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Globalisation – opportunity or obstacle for development?


10/2003
  

Globalisation –
Opportunity or obstacle for development?

[ By Franz Nuscheler ] At the international conference "Development – Myth or realistic political goal" held from July 2 to 4 in Brühl, Franz Nuscheler presented a bundle of highly condensed theses answering four key questions and highlighting the dilemma of North-South politics. D+C prints a slightly abridged version.


1. Question: Is globalisation an obstacle to development or an opportunity for poorer countries?

This was one of the most contentious issues in the commission set up by the German Parliament to study the "Globalisation of the World Economy". Even the international organisations do not agree. World Trade Organisation and World Bank stress the positive effects of globalisation; in reports by UNDP and UNCTAD – where Third World countries have a louder voice – the predominant view is critical.

From globalisation's apologists we hear glad tidings: the global liberalisation of markets, they say, is promoting growth, and more growth means more affluence. But where and for whom? Globalisation's critics, on the other hand, claim that its blessings are bestowed only on the strong in the world economy; few developing countries profit, and where they do, the benefits are often confined to minorities. In an exemplary row in the daily Süddeutsche Zeitung, Cologne economist Carl Christian von Weizsäcker hailed the globalised world market as a "generator of affluence"; Attac activist Susan George begged to differ. "Profits boom," she said, "the poor lose out."

Sociologist Ulrich Beck, a man with a number of publications on globalisation to his credit, speaks of "global social Darwinism". And Nobel Prize-winning economist Joseph Stiglitz endorses this critical appraisal in his book "Im Schatten der Globalisierung" (In the Shadow of Globalisation). He, too, sees the industrialised and newly industrialising countries as the winners and the majority of developing countries as the losers in the globalisation stakes.

The tricky thing is that both apologists and critics can produce a wealth of data in support of their arguments. It is now verging on the banal to state that globalisation has winners and losers, both at international level and within societies, both in the North and in the South. On the one hand, it offers competitive threshold countries new opportunities in increasingly deregulated global markets – although not in the agricultural market, which is important to many developing countries; on the other, however, it threatens to push whole regions onto the economic and political sidelines.


Globalisation without a human face

The UNDP Human Development Report 1999 presented a wealth of data painting a picture of "globalisation without a human face". The graphic image of "global Apartheid“ defining opportunities in life refers mainly to the big social disparities between the richest and poorest fifths of the world population. According to UNDP, the income gap between these two groups more than doubled between 1960 asnd 2000. But can the blame for this growing inequality really be laid at the door of globalisation?

Quite apart from war, corruption, the breakdown of government in "failed states", falling raw material prices, rampant population growth, AIDS and drought –the mechanisms of statistics are also geared to widening the gap between rich and poor. If per capita income in the richest countries were to rise by just 1% a year from the roughly 26,000 US dollars at which it stands at present, growth in monetary terms would be 260 dollars. In the world's poorest countries, however, where annual incomes average 420 US dollars, even 10 percent growth would only produce another 42 dollars. So it may be rash to apportion blame on the strength of such statistics. Even so, they show there is a tendency for the poorest countries to be increasingly left behind by development in other regions of the world.

The threshold countries are taking the opportunities offered by an increasingly liberalised global market. To get in a position to do so, however – as the success stories of South Korea, Taiwan or Mauritius show – they had to craft a clever development policy to enable them to become competitive. They were winners in the globalisation stakes; but the losers also included non-competitive industries in this country. Not just in the South but also in the North, globalisation requires structural adjustments, which carry a heavy social price tag. The brutal rule of competition reads: adapt or drown!

Capital flows are good indicators of structural change in the global economy. Of the substantial direct investment that have flowed to the "South", only crumbs have found their way to the poorest countries. The reason is simple: capital does not go where there is nothing to be earned and where investment risk is heightened by political instability. Most direct investment has gone to a dozen threshold countries in the Far East and Latin America, the lion's share of it to China, in whose coastal regions a developmental "super threshold country" is taking shape. The example of China shows increasingly unequal development between coastland and hinterland, as a result of which a tide of millions of migrants has been set in motion. Global Cities are developing everywhere as poles of development better networked with the outside world than with their own hinterland. The thrust of modernisation often remains confined to small enclaves.


