Globalisation - Comparative Book Review from 2003

Here's a review of three books that (very loosely) pertain to globalisation - it was an essay from one of the papers I took in 2003. Needless to say my views have changed (or at least refined somewhat) since then.

Globalisation, the Global Economy and Development

Books Reviewed

Thomas L. Friedman. (2000) The Lexus and the Olive Tree. HarperCollins Publishers. London 489 pages. ISBN: 0006551394

Korten, David. (2001) When Corporations Rule the World (second edition). Kumarian Press Inc. Bloomfield. 385 pages. ISBN: 1887208046

Edwards, Michael. (1999) Future Positive: International Co-operation in the 21st Century. Earthscan Publications Ltd. London. 292 Pages. ISBN: 1853836311

The term globalisation is a problematic one. Like other words such as development and capitalism there is little consensus as to what exactly globalisation defines. In the numerous debates about globalisation meanings shift and change depending on context and agenda.

In the broadest sense, globalisation refers to the increasing international transfer of information, goods and finance that has been facilitated, in part, by changes in information and transportation technology, and in part by international political agreements. Put as such, globalisation is hardly a new phenomenon. Indeed, it could be argued that globalisation began when the first merchants started buying and selling goods beyond the immediate confines of their villages.

What has changed in the last three or four decades is the rate at which the world is being globalised. The levels of capital and traded goods now moving around the globe are much larger and moving much faster than ever before.

From a development perspective the shape of this global system is important. Decisions made on the London Futures Exchange affect the lives of Mayan coffee growers. Financial crises like the East Asian crisis have the potential to force millions of people into poverty. At the same time though, international investment can create jobs and improve the quality of people’s lives.

Award winning New York Times Columnist, Thomas Friedman, claims early on in his book “The Lexus and the Olive Tree” that he is not a “salesperson” for globalisation but merely an objective journalist describing an inevitable trend and advising on us how best to deal with it. However, it quickly becomes clear that Friedman is very much in favour of the existing system of globalisation. While Friedman identifies cultural, ecological and economic problems with the current system he believes that they are far outweighed by its benefits.

Friedman believes that globalisation is the natural product of technological change. As technology has made it faster, cheaper and easier to move goods and money around the globe, the Earth has become increasing economically inter-linked. Most recently, according to Friedman, advances in information technology have facilitated what he terms the “democratisation of finance” and the “democratisation of information”. By the “democratisation of information” Friedman refers primarily to the increased availability of information to individuals as a result of the Internet and other technological advances. In the developed world the “democratisation” of finance means that a larger proportion of society benefits from the wealth created in the financial markets either indirectly through their pension funds or directly using online brokerages. In the developing world, thanks to the increasing mobility of capital, there is now more money to finance development and move people out of poverty.

A by-product of Friedman’s “democratisation” is a phenomenon that he calls “the electronic herd”, investors and speculators who are able to move vast amounts of money around the globe more or less instantaneously. Using the examples such as George Soros’ “betting against the pound” and how it forced England out of the European Exchange Rate Mechanism, Friedman illustrates just how much power international investors wield and also, just how powerless governments can be in comparison.

This power imbalance forces governments to adopt a set of economic policies that he calls the “Golden Straightjacket”. “Straightjacket” because governments, who fear the flight of investors, are highly restricted in what policies they can prescribe but “golden” because, if the policies are adopted correctly, great wealth can be generated for their people.

