Is Globalisation a Stabilising Force in the International System?

free tradeBy Ian Howarth

Globalisation can be defined in many ways, Martin Albrow (1990) defines it as follows; ‘Globalisation refers to all those processes by which the peoples of the world are incorporated into a single world society, global society.’ (Bayliss & Smith, 2001 p15) or alternatively Martin Khor (1995) states that, ‘Globalisation is what we in the Third World have for several centuries called colonization.’ (Bayliss & Smith, 2001 p15)  Within these two disparate views of Globalisation can be found the tensions in perspective which depend upon from where in the international system you are viewing the effects and outcomes of Globalisation. The western capitalist perspective sees Globalisation as a positive development that has opened up new markets and brought the world together.  Robert Cox argues that Globalisation has made ‘the world… [Into]… a global shopping mall in which ideas and products are available everywhere at the same time’ (Bayliss & Smith, p15).  However, for a vast majority of people in the Third World globalisation is seen as a new form of western economic imperialism. The great example of this is where underdeveloped agricultural economies or sectors are opened up to exploitation by western multi-nationals, as can be seen in the collapse in Mexican agricultural production following its admittance into the North America Free Trade Area (NAFTA).  If attempting a more neutral view of Globalisation we can probably at best say that it is an attempt at a single world economy. A global economic system where business is assured that its investments are protected by an international framework of treaties and regulations. It ties the economies of many nations together forming a dependent network e.g. the European Union (EU) or the NAFTA.

The EU and NAFTA are zones of economic dependence where conflict and trade barriers have been removed.  In doing this it has allowed for the unrestricted expansion of business and trade and led to greater economic growth.  This has had massive benefits for the peoples of the respective nations within these trade zones, raising employment and increasing individual wealth.  In creating this complicated network of economic dependence between nations it has created a more stable international political environment.  The ties that bind the nations of the European Union together run so deep and are so complex that it is inconceivable that a general war could ever break out again between any of the members of this zone.

Within the EU and NAFTA economics have become central driving forces within the respective nation’s foreign policies. It is this force that can help to explain the moves particularly within the European Union in creating a single market and a single currency.  In short the economic devastation the last war caused was so great that even the victors were left in ruins. It was bad for business and so the victors led primarily by the USA drew up an international system of finance and investment at the Bretton Woods Conference that created a dependent world economy.

The removal of trade barriers and in Europe even border crossings has created vast multi-nationals that employ thousands and span continents.  The nation state has seeded economic control within their territorial boundaries partly by choice and partly by consequence of choice to the ups and downs of global economic forces.  This has created an international economic system where borders are an irrelevance which in part can explain the loss of control over stock markets, and the value of a nation’s currency.  Even the world largest economy the USA cannot control the destiny of its own economy, due to the fact that US economic growth depends just as much on domestic sales and confidence as it does on European or Asian economic growth and confidence. The multi-national giants of the United State like Boeings, Microsoft and Google gain the majority of their profits from their international not domestic markets.

It is possible to argue that Globalisation has brought about stability/unity within the international system if you only focus on the industrialised nations. These are nations that following 1945 largely shared a common ideology and started with roughly the same kind of technological and industrial base.  However, in the developing world massive problems have arisen out of the push for wider and deeper globalisation of the world economy. The process of colonization right up to the middle of the last century led to the establishment of many national economies based on the sale of a small range of products largely agricultural e.g. Jamaica Bananas and Tobacco.  These cash crop economic systems represent the backbone of many developing nation’s economies.  They are the main source of employment and investment.

The effect of decolonisation and subsequently globalisation has brought to bear on these small and poor nations international competition which has driven down prices and demand.  Nations such as those in the Caribbean have been forced by large supermarkets and demand within developed economies to lower prices or global food retail giants like Wal-Mart of Tesco’s will go and find someone else to buy from.  The devastating effects of these forces on small and poor countries dependent on the incomes raised by these crops have not been unifying.  It is arguable that in these parts of the global economy the primary effect of globalisation has been to entrench inequality and poverty.  Corporations with larger balance sheets than the nations they operate in use this substantial power to prevent wage inflation and unionisation.  This maintains the supply of cheap labour which allows for low prices for consumers in developed economies.

The unequal balance in world trade is clear 1.2 billion people live on less than a dollar a day, and the gap per capita incomes between the richest and poorest countries has gone from 30:1 in 1960 to 74:1in 2000 (www.unctad.org 2001).  The effect of the stringent demands of the World Trade Organisation (WTO) on countries to conform to economic models designed for developed economies has led to unemployment, poverty and instability.  This is further exasperated by the unfair practices of the EU and NAFTA within the one sector where the economies of the developing world could compete, agriculture.  The EU’s Common Agricultural Policy (CAP) prevents cheap imports of agricultural goods, while at the same time subsidising agriculture in the EU to the tune of billions of dollars a year.  These policy positions can in part be attributed to the ground swell of opposition to globalisation which was seen during the Seattle WTO conference in 1999 and in Nice in 2001. Instead of addressing some of these inequalities the response of government leaders was to move their meetings out of town and away from the people.

The collapse of the financial system revealed the extent and complexity of the connections between geographically distant economies.  The freeze in world finance and the need to massive taxpayer funded state interventions to stabilise the system revealed a new kind of potential for instability that had grown up with the spread of globalisation.  The selling of cheap home loans to people with poor credit ratings in the United States led through a complicated web of global financial transactions to the collapse of the Royal Bank of Scotland.  This has of course brought massive instabilities within many nations.  Political and civic unrest in Spain, Portugal and Greece which could lead to all kinds of unwelcomed political outcomes for the international system

Globalisation can bring unity to the international system.  In the developed world it has been a successful policy and contributed to an unprecedented period of peace and prosperity. The financial crash and crisis since 2008 is not in itself evidence of a failure in globalisation, but in the managing and regulation of financial systems.  In the developing world globalisation has been a far less successful policy approach with the results promised to the wider societies of these nations failing to materialise.  It is too often the case in developing economies that tiny wealthy global elites reap the rewards while the mass of the people upon which this wealth is generated receive none of the benefits.  In the developed world increased profits and economic growth led to higher living standards and development.  In the developing world the development and higher living standards enjoyed in the developed world are not being delivered, and this is a cause of tension and potential instability.

