Financial Times

Globalisation: The good, the bad and the ugly
By Anura de Silva
The terror of 9/11 could have been an alarm of the real danger globalisation has caused the world, because it has failed to lead the world to economic success and rising prosperity for all. Although, internationally traded goods and services accounted for over a quarter of total world output in 2000, compared to only 10% in 1970, expansion of trade has resulted in a drastic slowing of real economic progress. Average per capita income worldwide rose by 83% between 1960 and 1980; but in the two subsequent decades the increase was just 33%. This slowdown in growth has hit some of the developed countries hard, most developing countries harder and all un-developing countries to an extent of paralysis.

Public protests have targeted the flaws in the world's financial markets and its institutions, primarily the IMF whose majority owners (US and Europe) have imposed their own agendas for over two decades. Many organisations are calling for fundamental reforms in which the shares and voting rights at the IMF need to be redistributed in such a way that US and European governments could no longer coerce dependent countries as a new form of colonialism.

Forced liberalisation of capital markets has caused many flaws apart from instability; the so-called offshore financial centres - the small countries that help companies and wealthy individuals that evade taxes. Investor capital is posted in such a way that authorities in their home countries never know about their yields. Poor countries that offer tax-free status in return for low wage employment are actually getting a raw deal. Developing countries could have earned more in terms of taxes if they were allowed to develop their indigenous resources rather than end up producing a decreasingly poor resource base. Drying out such tax bases and establishing a global framework on a minimum level of taxation are therefore a central component of reforms needed to stabilise the developed as well as developing nations.

Governments of countries such as India, China, Malaysia and even Vietnam themselves determined the conditions of their integration into the world market, so that they are not just extensions of production lines in western companies. China, Malaysia and South Korea, for example, attached tough conditions on investment by foreign corporations for many decades: either investors had to allow domestic companies to take part in their investments to acquire necessary know-how and gain access to global distribution channels or guarantee a fixed percentage of the value addition to be produced within the country, so that a stimulation of domestic development could occur beyond the factory gates. We on the other hand totally failed to pick up clues from those successfully developing countries but let foreign investors exploit our unskilled labour leaving them without much transferable skills coupled with lost opportunities to learn their own home-grown skills.

At the same time, GATT that permitted developing countries to use tariffs until 1995 to protect their domestic producers from stronger external competition is now been blocked with least assistance from the WTO. As the regulator for world trade, this mission of WTO has since caused the opposite effect in practice. While developing countries have been lowering their tariffs and rolling out the red carpet for foreign investors, OECD states have broken their promises by continuing to raise taxes on processed goods from developing countries at tariffs four times as high on average as for trade among themselves.

Every year, this costs developing countries an estimated 134 billion euros in export earnings, which is more than double the amount of development aid provided worldwide. Nations like ours who have become so dependent on foreign aid by pledging our children's future are yet to realise that they are receiving less than half the opportunities they could have earned from a much level playing field. Today, it is like feeding half our own produce for us to stay alive, pay the balance to WTO as pawning fees and leave none to investment for our future unless we choose to sacrifice the portion allocated to feed the population.

This is precisely how industrialised nations are right royally tightening the screws on developing nations from both ends: input and output. Ever more tragic is how our own so-called economists and their policy makers remain dumb while this exploitation continues. The only way we as a nation could stand a chance is if the WTO policy could be turned back on its feet: rich countries to open their markets while developing countries to protect themselves at least until they become competitive - exactly what all successfully industrialised countries once did. Instead, countries such as ours who opened markets without thinking far, are today unable to protect our own agriculture, indigenous plants, medicine, education, culture, etc. it once had in richness and in abundance transferable for our next generations and theirs.

In this way, progress from globalisation is gradually turning into quite the opposite: in its present form, globalisation is redistributing income from the bottom of the scale to the top rather than the reverse. It has even introduced mechanisms to prevent indigenous wealth from being redistributed among its own people by coercing its agents in the local community when the central task of democracy should be to alter fiscal and economic policy to counteract mounting inequality and insecurity in a just manner.

The issue is not to prevent the setting up of industrialised companies in low-wage countries or go back to socialism but to hold them responsible to ensure that it does not lead to the exclusion of the losers. Developing countries have an economical and a moral responsibility to offer useful training to their labour force and a guaranteed income, so they can further develop their skills or even re-enter the system somewhere else at a higher level of productivity.

Total neglect of mothers and sisters exported as menial labour to some of the most uncivilised countries without any form of protection as a means of national income is probably an extreme disgrace to our nation as our governments lack the will, courage or the ability to voice their concerns on behalf of its own people. As such people in these dependent nations are not just losing faith in their governments but their commitment to each other wondering if this is what democracy had to offer them.

According to the German-British sociologist Lord Dahrendorf, the growing inequality is not beneficial for democracy: he warns that we are entering an 'authoritarian century". Even Steven Roach, Chief Economist at Morgan Stanley, warns of the growing "moral dilemma" of inequality. Perhaps it is only a matter of time before a politically led backlash erupts as corporate bosses or democratic politicians seem to care for such scenarios.

The growing number of dissidents who are turning against the current, shortsighted form of globalisation indicates that cracks are very definitely beginning to appear in the neo-liberal faith, as a different world is possible. 9/11 proved to the entire world that vulnerability had no iron clad to protect even against the after shocks that occurred in some developing nations.

Thanks to grass root democracy in action for world social reform, individual men and women are becoming very active to achieve alternate forms of globalisation. While politicians are politicking for their next term in office, older people grumble in talk shows and panel discussions, young people need to become busy campaigning for fair elections, world trade, sustainable development, cultural diversity, equality of the sexes, implementation of human rights across all domains, free from crime and terror, biodiversity and nature conservation as their commitment towards a new global order. The writer is a corporate management consultant

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