Winners and Losers

Globalisation is defined by the spread and integration of people, goods, finance, knowledge and culture across the planet. Each of these dimensions of globalisation has advanced since the dawn of civilisation, at a pace determined by the available technologies for transport and communications.

Motherboard of a laptop © Greenpeace International

Accelerated now by microchip technology and the efficiency of container shipping, globalisation has drawn attention to itself on account of its far-reaching consequences.

The impact on ordinary households is most apparent in high and middle income countries. Most everyday goods are imported from a single country, China; simple enquiries about banking or insurance may involve a call centre in India; a globetrotting executive can sustain family intimacy through social media tools.

These illustrations of globalisation are broadly positive in their effect on individuals, creating space for personal fulfilment, stimulating wealth and encouraging cross-cultural experience.

At national level, the economic opportunities presented by globalisation have been responsible in part for the success of countries such as China, Vietnam and Brazil in achieving significant poverty reduction. But most low income countries have been less fortunate and there is rising concern that the global poor have been left behind in the slipstream.

Whereas sharply rising volumes of foreign trade and investment over the last twenty years have transformed standards of living in industrialised countries, the number of sub-Saharan Africans living in extreme poverty has risen.

Whereas internet technology has revolutionised our capacity for knowledge and interaction, swathes of South Asia and Africa provide no electricity, let alone computers. Whereas the global supply chains of our supermarket culture deliver exotic year-round affordable foods, over 900 million people in the developing world experience hunger.

Contemporary globalisation is therefore linked with widening global inequality. The continuing post-colonial search for an effective development model for the losers of globalisation reflects the anxiety of the winners.


Thomas Friedman, author of The World is Flat, explains his interpretation of the history of globalisation, from United Way of Greater New Haven.
Washington Consensus

The sequence of major wars and economic depression that marked the first half of the 20th century induced a profile of inward-looking states with closed economies.

The relative stability that evolved after 1945 boosted confidence. By the 1980s, most of the wealthier western economies had lifted capital controls, enabling foreign ownership of business assets.

Bolivians protesting against water privatisation © Julie Plasencia / AP / The UNESCO Courier

Strong leadership of US president Reagan and UK prime minister Thatcher shaped the emerging ideology of economic management.

This favoured a diminished role for government through privatisation of state-owned enterprises, downward pressure on social spending alongside deregulation of barriers to foreign trade, investment and capitalist enterprise. These principles of “neoliberal” or “open market” economics became known as the Washington Consensus.

The collapse of the Berlin Wall in 1989 added countries of the former Soviet Union to the western template, its greatest moment of triumph. Even the major surviving communist regimes in China and Vietnam had by then introduced doi moi (open door) policies as a gesture to market discipline.

Within this short space of time, the world’s major industrial and banking corporations had been presented with what they desire above all else – a massive increase in the size of the market. Many of these entities quickly built up revenues which exceeded the entire economies of individual developing countries.
Exclusion from Globalisation

Such was the dominance of the Washington Consensus that it was imposed on the poorest countries through the 1980s as a condition for World Bank and IMF support. As an economic template for development, the Consensus proved to be a disaster.

Government spending on health and education was curtailed and state support for agriculture and industry dismantled. Utilities were privatised without recognising the needs of poorer customers.

Into the new millennium, the results were painfully clear. Whilst developed economies gorged on booming international trade and investment, global poverty remained trapped in a parallel expanding universe.

India hosts both global industry and global poverty © bbjee (flickr)

Economic growth in Africa has been relatively strong in recent years but has tended to create urban elites, whilst rural livelihoods remain primitive. India too has had very considerable success as a participant in the globalised economy, yet over a third of the world’s extreme poverty remains located in that country.

If China’s success in poverty reduction is removed from global figures for the period 1981 to 2008, the number of people living below the international poverty line of $1.25 per day has risen. This is a poor advertisement for globalisation.

Those who describe our world as a global village, in which we can understand and support each other in irreversibly integrated economies and lifestyles, overlook the exclusion of many countries from the opportunities of globalisation.