While he sees the benefits of globalisation, Friedman also highlights some of the significant problems of the system of globalisation he describes. Friedman identifies environmental destruction, inequality and the anger of those marginalised by globalisation as problems. However, to Friedman these problems are not enough to justify changing the existing system of globalisation as a whole. Friedman doubts that change is possible and, even if it was, he sees the benefits of globalisation as too great to risk loosing. Instead, Friedman provides suggestions for mitigating the problems through the existing system. Friedman also believes that globalisation itself can solve many of the problems it produces. In addition to this he envisages a global policeman role for United States, whom he views as a “benign hegemon and reluctant enforcer”. Sometimes, Friedman claims, “the hidden hand of the market cannot function without the hidden fist.” (Page 464)

Friedman’s descriptions of globalisation are perceptive and his book is a good resource for someone seeking to understand why the policies advocated by most mainstream political parties are becoming increasing similar, or someone seeking to understand the paucity of choice available to the new Brazilian president as he seeks to reduce poverty in his country. Where Friedman is much less convincing though, is in his claims that the current system of globalisation is a natural product of technological change, and that it is both beneficial and unalterable. For a start, Friedman’s so called “Democratisation of Finance” in the United States took place over a period of time where inequalities of wealth in that country rose to unprecedented levels (Frank, 2000). Furthermore it is very hard to see the democracy of a system where a very small section of society (financial speculators) has more power over the choices of governments than the people voting for them have. In addition to this, Friedman’s claim that the United States is a “benign hegemon and reluctant enforcer” is highly questionable. It is very hard to see the benevolence in the US’s role in overthrowing democratically elected governments in Iran, Guatemala and Chile. So far, self interest rather than benevolence seems to have been the dominant force guiding American foreign policy. Indeed, as Will Hutton points out, the existing system of globalisation has been shaped as much by American self interest - as reflected in the policies of the IMF, WTO and the dismantling of the Bretton Woods currency system - as it has been by technological change. (Hutton, 1999).

Given the fact that the existing system has been shaped by policy, there is no reason to believe, as Friedman does, that overall reform is impossible without retreating to a segregated world deprived of all the benefits interconnectedness can bring.

Unlike Thomas Friedman, David Korten, a former Harvard Business School Professor and development practitioner, sees the current global economic system as neither inevitable nor desirable. Korten believes that, unless substantial change is made to the existing system of globalisation, the planet is headed towards a threefold crisis of deepening poverty, environmental destruction and social disintegration.

In a sense, the title of David Korten’s book is misleading. While much of his book is about the history of the corporation and the disproportionate share of political power controlled by corporations, Korten’s work also encompasses an overall critique of the global economy, which concentrates wealth and power in the hands of a very small proportion of the population.

Korten starts off by challenging what he calls the “myth of growth”. Growth, Korten argues, has only become a popular focus of economists and politicians because it provides a potential alternative to the trickier issues of redistribution. Korten claims that much of the “growth” experienced in the western world since World War Two has come at the expense of living standards and the environment. Korten also attacks the global financial markets and, in particular, speculative capital flows. Korten believes that speculative capital promotes economic instability and undermines development.

With regards to development, Korten claims that conventional practice is often shaped to suit the interests of the developed world rather than assisting people in developing countries. In particular, Korten accuses the IMF and World Bank of forcing policies on developing countries that increase poverty, damage the environment and facilitate the “corporate colonialism” of the developing word.

Korten believes that the outcome of this globalisation of corporate interest is the concurrent development of:

· A race to the top, in which the planet’s wealthy are able to evade taxes and national laws by moving their wealth between countries and by playing off different countries against each other.

· And a race to the bottom, where employment is moved to areas with the cheapest labour costs and most lax environmental standards. This undermines the position of workers and enables developed countries to consume far beyond their means, while externalising the environmental costs to the developing world.

As an alternative to this system, Korten proposes what he calls “People Centred Development” where economies are localised (though still kept within a global framework), economic power is dispersed and democracy is brought closer to the people. Markets, trade and corporations still play a role in People Centred Development yet the pursuit of profit at the expense of everything else is eliminated.

While People Centred Development may seem like a vague and idealistic concept Korten does provide some concrete suggestions as to how it could be achieved. Amongst other things Korten suggests:

· Implementing a system of taxation that ensures the price paid by consumers reflects the real environmental costs associated with producing goods.
· Limiting advertising.
· Eliminating corporations’ ability to fund and lobby politicians.

