Globalization of Economy or Globalization of Poverty


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  • 8/14/2019 Globalization of Economy or Globalization of Poverty


    Globalization of Economy or Globalization of Poverty?

    This article contains valuable information on the disastrous consequencesof the free market economy as represented by WTO, TRIM and TRIP, WB

    and IMF, while further clarifying Prout policy on globalisation and the Proutalternative economy to replace globalisation. The author condemns thefree-market ideology embraced around the world as being equivalent to afundamentalist religion with money and profit the Gods of humanexistence. We need to get away from this ideological indoctrination thatcapitalism is the single available economic model, and help the peoplemove towards a Zeitgeist wherein the well-being of the collective society isparamount, and where not a single person is economically left behind!

    by Ac. Krtashivananda Avt.

    In the quest for economic growth, free-market ideology has been embracedaround the world with the fervor of a fundamentalist religious faith. Money is itssole measure of value, and its practice is advancing policies that are deepeningsocial and environmental disintegration everywhere.

    The economic profession serves as its priesthood. It champions values thatdemean the human spirit. It assumes an imaginary world divorced from reality,and it is restructuring our institutions of governance in ways that make our mostfundamental problems more difficult to resolve. It has reduced economics to anideological shield against intelligent introspection and civic responsibility, andinfused the study of economics with a strong element of ideological


    The Sanctification of GreedThe beliefs espoused by free-market ideologues are familiar to anyone who isconversant with the language of contemporary economic discourse:

    Sustained 'economic growth', as measured by gross national product, is thecriteria of progress.

    'Free markets,' unrestrained by government, generally result in the most efficientand socially optimal allocation of resources.

    'Economic globalization', achieved by removing barriers to the free flow of goodsand money everywhere in the world, spurs competition, increases economicefficiency, creates jobs, lowers consumer prices, increases consumer choice,increased economic growth, and is generally beneficial to almost everyone.

    'Privatization', which moves functions and assets from government to the privatesector, improves efficiency.

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    The primary responsibility of government is to provide the infrastructurenecessary to advance commerce and enforce the rule of law with respect toproperty rights and contracts. These free-market ideological doctrines assumethat:

    People are by nature motivated primarily by greed.

    The drive to acquire is the highest expression of what it means to be human.

    The relentless pursuit of greed and acquisition leads to socially optimaloutcomes.

    It is in the best interest of human societies to encourage, honor and reward theabove values.

    The economic rationalists, market liberals and members of the corporate class

    are working hard to impose the above economic doctrines on the whole world.What is the result?

    Global Income DistributionWorld population distribution of arranged by income:

    [Source: UNDP, Human Development Report, 1999, Oxford University Press,New York 2000]

    *Top 200 corporations combined sales is equal to 18 times combined income of1.2 billion people(24% of the world population) living in severe poverty.

    *1983-1999 top corporations profits grew by 362.4% while employment grew byonly 14.4%.

    * In India, government (both BJP and UPA) shows big figures of foreigninvestments, but they forget about the generation of employment:

    We can roughly say that investment increased by 425% in 5 years. This is onlythe foreign investment.

    [Source: Statistical Outline of India 2002-2003; Tata Services Limited, Bombay

    House, Mumbai]

    Background:On April 15, 1994, 115 countries of the world concluded the final treaty of theGeneral Agreement on Trade and Tariff (GATT), and thus laid the ground rules ofthe World Trade Organization (WTO). The basic rules are:

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    Trade Related Investment Measures (TRIM).Trade Related Intellectual Property rights (TRIP).General Agreement on Trade in Services (GATS).TRIM

    This regulation abolished:

    1. The requirement for national treatment.2. The prohibition on Quantitative restriction.

    The first point means identical treatment has to be extended to domesticproducts and to imports. With this clause, the difference between nationalenterprise and foreign enterprise is dissolved.

    The second point means that the quantitative restrictions involving importlicenses and quotas on imports and exports should be abolished.

    NB: The Indian government recently abolished quota restrictions on 1423 items,against which a BJP M.P. protested and was consequently marginalized by theruling party - BJP.

    These two provisions will effectively allow full freedom for MNCs inundevelopedcountries, and will drain the foreign exchange and also ruin the small-scalesector of those countries.

    TRIPAccording to the provision of TRIP, the Indian Patent Law of 1970 has to be

    amended, which the present government did with the help of opposition parties,and thus befooled the masses.

    The Indian Patent Law of 1970 demands that separate patents have to beobtained for the process or the formula and for the product. Patents on essentialitems like agricultural products, human and veterinary medicines, surgicalinstruments, pesticides as well as defense and atomic energy-related items wereprohibited. In some cases, the patent on a process was allowed even though thepatent on the ensuing product was prohibited. This enabled the researchscholars to invent new processes for the same product.

    The new patent law in WTO extends the scope of patentability, thus restrictingthe scope to produce using modified processes. India was supposed to amendits patent law by 1999, which they did this year. For certain items such as food,chemicals, medicine and herbs, it has been extended for another five years. By2004 all national patent laws was supposed to be superseded by internationallaw. This year they are going to pass law accordingly.

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    With regard to plant varieties, India is allowed to have its own sui generis system,which can be applied up to the end of a ten-year period.

    WTO is free to devise stiffer "plant breeder rights" so that a global model can beuniformly applied to all member countries. This will drastically reduce farmers'

    rights and curtail their freedom to retain protected seeds from their harvests or toexchange or sell such seeds. Every time they will have to purchase protectedseeds from the multinational companies.

