Your Humble Blogger recently came across Making Globalization Good - The Moral Challenges of Global Capitalism, ed. John H. Dunning, Oxford University Press, 2003. I don't claim to have read all of any of the chapters, but I skimmed a few of them, and I find it really interesting reading, on a topic I find really confusing.
The question of globalization is a tricky one for me, not least because I find myself disagreeing, by instinct at least, with people whose judgment I usually trust. In short, I'm in favor of globalization, and most of the left appears to be against it. Or at least, most of the left appeared to be against it a couple of years ago, when it was in the headlines. Broadly, and if people want to talk about it, I'll try to be clearer, I think that globalization is good for the poorest in the world. I don't particularly believe in the nation-state, and in sovereignty, so those issues don't persuade me against globalization. And although I do worry about more power going into the hands of the big corporations, that power is (at least partially) being taken out of the hands of the Mugabes of the world, which is a trade-off that doesn't immediately scream out injustice.
However, I do sympathize with the idea that there even as globalization redresses, inevitably, certain injustices, it creates others. I am hopeful (ain't Your Humble always hopeful?) that something can be done about the new ones, and prefer that hope along with the marvelous mix of Stuff that globalization brings to insularity, isolationism, and protectionism. I don't want to bring laissez faire capitalism to the developing world, but I do want to bring some wealth and comfort to the poorest nations. Can it be done?
And now a short circumambulation: There appears to be developing a substantial school of thought, not entirely distinct from Bob Putnam's work, that determines that democracy is not merely a matter of elections, but rather of a network of IVSRs: Institutions, Values, Symbols, and Rituals. Fareed Zakaria has been articulating it quite well, in regard to the long haul in Iraq. This school of thought says that there are things which may not appear to bear directly on matters of freedom, development, or the economy, but which, if lacking, make those things impossible.
This book (remember the book?) is a series of essays about, in large measure, what IVSRs are necessary and sufficient for globalization to be Good, in a moral or ethical sense. That is, how to derive the good, without adding in new evils that overwhelm it. It's an important issue, and a fascinating one.
Thank you,
-Vardibidian.
I’m looking forward to seeing your ongoing comments on the Dunning book. (hint, hint)
I’m especially curious about whether the author believes that any postulated benefits of globalization can be achieved by means other than the “race to the bottom”: 1) corps take their business to the cheapest, most authoritarian countries and 2) supplant the local economies until 3) the locals decide that the only way to win is to play the winners’ game and 4) enact political changes that make them more like Western Industrialized nations and less attractive for transnational business, causing corps to 1) take their business to the cheapest….
This is the essence of the most common argument I have heard in favor of unregulated globalization, and it sounds to me like a virtue made out of vice.
I don’t know whether I’ll ever actually read the whole book, much less comment on it, although your encouragement makes it more likely.
The authors (it’s a collection of essays by various people) are not (on the whole) in favor of unregulated globalization, but the question is what regulations are necessary, and what are helpful, and what harmful. I don’t have the book in front of me (one of the reasons I may not finish reading it is that I don’t own a copy) but I can say that they are not particularly interested in the race to the bottom, or even in replicating Western IVSRs to make poor countries more attractive to multinationals.
One of the authors (Dunning, I think, though it might have been Stiglitz) posits that the reason the “Asian Miracle” was so transformative was because it took place in areas with a deep Confucian tradition. Once the Westerners tried to take money out of it (that’s the thing about foreign investment) much of it collapsed, but still it had more dollar-for-dollar punch in improving the lives of the peasantry than similar investments in, for instance, Africa.
As for the general rule about globalization helping the poor, it’s just that poor nations are better off if they can export a variety of products to wealthy nations without a bunch of tariffs, even if the wealthy nations can export back expensive stuff without tariffs, because (a) the poor country will get more money for its exports from a rich country than internally or from other poor countries, and (2) the rich countries will probably not destroy your local luxury-car industry because you probably don’t have one. It’s more complicated that that (what isn’t), but that’s the idea.
Thanks,
-V.
I’m generally anti-globalization from an economics and social justice perspective, mixed on it from a cultural standpoint. There are cultural benefits, but I think that “open” markets are not a necessary precondition for cultural exchange. Here are the two central economic problems with globalization in its current form, as I see it.
Problem 1. It doesn’t actually bring wealth to poor countries. If the wealthy country (or multinational corporation) owns the factory or the plantations or the mines from which the exports come, the country doesn’t get the profits from the exports, the owner does. The country only gets the taxes and the wages, which are low. If the country has gone into debt to finance the development, as the World Bank and IMF will have arranged for it to do, the country doesn’t even get to keep the taxes, they go to the creditors to pay the debt.
Problem 2: an export-based economy doesn’t help the people who live in it very much. Money needs to circulate locally to create wealth. You pay the grocer who pays the farmer who plays the blacksmith who pays you, the weaver. But for this kind of circulation to take place, you need good wages for workers (which globalization in its present form doesn’t give you), and you need local consumer goods. Otherwise the money enters the community and goes right back out.
