Globalisation, poverty and inequality

GLOBALISATION: I have been reading a refreshing article by Dr. Krishan Chaudhary, Executive Chairman, Bharat Krishak Samaj, India, about the recently concluded US-India Agricultural Knowledge Initiative Agreement (AKI).

He says, “This agreement will cast a demonising spell over the country and is bound to cause large-scale plunder of the agro-rural society and definitely tend to capitalise on our living, life pattern, culture and social norms.

The so-called “Second Green Revolution” has no connection with the First Green Revolution in which the seeds were with the farmers.

The agricultural pact is a part of the larger picture of emerging trend of globalisation, which aims towards corporatisation of agriculture. The entire game is aimed at promoting the interest of multinationals”.

Dr. Chaudhary has a good valid point. The idea of globalisation is sold to the developing countries with promises of handsome dividends. Yet most of those promises have not materialised yet.

This concept of globalisation necessarily involves a greater dependence on international trade, especially exports, along with the reduction of tariffs and subsidies.

Advocates claim that with stronger integration with the global trade, and a liberalised economy, countries will achieve faster economic growth.

The UN report, the World Economic and Social Survey 2006, shows that although there is considerable inequality within many developing countries themselves, 70 per cent of global inequality stemmed from the difference of income between countries.

The report states that the current mode of globalisation, so to speak, has not benefited developing countries and has certainly contributed to losses including de-industrialisation.

If you put it in simple terms, on the one hand, the world has become more globalised and much more prosperous in the last century. On the other hand, inter-regional inequality has grown.

If one tracks per capita GDP of the large regions of the world, the growing disparity is obvious; today the richest has a per capita income that is 20 times the income of the poorest region.

It is clear when reviewing three decades of high level reports on poverty and inequality, that any alleviation of inequality is increasingly subdued by the growing levels of economic competition between developed countries, and fuelled by profit driven commercial interests.

Then, what is the solution? The measures to create equality must entail a net transfer of resources from the richest five per cent of the population to the majority world - the 40 percent of the world who currently live on less than $ 2.00 a day.

Such a transfer requires international cooperation and the redirection of economic and political policy away from the existing competitive, growth driven regime, to a more equitable framework.

Ultimately, new regulations reducing the power and influence of multi-national corporations, without curbing their ability for innovation must be sought by the global public.

Concerted public effort along these lines is crucial if the international political economy is to be guided by the global public for their own benefit.

For many decades, the World Bank’s official view about development has been: adopt a liberal trade policy, deregulate markets, privatise state enterprises, welcome foreign firms, and maintain fiscal balance and low inflation.

The trouble is that there is no evidence that opening to trade does generally result in subsequently faster growth, holding other things like macroeconomic conditions constant.

The best examples quoted as successes of globalisation are China and India, but they are not so. They have certainly both had fast rises in trade/GDP in the recent period, and also fast economic growth.

But the onset of fast growth occurred about a decade prior to their liberalising trade reforms. As Robert Hunter Wade, Professor of political economy, points out, ‘Their experience, and that of Japan, South Korea and Taiwan earlier, shows that countries do not have to adopt liberal trade policies in order to reap benefits from trade and in order to grow fast.

They all experienced relatively fast growth behind protective barriers, and their fast growth fuelled the expansion of their trade.

As they became richer they tended to liberalise their trade - providing the basis for the common misunderstanding that trade liberalisation fuelled their growth.’ The sensible countries liberalise in line with the growth of domestic capacities - they try to expose domestic producers to enough competition to make them more efficient, but not enough to kill them. China and India suggest a policy regime that is not close to what the World Bank says, but nor is it “anti-globalisation”.

Today, the West’s global dominance is being challenged as unjust - whether that is by the World Trade Organisation’s new bloc of leading developing countries or even by the fanatical violence of the Islamist extremists.

The common argument is that the huge wealth generated by globalisation, with its equally huge ecological footprint, should not be for the benefit of a tiny proportion of the world’s population.