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Improving the rules of the game of globalization

The Jakarta Post, 20th Anniversary Special Edition, 25 April 2003
Progress With Indonesia – Trade and Industry section
http://www.thejakartapost.com/tib17_1.asp

Yanuar Nugroho

From the Asian Social Forum at Hyderabad, India, in January 2003 to the World Social Forum at Porto Allegre, Brazil, in February 2003, held as the alternative to the World Economic Forum in Davos, strong criticism – if not rejection- has been leveled at the current practice of globalization.

But which practice?

Many facts show us that globalization, like everything else under the sun, is inherently ambivalent. On the one hand, it brings prosperity, comfort, convenience in the form of economic growth, technological advancement, more open and democratic governance, and so forth.

But on the other hand, there are vast amounts of casualties from its progress, which only benefits some groups or countries.

Some simple statistics from EcoFuture in 2002 highlight the disparity between the haves and have-nots of our world. As a percentage of the world’s population, Americans comprise only 5 percent, but they consume 30 percent of the world’s resources.

The amount of energy used by one American is equivalent to that used by three Japanese, six Mexicans, 14 Chinese, 38 Indians, 168 Bengalis, or 531 Ethiopians.

Thus it is not exaggerating to say that a person in the United States or other rich developed countries causes 100 times more damage to the global environment than a person in a poor country.

Average annual income of the 3.3 billion people in the global “middle class” is now around US$700-750 and average annual income of the 1.1 billion people in the global “consumer class” has reached over $7,500. But, according to the New RoadMap Foundation, this consumer class takes home 64% of the world’s income! Globalization is here to stay, but we must end its current patterns and practices that neglect everything else for profit accumulation alone. The concerns expressed by many about the overall current globalization process must be acknowledged and addressed in any development model.

We must recognize that these concerns are real and can affect the daily lives of millions, even with the inescapable fact that we cannot turn back the clock on globalization. Technological advances that have fuelled it cannot be shunted aside, and restrictions on unimpeded access to information and communications technology, for example, will ultimately be self-defeating for those who try to impose them.

The question is how to start. Many suggestions could be made, but going directly to the structure and the system of “decision-making” in these whole worldly dynamics might be more helpful. Take the graph below.

voting-power-at-the-imf.jpgvoting-power-at-the-world-bank.jpg

With 80 developing – or poor — countries controlled by the International Monetary Fund (IMF) through the International Development Association, the “hospital” for those suffering from severe financial crises, there is practically no power for them to change the current pattern and practice of globalization being imposed.

A cursory examination makes the so-called participation of poor nations appear encouraging. Developing country membership in the World Trade Organization has risen rapidly in recent years to a total of 110 states.

But membership does not equate with influence. Many developing countries have limited or non-existent representation in Geneva.

A case in point: 19 of the 42 African WTO members have zero representation. Many other developing countries lack the technical capacity to negotiate meaningfully. Too often, the rules of the game are set by the rich and the better-prepared developing countries.

And where the rules have already been set- for example in the case of customs valuation procedures–they have often been based on developed country models, which can be inappropriate and prohibitively expensive for poor countries. In fact, many WTO signatories have been unable to comply with agreements negotiated under the Uruguay round.

We must go beyond the clichid and irrelevant debate on ‘for or against’ globalization. Thus, it is the challenge to us to harness the positive aspects of globalization in the cause of development and poverty reduction, and to offset its negative aspects for those adversely affected.

The motto cannot be “there is no alternative” a.k.a. TINA, but, “there are thousands of alternatives”, or TATA. It is that another world is possible, another practice of globalization is possible – that is the globalization with a human face, one that is inclusive, promotes social equity and works for the poor.

If we are to have a balanced and inclusive world trading system that attracts the adherence of developing countries, much needs to be done to enhance their capacity to participate in the rule-making process, moving away from the “one size fits all” approach to the rules themselves, a fact acknowledged by the World Bank in 2002. This move will be to ensure that their implementation does not place unreasonable financial and technical burdens on those least able to bear them.

We need to work with others on issues and solutions. This means partnerships within countries; partnerships between countries and their external supporters; and partnerships among these external supporters themselves.

Globalization properly conceived means much more than merely market integration; it also means and requires working together toward agreed solutions to global problems. And these solutions need to be developed in a cooperative and transparent way that explicitly includes the priorities of the poorest countries and their peoples.

More generally, we need an increasingly inclusive approach to development issues in general and to poverty reduction. And more particularly, fair trade, as the heart of our “new” globalization, must be the foundation stone of all our business practices and trading works in an increasingly interdependent 21st century world.

At this point, we need to (re)start our understanding on the ongoing process of globalization nowadays which has started to undermine life. Our total world GDP is estimated at US$30 trillion per year and total value of export-import scale is $6.2 trillion annually. But, the whole value of stock and capital markets is worth between $180 trillion to $200 trillion per year! Thus there exists a “virtual value” of world production as much as $150 trillion to 170 trillion, which means two things.

First, the old and conservative concept of added value must be accompanied by virtual value, if we do not want to lag behind the history of modern economics. On the New York Stock Exchange (NYSC) in 1995, for example, the price for Coca-Cola brand shares was $80 billion, compared to its physical assets of $35 billion at the time from its total capitalization of as much as $115 billion.

Clearly, this virtual value was much higher than physical assets of the company itself.

Second is that the concept of power, particularly power of capital, should also be renewed.

Back to the NYSC, where its capitalization (virtual) value is now more than $17.2 trillion per day. Compare this to the gross domestic product (GDP) of the United States, which is only $10.3 trillion per year and the combination of the GDP of 12 EU countries as $9.5 trillion per year. The speed and power of “fooling around with funds” from this capital market is 11.5 trillion per day per 80 countries. This fact shows that the state, held up to the power of capital, is decidedly more powerless.

It is thus a clichi to say that democracy is only targeted at “the state power” since the forms and socially consequential exercise of power are shifting. The biggest irony in our time is the fact that the “power of capital” has escaped from the criteria of public accountability, toward which it has been applied to the “power of the state/government”.

The irony is from the premise that power is involved within the whole process of our shared life. Without this, democracy would lose its raison d’jtre, for it is substantially an idea or movement to make any socially consequential exercise of power accountable. Thus, we cannot allow the sundering process of ownership/property from its relationship with power, since there is no property which does not involve power, and vice versa.

What must be stated is that any socially consequential exercise of power based on private property should not escape the democratic criteria. Perhaps we should pay more attention to the fact that what is most influential in our societal life nowadays is not only the dictatorship of the state, but rather oligarchic domination of capital -or even the combination of both.

Improving the rules of the game is itself an ambitious vision.But we must work to realize it if we are to go forward together into a new century in which the long pent-up aspirations of thepoor of the world are to have the chance for fulfilment that they deserve.

Technology and its consequences are increasingly linking us together into one world. But this “one world” cannot remain split along a fault line that separates the lives and aspirations of the rich and the poor. Technological progress alone will not bridge the divide.

Rather, our sense of common humanity must be the shared bond and the driving force that makes us also increasingly of one mind, and part of one united endeavor, in the development enterprise that we all serve.

The writer is the Director of The Business Watch Indonesia, a lecturer at Sahid University Surakarta and a researcher at Uni Sosial Demokrat, Jakarta

  1. andres
    Monday, 30 July 2007 at 8:36 pm

    Good

  2. Saturday, 10 November 2007 at 1:28 am

    andres, thanks!

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