO served to preserve the US's lead in knowledge-based industries, eliminate the trade restrictions of developing countries imposed on transnational corporation (TNC) subsidiaries, and hold on to US's advantage in international services. A "neoliberal" free-trade regime would better serve US corporations under WTO's strong enforcement mechanism to break down trade barriers. Changes in the sphere of finance capital are also in the offing. The 1944 Anglo-Saxon Bretton Woods institutions-the International Monetary Fund (IMF) and the World Bank (WB)-were established supposedly to promote world economic stability and growth, respectively. Buttressed by the world largest banks and controlled no less by the imperialist interests of the world strongest powers, mainly US state interests, the IMF-WB tandem presides over the commanding heights of an uncertain international capitalist financial order. (O'Rourke & Williamson) Mounting debts and debt-servicing difficulties in the 70s forced the economies of many developing countries to rely on the IMF's and the WB's rescue packages and economic management. Since the debt crisis of the 1980s, both the IMF and the WB imposed "structural adjustment" prescriptions on developing countries: (1) cutbacks in government expenditures, especially in social spending; (2) rollback or containment of wages; (3) privatization of state enterprises and deregulation of the economy; (4) elimination or reduction of protection for the domestic market and less restrictions on the operations of foreign investors; and (5) successive devaluations of the local currency in the name of achieving export competitiveness. Much rethinking is going on right now since the Asian financial crisis of 1997-99, as well as the post-Soviet Russian economic meltdown. Both the IMF and WB were forced to increasingly assume orientations that are objectively opposed to each other. The IMF promotes and enforces macroeconomic policies to governments, mainly among the developing countries, along generally neoliberal prescriptions. The WB now concentrates on issues related to poverty, albeit along neoliberal prescriptions, too. Clashes are unavoidable. Even the former WB chief economist, Joe Stiglitz, has been castigating the IMF. In one his his recent works on the Asian crisis of the late 90s and the Russian economic collapse, he asserted that the "IMF prescriptions of demanding that crisis-torn countries implement budget cuts and higher interest rates to restore market calm worsens recessions and plunge more people into abject poverty." It remains to be seen how the big powers would refashion the IMF and the WB to better serve international finance capital and rein in the trade wars. In the medium term, a lot has to do on how the mighty US dollar-which is still the world's currency-would fare against the Euro. If there are trade wars, there are also currency wars. The European Monetary Union (EMU), which is the foundation of the Euro, is all set to challenge the might of the US dollar. Another is the disturbing state of both the Japanese and US economy. Still, another are Argentina-style financial collapses, or another round of an Asian financial crisis that can seriously hurt the stability of the whole international financial system. Even the Industrialized Economies are Not Immune Globalization has its inherent hitches. Despite the revolution in productive forces, the domestic economies of Japan, the US and some European economies are mired in systemic economic difficulties. There is the possibility that the confrontation between capital and labor inside these societies would overtake the dominance of the international inter-capitalist frictions. (Scholte, 2005). Strong recessionary pressures have been plaguing Japan since its bubble economy burst in the early 90s. It has been over a decade but, still, Japan has yet to escape from prolonged recession. In Western Europe, Germany's and France's high unemployment rates, well over 10%, are already generating disturbing political and social unrests. Prospects for higher growth rates are not upcoming. Even the US economy has yet to demonstrate a sustained rebound from recession. Growth levels below 3% are not a good indication. Alongside the "9/11" problematic are the (1) resurgence of public debt, (2) bursting of the "dot-com" bubble, (3) protectionism in steel, timber and agricultural products, and (4) high-profile corporate accounting scandals (such the Enron case). These sum up to a loss of business confidence. Another worrisome poser is the "strong-dollar, weak-dollar" paradox. A stronger US dollar coupled with protectionism would raise the costs of Asian exports, hurting the Asian economies in the process. This would in turn reduce the capacity of the Asian markets, especially China and Southeast Asian economies, to absorb the US's excess produce. In contrast, a weak dollar can unleash inflationary pressures inside the US and would possibly force the US to later pay in Euros, instead of the US dollar, for its imports. Such can weaken the US dollar further and give the EU a clear edge in the currency war. Economic troubles in Western Europe easily slide to social and political issues. Unemployment, for example in France and Germany, have already bred anti-immigrant sentiments. The false notion that the immigrants have been stealing the jobs of the people is provoking a resurgence of far-right politics in these countries, especially in France. Anti-Semitism, anti-Arab, anti-African and all sorts of racist xenophobia are expected to rise in many western European countries. The proliferation of weapons of mass destruction-both nuclear and biotechnological-still makes the world an unsafe place. Most of these are in the hands of industrialized nations. The armaments industry comprises a sizable chunk of these nations' economies. Another worrisome case is Russia and the rest of the former Soviet Union. Some nuclear material can easily get into the hands of Russian criminal syndicates for smuggling elsewhere. "Socialism-In-One-Country" or "Market Socialism" So far, the only remaining avowed socialist countries that have been weathering the post-Cold War era and globalization are China and Vietnam, both one-party states. China transformed a significant segment of its society to capitalist accumulation, market economy, and limited sway of finance capital. Shanghai and other cities along its Pacific coast are experiencing an unusually fast pace of capitalist development. Growth rates in Shanghai, for instance, have been well over 10% for the past years. More and more people from the countryside stream in their millions towards Shanghai, taking advantage of the construction boom, the sweat shops and other labor-starved industries, thriving trade, and the stock market. China's ability to steadily raise the purchasing capacity of many of its citizens has been serving as its ace at wresting the coveted most favored nation status (MFN) from the US government's list of priority trading partners. Overall, China's growth rates have been averaging at ore than 6%, prompting many economists to predict that the Chinese economy would equal that of the US's by the year 2020. Under what added considerations and as to how long will the Chinese Communist Party pursue this dual economic course-the combination of a command and market economy-remains to be seen. Vietnam also chalked up consistent and impressive growth rates for the past decade. Vietnamese leaders also showed flexibility by opening up a segment of its economy to the market. Vietnam is a top exporter of rice in the ASEAN and elsewhere. The pressure is now on Cuba and North Korea. Both are also one-party states presided over by strong leaders, Fidel Castro and Kim Jong-Il. North Korea has been refusing to try market-driven socialism. As for Cuba, the US's economic embargo has been preventing Cuba to experiment on market mechanisms. Famine is still hurting North Korea. International aid was instrumental in alleviating food crisis. However, much of North Korea's resources go into its more-than-a-million strong armed forces. Majority of these are stationed north the demilitarized zone (DMZ) facing hundreds of thousands of American and South Korean troops below the DMZ. Exodus plagues both countries. North Korea disdains asylum seekers, while Cuba lets go of its citizens seeking political and economic refuge in the US. As to the former members and allies of the former Soviet Union, not much socialism is left since all have gone the way of primitive capitalist accumulation. Almost all of their economies are now either too weak or in disarray, their social welfare systems dismantled, and criminality or the underground economy running amuck. Most of the Cold War era socialist countries have sunk to Third World status. It is only China that has been showing capacity to contend with the strongest capitalist powers economically, politically and militarily. In fact, China has overtaken Japan as Asia's regional power. The South Will Hurt More Consistently on the losing end of the heightened inter-capitalist competition are the underdeveloped societies of the South. More than the capital-labor frictions within industrialized economies, the North-South divide can easily assume dominance within the decade. (Rodrik, 1997). Even the United Nations admit, for example, that the IMF, World Bank and the WTO are "unfair" or "out of touch". The United Nations Human Development report for 2002 noted that the divide between the rich and the poor, the powerful and the powerless, sparked a powerful "anti-globalization backlash" that is "one of the most important movements of our time". The finest example was the Battle of Seattle years ago. Almost half of the voting powers of the WB and the IMF are controlled by seven states-United States, Japan, France, Britain, Saudi Arabia, Germany and Russia. As for the WTO, all member-countries have a seat and a vote, but decision-making is largely in the hands of Canada, the European Union, Japan and the United States. Among all these states, the United States holds greatest influence in these three global institutions. The financial systems of the nation-states in Asia, Africa and Latin America deserve utmost and continuous scrutiny. The Asian financial crisis of the 90s, the Mexican debt crunch, and the more recent Argentinean financial collapse are easily replicable in the underdeveloped and developing world. More of these can easily shake the pillars of the world financial system. More of these breeds greater political and social chaos in the third world. (Keohane & Nye, 2000.) Poverty, famine, drought, pestilence, environmental disasters, toxic wastes and the AIDs epidemic continue to hound a large chunk of humanity in Africa, Asia and Latin America. Internal colonialism, more ethnic differences threaten to explode in orgies of violence, up to genocide. Glaring forms of human intolerance-against the children, elderly, gays and lesbians, and national minorities-pervade the underdeveloped world. Works Cited Fischer, Stanley. "Globalization and Its Challenges." The American Economic Review, Vol. 93, No. 2, Papers and Proceedings of the One Hundred Fifteenth Annual Meeting of the American Economic Association, Washington, DC, January 3-5, 2003 (May, 2003), pp. 1-30 Hirst, Paul, and Grahame Thompson. Globalization in Question: The International Economy and Possibiities of Governance. London: Polity, 2000. Keohane, Robert and Joseph Nye. "Globalization: What's New What's Not (And So What)" Foreign Policy, No. 118 (Spring, 2000), pp. 104-119. O'Rourke, Kevin and Jeffrey Williamson. Globalization and History. USA: MIT Press, 2001. Robertson, Roland. Globalization: Social Theory and Global Culture. London: Sage Publications, 2004. Rodrik, Dani. "Sense and Nonsense in the Globalization Debate". Foreign Policy, No. 107 (Summer, 1997), pp. 19-37. Scholte, Jan Aart. Globalization: A Critical Introduction. London: Palgrave McMillan, 2005. Read More