MUMBAI, India, Jan 19 (IPS) - The path of economic globalisation must be changed in order to avoid undermining social security. Otherwise it will continue to exacerbate poverty, and therefore violence, warned World Social Forum panellists here Monday, including Joseph Stiglitz, Nobel laureate in economics.
"The essence of economic globalisation is that it should bring job security. If there were such a commitment, developing countries could have opened markets by explicitly tying market access to job opportunities," said the U.S. expert who served as the World Bank's chief economist from 1997 to 2000.
Economic instability and social insecurity will lead to a rise in violence in the world because it is impossible to separate economic issues from social and political issues, he said.
The loudest applause went to Stiglitz at Monday's conference, "Globalisation, economic and social security", which drew more than 1,000 of the reportedly more than 150,000 people participating in the Mumbai WSF.
To protect the workers' social benefits, "economic policy cannot be delegated to the technocrats of international financial institutions," but instead should be at the centre of democratic debate in each country, he said.
Stiglitz, professor at Columbia University in New York, condemned the insistent pressure that the International Monetary Fund exerts on countries of the developing South to reform their social security systems, reforms he says ends up eroding the few protections that millions of workers might have.
Winner of the 2001 Nobel Prize for Economics and famed for his harsh criticisms of how the international finance institutions handled the 1997 Asian crisis, he also proposed that the World Trade Organisation (WTO) should include on its agenda plans to strengthen social security and to fight poverty.
The fourth World Social Forum, underway in the former industrial centre of Goregoun, in Mumbai, since Friday, has drawn activists from around the world to take part in workshops, seminars and conferences on a wide range of social issues. The six-day event wraps up on Wednesday.
Groups of activists -- the vast majority are from Asia -- arrive at the WSF venue daily for the conferences and panel discussions. Many are dressed in their colourful national attire, others are dancing to the sound of drums and shouting slogans against neoliberal globalisation, against multilateral financial institutions, and especially against the U.S. government.
Participating in the same panel as Stiglitz, Antonio Tujan, a Filipino economist and journalist, said that the current process of economic globalisation has two major harmful impacts on social security: the flexibilisation of labour and the debilitation of trade unions.
Tujan, of the IBON Foundation, a non-governmental Filipino think tank, said the adoption of flexible labour policies as a means to attract investment "institutionalises unemployment" and weakens the labour movement.
In the Philippines, an employee can only join a union after working for a company six months. As a result, many firms hire workers only to fire them before they reach the six-month mark, he said.
Monday's conference also included the testimonies of workers, like that of Mexican unionist Bendicto Martínez, who enumerated the negative effects on Mexico's social security system caused by the North American Free Trade Agreement, NAFTA, which also comprises Canada and the United States.
"Between 1994 (the year NAFTA took effect) and 1995, thousands of small and medium businesses shut their doors, businesses that employ nearly 60 percent of the Mexican labour force," said Martínez, member of a Mexican metalworkers union.
In the past 15 years of economic and trade liberalisation in Mexico, he said, the pace of work in industry has accelerated drastically, while wages have been reduced and obstacles have been erected to prevent union activities.
"The unions were several impacted, because faced with the closing of the sources of jobs, they lost many of the benefits they had enjoyed before," Martínez said.
"The Mexican government signed all of the WTO agreements, but none are heeded, and there is more and more repression against unions," he said.
Laura Tavares, an expert from the University of Rio de Janeiro, said that the major questions affecting the population, such as social security issues, are taken over by the ones wielding power, and there is little participation by the people.
Tavares said the Brazilian government of Luiz Inácio Lula da Silva, of the leftist Workers Party, is working to change that dynamic, and has made some progress.
"Though it remains a very difficult task," she said.
BBB, It's much easier to find fault than to find solutions to problems. If economic globalisation results in violence, what will globalized poverty produce? Many of today's developed countries were once poor countries going into the depression years of the last century. At some point in time, it is the responsibility of the government to develop social programs and social overhead capital to develop their economies to become competitive in the world markets. To blame violence to globalisation seems to contradict what is happening in China and India which makes up almost 50 percent of the world's population. Many still live in poverty, but they are slowly advancing their educational and social overhead capital to meet the needs of a growing economy, and many are advancing to middle class status where none or few existed before they started to participate in the world economy. Without globalisation, their economies would be stagnant. I'm not so sure about Stiglitz's thesis that globalisation produces violence. For those countries not advancing in their economy to compete in the world markets, it's up to their government to provide the necessary schooling and social overhead capital. In Russia, although they have a relatively good educational system, their government is corrupt, and the mafia runs rampant in their country. Most professionals still earn two-three hundred per month, even as a doctor, lawyer, or college professor. Corrupt governments will hinder their economic progress no matter what the outside world does in world trade.
