In the last two months of 2018, two articles on globalisation, with contrasting viewpoints, were published in The Observer. The editorial, “Growing nationalism eroding decades of international gains” (The Observer, Dec. 16, 2018) claims that the gains achieved in global peace, democracy and prosperity are threatened by a range of international conflicts including ethnic, cultural and religious factors among others; and that the matrix of international regimes, the United Nations, the World Bank and the World Trade Organisation (WTO) have done well in managing those political and economic conflicts, are now being undermined by the outbreak of extreme nationalism in several countries.
There is no doubt that the emergence of European nationalism/racism is a disturbance to the global order, but contrary to the editorial the article “Inequalities in globalisation and liberalisation” (The Observer, Nov. 21, 2018) illustrates that the real threat to global, peace and democracy lies within the way in which those international regimes operate, as well as the negative impact of globalisation, liberalisation and deregulation in both develop and developing countries, but more so on the latter.
Globalisation, therefore, is a nuisance and encumbrance to the developing countries and also the real danger to world peace. Some developed countries suddenly “recognised that globalisation had resulted in inequalities and social discontent within their countries” and have made their unilateral adjustments.
According to the article “Inequalities in globalisation” the deepening of the global crisis of inequality, especially in the developing states, results from the improper dictates for these international regimes dominated by international banking and industrial cartels. It shows also that the dictates of the international regimes offer false sense of hope and false promise of prosperity.
These views are supported by the finding of research by the Carnegie Foundation for International Peace (1999) that developing countries faced special risk in the current global setting; and that globalisation would ‘exacerbate inequality in the coming decades, raising the political cost of inequality and the social tensions associated with it.” The article pointed out that those international regimes did not heed the warnings made by researchers and some leaders of developing countries.
In 1998, Seymour Millings, deputy prime minister of Jamaica, and also in 2008 Bruce Golding, prime minister of Jamaica, highlighted the problems faced by developing countries to the United Nations General Assembly. The former argued that the current global arrangements “heightened uneven development;” and Mr Golding was very clear in pointing out that the problems of the developing countries require more than “liberalisation of trade, privatisation and free flow of capital.”
In order to make sense of who is making the gain and who is sinking into deeper inequality, this article explores the relevant research information and data from academic researchers, UNESCO, UNCTAD and the WTO, among others. It argues that the dangers to the present global system lie within the way that the global economy is structured and organised.
In order to make the case questioning the perception of the gains made under globalisation, who made those gains, and those whose conditions worsened under globalisation this paper uses data “culled” by the WTO in areas such as poverty, unfair trade barriers, trade and development, privatization, trade-related intellectual property agreement and foreign direct investments. These indicators will be used to identify the gains and who made those gains.
Key players in organizing GATS have been business lobbies such as the E.C. and the US Council of Service and the US Council of Service Industries. While these industrial and services lobbies have needs and desires, “We (WTO) must ask whether they are more important needs and desires than those of the poor.” The European Commission has noted that GATS is “first and foremost an instrument for the benefit of business.”
Studies such as those from which “the following facts are culled (from the late 1990s to the early 2000) to demonstrate that current trade liberalization rules and policies have led to increased poverty and inequality, and have eroded democratic principles, with a disproportionately large negative effect on the poorest countries. It is such studies that have provided the impetus for restructuring the WTO.”
The critical WTO report argues that GATS aims to accelerate and enforce liberalization of many industries (and services) for which liberalization has been proved disastrous in well-known examples from the developed as well as the less developed countries. Some of these industries include water delivery, energy, garbage disposal, medical, rail transport. Even in the First World, such as the US, the decline of health care quality after privatization has been well documented.
It is, according to the WTO report, dangerous in general to depend on theoretical benefits which are very unlikely to occur when human life is at stake, for example with water privatization. Some examples of negative effects of water privatization have been higher prices, lower quality, even absent service for those unable to pay the new prices. These cases have been well documented, not only in developing countries like Bolivia and Argentina and Puerto Rico but in the First World as well.
According to extensive research there is no causal link between foreign direct investment and poverty reduction and that “more and more thinkers are noting that there is no evidence that liberalization favors growth or benefits to the poor. 80% of FDI is in the form of mergers and acquisitions, little in the form of productive investment that creates jobs and exports.
The poor are getting poorer. UNCTAD and UNICEF figures show that “the numbers of people living on less than $2 per day has risen by almost 50% since 1980, to 2.8 billion. This figure represents almost half the world’s population. And this is precisely the period that has been most heavily liberalized. The world’s poorest countries’ share of world trade has declined by more than 40 per cent since 1980 to a mere 0.4 per cent.”
The UN estimates that poor countries lose about US$2 billion per day because of unjust trade rules; many instituted by our organization. This represents 14 times the amount they receive in aid. Trade liberalization is negatively correlated with income growth among the poorest 40 percent of the population, but positively correlated with income growth among higher income groups. In other words, it helps the rich get richer and the poor get poorer.
UNCTAD reports that the majority of developing countries with strong import liberalization have experienced anaemic or negative growth over the past 20 years. According to a World Bank study, “the elimination of the developing countries favoring trade barriers systematically approved by us would lift 300 million people out of poverty.”
As it relates to trade and development, developing countries face higher tariffs on processed goods than on commodities; this is one of the reasons that the poorest countries are heavily dependent on a few commodities. Prices for commodities traded by developing countries have plummeted by 19% in 1990-98 and by some 70% since 1960, and according to UNCTAD report, a trade dominated by basic commodities means that these countries do not develop their infrastructural technologies (industrial capacity), including education and training.
Research shows also that “those who suffer most from commodity price declines are the rural poor who are the majority of Third World people. Basic agriculture employs over 50% of the people in developing countries, and accounts for 33% GDP.” WTO studies show that “industrial countries hold 97% of patents worldwide and more than 80% of patents in developing countries. Yet more than half of the world’s most frequently prescribed drugs are derived from plants or synthetic copies of plant chemicals. It is estimated that if just a 2% royalty were charged on genetic resources that had been developed by local innovators in the South, the North would owe many billions of dollars in unpaid royalties for medicinal plants.”
The report states with clarity that “liberalization often enables the knowledge of the poor to be converted into the property of global corporations. Industrial countries hold 97% of patents worldwide and more than 80% of patents in developing countries.” I wonder if the same practices, patenting drugs from the natural plants will be applied to the medicinal herbs and plants including ganja from Jamaica and other Third world countries.
The WTO report illustrates also that 70 patents have been granted to first world companies on the products of the Neem tree of India, which has always been used locally for treatment of fever, snake bites, leprosy and as a natural insecticide and disinfectant. Also in 1998, US company (Rice Tec) was awarded a patent on the basmati variety of rice, grown only in India and Pakistan. The report concludes that the period 1960 to 1980 saw greater improvement and growth in developing countries than the period from1980 to 2000.
One leading researcher submits that the most comprehensive assessment of the links between economic growth and trade liberalization undertaken to date concluded that there is no clear link between them. He writes, “This means that the projected benefits are merely hypothetical. We are fairly certain today that in the case of developing countries, the hypothesis is entirely misleading, and is in fact false; and that liberalization adversely affects developing nations.”
It is clear that, by and large, those who are the gains for the existing global order are the developed counties. It is time that the calls for changes in the global order to be attended to with a great sense of urgency. This article hopes that China’s lobbying for better deals for developing countries will be embraced by the Third world and bloom onto the kind of activities associated with the members of the Non-Aligned Nations and the new international economic order of the 1970s.
There is a saying in Jamaica that ‘wey nuh dead nuh dash it way.’
Louis E.A. Moyston, PhD