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Posted: December 24, 2001

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Globalization and World Order
The Institutionalization of Injustice

by Nafeez Mosaddeq Ahmed
 

Introduction

This briefing attempts to provide a concise overview of the problems inherent within the process of globalization, and the root of these problems in the actual structure of the global economic order. Globalization has been promoted by neo-liberal theorists as the key to prosperity, equality and even peace. In fact, two decades of neo-liberal policies under the banner of globalization have led to massive political and economic catastrophes around the world, widening the gap between the rich North and the poor South. This paper provides a basic outline of the key elements of the global economic system and its role in increasing poverty, suffering and the marginalization of hundreds of millions of people, challenging the conventional view that the process of globalization under the tutelage of Western financial institutions is largely beneficial for the world.

I. The Global Structure of Economic Relations
The injustice that is inherent within the global politico-economic order is evident from an analysis of its systematic impact in terms of economic relations. The dominant players in the world economy are the most industrialised countries (the United States, the United Kingdom, the countries of Western Europe, Japan, China and so on), monopolising wealth, trade and the production of certain items. The countries of the rest of the world are generally in various subservient trading relationships with these dominant states. Although some are politically and economically more stable than even less fortunate states, they retain economies which are distorted and dependent with low-cost labour producing cheap commodities or manufactures required by the dominant countries, as well as providing a market for more expensive and profitable manufacture.
 
These economic relations constitute a hierarchy of exploitation that is of principal benefit to a small elite, marginalising the vast majority of the population. While worsening the plight of the poor and perpetuating vast inequality, the international economic system enriches those who are already privileged. Kamal Malhotra, Co-Director of Focus on the Global South - an independent international policy research organisation based at Chulalongkorn University’s Social Research Institute in Thailand - has provided a lucid explanation of the causes of this state of affairs in the general structure of economic relations as the result of globalisation. In a paper for the Development Context Project of the UK-based research group Action Aid, Malhotra notes that “the current dominant forms of economic and financial globalisation in the context of their concomitant processes of liberalisation and integration are clearly of benefit to those with considerable amounts of accumulated capital or certain professional skills to sell or trade in the marketplace…

“Those without one or both to sell or trade such as the poor and already marginalised in both industrialized and developing countries are clearly being further disempowered and peripheralised by such globalisation processes. This is true between countries (eg. traditional North and South), within countries (eg. the North and South within East and Southeast Asian countries) and among certain population, gender, age and skill groups globally (eg. non-indigenous versus indigenous peoples, men versus women, professional versus unskilled labour in both the traditional North and South, rich versus poor children).

Thus, those who profit from the skewed structure of world order are the elite bearers of capital profit from the status quo, while the underprivileged are set to lose out due to their insignificance in relation to the global market.

“Financial liberalisation, for example, has already resulted in a significant shift of resources and power in favour of those who have capital globally, thereby leading to a further concentration of capital in fewer and fewer hands. Full capital account liberalisation as demanded by the IMF, and even more starkly in Fukiyama’s vision of the ‘end of history’ will, if implemented, therefore, represent the biggest single shift in the balance of power in favour of those who have already accumulated capital at the expense of labour globally”.

The inherent structure of the international economy is predisposed to profit the corporate elite which is primarily based in the countries of the Global South, thus resulting in the  increasing marginalisation of the poor.

II. International Institutions and Organisations
This global structure which is skewed to benefit the causes of power and profit, is primarily deployed through the international Bretton Woods financial institutions, the International Monetary Fund (IMF) and the World Bank (WB). These institutions were   established under the leadership of the United States by the Western to secure their elite interests. Their role was to formalise the dependency of the world on the Western powers to ensure the control of regional resources. As former United Nations Commission for Trade and Development (UNCTAD) economist Frederick F. Clairmont has observed: “What the U.S. imperial master demanded, and still does was not allies but unctuous client states. What Bretton Woods queathed to the world was a lethal totalitarian blueprint for the carve up of world markets.”[1] It is not surprising then that the results of the policies of the Bretton Woods institutions have been devastating for the majority of the world’s population, serving only to enrich powerful investors while impoverishing almost everyone else. British sociologist Peter Townsend, a Professor at the University of Bristol, points out that:
 
“The policies of international agencies and the activities of multinational companies in fact lie behind the problem in the 1990s of social polarisation and even more endemic poverty... International agencies like the World Bank and IMF have policies of social control whose effects, whether in the 15 new republics of the Commonwealth of Independent States, Afghanistan or the Philippines are certainly not redistributive”.[2]
 
Indeed, their primary role is to concentrate wealth in the hands of ruling elites in the West and their puppet-clients elsewhere. This systematically creates conditions conducive to the escalation of poverty. Townsend notes that:
 
“Poverty is not something people impose on themselves for want of effort and community organisation. It is constructed by divisive and discriminatory laws, inflexible organisations, acquisitive ideologies of wealth, a deeply-rooted class system and policies which serve privilege in the short term and destroy society in the long term.”[3]
 
These financial institutions pave the way for the intrusion of transnational corporations (TNCs). These huge corporations are not situated in any single nation, but instead operate across national borders, planning, producing, and marketing on a global scale, assigning various functions to different regions of the world where the most considerable profits can be made. Many such corporations have more power than the nation-states, across whose borders they operate, which means that they elude national laws. Exxon and Standard Oil for instance have even larger budgets than Switzerland or Saudi Arabia.[4] The majority of corporations, despite being ever more global in power, have their home bases concentrated in the Northern/Western industrialised countries. In fact, more than half come from only five nations: France, Germany, the Netherlands, Japan and the United States.
 
