Franz Nuscheler

Globalization: Is the South Losing Touch?

The Globalization Debate: Outline of the Arguments

Globalization was all the rage in the 1990s, and the supposed cause of every imaginable sort of development and every discernible trend, aspiration and fear. Some saw a golden age on the horizon, while others saw the opposite. This imprecise term had to serve a whole range of purposes, whether as a way of attacking the variation in social and environmental standards between different locations, as a “prime ­excuse” for shedding nation-states’ responsibility for the failure of economic and social policies, or as a scenario of the future warning of the wrong direction being taken by the entire world. It was widely demonized, but seldom analysed.

The terrorist attacks of 11 September were interpreted as a perversion of globalization, demonstrating the vulnerability of the entire world to individual violence. The al-Qaeda terror network was organized like a multinational corporation that knew how to exploit to the full the destructive potential of globalization.

There were scenes not dissimilar to civil war on the streets of Seattle before the opening of the “Millennium Round” of WTO talks in December 1999. These scenes were later repeated on the fringes of the ­annual meetings of the IMF and the World Bank, and culminated in an orgy of violence at the G8 summit in Genoa in summer 2001. Banners denounced the demonic scapegoats of globalization, the WTO and the IMF.

The media quickly lumped very differing groups of peaceful demonstrators and violent trouble-makers together under the term “anti-globalization protesters”. This composite international movement, which varied widely in background, origins and political leanings, was demonstrating against a whole range of things: Third World groups from around the world against trade rules disadvantaging developing countries, human rights groups against the exploitation of child labour and against multinational corporations operating worldwide, women’s groups against appalling employment conditions in “world market factories” in exporting areas, environmental groups against free trade which threatened to turn ecological ruthlessness into competitive ­advantage, consumer associations against the worldwide spread of genetically modified foodstuffs, and left-wing groups against global “turbo-capitalism”, or “predatory capitalism” in Helmut Schmidt’s words. Even the international speculator George Soros was using such polemical terms.

What still unites the opponents of globalization with each other and with many contemporaries is fear of the dangers of globalization, either anticipated or already identified. They oppose “commercial terrorism”, which threatens to give competition and the profit principle supremacy over the social and ecological well-being of the world in the ideological name of neo-liberalism; and they criticize the oligopoly of the rich and powerful who attempt to hide behind police lines and democratic controls. Together they demand that globalization be shaped democratically according to the principles of justice and sustainability. They therefore deserve praise rather than blame - as long as they do not resort to violence.

Following Genoa, this global protest movement succeeded in stimulating a broader public debate about the opportunities and dangers of globalization and, as I experienced as a member of the German Commission of Inquiry (the “Enquete Commission”), its criticism was greeted more sympathetically than before. The NGO “Attac” even managed to have the “Tobin tax” on speculative currency markets, which had been so roundly condemned by bankers and by many economists and politicians, put back on the political agenda.

The following argument is crucial. Globalization cannot be stopped. It is a “megatrend” of world history. However, it is not a fated natural event but the result of an intentional political strategy, called neoliberalism, which was devised in the control centres of world economic and political power. All that can therefore be done is to set up social and ecological fences to pen in and tame this particular horse before it gallops away: in other words, to influence globalization by political means.

The Winners and Losers of Globalization

The apologists for globalization proclaim that they bring good news: liberalization of markets has the effect of encouraging growth, and more growth means a better standard of living. But where and for whom? The critics of globalization protest that its blessing only extends to the powerful in the world economy, is of benefit to few developing countries, and then generally only to the minority. An example of this debate appeared in the Süddeutsche Zeitung (of 29-30 September 2001): while the economist Carl Christian von Weizsäcker declared the globalized world market to be the “engine of prosperity”, the “opponent of globalization” Susan George contended that “profits are exploding; the poor are losing out”. Similar disagreements were argued out in the Enquete Commission on the “Globalization of the World Economy”.

