The Rough Guide to Globalisation
A CAFOD briefing
"Is globalisation only to benefit the powerful and the financiers, speculators, investors, and traders? Does it offer nothing to men, women, and children ravaged by the violence of poverty?" Nelson Mandela, Davos World Economic Forum, February 1999
Globalisation is in danger of becoming a swear-word, the target of protests from Prague to Seattle. It is also a political hot potato, with a White Paper on Globalisation and Development due out in mid-December, and a new effort to restart global trade talks expected now that the US elections are over. This briefing explains what globalisation is, its impact on the poor countries of the world, and what needs to change. CAFOD has been charting the impact of globalisation on development for several years, and will be launching a four-year campaign on trade and food security during 2001.
What drives globalisation?
Globalisation describes the process whereby individuals, groups, companies and countries become increasingly interconnected. This interconnectedness takes place in several arenas:
The inexorable rise of giant transnational corporations (TNCs) lies at the heart of globalisation. Brand names, from Nike to Coca-Cola, have become some of the most widely recognised images on the planet. Of the world's top 100 economic players, 49 are countries and 51 are corporations. General Motors, Wal-Mart, Exxon Mobil, and Daimler Chrysler all have revenues greater than the combined economic output (GDP) of the 48 least developed countries.
With economic power has come political clout. World leaders scramble for audiences with Bill Gates (Microsoft) and John T. Chambers (Cisco). Corporate lobbyists are enormously influential (though often invisible) in drawing up the laws governing global trade and investment. Supporters of globalisation argue that TNCs bring jobs and new technology to developing countries, while critics worry that their growing political might is undermining national governments and allowing corporations to run the global economy to suit themselves and their shareholders.
Rich and poor countries alike have bought into the globalisation message - that you can export your way out of under-development. From 1980-99, world trade in goods (not services) tripled from �1 trillion to over �3 trillion. Poor countries have concentrated on clothes, footwear, electronics, and food - a trip down the aisle of your local supermarket has become a tour of the Third World, with asparagus from Peru, prawns from Bangladesh, and mangetout from Zambia. China has become the world's largest exporter of clothing, toys, electronics, and shoes. Trade can create jobs and wealth in poor countries, but the regular media expos�s of appalling working conditions in Third World farms and factories have led to increasing concern over the social and environmental conditions under which the goods are produced.
The accelerating pace of innovation in information technology (IT) is driving globalisation. The cost of a three-minute phone call from New York to London fell from $245 in 1930, to $3 in 1990, to about 35 cents in 1999 (1990 prices). Using 24-hour email, companies can split up their assembly lines between countries on different sides of the globe, sending designs and orders down the phone line and shifting components from one country to another to minimise costs. IT can cut costs and create a global village, but has awakened fears of a growing "digital divide" between the haves and have-nots. Thailand has more cellular phones than the whole of Africa.
The doubling of tourism over the last 15 years, and increased international migration, have meant greater cultural contact between countries and peoples. The spread of information and corporate branding has generated something akin to a single global culture, especially among the teenagers of the MTV generation. Those hyping globalisation believe this will lead to greater international understanding. Others fear that the global cultural tapestry could be replaced by bland corporate imagery and the platitudes of "Just do it" branding. Priests in Latin America have told CAFOD they have been asked to baptise children from poor families with names like Rangerover, Thissideup and Iloveny (think about it).
Capital flows, increasingly disconnected from any real trade or investment, have grown enormously in the last 15 years. They now run at about $2 trillion a day (that's 12 zeroes), moving around in the Alice-in-Wonderland world of derivatives, futures, and currency trading. The capital crossing the world's borders in three days exceeds a whole year's global trade. Globalisation's supporters argue that capital flows can provide much-needed investment, for example via third world stock markets, and can deter governments from following unwise economic policies which endanger "market confidence". However, such massive capital flows can easily overwhelm even large economies (as Norman Lamont found out in 1992), and in the last three years capital surges have caused severe social and economic crises in Thailand, Korea, Indonesia, Brazil, and Russia. The World Bank has found that these crises tend to hit the poor hardest, while subsequent recoveries benefit the better off, ratcheting up inequality.
Globalisation and the poor
In the age of the internet, 1.3 billion people worldwide have to live on less than 70 pence a day, and more than 800 million people do not have enough to eat. Globalisation may not be wholly, or even mainly, to blame for these facts, but neither has it had much impact on ending them.
One reason that globalisation has failed to benefit the poor is inequality. In a highly unequal society, the poor receive less benefit from economic growth. Rising inequality, both between and within nations, has been one of the most alarming features of recent decades. In 1960, the income ratio of the poorest 20 per cent to the richest 20 per cent of the world's population was 1:30. Today it is 1:74. The assets of the world's top three billionaires come to more than the combined economies of all the least developed countries and their 600 million people.