The number of transnational corporations has rocketed over the years. In 1970, there were about 7,000; by 1995, this figure grew to a massive 40,000. The result is that today, 51 of the largest one hundred economies in the world are not countries, but transnational corporations - only 49 are countries. These primarily Northern/Western corporations hold 90 per cent of all technology and patents world wide, and monopolise 70 per cent of world trade. Another 30 per cent of world trade is ‘intra-firm’, meaning that it occurs between different units of the same corporation.[5]
 
Through their increasing control over the world, transnational corporations thus institutionalise the global economic domination of the Western powers. For instance, they are responsible for mining, refining and distributing most of the world’s oil, gasoline, diesel and jet fuel, as well as for extracting most of the world’s minerals from the ground. Hence, they build most of the world’s oil, coal, gas, hydroelectric and nuclear power plants; harvest much of the world’s wood, making most of its paper; grow many of the world’s agricultural crops, while processing and distributing much of its food; manufacture and sell most of the world’s automobiles, planes, communications satellites, computers, home electronics, chemicals, medicines and biotechnology products. Additionally, Western-based transnational corporations exert significant leverage over the domestic and foreign policies of their home governments.[6]
           
The role of transnational corporations in the global system, alongside other international financial institutions, has been discussed by the Wuppertal Institute for Climate, Environment and Energy. The Institute notes that transnational corporations “are part of a global marketing system to which they are subject whilst driving it onwards. This system favours the rich, promotes concentrations of power, and with the World Trade Organization (WTO), the World Bank (WB), and the International Monetary Fund (IMF) has created institutions and rules that favour the global players.”[7] These rules most often take the form of various trade agreements, organised by Western governments with the view to liberate transnational corporations from national laws and restrictions to allow them unimpeded access to regional resources. In practice, these intergovernmental trade and investment accords allow corporations to bypass the authority of national governments and ignore the wishes and decisions of local communities, thus paving the way for corporate exploitation of non-Western countries. Consequently, workers’ rights are flagrantly violated, the environment is increasingly devastated, and the political participation of communities in the determination of their own socio-economic affairs is effectively eroded. Among these accords are the Uruguay Round of the General Agreement on Tariffs and Trade (GATT); the World Trade Organization (WTO), which was created to enforce the GATT’s rules; the proposed Multilateral Agreement on Investment (MAI); the North American Free Trade Agreement (NAFTA); the European Union (EU); etc.[8]
           
With the support of their home governments, giant transnational corporations continually searching for bigger markets and higher profit are propelling and intensifying economic globalisation. The relocation of manufacturing industry in Third World countries means that labour is cheap, while new forms of technology make it possible to severely restrict the range of skills which have to be taught to, and practised by, low-paid Third World labour. Indigenous industries and companies are consequently undercut, while First World industries thrive. This is a crucial implication of the ‘free trade’ that is legislated for under international agreements such as GATT. Free trade enables TNCs to move entirely unrestricted across borders, escaping the enforcement of protective policies for workers and the environment. International pacts like those listed above legitimise this form of ‘free trade’, along with the subsequent exploitation of Third World labour and resources, and environmental devastation. Consequently, the industrialisation introduced into these countries has no genuine impact in terms of the independent development of the Third World; rather, it results in the technological and industrial dependence of these countries on the West through TNCs. In this manner, the West imposes industrialisation on the Third World for their own profit, exploiting Third World labourers, and ensuring that the profits and technological advancement of industry accrue not to the people of the country itself, but primarily to the corporation and a select elite within the respective country.[9]
           
As the Washington DC-based Institute for Policy Studies (IPS) reports: “Two hundred giant corporations, most of them larger than many national economies, now control well over a quarter of the world’s economic activity...
 
“… these firms are weaving webs of production, consumption, and finance that bring economic benefits to, at most, a third of the world’s people. Two-thirds of the world (the bottom 20 per cent of the rich countries and the bottom 80 per cent of the poor countries) are either left out, marginalized, or hurt by these webs of activities.”[10]
 
Corporations and the largely Western governments legislating for their freedom and promoting their power, remain responsible for “the rising inequalities in the United States and the world between those who benefit from expanding corporate activity and those who are being left behind. This inequality [is] fueled by accelerated corporate concentration”.[11] The fact of the matter is that the alleged benefits of transnational corporations  - such as the introduction of foreign capital and advanced technologies, training of local workers, access to world markets, integration into process of globalisation, and so on - are beneficial only in an extremely limited and distorted way. TNCs primarily gorge themselves on profit while maintaining the distorted, dependent nature of the Third World. The ‘industrialisation’ they introduce is usually only a specialised part of a whole industrial process. Often industrialisation is established to the detriment of Third World nations and environments that are not suited to that industrialisation. In any case, the impact of industrialisation remains monopolised by the corporations introducing it - it is therefore implemented to the benefit of those corporations; the owners and beneficiaries of Third World industry are based in the First World. In this light, the tragic import of what has been called ‘free trade’ becomes clear.
 