And referencing the tulip point, isn’t money an illusion anyway?
Hm. Chris, I disagree with you on this.
Problem 1: This is a very plausible analysis, but does not particularly appear to reflect what actually occurs. Poor nations which increase trade with wealthy nations become less poor. It is true that there are serious issues with debt (to our shame), but the trade part is helping, not hurting, as far as I can tell. Where trade is liberalized (globalization is increased) there is increased trade from a variety of sectors, not just the big multinationals. And even the the notorious Nike factories do bring wealth to the exploited workers (which is not to let Nike off the hook for the exploitation).
Problem 2: The model says that people in rich countries are willing to spend more for, say, bananas or microchips, than people in poor countries. Lots more. Enough more to pay for the transportation, the middlemen, and still increase the payout to the banana farmer or the chip factory hand. Then the money goes to the landlord, who invests in more housing, which pays the construction worker, who buys a mobile phone, which sends the money back out of the country.
As long as the poor country (a) makes or can make something for export where it really does have a competitive advantage, either through natural resources, cheap labor, or local color, and (b) powerful forces (Nike, or Mugabe, or the IBRD) don’t divert too much of the resources to themselves or their cronies, increased international trade should lead to more wealth in the poor country. And it does. Not everywhere, although there are lots of places where those conditions don’t apply, but not even everywhere the conditions do apply, but as a rule it does appear to work.
One of the things the book probably touches on (if my skimming is accurate) is how those conditions can be filled, as well as how the increased wealth within the borders of a poor nation can be to the benefit of that nation generally, and not just to the (for instance) military castes.
Thanks,
-V.
It’s entirely possible that I’m wrong, here — as I’ve said elsewhere, economics makes my head hurt. But how about some case examples? I base my generalizations on the following:
1) Since NAFTA, the Mexican economy hasn’t improved, and the poor in Mexico have gotten poorer, and farmers have been driven off their land because they can’t compete with (massively if implicitly subsidized) American agricultural products. Aside from a select group of countries in Asia, I guess I just don’t see where the poor are getting less poor as a result of global free trade.
2) The successful Asian economies have been diverse economies. True, they have emphasized goods for export, but goods with of high added value: transistor radios, not tennis shoes. Moreover, the most successful of them developed under an international trade regime that was quite different from the hard-line free trade regime that obtains now. And the Japanese economy is stalled in part because it is too oriented towards exports — the Japanese domestic market needs to be working.
Now, one might make the argument that globalization and free trade are good things, and that we’re just not doing it right. I can see that a growing trade, rather than shrinking trade, is generally a good thing, but I’m not convinced that either free trade or the globalization regime is necessary for trade to grow. They seem to me models that are designed to transfer wealth from the poor to the rich, as are most economic arrangements that are set up on the rich’s terms.
Could you back up a moment, Chris, Vardibidian, Dan, and define “globalization” a little more precisely (if possible)?
I hear it used as a synomym for:
— Americanization of the world (esp. of “Second World countries”)
— Westernization
— democratization
— integrated economies (beginning with no tarifs or other duties and excises to slow/divert any benefits of trade)
— end of nation-states as sovereign entitites
— cultural blending (loss of cultural diversity)
— development of global community (with an underpinng of cultural “neighborhoods” partially disconnected from geography and generally getting along)
— Kir
The globalization I have been writing about is the integrated economies sort. That is, I think, its usual meaning in an economic context. “Integrated economies” also includes, _in practice_, not only a lack of restrictions on trade, but a lack of restriction on the movement of capital between countries, multinational corporations, and multinational trade agreements that give businesses leverage against government efforts to place restrictions on trade, business practices, and capital flows.
Attacks upon, or justifications of, this sort of globalization often invoke the other definitions of the work that Kir has listed as support for the economic direction they advocate, since most of them can be seen as consequences of economic integration. In the absence of economic integration of the sort described above, they might still come about by other means, of course.
What Making Globalization Good is talking about is primarily economic globalization, that is, the increase in traffic between nation-states. As Chris points out, much (but by no means all) of the opposition to globalization is in fact opposition to the other aspects that you mention. Also, many people see a connection between globalization and environmental degradation, with good reason.
The question I am interested in, I suppose, is put by Alice Hamsden in The Rise of “The Rest” as, essentially, will Nicaragua and Pakistan be more like Mexico and Brazil, or more like Taiwan and South Korea? In Mexico and Brazil, the opening of the trade gates was pretty bad for both the environment and the peasantry (I’m talking over the last 20-30 years, not just NAFTA), while pretty good for the rich and the Americans (I’m exaggerating here, and I could be totally wrong anyway). In Taiwan and South Korea, on the other hand, integration into the world economy had a different path, and the results were better, and the benefits were more widespread (again, this is a simplification, but what isn’t).
Thanks,
-V.
