Why Globalization Is in Trouble – Part II

WASHINGTON: In the rich world globalization had driven the wedge between social classes, while in the poor world, the main divide is between countries: those that adjusted to globalization and, in many areas, prospered and those that adjusted badly and, in many cases, collapsed.

Indeed the Third World was never a bloc the way that that the first and second worlds were. But it was united by its opposition to colonialism and dislike for being used as a battlefield of the two then-dominant ideologies. As the Second World collapsed and globalization took off, the latter rationale evaporated, and a few countries, most notably India and China, accelerated their growth rates significantly, enjoying the fruits of freer trade and larger capital flows. And although these two countries adapted well to globalization, there is little doubt that their newfound relative prosperity opened many new fissure lines. Inequality between coastal and inland provinces, as well as between urban and rural areas, skyrocketed in China. So did, and perhaps by even more, inequality between Southern Indian states, where the hub cities of Mumbai, Chennai and Bangalore are located, and the slow-growing Northeast. For China, which still may face political transition to democracy, widening inequality between different parts of the country, could have disastrous consequences.

But another large group of Third World countries, from Latin America to Africa to former Communist countries, experienced a quarter century of decline or stagnation punctuated by civil wars, international conflicts and the plight of AIDS. While between 1980 and 2002, the rich countries grew, on average, by almost 2 percent per capita annually, the poorest 40 countries in the world had a combined growth rate of zero. For large swaths of Africa where about 200 million people live, the income level today is less than it was during the US presidency of John F. Kennedy.

For these countries the promised benefits of globalization never arrived. The vaunted Washington consensus policies brought no improvement for the masses, but rather a deterioration in the living conditions as key social services became privatized and more costly as was the case, for example, with water privatizations in Cochabamba, Bolivia, and Trinidad, electricity privatization in Argentina and Chad. They were often taken over by foreigners, and to add insult to injury, Western pundits arrived by jets, stayed in luxury hotels and hailed obvious worsening of economic and social conditions as a step toward better lives and international integration. For many people in Latin America and Africa, globalization appeared as new, more attractive label put on the old imperialism, or worse as a form of re-colonization. The left-wing reaction sweeping Latin America, from Mexico to Argentina, is a direct consequence of the fault lines opened by policies that were often designed to benefit Wall Street, not the people in the streets of Lima or Caracas.

Other Third World states – particularly those at the frontline of the battle between communism and capitalism, with ethnic animosities encouraged during the Cold War, efforts by Washington and Moscow to get the upper hand in the conflict – exploded in civil wars and social anomies. That part of the world associates globalization with disappointment (because Washington consensus never delivered), resentment (because others got ahead) and poverty, disease and war. In several sub-Saharan African countries, life expectancy at the turn of the 21st century is not only where it was in Europe almost two centuries ago but is getting worse. In Zimbabwe, between 1995 and 2003, life expectancy declined by 11 years to reach only 39 years.

Ideologies which proposed some economic betterment and offered self-respect to many people in Africa (from Kwame Nkrumah’s African socialism to Julius Nyerere’s “cooperative economy”) and parts of the former Communist bloc (Tito’s “labor management”) all collapsed and have given way to self-serving oligarchies that justified their policies, not by calling on their own citizens, but by publishing excerpts from reports written by the World Bank and the International Monetary Fund.

In the Third World as a whole, globalization, at best, produced what Tocqueville, with a touch of aristocratic disdain, called a government of the commercially-minded middle classes, “a government without virtue and without greatness”; at worst, it produced governments of plutocrats or elites unconcerned about their own populations. Globalization thus appeared in the poorest and weakest countries at its roughest.

Perhaps the greatest casualty of the money-grubbing global capitalism was loss of self-respect among those who have failed economically – and they are preponderantly located in the poorest countries. The desperate African masses who want to flee their own countries leave not only because incomes are low and prospects bleak, but also because of a lack of confidence that either they or their governments, no matter who is in power, can change life for the better. This despondency and loss of self-respect is indeed a product of globalization. In the past one could feel slighted by fortune for having been born in a poor country, yet have as compensation a belief that other qualities mattered, that one’s country offered the world something valuable, a different ideology, a different way of life. But none of that survives today.

The problem was, strangely, noticed by Friedrich Hayek. Market outcomes, Hayek argued, must not be presented as ethically just or unjust because the market is ethically neutral. But to buttress the case for global capitalism, its proponents insist in an almost Calvinist fashion that economic success is not only good in a purely material sense, but reveals some moral superiority. Thus winners are made to feel not only richer but morally superior, and the converse: The losers feel poor and are supposed to be ashamed of their failure. Many people do, but understandably not all take gladly to such judgment.

An interesting coincidence of interests emerges between the desperate masses and the rich in advanced countries. The latter, educated and with considerable property “interests,” are, economically, often in favor of greater Third World competitiveness and migration since, either as investors abroad or consumers of cheap labor services at home, they benefit from low-wage labor. This unlikely coincidence of interest lends some superficial justification to the claims of George Bush and Tony Blair that the opponents of free-trade pacts work against the interests of the poor. The problem that the president and the prime minister fail to acknowledge, or perhaps even to realize, is that many of the policies urged by their governments on poor countries in the last two decades have indeed brought people to their current point of desperation.

Sandwiched between this unlikely “coalition” of the global top and the global bottom, are globalization’s losers: the lower and middle classes in the West, and those in the “failed” states, not yet sufficiently desperate to board the boats to Europe or cross the US border at night. They too lost in terms of their national sovereignty and personal income. They may not gladly accept, though, that they are morally inferior. At first sight, they do not seem likely to derail globalization because their power is limited. Yet in a more interdependent world with an easy access to deadly weapons, politics of global resentment may find many followers.