Bibliography:

Bayliss, John. Smith, Steven. (2001) ‘The Globalisation of World Politics’ 2nd Edition, Oxford University Press, Oxford. p15, 16,17

White, Brian. Little, Richard. Smith, Michael. Editors (2001) ‘Issues in World Politics’ 2nd Edition, Palgrave, Basingstoke, Chap. 3, p36-40

http://www.unctad.org or alternatively access http://www.un.org & then click on economic and social development.

Private Profit and Public Debt; The Continuing Hypocrisy of the ‘Free Market’

By Ian Howarth

Since the autumn of 2008 there has been one issue in politics on which if the surface is scratched a great sense of anger, almost rage can be found.  I am of course talking about the financial crisis and the crushing five year recession that has followed.  In particular I am angered by what I see as a great injustice being committed by our politicians on behalf of the richest people in the country and the world.   fat cat

Why has the British and America taxpayer continued to tolerate billions of pounds of their money being used to support the people and institutions that drove the economy onto the rocks, with out so much as an ounce of real reform to the mad and immoral practices of the institutions responsible.  In Britain today we are told by our leaders that we are living in an ‘Age of Austerity’. An austere age in which banks and market traders reap mighty profits while nurses, builders, and postal workers face redundancy!  An austerity that provides us with the spectacle of multimillion pound bonuses after the timely injection of billions of pounds worth of taxpayer’s money saved the financial system from collapse.   This is a strange and discriminating type of austerity, one that picks its way through society, sparing the hedge fund manager while leaving thousands of young people without work.

In truth most of us have yet to fully awaken to the scale of the crime against public decency that is being perpetrated in the halls of power and high finance today. Most of us are still reeling from the shock of finding that the promises of endless prosperity and an end to ‘boom and bust’ were in truth propped on so shaky a foundation that they were in reality as worthless as Lehman Brothers shares.

I simply find it impossible to fathom the sheer scope of the hypocrisy that our leaders on all sides of the political divide are trying to feed us.  There is an old maxim that cometh the hour, cometh the man.  This is the hour, but I do not see anyone of worth claiming the mandate of the people and providing the answers, or leadership I believe millions of us seek.     Where is our FDR?  We need someone to offer us a New Deal and put an end to the deceitful self-interests of the small and powerful elite who have raided the public purse in the interest of private enterprise.  Are we to simply watch as the financiers and corporate executives run away with our money leaving ordinary people to face cuts to their schools and hospitals in the name of efficiency and living within ‘our’ means?  Must we return to the old dying on trolleys in hospital corridors for a lack of funding and compassion?  We face growing poverty and a widening gap between those that have, and those that have not, all so that the corrupt system that delivered us to this place may survive.

The Banks are in reality broken, and so the state must take its just stake and make clear to those CEO’s and executives that a bank that is too big to fail, is too big to exist.  The retail and casino operations need to be separated and the state must regulate with a ruthless zeal those practices that have led us to this place.  To continue on our current trajectory is only to ensure that we face such crisis again, and to ignore the human suffering that it must inevitably contain.  The disconnect between profit and the real world must be ended and tethered to the wealth of the nation through the guarantee that the practices of these mighty financial institutions will be regulated to ensure that they are not simply printing money for their own executives, but engaged in economic activity that benefits the whole of society.

It is the role of the state to ensure that all sectors of the economy are operating not only to the benefit of shareholders but the nation at large.  However outrageous these suggestions may seem to the apostles of Friedman let us not forget the single biggest lesson of the last five years.  If this crisis had been left to the free market the financial system would have collapsed and many millions of us would have faced losing our pensions, savings and even our current accounts.  It was in the end the guarantee of the state, of the taxpayer, that all debts would be met, and all deposits honoured that allowed these banks to continue.  As long as it is true to say that the largest of our banks cannot be allowed to fail then the shareholders and speculators of these institutions are in fact taking no risks at all with their investments.  This is not a free market.  These banks can in reality do as they will because they now know that the state is their acting as a back stop should they hit choppy waters.  This is why the state has the right, and obligation to crack the whip and end the free ride.  We cannot continue to abide a system that allows for state welfare for banks, and financial institutions while they continue to preach a failed doctrine of free markets and light regulation.   The Banks  have been given an implicit guarantee of state support without any conditions set upon their practices.  This is both immoral and undemocratic. The leaders we rely on have placed their connections and friendships with the high flyers of the City of London over their responsibility to represent and protect the interests of the people and their money.

What we need is a system that rewards and punishes fairly, and recognises the right of democratic forces to exert control over the dangerous excesses that are inherent to capitalism.  It is clear to me that the last 30 years has witnessed a mighty experiment in free market economics, a de-regulation of everything with a simple and accepted mantra; leave it to the market to decide.  This experiment led us to this place and a world in which a few got very rich, but ultimately the taxpayer, not the free market had to carry the can.   This is not a choice between the inefficiencies of a command economy or the disastrous effects of deregulated free markets.  It is an argument for common sense, and the recognition that in a democracy the people have a rightful interest in economic policy, and the right to place certain demands and expectations on the corporations that seem to believe that as private enterprises they need only answer to the Board. The outcome of this crisis and the role of the state in averting an even greater disaster must mean an end to this hypocrisy within the free market.