One question I’d be interested in hearing is whether free international trade in Mexico and Brazil was accompanied by free markets at home. My impression that Mexico remained a centralized command-and-control economy run by (often-corrupt) politicians, for much of the past 20 – 30 years. That’s not a very well-informed opinion, and I know even less about Brazil… But I wouldn’t be at all surprised if there was a correlation like “free trade + free markets = broad benefits” and “free trade + corrupt politicians = oligarchy enriches itself”.
Taking corruption into account makes the whole thing more, not less, complicated (doesn’t everything?) as far as I can tell. Sure, Mexico is and was corrupt, but South Korea wasn’t exactly a paragon of transparency, either. And there’s the whole question of what kind of corruption (law enforcement/judicial corruption, though clearly horrific, would not necessarily affect globalization, while kickbacks for permits might increase the “free market” aspect, as opposed to cronyism, which is another kind of corruption.
Digression: Evidently, after years of being Transparency International’s Most Corrupt Nation on Earth, Nigeria has moved to # 2. Of course, TI is looking into allegation that they bribed Bangladesh to take the #1 spot. End Digression.
Anyway, I would guess that corruption and transparency should enter the picture as part of the IVSRs I keep talking about, which brings us back full circle.
Thanks,
-V.
In response to Irilyth’s comments on corruption, certainly corruption is a significant factor in some countries’ continuing poverty. I don’t think, however, that “presence of corruption=absence of free markets” or “presence of free markets=broad prosperity.” South Korea was a military dictatorship for many years, with plenty of corruption, but its economic development has led to fairly broad-based prosperity. Taiwan was also not democratic during its industrializing period, I believe, and I have the sense that the pre-democracy Chinese Nationalist government there was plenty corrupt.
I think it’s worth returning to one of V’s original points from the book summary, that capitalism has interacted in interesting ways with a basically Confucian culture in east Asia. Confucianism’s ethics and homogeneous, tightly knit societies have been the chief factors in separating the path of Taiwan and South Korea from Brazil and Mexico. Remember that in those latter examples you have a racially divided society with a centuries-long history of a ruling oligarchy of one race exploited and an impoverished peasantry of other races, and the patterns of exploitation built into those societies have continued in the industrializing economy.
Finally, I’ll reiterate a point I made earlier, that nations that industrialized after WWII but prior to the establishment of the neo-liberal world trade regime embodied in GATT, the WTO, NAFTA, and the monetary policies of the IMF have done pretty well; the ones who have been industrializing subsequent to GATT, etc., have not.
Thomas Friedman has a “Theory of Everything” that touches on this topic. He says, in short, that when, in the 90s, the US became not just the only superpower, but the world’s Hegemon, most people only somewhat resented it, because we were more or less benign despots. After the World Trade Center was destroyed, and we swatted the Taliban “[w]ith one swipe of our paw,” the mood of the world went from envy/admiration to fear/hate.
My Best Reader points out that this also have something to do with the end of the global boom; when everyone was getting richer, it was easy to view the US as benign. Now that times are tough all over, people’s view of the US is still Friends and J.Lo, and that’s easy to resent.
By the way, Mr. Friedman has the wrong URL for The Yale Center for the Study of Globalization, whose Director, Ernesto Zedillo, is the former president of Mexico, so I suspect their perspective is a trifle different from the above discussion.
Thanks,
-V.
I don’t know my history well enough to talk much more about the corruption issue. One quick thing: Was Korea’s corrupt structure dismantled before, after, or while the nation was becoming more broadly propserous?
On another note, a WSJ editorial says that “A recent World Bank report estimates that developing countries would grow by an extra 0.5% annually, lifting an additional 300 million people out of poverty by 2015, if only rich countries would lower trade barriers. And a report compiled by Australian officials says that trade barriers and subsidies in developed countries result in a tax of $7.1 billion a year on African countries.” It goes on to criticize African governments (esp Mugabe’s Zimbabwe) for being corrupt in other ways, but I thought that was an interesting example of how globalization can help the poor.
just want to point out that what’s keeping a lot of these cited countries poor is not necessarily trade restrictions. they are starving for cash because of the terms of the debt load they’re carrying. northern banks messing with currency and demanding instant cash or “no prenatal care for you, kiddo” is not exactly proof that free trade works better.
also to point out that the WSJ is not on the side of ordinary people, anywhere. if they are suggesting some regional solution, chances are one can find, underneath the cloth of it, a fantastically large brokerage opportunity that will tighten ordinary finances in other places. they were as much in on the junk stock sales swindling during the tech boom as anybody. beware.
The editorial Irilyth is referring to is “Self-Help for Africa,” from the Wall Street Journal Europe, p. A8, 4 June 1993. It does smack, as david points out, of exasperation that developing countries are not all, y’know, western. They say, essentially, that we shouldn’t listen too closely to “the sob stories about Africa’s plight” because they let Mugabe continue to have sovereignty. However, the preposterousness (imao) of the WSJ’s position should not cause rejection of the facts. We can do something about trade barriers and about Mugabe and about debt load as well. As rabbi Tarfon said, the day is short, the work is plentiful, the laborers are sluggish, but the reward is great, and the Master of the House presses.
Redintegro Iraq,
-V.