The two sides have a plethora of data with which to back up their claims. And both sides need to be heard in political education. Globalization has winners and losers, both at state level and within the society, in North as well as South. It is an extremely ambivalent phenomenon, facing both ways like a head of Janus. On the one hand, it offers competitive threshold countries fresh opportunities in the increasingly deregulated world market, and on the other, it threatens yet further to marginalize whole regions economically and politically. This ambivalence makes it difficult to reach a balanced judgment.

The Human Development Report 1999 produced by the UNDP contains plentiful evidence of “globalization without a human face”. The image of a “global apartheid” of life-chances derives above all from the huge social disparities between the richest and poorest fifths of the world population. According to the UNDP, the gap in income between these two groups more than doubled in the four decades between 1960 and 2000. But can this growing inequality really be blamed on globalization?

Quite apart from all the factors impeding or even totally preventing development - wars, corruption, falling prices of raw materials, high population growth rates, AIDS and drought - the statistics themselves tend to exaggerate the increasing divergence between rich and poor. This can be seen in the following mathematical example: if annual income per head of around US $ 26,000 in the richest countries were to grow by a mere 1%, this would still mean 260 dollars; if annual income per head of around US $ 420 in the poorest countries were to grow by as much as 10%, it would still only amount to 42 dollars. It would therefore be wrong to apportion blame hastily on the basis of such calculations. Nevertheless, these figures do demonstrate the tendency for the poorest countries increasingly to lag behind development in other world regions.

Any answer to the question whether the South is losing touch also needs to take into account the three fifths that lie between these extremes. Globalization has the effect of excluding some and integrating others. The oil-producing countries are not losing touch. Their raw material is desperately needed by the industrialized countries, and they are becoming attractive export markets because of high foreign earnings; they are indeed catching up. The threshold countries in South and Southeast Asia, and in Latin America, have also not lost touch. They offer significant export markets and investment opportunities, and produce high-value consumer goods and foodstuffs, and some of them offer online services. India is both a poor region and a major software manufacturer training IT specialists who are in demand worldwide.

The threshold countries, or “emerging markets” in commercial jargon, are exploiting the opportunities offered them by an increasingly liberalized world market. But they needed to become competitive first by pursuing astute development policies. They have been the winners of globalization, and the industries that are no longer competitive here at home have lost out. Globalization calls for structural adjustment in the North as well as the South, and this has its social costs. The brutal principle of competition is “Adjust or die!” The rich societies, however, have more options and room for manoeuvre in making these adjustments.

Flows of Trade and Capital as Indicators of the Relative Positions of Groups of Countries

Capital flows are a good indicator of structural change in the world economy. They provide evidence both of the inclusion of economically attractive and politically stable parts of the South in the process of globalization and of the exclusion of losers in the global jockeying for position. The losers are located in Africa, in South Asia, in parts of Latin America and the Caribbean, and in the former Soviet Union. Of approximately US $ 200 billion flowing into the “South” in the form of direct investment in 1998, only 5 billion went to the Least Developed Countries (LDCs).

The bulk of direct investment flowed into a dozen threshold countries in the Far East and Latin America, the largest individual proportion going to China, the coastal areas of which are developing into a “super emerging market”. The mass migration of workers which this has set in train is typical of the worsening inequality in development between coast and hinterland, and is known by dependency theorists as “structural heterogeneity”. It is occurring wherever “global cities” are being created as focal points of development, with stronger links with the outside world than with their own hinterlands. The drive towards modernization is frequently restricted to small enclaves.

According to forecasts by the WTO and the OECD, almost all groups of countries will benefit from the liberalization of world trade - with the exception of the raw-material producing countries in sub-Saharan Africa, which can generally only export those raw materials after low-level processing, with proportionately little added value. While the successful growth and development in the Far East are largely due to the export of competitive industrial goods, the raw-material producing countries are lagging even further behind the expanding world economy. But they are not losing touch as a consequence of globalization. The cause is too little, rather than too much of a share in globalization, and the inability to hold their own in international competition.

