The Case Against the Global Economy

Free trade and its corollary global economics in recent decades have become virtual economic gospel for most mainstream American economists as well as for a large part of the American public. Free trade, it is argued, benefits the consumer by offering a greater variety of goods and services at lower prices. It promotes economic cooperation among nations and greater good will as well. These arguments have proved so persuasive that dissenting voices hardly have been heard.But recently a growing number of well-informed skeptics and outright dissenters have been making themselves heard. Evidence is provided by the publication last year (1996) by the Sierra Club of a volume of forty-five critical essays entitled, "The Case Against the Global Economy." The writers are a varied group of economists, ecologists, agriculturists and political scientists, many, if not most, associated with various think tanks across the country. This book, published without fanfare at the time, has been gradually gaining the attention of a large number of readers attracted by its provocative thesis. Its case essentially rests on three arguments:*Western Democracies have ceded far too much authority to the tribunals of the World Trade Organization which, since the Uruguay Round of GATT (General Agreements on Tariffs and Trade) in 1994, have had the power to issue directives that often supersede the legal authority of nation-states. These directives are incompatible with democratic procedures since they are arrived at in secret and offer no legal recourse for citizens of a member nation who might object to their content.*Policies of international agencies such as the World Bank, the International Monetary Fund, GATT and WTO are creating a form of corporate colonialism as Third World farmers lose control of their lands when management is turned over to giant transnational agribusinesses, such as Philip Morris, Kraft and Archer Daniels Midland.*As a result of the policies of WB, WTO et al., there is now nothing to stop transnational corporations from entering a Third World country, cutting down its forests, overproducing on its lands, then pulling up stakes to repeat the pattern on yet another hapless Third World country.What happened to local government?In an essay entitled GAFF, NAFF and the Subversion of the Democratic Process, consumer advocate Ralph Nader and his associate Lori Wallach point out changes the new system has wrought. Says Nader: "Under the new system many decisions that affect billions of people are no longer to be made by local and national governments but instead, if challenged by any WTO member nation, would be deferred to a group of unelected bureaucrats sitting behind closed doors in Geneva."How, one may ask, did the WTO tribunals ever gain such authority? The answer lies in the almost mystical faith that heads of Western nations seem to have in the power and efficiency of free trade to usher in a new golden age of peace and prosperity among the peoples of the earth.The justification by the WTO for its interference in the economic and political affairs of a member-state is to see to it that every law (in the American instance) that is passed by Congress and by a state legislature qualifies as the "least trade restrictive." As Nader observes, "Under WTO rules, for example, certain objectives are forbidden to all domestic legislatures, including the U.S. Congress (et al.). These objectives include providing any significant subsidies to promote energy conservation, sustainable farming practices, or environmentally sensitive technologies." In other words any law or ruling that might conceivably result in added export costs are regarded by the WTO as "trade restrictive" and GATT-illegal. Nader also notes that any WTO member can challenge any U.S. law as an illegal trade barrier before a WTO tribunal in general. In such an instance, the tribunal could approve trade sanctions against the United States if it refused to remove laws that were deemed GATT-illegal.How real is this threat to local autonomy? Nader says the European Union, Japan and Canada have published annual reports describing U.S. laws they regard as illegal trade barriers. A recent "sampling" includes the Delaney Clause, which prohibits carcinogenic food additives; the nuclear Non-Proliferative Act; the asbestos ban, drift net and whaling restrictions; the Consumer Nutrition and Education Labeling Act; state recycling laws, and limitations on lead in consumer products. Nader doesn't say so for certain, but apparently these countries have limited their opposition to published complaints so far.A New ColonialismA second important component in the case against global economics is that it is creating a new kind of colonialism -- in effect a corporate colonialism. To understand how this came about, it is necessary to understand the World Bank and the IMF. These institutions loan money to Third World countries but with very binding conditions attached. The recipient countries have been more than eager to obtain the loans, which they have needed to pay interest on their borrowings from Western banks. Little did they realize, at first, the far reaching consequences of accepting WB and IMF loans.The principal agent of drastic economic change in Third World countries wrought by WB and IMF is what has become known as structural adjustment loans, or SALs, which came into frequent use toward the end of the McNamara tenure at the World Bank in the mid-1970s.In an