|
||
|
Globalization needs international regulations
GENEVA: The globalization processes, including freedom of capital mobility was making national governance more difficult, for developing and industrial countries, and there is a need for international regulations to minimize costs, and also enable developing countries to undertake gradual strategic integration into the world economy. This view was advanced at a panel discussion at UNCTAD's Trade and Development Board (TDB), though a minority seemed to favour the "big bang" approach to trade and investment liberalization, blaming the failure to adapt, for countries lagging behind in enjoying the benefits of globalization. Other issues thrown up in the discussions and comments included questions about falling prices and adverse terms of trade, deflationary forces as symptomised by excess supply capacity in key sectors including electronics, and the role of the State in promoting capital accumulation - an interventionist role or a hands-off role, and allowing foreign capital and competition to achieve this objective. An activist role for State Indian academic, Deepak Nayyar, said that the market-driven processes of globalization, integrating national economies into a world economy, is an asymmetric one, with some winners but many losers, and widening the economic disparities among nations, and income disparities among peoples, even as it creates aspirations for consumption patterns and life-styles that cannot be sustained socially, culturally, politically or environmentally. Mr. Nayyar, a former chief economist of the government of India and now Professor at the Jawaharlal Nehru University (New Delhi), said the State has to play an activist role - though this could be different in different societies and depends on their stages of development - in order to maximize benefits of globalization and minimize the costs of integration into the world economy. Nayyar, one of the expert panelists who participated in the UNCTAD Trade and Development Board's informal discussions on Globalization, Income Distribution and Development, challenged the plea of many governments, who rationalize their own "compromises" by pointing to globalization and advancing the "there is no alternative" arguments. Rules of the game need modification In order to ensure long-term sustainability, avoid social upheavals and breakdowns, and also a "prisoner's dilemma" outcome of environmental degradation and insecurity as a result of unsustainable global patterns of production and consumption, the international rules of the game need to be modified and provide an accommodating (global economic) environment to the developing world, he argued. Other panelists and experts at the informal discussions, spread over three sessions in two days, included economic historian, Prof. Paul Bairoch, Cambridge academic, Prof. Robert Rowthorn, former WTO Director of the Research Unit, Mr. Richard Blackhurst, and Mr. William Pfaff, columnist of the International Herald Tribune. Blackhurst, and later, the IMF representative, advocated the "free-market-free-trade" dogma, and a "big bang" approach to liberalization to defeat protectionist lobbies, and saw benefits in "markets" punishing governments for bad macro- economic policies, but interventions and comments from other panelists underscored the need for the excesses of the market to be corrected and regulated by the State. Markets alone, Nayyar argued, don't bring prosperity to all, but exclude a significant proportion of people from the process of development; and to the extent that globalization is a market-driven process, it is highly asymmetric and uneven. Hence, a proactive and reactive State policy, and combinations of them, are necessary to ensure equitable growth. Markets are inherently stratifying - since individuals enter the market with different resources, assets and capabilities - competition, creating winners and losers, could not only result in a virtuous circle, but also vicious circles. This market-driven globalization - with social, political and cultural, as also the economic dimensions - is creating two worlds. For those included, "the world is their oyster" and for the many who are excluded, there is rising frustration and social discontent in societies, that is making national governance impossible even as there is no international governance to cope with the problems. Exclusion in market societies Exclusion is inherent in market societies: those with insufficient purchasing power, or are in inaccessible locations (urban slums and the rural landless and dispossessed) can't obtain goods through private markets nor enjoy public good that the rich and the asset-holders can (whether it be clean water, power, transport or other such). People without purchasing power are excluded both as producers and consumers, and so are those who don't conform to the market-culture, such as indigenous peoples. The exclusion in developing societies is exacerbated by output losses due to enforced structural adjustment policies (of the Fund and the Bank), the general weakening of State structures and withdrawal of public services. But the globalization of rich- country consumption patterns was engendering frustration - with a potential in all countries for the rich to "secede" from the rest of society, no longer needing the poor within their borders. But the analog of this would be the poor and countries being excluded. Corrective and proactive national actions should include measures to ensure that people have assets and capabilities, systematic efforts to make the unemployed "employable" and create employment opportunities, and provide the poor with assets - all of which require a large role for public investments. Equally important are "interventions" by the State to correct market failures and locational disadvantages, as well as the provision of social safety nets. In presenting a long-term overview of historical changes, in the currently affluent industrial societies, and particularly in terms of poverty and income-distribution and population changes, Prof. Bairoch said, there had been major cyclical swings in inequality throughout history, that long- term factors like population growth have had different impacts at different moments in history and in different countries. In this perspective, Bairoch said that State policies can make a difference in achieving distributional goals, and this has been essentially due to the willingness of governments to adopt proactive policies to achieve such ends. Presenting data on the Organization for Economic Cooperation and Development (OECD) manufacturing, exports and North-South trade, Rowthorn said, while the world balance of manufacturing output was shifting, and projections suggest that the current dominance of the OECD countries will be reduced by 2025, it was incorrect to say that the North-South trade and imports of manufactures from the South and/or migration of industries from the North to the South are responsible for de-industrialization and increasing unemployment in the North. North-South interaction While import of manufactures from the South into the North was rising, this was far exceeded by exports from the North. A new kind of specialization in manufactures and exchanges was taking place, the surplus of the North in manufactures trade had not disappeared. There has been a decline in the North's low-value added and less skilled industries. But technological changes have been as important, if not more for the decline. The North-South exchanges, in terms of hours of work, suggest that one hour of labour in the North is being exchanged for 4-5 hours of labour from the South - with the North concentrating on goods containing high-value added. North-South trade itself has only a small impact on manufacturing