Who will benefit from increasingly deregulated global trade?

According to forecasts by OECD and WTO, nearly all groups of countries will profit in one way or another from the liberalisation of world trade – with the exception of the countries of Subsaharan Africa, which can only export raw materials at a low stage of processing with little added value. The trade commodities they can offer to the world – raw materials and cheap labour – are either available in abundance or in dwindling demand. So what is at play here are not sinister powers of globalisation but the plain old mechanism of supply and demand. What counts in international competition today are not tons but kilobytes.

In its study on "Trade, Growth and Poverty", the World Bank showed a correlation between a country's integration in the world economy and its economic growth. In most "globalising" countries, the study also noted a reduction in poverty rates. However, according to another World Bank study („Globalisation, Growth and Poverty“, 2002), the biggest hindrances to the global market integration of poorer developing countries are the agricultural protectionism of the OECD countries and the customs barriers erected against textile imports. In these areas, of all places, areas of vital significance for many developing countries, free trade does not exist. The next WTO round needs to deliver a breakthrough here or its free trade principles will lose all credibility.

Africa was on the world economic sidelines before the word 'globalisation' was even coined. It was not globalisation that "pushed Africa further down the stairs", as South African writer Breyten Breytenbach puts it, but an inability to market competitive products which are in demand, offer incentives to investors and create legal stability. I share the view of Nelson Mandela and Kofi Annan that Africa should not always look for scapegoats outside Africa.


2. Question: How should and how can globalisation be shaped politically to permit fairer development?

This question actually comprises three questions, which cannot be answered fully in just a few words:
1. the strategic question of how globalisation should be politically moulded;
2. the analytical question of how it can be shaped given the global balance of power;
3. the normative question of how fairer development could be achieved in the global community.
In their attempt to define the concept of global governance, the parliamentary commission on "Globalisation of the world economy" and the Development and Peace Foundation (SEF) in Bonn came up with three answers to the first of these questions.
1. Shaping globalisation politically means stepping up international cooperation because global community tasks such as the achievement of Millenium Development Goals can only be accomplished by joint efforts. All societies are affected to some degree by misguided development. This is why the Brandt Report more than two decades ago spoke of the need for a Weltinnenpolitik, or global domestic policy.
2. Making this possible will require not just an increase in ODA but first and foremost the creation and implementation of rules geared to the concept of a socio-ecological market economy. Regulatory bases for this are provided by the social human rights enshrined in international law and the so-called Rio conventions on global sustainable development.
The need for a global structural policy
3. The study commission and the federal development ministry BMZ have embraced the concept of a "global structural policy", that is to say the remodelling of internal and international structures:
– internal political, social and economic structural reform aimed at more free market dynamics and competitiveness, more constitutionality, social justice and democracy;
– international structural reform, especially in the OECD countries, which profit from present world economic structures because of their market power.
International structural change needs to be geared to the imperative of global sustainability and calls for:
– the dismantling of trade protectionism, especially agricultural protectionism; according to the World Bank, OECD countries dole out some 350 billion US dollars a year in farm subsidies, i.e. around seven times what they spend on ODA;
– international regulations on competition at the WTO which do not, for example, make the exploitation of female and child labour a competition-distorting locational advantage;
– embedding the speculative "casino capitalism" in global rules to stabilise international financial markets, a stability which is a global public good;
– new preventive debt relief initiatives for countries which are not yet included in Poverty Reduction Strategy (PRS) programmes but also suffer from a heavy debt burden.