Many developing countries are more marginalized from the world economy than at the time of decolonization. There is diminishing demand for, or an excess of, what they can offer - raw materials and cheap labour. Tiny Singapore, on the other hand, exports more in value terms than a country the size of Russia. The reason: it is no longer tons weight that matter in international competition, but kilobytes. Raw materials, the prices of which fluctuate widely and are tending to fall, have no future as a basis for development. This is not as a result of the dark forces of globalization, but of the simple mechanism of supply and demand. Development policy needs to help to improve international competitiveness.

Africa was already economically marginalized and dependent on drip-fed foreign aid before there was any talk of globalization. The vast majority of African states have not even been able to take advantage of the preferential trading arrangements granted them by the EU under the Lomé Conventions. The upshot is that Africa is increasingly losing touch with the expanding world economy and is reliant on survival aid from outside. Furthermore, the example of Mauritius, which has developed from a moribund monoculture based on sugar into a dynamic emerging market by exploiting the opportunities of globalization, demonstrates that the legacy of a colonial economy is not an insuperable obstacle. This achievement was made possible by a vigorous ­assault on structural problems rather than by development aid.

The Digital Divide

Development is a matter not only of flows of capital and trade but also of access to knowledge - alongside many other factors in the internal life of a society. There is a wide gap also in the field of communications between North and South, rich and poor. The Human Development Report 1999 calculated that the poorest fifth of humanity had access to only 0.2% of the Internet hosts available worldwide, and to 1.5% of telephone connections. High prices and charges have meant to date that only privileged minorities can share in the globalization of communications. On the other hand, mobile telephony is reaching remote ­villages, and giving them the opportunity to communicate with the ­outside world.

The marginalization of the poorest countries, and of the majority of their populations, is reinforced by limited access to modern communications technologies, which in turn reduces opportunities for development. This illustrates clearly what is meant by talk of simultaneous globalization and fragmentation. In other words, while the world may be more closely interconnected by global telecommunications, there are deepening divisions within the “global village”, that romantic vision of world society. This reveals another important new task for development policy: helping to spread new communications technologies outside the “global cities”. A start has been made, given impetus by both the World Bank and the G7 at their most recent summit meetings.

Intermediate Summary

Ralf Dahrendorf’s answer to the “common survival interests” of North and South posited in the Brandt Report was short and conclusive even then (i.e., in 1980): on economic grounds, the North had no need of large parts of the South. The question remains whether the North can afford on political and moral grounds to leave the poor regions of the world, which are also the wellsprings of crisis, to the consequences of naked commercial profit-and-loss calculations; can long-term political reason overcome short-term economic reasoning?

These questions became highly topical after 11 September 2001. The “holy warriors” of the jihad declared war both on the hegemony of the West in world politics and the world economy, on their own political disenfranchisement, and on the social polarization of world society. Social exclusion and political humiliation are the seedbed of all forms of radicalism.

The "New South" = "The Mass of the World Population"?

Thus, the question is whether and in what way globalization causes or accentuates poverty in the South. It is often described by the sociologist Ulrich Beck, who has written a whole series of publications on globalization, as “global social Darwinism”, increasing the wealth of the few and the impoverishment of the many. The economic and social geographer Fred Scholz has introduced the term “New South”, as a universal social category, to describe the “rest of the world”, and hence the “mass of the world population”, who are excluded from globalization. He depicts the following horror scenario:

“It can act as a dumping ground for all kinds of used goods and cheap products, and may sometimes be the recipient of alms and disaster aid and the target of military peace-keeping exercises... But this marginalized left-over world, the New South, will generally be doubly out of touch and left largely to its own devices. It will fret out its own internal contradictions and fragment through its own morbidity, and it will suffer from violence, poverty and backwardness.”

Does this social disaster in the “New South” really apply to the “mass of the world population”, as Fred Scholz maintains? The description is reminiscent of reports from the impoverished regions of Africa and South Asia, and from the slums of Manila, Cairo, Rio or Harlem, but the “mass of the world population” does not live in such dreadful conditions. Here too, globalization is blamed for all the misery in the world.