Generally speaking Korten’s picture of globalisation as a system in need of substantial reform is much more convincing than Friedman’s description of a global system which is more or less satisfactory and is only in need of some minor modification. Yet his work does have some flaws. Authors such as Michael Edwards (reviewed below) claim that Korten and similar critics are overly pessimistic about the current state of the world and that the changes he suggests are too drastic, potentially counterproductive and unlikely to ever be implemented. Certainly some of Korten’s criticisms of the existing order and his solutions are simplistic but Korten himself appears to be aware of this stating that his work is not intended to be the final word on the topic but rather a starting point for further discussion.

Michael Edwards in “Future Positive” produces the most even-handed examination of the historical and political forces that have led to the present state of global development.

To Edwards, the current global system is neither the natural product of technological change nor the result of a corrupt and over-powerful business class. Instead, Edwards argues, the forces that have shaped our global system are as complex as human nature itself.

Natural selection, Edwards argues, has given humans both the tendency to act primarily in their own self-interest and the ability to co-operate and work together. For Edwards, it is this ability to co-operate that needs to be enhanced at all levels, from personal interaction to international politics, if we are to create a more positive future for the planet. Co-operation, Edwards claims, needs to take place within countries in the form of a balanced partnership between civil society, government and business. Co-operation between countries, he argues, needs to be reflected by international agreements and institutions that are less geared to the interests of the developed world. Also, Edwards claims, the nature of international aid projects needs to be re-thought. In Edwards’ opinion international development assistance needs to be more flexible, context specific and facilitating. At the same time it needs to be less interventionist and provided more in the spirit of international co-operation rather than serving the narrow interests of the donors.

Edwards believes that development organisations, especially large bureaucratic ones like the World Bank, need to change as well. He argues that they must become learning organisations that are more tolerant of dissent and differing views.

While the changes Edwards suggests are significant he still views them as being possible within the existing global capitalist system. Edwards believes the future for capitalism is a humanised future, one which strikes a balance between unrestricted laissez-faire and overly restrictive state socialism. In Edwards’ view, the role for government in this system should be “light but firm”. Examples of this sort of international governance would be sensibly imposed environmental taxes and some financial market regulation. Edwards also believes that in some cases voluntary agreements can be more useful than excessive legislation.

Of the three books “Future Positive” provides the most nuanced interpretation of globalisation. In many ways Edwards’ more modest proposals for change appear more realistic than Korten's sweeping reforms. Yet, at the same time, there is a disparity between the fundamental paradigm shift that Edwards calls for and the less than radical ideas for change that he provides. Is co-operation really possible within the system of global capitalism? Or is self interest such an integral part of the existing system that if we really want to foster co-operation then we need to look for much more significant alternatives? And the track history of ‘voluntary agreements’, with regards to corporate responsibility, makes Edwards’ proposals in this area appear wilfully naive. In addition to this it is difficult to share Edwards’ optimism about the potential for co-operation in a post cold war world. So far, since the fall of the Berlin wall, the actions of the world’s one remaining super power seem to reflect a trend towards unilateralism rather than international co-operation.

Nevertheless, Edwards’ book, like Korten’s, while not containing all the answers, does provide an excellent starting point for thinking about alternative development and alternative global solutions. Something that Friedman failed to dissuade me from believing the planet is in desperate need of.

References

Frank, Thomas. 2000. One Market Under God. Vintage. London.

Heyne, Paul. 2000. The Moral Economy. Independent Review. Summer 2000 v5 i1 p137

Hutton, Will. Americas Global Hand. The American Prospect, Dec 6, 1999 v11 i2 p52

Lewis, Martin W. 2000. Global Ignorance. The Geographical Review, Oct 2000 v90 i4 p603

Northrop, Emily. 1998. When Corporations Rule the World. Journal of Economic Issues, Sept 1998 v32 n3 p896