One problem is unequal access to technology - one CAFOD partner in Peru talks of los desenchufados, the "unplugged ones" among the Andean farmers, who are unable to benefit from new technology and fall ever further behind their richer neighbours. Inequality is also driven by financial instability and unfair terms of trade between rich and poor nations. If the political will is there, improvements can be made in all these areas. A fall in inequality would benefit rich and poor alike - as the World Bank points out, countries with lower inequality grow faster and consume more imports.
Globalisation has affected the working lives of the poor. Although jobs may be created, CAFOD has seen in many countries how competition between countries can lead to a "race to the bottom": each country competes for foreign investment by offering lower wages, fewer unions or rights at work, and more tax breaks for corporations, all of which reduce the potential benefits of investment to the host country and the workforce. The "anxious society" of temporary contracts and vanishing job security is not just a British problem, but a global one. In the UK the cost of clothes and footwear has fallen by a third in the last 15 years, in part because labour is getting ever cheaper. A Nike quilted jacket costs �100 in a London shop, but only 51p of that goes to the Bangladeshi women who make it. CAFOD has found garment workers in Indonesia earning 57p for a 10-hour day.
In the countryside, globalisation has spelt disaster for many poor farmers when developing countries have suddenly opened their economies to imports, often as part of the "structural adjustment programmes" required by the IMF and the World Bank in return for loans and debt relief. Unable to get access to credit or modern technology, they have been expected to compete with northern agribusiness, while being squeezed out by local export industries which produce for the global market. In Mexico, prices received by maize farmers have halved since the North American Free Trade Agreement opened the borders to US maize in 1995.
What needs to change?
The debate should not be about whether we are pro- or anti-globalisation. Some form of globalisation is a given. But globalisation is not like the weather, beyond any government or individual's control. As Secretary of State for International Development Clare Short has pointed out, the rules of globalisation have been designed by people and can be changed by people. There is nothing inevitable about the rules that established the WTO, the North American Free Trade Agreement, or, for that matter, the EU. Given sufficient political will, it is quite possible to regulate corporations, stabilise international financial flows, and ensure that the poor benefit fully from the potential offered by increased trade and investment. CAFOD believes that the logic of globalisation needs to change - trade and investment should be recognised as a means to an end, and that end is human development and the eradication of world poverty. To do this, some key concerns must be addressed:
In an unplanned, ad hoc way, globalisation has come to be administered by several key institutions. Best known are the World Trade Organisation, the World Bank, and the International Monetary Fund, but there are many others. Most of them have been criticised for the same failings - a lack of transparency and accountability, an ideological bias in favour of deregulation and the reduction of governments' role in managing the economy, and the disproportionate influence exerted on them by a few powerful governments. If globalisation is to work for the poor, these institutions must be reformed.
The EU and US preach free trade, but often fail to practise it. The EU slaps taxes on Third World exports and dumps its subsidised produce in developing country markets, destroying local livelihoods. Battalions of US lawyers earn a living by bending the rules to keep out Third World imports, claiming risks to health or dumping. When new WTO rules are drawn up, they usually reflect the balance of power within the organisation, benefiting the richer countries, for example by permitting the kinds of subsidies used in the North, but banning those used in the South. As long as this continues, globalisation is likely to look to many third world governments and citizens more like an exercise in northern self-interest than a real opportunity for progress.
Globalisation can undercut national sovereignty by drastically reducing a government's options. Some say this is a good thing, preventing national governments from pursuing "unsound" economic policies. But it can equally well prevent them pursuing policies that benefit the poor, for example by putting food security and small farmers first, rather than opening all their markets to cheap foreign imports. Trade rules must not prevent developing countries from pursuing the right policies for development.
Can globalisation be reformed?
CAFOD believes there is no choice. The debacle in Seattle in November 1999 showed that the status quo is not an option. For the wellbeing of the world's peoples as a whole, developing countries and their citizens must be given a greater voice in, and see greater benefits from, the evolving global system. That will require political will from decision makers, North and South, but also active involvement by citizens and non-governmental organisations.
Both in its work with partners overseas, and with its supporters in England and Wales, CAFOD is committed to this process. Through the Ethical Trading Initiative, it works with corporations keen to improve wages and conditions in their overseas suppliers. In its public campaigning over the next four years, it will be drawing attention to the need for reform of global trade rules and turning the spotlight onto the behaviour of transnational corporations. It supports the fairtrade and ethical investment movements. All these efforts are essential if the forces of globalisation are to be harnessed in the service of the greatest crusade of our times, the drive to end the scandal of global poverty.
The Winners and Losers
Globalisation has winners and losers amongst the rich and the poor of the world, both North and South. For obvious reasons CAFOD's stories come from amongst the poor in the South.