It is a horrific vision from the best-seller Globalization Trap that globalization must almost automatically lead to an 80/20 society, in which 80 % will be losers and only 20% winners. This prognosis may make a striking journalistic effect, but it is not backed up by sound analysis of the development trends that are already discernible. The success ­stories of the “Asian tigers” in the Far East are due not only to above-average growth rates, achieved principally thanks to increased exports generated by foreign companies, but also to their exploitation of export-led growth in order to implement active social policies. A good part of their success as exporters has been due to the opening up of markets and the inflow of foreign capital.

People’s impoverishment and exploitation cannot therefore be laid entirely at the door of globalization. It is being made a scapegoat for problems that are by no means new. Many accusations now being levelled against globalization used to have different targets: the world market, the IMF and the World Bank, the “multinationals”, and political and economic imperialism. Long before there was talk of globalization, colonialism had reached almost every corner of the globe and took what it wanted with force. Much of what is currently written about globalization is already to be found in Karl Marx.

Globalization from a Women’s Perspective

How has globalization affected the situation of women? For feminists such as Christa Wichterich (1998), the “globalized woman” is exclusively a victim in the global market place. In the World Bank’s view, on the other hand, women are among the winners of globalization since their employment rate rose markedly in the 1980s and ’90s. But this rising level of employment says nothing about working conditions. There are good reasons why the ILO (the International Labour Organisation) is no longer calling for “work for all” but for work for all that is “fit for human beings”.

Firstly, additional jobs for women have been created in the 600 or so export zones or “free production zones” set up by many developing countries with low wages and appalling working conditions. According to the findings of the ILO, 70% of these workers are women, usually young women, and the proportion is nearer 90% in the labour-intensive textile factories manufacturing cheap textiles of all kinds for the West. Members of local trade unions bemoan the exploitation, but ­accept it through gritted teeth for want of any alternative, and fight for small improvements such as shorter working hours, re-employment after sickness or childbirth, and freedom for trade unions to operate.

Secondly, globalization encourages female migration: the international trade in women that sells hundreds of thousands of women from the poor regions of every continent into prostitution. Worldwide, according to conservative figures from the German Federal Office of Criminal Investigation, around 200,000 women and girls are sold every year to other countries as brides, cheap labour and prostitutes. Terre des Femmes puts this figure as high as a million.

Thirdly, women carry the burden of providing for the entire family if the husband is unemployed or underemployed and is either unable or unwilling to earn a living wage. Women have been and still are the victims of structural adjustments, where these have led to the abolition of basic social services. The “feminization of poverty” cannot be blamed solely on globalization, but it has certainly contributed wherever women form a reserve army of labour for underpaid activities, and the ability to exploit them has become an accepted advantage in global competition.

However, feminists themselves see the international women’s movement as providing effective shock troops for “globalization from below”. The “globalized woman” is fighting back against grinding globalization, and is starting to take control. The Indian sociologist Shalini Randeria, who teaches in Berlin, has stated for example (1998) that: “The international women’s movement is among the political forces helping to shape counter-hegemonic globalization.”

The Ecological Dangers of Free Trade

Ever since the appearance of the classic work by Adam Smith (1723-90), The Wealth of Nations, it has been part of the creed of liberal economic theorists and politicians that export trade which is largely free of state intervention and protectionist measures is of advantage to all traders. If free trade produces wealth for all, why were there such militant protests in Seattle and Genoa against further liberalization of world trade? Environmental groups from around the world united because they believed that unfettered free trade would exacerbate global and local environmental problems. Ecological criticism of free trade, encouraged by globalization, focuses on the following, already discernible developmental trends:

Firstly: Growing economic activity and wealth go hand in hand with take-over of land, higher consumption of energy and raw materials, and emission of greenhouse gases. If growth is the declared aim of liberalization of trade, and competition prevents states from restricting the use of resources, then globalization is helping to exacerbate the global environmental crisis that is going to affect the South more than the North. The head of UNEP, Klaus Töpfer, therefore speaks of “ecological aggression by the North against the South”.

