Amis UK Conference Globalisation: In Whose Interest?
Conway Hall, London, 17 June 2000
We are asked two questions: who benefits from the globalisation of markets, and what are the effects of globalisation on democracy? Let me first define globalisation very quickly. I think if you just say 'globalisation', it's a slogan; it's not a concept. So I always try to say corporate-led or corporate-driven globalisation, because this is a process in which the transnationals are deeply engaged. So I'll give two very quick answers to those questions, and then try to approach them from a slightly different angle. The first question: Who benefits? Well, it's the top 20 percent and especially the top one percent, in any given society. Forbes has just published its new list of billionaires, and we can all cheer because we're up from 465 billionaires in the world to 482. The top 200 of them have $1.1 trillion of assets, and the top three have got the equivalent of the wealth of the 48 poorest countries, so I think we can say that globalisation is pushing wealth upwards A quick answer to the second question: What are the effects of globalisation on democracy? Well, in one word, they are negative. The power of the transnationals and their lobbies is increasing, and the power of unelected institutions like the IMF, the World Bank and the World Trade Organisation is also increasing. So just as globalisation pushes wealth upward, it pushes power upward.
Now, I'll use my remaining eighteen minutes to approach these questions from a slightly different angle. This is supposed to be a debate, and so I'm going to try to engage it right away in the terms of a debate. I think there are several things that all four of us could agree on, but not on everything. We used to criticise the IMF on the grounds of the social and environmental outcomes of its policies, and it always would reply by saying, 'We are not a development institution.' But now, for a few months now, the IMF has declared that its main goal is poverty reduction, and I think we can welcome that, but it is, in some way, a kind of admission that at the very least, its policies up to now haven't worked. I think we all agree, therefore, that we want to reduce poverty, that the present levels of poverty in the world are a global shame, and have got to be reduced. We can probably all agree, also, on the fact that we need global public institutions to contain prices and to enhance democracy. But beyond that, I think we've got a completely different analysis, and a deep disagreement on how to reverse poverty and reduce it, and on what kinds of institutions we need at the global level. And I think that our disagreement is based on empirical, on analytical, and on political grounds.
The analysis: The opposite side always tells us that the rising tide raises all boats. I would reply that certainly the rising tide raises all yachts, but I'm not sure that everyone's got a boat, and I'm not sure that the boats they have are not extremely leaky. There are inequalities that are immesurably growing. They might say: globalisation, if allowed to proceed far enough and fast enough, can include everyone. Our side would say: probably worldwide, two thrirds of the people on earth are left out and will remain left out of this process, for the reasons of wealth concentration that I mentioned before. We think it's going to get worse. Recent studies at the UN University have shown that 85 percent of the people now alive in the world are living in countries where inequalities are increasing. [Another organisation], a couple of years ago, published quite revealing figures on inequalities which are occurring in practically every country. They based this on some 2600 empirical studies. And if I can just some special attention to my own country of origin, the United States, I'd like to tell you that the CEO of a major company is making 419 times as much as his average worker. It was 326 times only three years ago. Since 1990 inflation has increased by 22 percent, and workers' average annual wages by 28 percent. But corporate profits have gone up by 108 percent, the Standard and Poor's stock exchange index by 224 percent (that's less than the Dow), and if workers had been rewarded like their chief executive officers, the minimum wage in the United States today would be $22 not $5.15, and the average worker would be earning $110,000 a year, and not $23,000. If you're an American working at the minimum wage, you're working 40 hours a week, and 52 weeks a year, therefore no holiday; at the end of the year you've got $10,700, which is 40 percent below the poverty line for a family of four.
And just one word about Russia. This is not me, it's quoting from Joseph Stiglitz, who used to be the chief economist of the World Bank, before he was gently eased towards the door. In Russia, more than 50 percent of the people are impoverished, versus just 2 percent ten years ago, and GDP is just 50 percent of where it was.
I have no particular grief for of the Soviet Union, but we also know that life expectancy since the Wall came down has diminished by seven years for men in Russia. So I think we are absolutely opposed to the analyses of the Bank and the Fund as far as inequalities are concerned. And just let me finish this this chapter by quoting the CEO of a very large company called Lucent Technologies, in the US He says, 'This is going to blow up in our faces. There is no way a society can have this much of its accumulated wealth distributed to these few people.'