sectors as a whole, though there has been a big job loss in some sectors such as clothing. But North-South competition and the new division of labour is not a major factor behind the present high unemployment in the OECD. Most of the job declines in the North is the result of the "normal process of growth" - higher productivity. At the same time, growth in services employment has been growing. The differential trends in manufacturing and services employment is a historical trend. If one examined the employment trends in the Newly Industrializing Countries (NICs), there too, manufacturing employment is declining. The unemployment and the rising inequality are due to the OECD countries' macro-economic policies and performance, "a case of mismanagement since the time of the first oil-shock", Rowthorn said. Richard Blackhurst said that a survey done inside WTO of press clippings showed that those criticizing globalization and blaming it for the widening gap among nations were not economists. He suggested that those countries lagging behind were those who had been slow to undertake reforms and liberalization and that globalization was increasing the costs for countries, of bad policies. Blackhurst cited the case of the US to argue that while jobs were being lost in some industries, the jobs gained in the export sectors paid 17% more. But proponents of the benefits of globalization and universal free trade and corporate behavior, columnist Pfaff countered, based themselves on economics, "which is no science, but only a theory", and did not reflect societal values and experiences. The canonization of Adam Smith and David Ricardo and their theories of free trade as a solution to current economic problems, will not lead to a happy ending. Free trade may only benefit equally placed countries Free trade may be beneficial among countries who are more or less equally placed and there is a closed system with a fixed quantity of labour. But with large and growing labour in the developing world, the outcome could be the Ricardian maxim of the "iron law of wages", based on the Malthusian views of his time, about labour wages being just above subsistence - an outcome that would have serious ethical and political consequences. Those arguing for a deregulated world economy should bear in mind that many of the regulations were put in place in order to tackle the excesses of the laissez faire doctrines of industrial society. While benefits of free trade within groups of countries at similar levels of development were obvious, it had some disturbing consequences in exchanges among societies at radically different levels of development, Pfaff said. For the latter, gradualism and structured changes seemed highly desirable. On the question of labour mobility and migration, Rowthorn said that the industrial countries should help and provide aid for the development of the developing countries, and also accept their exports and enable these countries to earn and invest. But he did not think it would be socially and politically possible to accept unrestrained migration. European welfare societies and systems would collapse if people could migrate and claim the benefits of welfare. Europe and industrial countries would never agree to migration and this was a political reality, he added. Nayyar said, in a world of unequal partners, it was not surprising that the rules of the game for globalization are unequal in construct, and inequitable in outcomes. The strong had the power to set the rules and invoke them, but the weak had neither. As a result, national boundaries do not matter for trade flows or capital flows, but do matter for technology flows and regimes as in TRIPs or in terms of labour flows. Labour mobility If the globalization argument is in terms of orthodoxy of economics and efficient utilization of resources, it was difficult to accept that a priori labour mobility was not possible. The 19th century globalization had in fact involved vast labour mobility - 30 million people or 40% of the European work force had migrated to America. In the period after abolition of slavery, 50 million people left China and India as indentured labour, a substitute for slavery. Even today, there is labour mobility, but it is illegal, and the labour importing countries closed their eyes to it - whether in the Middle East or East Asia or even in Europe. It was time to recognize that labour mobility is part of the process of globalization. If not legally recognized, market forces will still create them. The current WTO agenda however, is partisan - providing for a multilateral framework on investment, but not on labour mobility or on controlling the Restrictive Business Practices (RBPs) of TNCs. The chief of UNCTAD's global interdependence and development division, Mr. Yilmaz Akyuz said that labour mobility was different from free migration. Labour mobility would mean that just as one could bid for a project or procurement contract in UK, one should be able to apply for a job in the UK or elsewhere. Such an issue needs to be brought on the agenda of global negotiations. Nayyar noted that in the 200 years or so of the free trade doctrine, adherence and departures from the doctrine have been justified by the strong and the powerful. The advocacy of free trade came from Britain, then moved to the US and later, to Japan. But what they had in the WTO after the Uruguay Round was not free trade but mercantalist reciprocity. If people believed free trade is best, then it is a unilateral act and not a negotiable one. But the world was too complex for such simplistic views. Countries in the pursuit of national development objectives had to recognize their stage of development, and engage not in a market-driven integration, but a selective strategic integration into the world economy, for which trade is an opportunity. While national governments had and could undertake several measures, there has to be an enabling international environment to enable countries to maximize benefits and minimize costs of integration into the world economy. For this, it was necessary to think anew about the notion of special and differential treatment for developing countries, which was in Part IV of the old GATT, but has almost disappeared from the WTO. The old Part IV envisaged exceptions to rules or some extended times for the developing countries. "The time has come to think of a new paradigm whereby countries that are part of the WTO system should have same rights, but their obligations will vary and will be a function of the stage of their development," he said. Labour mobility for services should be distinguished from migration. Just as there is a right of establishment and commercial presence for capital, so should labour have a right in terms of temporary presence for a specific purpose or a finite period across national boundaries. This could be as individuals or corporate entities. There were too many restrictions now on labour movements that were contrary to the globalization process, and these should be negotiated and be subject to WTO rules. The freedom of movement of capital has made things difficult not only for developing countries, but even for the industrial economies. This is an area without a national regulatory system, and hence the need for international regulations. Globalization had made national economies more difficult to govern. One must begin looking ahead and construct international governance and regulations in this regard. Otherwise, it may give rise to public bads, with each country pursuing its own self-interest to the best of its policy, giving rise to the problem of free riders and prisoners' dilemmas where ultimately everyone is worse off. (SUNS4077) Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS)from which the above article first appeared.
|
||
