8:18 AM Jan 10, 1996

GLOBALIZATION: SOLIDARITY OR TRANSNATIONAL IMPERIALISM?

Geneva 10 Jan (Chakravarthi Raghavan) -- As 1996 opened on a sombre note -- with downward revisions of growth prospects, corporations sacking workers for profit maximisation, and increased social and political uncertainties everywhere -- "globalization", and the concepts and visions behind it, seems likely to be the latest buzz word and battle cry in international and national discourses.

The concepts, visions and consequences of "globalization", and the agents and actors shaping it for good or bad, will figure at the two economic 'events' of this year -- the Ninth Session of the UN Conference on Trade and Development in April-May in South Africa and the first Ministerial Session of the World Trade Organization (WTO) in December in Singapore.

UNCTAD-IX has as its theme "Promoting growth and sustainable development in a globalizing and liberalizing world economy" and is to explore under this how to maximise the development impact of the globalization and liberalization trends and minimise the risks of marginalization and instability.

That of the WTO's December meeting (for which the UN General Assembly has asked UNCTAD to provide its own inputs - on the Uruguay Round effects and the new agenda proposals) is yet to be clearly set, but is sought to be pushed in the direction of fuller laissez faire.

The theme of UNCTAD-IX was set and agenda approved in March last year, and much of the preparatory work got under way long before a new UNCTAD Secretary-General (Rubens Ricupero) was named and took over.

Ricupero in finalising and issuing the Conference document, 'Report of the Secretary-General' (circulated to delegations, but yet to be published), appears to have referred to this aspect and reserved his right to come up with revised recommendations or conclusions in the light of comments he might receive.

Within the secretariat itself there has been some division of opinion and doctrinal views about these trends, the actors (domestic capital vs free hand for TNC-led foreign investment) and an interventionist or neo-liberal (laissez faire role) for the State in this situation.

While sharing his thoughts with delegations and friends whom he has been meeting and talking with, and leaving with them the impression of his continued deep commitment to the development of UNCTAD, and while seeking a cooperative rather than confrontational approach to the Bretton Woods Institutions and its new adjunct, the WTO, Ricupero's own detailed policy views and thrust do not appear to have percolated down to second-, third-levels of professionals inside.

The WTO ministerial conference, besides the mandated agenda set by the agreement and the review of the implementation of the Uruguay Round accords, is being pushed in a different direction by its leadership, and its two dominant members, the United States and the European Union, who use free-market-free-trade theory language to advance their own neo-mercantalist interests. They are pushing the WTO membership to agree on new agendas and negotiations, for new commitments from its developing country members - an investment regime to give freedom for foreign corporations to establish and engage themselves in any economic activity (with some very limited security-related exceptions) anywhere in the world, maximise their profits, and be assured of their ability to repatriate to their home bases (or offshore tax havens).

Environment and social clause issues are also being aired that could become cover for new barriers to trade and exports of the South.

But unlike the late 18th and the 19th century when commitments and foreigners' rights were enforced through arms and gunboat diplomacy, this time it would be sought to be enforced by threat or actual trade sanctions.

All these will push the practice and implementation of neo-liberalism and the programmatic details of the 'Washington Consensus' -- the limited role of the state and the near freedom of (foreign) private enterprise across the world.

The neo-liberal theology (laissez faire capitalism) that was being pushed under the socalled "Washington Consensus", received a severe body blow with the Mexican peso crisis and the efforts of Washington and Washington-based institutions to cope with it have shown up the hidden apostasy of this doctrine.

Despite the impression sought to be given by the use of the term "consensus", namely of a policy agreed to by governments across the globe and the international community of nations or the conventional wisdom without any serious challenge, it is only a consensus involving Washington (White House and Congress) and institutions (the IMF and the World Bank) and the network of establishment non-governmental organizations and opinion leaders centred around there.

The term itself was coined by one of such establishment figures, John Williamson of the Institute of International Economics (IIE).

Though many finance ministers and officials of the developing world in this decade (willy-nilly forced to adopt it by the powerful conditionality weapons used by the IMF and the World Bank to make the rest of the world fall in line with official US views) have been using the term and propounding its doctrines to their public, it has been without any political legitimacy, national and international.

The Mexican episode has put an end to its claims of efficacy.

As Paul Krugman put it in the prestigious US establishment journal, Foreign Affairs (July/August 1995), the efficacy of different aspects of economic policy (of this neo-liberal theology) had been "greatly oversold" but may be usefully though of as a "sort of speculative bubble -- one that involved not only usual economic process by which excessive market optimism can be a temporarily self-fulfilling prophecy, but a more subtle political process through which common beliefs of policy-makers and investors proved mutually reinforcing...

"For all its special features, the Mexican crisis marks the beginning of the deflation of the Washington consensus. That deflation ensures that the second half of the 1990s will be a far more problematic period for global capitalism than the first."

