Globalization: good or bad?


By Lewis Williamson
The Guardian


It is clear that globalization has failed to rid the world of poverty. Rather than being an unstoppable force for development, globalization now seems more like an economic temptress, promising riches to everyone but only delivering to the few. Although global average per capita income rose strongly throughout the 20th century, the income gap between rich and poor countries has been widening for many decades. Globalization has not worked.

The reason globalization has not worked is because there has not been enough of it. If countries, including the rich industrialized ones, got rid of all their protectionist measures, everyone would benefit from the resulting increase in international trade: it's simple economics. If unnecessary government regulation can be eliminated, and investors and corporations can act freely, the result will be an overall increase in prosperity as the "invisible hand" of the market does its work.

Tell that to countries that have followed this route. I doubt many people in Argentina would agree. Many developing countries have done exactly what free market evangelists such as the International Monetary Fund told them to and have failed to see the benefits. The truth is that no industrialized society developed through such policies. American businesses were protected from foreign competition in the 19th century, as were companies in more recent "success stories" such as South Korea. Faith in the free market contradicts history and statistical evidence.

You're looking at the wrong statistics. In most cases, low-income countries are the ones that have not been able to integrate with the global economy as quickly as others, partly because of their chosen policies and partly because of factors outside their control. The plain truth is that no country, least of all the poorest, can afford to remain isolated from the world economy.

Even if this were true, what about the other unwanted effects of globalization? The power of corporations and the global financial markets adversely affect the sovereignty of countries by limiting governments' ability to determine tax and exchange rate policies as well as their ability to impose regulations on companies' behaviour. Countries are now involved in a "race to the bottom" to attract and retain investment; multinational corporations are taking advantage of this to employ sweatshop labor and then skim off huge profits while paying very little tax.

First, governments' sovereignty has not been compromised. The power of the biggest corporations is nothing compared with that of government. Can a company raise taxes or an army? No. Second, nations are not involved in a "race to the bottom". Figures last year showed that governments around the world are on average collecting slightly more taxes in real terms than they were 10 years earlier. And the argument that workers in poorer countries are being exploited is hard to support. They are clearly better off working for multinationals. If they weren't, they wouldn't work for them. In fact research shows that wages paid by foreign firms to workers in poorer countries are about double the local manufacturing wage.

But what about these so-called multilateral organisations like the IMF, World Bank and World Trade Organization? I don't remember electing them, so what gives them the right to say how countries run their own affairs? Isn't it obvious that these organisations only serve the interests of the US and to a lesser extent the other rich countries? Their only role is to peddle the neoliberal orthodoxy - the Washington consensus - that only impoverishes the poorest nations and maximizes the profits of multinationals.

It is only through organisations such as these that the less developed countries have a chance to improve their situations. The IMF is there to bail out countries that get into financial difficulties. Governments go to the IMF because the alternative is much worse. If the IMF and its sister organization, the World Bank, were shut down, the flow of resources to developing countries would diminish, leaving the developing world even worse off. The WTO is a different kind of organization and is run on a one-country-one-vote basis with no regard for the economic power of each nation; every single member has a veto. In addition, no country can be compelled to obey a WTO rule that it opposed in the first place.

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