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Globalisation widens the rich-poor gap

"GLOBALISATION" has become one of the most talked-about catchwords and concepts of recent times. It has become the subject of countless articles, speeches and seminars.

Later this April, the three-yearly major Conference of UNCTAD (the UN Conference on Trade and Development) will have globalisation as its major theme.

Governments have to incorporate the implications of globalisation in their policies, companies have to cope with it to survive (or to thrive), and the public in many countries is most anxious that it may displace jobs or negatively affect values and culture. A proper analysis of this phenomenon is still in the making. What is clear is that there are gainers and losers in the process. The fear is that globalisation will widen the gulf between the strong and weak, the have and have-nots, the modern and traditional.

And that whilst it will enrich a minority of countries or people who lead the process or take advantage of it, most others will be left behind, be further marginalised or worse become even more impoverished.

Economic and cultural globalisation is sweeping through all countries. The link between this phenomenon, the growing inequities within and among countries, and the persistence of poverty in the South, is very strong.

Tackling the internal causes of poverty remain important. With a given level of resources, a country can still cut wastage to a minimum and make the best of things, whilst striving to raise the resource level.

However, the external environment has become much more significant in recent years in influencing the level of available resources and in the way they are used.

Globalisation per se need not be necessarily bad. But when it is imposed on countries that are ill-prepared to adapt, it can have much more negative effects on balance.

The kind of globalisation process that is predominant is accompanied (or driven) by increasing rights and powers of big corporations, and the rollback of the rights, resources and role of the state nationally.

There is a return to laissez-faire. The social, welfare, economic and developmental roles of the state in Southern countries is greatly eroded.

The shift of power to the private sector may lead to the growth of some indicators, and reduction of wastage and losses in the public sector. In many countries it has also marginalised large sections of people, and increased poverty and unemployment. Internationally, the rich nations (G7 and OECD) have consolidated their already strong grip on global institutions and relations. Many key decisions of global significance are made by them acting alone or as a group.

They have also empowered and made use of organisations which they control (such as the World Bank, IMF and GATT-WTO) to shape global relations and the content of national policies, especially of the South.

Correspondingly, the institutions that have a more open or democratic character, and with a development or social orientation (such as the social and economic agencies of the UN) have been gradually depleted of importance, function and power. Whilst they still provide a forum for discussions and for the South to voice their views, and though they still provide policy and technical aid, their role has been eroded by the more powerful policy and aid clout of the Bretton Woods and WTO organisations.

The South is losing hundreds of billions of dollars annually in resource outflows to the North on account of terms-of-trade losses, debt servicing, payments for technology use, foreign profit outflow, etc.

Unequal trade is the most serious of these. Low commodity prices combined with higher manufactured imports have caused the South to lose a large percentage of their GNP in South-to-North resource transfer.

The trade situation contributed to the debt problem of the 1980s and 1990s which in turn worsened resource outflows and placed many Southern countries in balance of payments crisis.

Inability to repay debt led to World Bank-IMF leverage to impose structural adjustment policies as condition for rescheduling and new loans.

This became the conduit for changes in policy away from an active state role in development to liberalisation/privatisation. Rising share of state revenue went to service debt.

Suppression of demand, and increased re-channelling of national resources to service debt, caused recession. Social development financing fell, reducing the poor's access to basic facilities including jobs, education, health.

The Uruguay Round negotiations (1986-94) were meant to improve the welfare of all through strengthened multilateral trade rules. However, even according to establishment estimates, most of the trade gains will accrue to the North, and even the trade gains of the South will mainly accrue to a few major trading countries.

There will be some losers, especially in Africa. Trade inequities among countries will widen.

More serious, the too-strict application of some WTO principles (such as national treatment to foreign goods, services and investors and discouragement or banning of subsidies to local producers) can be counter to development needs (of aiding the domestic sector to withstand competition from larger companies/countries until it is able to compete on fairer terms).

Because it is a legally binding organisation, and its having an "dispute settlement system" (enabling trade sanctions and retaliation to be applied to those that fail to follow their obligations), the WTO has the teeth to discipline developing countries. It has thus become the vehicle of choice of the North to introduce "new issues" simply by linking them to trade through the term "trade-related." Thus, services, intellectual property rights and investment measures were brought into the ambit of WTO. The South is still recovering from the shocks of the Uruguay Round, and what it means in concrete national policy changes. Yet the North is pressing to introduce more "new issues" on the "trade agenda" which would bring the WTO out of the boundaries of trade to encroach on other areas. Trade and environment is already on the agenda.

The newest issues being proposed are a multilateral investment regime, labour standards, competition policy and even corruption.

Policy areas which previously were in the domain of national decision-making are now falling under the dictates of "global institutions".

Macroeconomic policy, financial management, development planning, are increasingly taken out of the jurisdiction of national governments and placed under the scope of the Bretton Woods and WTO organisations.

To prevent further marginalisation of developing countries in the globalisation process, the following measures should be adopted:

** The UN as a whole should be strengthened, with its role as development catalyst and formulator of international macroeconomic policy recaptured or reaffirmed. The UN should reaffirm its paradigm of aiding the South to become more equal in the international arena and not "surrender" to the new laissez-faire orthodoxy.

** UN agencies should retain their commitment to development, but also reform in the light of new knowledge gained through the recent series of UN Conferences. The new paradigm of sustainable development and human-centred development should be further strengthened and given concrete manifestation in terms of policy and activity.

** Southern countries must strengthen their analytical, policy and negotiating capacity. Neglect of attention on on-going negotiations would be allowing the powerful actors to determine international and national policies by default.

** They must also be acutely aware of globalisation trends and be nimble and flexible to be open to policy options that best protect them and that in turn they can exploit to keep onto the track of sustainable development.

** Strengthening the role of civil society is important.

NGOs and social movements should be facilitated to play more effective roles in development activity, policy discussion and public awareness building.

** The South should lead initiatives to democratise global decision-making. Efforts towards guidelines or regulations for TNC activity in general should be revived. International control of financial speculation and flows is one current critical need, as yet unfulfilled. Regulation of information-media flows through telecommunications and information technology is another area as it has wide social-cultural ramifications. - Martin Khor


 


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