Chapter 2: Consequences of Capitalistic Globalization

Globalization and Human Solidarity
by Tissa Balasuriya

Chapter 2: Consequences of Capitalistic Globalization

a. Economic Impact

The argument for globalization is that the productivity of the world increases, marvelous technological advances are available for all, including long distance instantaneous Communication, the resources are used more efficiently, humankind’s needs can thus be satisfied. Capitalistic globalization is said to have triumphed definitively over all other approaches. This is the way the rich countries can help the poor ones. It is argued “there is no alternative (TINA)” possible; this is the inevitable path for all countries in the future.

Private capital, that is the principal agent of present globalization, has as its primary goal the maximization of its own profit. It pays less attention to objectives such as the promotion of the good life of all, production for use, employment, fair trade, or safeguarding nature. It is rather amoral as to the way companies and individuals earn their money, such as traffic in arms and narcotics.

Poorer peoples face many drawbacks of such globalization. Cheaper food imports may discourage local agriculture and make the poor countries dependent on the advanced countries for food. Local industries may close down or be integrated within the dominant TNCs, through the stock market operations. The rich countries too may find their production bases being moved to countries where labour is cheaper, leading to long term unemployment in the rich countries too. Though a free market’ is said to operate under this dispensation, often there is less competition due to mergers, take-overs, monopolies and oligopolies.

The enforced opening of the markets of the poor countries to foreign imports leads often to the capture of these markets by the TNCs that have much advantages in international trade. The evolving trend is for five or six large corporations to control the bulk of the transactions and determine prices in international trade. Much trade in the world is now intra-­and inter- company trade; 75% of world trade is controlled by the TNCs and their affiliates.

A particular and essential characteristic of present day globalization is the power of mobile global finance. The possibility of moving massive amounts of private finance capital almost instantly through the banking system and instantaneous communication gives immense uncontrolled power to the owners and managers of investable finance available in immense quantities to the very rich individuals and companies. $2-3000 billion are said to move daily in the world today. Most of this is for buying shares in the share exchanges or for speculation in the global currency market; only a small percentage of this corresponds to new productive investment or exchange of goods.

This recent development provides avenues for immense financial profit-making without entering the productive process at all. The sudden outflow of such mobile speculative currency in large amounts is one of the main causes of the financial, economic and social crisis of the South East and East Asian countries since July 1997

The big financial houses are transnational in the sense of being beyond the control of national states or even the UN agencies. There is as yet no power on earth that can bring such financial movements effectively under control and public accountability. This makes for the instability and volatility of the stock markets that can cause chaos in the economies of countries and even globally, unless early remedies are found for this situation.

There is a continuing transfer of hundreds of billions of dollars worth of resources (financial and material) from the poor to the rich persons and countries, due to unfair trade, debt services, transfer payments for technology, patents and as profits from investments. Capital is being accumulated by a few and its power is being affirmed and increased through global institutions. Capitalistic globalization aggravates the inequalities within and among countries.

The relentless, remorseless persistence of rich taking over resources, lands from the poor is legitimized with intricate and sophisticated theories of economics and jargon. (The sophistication of names, acronyms, such as WTO, TRIPS, TRIMS mystify the economic processes for most people).

This is a form of re-colonization that does not need any military intervention; it is done unceremoniously by a mere legal transfer of ownership of the shares of enterprises, helped by the previously mentioned international agencies built around the UN system. The workers of poor countries become labourers for foreign companies, with the collaboration of local elites. Children are born in poor countries with a burden of debt round their necks, perhaps to be paid during their whole life time. The governments of poor countries have to maintain this system to survive in power with the support of the collaborating local elites. Though the rich countries proffer development aid, resources in effect flow from the poor to the rich countries, increasing the gap between them.

b. Social Effects

Privatization of state enterprises increases prices of services such as electricity, water and irrigation, roads and transportation, and tends to subsidize rich private investors. The process of privatization has often involved sale of state enterprises at well below market value. Governments are pushed to this by the operation of the economy with increasing costs of production, losses of peasant farmers and local companies, with dumping of subsidized foreign goods into their liberalized market. The corruption often involved in all these makes for the instability of elected governments.

While capitalistic globalization confers many advantages to the owners of capital and the local elites of both rich and poor countries, with the availability of more consumer goods and their participation in the TNC - led businesses, it has gravely harmful effects on the poorer sections of almost all societies. There can be economic growth without its benefits being shared by the poor and marginalized due to the growth m inequalities. What the system produces is often what can be sold to those who have money, and not the necessities of the many who are poor.

There is a commercialization of most aspects of life:  education and health services, water supply, transportation and even leisure and sports. Governments, harassed by the burden of debt service payments, reduce public expenditure on health and education and other social services to balance their budgets.

SAP creates more unemployment through the process of privatization, retrenchment of workers, the closing of local industries due to import liberalization, the displacement of small farmers due to foreign subsidized imports and cut in agricultural subsidies such as for fertilizers and water and reduction of marketing facilities. The big companies even cause unemployment by their planing and rationalization of production for profit maximization. Unemployment increases in both poor and very advanced countries. Thus there are about 35 million long-term unemployed in Western Europe and North America. Unemployment in the US went up from 5.1% in December 1994 to 5.8% by January 1996. In Britain it was 7.8%, Italy 11.5%, France 11.7% in November 1995, in Belgium 14.5%, Canada 9.2%, Ireland 13.1% and Finland 17.0% in December 1995, Germany 12.0% in January 1996 and Spain 22.7% in third quarter of 1995.(World of Work , Magazine of International Labour Office, Geneva, No. 16, 1966, p. 5.)The rich countries have enough resources to ensure social security to their unemployed. All the same there is homelessness, youth frustration and unrest, crime in rich countries too. This unemployment is structural due to movement of platforms of production out of these countries. It seems irremediable within the “free market system” and aggravates social conditions.