Losers amongst the poor
Garment worker, Indonesia
Dani lives with his wife, Nyai, and two children in a two-room plywood shack by the railway line in the Indonesian capital, Jakarta. The house shudders whenever a train roars past, inches from the front door. The gaps in the walls are covered with "Do Not Use" stickers from a Massachusetts clothing company. Family possessions consist of an electric fan, a small tape recorder, and a battered eyeless teddy for the children. Dani, the family's sole breadwinner, is one of the millions of Indonesian workers buffeted by the economic crisis that struck the country in late 1997. He says:
"I work for PT Griya Prima, making clothes for Gap and Docker. Things are bad; they aren't paying our wages on time. They're laying off 400 people at the factory. There's no overtime any more, so we're earning the minimum wage of 35p a day. We're living off our savings. We try to make do, but we have to pay rent, electricity, and water. The price of milk has trebled so we've stopped buying it for the children; we give them sweet tea and water. Food is vegetable soup with lots of water, sometimes an egg, but never meat. We're worried about the future; we can't imagine what's going to happen. I want to make more of my life, but when I get home at night, I'm tired. Nyai feels the work is too hard for so little money."2
Bangladeshi garment worker
"I haven't had a day's rest in two months, and I work from 8 am to 9 or 10 at night, sometimes even the whole night through. That's why I'm ill; my head feels heavy and painful, I get fevers and have no energy. Management decides on overtime, and we do what we're told, or we're sacked. Management don't pay proper overtime rates, and say you've only done 30 or 40 hours in a month, when you've actually done 150. There's no record, so they can say what they like."3
Mexican Indian craftwork v Barbie
"Who is going to buy this for $5 now that they can get a Barbie for $7?", asks Augustina Mondrag�n, director of a cooperative of Mazahua indian women. She shows an olive-coloured rag doll dressed in typical costume. "I don't think free trade is going to be very good for the Mazahuas", she adds.4
Small farmers In Zambia
Zambia's rush to enjoy the fruits of globalising world trade has produced little for ordinary Zambians. Some of the country's most fertile agricultural land is now used to grow cut flowers for export. In a country where three out of every four people go hungry, the human need for food has taken second place to the demands of Europe's florists and flower arrangements.
Winners Amongst the Poor
Bangladeshi migrant worker in Korea
"At first there were so many jobs here! People were coming from all over. I was in construction and became a salesman at a US base, earning US$400 a month and sending $300 of them home to my family. I'm helping to put my three brothers and four sisters through university - I've got a history degree. I'll stay for another two years, then go home."5
River blindness victims in West Africa
River blindness (onchocerciasis) is caused by a parasite that is carried from person to person by the blackfly. The Onchocerciasis Control Program (OCP) was initiated in West Africa in 1974, using systematic spraying to control the blackfly. Today over 30 million people are protected from infection, and 185,000 people who were infected are spared blindness. The programme pinpointed the peak times to spray by collecting information from 50,000 sensors along river bottoms in the region. Local inhabitants entered the data into computers, and the information was beamed via satellite to a network of entomologists and laboratories, which in turn transmitted spraying schedules to a team of aircraft pilots. In recent years, the OCP has been further boosted by the discovery of the drug ivermectin, which provides protection against the disease, and is supplied to the programme free of charge by the pharmaceutical company which produces it.6
Young Filipinos go mobile mad
The craze for text messaging is growing faster in the Philippines this year than any other country in the world. And it's mainly young people that are driving this massive craze. "Texting is fun and exciting. Most of my friends have mobiles", says 23-year-old Ibyang Cardona. "You stay in touch with your friends with mobiles more than friends who haven't got them. People stop talking to each other to start texting." "I have a theory about why it's so popular here," says CAFOD representative Rock Rock Antequisa. "Filipinos tend to be very close to their friends and family, but with all the changes in our economy and socially, people are tending to be apart from each other more than they used to. Most Filipinos are not psychologically prepared to be apart from each other. That means this method of communication is very helpful. It satisfies this longing amongst Filipinos."7
Voices from the World Trade Organisation
In October 2000, CAFOD visited the World Trade Organisation headquarters in Geneva and talked to a number of representatives from developing countries. Here are some of their views.
African least developed country
"On an average day there are 10 or 12 meetings, on different issues, all starting at the same time. It's not workable. Meetings are so frustrating. They know you are weak and you walk out frustrated. I've been attending meetings for four years, and it's hard to write two lines about how my country has benefited. On agriculture, the promise was - liberalise and things will get better. The opposite has happened. Now we have food insecurity."
Asian middle income country
"We spend some time making rules, and the rest of the time trying to flout the rules we have made. That is free trade at the WTO!"
African least developed country
"Cheap imports are coming in, destroying jobs. We are becoming beggars in our own country."
Latin American least developed country
"I have a message for the British Government: at the Uruguay Round, there were a lot of studies showing the future benefits to developing countries. Where are they?"
Endnotes
1 Examples of losers among the rich in the South include owners of domestic industries which are suddenly exposed to competition from imports or bankers and property developers in Thailand, hit by that country's financial crisis in 1997. Winners include the dot.com millionaires of South India's "silicon plateau" and large farmers producing for export.
2 CAFOD, Fashion Victims, 1998, p14
3 CAFOD field trip, 1998
4 Latinamerica Press, 1993
5 CAFOD field trip, 1999
6 World Development Report 1998/9, World Bank, p60
7 CAFOD field trip, 2000
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