A more accurate representation is of an interconnected world in which the actions, and more especially the excesses, of a consumer culture impact unjustly on those unable to enjoy its rewards. The three major contemporary crises of global unemployment, food insecurity and climate change can each be interpreted in these terms.


Nancy Birdsall, President of the Center for Global Development, offers a very brief explanation of why we should be concerned about the effect of globalisation on inequality.
In Search of a Development Model

Embarrassed by the global divide, world leaders signed up to the Millennium Development Goals, targets-based promises to achieve poverty reduction over the period to 2015.

No clear alternative model for development accompanied this vision. Indeed, the much derided Washington Consensus survives - with few modifications - in the conditions for support of developing countries by the World Bank and IMF.

Global justice protest: G8 in Edinburgh © Peter Armstrong

The challenge for underdeveloped countries is to build capacity for industrial and agricultural production in parallel with protection of basic social rights. Strategic priority sectors require state support through subsidies and protective tariffs, together with protection from intrusive foreign capital. This has been the historical development model for most of the world’s major industrialised countries.

The grievance of today’s developing nations is that global regulations for trade and investment deny them this critical policy space. In practice, globalisation reinforces the monopolistic patterns of big business, erecting high barriers to entry.

The development model permitted by contemporary regulations prefers to attract foreign investment through the creation of special economic zones, regions ring-fenced with business incentives such as streamlined bureaucracy and low rates of tax.

The price of inclusion in globalisation by this means can be high; foreign investment has limited value to a developing country if no tax is paid, if no skills are transferred to local workers, if domestic businesses are forced to close and if no intellectual property rights are gained. Loss of national sovereignty is the undertone of globalisation.

New jobs created by this model can be compromised by pressure to drive down wage levels, labour conditions and environmental standards. Corporate social responsibility departments of large western companies are much exercised in vetting their production chains for sweatshop labour or environmental abuse.
Governance of Globalisation

The search for a development model is impeded by unrepresentative global governance. Whilst economic integration powered by private capital has advanced at lightning speed, political globalisation moves at snail’s pace.

Strong nation states remain more powerful than global institutions. The national horizon of their accountability is therefore incompatible with the global consequences of their actions.

In more than twenty years since the fall of the Berlin Wall, governance structures of the World Bank, IMF and the World Trade Organization (WTO) have remained largely unchanged. Amendments to voting rights of the Bank and the IMF boards advanced during 2010 have negligible effect, leaving control of policy and senior appointments in the hands of the richer countries. Governance is therefore driven by economic power rather than democratic principles.

If the international rules for conduct of a globalised economy are created by the dominant participants, those yet to gain a foothold are unlikely to win favours. Regulations for trade, investment and intellectual property rights are the principal examples of economic injustice.

Multilateral environmental agreements enjoy more democratic governance through the equal voting rights under UN treaties such as the UN Framework Convention on Climate Change. However, in the absence of majority voting, richer countries led by the US and Canada have been able to stall actions to protect the environment or to compensate poorer countries who are most affected.

The institutions and principles for sustainable development created at the inspiring 1992 Earth Summit have therefore been neutered by the power of economic and financial globalisation. An attempt to reinvigorate the institutional framework for sustainable development is central to the Rio+20 summit in June 2012.
Environmental Limits

Inequality is not the only characteristic of neoliberal economics that has been globalised. Failure to internalise environmental costs in the world economy means that globalisation is accelerating our headlong rush towards the limits.

Poorer countries will tend to be the losers when confronted with scarcity of food, water and natural resources. Such scenarios also elevate the risk of violent conflict.

Virtual water ready for export, South Australia/Dave Clarke © Flickr

Future generations will search in vain for rational explanations of why our common household goods are transported half way around the world from China, not just once but a second time, in the reverse direction for the purpose of recycling.

Shipping and aviation are the engines of globalisation but have largely evaded international regulations to reduce greenhouse gas emissions such as the Kyoto Protocol.

International transport is also the key agency for a fault line in national accountability for global warming. Countries do not take account of imported goods in their national inventories of greenhouse gas emissions. International negotiations to control emissions have so far been unable to compensate for this distortion.

In the same way, globalisation also moves “virtual water” around the world, often from countries which can ill afford its loss.

Globalisation is not itself responsible for these failures of open market economics. Indeed, if we could identify an alternative and sustainable economic model, then its globalisation would become desirable.
International Migration

An alternative for the global poor is to seek work abroad. Globalisation has commoditised labour migration, notably in many Middle Eastern countries which are totally dependent on Asian migrants for the “dirty, dangerous and difficult” jobs rejected by nationals.

Migration in Europe © Fòrum Barcelona 2004

Airlines construct their schedules to serve the routes taken by migrants; the receiving countries build infrastructure not just to accommodate foreign labour but also to create an appropriate cultural environment.

Payments, known as “remittances”, that are sent home by international migrants have become an important measure of the performance of a globalised world economy. In 2010, remittances exceeded $325 billion, almost three times total foreign aid disbursements.

Opportunities for migrant workers can therefore be viewed as a positive characteristic of globalisation. Many economists go further in advocating that free movement of labour would be the most effective means of reducing global inequality.

However, the ideological passion for free movement of goods and capital extolled by many of the richer countries is not extended to people. Most rich countries impose strict regulations on labour migration.

The unacceptable branch of international migration is human trafficking. This has grown in parallel with economic globalisation, perhaps as a consequence of it. As extreme poverty and cross-border mobility are the drivers of sex trafficking and other bonded labour, the suggestion of cause and effect is inevitable.
Anti-globalisation

Joseph Stiglizt at the WSF, Mumbai, 2004 © OneWorld TV

The 1990s slide towards greater poverty and environmental breakdown, together with the dilution of powers of developing countries to manage their own affairs, led to a strong public reaction against global bodies deemed to be responsible.

After violent clashes at a WTO meeting in Seattle in 1999, gatherings of G8 world leaders and international financial institutions retreated to inaccessible and remote locations, encircled by massive security operations.

Although the activists became known as the anti-globalisation movement, their grievances were equally exercised against capitalism, corporate power and US economic and cultural imperialism.

Despite the durability of the structure of global governance and its neoliberal policies, the visibility of this anti-globalisation movement at international meetings has faded considerably.


Lord Mandelson and Joseph Stiglitz in discussion with Reuters about the revival of anti-globalisation sentiment in the US, from Institute for Public Policy Research.
Globalisation in Retreat

The 2008 financial crisis has revived anti-globalisation sentiment, but from a rather different perspective. Replacing the Seattle focus on injustice experienced in the developing world at the hands of global governance, contemporary protests – such as the Occupy Movement - are concerned for the poor everywhere, the 99% disadvantaged by financial globalisation.

No greater damage could be done to the creed of globalisation than the extensive state support for western banks that now prevails. And world leaders convey a sense of helplessness at the sheer complexity of the interdependent world created by globalisation.

21st century search for food security © ActionAid UK

In consequence, there are signs of globalisation in retreat. Labour migration rules are being tightened in many countries. Unemployment in the US and other developed countries has engendered a backlash against the free trade mantra, further undermining the WTO’s Doha development agenda which aims to increase global trade.

Despite these setbacks, globalisation has avoided a knockout punch. No credible alternative global economic model emerged, even when the world's investment banks were at the mercy of public opprobrium.

The austerity measures imposed by powerful creditor countries and institutions on the struggling economies in Greece, Ireland and Portugal carry all the hallmarks of the Washington Consensus. Social spending slashed, services privatised – fiscal discipline to strip down economies for battle with globalised world markets, irrespective of the social consequences.

This suggests that anti-globalisation sentiment has missed its golden opportunity. If this is so, then tackling the planet’s major problems urgently depends on a new vision of globalisation, recalibrated to address the mistakes of the past.


Parag Khanna says that globalisation is thriving, in contrast to those who say it is in reverse; extract from a Chatham House event in London.


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