essay on SALs, Warren Bello, a Philippine sociologist and writer who has witnessed first-hand how these loans work, describes in detail the conditions attached to accepting them. He says the main conditions include: First, removing restrictions on foreign investments in local industry, banks and other financial services. No longer could local industry or banks be favored or protected against giant foreign intervention. Second, re-orienting the economy toward exports in order to earn the foreign exchange required for servicing the debt.The effect has been to reduce self-sufficiency and diverse local production in favor of single-product manufacture or single-crop agriculture. Third, reducing wages or wage increases to make exports more "competitive." Fourth, cutting tariffs, quotas and other restrictions to grease the way for global integration. And fifth, privatizing state enterprises, thereby providing further access for foreign capital.At first many debtor nations were understandably reluctant to accept SALs. But the Third World debt crisis of 1982 virtually compelled them to accept. Ultimately, such important countries as Brazil, Mexico, Argentina and the Philippines were among those accepting the loans. Bello says there have been "a number of comprehensive studies" that indicate SALs did not achieve their ostensible goal of stimulating economic growth. Ironically, a study conducted by the IMF itself showed that in the period 1973-1988 the countries that did not receive SALs had a higher rate of economic growth than those countries who did.Nevertheless, private investment in Third World countries has grown steadily and now stands at something like $200 billion a year. Edward Goldsmith, co-editor of this book and an ecologist who is founder and publisher of The Ecologist (Europe's leading environmental journal), compares this figure with the World Bank's $23 billion a year in Third World investment loans to indicated how massive has been the increase in foreign investment in these countries in recent years. Goldsmith attributes this dramatic increase to the attractive conditions for investment now available to transnational corporations in these countries, especially an abundant supply of cheap labor, some of it now highly skilled. TNCs (transnational corporations) now operate quite independently of their country of origin, which in many instances has little control over them. As Goldsmith observes: "The new colonial powers (i.e. the TNCs) have neither responsibility for, nor accountability to anybody but their shareholders."James Goldsmith (apparently no relation to Edward), a French member of the European Parliament and a well-know critic of GATT, calls the influence of this world-wide trade organization "a great tragedy". According to Goldsmith, GATT-enforced methods of agricultural production have produced mass migrations of the poor to the outskirts of Third World cities where they live in awful slums. Says Goldsmith: "When you intensify the (mandated) methods of agriculture (i.e. single crop specialization for export) and substantially reduce the number of people employed on the land, those who become redundant are forced into the cities. ... Throughout the Third World families are broken, the countryside is deserted and social stability is destroyed.A Cultural SamenessThe intrusion of transnational corporations into the life of Third World countries has had not only economic and social consequences but cultural ones as well.In an essay titled Homogenization of Global Culture, Richard Barnet, a well-known Washington writer on TNCs, and his associate John Cavanaugh note that entertainment conglomerates are creating a dreadful sameness among the world-wide culture of nations."Satellites, cable, walkmans, video cassette recorders, CDs and other marvels of entertainment technology have created the arteries" that have facilitated cultural homogenizing. "American cultural products are sweeping the globe," the authors explain. They say, for example, that reruns of Dallas and the Bill Cosby show fill the television screen of every continent. MTV is especially popular. The authors estimate that MTV programming since 1993 has been beamed daily to 210 million households in 71 countries. What do the authors believe is the cause of this seemingly almost world-wide acceptance of American entertainment products (an exception are the strongly Muslim countries) and what are its effects?Barnet and Cavanaugh sum up: "One persuasive explanation is that it (i.e. American entertainment products) fills the vacuum left by the pervasive collapse of traditional family life, the atrophying of civic life, and the loss of faith in politics that appears to be a worldwide trend. ... Popular culture acts as a sponge to soak up spare time and energy that in earlier times might well have been devoted to nurturing and instructing children or to participating in political, religious, civic or community activities or to crafts, reading and continuing self-education."The Impact On Natural ResourcesAn especially troubling consequence of GATT and WTO policies is the apparent devastation of natural resources in many Third World countries. This aspect of corporate colonialism was undoubtedly an important factor in the decision of the Sierra Club, America's leading conservationist organization, to publish this book.In an essay titled "Global Trade and The Environment," Edward Goldsmith examines the changes in the natural environment of several Third World countries