Socialist Worker

The global market place: in whose interest?

Issue No. 1703

Susan George debates International Monetary Fund

The global market place: in whose interest?

WE PRINT extracts from a recent debate between campaigner and author SUSAN GEORGE, and FLEMMING LARSEN, the International Monetary Fund's European director. The debate was organised by Amis UK, the British offshoot of the French left wing monthly Le Monde Diplomatique.


Susan George

Campaigner against the World Trade Organisation

LET ME first define globalisation. I mean corporate-driven globalisation. Who benefits? It is the top 20 percent and especially the top 1 percent. Forbes has just published its new list of billionaires. It has gone up from 465 billionaires in the world to 482.

The top 200 of them have $1.1 trillion of assets. And the top three have got the equivalent of the wealth of the 48 poorest countries. Globalisation is pushing wealth upwards. The effects of globalisation on democracy are negative. The power of the transnationals is increasing. The power of unelected institutions like the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO) is also increasing.

Inequalities are growing. Recent studies have shown that 85 percent of people live in countries where inequalities are increasing. If I can give some special attention to my own country of origin, in the United States the chief executive officer (CEO) of a major company is making 419 times as much as his average worker. It was 326 times only three years ago. Since 1990 inflation has increased by 22 percent and workers' average annual wages by 28 percent. But corporate profits have gone up by 108 percent.

IF WORKERS had been rewarded like their chief executives the minimum wage in the United States today would be $22 an hour not $5.15, and the average worker would be earning $110,000 a year not $23,000. If you're working at the minimum wage-working 40 hours a week, 52 weeks a year, no holiday-at the end of the year you've got $10,700.

That is 40 percent below the poverty line for a family of four. One word about Russia. It's not from me, but from Joseph Stiglitz, who used to be the chief economist of the World Bank. In Russia more than 50 percent of the people are impoverished versus just 2 percent ten years ago, and GDP is just 50 percent of where it was.

I have no grief over the collapse of the Soviet Union, but life expectancy since the wall came down has diminished by seven years for men. Let me quote the CEO of a very large company. He said, "This is going to blow up in our faces. There is no way a society can have this much accumulated wealth distributed to these few people."

It is also important to note that inequalities between countries, not just within them, have grown enormously. Take two periods, 1950-73 and then 1974 to the mid-1990s. In the first period growth was much higher, before the onset of neo-liberal policies. The spread between rich and poor in the share of the global income rose from 35:1 to 40:1. That's already very unequal.

But in the second period this rich-poor spread went from 40:1 to 74:1, and is still rising. The other side would point to the recovery in Eastern Asia. Asia grew slightly higher in the second period compared to the first, until the crisis of 1997. Now we see every day talk of recovery. However, the human recovery is going to take a great deal longer than the recovery of GDP.

In Indonesia an extra 40 million people, 20 percent of the population, have slipped below the poverty line. Health budgets have dropped by 10 percent in the Philippines and Thailand. Domestic violence is up by seven times in Korea.

SUICIDES throughout Asia have increased. And this is not very nice for Mr Larsen, but these are referred to in the area as "IMF suicides". I also want to say something about the environment. The policies that are in place now are simply not sustainable and are destroying life. The World Bank is still spending 40 percent of all its loans on a portfolio of oil, gas and mining. It's also financed the water privatisations in Bolivia which led to higher water rates, riots and several deaths. What about institutions and democracy? The major institutions are transnational corporations.

These companies are much larger than most countries. If you take the list of the first 100 economic entities in the world, then 51 are corporations-only 49 are states. So General Motors and General Electric are much larger than Poland. Mitsubishi is much larger than Saudi Arabia. These corporations are largely above the law. They don't take responsibility for their actions, as we can see very well with Union Carbide at Bhopal in India, with Shell in Nigeria, and most recently with TotalFina after the oil spill in France.

How is the power of transnationals expressed? They don't want to be seen taking over a government directly. What they do is to use lobbies. There is a whole alphabet soup of lobbies which are not very well known but extremely effective, like the European Round Table of Industrialists, 47 European CEOs who have the ear of the European Commission.

THE LOBBIES are the unofficial institutions. There are the official ones, also unelected, also extremely powerful- the IMF, the World Bank, the WTO. They have helped with massive privatisations throughout the world. They are devastating the environment with their Structural Adjustment Policies (SAPs). Many of us have written hundreds of studies, books, made films. We have spoken about the human devastation of the SAPs. None of this has done any good at all. I am sorry to say that I really feel now that one has to put it in these terms-there is no degree of human suffering, however great, which is going to force changes in policy.

The IMF was capable of saying to Mozambique this year, one of the poorest countries in the world, devastated by floods, that, alright, you don't have to pay $100 million in debt service, only $73 million. I find that obscene. Thank god there's a backlash. The other side think they haven't explained their policies well enough. On the contrary-we understand their policies only too well and we think they're wrong.