Monday's conference also included the testimonies of workers, like that of Mexican unionist Bendicto Martínez, who enumerated the negative effects on Mexico's social security system caused by the North American Free Trade Agreement, NAFTA, which also comprises Canada and the United States.
"Between 1994 (the year NAFTA took effect) and 1995, thousands of small and medium businesses shut their doors, businesses that employ nearly 60 percent of the Mexican labour force," said Martínez, member of a Mexican metalworkers union.
In the past 15 years of economic and trade liberalisation in Mexico, he said, the pace of work in industry has accelerated drastically, while wages have been reduced and obstacles have been erected to prevent union activities.
Propaganda. Nothing else.
In 1995, Mexico fell into a depression, the GNP fell 6.2 percent. This was NOT because of NAFTA, but because of the excessive dependency on short term foreign capital inflow; when foreign shor term bond holders wanted their money and capital gains back, and were not willing to reinvest, a financial crisis ensued, which jeopardized the whole Mexican banking system.
Mexico got out of the crisis thanks to the US bailout, lobbyed by former president Clinton. And I believe the lobbying was stronger because of the NAFTA agreements.
I worked with the Secretary of Labor in 1995 and, though that was a year of high unemployement, (6% open unemployment; around 17% counting covert unemployment -less than 20 hours a week or less than minimum wage-), the "60 percent of the Mexican labor force" statement is totally preposterous. Could you imagine what kind of riots we might have had?
And while it is true that "the pace of industry" has increased, it is false that real wages in manufacture have diminished, as an average, in the last 15 years. In Marxist terms, what we've had is an increase of relative surplus value, not an increase of absolute surplus value.
As for violence and globalization... gimme a break... How many wars, including the two world wars of the XX Century have to do with NOT globalization, but looking for violent means of expanding the markets?
In a nutshell: another typical IPS bulletin.
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dlowan
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Mon 2 Feb, 2004 02:42 pm
Interesting comment, Fbaezer. On another thread a similar report was referenced, and I quoted bits of it asking for opinions on its validity, but nobody did.
So you believe NAFTA's effect on Mexico has been positive? Could you expand?
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fbaezer
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Mon 2 Feb, 2004 04:53 pm
dlowan, these are my comments about NAFTA, from an older thread:
From the Mexican point of view, NAFTA has been a mixture of blessing and damnation.
Blessing because you can do nothing nowadays with a closed economy. Our exports have grown tenfold over the decade.
Blessing because Nafta was a key element in deciding the US intervention to bail out the Mexican banking system in 1995 (it was very much needed and was, mostly, the Mexican government's mistake).
Damnation because the US interest groups (farmers, fishermen, teamsters) have managed to keep protectionism -and practically defeat the Treaty- in some areas, blocking the integration process and damaging the economy of many Mexicans (specially poor corn and bean farmers).
---------
Fact: the US unemployment rate has dropped during the NAFTA years (this also speaks about the myth of foreigners "stealing" jobs from US citizens). Mexico's open unemployment rate has remained at the same level (due to a high growth of the work force).
Fact: Mexico had a trade surplus with the US before Nafta. It grew larger.
Fact: Protection for Mexican agriculture, according to NAFTA, implies the elimination of tariffs, little by little, at different paces, depending on the product. In Mexico we can predict who will protest according to the product who falls into the non-tariff categories at the time. Two years ago, we had pineapple and watermelon growers. Last year we had the bulk: white corn and bean growers, who want Mexico to renegociate the tariff elimination and accuse the US of protectionism.
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georgeob1
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Wed 4 Feb, 2004 10:00 am
The fact that the Mexican trade surplus with the U.S. has grown under NAFTA suggests that Mexico has at least not been a loser under the treaty.
Interest groups on both sides of the border will work to gain or protect whatever advantage they perceive they have or need. In general we should enforce the free market goals of the treaty as much as we can.
My strong impression is that those who most loudly seek to associate social or environmental goals with trade policy, do so for hidden (or sometimes obvious) economic reasons. Unions which decry (say) Mexican labor practices are not so much supporters of Mexican laborers as they are protectors of their own protectionist privilege. Environmental issues are also used in this manner.
