Globalisation

Globalisation - Problems

The current trade system has adopted a principle of minimum interference, in the form of tariffs and subsidies, and maximum growth. It sees economic growth and increasing consumption as ends in themselves and pursues growth at all costs. The problem with uncontrolled growth is that it is depleting the natural capital, the environment on which the global economy is based, faster than it can be replaced.

There are major contradictions between the objectives of the WTO, IMF, World Bank and the types of projects that they fund. They pay lip service to the problems of poverty, ethical development and environmental protection but do very little to fix them.

The goals of the trade organisations, corporations and lobbying groups are commercialisation, privatisation and deregulation of the world's domestic economies.

Environmental agreements

Our current trade system is oppressive, unfair and is destroying our environment.

Several of the more recent agreements brokered by the WTO were notable for their exceptional bias towards big business and wealthy countries - specifically, the Agreement on Agriculture (AOA) and the Trade Related Intellectual Property Rights (TRIPs) Agreement.

Multilateral environment agreements that govern trade in the products of biodiversity, protect endangered species or habitats, or control the movement of toxic waste around the globe could be undermined by trade agreements. These agreements include the Montreal Protocol, the Convention on International Trade in Endangered Species (CITES), the Convention on Biological Diversity, and the Basel Convention on Trans-boundary Movement of Hazardous Waste.

Another problem with the free market economic system is that it is over simplistic. Many of its supporters believe that economics works according to laws of physics, biology or nature and if it is left alone, will eventually regulate itself for the benefit of all humanity. There is an almost religious faith in the theory of free trade extending back to the 18th Century. Because free trade is seen as more efficient it is considered better generally. Massive destruction of human culture and the environment is seen as just collateral damage to economists dedicated to the idea of a free market.

Those advocating the free market system claim that eventually the poor in developing countries will benefit from deregulation. The theory is known as 'trickle down effect', because over time the wealth generated by liberalisation is supposed to trickle down from the rich to the poor. So far the world trade system has increased the wealth of a small minority of people, mostly in developed countries but the poor have become poorer.

It is taken for granted that constant economic growth is desirable even if we are depleting our resources faster than they can be replenished.

Statistics

World cross-border global transactions have grown from $3 trillion in 1990 to $10 trillion in 2007 and are expected to increase to over $70 trillion by 2025. About 84% of this was merchandise and 16% is services. About 75% of the value of world merchandise trade is from manufactured goods, mainly transport, machinery and electronic equipment. Minerals and agriculture, which form the main source of income for the developing world, make up 22% of merchandise trade. About 40% of international trade occurs through transnational corporations.

Some transnational companies are so big that they have greater sales than the total sales of many developed countries. The combined sales of the world's largest 350 multinationals total one third of the combined GNP's of all industrialised countries, and exceed the individual GNP's of all developing countries. The GDP of the poorest 48 nations (i.e. 1/4 of the world's countries) is less than the combined wealth of the world's 3 wealthiest individuals. So extreme is this discrepancy in ownership that In 2004, approximately 0.13% of the world's population controlled 25% of the world's assets.

In 1960, 20% of the world's population living in the richest countries were 30 times richer than the poorest 20%. By 1997, they were 74 times richer. Between 1975 and 1997, GDP increased about 50% in the most developed countries and fell by about 15% in the least developed countries (United Nations Development Program Figures 1999).

After fifty years of free market economic or economic rationalism, more people in the world than ever are poor, hungry, sick or dying and the environment is getting worse. While more people are getting richer, more people are becoming poorer. The gap between rich and poor is getting wider and the quality of life for all people is decreasing.

Transport and environment

The trade system promotes increasing consumption even when it involves the loss of natural habitats and biodiversity, the natural capital on which the global economy is based. More trade means more transport and this means more roads, noise and more air pollution. A rise in levels of global transport has also resulted in increased transmission of alien species from one country to another, for example in the ballast of ships. The introduction of these species into sensitive ecosystems results in disaster for some environments.

One economic theory promoted by free market economists, the theory of comparative advantage, is that nations should specialise in producing that at which they are best. This runs against the views held by most environmentalists that it is better to produce locally because it reduces transport costs.

There are limits to the capacity of ecosystems to absorb pollution both in terms of the rate and the total of amount pollution, but there are no defined limits for trade, industrialisation and growth.

Growth driven economics has resulted in the production of timber from unsustainable sources and the loss of the world's tropical forests. Marine fisheries have been over-exploited and fish stocks are in serious decline.

Where national laws intended to protect the environment challenge WTO rules on trade, the result has nearly always been that WTO rules have had precedence over the nation's laws.