SUSAN GEORGE will be speaking on The challenge to global capital at the Marxism 2000 week of socialist debate.

  • See page 3 for details.

Flemming Larsen

International Monetary Fund European director

I REPRESENT the other side. I agree that globalisation needs to be changed, guided. But you need to be careful not to throw out the baby with the bathwater. There are many aspects of globalisation that one can disagree with and many that one can be appalled over-the growing gap between rich and poor in the world, for example.

It is not globalisation that is responsible for all the evils in the world, which seems to be the implication of Susan's very impressive list of things she dislikes-many of which I agree with her on. She is seriously wrong to imply that all of that is due to globalisation.

Economic growth in the 20th century, and particularly the second half, has been truly remarkable. For a very large proportion of humankind, hundreds and hundreds of millions of people, the world is a vastly better place to live today than it was 100 years ago.

THIS IS due to much better economic policies, though there is much scope for further improvement. It has been due to a lot of technological progress. We are now experiencing the latest wave of such progress-the IT revolution. It is due to the ability of countries to develop and benefit from their comparative advantages in production of totally different types of goods and services.

This has fostered increased competition worldwide, a process that today is often referred to as globalisation but which is really as old as human economic interaction. We had one episode in the last century where globalisation wasn't achieved, after the great recession, and which the world had to pay a very heavy price for.

When interactions between countries then increased substantially after the Second World War, thanks largely to the institutions put in place by governments, wealth increased again in many countries around the world-unfortunately, of course, not everywhere.

When these forces work together-good economic policies, technological progress, the ability of countries to benefit from their comparative advantages-then we can lift countries from relative poverty in just one generation. We have seen that in many of the countries in South East Asia that are today among the most successful countries. Notwithstanding the recent financial crisis, those countries remain extremely strong.

Recognising these benefits on the one hand, one also does need to recognise, and I would be the first to do so, that the world is not perfect and that globalisation has many faultlines. Here I mention three areas. One problem is the financial markets' volatility and recurrent financial crisis.

The second is the perception that domestic policy-makers have lost power to influence the destiny of the countries they govern, that globalisation is undermining democracy. The most serious problem is that the benefits of globalisation are distributed very unequally within and especially among nations. Many of the poorest nations have been regressing during the last two decades.

All of these problems, many of which are real, some of which are perceived, have the capacity to feed a backlash against globalisation. The targets have been the multilateral institutions like the IMF, the WTO and the World Bank, which are seen to be responsible. I think that is both both ironic and also extremely worrying, because a retreat from those organisations would undermine one of the pillars of economic progress that has been experienced in the 20th century. It would also deprive the poorest countries of perhaps their best chance to buck the trend and to begin healthy and strong sustained growth in the future. I interpret the backlash, the protests against globalisation, as an expression of a lack of confidence in the system.

I think there is an urgent need to listen to the concerns expressed, to acknowledge that there are problems, to agree on the measures that are needed to alleviate the problems, and, ultimately, to work to restore confidence in the system.

It is now widely recognised in the financial community that there can be market failures and we have to find ways to reduce those market failures-through better and more timely data, through the establishment of internationally recognised standards and codes of conduct, through a greater role for private investors in crisis resolution, through the promotion worldwide of much more robust financial systems and many other measures.

All this is still not enough, particularly with respect to the poorest countries. I argued earlier that globalisation offers the best opportunity the poorest countries have for raising growth and eliminating poverty. At the same time I fear that the gap between rich and poor will continue to grow, and the policy requirements for poor countries will become more demanding.

FOR POOR countries to meet those demanding requirements they need to have in place strong incentives that offer real growth and pro gress. Particularly important are better market access for those countries and generous debt reduction.

To conclude I would like to read a piece written by one of my staff in Paris. She is of Indian origin and she writes about her home town of Cochin: "To the common man 30 years ago globalisation meant Norwegian joint ventures for fishing. A decade or so later globalisation meant remittances from people working abroad in semi-skilled jobs. Today there are internet signs everywhere. Globalisation means the export of services. Networking with the earlier wave of emigrants, a host of small service-oriented firms has sprung up, taking advantage of the high literacy rate and competitive wages. These firms export IT services back to the United States and Europe. The industry is very labour intensive, working in areas such as recording and billing for overseas corporations and specialised data entry."

It is striking that many of the concerns about globalisation have been expressed by advocates for the developing countries living very much protected lives in the industrial countries, the wealthy North. I would think most of the people in Cochin are not only happy about the process of globalisation, but would probably prefer more rather than less of it.


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Sat 1 Jul 2000, 00:00 BST
Issue No. 1703
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