The WTO and its leadership, including Director-General Renato Ruggiero who has been in office since May, in speeches, reports and comments have been envisioning the 19th century golden age as the ideal state. In a speech in October envisioned the WTO liberalisation (of capital and trade flows) creating a global economy "which can bring high quality, medical, education and business services to every village of the world, (and) will globalize human society itself."

In the WTO's report on International Trade in 1995, the secretariat said; "..if governments everywhere were permanently committed to complete laissez-faire in domestic and international policies, supported where necessary by strong anti-trust laws ... global integration would progress under its own natural momentum, propelled by daily decisions of hundreds of millions of individuals and firms."

Both sides in the arguments over globalization, liberalization and "integration of the world economy", appear to base themselves on the concepts and theories of the market and the experience and behaviours of the past to draw lessons for the future.

One side is driven by a nostalgic, often mythical, vision of the 'golden age' of capitalism of the 19th century. The other is influenced by both the experience of the interwar period and the postwar 'golden age of capitalism' (between 1950-1973) and its benefits for the North (with some trickledown effects on the South).

But it ought to be a sobering thought to both that neither "golden age" was very long lasting - in both cases just a generation and half.

The globalization/liberalization process, under 'Triad Capitalism', through the instrumentality of the Transnational Corporations, was evoked by the guru of the TNC process, Prof. John Dunning of the American Rutgers University, at his Prebisch lecture at UNCTAD in 1994, but saw this possible eldorado of the Market God and the new civilization of its followers likely to be threatened by religious conflicts and suggested a summit of religious leaders of traditional religions to establish common ground rules for values and behaviours of their followers.

Governments, and inter-governmental organizations, whatever the religious professions and faith in god of individuals within them, can't confine themselves to prayers, but have look to political agreements and instruments to achieve their goals.

As envisioned so far by the dominant actors and the TNCs, it is seen by the public in the South as no more than a return of the 19th century colonialism economics.

The view of the dominant centres is to push and facilitate the role of the Transnational actors to integrate the countries of the world into one 'global' economy -- a transnationalized world economy -- under the slogan of free-market-free-trade.

But the theories of free-market-free-trade, from the time of Adam Smith and Ricardo down to our times are based on several assumptions about the polity and society that are often ignored.

There is the assumption that economies liberalizing their trade (and now the capital movements) are in fundamental equilibrium and enjoying full employment, and liberalization and (the new globalization) will not alter this position. There will be a societal consensus in balancing unemployment and inflation.

Such a free trade will produce net gains for everyone and trade liberalization will be a zero-plus, and not a zero-sum game, with gains of one offset by losses of the other.

In these days of modern communications and technology, and speedy transmission of images and information about gains and losses, the zero-plus game has to be evidenced now, and not merely envisioned for some distant and constantly receding future.

A second assumption is of the existence of a harmony of interests based on social and cultural cohesion across the world and in all countries.

The "globalization" of TV, Radio and films, and the efforts to inculcate a "global consumer culture", the Macdonaldisation of countries, with similarity of tastes (among the rich, 'beautiful people' of every society) may come about, faster than many think.

But this is no gurantee of harmony of interests based on social and cultural cohesion. Stubborn structural unemployment within industrial societies is threatening even national cohesion -- as the strikers that marched on French streets (with much popular support) in December last showed. But there is even greater tension between the affluent life styles of the rich in the developing world and the ever increasing numbers of marginalized poor.

Free trade assumes constant returns to scale and conditions of perfect competition assuring equality of opportunity to produce and compete for everyone. But in a transnationalized world economy, there is no perfect competition, only oligopolistic competition among the TNCs and their alliances. There is thus no guarantee or scope for efficient and optimal use of resources.

The free-market-free-trade concepts also envisage and require an efficient and functioning international financial system -- where growth and distribution of international finance would be according to needs and promote improvements in national and world-wide employment and ever increasing real incomes. But globalization of financial markets that move trillions across the globe every day in 'round trips' has not brought about such transfers of real resources, only of speculative hot-money capital searching for arbitrage points and profits.

The conflicts between the two visions of the 'golden age', and the dilemmas for policy-makers in fashioning instruments seems likely to be the major area of conflict this year.

In the first, the state stepped back and only kept law and order. In the second it played an interventionist role to ensure better distribution of gains.

The new transnational globalization/integration process will leave the nation states without real resources to ensure social equity, and will have no international overarching power to achieve better distribution of gains among states and peoples.

Which paths would governments choose in their journey to the 21st century, and what instruments would they forge and fashion?

Would any consensus on concepts and visions, and measures to further them, emerge in discussions at UNCTAD-IX and the first WTO Ministerial, or will there be more of the attempts at muddling through that this decade has so far witnessed remains to be seen.