Secondly: The expansion of world trade through the removal of trade barriers leads to far more transport activity by land, sea and air. The revolution in transport has reduced the costs and time required for transportation, but has increased damage to the environment through higher CO2 emissions, which are one of the main causes of the greenhouse effect. The internationalization of production, brought about by the division of its stages between locations widely dispersed across the globe, leads to much greater use of transport. Many products have already travelled long distances, some parts further than others, before appearing in the shops here at home. The growing mobility of people and goods across a multiplicity of borders is both a feature of globalization and a serious ecological problem.

Thirdly: Increased international competition may lead to “eco-dumping” if lower spending on environmental protection can give a particular location a cost advantage. Many developing countries competing for foreign investment are prepared to offer themselves as homes to “dirty industries”. Domestic and foreign businesses are then able to produce with little environmental expenditure and to export more cheaply. This is a distortion of competition, making eco-dumping a competitive advantage and penalizing those who invest in environmental protection. This is particularly the case in industries such as iron and steel, engineering, chemicals and paper, which cause high levels of environmental damage. The Far Eastern “tigers” owe a good proportion of their competitiveness to this ecological ruthlessness, which is in stark contrast to the model of “sustainable development”. The conflict of interest between free trade and environmental protection will only cease if the external costs of environmental damage are reflected in prices, i.e. “costed in”.

Fourthly: The liberalization of international trade in agricultural products promises exporting countries higher profits but causes them to develop ecologically disastrous monocultures, to overexploit their natural means of survival, and to neglect the domestic provision of food from their own resources. For example, the terrible forest fires in Borneo, which were responsible for a third of the world release of CO2 in 1998, were attributable to plans by the Nestlé corporation to grow palm oil on the burnt-out areas. The agriculture agreement sponsored by the WTO which opens up developing countries’ agricultural markets threatens the livelihoods of many millions of small farmers, who have until now been supplying basic foodstuffs to local markets.

The question is whether all these environmental sins can be blamed on free trade and globalization, or rather on irresponsible actions by states, companies and consumers. Long-distance trade can only grow if there is a demand. Unenlightened consumers in the “OECD world” are after all demanding cut flowers, grapes and strawberries in the winter from sunnier regions of the world.

So far, trade protectionism has generally only brought harm to developing countries without doing much for the environment. Developing countries and environmental groups in the South therefore treat the debate about the internationalization of environmental norms with great mistrust. What they want from a new world trade order is not the imposition of social and ecological restrictions, but the creation of fairer conditions of trade, the removal of protectionism (especially the EU’s agricultural protectionism), a greater share in the profits from trade that flow to the beneficiaries of the WTO, and indeed more influence within the WTO, which they suspect of being an instrument of Western interests like the IMF and the World Bank.

Globalization and Human Rights

Human rights groups fear that globalization may undermine all the progress made in establishing a package of human rights as the norm. Social rights are undermined by deterioration in living and working conditions, women’s rights by greater exploitation in “world market factories” and the growing intercontinental trade in women, and children’s rights by the expansion of child labour and child prostitution. According to the 2001 annual report of Amnesty International, the growing economic pressure brought about by globalization in all societies poses a systemic threat to human rights. Are these fears justified?

The opening up of markets for capital, goods and services, and competition between locations, have weakened the ability of states to impose minimum social standards and have strengthened the negotiating power of multinational corporations. Their transnational structure also weakens the power of national trade unions to organize.

Social rights are intended to humanize globalization, but they have little regulatory power, while the power of capital, which is driving globalization forward, is enormous. It is certainly true that “multinational-bashing”, as still practised by large parts of the “Third World movement”, does not do justice to the behaviour of some thoroughly responsible “multinationals”. They are not all ruthless exploiters that will climb over corpses if they have to, as in the example set by Shell in Nigeria. But nor is the position regularly taken by Hans-Olaf Henkel, the President of the Federal Association of German Industry (BDI), quite that clear-cut: “Democracy, the market economy and human rights belong together like equal sides of a triangle.” In the “New South”, experience tells us that this equality is not always in evidence.