wrought by transnational corporations. In the case of Taiwan, Goldsmith draws on the "carefully documented" research of Walden Bello and Stephanie Rosenfeld contained in their book Dragon In Distress (1990). According to the authors, forests have been cleared for industrial and residential developments and to provide space for plantations of fast-growing conifers. "The Virgin Broadleaf forests that once covered the entire eastern coast have now been almost completely destroyed. The vast network of roads built to open up the forests to logging, agriculture and development have caused serious soil erosion, especially in the mountain areas, where whole slopes of bare soil have slid away." The profligate use of fertilizer by export-oriented plantations has led to soil acidification, zinc loss and decline in soil fertility.In a number of Third World countries timber has become a popular export crop. In Malaysia, for example, more than half the trees logged are exported. Goldsmith observes that in 1945 Peninsula Malaysia was about 70-80 percent forested, but today the trees are mostly gone. "The result is escalating soil erosion, the fall of the water table in many areas and a general increase in droughts and floods." TNCs are stripping parts of Malaysia so rapidly that "in a few years all but the most inaccessible forests will be destroyed and the culture and life-style annihilated as well." Brazil and South Africa also are among Third World countries where "vast numbers" of natives have been driven off the land to make way for export crops.Goldsmith is very doubtful that measures to control will soon be adopted in Third World countries because local politicians who own many of the concessions are being paid off by TNC's.What Can Be DoneThe final section of the book deals with what needs to be and, more importantly, what can be done to reform the oligarchic system of world trade that appears (on the evidence of this book) to be taking hold most everywhere. Where trading partners are of commensurate economic strength, it is reasonable to assume that, in general, both partners benefit from free trade. Reciprocal trade relations are easier to maintain. Thus, the United States, Japan, European Union and Canada generally continue to maintain harmonious and mutually beneficial free trading relations among themselves.But among unequal trading partners, the situation is obviously quite different. One form or another of economic protection is, these writers point out, virtually the only way Third World countries can gain a measure of economic independence and avoid the sort of humiliating subjugation by transnational corporations that they are undergoing at present.It is always easier to point out the shortcomings of a system than to suggest practical measures of reform, and the section of the book devoted to such measures is understandably not always as strong or detailed as one would like.Two English ecologists, Colin Hines and Tim Lang, list some urgently needed specific reforms. These include: The necessity of Third World countries being allowed to regain their own import and export controls. This would enable them once again to produce locally a much larger amount of their own food, goods and services and restore a sense of self-reliance essential to their future welfare.Additionally, Hines and Lang write, TNCs must be brought back under national government control. This would mean amending GATT and WTO charters. Third World countries could decide for themselves which TNCs would have access to their economies and which would not. GATT should be transformed into a general agreement for sustainable trade, aid and technological transfer. International trade should be geared to the cultivation of sustainable local economies with the goal of fostering maximum employment through regional self-reliance.The other area where reform is strongly indicated is where WTO tribunals under GATT covenants can interfere in the domestic affairs of member countries.As we have seen, WTO now has the power and authority under certain conditions to overrule statutory measures of a member nation that have been designed to protect the health, safety and welfare of its citizens. If such measures are regarded by WTO as adding to the export costs of that nation, they can be effectively voided. Since there is no way ordinary citizens of a member nation can appeal WTO rulings -- or any way they can repeal them through legislative action. as Ralph Nader points out, these rulings subvert democratic processes and cry out for reform.Any critique of the arguments presented in this book would have to end by assessing the reasonable chances for reform. Right now they don't look too promising. The first step is clearly to reign in the autonomy of TNCs and make them once again accountable to the laws of the countries where they originated. How long this process might take is unknowable at this time. But there are straws in the wind: A column on the OP-ED page of the Sunday, July 13, New York Times, cites a 1996 study by Cornell University (commissioned by the Labor Department) that found 62 percent of U.S. companies surveyed have used the threat of moving to Mexico to hold down wages here at home. Should TNCs continue to abuse their power by making threats, it's reasonable to assume an aroused public opinion will tilt against them and ultimately be felt at the congressional level.Gifford Phillips is Contributing Editor of Crosswinds.

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