The globalization project (1970s – 2000s), liberalizing trade and investments, and privatizing public goods and services, has privileged corporate rights over social contracts and redefined development as a private undertaking. Discuss We must ensure that the global market is embedded in broadly shared values and practices that reflect global social needs, and that all the world’s people share the benefits of globalization (Kofi Annan 2001).
Upon viewing this quote from the Noble Prize Laureate, Kofi Annan, it became clear that prior to reading the extensive literature on world development, this author along with the vast majority of people in the world had bought into the false hopes and propaganda presented by multinational institutions on the benefits of development and by extension globalization. The picture painted seemed enticing yet as one searches deeper, the true meaning, the conditionality and the true cost of globalization is realised.
The literature has evoked ambivalent feelings which are overpowered by a sense of paralysis to effectively confront future challenges and shape development on a personal as well as national level. At the heart of the statement presented by Mc Michael (2001) which reads: “The globalization project (1970s – 2000s), liberalizing trade and investments, and privatizing public goods and services, has privileged corporate rights over social contracts and redefined development as a private undertaking” is an issue of economics, through which, the development project has been repackaged and rebranded into the contemporary word; globalization.
The following pages shall present the picture painted by globalization, including as many contributing factors as can support Mc Michael’s statement. After which the author shall engage the reader in an analysis and discussion on, to what extent the statement is accurate, in lieu of past and present trends. There are many definitions which may be offered for the globalization project, Renato Ruggiero, the founding director general of the World Trade Organisation (WTO) defined its vision as such: the implementation of the rule of the market via the restructuring of policies and standards across the nation-state system (Mc Michael 2008).
Basically this means that the globalization project’s fundamental aim is to allow the forces of the market to take the leading role in determining the direction of global development. At face value, this project seems absolutely absurd, for how can one leave something as critical as the evolution of its people as they progress from one stage to another in the ‘invisible hands’ of the market? Should not such a task be the responsibility of a nation’s elected government as well as the people themselves? The answer therein presents the missing link to the puzzle called globalization.
For the perceived invisible hand of the market is managed by the wealthy corporations of the first world nations. These corporations not only possess the means to produce for a global market, but also the influence to formulate and restructure multilateral policies and trade standards towards their advantage. They have at their disposal the institutions of the Bretton Woods System which were established under the previous development project. It is certainly not coincidental that these multilateral institutions can exact much influence and sanctions on nations that choose not to comply with these one-sided policies.
Hence, while Kofi Annan and many others hope that globalization is set on the premise of broadly shared values and practices that reflect global social needs, the reality is vastly different. For globalization serves the economic interests of a few and may even be seen as another stage in capitalist expansion (Logan 2002). In lieu of these factors, one can now appreciate how Mc Michael was able to make such a definitive statement about the globalization project having redefined development as a private undertaking through its operations.
The argument which had emerged during the post war period examined whether the state or the free market should lead the development process. Early thinkers of development believed that it followed a linear path of specific structural changes (Todaro and Smith 2011); economies needed more state intervention as put forward by theorists like John Maynard Keynes and later under structuralism by Arthur Lewis, Raul Prebisch, Paul Rosenstein-Rodan, Hans Singer and Walter Rostow among others.
The development project was driven by the heavy industrialization of the Third World and laden with foreign aid from more developed countries in the form of technology, ideas and loans; capital accumulation and savings; and development planning by governments that usually consisted of some five-year, or ten-year plan to catapult their country into developed status.
Operating on a continuum, of ideas and perspectives on development, several other policies were introduced during the 1960s which would have still affected the Third World leading up to the new millennium, especially since these countries were always playing catch up to the First World. These policies included import substitution industrialization; protectionist policies for infant industries; subsidization; nationalism; tariffs and or trade barriers; all or most of which were dependent upon the state to execute.
Following this, the onslaught of high inflation and even higher levels of unemployment in the late 1970s (Friedman 1997) acted as a catalyst for the application of the free market system. What emerged was mounting criticism of the state-led model from neo-liberal theorists. It was posited that governments of the Third World were too corrupt; poor managers and too involved to execute the business of development efficiently. In reality these international organisations were in pursuit of a less frustrating means of attaining their self interests.
The idea or notion of development became a means through which governments secured their tenure. Sugata Bose remarked, “Instead of the state being used as an instrument of development, development became an instrument of the state’s legitimacy. ” In that sense government failures provided an easy out (Meier 2001); (Siglitz & Hoff 2001) of the sate led regime. Put simply by the World Bank, governments need to do less in those areas where markets work, or can be made to work, reasonably well.
In many countries, it would help to privatize many of the state-owned enterprises. Governments need to let domestic and international competition flourish (The World Bank 1991). It is somewhat difficult to appreciate that this consensus of ‘no state involvement’ was born out of the radical thinking of a few. In fact, this mode of thinking can be traced to the posturing of one P. T. (Lord) Bauer (1915–2002) whose thesis was so controversial yet timely.
