The Globalists: Hoisted by their own Petard
Did you notice that the cry for “Globalisation” is now muted? From around 1960 till quite recently, the Western economists, their international media and their aid agencies were singing the praises of globalisation and demanding that poorer nations conform to this philosophy or be denied aid assistance or much worse. But now the plaintive cry is that developing nations are manipulating their currencies against the West by under-valuing, indulging in unfair trade practices to gain access to Western markets and acquire Western businesses. So protectionism is becoming increasingly popular in the West. Few conomists, if any, have commented at length on this seismic change in the world economy.
If anyone seriously believed that globalisation was only about breaking down barriers to trade and expanding prosperity for all nations, as many economists would have us believe, then you then you are living in Cuckoo Land. Let us look at the international situation that gave it birth.
After World War 2, most of the large mass of nations in Asia and Africa were able to gain
independence after hundreds of years of colonial rule, economic exploitation and social degradation. These economies were ravaged and survived on the basis of subsistence peasant agriculture for the masses and large export-based plantations or mines owned mainly by the former European colonisers. There was no local capital accumulation
or technological base to establish industries or mechanised agriculture. So the
Western aid agencies developed to fill in the gap.
This generosity of the former imperial rulers was also spurred by the threat posed by the Communist bloc countries allied to the Soviet Union that was challenging the West
and its imperial policies. Assistance to developing countries and the creation of a comprador capitalist middle class friendly to the West could keep communism at bay. If that seemed unworkable, it was necessary to overthrow elected governments and install puppets, as in Guatemala, Chile, Indonesia, Congo or go to war as in Korea, Vietnam and Cambodia. In a memorandum to the British Cabinet on Foreign policy, dated 04 January, 1948, the Secretary of State for Foreign Affairs begins his memo with this sentence:
“In my paper on “The First Aim of British Foreign Policy” (CP48.6) I have shown
that the Russian and the Communist Allies are threatening the whole fabric of
Western civilisation, and I have drawn attention to the need to mobilise spiritual forces, as well as material and political, for its defence.”
Globalisation and Western aid
Western aid was based on a fundamental premise: developing countries should be raw material producers while the industrialised countries would be the manufacturers who added value and made the super profits. Consequently, economic aid was mainly for peasant agriculture and not for industry. Countries in Asia which were determined to industrialise after independence, like China, India, Ceylon and many in Africa had to turn to Soviet aid and receive often outdated factories that created inefficient state owned
enterprises that were a burden on the economy. At the same time, from the 1950s to about 1990, market manipulation by Western buyers kept bringing down commodity raw material prices while the prices of Western manufactured finished products rose, altering the terms of trade and impoverishing developing countries that “produced more to stay in the same place.”
Then came globalisation, proclaimed as the panacea for the ills of the developing countries by economists and politicians of the West and implemented through the two
international agencies controlled and directed by them: the World Bank and the
International Monetary Fund (IMF). These can be likened to hired missionaries of Western economic philosophy and interests. It is they who implemented globalisation by making aid assistance tied to its conditionalities. These conditionalites were designed to maintain Western dominance of the world economy while developing countries would be suppliers of raw material and buyers of finished products. The financial aid was indispensable for developing countries as they had neither the capital nor the access to world capital markets because of their impoverished state while World Bank/IMF loans came with low interest rates and long-term repayment.
A look at the usual conditions for aid is revealing: (1) Privatise all state owned enterprises and open them up to foreign (Western) buyers; (2) Reduce or eliminate import tariffs to open markets for foreign products; (3) Eliminate subsidies for local agriculture and
industry; (4) Cut poverty alleviation programs and subsidies for the poor; (5) Reduce taxes on corporations and individuals; (6) Reduce public spending and cut public services; (7) Devalue local currencies to make export prices cheaper; (8) Develop commercial agriculture for export at the expense of food crops for local consumption; (9) Liberalise currency regulations to permit easy flow of foreign capital (and currency speculation).
One of the egregious demands of the World bank/IMF was to privatise all water supplies in developing countries and hand over these for management to US corporations like Bechtel. The popular upheaval against this theft of its basic resources available to the poor population led to riots in Cochabamba in Bolivia and put an end to this project.