On the issue of the global balance of power, the Human Development Report 2003 notes that the frustration felt in many developing countries over the unequal distribution of power in world politics and the world economy is today greater than ever. For the self-esteem of elites, this power gap is even more serious than disadvantages in trade – which explains the clandestine Schadenfreude after September 11, 2001. To gradually reduce the power gap, the study commission proposed a shift towards North-South parity in the way votes in the international financial organisations are distributed.

In view of the evident crisis of multilateralism, it is all the more urgent to address the question of politically shaping globalisation. The momentum of globalisation compels even hegemonists to seek multilateral cooperation in areas which they can no longer dominate on their own. But because of the uneven distribution of power in world politics, they do not need to surrender the advantages they enjoy in North-South relations, particularly since international solidarity – what political philosopher Otfried Höffe defines as "reciprocal assistance" – is a scarce resource and a weak moral counterbalance.
I therefore see no prospect of governments developing an intrinsic desire for reform unless they realise it is in their own interests. Nor do I overestimate the power of civil society actors to make a difference and bring about change. But from half-hearted reform moves like the Cologne HIPIC debt relief initiative, I draw hope and the lesson that without pressure from the increasingly transnational "guardians of globalisation" and their role as watchdogs in North-South relations even less would have changed. So – like Jürgen Habermas and Ulrich Beck– I have more confidence in the mooving force of global civil society than in the state system's willingness to embrace reform.


3. Question: How can global cooperation occur when most countries lack the capacity to participate as equals in global processes?

The premise inherent in this question certainly applies to many developing countries which are not well endowed with economic potential, human resources and social infrastructure. What can they do to avoid being totally marginalized as political dwarves and international hardship cases?
1. They need to reduce their conflicts of interest with each other and channel what capacity they have into regional cooperation projects, which will also give them a chance to counter the pressure of globalisation. It is also in the interest of the EU to step up the agreed promotion of regional cooperation and support for projects such as NEPAD. Regional cooperation is a prerequisite for more ownership – but it also means taking more responsibility.
2. The Group of 77 can only participate in international negotiation processes effectively as the "Third World's trade union" if it does not weaken its own position with conflicts of interest. Why have the South's leaders forgotten the warnings of the 'South Commission' chaired by Julius Nyerere, which concluded that without more intensive South-South cooperation or "collective self-reliance", a North-South partnership based on equal rights would remain a pipe-dream?
3. How the South copes with globalisation depends on how it plays its cards – how well it manages to strengthen its own negotiating position. Whining about the North being too powerful long ago ceased to stir any pangs of conscience there. The only chance to become a player, not a ball, in the game of globalisation is to try and build up countervailing clout.
4. The North and the UN organisations could and should invest more in capacity-building. Capacity-building assistance could make a greater contribution to self-determined development than costly industrial or infrastructure projects (which often end in ruins for lack of human resources).
Look at the WTO, for example. On paper, all of its members enjoy equal status but the host of smaller states cannot really join in the complex negotiations as equals because they do not have the professional resources needed to do so in an expensive place like Geneva. Many talks take place in "green rooms" without them. Here, the WTO could and should provide more technical assistance itself – something it is only just starting to do – so as not to jeopardise its legitimacy as a global institution. The same goes for the IMF, the World Bank and other UN organisations.
The conclusion to be drawn: empowerment of the poor is the key to social and political change and ownership, promoted by regional cooperation, is vital for self-assertion in a globalising world.


4. Question: Do we need to look more closely again at the concept of "structural adjustment in the North"?

The answer to this last question is found in the comments above on the need to eliminate power imbalances. And when I speak of "structural adjustment in the North" I do not mean just changing production structures to lay structural foundations for the elimination of trade protectionism; I also mean changes in consumption and lifestyle to pave the way for global sustainable development, because the OECD countries are the ones mainly responsible for the overexploitation of natural resources. This is why UNEP executive director Klaus Töpfer speaks of "ecological aggression by the North against the South" and of a worsening ecological North-South conflict.




Professor (emeritus) Dr Franz Nuscheler is director of the Institute for Development and Peace (INEF), Duisburg-Essen University.
inef@uni-duisburg.de