The fact is that the fastest, most efficient, and least politically intrusive way to spread the creation of wealth around the world is through free trade and free movement of capital. Nations can and should be left to decide for themselves how they will play out the advancement of their own economic, social, and environmental goals.
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Acquiunk
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Wed 4 Feb, 2004 10:56 am
I read Stiglitz while in La Paz, Bolivia and much of what he wrote resonated because it reflected what I was observing. Trade is not neutral and if it spreads wealth, it does so unevenly. It tends to increase the power imbalance both internally and internationally between those who can benefit from the system and those who can not. For example, the recently deposed President of Bolivia and the clique around him were big winers. His personal wealth could have cancel the national debt of the country. Free trade is popular only with those who posses or have access to large amounts of capital. The system works against those of limited means. It drives down wages and standards of living as it encourages capital to seek the cheapest possible venue for production. As a result I observed Bolivian miners and textile workers attempting to live on what were literally starvation wages while highly skilled, well paying jobs were held by North American expatriates.
Global trade also demands a global system of meaning, so that everyone is in agreement with what is to be done (contracts have to mean the same in all places for example.). We feel comfortable with that because it is our system of meaning that is imposed on others and are not very tolerant of the system of meaning of others. Consider for example the continuous complaining about Japanese "trade restrictions and the growing complaints about the Chinese. Two non western economies that are in a better position than most to demand that there own systems of meaning be considered. As a result people find not only their physical well being under assault but the culture (the system of meanings and values by which we understand the world) forcibly reordered.
Free trade, as it is presently structured is not perceived or experienced by many people as a benign process spreading wealth and well being, but a disruptive and chaotic juggernaut. And they see no reason why they should tolerate this for the benefit of someone else. If, in this context, there is a violent response, it may not be, in the long run useful, but it is understandable as people attempt to protect their own perceived interests. If the process is restructured, many people who now look with comfortable approval on free trade are going to find there own power and wealth seriously challenged, and I doubt that will happen easily or painlessly.
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fbaezer
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Wed 4 Feb, 2004 11:28 am
I think both georgeob1 and acquiunk have made good points.
While it is true that "the fastest, most efficient, and least politically intrusive way to spread the creation of wealth around the world is through free trade and free movement of capital" (georgeob1), it is also true that " trade is not neutral and if it spreads wealth, it does so unevenly. It tends to increase the power imbalance both internally and internationally between those who can benefit from the system and those who can not" (acquiunk).
IMO the social drawbacks do not mean that we should combat free trade, since protectionism has lead many countries to economic stagnation, lack of competitiveness, high prices for low class products and big profits for the local protected bourgoise.
It means that free trade -capitalism, actually- must be counterbalanced by fiscal-social-cultural measures. A look on the taxing systems and ways of expenditure of the most inequitative countries in the world (Peru, Bolivia, Brazil, Panama and Mexico are the most inequitative in Latin America), will tell you more about what's wrong with those societies than the trade figures.
As for real wages, they drop in some industries, rise in others, as capital reallocates itself. The US, for instance, looses low paying manufacturing jobs, and gains even lower paying service jobs ("hamburger flipping") AND high paying service and industry jobs (technology).
Nowadays, investment in personal human capital (education) is the key. So, not only free trade, but a high level of investment in human capital is required for any society to succeed in the competitive XXI Century.
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Setanta
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Wed 4 Feb, 2004 11:58 am
A good deal can be accomplished through the tax codes as well. The US tax codes are so specifically written that they will, to use one real example, give tax exemption to any company which builds a warehouse of "x" dimension by "y" dimension, with such-and-such a starting date, and such-and-such a completion date. This is material in a book, which i am not here to tout. I see no reason to name names, its not the point.
American companies relocate, at least relocate business offices with financial responsibilities, off-shore even when they don't export jobs. The point is tax evasion. The valuable human capital initiatives to which Fbaezer points could be well-funded if regulation and taxation were as globalized as trade.
I would also like to see, and never expect to see, the death of the term "free trade." No such thing--there never has been.