And also, I think, as you probably all know, inequalities between countries, not just within them, have grown also, enormously, and they've grown a lot faster in the period which began the globalisation period. If you take two periods, 1950-1973 and then 1974 to the mid-90s, what you find is that growth was much higher in the first period, which is to say before the onset of neo-liberal policies, before countries were told that they had to tear down all their regulations, open their borders, have no capital controls, etc. And during that first period, 1950-73, the spread between rich and poor in the share of global income rose from 35:1 to 40:1. That's already very unequal. But in the second period, this rich-poor spread went from 40:1 to 74:1, and it's still rising. So what we're seeing here is that the top 20% is consuming, in another way to put it, sixteen times as much as the bottom 20%. The other side, I think, would point to the recoveries in Asia, because Asia was the only area which was growing a little bit faster in the second period compared to the first. All the other areas of the world grew much faster 1950-73, but Asia was slightly higher growth until the crisis of 1997-98. And now we see every day talk of recovery. However, the human recovery is going to take a great deal longer than the recovery of GDP.
In Indonesia an extra 40 million people, which is 20 percent of the population, have slipped below the poverty line. Health budgets have dropped by 10 percent in the Philippines and Thailand. Domestic violence is up by seven times in Korea. Throughout Asia, suicides have increased by about 50%, etc. And by the way, this is not very nice for Mr Larsen, but I'll say it anyway: these are referred to in the area as 'IMF suicides', because people perceive that their loss of employment and of livelihood is due to the structural adjustment policies of the IMF.
But it's not just the inequalities. There's more to life than the GDP. And here I do want to something about the environment, which usually is not integrated into analyses of economics. Here I have to say that the policies that are in place now are simply not sustainable, and they're destroying livelihoods all the time. When the IMF demands the reduction or the abolition of export taxes, what happens? Well, in Cameroun, the result is fifty percent more exports of raw timber. In other words, much higher rates of deforestation. And it's also the case for the most highly indebted poor countries, which have a much higher rate of deforestation than other countries. Export crops have been encouraged to the detriment of food crops, and in order to comply with structural adjustment policy demands, environmental budgets either disappear or are drastically reduced, in Brazil by two thirds, in Russia by forty percent. There are no more programs in cities in Indonesia, etc., etc. And the World Bank is still spending 40 percent of all its loans on a portfolio of oil, gas and mining. It's also financed the water privatisations in Bolivia, which led to higher water rates, to riots, to several deaths. If the Bank wanted to, its spending on energy alone could bring down the price of solar and renewables to a level of competition with fossil fuels, but it doesn't choose this avenue, and it's still spending 25 times as much on fossil-fuel projects as on renewables.
So we think that the present policies are leading to untenable social polarisation, and ecological devastation. Now, very quickly, the second question: What about institutions and democracy? What are the effects of globalisation here?
Well, we see [that] the major institutions, the major players in the power game, are transnational corporations which, in proportion to their size, provide very little employment. The UN says that there are now fifty thousand transationals, no, I think it's sixty thousand this year, with about half a million affiliates. Taken all together, these companies, which have sales which amount to at least a third of the world's product, only provide employment directly to about sixty million people. Now, let's be generous, and say each one of those jobs leads to two more jobs indirectly somewhere else in the economy. That's still only 180 million people, and that's well under 20% of the world's available labour force. In other words, transnationals are never going to solve anybody's employment problems.
They are also going the road of very high concentration, in other words, increasing their power. Eighty percent of everything that is called 'investment', and I put the word in quote marks, is not investment at all, it's just mergers and acquisitions of other companies. These companies are much larger than most countries. If you take the list of the first 100 economic entities in the world, 51 are corporations; only 49 are states. So General Motors and General Electric are much larger than Poland. Mitsubishi is much larger than Saudi Arabia, etc., etc. And these corporations are largely above the law. They don't take responsibility for their actions, as we could see very well with Bhopal (Union Carbide), with Shell in Nigeria, and most recently with TotalFina for the oil spill in France. They can put themselves above the law. I don't really have time to go into the question of financial transnational corporations, only to say that the pension funds, the insurance companies, the brokerage houses and the commercial banks are now handling about 28 trillion dollars a year. [This was[ the figure in 1995, from the Bank for International Settlements. I don't know the figure today; I would suggest that it is at least twice that much, but I can't prove it. This is a figure which is almost unimaginable; it is almost equal to the total GDP of the world. So these companies are able to demand an enormous return on capital: 15% annual return on capital is not a very high figure for them.