A confusion between the Western process of ‘modernisation’ orientated toward the unlimited growth of production and consumption, and the process of ‘civilisation’ involving the development of human personality and society intellectually, ethically, culturally, and spiritually, is apparent in the notion that TNCs have an unequivocally beneficial impact on the Third World. In fact, as noted by the economist Martin Khor, Research Director of the Third World Network, globalisation involves “the vastly expanded freedom and powers of transnational corporations to trade and invest in most countries of the world, whilst correspondingly governments now have significantly reduced powers to restrict their operations.”[12]
           
But this current mode of operation of TNCs within the world has been described accurately by the French sociologist Marc Ferro as “multinational imperialism”. The globalisation spearheaded by these corporations has forced poor countries to enter a world system dominated by the Western powers in the name of ‘free trade’. As pointed out by Professor of Economics at the University of Notre Dame, Martin H. Wolfson, formerly a U.S. Federal Reserve Board economist: “Advocates of the free-market model argue that it results in benefits for all, but evidence is mounting that it has been used to further the interests of the wealthy while creating disastrous conditions for the rest of us.”[13] Thus we find that the alleged benefits of TNCs in fact veil far worse problems. “Introduction of foreign capital and advanced technologies” implies the dependence of Third World local economies on Western capital and investment. It thus means the subjection of Third World economies to domination by Western transnational capitalists and can thereby involve the devastation of the local environment by misapplied Western technology. “Training of local workers” implies destitution-compelled employment by Western TNCs under horrendous working conditions and grotesque wages, i.e. slave labour. “Access to world markets” amounts to entry on to markets and trading terms dominated and manipulated by the most powerful and wealthy countries for their own profit. The process of integrating into the sweep of globalisation encapsulates all these problems.

III. Free Market Success? A Case Study of Southeast Asia

A recent example of the role TNCs play in the world in tandem with international financial institutions is the Southeast Asian economic crisis. An analysis of this case provides an illuminating insight into the inherently unjust structure of world order. The Southeast Asian economic crisis commenced in the summer of 1997 moving from Thailand, to the Philippines, to Malaysia and through to Indonesia, involving a sudden drop in exchange rates in the local currencies and in the share prices of indigenous companies, leading towards the collapse of numerous banks and companies. The collapse was a direct result of the role of Western TNCs. These countries only have small markets and few local investors, lacking capital. Western speculators enter these countries through indirect investment with capital around the likes of hundreds of millions of dollars, sometimes even billions. They then purchase local shares, resorting to different styles to promote them, often by leaking news that they have invested heavily in a number of certain shares, or by ‘hyping’ the company whose shares they have just purchased with claims of a bright future. The result is that locals rush to buy these shares causing a rise in their value. Once the shares attain their profit target as predetermined by the Western speculators, they will sell their high-value shares to the local investors in the local stock market, taking their capital and profits with them. This occurs before local investors even realise what has happened. Sometimes, a number of investors act as a single group in the market. If this happens, a general collapse in the market can occur when these investors decide to remove their funds simultaneously, creating a collapse of the local currency and threatening the banks that give credit to local investors with bankruptcy. Former U.S. Federal Reserve Board economist Martin Wolfson explains the process well:
 
“In Asia the free-market model… sought a ‘free’ labor market and also the deregulation of financial institutions and the dismantling of restrictions on the free movement of investment capital. Yet what followed wasn’t an improvement in the standard of living among Asian people. Investors rushed to obtain superprofits in emerging markets. There was a speculative runup of real estate, stock and bond markets, and eventually a scramble to flee when these speculative bubbles burst. The capital mobility made possible by free-market deregulation resulted in crashes of Asian currency values, as panicked investors sold local currencies and dashed to the exits.”[14]
 
The IMF then went on to play its role in wreaking havoc on the Southeast Asian economies. Nations that receive IMF loans, depending on the state of their economy, may be forced to devalue their currency; lower their import barriers; remove subsidies for local industries; lower social welfare funding; pay lower wages; reduce general government spending; expand production and export of their timber, minerals and agriculture. This inevitably results in the falling of wages, drops in the quality of education and health care, and the increase in local poverty. IMF loans are paid back in dollars or pounds sterling. For the country to earn the currency it needs to export its goods or purchase foreign currency on the international market. Thus, government expenditure on basic necessities such as food is diverted to other products such as cash crops. In the long-term, since the country has not invested in developing its own agricultural base for feeding its people, it may need to purchase its food from the First World. The country becomes a source of cheap labour for food production for the First World, thus leaving its own people’s basic needs, let alone aspirations and prosperity, to dissipate. The example of Indonesia is a case in point. The IMF provided a $43 billion ‘rescue’ package to the country in the wake of the crisis that was tied to orders to undergo a variety of structural reforms. These reforms placed the burden of debt onto the Indonesian people rather than banks. The results included a sharp increase in the prices of food and other essentials. Additionally, the price of kerosene (widely used by the poor in Indonesia for cooking), the prices of premium gasoline, electricity prices, rail fares and bus fares all increased. Inevitably this had a devastating impact on the welfare of the Indonesian people, particularly the most deprived.[15]   
 
This scenario essentially repeated itself across the Southeast Asian economies, with equally disastrous effects. Wolfson observed during the later stages of the crisis that “as these countries try to put together their shattered economies, the International Monetary Fund (IMF) is offering them bailouts.” However, the bailouts do not constitute genuine aid. On the contrary, they “come with disastrous strings attached: The IMF demands that these countries continue to deregulate financial markets, raise interest rates and cut government spending. These policies have been rightly criticized from all sides as a prescription for slow growth, unemployment and poverty.”[16]
           