It has become evident, however, that globalization can also stimulate democratization, “good governance” and decentralization:

  1. Globalization has made not just the market economy, but democracy as well, the universal model, and is placing dictatorships under pressure to justify themselves. The “open skies” of global communications ensure that the message of human rights cannot be kept out of their territories; they produce more freedom of information than all the human rights conventions put together.
  2. Nation-states are called to account internationally in the same way as companies operating worldwide, because their actions are increasingly measured against standards applicable globally. The media, reporting from the entire world, are creating a world public, which is feared by both dictators and powerful “multinationals”. This “CNN factor” has a powerful influence on international relations, and not only in times of war.
  3. NGOs networking across borders are increasingly intervening in issues concerned with human rights, the environment and development in states’ domestic and foreign policy, and are using the legal force of international agreements to exert pressure on governments. By means of sophisticated campaigns and international networking, they have persuaded a growing number of companies to make voluntary social and ecological commitments. Exploitative child labour has, for example, been restrained by civil society watchdogs and “biting dogs” as much as by the UN Convention on the Rights of the Child. World politics has not yet been “NGO-ized”, but private agencies are intervening effectively in world politics, with the result that UN General Secretary Kofi Annan has spoken of a “silent revolution” taking place behind the scenes in the rituals of state relations.
  4. Because overstretched central governments can no longer control everything from the “top down”, there is growing room for manoeuvre for regions, groups and individuals. New political networks have come into being at all levels of political action, in which state and private agencies are looking for joint solutions to problems. Politicians and bureaucrats have recognised that they need the management potential of companies, the knowledge of academics and the committed involvement of the civil society. Politics no longer functions as it did in Bismarck’s day. Centralized institutions are facing calls for decentralization everywhere. “Top-down” is out, “bottom-up” is in.
  5. The pressure of globalization has also fostered various regional ­cooperation and integration projects, which enable weak forces to combine. Africa too has made another attempt to free itself from its powerlessness by setting up an AU (African Union).

There are Ways of Escaping the “Globalization Trap”

Given its many potential dangers and advantages, it should be evident that it would be as unwise to condemn globalization out of hand as to romanticize it uncritically. It is neither the work of the devil nor a gift from heaven, either in North or South. Equally, lamenting the “powerlessness of politics” is of little help. Such defeatism may even provide an excuse for failure to do what is obviously needed.

The globalized economy needs a social and ecological framework, which can only be given it by globalized political action. This must produce agreements on binding social and environmental norms which can prevent even global “predatory capitalism” from making as much profit as possible at the expense of people and the natural world. It is the task of politics to shape globalization according to a normative yardstick of global well-being that will prevent the supposedly inescapable fate so horrifically described by the two authors of the Globalization Trap. Many people are therefore now turning their attention to “global governance”.

The Vision of “Globalization with a Human Face”

The Human Development Report 1999 speaks first of “globalization without a human face”. Millenarian auguries of disaster warn apocalyptically of “global war of all against all”. But the UNDP report also sets out a vision of “globalization with a human face”, which would aim at:

  • fewer violations of human rights
  • less inequality between and within societies, generations and the genders
  • less marginalization and exclusion of countries and people in inhumane living conditions
  • less insecurity of income and vulnerability for people and countries, and hence more “human security”
  • less environmental destruction that will leave future generations with irreparable damage, less wastage of diminishing resources, and more sustainability of production and life styles

The message from the UNDP is unmistakable: “Strong political control is required in order to secure the benefits of globalization for the well-being of people and not merely for the sake of profit.” The motto must therefore be: Stop moaning and influence politically what cannot be prevented. Development policy must be reborn as “global structural policy” in order to help the “halt and lame of the world economy” to take advantage of the opportunities of globalization. What is needed is solidarity between the strong and the weak, within regions as well between regions.

The guiding model is provided by a social market economy which does not rely solely on the “unseen hand” of the market. Even Adam Smith, the prophet of liberalism, realized that the market must be set within a regulatory framework so that its constructive energies can flourish. What applies at the national level must now be transferred to the ­global economy and global policy. This is precisely what is meant by “global governance”.