Now, how is this power expressed? Well, the transnationals don't want to express it directly, by actually being seen to take over governments. What they do is to use lobbies. There is a whole alphabet soup of lobbies which are not very well known but extremely effective, like the European Round Table of Industrialists (the ERT), 47 European CEOs who have the ear of the European Commission, are very good at introducing their demands at various levels. We've got the Trans-Atlantic Business Dialogue (the TABD) of CEOs from both sides of the Atlantic, also very busy at the highest levels of policy. The US Council for International Business, where Pascal Lamy spoke only last week, in order to tell them that he really wants to get investment back on the agenda of the WTO, but we've got to do it with enormous care, he said, because we have been through the period of the Multilateral Agreement on Investment, which was of course defeated by militant forces. So we must exercise enormous care, but he wants this to be on the agenda, and he and his staff also expect health and education to be on the agenda of the WTO, and they're working for that. Charlene Barshevsky, the US special trade representative, has got 24 different committees made up of transnational corporations, which include 800 representatives of only companies. When the US environmental movement sued the government, saying, 'We want to be at least on the committee for pulp and paper,' they were given the nod by the federal judge, he said that they were right, and the government appealed this decision; they really only want to listen to the transnationals.
Official institutions (the lobbies are the unofficial ones): official ones, also unelected, also extremely powerful: the Fund, the Bank, the World Trade Organisation, which have helped with massive privatisations throughout the world. I would say that they are devastating the environment with their Structural Adjustment Policies; I have mentioned that. Since they encourage (the Bank and the Fund) everyone to export flat out, and since many countries have only basic commodities to export, you don't need a PhD in economics to understand that that's going to mean much lower prices for everyone, because there are masses of goods on the market at the same time. So we shouldn't be surprised that commodity prices are down a further 20% between 1997 and mid-1999 and at secular levels, in constant dollars; it's the lowest level they've been at in 150 years. So perhaps SAPs will be our greatest area of disagreement; that remains to be seen. But here I would just like to say that many of us - Bernard, me, but hundreds of our colleagues - have written hundreds of studies, books, made films, had conferences. We have spoken about the human devastation of the SAPs. None of this has done any good at all. And I am sorry to say that I really feel now that one has to put it in these terms: there is no degree of human suffering, however great, which in and of itself is going to force changes in policy.
The IMF was capable of saying to Mozambique this year, [to] Mozambique, one of the poorest countries in the world, devastated by floods: all right, you don't have to pay $100 million in debt service this year, only $73 million. Personally I find that obscene, and I am sorry to come to this conclusion, but one does sometimes have to speak about economics in moral timers.
The WTO is trying to commoditise everything; it's making its rules in order to do this. One third of all of what we call world trade is carried out between subsidiaries of the same company, and another third is carried out between subsidiaries of different transnational corporations. So in fact we're talking about making rules, very large rules, in favour of transnational corporations. Now, the opposition will say: but trade increases wealth, and wealth increases welfare, and when you've got more wealth, then you can start to concentrate on the environment. I know these arguments, but I would counter that the externalities are never counted. We are never told how much the transportation is polluting. We're not told about the other polluting causes. We're not told about the depletion, and we're not told about the livelihoods that are destroyed. For example, free exports of US grain to Mexico under the NAFTA agreement have resulted in the ruin of millions of small Mexican peasants, who have gone to the cities as a result, because they can no longer make a livelihood in farming. Who is counting those costs of free trade?
Naturally, there's a backlash, and I say, thank God there's a backlash. Very often, I think, on the other side, they think: well, we haven't explained our policies well enough, and if only you understood what we're doing, then you would be on board. This is the argument of the Commission now; they think they haven't explained their trade policies well enough. On the contrary, we understand their policies only too well and we think they're wrong.
So let me distinguish, in conclusion, between what I would call Davos Man, sort of the way you say Neanderthal Man, and Seattle Man and Woman. You can say Davos Man, because they only are men, basically, but you can say Seattle Man and Woman. And these two are warring species. These are species which, under present circumstances, are not going to get along. Seattle Man and Woman say that globalisation isn't inevitable, that it is made by certain rules which can be dismantled, and we can make other rules which would lead to a more fair and more just world, because we believe that the present rules - and that's why we're protesting, and that's why we're coming to debate in circumstances like these - we believe that the present rules are socially polarising, ecologically devastating and unsustainable, and democratically unacceptable.