Thus in Indonesia, the combination of heavy losses in investment and IMF structural reforms led to widespread public dissatisfaction, resulting in massive national protests. While Western corporate elites profited from their dominating economic influence over this country, the media wrongly pinpointed Suharto and his regime as the primary cause. Research Director of the Preamble Center for Public Policy and Co-Director of the Center for Economic and Policy Research in Washington DC, Mark Weisbrot, commented: “Everyone knows the IMF actually made the Asian crisis drastically worse. They threw gasoline on the fire, converting what was originally a financial crisis into a major regional depression with no clear end in sight.”[17] Tim Shorrock, a Washington-based journalist and labour activist specialising in Asian affairs, similarly reported that:
 
“The traditional IMF prescription for growth in developing countries - export-led development fueled by foreign capital and based on low wages - is deeply flawed. In Asia, it has supported a tiny group of elites who have integrated portions of their countries’ economies with the world market while keeping a tight lid on political activities and labour unions.”[18]                           
           
The result, as Oxfam reported, is that far from resolving the region’s problems:
 
“… IMF rescue measures have exacerbated their severity, contributing to an economic collapse which parallels in scale the Great Depression of 1929. Real wages have collapsed, remittances to poor rural areas have fallen, and access to basic services is deteriorating. Industry and agriculture alike have been crippled by a credit squeeze.”
 
While the international community concentrates on blaming political mismanagement and corruption within the region itself, which no doubt played a significant role, “Economic mismanagement on the part of the IMF” is studiously ignored, despite having “reached epic proportions.” IMF polices in the form of unnecessary “fiscal stringency, a crippling squeeze on credit, and failure to address the problem of unsustainable debt, have consigned much of East Asia to a vicious circle of declining output and falling investment. Deflation has been used as a device for achieving balance of payments goals and restoring creditor confidence, giving rise to a full blown recession.” Again, focusing on the representative example of Indonesia, Oxfam noted that because of the IMF-induced crisis “around 100 million Indonesians will be living in poverty - a fourfold increase over 1996”, by the end of 1998.
 
“As households adjust to lower incomes, the crisis threatens to spill over into the next generation. Over 1.6 million children are expected to drop out of primary school and junior secondary school this year, undermining prospects for shared growth in the future. Throughout the country, reports from Oxfam staff working with poor communities document a tragic story of declining access to health care, increasing malnutrition, and - in Central Java - a distressing growth of child prostitution.”[19]
           
Although the same IMF policies have time and again quite systematically resulted in the same brand of economic catastrophes, the IMF continues to impose them upon sovereign nations under the baseless pretence that they will work. Yet, it has already been exhaustively proven by the IMF’s disastrous record that they do not work. Similarly, the World Bank continues to enforce economic policies on the Third World that its own reports have already concluded have failed - not because of Third World corruption and so on, but because of the policies themselves. Nevertheless, the Bank goes on to endorse the same policies.[20]
 
The role of such institutions as the IMF and the World Bank[21] can thus be well understood. John Martin of the World Health Organisation notes: “A combination of debt problems and IMF Structural Adjustment Programmes (SAPs) has led governments to cut expenditure on health and the result is increasing infant mortality rates, declining immunisation levels and a frightening marginalisation of poorer social groups.”[22] David Ransom explains the basic reasons for this: “SAPs require privatization, cuts in public expenditure, increases in exports and absolute adherence to the principles of free trade. These principals are indifferent to the eradication of poverty: they are largely responsible for its creation.”[23] Nancy Alexander of the U.S. non-governmental organisation Bread for the World describes the IMF as “really a centralizing economic power in the world”.[24]
 
But as former Martin Wolfson points out, the problem “is deeper than the specific policies of the IMF…
 
“It’s a problem of the basic injustice and bias of the free-market model. The objective of the IMF’s bailout money is to allow borrowers in Asian countries to repay investors; the objective of the continued deregulation and slow-growth policies is to restore the ‘confidence’ of investors and to make it again profitable for them to return. The consistency of the free-market model thus becomes clearer: … the focus is on restoring the investments of the wealthy, not on helping the people.”[25]
           
Probably the most damning indictment of the neo-liberal policies imposed on the world through IMF and World Bank programmes has come from within these very same pillars of the global economic system. The former Chief Economist of the World Bank, Professor Joseph Stiglitz, who was also Chairman of President Clinton’s council of economic advisors and won the Nobel Prize in economics, was forced out of the World Bank due to his criticisms of the Bank’s policies in tandem with other financial institutions, at the insistence of U.S. Treasury Secretary Lawrence Summers. In an extraordinary interview with the London Observer, Professor Stiglitz outlined the devastating consequences of the global economic system on the Third World as a result of the programmes imposed by international financial institutions, in terms of social, economic and political crisis. Due to the article’s comprehensive but concise overview of the impact of the Western ‘development’ strategy, excerpts from it are quoted extensively below:
 
There’s an assistance strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank’s ‘investigation’ involves little more than close inspection of five-star hotels. It concludes with a meeting with a begging finance minister, who is handed a ‘restructuring agreement’ pre-drafted for ‘voluntary’ signature. Each nation’s economy is analysed, says Stiglitz, then the Bank hands every minister the same four-step programme.
 
Step One is privatisation. Stiglitz said that rather than objecting to the sell-offs of state industries, some politicians - using the World Bank’s demands to silence local critics - happily flogged their electricity and water companies. ‘You could see their eyes widen’ at the possibility of commissions for shaving a few billion off the sale price. And the U.S. government knew it, charges Stiglitz, at least in the case of the biggest privatisation of all, the 1995 Russian sell-off. ‘The U.S. Treasury view was: “This was great, as we wanted Yeltsin re-elected. We DON'T CARE if corrupt election.”’... Most sick-making for Stiglitz is that the U.S.-backed oligarchs stripped Russia's industrial assets, with the effect that national output was cut nearly in half.
 
