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Statement of Mr. Chakravarthi Raghavan, on behalf of Third World Network, on 25 October at the Committee of the Whole (of the UNCTAD Trade and Development Board) preparing for UNCTAD-X


Mr. Chairman.

Thank you very much for giving us the floor and the opportunity to speak. And since we are taking the floor for the first time in the plenary, we wish to extend to you and to the bureau our best wishes in your endeavours to prepare for UNCTAD-X.

We have been requested to participate at this meeting and undertake the role of representing the Southern perspective as part of "civil society" preparations for UNCTAD-X, and its theme "Applying the lessons of the past to make globalization an effective instrument for the development of all countries and of all people.".

It is beyond us, or for any NGO, to "represent" civil society. We make no such claims. And as an NGO we have repeatedly made clear, we don't substitute ourselves for governments.

With this caveat, we will in the time available, share with you what we see are trends and reactions in civil society of the South to the major challenge at the turn of the century - that is Development and this means satisfaction of basic human needs of people - adequate food, shelter, clothing, health care, education etc. Any ideology or policy that cannot deliver these is a failure. And more than two decades of neo-liberal economics has not delivered; in fact it has increased the numbers, absolutely and proportionately, those whose basic needs are not satisfied, and which has widened the equity gaps within and among societies.

In 1994, when the euphoria of the theology of globalization was sweeping across international community, and UNCTAD began preparations for the Midrand Conference -- after the signing of the Marrakech Agreement, but before entry into force -- we were involved in some of the consultations about the theme of that conference. We voiced our doubts, and raised some questions, about the UNCTAD-IX theme, and warned about the dangers of the misuse of the age-long desires of peoples to come together to make 'globalization' a new name for laissez faire economics, and attempt to write normative principle of organization for all the countries of the world - a one-size fit all policy framework.

This was before the Mexican peso crisis; and the Secretary-General of UNCTAD, Mr. Rubens Ricupero, who was yet to take over the office, was the first to recognize that the Mexican crisis meant the collapse of the Washington Consensus.

Now no one, and certainly not its authors and promoters (in the World Bank or the IMF), seriously preach and advocate the Washington Consensus. They are talking of the Washington-plus, of a new development framework, which unfortunately in essence appears to be just old vinegary wine in new bottle, with a different 'appellation of origin' - some cosmetic external add-ons.

So when we talk of globalization and the lessons of the past, we need to ask ourselves, what globalization and what past. Where does this past begin or end? Is the past only the 1970s and early 1980s, when post-war Keynesian economic system was given up in favour of neo-liberal theology? Or does the 'past', to draw lessons from globalization, also cover the experiences of the 19th century when too there was "globalization", with the countries of the South, in Asia and Africa under colonialism, and Latin America though independent in fact suffering the same colonial-era economic relationships? And in that era while Europe, and later the United States industrialized, and accumulated capital, technology and wealth, the overall outcome in the South was one of de-industrialization and arrested industrialization, and social confllicts in the North ending up in two wars in this century.

And if that phase of 'globalization' was a world under British hegemony or domination, the current phase is as former US Secretary of State Henry Kissinger has put it "globalization is just another name for US domination" (lecture at Trinity College, Dublin 12 October 1999) - and, we would like to add, for the benefit of US Corporations, creating a level playing field for them, while making it a killing field for ordinary people everywhere. While the International Monetary Fund and the World Bank try to force this ideology through their conditionalities on the developing world and the transition economies, the WTO and its unequal asymmetric rules and the dispute settlement system (which is really guided and run by the secretariat) is now trying to push this globalization, the deregulation, privatization, and a free hand for foreign corporations to trade, invest and, by mergers and acquisitions, take control of the economies of the South, and drive trade policy, national and international. This is why, as former GATT Director-General Arthur Dunkel put it, in a dinner speech, at a recent seminar in New York, the WTO is seen by civil society as pushing corporate interests and in effect having been captured by the world's TNCs.

For, not too long ago, on 8 October 1996, addressing the Trade and Development Board, the WTO Director-General, Mr. Renato Ruggiero, said that in the WTO, "we have created a global trade architecture which is greater than the sum of its parts - a seamless web of interlocking interests and responsibilities, inter-dependent and indivisible...." He then went on to say about the WTO, on the road to Singapore, "... But the reality of globalized economic activity and deep integration has greatly reinforced this logic. WE ARE WRITING THE CONSTITUTION OF A SINGLE GLOBAL ECONOMY" (emphasis added).And in the same speech, in relation to the programme for the Least Developed Countries, the WTO head went on to say, that the programme to help LDCs, that he had put forward to the G-7 leaders involved "...Helping to improve the investment climate they face, especially by creating a more level playing field THROUGH NEGOTIATING AT THE APPROPRIATE TIME, MULTILATERAL RULES ON INVESTMENT" (emphasis added)

Last week, at the informal sessions of the TDB where we participated, the sceptics of 'globalization' as a normative policy for the world, were told that "we are like the flat-earth believers" of the era of Christopher Colombus, and having a nostalgia of the past.