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Acquiunk
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Wed 4 Feb, 2004 12:01 pm
fbaezer wrote:
As for real wages, they drop in some industries, rise in others, as capital reallocates itself. The US, for instance, looses low paying manufacturing jobs, and gains even lower paying service jobs ("hamburger flipping") AND high paying service and industry jobs (technology)./quote]
A high technology company in northeastern Connecticut, where I live, shut down it's manufacturing plant within the past three weeks, laid off 250 employee's and moved it's operation to China. These were some of the highest pay jobs around in what is essentially an economically depressed corner of the state. Most of the towns here are moribund former textile centers. The alternative being offered is a super warehouse/distribution center being built by Wal-Mart (a study in it's own right) that will pay $10 an hour max. The problem run much deeper than simply acquiring more and better skills. That capability is a human universal and the Chinese are just as capable of acquiring them as are American workers, and they are willing to work for much less with a much lower standard of living.
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georgeob1
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Wed 4 Feb, 2004 12:07 pm
Acquiunk,
I agree that relative differences in the wealth and power of people anywhere permits those so inclined to abuse that power and deny others access to free markets and access to capital. This is a challenge that every nation and society faces. Certainly the historical stratification of Latin American societies is a result of such actions. However, in each of these cases the root cause is internal to the society itself.
Similarly, among nations, the rich and powerful have been able to secure sole access to key natural resources and to close captive markets for their exports. The various free trade arrangements that have been developed to end these abuses have already contributed far more to the reduction of poverty in the world than did a generation of aid and socialist command economy experimenting by third world nations.
The former Soviet system has amply demonstrated the failures of central planning and socialist economic principles. It produces only uniform poverty, reduced life expectancy, and severe environmental degradation.
Free markets among nations can contribute to the spread of wealth. It is up to those nations themselves to apply the same free market principles to the internal operation of their own economies. Though it is often done, I believe it is quite incorrect to suggest that free trade among nations is a cause for the unjust distribution of wealth within them.
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georgeob1
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Wed 4 Feb, 2004 01:01 pm
Just read the interstitial posts from Fbaezer, Setanta, and Acquiunk. This is getting interesting ! I think that, though we agree on the general principles, we draw some different conclusions from them - at least in some cases.
Setanta has (correctly in my view) pointed out the intrinsic adverse effects of government attempts to influence behavior through complex tax codes and other like devices. In effect arbitrary, non economic advantages and disadvantages are the inescapable by product of government meddling. This leads to even more influence peddling and intervention as others attempt to steer the government beast to act in their (as opposed to their competitors} behalf. Setanta proposes the harmonization (to use the favored EU term) of tax law, and other like policies as a remedy. I believe this remedy goes in precisely the wrong direction - it solidifies government intervention in free markets and removes any economic incentive for the removal of non-productive governmental intervention. (My opinion is that, left to themselves, governments, like entropy, will always increase,) A good example of this is the pressure now being applied to the government of Ireland by the EU to raise its corporate taxes - in effect to shield other EU governments from tax competition from a smaller, leaner, and more effective government. I think free market solutions are generally better than government ones, and that the institutions of government themselves should not be exempted from market pressures,
Acquiunk points out the locally adverse outcomes that can and do result from free trade. He notes the loss of an insurance company software operation where he lives (outsourced to India) and a high tech manufacturing operation (outsourced to China), and that the only new economic opportunity in the area is a Walmart warehouse operation, employing lower wage labor. I don't accept the notion that in this case software development and high tech manufacturing have necessarily been "replaced" by low wage schlepping boxes in a warehouse. This is a country in which the people enjoy high degrees of geographic mobility, both in terms of where they choose to live and how far they travel to their work. The warehouse is not the only opportunity available to the displaced workers - they have choices. While there are undoubtedly winners and losers, the facts remain that unemployment in the USA is low by both world and our own historical standards. Our GDP per capita is by far the highest in the world, and, even though income inequality here is a bit greater that the averages for other G-7 nations, the relatively poor here earn more than their counterparts in most other G-7 nations, and move up the income scale much faster than those in any of them. Finally the benefits to India and China (in this case) must also be considered. The beneficiaries in these countries have the same value as humans as do the citizens of Connecticut.
Fbaezer suggests (as I understand it) that the right response is government action to improve the economic competitiveness of the population, particularly those elements seeing the adverse effects of the removal of protectionist barriers. I certainly agree with this. I guess my main point is that I do oppose what amounts to internal protectionism or socialism as a remedy for the transient adverse effects of external free markets.
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Acquiunk
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Wed 4 Feb, 2004 01:24 pm
georgeob1 wrote:
This is a country in which the people enjoy high degrees of geographic mobility, both in terms of where they choose to live and how far they travel to their work. The warehouse is not the only opportunity available to the displaced workers - they have choices.