After privatisation, Step Two is capital market liberalisation. In theory this allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money often simply flows out. Stiglitz calls this the ‘hot money’ cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days. And when that happens, to seduce speculators into returning a nation's own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%. ‘The result was predictable,’ said Stiglitz. Higher interest rates demolish property values, savage industrial production and drain national treasuries.
 
At this point, according to Stiglitz, the IMF drags the gasping nation to Step Three: market-based pricing - a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls ‘the IMF riot’. The IMF riot is painfully predictable. When a nation is, ‘down and out, [the IMF] squeezes the last drop of blood out of them. They turn up the heat until, finally, the whole cauldron blows up,’ - as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots.
 
There are other examples - the Bolivian riots over water prices last year and, this February, the riots in Ecuador over the rise in cooking gas prices imposed by the World Bank. You’d almost believe the riot was expected. And it is. What Stiglitz did not know is that Newsnight obtained several documents from inside the World Bank. In one, last year's Interim Country Assistance Strategy for Ecuador, the Bank several times suggests - with cold accuracy - that the plans could be expected to spark ‘social unrest’. That’s not surprising. The secret report notes that the plan to make the U.S. dollar Ecuador’s currency has pushed 51% of the population below the poverty line.
 
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and tear gas) cause new flights of capital and government bankruptcies This economic arson has its bright side - for foreigners, who can then pick off remaining assets at fire sale prices. A pattern emerges. There are lots of losers but the clear winners seem to be the western banks and U.S. Treasury.
 
Now we arrive at Step Four: free trade. This is free trade by the rules of the World Trade Organisation and the World Bank, which Stiglitz likens to the Opium Wars. ‘That too was about “opening markets”,’ he said. As in the nineteenth century, Europeans and Americans today are kicking down barriers to sales in Asia, Latin American and Africa while barricading our own markets against the Third World’s agriculture. In the Opium Wars, the West used military blockades. Today, the World Bank can order a financial blockade, which is just as effective and sometimes just as deadly.
 
Stiglitz has two concerns about the IMF/World Bank plans. First, he says, because the plans are devised in secrecy and driven by an absolutist ideology, never open for discourse or dissent, they ‘undermine democracy’. Second, they don’t work. Under the guiding hand of IMF structural ‘assistance’ Africa’s income dropped by 23%. Did any nation avoid this fate? Yes, said Stiglitz, Botswana. Their trick? ‘They told the IMF to go packing.’ Stiglitz proposes radical land reform: an attack on the 50% crop rents charged by the propertied oligarchies worldwide.
 
Why didn’t the World Bank and IMF follow his advice? ‘If you challenge [land ownership], that would be a change in the power of the elites. That’s not high on their agenda.’[26]
 
Stiglitz’s expert testimony speaks for itself. The Western financial institutions responsible for the carving and structuring of the current global economic order have systematically produced massive social, economic and political crises around the world in order to secure elite interests. While the elite profits, the majority of the world’s population suffers.

IV. The World Trade Organization

One of the latest pillars of the global economic order is the World Trade Organization (WTO). Launched in 1995, it plays the role of enforcer of the GATT ‘free-trade’ agreements. The New Internationalist reports that through agreements such as the GATT accord upheld by the WTO, the countries of the developing world “are being dragged, kicking and screaming, into a ‘free-trade’ global economy in which only the fittest will survive and the fittest these days are almost inevitably the transnational corporations…

“A staggering 70 per cent of all international trade is controlled by a mere 500 corporations. The state of our world is increasingly being determined in the boardrooms of these companies rather than by national governments... deregulation is all and corporations can seek their profit wheresoever they wish in the happy, clappy global market. All too often this means seeking the workers who can be paid the lowest wages.”[27]

International trade agreements are therefore crucial in permitting such policies to be implemented globally, largely at the expense of Third World populations. Dave Phillips of San Francisco’s Earth Island Institute, an environmental group, cites developments in the tuna industry as an example of the implications of economic globalisation under WTO tutelage. “In the old days,” he observed in an interview, “California had the largest tuna-canning industry in the world, but today - these are approximate figures - the wages in California are about $17 an hour…

“So the industry moved, first to Puerto Rico, where wages are about $7 an hour, and then, when they decided that was too much, to American Samoa, where wages are about $3.50 an hour. From there it moved to Ecuador, where workers are paid about $1 an hour, and then on to Thailand, where a great deal of the industry is today, and wages are about $4 a day! And now, amazingly enough, there is some movement to Indonesia, where wages are as low as a couple of dollars a day.”[28]
           
One of the reason that wages in Indonesia can be so low is that under the military dictatorship, union organisation is weak. Hence, working conditions are poor. This is a direct consequence of the GATT ‘free trade’ rules, which operate to the detriment of all the employment, environmental and safety standards that protect basic human rights. Such standards are considered to be ‘non-tariff barriers’ to free trade, in the sense that “one country’s higher standards are restricting the ability of another country to undercut them with more polluting industry, more dangerous and lower-paid jobs”, as the New Internationalist observes. WTO-enforced GATT ‘free trade’ rules allow corporations to ignore “one country’s higher standards”, and to thereby ‘freely’ trample on workers’ rights, while devastating the environment.[29] Thus, Kevin Watkins, Oxfam Senior Policy Advisor, observes that the GATT final accord “has created a new world trade order geared to the interests of the industrial countries and powerful transnational companies, consigning the world’s poorest countries to a future of deepening poverty in the process.”[30]
 