I guess it all depends on what is the conception of the 'past' vis-a-vis globalization. And those who want to use 'globalization' as a normative rule for quote liberalization unquote, and create a global laissez faire, are surely the people who think they can go back to the past, the 19th century and its 'golden age' that never was.

More recently, over the last year or so, there has been a backlash from the public, particularly in the aftermath of the so-called financial crisis that began or struck Thailand in July 1997, and then spread first to other parts of Asia, then to Russia and then to Brazil etc. Protagonists and critics alike are both struggling how to deal with this backlash - the first are groping for ways to contain or side-track the issue, and the latter on how to use it for their own goals.

Even now, the tendency is to dismiss critics of Globalization as 'Luddites' trying to stop the onward march of technology and progress, or as people suffering from nostalgia and flat-earth believers .

But recently, over the past 2 or 3 years, economists, market- economists at that, have begun to write and speak up, and have looked at both the historical experience and empirical evidence available.

And they have begun to challenge some of the basic assumptions - behind the indiscriminate policy advice to countries for liberalisation of trade and investment, deregulation of domestic economies.

And several recent studies (Paul Bairoch & Richard Kozul-Wright, Dani Roderik, and National Bureau of Economic Research) bring out that in terms of historical experience, growth, accumulation of capital and production came first, and liberalization of economy came later. Only countries that followed this path had sustained growth and development. Britain embraced Adam Smith and Ricardo only after it had industrialized itself. Europe, France and Germany, which embraced laissez faire briefly, found they were losing out and quickly reversed themselves in the late 1880s (and managed to escape the Long Depression). The US grew and industrialized itself throughout the 19th century, and except for less than a decade in this century, industrialized behind high tariff walls and protection.

The colonies of Asia and Africa, where the processes of growth- and-industrialization, and then liberalisation, were reversed suffered de-industrialization or arrested industrialization.

Political economists have therefore begun to argue:

* against pressuring the developing countries and transition economies into big-bang approach to liberalisation, but rather ask them to go slow, take small steps, even experiment and retreat if things don't work out;

* for flexibility for the developing countries from disciplines of rules, and special and more favourable treatment to developing countries until they overcome their under- development and achieve a level of development where they can at their own pace take on more obligations; and FOR INDUSTRIALIZED COUNTRIES TO PRACTISE WHAT THEY PREACH

Mr. Chairman

Mr Kissinger in his speech that I referred to earlier had raised what he called "Some questions about globalization:" and went on to say:

"The conventional wisdom holds that, the world economy being truly global, every country has the opportunity to participate in the general well-being, provided it practises the correct macro- economic policy. The global economic system works to the benefit of everybody who follows the rules of the game."

"In my view this assessment is only partially true. THE GLOBAL ECONOMIC SYSTEM BENEFITS, ABOVE ALL, THE DEVELOPED COUNTRIES; THE DEVELOPING COUNTRIES LAG BEHIND, AND NOT ONLY BECAUSE OF INADEQUATE POLICIES ON THEIR PART....."(emphasis added)

The process of development begins by widening the gap between the rich and the poor in each country. The challenge is whether the political system can stand the cost of development. So far, the evidence on this subject is ambiguous. And if a social safety net is created, it will reduce the comparative advantages of cheap labour (of the deeveloping countries).

This is compounded BY THE PROPENSITY OF THE GLOBAL SYSTEM TO PRODUCE FINANCIAL CRISES EVERY FEW YEARS. EACH CRISES HAS BEEN MORE SEVERE THAN THE PRECEDING ONE, AND MORE GLOBAL. NOR DOES CARRYING OUT THE PRESCRIPTIONS OF THE GLOBAL ECONOMIC SYSTEM IMMUNISE THE COUNTRY AGAINST CRISIS - SEE ARGENTINA AND TO SOME EXTENT BRAZIL. THE REMEDIES OF THE IMF ARE INVARIABLY AUSTERITY, WIDENING THE SOCIAL GAP WITHIN EACH COUNTRY AND COMPOUNDING POLITICAL INSTABILITY....(emphasis added)

Thus, in the medium-term, the elements of dislocation of the globalization process may outweigh the long-term benefits.....

These words are from Henry Kissinger, Former U.S. Secretary of State, and Nobel Peace Prize winner, who when in power used all of US military might to prevail over an Asian country, and failed. He was delivering a lecture at Trinity College Dublin. ( www.independent.co.ie edition of 13/10)

Kissinger says:

"The basic challenge is that what is called 'globalization' is really another name for the dominant role of the United States. During the past decade, the United States has created unprecedented wealth; broadened and deepened the availability of capital; funded the creation, development and broad distribution of a wide variety of new technologies; created markets for an endless array of goods and services.... in economic terms it can get no better: full employment, rising real wages, increasing productivity, low inflation, increasing wealth and non-stop growth...... For America, these are good old days. ...Since no model anticipated the extent and duration of the boom, no prediction of the future path of the economy has ultimate validity.....

"Success of this magnitude inevitably inspires imitation... The important point is what is being imitated.... THE ONLY PROBLEM IS THAT THIS MODEL IS UNIQUELY APPROPRIATE TO THE CIRCUMSTANCES OF THE UNITED STATES AT THE TURN OF THE 20TH CENTURY. YET, OUR POLICY MAKERS AND OUR BUSINESS SCHOOLS ENTHUSIASTICALLY ARE IN THE BUSINESS OF EXPORTING IT, WITH THE SORT OF MIXED RESULTS THAT SHOULD HAVE BEEN EXPECTED. The extreme case is easy: Russia is no closer to being a free market economy than it is to being a democracy, despite all the lectures, billions of dollars and endless crises. But even in countries where some of the preconditions should have existed - in Southeast Asia and South America - the results are spotty at best.

Kissinger identified five problems:

The problem of political world order requires some reconciliation between the principles of sovereignty and humanitarian intervention and between parts of the globe pursuing different concepts of international order.

globalist economic policy requires SOME RECONCILIATION BETWEEN THE MARKET AND WHAT IS SOCIALLY AND POLITICALLY BEARABLE.

some agreed relationship between equity and speculative investment.

some means of dealing with crises that mitigates austerity.

TRADE POLICIES THAT TAKE INTO ACCOUNT THE CONCERN OF DEVELOPING COUNTRIES WITH THEIR SPECIAL PROBLEMS, ESPECIALLY AGRICULTURE AND EXTRACTIVE INDUSTRIES.

a recognition by the US that its fiscal and monetary policies affect the global system and not solely the national interest.

The UN Economic Commission for Europe for some years has been preaching the folly of forcing Russia, the CIS and the East Europeans to adopt the big bang approach, and had warned against the very dangers which has now overtaken these countries - with no end in sight for them. More recently, it has pointed sharply to the lack of empirical evidence that 'open economies' do better than others or that investment liberalization results in growth and development:

UNCTAD's own Trade and Development Report 1999 has some very useful and important things to say about the international trading and finance system and the possible backlash to globalization if there is no serious effort to reverse course and enable the developing world to earn (by selling its goods and services abroad to the industrialized world) and buy, invest, industrialialise, and provide employment.

Capital flows need to be regulated. The old distinctions between FDI, short-term flows, portfolio investment etc have lost their meaning - because of the deliberate policies of the central banks and governments in the North to deregulate. It is a mistake to allow banks to function as they are now. There is need to put some restraints and even reversal of financial liberalisation, reveral of the current wave of mergers and acquisitions - which do not add to productive capital or production in countries

For this, the rules of the game, including the agreements of the WTO need to be revisited and changed, or special dispensation given to the developing countries. They cannot keep their markets open, when the markets of the north are closed. The South needs ability and the markets to earn by exports to finance imports, and not finance imports by hot money..

In just a few weeks, the WTO will be meeting at a Ministerial Conference in Seattle (30 Nov - 3 Dec). The major trading powers - the US, EC, Japan, Switzerland and others have a chance to pause and try to remedy the major problems of the system that have now been identified by a number of sources.

This issue cannot be shirked by arguing that such changes will alter the balance established in Marrakech. That was a balance of inequity and injustice and if not corrected by changing the rules, will be changed by countries being forced to opt out or by civiil conflicts and social disorders

But like the dominant and imperial powers of the past, now too the dominant North may try to go ahead, promoting as usual the interests and profits of the global corporations, and just shrug off the increasing marginalisation and equity gaps within countries and among countries. In short, business as usual.

But this time, developing countries appear to have organized themselves better, key countries are holding together, and their public expects them to hold on.

The civil society in the developing world, (and their allies everywhere) are watching; and many activists are gathering at Seattle, to see what the US, EU etc are going to do, and how their own ministers and officials stand up to defend national interests.

As the World Bank Chief Economist, Mr. Joseph Stiglitz recently put it: "What are developing countries to make of the rhetoric in favour of rapid liberalisation when rich countries with full employment and strong safety nets argue that they need to impose protective measures (in agriculture, labour-intensive industries etc) to help those of their own citizens adversely affected by globalisation?"

If that happens or if developing countries are asked to 'liberalize' to make Seattle a success (as the Swiss delegate said here), and take more obligations on investment, services etc to enable Europe and Japan to make some concessions to the US in agriculture, as UNCTAD and many others have cautioned and warned, and now Henry Kissinger has added his voice, we may all be in for crises and social disorders.

This is what Kissinger said in the lecture I quoted:

"I DO NOT PRETEND TO HAVE ANSWERS TO ALL THESE QUESTIONS. BUT IF THE INTERNATIONAL COMMUNITY DOES NOT FIND MEANS TO DEAL WITH THEM, THE EARLY 21ST CENTURY COULD FIND ITSELF BESET BY THE SAME SORT OF SOCIAL CONFLICT THAT CHARACTERISED THE BEGINNING OF THE 20TH CENTURY....."

Mr. Chairman,

This is not a legacy that we should leave behind for our successors in the next century.

As Mr. Ricupero said UNCTAD is a knowledge-based organization. To enable UNCTAD to discharge its responsibilities, member- governments must enable it to equip itself with necessary human and material resources to undertake analysis, and put forward policy conclusions and recommendations to enable countries, and particularly the developing countries to meet the challenges of the next century.

Thank you.

 


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