Blogger’s Note. Reflecting upon the a recent “long read” published in the Guardian – an absorbing piece by Nikil Saval entitled “Globalisation: the rise and fall of an idea that swept the world” – I was rather jarringly reminded of something I wrote back in the nineties. What strikes me about this vintage analysis, published in the International Journal (53:1, Winter 1997, pp 17-37), is just how little the debate has advanced over the intervening two decades. It seems that virtually nothing has been learned, and even less done in response to this longstanding critique. Why? As a contribution to everyone’s summertime reading, I have decided to re-release the original, complete and unabridged, in five easy pieces. With apologies for the curious formatting, I would very much welcome reader commentary.
What about growth … and development?
Development is a precondition to human security and democratization, and development
prospects are conditioned by history and geography, demography and ecology, technology and
resources. Globalization, however, worships at the altar of growth, which is now almost
undisputed as the primary indicator of national achievement, good governance, and business
Donor countries and agencies, the World Bank/International Monetary Fund (IMF), and the
regional development banks play a central role in the globalization process through their
enthusiastic promotion of growth-centred national strategies, based on expanded trade and
investment, worldwide. The strict policy conditions attached to aid and loans are a powerful
instrument for advancing international economic integration, but the price is significant. Equipped
with heavy machinery and maps derived from infrared satellite imagery, deregulated and
unimpeded by the burden of government controls, from the rain forests to the tundra Adam
Smith’s acolytes are exacting a heavy toll.
Belief in the immutable and indivisible harmony between man and nature lies near the centre of
many of the world’s great religions. In a growing number of countries, however, this conviction is
becoming impossible to sustain. No matter how vivid the dream, how convincing the advertising
copy, the ethics of environmental stewardship and sustainable development seem irreconcilable
with the central elements of globalization. When measured by growth alone there are success
stories, especially in parts of Asia and Latin America. But even these are beginning to bump up
hard against the outer environmental limits to growth. Ten years of unconstrained double digit
growth in much of east and Southeast Asia has given rise to environmental pressures which are
approaching or exceeding tolerable limits. Street children with symptoms of lead poisoning;
steeply deteriorating soil, air, and water resources; pollution and congestion reaching unparalleled
intensities are increasingly the rule rather than the exception.
The gritty truth is that life in many celebrated economic success stories does not jive with the
naive boosterism of neophytes which still suffuses much of the reporting on the wonders of
growth. One visit to a coastal city in southern China or the capital of any Southeast Asian
economic miracle should be enough to raise major questions regarding the ecological costs
associated with the present course. The earth’s ecosystem cannot tolerate a doubling – let alone a
quadrupling – of the number of people living at anything close to first-world levels of
consumption. In any scenario, constraints must come; perhaps that is the more profound
message embedded in the recent Asian currency crisis and stock market meltdown.
… and financial flows?
The multinational operations of the huge corporations and banks which drive globalization
generate substantial amounts of hot money; technology and the integration of world financial
markets allow them to move it about internationally with great ease and speed. This raises critical
issues about speculative flows of short-term investment and flight capital and calls into question
the continuing effectiveness of the Bretton Woods financial institutions. At the same time, record
bank profits have added to the growing body of empirical evidence which demonstrates that the
financial sector has benefited most from the liberalization of financial markets. Tax and revenue
authorities can’t keep up: whose interests are being served by deregulation?
Arbitrage and the global trade in cash have become major features of the world economy. About
US$1.3 trillion in foreign exchange is traded daily. In search of speculative opportunities, or
spooked by rumours of instability, international capital – hot money – moves among and between
national economies with striking speed, often in pursuit of the slightest margins. Such movements
can be tremendously destabilizing. Countries such as Mexico in 1994 are seen as attractive
investment destinations one day and face a run on their currency and an interest rate spike the
next. Korea and a raft of Southeast Asian countries were widely praised as success stories, yet
now must swallow the IMF’s bitter prescriptive pill. Over the medium term, such corrections
may have a tonic effect, but the dislocations and social costs attributable to the cure are perilous.
What kind of system turns yesterday’s prodigy into today’s basket-case?
In the absence of effective regulation, global financial markets will remain volatile and potentially
hazardous. Ad hoc responses, and a measure of good luck, have sufficed to date, but the next
failure could be much larger than the collapse of Barings Bank or the Orange County bankruptcy
or even the Mexican peso crisis. The repercussions of a major bankruptcy could be catastrophic.
How many national bail-outs can be financed, and who benefits from the terms of the rescue
packages? Put another way, what is the message when money becomes the most traded
commodity in the world? And how can weakened states cope with the power of markets when
they turn predatory and destructive, depreciating the value of human capital and disassembling
the social infrastructure?