As Oxfam further observes of the WTO, it is “ironic that a body set up with praiseworthy aims has turned out to be yet another way for rich countries to get richer at the expense of poor countries... Despite growing evidence that world trade rules spell ruin for poor people, the rich countries just don’t seem to care.” [31]
 
The WTO is therefore fundamentally flawed. Firstly, the WTO is an extraordinarily unrepresentative body. With up to 50 meetings a week at WTO headquarters, poor countries simply do not have the resources necessary to send representatives to all of them. The result is a massive imbalance in bargaining power in which the voices of the poor are drowned out amid the clamour of the privileged countries and corporations.
           
Secondly, the WTO is an enforcer of the so-called ‘free market’. The devastating results of this globalisation of the market under international agreements such as the GATT Accord, were indicated above. Other examples abound. In the Philippines, for instance, Oxfam reports that: “hugely subsidised imports of corn from the US threaten the livelihoods of local small-scale farmers, depriving them of money to pay for health care or school for their children.”[32] This is not an isolated occurrence, but rather constitutes the systematic outcome of the enforcement of the global order. Kamal Malhotra of the Focus on Global South notes the early example of South Korea, where “between 1973 and 1983 grain imports [from Western countries] (particularly wheat and corn), and those of beans shot up by almost 300 per cent…
 
“Their lower prices discouraged domestic production and dropped South Korea’s food self-sufficiency ratio from 27% in 1965 to 6% in 1983 for wheat, from 36% to 27% for corn, and from 100% to 25.7% for beans. At the same time, the country’s agricultural imports from the US rose from $1.8 billion in 1986 to $5 billion in 1991, making it the highest per capita consumer of US farm products. Indeed, half of its food imports, 60% of its grain imports, 95-100% of its soybean imports and 70% of its wheat and cotton imports coome from the US.”[33]
 
These hugely subsidised food imports, as Oxfam observes, “threaten the livelihoods of local small-scale farmers, depriving them of money to pay for health care or school for their children”. According to Malhotra, the policy has “had a devastating impact on small farmers in Latin America, the Carribean and the Asia-Pacific, but has served US and EU agriculture and trade policy handsomely.” Countries in these regions have moved “from virtual food self-sufficiency 40 years ago to chronic food dependency today (primarily on the US)”. The ominous result is that “there is a danger of food-importing countries becoming even more dependent both on richer and more powerful countries and on transnational corporate monopolies for their most important and basic needs (e.g. food staples).”[34] With imports being extended to tobacco, beef and even rice, production within these countries decreases, unemployment thus rises, and impoverishment consequently becomes entrenched. Nations are unable to reject these provisions in the international ‘free trade’ agreements without facing harsh WTO sanctions.
 
This highlights a third problem that has already been indicated. In general WTO rules, in the tradition of the Bretton Woods institutions, impose themselves upon the internal affairs of other states, overrule national laws, and enforce trade standards that are highly detrimental for Third World populations, though of benefit for Western investors. For example, the WTO has already successfully overruled national laws that protect public health. Oxfam notes that “the WTO Dispute Settlement Panel has ruled against import bans on hormone-treated beef and has the power to stop national governments imposing import restrictions or labelling GM products.”[35] The WTO is therefore trampling on people’s rights to choose what they buy, solely so that TNCs can push their potentially harmful products onto Third World populations to maximise profits.
           
A last revealing problem is that the WTO lacks both openness and accountability. Oxfam notes that “it refuses access to many of its papers and there is little scrutiny of its actions in national parliament.” This is extremely worrying considering its “enormous power to affect all our lives”. Due to organisations like the WTO, the increasing domination of the world by unaccountable transnational corporations is being intensified through international agreements.[36] Aileen Kwa of Focus on the Global South thus notes that the “agenda of the WTO, the implementation of its agreements, and the much-praised dispute settlement system all serve to advance the interests of developed countries, sidelining those of the developing countries.” The U.S. approach in this respect is instructive:
 
“Washington has promoted free trade principles only in sectors that benefit the U.S. economy; in other sectors, like textiles, protectionism reigns… Further liberalization in selected issues, old and new, will give Northern corporations more access to the resources of the South, thereby further debilitating the domestic economies of developing countries.”
 
U.S. influence in the WTO has more often meant U.S. domination than responsible leadership. “Instead of promoting beneficial goals for all, the U.S. is too often concerned with aggressively expanding its own markets. As much as domestic politics permit, it pursues a corporate-driven menu of liberalization that marginalizes the development needs of the poor.”[37] As Martin Khor puts it, the agenda of the Western powers under U.S. leadership is “liberalization if it benefits me, protectionism if it benefits me, what counts is my commercial interest.”[38]

V. Corporate Benevolence? A Case Study of Nike

A representative example of this new form of “multinational imperialism” can be found in the activities of Nike. During the 1970s, the U.S.-based Nike TNC operated largely in South Korea and Taiwan. However, when workers there gained new freedom to organise and wages began to rise, Nike looked to other regions to find a source of cheap labour. Subsequently, in 1986 Nike began producing shoes in Indonesia. Indonesia, a regime whose policies of domestic repression are well-documented by human rights organisations, outlaws independent unions and sets the minimum wage at rock bottom - below the subsistence level for one person. In 1996, the entry-level wage was only $2.20 a day.