With all these and more it is not surprising that poor countries became poorer and the rich West became richer during this era. But many developing countries, starting in Asia,
began to resist these conditions. Korea and Taiwan first began to industrialise along the lines of Japan, beginning with textiles and garments and then went into heavy industries and, finally, high technology. Other East Asians quickly followed and by 1980 the export of manufactured goods exceeded commodity exports from developing countries.
Blowback of globalisation
The large Western transnational corporations, who were the main beneficiaries of globalisation at the expense of developing countries, turned the Western economic theory on its head. Western economists and aid agencies worked on the assumption that developing countries were incapable of advanced industrial production, technology management, research and development. But countries like China, India and other Asians were producing more graduates with advanced university degrees than Western countries. This coupled, with cheap and efficient labour, had persuaded western corporations to transfer their production to Asia and South America while maintaining and expanding their marketing in the rich Western markets. By 1995 the UN Trade and Development
Report was stating that 75% of world trade was at some point in the hands of these large transnational corporations. Of the 100 largest corporations in the world at the time, none was from a developing country except the Venezuelan Petroleum Corporation.
Even at that time, Western economists were predicting that employment in the developed Western countries was secure because the technological expertise and research and development could not be done in developing countries. The West would supply the research and high technology and marketing and developing countries would provide cheap labour and become part of the market. But the developing countries were smarter than these economists believed. Their skills and expertise are now employed by the
largest Western corporations for sophisticated research and development, technology support services for customers, high technology production, even for medical diagnosis. Fast computer-based communications have made these services easy to outsource to skilled workers in developing countries in Asia. The largest Foreign Direct Investment destination is China, not the USA.
Chinese corporations, like China Construction America, Inc., are now involved in large construction projects in the USA as US corporations find it easier to subcontract to China which has develop a very high level of management and technology expertise in construction. The result is increasing unemployment in the USA and the EU which threatens their economies while their transnational corporations are making super
profits, undreamt of in the past. Big transnational corporations have no loyalties to their countries: their obsession is profit.
A corruption at the highest government levels in the West has also contributed both to the economic decline of these countries while the financial corporate sector reaps profits. People are on the streets demonstrating against poverty and unemployment in European countries like Greece, Italy, Spain and Portugal, not so much in Africa and Asia. Senator Bernie Sanders’ website revealed the following story:
“As a result of this audit (by the Government Accountability Office), we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”
Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea
to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of
Congress and the president,” Sanders said.
The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial
institutions and corporations that were given emergency loans.”
Developing countries on the rise
Developing countries owe their economic advance to globalisation and the Western transnational corporations in a way not anticipated by the originators of this economic philosophy. It is true that manufacturing to a large extent in India, China and other countries is contract manufacturing for transnational corporations. But developing countries are bridging this divide fast. South Korea is a world leader in electronic goods. The largest steel-maker in the world is an Indian. China and India have some of the world’s largest petroleum companies. Chinese financial institutions are among the biggest in the world in terms of assets. China and India have built huge motor vehicle industries. China and India have advanced space technologies. China is creating the most advanced
railway system and other infrastructure projects. And the list is growing.
While production is moving out of the West, creating massive unemployment, and economies are declining, the US-EU region continues its profligate spending, as though nothing has changed, by now borrowing from developing countries that have massive foreign exchange surpluses. Western consumers are in debt to maintain high living tandards and governments still act as though they are lords of the earth. Governments borrow to build huge militaries and police the world and invest in high profile space
projects. The US national debt of $14.3 trillion is equal to 24% of the world GDP. Most countries in the EU, including the UK, are heavily in debt. The World Bank/IMF is no longer the sought after source of foreign aid and development loans: it is China.
The plight of the West and the antics of its political leadership recall Satyajit Ray’s great film set in Bengal – Jalsaghar: The Music Room. Biswambhar Roy, the aristocratic zamindari (landlord) whose family dominated the village for centuries is losing his fortune as the river eats up his vast landholdings. He gradually becomes bankrupt but out of inherited pride maintains the high living standard of his ancestors by borrowing from the new rich business families in the village. He holds lavish music recitals and dinners with borrowed money to impress the village society till, eventually, he is unable to borrow any more or survive. Full of pride to the very end, he dresses in his finery and rides his favourite white horse to the river, committing suicide in great style.
Baddegama, Sri Lanka.
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