I haven't time at the moment to reponed to your post at length but one quick point. There is a church in northeastern Connecticut that has members that are direct descendents (same surnames) of the families that founded the church in the 17th century. While this is a bit unusual, it points to the stability of the communities in that part of the state, and we are not discribing "Dogpatch" here. What you propose by way of an economic solution strikes directly at what makes us function as a species, stable communities. A lot of the social problems in this country are the result of dysfunctional communities, places that are basically just collections of people in a geographic local. We are more than simply Homo economus but free trade and globalization, as it is structured at the moment reduces us to that.
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georgeob1
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Wed 4 Feb, 2004 06:33 pm
Acquiunk,
I understand and share your sentiment with respect to your community. However I also recognise that, in the more than three centuries that have passed since its founding, this community has already undergone several changes in its economic structure. Indeed the ability to adapt and deal effectively with new economic conditions must be a core component of the character of any community that has survived for so long. Change and adaptation is a part of life. Only the dead have no more of change.
If we were to enact some constraints that would have prevented the industries in question from leaving, we would be faced with a host of problems, starting with the problem of defining just what communities and what industries would be so constrained or subsidized. We would have also to deal with other communities that were not so preotected, but which must share the cost through higher prices or more taxes. If the protections became more widespread then ultimately our trading partners would retaliate against our exports, leading to even more victims and cost. The 17th century European solution to this problems was a captive empire in which the colonies provided raw materials exclusively to the ruling power and were prohibited from either their own manufactures or from trading with other sources. Ultimately the empires fell leaving no real alternative to free trade,
There really is no workable alternative to free trade in a capitalist economic system - unless you prefer the 'delights' of a socialist centrally planned economy.
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cicerone imposter
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Wed 4 Feb, 2004 08:12 pm
Nobody has brought up this point, but I find that our strong economy has its drawbacks. We continue to have an inbalance of trade that increases yearly, and too many dollars in the world markets will eventually bite us in the back-side. Japan, China, and Korea continues to buy US bonds in their attempts to maintain a strong US dollar, but even their strategy will evenally fail, because there will not be enough goods and services to support it. It'll become like monopoly money, and inflation will be the downfall of our economy. Our government statistics keep telling us how well out economy is fairing, but we all know that more and more services are disappearing from our landscape, and it has become a self-service economy. Anybody talk to a human lately when you called a business?
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ossobuco
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Wed 4 Feb, 2004 08:31 pm
Yes, that happens a lot here in my small town, CI, but seems to be just a local phenomenon...
Incidentally, has anyone else read Stiglitz's book 'Globalization and its Discontents'?
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Setanta
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Wed 4 Feb, 2004 10:13 pm
Please note George, while you are summarizing what you say are my conclusions, that i've described the "free market" as a chimera. I never have made any argument from free market forces, because i don't believe such things exist in reality. The only market forces are the restraint imposed by government, and the demand of consumers, and, finally, the degree of venality of the capitalist. Just because i see the necessity for private capitalism doesn't mean i think the capitalists are to be treated as trustworthy to the point of abandoning oversight and regulation. I cannot for the life of me understand why anyone who lives within a society of consentual law and custom would assert than any one individual has the right to attempt to privately enrich themselves by any means which occurs to them without interference--as though that were a natural right of which government regulation seeks to deprive the poor, beleaguered capitalist.
Far from it, what i suggested is that a uniformity of standards which capitalists are required to adhere to eventually ends the economic inequalities which allows corporations to "ship jobs overseas," "exploit cheap labor," or to practice market dumping and manipulation. When i spoke of the tax code, i spoke of its a abuse by interested individuals buying "access" (my vote for euphamism of the century) in order to shift the burdens of society's funding from corporations to working class and middle class families--which is the effect, regardless of the intent.
Political life has become a exploitive profession which subsists symbiotically with the exploitation of the monied men and women. Office is for sale to a scandalous degree not imagined in the days of the rottenest English borough, of the most muck-laden American political machine. It is absurd to me to think that it is likely a politician above the small municipal level has any motive beyond personal gain, and i'm not entirely sure about all those at or below that level either. "We" have no one to thank or blame other than ourselves, which statement i make in the bitterness of one who suffers the apethetic stupidity of other "citizens."
Civis Americanus sum, i regret to say.
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cicerone imposter
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Wed 4 Feb, 2004 10:27 pm
Set, With all its failings, it's the only thing we've got - sadly.
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