    Import of Patent RightsCurrently, patent holders must obtain a patent from the patent-granting country.According to the new laws of WTO, imports and locally produced products will beautomatically allowed patent rights on an equal basis.

    This means that patents can be obtained not only for establishing manufacturingmonopolies, but also to establish import monopolies.

    Patent holders will have no obligation to the national governments that confer thepatent rights.

    There will be no check on the import of patented products. They can be sold at ahigh transfer price without any price control. The impact of the new patent law willbe extremely harmful on prices, especially of medicines. The cost of manymedicines, including life-saving medicines, will increase by five to ten times.

    Availability: The availability of new drugs and medicines from ndigenous sourceswill be greatly reduced. The effect of these new patent laws on local research

    and development and on small-scale pharmaceutical industries (SSI) will beextremely adverse. About 18,000 such industries may face bankruptcy andclosure in India only.

    GATSAccording to this clause, all restrictions on banking, insurance,telecommunications and air transport have to be repealed. This will enable theMNCs to control the entire economic infrastructure of any underdeveloped ordeveloping country.

    IMF-WB-WTO: The unholy trinity

    So far, IMF (International Monetary Fund) and WB (World Bank) have tried tocontrol the economies of developing countries using the leverage of loans. Thisworks only if the country asks for a loan. By introducing the WTO laws, the MNCswill now control the trade and services of a country. Even the national budget ofany country will be dictated by this trinity vis- -vis the MNCs.

    With the introduction of so-called globalization, economic control will be passedon to MNCs, and whatever basic infrastructure exists will be ruined instead of

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    enhanced. Abnormal hikes in the prices of essential commodities increase thegap between rich and poor, and gradually increasing dependence on foreignmoney and expertise are the symptoms that India, for example, is alreadydisplaying by inviting economic colonization.

    Instead, India needs to expand and strengthen its basic industrial sector. Small-scale industries, artisans', farmers', handloom, weavers' and cottage industriesshould be encouraged through decentralized planning and by increasing creditfacilities.

    Prout policy on globalizationAn economic system can remain viable only so long as society has mechanismsto counter abuses of either state or market power and the erosion of the natural,social and moral capital that such abuses commonly exacerbate.

    The market produces a socially optimal outcome when the government and the

    civil society are empowered to act to maintain the following six conditions formarket efficiency, which contradicts monopoly of economic power. Marketscannot produce them. But without these, a market cannot function efficiently.

    1.Fair Competition: Those who hold monopoly power compel the legislators torewrite the rules in their favor. Only a firm government hand can restrain theinexorable tendency towards monopolization. Politicians are rarely willing to exertsuch a strong hand, however without crisis, and hence it demands an active andwell-organized civil society. This means the general population must have a highlevel of understanding and must be ready to demand fair laws.

    2.Moral Capital: Although market theory assumes self-interested individuals, butthe real world markets often reward greedy, dishonest and immoral behavior.Neither a society nor a market economy can function efficiently without a moralfoundation.

    3.Public Goods: Many investments and services that are essential to the publicwelfare, such as investment in basic scientific research, public security and

    justice, public education, roads, defense and other such infrastructures, are notsupplied by the market but rather are used by it. These are the social costs ofproduction.

    4.Full Cost Pricing: In so-called free market economies, a producer tries toexternalize social and environmental costs in order to increase profit. Withoutgovernmental intervention, no company likes to pay the social costs of itsproduce.

    5.Just Distribution: In a market system, there is a strong tendency, especiallyduring periods of economic expansion, for the owners to increase their wealthand income while the income of laborers lags far behind. A market in which

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    economic power is unjustly distributed will allocate resources in an unjust andsocially inefficient manner. Market efficiency and institutional legitimacy dependsupon governmental intervention to constantly restore the equity that the forces ofmarket inexorably erode.

    6.Ecological Sustainability: As the human economy grows to fill its ecologicalspace, limiting the scale of economic subsystems to maintain an optimal balancewith nature becomes necessary for the survival of species. The government musthence set limits and ensure that appropriate signals are sent to the market. Wecan clearly see that a market freed from governmental restraint is inherentlyunsustainable because it erodes its own institutional foundations. Hence what isneeded at this stage is a regulated market and not a free market.

    New Economic Order In 1975, observing the success of OPEC, Third World countries meeting at theUnited Nations demanded changes in the structure of international trade so as to

    bring equality between rich and poor nations. Professor Tinburger proposed theRestructuring of International Order (RIO) for this purpose. RIO goals are:

    To bring parity between rich and poor countries in the prices ofexported goods, to facilitate industrialization with indigenous raw material, and toreduce the influence of MNCs.

    Since 1991 NEO fizzled out making way for WTO.

    PROUT proposes the following strategies to ward off the dangers of the currenteconomic globalization:

    - Introduction of economic democracy to counter monopoly of economicpower.

    - To create self reliant economic units.

    - Formation of economic community amongst equally developed countries likeEEC, ASEAN, ANDEAN, SAARC etc.

    - The North Atlantic Free Trade Association (NAFTA) already caused disaster inMexican economy. Free market between rich and poor countries will bring

    economic disaster to poorer country. Hence it cannot be supported.

    - Production should be reoriented based on domestic consumption andindigenous raw material.

    - Encourage small scale industries and mechanise the agriculture in developingand underdeveloped countries.

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    - Encourage labor intensive industries.

    - Curtail the monopoly of economic power.

    - Eradicate corruption.