Lord Bauer attributed his distinctive insights to reasonably long stints in the tropics, first studying colonial rubber production in Malaysia and later examining the role of traders in West Africa who provided both inputs to the production of cocoa, peanuts, cotton, and kola nuts and then, later, acted as intermediaries when they bought the cash crops for sale on the world market. He wrote: The historical experience I have noted was not the result of conscription of people or the forced mobilization of their resources.
Nor was it the result of forcible modernization of attitudes and behaviour, nor of large-scale state-sponsored industrialization, nor of any other form of big push. And it was not brought about by the achievement of political independence, or by the inculcation in the minds of the local people of the notion of national identity, or by the stirring-up of mass enthusiasm for the abstract notion of economic development, or by any other form of political or cultural revolution. It was not the result of conscious efforts at nation building or the adoption by governments of economic development as a formal policy goal or commitment.
What happened was in very large measure the result of the individual responses of millions of people to emerging or expanding opportunities created largely by external contacts and brought to their notice in a variety of ways, primarily through the operation of the market. These developments were made possible by firm but limited government, without large expenditures of public funds and without the receipt of large external [aid] (Bauer 1984: 30–1); (Dietz and Cypher 2009). Lord Bauer succeeded at dismissing every known perspective on development at the time.
Critics argue that it was not feasible to make such generalisations about all societies based upon his isolated observations. However at the time the global capitalists were desperately in search of another means of exacting their influence with more fluidity and less hindrances from respective governments. Surely it would be more effective to manage the world as one homogeneous system without having to manoeuvre through individual state policies. Hence, whether well researched or not, Bauer’s thesis was welcomed and embraced.
A group of economists called the monetarists which gave rise to the new neoliberals of the day embedded Bauer’s work into their concepts and transformed the normative perspective of economics. This affected social, economic, political and foreign policy almost instantaneously. In developed nations, this counterrevolution favoured supply-side macroeconomic policies, rational expectations theories, and the privatization of public corporations (Todaro and Smith 2011). The globalized economy presented a situation in which neither distance nor national borders impeded economic transactions (Wolf 2001).
The capitalists realised that they could maximize their profits by providing the products and services that the state once did at a cost. With little to no restriction from the local government they established free zones, sweat shops, practiced product dumping and other exploitative measures in developing countries. This neoliberal thrust called for freer markets and the dismantling of public ownership, statist planning, and government regulation of economic activities (Todaro and Smith 2011).
Economic globalization weakened national governments and undermined sovereignty and self determination (Logan 2002). It resembled an intrusion or invasion of one’s home by a faceless aberration as the role of the state became marginalized. As governments succumbed to the pressure exerted by the developed nations, and their own desire to attain developed nation status, they found themselves victims to the debt regime crafted through the International Monetary Fund (IMF) and the World Bank.
In the 1980s and 1990s, the World Bank and the IMF became extremely influential in curbing the public sector in the less-developed world, and in the transitional economies of the former Soviet bloc, by using the threat of withholding aid and loans as their prime instrument for gaining policy agreements with less-developed nations that were consistent with neoliberal precepts (Dietz and Cypher 2009).
This herald in an era of structural adjustments; the vehicle which drove globalization into everyone’s consciousness and initiated an erosion of the social contract between the state and society. The term structural adjustment, gained its popularity during the Margaret Thatcher – Ronald Ragan era, as they embraced the concept into their foreign economic policies, but really it was the Bretton Woods system that served as the driving force.
When a country wanted to obtain a loan, one or a combination of the following implications of the structural adjustment program were realised: the selling off of domestic resources to global firms that supply the global economy and using the revenues to repay the debt to multilateral lenders; the erosion of the country’s natural resources that provide subsistence security to its poor citizens; a severe reduction and or restriction in the state’s capacity to pursue nationally coordinated development initiatives; the realization that the state is unable to effectively compete in the global economy; and the transformed focus of the state being redirected in government’s greater dedication to market rather than social (welfare) principles in their growth strategy.
Ironically, though the trend of thought among Caribbean states was that had they not followed appropriate national and regional policies, thereby making themselves more competitive on the global market, they would have been marginalised or absorbed (Demas 1997). The contention here is that they were never really prepared to compete equitably in the global market. Production levels were nowhere close to meeting the needs of local, regional and therefore global markets efficiently. While the IMF may have been able to successfully reduce the deficit in country’s balance of payments among Third World countries, the effects of marginalisation experienced through structural adjustment resulted in a detachment of citizens, high levels of unemployment and increased poverty among other circumstances.
This was the making for a troublesome social situation (Demas 1997). In Mc Michael’s statement he admonishes globalization for privileging corporate rights over social contracts; the term social contract needs to be expanded upon in order to fully grasp his intended meaning. The social contract theory can be defined loosely as a sort of hypothetical or actual agreement between society and its state (Rusling 2010). While the agreement may be based upon moral decisions, the contract binds citizens to a level of adherence or obedience to the laws and the guidelines of the state. It is hoped that all will adhere to these written or unwritten rules and secure a comfortable way of life.