With unemployment the informal sector increases almost in all countries. Theirs is a strategy of survival, doing whatever work that is available. They would be unorganized and hence without trade union rights, or rights to minimum wages. The new WTO effort to relate trade to human rights of workers such as child labour, working conditions and pollution control may in effect result in greater unemployment in poor countries.

As the foreign debts increase there is pressure of the IMF/ WB to cut economic and social subsidies for balancing the budget. The poor whose incomes were earlier related to such subsidies suffer much with these cuts, and due to inflation and control of trade union activities. In some areas these cause famine. Wages are kept low, inequalities increase and the social services built up in the previous era are reduced if not abolished. Strikes are effectively banned. Job security is reduced and labour laws tightened against workers. Cost of living rises.

Inequalities grow in and among countries. Rich are becoming enormously rich and the poor hopelessly poor in the poorer Asian countries. According to the 1996 UNDP report 358 billionaires earn incomes totaling more than the combined income of countries with nearly half the world’s population. In 1994 the income of the richest 20% of the world’s population was 78 times that of the poorest 20%, thirty times higher than in 1960. A relatively small elite of 10-15% of the population are better off than ever before. Vulgar affluence is visible amidst growing poverty of the masses in South Asia. Tourism can aggravate the show of affluence. Infant mortality rates and maternal mortality rates are rising in many countries that are subjected to structural adjustment. In some countries the resistance to disease and life expectancy are decreasing.

Urbanization grows, especially in the South, with new, often footloose production complexes for world market. Inhuman shanty towns are growing with increasing population and the exodus from the villages.

Unemployment leads to internal and external migration of labour and populations: as migrant workers, settlers, refugees; now mainly from the South to the North. The free market ideology recognizes freedom of movement for goods and capital, but not for labour. The rich countries are closing their countries against migration from the poorer South. The free market operates within the world system of nation states established by the colonial expansion of Europe during the five centuries after 1492. This is in effect a consolidation of the advantages of Europeans in the control over land and resources in the whole world. Now the rich companies and owners of capital can still roam the world and buy up land and resources, but the poor people cannot move away from where they are to the richer and under utilized lands such as that of the Americas and Australia.

Globalization may give women greater freedom of movement, communication, employment opportunities, and reduce the burden of domestic chores. But women suffer more due to these trends as they are at the receiving end of its negative consequences. The high prices and food shortages and worsening conditions of health place heavier burden on the women. Housing and education, health services and transportation are more expensive and commercialized. Home conditions become difficult: many mothers have to bring up children, as single parents due to divorce, labour migration and deaths in civil conflict.

Women are pressured to go abroad, due to the inadequacy of a man’s income for the family needs. Migration of workers, especially of women changes values and life styles of families both for better and for worse. They earn higher incomes, but there may be a disruption of family life, neglect of children, trauma effects on them etc. These will have serious long term moral and social consequences.

Women suffer the most due to civil wars, being subject to rape, becoming single parents, made refugees and having to bring up children without proper schooling, social services and their traditional cultural environment of home, the extended family and village or town.

The rapid growth of tourism has been both boon and blight to poor countries. Tourism, conducted on the basis of flexible morals, will “if unchecked despoil the environment, denude culture and denigrate sexual morality” as is happening in Indonesia with the 4 million tourists at present in 1996, expected to rise to 6 million in 1998.(Terence Netto quoting James Spillane in Catholic Asian news April 1996, p. 2. Fr. James Spillane S. J. is lecturer in Business Ethics at the Gregorian University, Rome and at Sanata Dhanna in Jogiakarta, Indonesia.)

In many poor countries, due to such worsening social conditions, there is increasing social discontent, crime, violence, and civil war. These lead to an increase in expenditure for defense, prisons, law and order and refugees. As the countries become relatively poorer and there is less of a surplus for the ruling classes, there is a tendency for them to resort to other forms of manipulation of the people.

With worsening social conditions, poor countries become almost ungovernable democratically. Political leaders then tend to divert popular attention away from economic issues, which are beyond their control, to social cultural issues such as ethno-nationalism, language and religion. These are in part the cause of the many ethnic, tribal and religious conflicts in the poor countries. The example of Eastern Europe and the republics of the former USSR show how ethnic conflicts can be engendered when such situations arise. One of the results of unemployment in industrial countries is the growth of racism against immigrants. Fascist approaches are resorted to by persons who see the foreigner as the enemy of their welfare. The fact that the ethnic conflict in Sri Lanka coincides with the liberalization of the economy and the strengthening of the SAP measures leaves room for questioning whether the civil war is not partly the result of the SAP itself.

In the coming decades civil conflicts are to be expected in the poor countries which are being subjected to structural adjustment policies. While there will be peace in North America and within Western Europe, the conflicts of the early 21st century will be mainly in the South and perhaps in Eastern Europe. Low intensity conflict (LIC) is one of the means for keeping up arms sales to the extent these poorer countries can bear it. On the other hand the rich countries, while selling arms to combatants, will also undertake programmes for conflict resolution through peaceful means, and ensuring of human rights in conflict situations. There is as yet no power to see to the major structural changes that are required for justice in the world, so that all persons may have the wherewithall for a decent human existence, that the modern world has the ample means to provide.

The sense of meaninglessness of life felt in the rich North too, may be mainly due to unemployment, inadequate housing, breakup of family life, drugs, wasteful consumerism . . . in spite of social welfare measures, or because of long term dependence on them.