However, workers in Indonesia’s shoe industry have been rebelling against low pay, forced overtime, abusive treatment by factory managers and lack of health and safety standards. Nike denies responsibility when such abuses are publicised, insisting that it does not own the factories, evidently believing it can absolve itself with the excuse that it contracts the work to independent sub-contractors. That it carefully chooses sub-contractors who systematically abuse the rights of workers is apparently besides the point. Nevertheless, criticism has continued to mount, leading Nike to finally relent in 1992, producing a voluntary Code of Conduct that set standards for its contractors. However, abuses have continued despite the Code of Conduct since Nike has taken no measures to enforce the code. Indeed, workers demanding better conditions have been dismissed and independent organising is still prohibited. Nike’s ‘Code of Conduct’ therefore turned out to be merely a new public relations stunt.[39]

By 1997, Nike had extended its operations in Asia into Vietnam, where about 25,000 young Vietnamese workers produce a million pairs of Nikes every month. The reason for this movement into Vietnam is rather obvious in light of previous insights. Vietnam’s minimum wage is a measly $42 a month. Labour for a pair of basketball shoes costs Nike only $1.50 - 1 per cent of the retail price. What is worse is that Nike contractors even cheat many workers out of this already insufficient minimum wage. According to reliable Vietnamese press reports, Nike workers in Vietnam are subject to other labour rights violations. There are frequent allegations of verbal, physical and sexual abuse of workers, charges echoed by Thuyen Nguyen of the New York-based Vietnam Labor Watch, who also notes that Nike contractors require overtime work far in excess of permissible limits.[40]

Such revealing manifestations of Western corporate ‘benevolence’ are not restricted to the Third World in terms of their detrimental impact. One may consider the garment industry in general, which has historically relied upon the extreme exploitation of women and children, despite having been a major source of profit, foreign exchange and industrialisation in many countries. Its anti-humanitarianism not only plagues the Third World, as was evident in light of Nike’s policies, but effects Western countries as well. Today, about 60 per cent of garments sold in the U.S. are sewn overseas by women and girls paid starvation wages. Because of this, towards the end of the 1990s 500,000 U.S. jobs were lost, while sweatshops exploiting female immigrants in the U.S. reappeared. So not only do TNCs institutionalise mass slave labour in Third World nations, they do so even within the rich countries. The U.S. Labor Department reports that half the 22,000 garment contractors within the U.S. itself are sweatshops that pay below the minimum wage with no overtime.[41] As economist Victor Perlo observes regarding the results of globalisation: “American workers toil longer hours, have shorter vacations, lower pensions, less unemployment insurance and other social benefits of all kinds.”[42] A vast amount of unemployment and slave labour within the West is therefore a direct consequence of the activities of Western TNCs.[43]

El Hadji Guisse, one of the 26 independent experts sitting on the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities, the main body of experts of the UN Commission on Human Rights, thus observes that transnational, governed by the drive for the unlimited accumulation of profit:
 
“… are unaware of or disregard the impact their activities could have on economic, social and cultural rights, whether at the collective or at an individual level. These companies are frequently, if not always, behind massive human rights violations; in the same spirit, the states that benefit from their activities pass legislation on their rights.”[44]

VI. The Overall Impact of Globalisation

The overall economic impact on the Third World of globalisation can be gauged in light of the tiny amount that the Third World receives through its trade with the West. For example, only around 15 per cent of the final retail value of products made from the main primary agricultural commodities goes to the producing country in the Third World. In fact, this figure too includes many direct and indirect costs, so that the individual Third World producer receives an even smaller amount. For some products the proportion is even lower than 15 per cent: for instance, 4-8 percent for raw cotton, 6 per cent for tobacco, 14 per cent for bananas.[45] A cursory inspection of the actual effects of the West’s direct investments in Third World countries, reveals that such investments have the exactly opposite effect to the Western claim that they foster Third World development. In reality, Western investments tend to foster Third World underdevelopment, while enriching the investors. A single period, 1970-79, suffices as an example. For every new dollar directly invested in every underdeveloped country during this period, transnationals repatriated about $2.2 to their home countries. With specific regard to U.S. transnational corporations, they had invested $11,446 million, only to receive back from the countries in which they had invested $48,663 million; this amounts to a return of $4.25 from the Third World for every dollar invested. However, these figures do not take into account the last year, 1980. Taking this year into account, the Western powers had, in sum, extracted almost $56 billion from the Third World between 1970 and 1980. This figure should be compared to the amount the West had directly invested: $8 billion. This amounts to a repatriation of more than $7 for every net dollar of direct investment for that decade.[46]
 
The situation is hardly different in the ‘new’ world order of the post-Cold War era. On the contrary, the situation is drastically worse, a fact that further highlights the wonders of the global economic system. While from 1970-80 the West had extracted $56 billion from the Third World via direct investments, between 1982-90 resource transfers from the Third World to the West amounted to “a much understated $418 billion”, according to development specialist Susan George.[47] Paul Ekins, a Research Fellow in the Department of Economics at Birkbeck College, University of London, therefore rightly observes that:
 
“[T]he global trading system, far from being a mutually beneficial voluntaristic system of exchange, has become a means of coercion, employed jointly by powerful institutions in the First World and their client states in the Third, by which to force Third World resources into the global market on terms highly unfavourable to the vendor. Needless to say, this process also undermines traditional culture and social structures conducive to self-reliance, so that it generates a dependency on Western imports and Western lifestyles which becomes increasingly difficult to overcome.”[48]
           
Globalisation is also, as Ekins notes, a fundamentally cultural process, where communications technology diffuses Western dominated, norms, values and ideals throughout the globe. This widely acknowledged fact is an essential aspect of the stabilisation of world order under U.S./Western hegemony. Indeed, it is the means by which Western products, goods, services, industries, icons and so on, can  permeate and penetrate all countries, hence globalising the market for Western goods and establishing the deification of mass consumerism. The maximisation of corporate profits can only be achieved by maximising production via enslaving Third World labourers; maximising consumerism by enslaving Third World masses to Western culture and the urge to consume Western products; and thereby globalising the market for Western goods, henceforth increasing sales, and therefore profits. As noted by Radhika Lal, an economics graduate of the New York-based New School for Social Research: “MNCs [multinational corporations] are seeking the Third World out not just as production sites but also as markets. Hence the emphasis... on the creation of a global consuming class which is susceptible to a high intensity marketing.”[49] This globalisation of the Western culture of consumption is therefore merely an essential logical consequence of Western “multinational imperialism”. The aim of such “high intensity marketing” is for Third World people to become enamoured of Western culture and its innumerable vanities, becoming consumers, or people who at least want to adopt the unsustainable Western lifestyle of unlimited consumption.[50] The Western monopolisation of the international mass media therefore means that it can monopolise advertising, undercutting the promotion of Third World goods, industries, culture and so on, to make way for its own hegemonic imposition in all spheres.
 
The linkage between the ideological indoctrination of mass marketing and the impoverishment of whole countries due to their subservience to profit-orientated policies of TNCs, as well as the grave consequences thereof, have been reported frankly by the respected French current affairs journal Le Monde diplomatique:
 
“By turning words and things, minds and bodies, nature and culture into commodities, we are further aggravating the world’s inequalities. Although global production of basic foodstuffs currently stands at 110% of world needs, 30 million people still die of hunger every year, and more than 800 million are under-nourished. In 1960 the richest 20% of the world’s population had an income 30 times higher than that of the poorest 20%. Today the wealth of that 20% is 82 times higher. Of the 6 billion inhabitants of this planet, barely 500 million live in comfort - leaving 5.5 billion living in need.”[51]
 
Western corporations are able employ a variety of policies to further their own enrichment to the detriment of Third World populations. Western-based TNCs have often used Third World countries as markets for products that the West regards as undesirable or dangerous, often with the approval of Western governments. Drugs, pesticides and herbicides are tested in Third World countries before being marketed in the West. Although totally banned in the West, such items are often sold widely to Third World populations to the extent that their governments have been pressurised into compliance via the threat of the withdrawal of Western government aid. Mass advertising campaigns have been employed to sell expensive but comparatively pointless (and even harmful) products, e.g. baby milk powder, soft drinks, tobacco, drugs and so on.
 
U.S. political scientist Stephen Shalom, a Professor at William Paterson University in New Jersey, observes that the West perpetuates a huge trade in dangerous substances by “the export of unsafe medicinal drugs to the Third World. Pharmaceutical companies, of course, try to make a profit everywhere, and they push drugs that have serious side effects in any country they can.” Though corporations have also attempted to deceive the Western public, “it is in the Third World, with their weaker regulatory structures, where the multinational drug companies have run rampant…
 
“Drugs that in the U.S. are banned or severely restricted have been pushed on poor countries by U.S. firms. The pain-killer dipyrone, for example, sometimes causes severe hemorrhaging, yet it has been advertised in Mexico for the relief of menstrual pain. In 1977 the drug was banned in the U.S. even for the terminally ill, yet it continued to be sold by U.S. and other firms in Malaysia and Singapore for the treatment of headache and flu. More generally, the warnings and contra-indications routinely distributed with prescription drugs in the United States are sanitized or omitted entirely when U.S. firms sell their products in the Third World.”[52]
           
A notorious example of such policies is the pushing of baby milk powder onto the Third World as a replacement for breast-feeding, despite the fact that experts agree that mothers’ milk is by far the healthiest food for infants, especially in poor countries where nutritional deficits are common. Shalom notes that a “million Third World citizens - these exclusively children - are estimated to have died each year from malnutrition and diarrhea resulting from the use of infant formula.” Since human milk is the cheapest and most reliable source of nutrients, mothers who bottle feed are obviously not giving their children the best possible nutrition. Additionally, they are frequently forced by financial hardship to dilute the formula with (often contaminated) water. This obviously has “grim results”:
 
“The international companies that sell infant formula don’t make money when mothers breast-feed, and so they have invested heavily in encouraging Third World women to switch to formula. Among the marketing techniques favored by the companies for securing their multi-billion dollar market have been slick advertising campaigns associating bottle-feeding with modernity, free samples given out in hospitals (if the mother can be kept from breast-feeding long enough, her milk will dry up), and the use of ‘milk nurses’, employees of the infant-formula firms disguised as health professionals.”[53]
           
The Swiss-based Nestle corporation has been the dominant firm in the business of selling baby-milk power to Third World mothers and families, though three other U.S. corporations have also been major exporters of the product, engaging in hard-sell marketing. Shalom reports that, due to massive public pressure from an international consumer boycott of Nestle products, “in May 1981 the World Health Organization voted to adopt a non-bi