This theory draws on several philosophers, who include Hobbes, Locke, Hume and Rousseau, to explore whether it is true that our moral obligations can be explained by a social contract. Governments get drawn into the discussion because government, with its regulatory authority, represents the citizenry or society, and it falls upon government to mediate this business and society relationship (Carroll 2008). In Hobbes ‘state of nature’ he paints a bleak view of society in the absence of a social contract, elements of which we find visible today. Hence it is expected that each sovereign nation would be responsible for meeting its obligations to its citizenry to avoid such a state of nature.
However, that very sovereignty has been under threat through globalization. The notion concept of sovereignty refers to the three-fold capacity of a state, which is the “absolute supremacy over internal affairs within a territory, absolute right to govern its people, and freedom from any external interference in the above matters. ” (Wang 2004) Through structural adjustment programs governments have been unable to meet their most basic obligations to their people. The realisations observed and mentioned above have bound the hands of the state and redefined development according to the will and priority of the invisible hand of the market. One may think that picture is all doom and gloom.
It is appreciated that not all Third World countries found themselves in the precarious debt position and so did not have to succumb to the austerity measures of the IMF, but for those that did; this is the reality of their situation. While a government may be placed on a tight rope by external lending agencies, they still face the daunting reality of re-elections after a period of time. Hence in order to maintain a position of power they are charged with satisfying the needs of their citizens. Resources are always scarce and as a government the basic mandate is to effectively manage those scarce recourses. Hence it is this author’s expressed opinion that development can never be solely a private undertaking.
The IMF may create a severe force but it is still up to the political will of government officials to efficiently manage and thereby meets its obligations. Without being too vague, these obligations in this author’s opinion constitute good health care, a robust education system, national security, social welfare and poverty alleviation where necessary and protection of the environment among others. In the past private enterprise, be it locally or internationally based have not been concerned with these issues due to the fact that they saw no profits in its application. Even today, the organisations which have benefitted most from globalisation have no real tangible presence in most of the countries they derive profits from and so feel no sense of obligation to citizens in the Third World.
This is because global firms are no longer limited by national borders and monetary policy in moving capital, which makes it harder for governments to regulate their economies (Logan 2002). The internet and media have allowed them entry into citizen’s homes at a rate governments cannot control. The capability of governments to manage their economies is increasingly constrained by multilateral organisations, multinational corporations and transnational financial institutions which increasingly wield economic and political influence that is global in scope (Strange 1996; Korten 1995) (Bernal 2007). A new policy dubbed Corporate Social Responsibility (CSR) has been gaining momentum among international corporations to appear more friendly and sensitive to consumer needs.
The European Commission states that enterprises “should have in place a process to integrate social, environmental, ethical and human rights concerns into their business operations and core strategy in close collaboration with their stakeholders” (European Commission 2012). This should imply that corporation whether locally or internationally based, physically present in a country or not should exercise some level of social responsibility. Yet if one notes in the definition, this obligation is to the stakeholders and not necessarily the general public. The state is responsible to its citizens while a private company is responsible to its stakeholders or share holders. Who is going to ensure that there is education for all children in a nation where families live on less that US$5. 00 a day?
Who is going to set the policies for immediate health care for all citizens especially those who cannot afford it? Many of the discussions about development and gaining a competitive advantage inculcate a fact that the human resources of a nation is not intellectually prepared to embrace structural and market changes. How can this cycle be broken if access to the right form of education can be afforded by only a few. Drawing the spotlight on Non- Governmental Organisations (NGOs) and lobbyist groups, one knows that on an international framework these groups do have some measure of ‘bite’ with which to make and indent in their own and often times international societies.
However, their focus is usually narrow, allowing them to address specific issues which are part of a larger social conundrum. Locally within the borders of some smaller Third World countries, NGOs do not have that political prowess to independently assume the role as custodian of some social ill. They rely often times heavily upon government assistance and at times even find themselves affiliated with political parties to either secure or attain power and prestige. The question now stands as who will execute that moral authority to ensure that all have equitable access to the scarce resources even in lieu of the fact that all men are not created equal?
In an analysis by Keynes he indicated that the key problem is not how to achieve a moral regeneration but rather how either to frustrate what Keynes regards as “bad morals”, or to construct a political framework in which those “bad morals” serve not only the private but also the public interest, just as in the economic market, private greed in converted to public service (Friedman 1997). Yes, it is agreed that globalization or global capitalism, has tilted the social contract away from the role of the state and towards capital (Carroll 2008) but it has not completely shifted, nor should it. If governments are unable to strike that balance in their own states, social unrest and a retarded economy shall emerge as the result.
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