[OPE-L:2888] globalization

From: Rakesh Bhandari (bhandari@Princeton.EDU)
Date: Sun Apr 23 2000 - 03:28:35 EDT


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I would be interested in any comments on this piece, especially
from Hugo and Paul Z (who was in Washington for the recent protests
I believe).
Yours, Rakesh

>From the New Statesman, London, 17 April 2000:

The left is wrong about free trade

Meghnad Desai Monday 17th April 2000

 As the opponents of globalisation regroup, this time in Washington,
Meghnad Desai argues that the World Trade Organisation is good for the poor

The commonplace view on the left is that the World Trade Organisation
allows multinational capital to dominate the hapless south. To stop free
trade, according to this view, is to halt, or even reverse, the onward
march of globalisation. The collapse of the Seattle conference last
December was therefore a triumph for the forces opposed to capitalism, to
multinational corporations, to ecological devastation and to greed.

But the truth is that, although the poor outside the Seattle conference
thought they had won, the rich inside really did win. Seattle will cost the
developing world many years of lost growth. Highly paid jobs will be
sheltered for a few more years at the expense of lower-paid workers in the
developing world. The trade union forces outside the conference were
defending their well-paid jobs and, as paymasters of the Democratic Party,
they got their returns. President Clinton sabotaged the talks from the
inside.

To understand this, we need a dose of history. There was a globalised
economy between 1870 and 1914 - organised by empires rather than
independent nation states. There was then a growing and vigorous
anti-capitalist movement in the north (as it was not then called) including
the Socialist (Second) International and many nationalist movements on the
periphery, including the Serbs, whose assassination of Archduke Franz
Ferdinand started the First World War. This war ended that episode of
globalisation, not because of revolt from below, but because the powerful
nations could not agree on the division of benefits from globalisation.

The next 30 years were a nightmare of protectionism, depression, fascism
and the Gulag. That is why the post-1945 order was built on a commitment to
promote and expand freer trade. The General Agreement on Tariffs and Trade
was to be its instrument. In the 1990s, GATT grew into the WTO at the
behest of the south.

The golden age of Keynesianism was not so golden for the south. There was a
shortage of capital flows from north to south and foreign aid came attached
with cold-war strings. Only when Keynesianism broke down, and the oil price
rise led to stagflation in the north, did developing countries begin to
find a place in the world economy. Capital began to flow to some - only a
few - newly industrialising countries.

The Asian tigers were successful in exporting to the rich north. Asia's
share in world GDP (excluding Japan) was about 10 per cent from 1960-75,
but rose to 20 per cent by 1999. The US share came down from 35 per cent to
less than 25 per cent.

In the establishment of the WTO, the developing countries had secured the
first and only post-1945 global institution in which countries were treated
equally. Neither the UN (with its veto powers for five permanent Security
Council members) nor the IMF/World Bank (with votes weighted by shares in
favour of the rich countries) has that equality. This is why both of the
giant trading blocs, the US and the EU, have lost cases before the WTO and
had to comply. The UN, by contrast, has never reprimanded the US. Nor did
the IMF ever criticise the US for irresponsible fiscal policy during the
1980s. The WTO is the only weapon the weak south has ever had against the
powerful north.

Globalisation has been seen as much more of a threat in the north than it
has in the south. Complaints about the "end of work", about American jobs
being stolen by Mexican "wetbacks" as a result of the North American Free
Trade Agreement (Nafta), or about American wages being decided in Beijing,
are heard all the time. There are more books on my shelves about
first-world fears about globalisation than there are about third-world
development.

But the truth is that the flow of capital (foreign direct investment not
just short-term portfolio capital) to the south has been greater since the
late 1980s than at any time since 1914. It is certainly true that not all
countries benefited from these flows, but then, nor did they receive
foreign aid in anything like fair or equitable amounts. Capitalism does not
work as a charity; it is a mode of production. It seeks profits where it
can, and it happens that, in a number of mature product industries, it is
more profitable to produce in the south: textiles, shoes, steel and,
increasingly, cars. This is the fastest way the south can industrialise.

Countries that have not yet received foreign investment, especially those
in sub-Saharan Africa, will have to integrate into the global order if they
are not to be left even farther behind. The third world needs capitalism
because capitalism alone will lead to growth. No other feasible alternative
has yet been found.

In the 1950s and 1960s, there was a strongly held view on the left that the
third world would never develop under capitalism because of monopoly
capital; the only answer was socialism of the Leninist variety. Ever since,
there has been an anti- capitalist streak in development studies. Now it is
clear that, far from monopoly capital stifling growth, capital goes
wherever it will make profits. As Marx said 150 years ago, capital has no
country.

The world as it is now is unequal. In 1975, the OECD countries had around
80 per cent of world GDP. By 2000, that proportion has come down to 70 per
cent. And this is what the first world fears. For the first time in the
history of capitalism, the metropolis is worried. This is because capital
is finding more profitable niches abroad and is prepared to desert the
industrialised north. These rich countries must now find jobs for their
unskilled male manual workforce. They have to invest in training and to
restructure their welfare states. The rich have problems and so they want
to slow down the pace of trade liberalisation. They want to impose social
and green clauses to stop poor countries exporting.

The WTO meeting in Seattle was the south's opportunity to register its
demands. But the exigencies of the US presidential elections and the
financial needs of Al Gore's campaign were more important for Clinton than
the needs of the third world. So he sabotaged it. The rich will use any
excuse to hang on to their privileges - even anti-capitalism.

Lord Desai is a professor of economics at the London School of Economics.

His article is extracted from After Seattle: globalisation and its
discontents published by Catalyst on 18 April, 5.99. Full details on www.
catalyst-trust. co.uk



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