There is no place for the precautionary principle in WTO rules. WTO free trade rules have been used to oblige Europe to import hormone-treated beef, and to prevent countries from choosing to import shrimps which are caught using special nets which do not trap and kill turtles.

Labelling

Over the past twenty years there has been a movement to give goods and services that are environmentally and socially acceptable a label to distinguish them from other goods. The WTO see such labelling as a barrier to trade and therefore illegal. Examples include organic food or timber from sustainable sources, and products that have been produced by people who have been paid a fair wage.

Democracy

The WTO is not a democratic institution. It is dominated by a few powerful Western governments acting on behalf of the corporations. Influence at the WTO is bought with a donation of a few hundred thousand dollars to a leading political party. This 'donation' will give the company access to key negotiators at a conference.

The WTO is not transparent and is not accountable to anyone.

As the corporations increase their control over the economy, society and the environment, democracy is weakened.

The WTO has a one-country one-vote structure but wealthy companies and powerful countries wield most influence. The more powerful groups exert leverage over governments in poorer countries to conform and often determine the agenda of negotiations.

Access for the public to information about the activities of the WTO is limited. Even members of governments are unable to get answers to queries about trade negotiations. Disputes are settled through the Appellate Body and are conducted in closed sessions. There is no public input permitted.

The larger trading countries like the US and trading blocks like the EU, determine the agenda of negotiations and pursue self-interests and the interests of their transnational corporations.

Bias

Governments are obliged to inform the WTO of changes that are made to its national laws that may relate to trade. Once trade rules are in place, a government cannot change their national laws if they directly counter the trade rules.

Disputes between members are mediated by the Dispute Settlement Body (DSB).

The WTO have increased levels of poverty for the majority of the world's peoples, facilitated a concentration of wealth in the hands of a few rich people, allowed growing inequality within and between nations, and facilitated unsustainable patterns of production and consumption.

Competition

Currently there is the tendency for more power to be concentrated globally in the hands of fewer businesses. Transnational corporations are merging or acquiring smaller companies. Monopoly capitalism is not good for consumers and the environment because it increases authoritarianism and decreases competition. Small business cannot be expected to compete with large corporations because large corporations are able to reduce costs. Large corporations can even drive down prices and because their large size buffers them against losses, they can eventually force small companies out of business.

Speculation

The current trade system has promoted deregulation of the investment sector of the financial market. This has stimulated increasing movement of large amounts of short-term capital, which has resulted in increasing economic instability and insecurity in developing countries. Speculators have been able to withdraw their investments at short notice and undermine economies, particularly in countries which have a relatively immature financial market. This has precipitated economic crises in some South East Asian countries and increased the number of people in poverty. In Malaysia in 1997, for example, capital flowing out of the country resulted in the Malaysian stock market losing 40% of its value in six months. Furthermore deregulation has resulted in fluctuating commodity prices in global markets, which has added to increasing economic insecurity.

Sustainable development is not possible in a boom and slump economic system fuelled by speculative investment.

Labour laws

The increase in the mobility of capital and companies globally has resulted in companies moving to countries where labour laws are weakest and wages lowest.

Third World farmers

Many small-scale farmers have no choice but to work with poor soils and in difficult climatic conditions. Free market principles do not allow for compassion. Support for small-scale farmers is less likely with trade liberalisation. Hard economic policies may force more Third World farmers to sell up and move off their land.

Many developing countries that oppose trade agreements are forced to accept them or risk being isolated in the global economy.

Countries that are massively in debt to the World Bank have been more compliant in adopting trade liberalisation and many have been obliged to increase exploitation of their natural resources and adopted unpopular austerity measures, which have hit the poor hardest. Countries in debt have been manipulated into restructuring their economy towards producing goods for export markets. In theory greater exports means people are able to afford more imports and consumerism stimulates growth. When countries are forced to turn over most of their land to grow cash crops or expand mining operations, the effects on the environment and local communities are usually negative. Producing exports does not necessarily lead to development. World market prices for exports may be low for many years or wildly fluctuate and sometimes they collapse. Among fields of tobacco, coffee or cocoa the poor frequently go hungry through lack of adequate nourishment.

Patenting

Indigenous peoples in developing countries have accumulated knowledge in areas such as plant breeding for hundreds or thousands of years. Under the rules of free trade agreements transnational companies can expropriate this knowledge and claim traditional plant varieties or plant uses as their own.

General problems

Over a quarter of the developing world live in poverty and millions of people in the developed world live below the poverty line. Over one billion people still live on less than one dollar a day. The current trade system has been unable to reduce poverty.

Trade liberalisation benefits the following: