Soc 222, 6th class

Instituting the Globalization Project

PhD Fatma Altınbaş Sarıgül

□Development redefined as a private, global project.

□World Bank’s ‘World Development Report 1980’ ; ‘development-participation in the world market’.

□The global economy was emerging as the unit of development.

© Sage Publications, 2011.

Securing the Global Market Empire

□ Emerging partnerships between states and corporations required to “pry open” the Third World often through military intervention and orchestrated by the United States

□1965: Coup in Indonesia against President Sukarno by General Suharto to protect Western economic interests

□Strategic interventions in Chile, El Salvador, Nicaragua, Panama, Grenada, Iraq

□ Military and economic aid to secure the perimeter of the “free world” and its resource empire


New International Economic Order (NIEO)

□1973: Collusion among OPEC countries threatened Western economic stability

□1974: G-77 proposal of NIEO (a charter of economic rights and duties) to improve Third World position in international trade □Widely perceived as “the revolt of the Third

World”□In 1974 World Bank reported the situation-

read pg.114


Consequences of NIEO□1974: World Bank response was to refocus

on basic needs via elevating rural development funding□Recognized inequalities within Third World□Questioned concept of aggregate growth as goal

□United Third World front unraveled□Divergence between middle-income and poor

countries□Group of Seven (G-7) strengthened

□Finance ministers of U.S., U.K., France, West Germany, Japan, Italy, Canada

□Performed crisis management including containing NIEO


Debt Regime□1980s debt crisis led to

□Instituted new era of global governance in which individual national policies were subjected to external, rule-based procedures that strengthened the grip of the First World through the international financial institutions (IMF and World Bank)

□Spawned debt regime:□Used Asian NICs as example to advocate for

export diversification and neoliberal policies (although they were state-managed economies)


Debt Crisis□Debt was not new in the 1980s.

□By 1960s, 2/3 of new loans in Latin America and Africa were for debt servicing (paying off interest)□1970s: inflated oil prices and unsecured lending deepened debt vulnerability

□1970s Debt Crisis□U.S. Federal Reserve Board reduced dollar circulation to prevent the fall of the dollar with lending binge□Interest rates rose□Lending to Third World states slowed

□Debt was not new in the 1980s. □Debt servicing (paying off the interest) accounted for more than 2/3 of new lending in Latin American and Africa by 1960s□1970s inflated oil prices and unsecured lending deepened debt vulnerability

□Debt crisis began in 1980□Began when U.S. Federal Reserve Board reduced dollar circulation (with an aggressive monetarist policy) to stem the fall in the dolla

r’s value from its over-circulation in the 1970s lending binge□Contracting credit raised interest rates as banks competed for dwindling funds□Lending to Third World states slowed; shorter terms issued□Rising oil prices made some states continue to borrow

□Higher oil prices actually accounted for more than 25 percent of the total debt of the Third World□By 1986, Third World debt totaled $1 trillion

□Countries devoted new loans entirely to servicing previous loans □Third World countries unable to continue debt servicing □First World recession reduced consumption of Third World products□Third World export revenues collapsed as primary export prices dropped□Third World countries were mired in a debt trap: to repay the interest (at least), they had to curtail imports and raise exports□Reducing imports of technology jeopardized growth, while expanding exports was problematic, as commodity prices were at the lowest in 40 years.


Debt Trap□ By 1986, Third World debt totaled $1 trillion

□Rising oil prices made some states continue to borrow

□Countries devoted new loans entirely to servicing previous loans

□Many Third World countries unable to continue debt servicing

□First World recession reduced consumption of Third World products

□Third World export revenues collapsed as primary export prices dropped

□ Debt trap: Had to curtail imports and raise exports but commodity prices were at 40-year low


Debt Management□The Bretton Woods Institutions were back.□IMF as debt manager, working with World

Bank and structural adjustment loan (SAL):□Mid-1980s: Structural Adjustment policies

(SAPs) restructured production priorities and government programs

□Loan conditions required policy restructuring, including austerity measures

□Debt defined as individual liquidity problem, not a systemic problem


Debt Management□Development alliance constituencies—

particularly ruling elites and middle classes used political power to shift debt repayment costs to the working poor via austerity cuts in social services □1982 – Mexico’s $80 billion debt became

model with bailout by IMF, banks and foreign governments and with austerity measures


Reversing The Development Project

□Debt regime rules restructured Third World economies, reversed development project□New definition of development as

“participation in the world market”□Focus on export intensification and

shrinking state□World Bank: New Social Funds run by NGOs,

included decentralized feeding and micro-credit programs□Programs neglected local participation and

gender differences© Sage Publications, 2011.

Structural Adjustment Measures

□ Drastic reduction of public spending (especially on social programs)

□ Currency devaluation (to inflate prices of imports and reduce export prices)

□ Export intensification (to earn foreign exchange)□ Privatization of state enterprises□ Reduction of wages to attract foreign investors

and reduce export prices□ Structural adjustment hurt the poor and least

powerful the most. Poverty rates climbed.


Impacts of Loan Conditions: Mexico

□ Food subsidies eliminated; malnourishment grew□ Minimum wages fell 50% between 1983 and 1989□ Purchasing power fell to 2/3 of the 1970 level□ 1990: Basic needs of 41 million Mexicans

unsatisfied; 17 million lived in extreme poverty□ Manufacturing growth rates fell; depleted formal

employment opportunities □ Mexico became agro-exporter of farm products,

such as fresh fruits, vegetables, and beef


Impacts of Loan Conditions: Africa

□ Vulnerable economies□Fall in commodity prices during 1980s □Tanzania, the Sudan and Zambia used more than

100% of export earnings to service debt in 1983□Cuts in food subsidies and public services led to

urban demonstrations and riots in Tanzania, Ghana, Zambia, Morocco, Egypt, Tunisia and Sudan

□ All development indicators fell□ Oxfam: 1993 – sub-Suharan Africa

□Cuts in public health spending; 10% decline in primary school enrollment


Case Study: Citizens Versus Structural Adjustment

□ 1976-1992: IMF riots across 2nd and 3rd World□146 riots in 39 of 80 debtor countries □Large, coordinated urban uprisings protesting

public austerity measures; broke into food banks□Grievances:

□State policies of economic liberalization□Collapsing entitlements□IMF undermining national public capacity

□ SAPs weaken motivation of states to respond to popular demands, thus shrinking democratic space


1980s: The “Lost Decade”

□1978-1992: 70 countries undertook 566 IMF and World Bank structural adjustment and stabilization programs □Did not necessarily resolve debt crisis □Debtor countries were 61% more in debt in

1990s than in 1982□1984: Direction of capital flows reversed:

□Inflow of loans and investment into former Third World replaced by outflow via debt repayment


The Debt Regime Challenges the Development State

□ Debt managers demanded shrinking of former Third World states by reducing social spending and privatizing state enterprises□1986-1992: Proportion of World Bank SALs demanding

privatization rose from 13 to 59%□By 1992: More than 80 countries had privatized

almost 7,000 public enterprises such as water, electricity, or telephones

□Privatization:□Reduced public capacity in development planning

and implementation □Extended reach of foreign ownership in the global

South □ Banks profited from investments in global South


SALs, State, and Society Restructuring

□ World Bank established parastatals (local agencies) to administer SAPs

□ Power shift to central bank, trade and finance ministries over social services, agriculture and education

□ Power shift from economic regulating agencies to agencies supporting global enterprise

□ Reinterpreted “shrinking” the state to mean a reorganization of state administration to encourage popular initiatives.

□ “Trusteeship” is revived: IMF is “insinuated into the inner sanctums” of governments around the world


Impacts of the Debt Regime□Relocated power within states in former Third

World to global agencies and markets□Imposed standard rather than locally-tailored

remedies on debtor states□Governments and business elites benefit□The poor are hurt


Incorporating the Second World Into the Globalization Project

□ 1989: End of Cold War, advent of unilateral world order□ East European countries subject to IMF supervision of

economies after borrowing from the West□ 1986: Soviet President Gorbachev planned perestroika

(restructuring) in exchange for participation in Bretton Woods institutions

□ IMF policies replaced central planning with “market-responsive” enterprises, reduced subsidies for food, transport, housing (economic rights of socialist systems)

□ 1989: Western shock treatment methods deployed once the Soviet Union and empire

□Precipitous decline in Russian living standards; explosion of organized crime.

□ Unipolar instead of Cold War bipolar world© Sage Publications, 2011.

Globalization Project Succeeded Development Project

□ Key principle: Implementation of a free world market through political intervention□Economic nationalism viewed as limiting

development □Obstructs transnational mobility of goods, money and

firms in the service of efficient (i.e., private) allocation of global resources

□TNCs represented by institutions such as the World Trade Organization (WTO) aim to govern this project

□WTO vision of the globalization project: □Implementation of “market rule” via restructuring of

policies and standards across the nation-state system


Emergence of the Globalization Project

□1980: Global management of capitalism as Bretton Woods claims to manage a global economy with the debt regime□Global managers: Bretton Woods institutions,

transnational corporate elites, governments restructured for market freedoms

□Washington Consensus: Development redefined as “trade not aid” and backed with financial coercion of multilateral institutional debt management


Global Governance□ Global institutions have assumed more powerful

role in governance, but require compliance from governments in two ways: consensus and coercion

□ Compliance can be guaranteed through institutionalizing market rule □ Individual governmental functions recomposed as global

governance functions and enforced through multilateral protocols

□ The World Bank, now the principal development agency, has played a definite governing role.

□LIBERALIZATION© Sage Publications, 2011.

Liberalization and Reformulation of

Development□Liberalization downgrades the social goals of national development, while upgrading participation in the world economy through such means as tariff reduction, export promotion, financial deregulation and relaxation of foreign investment rules.

□Globalization project: Under comparative advantage, “Find your niche in the global market”

□ Key for National Development□Globalization: Comparative Advantage: Specialization

But as mechanisms of specialization are repeated everywhere, they intensify competition, and cause social and economic marginalization, poverty, environment stress and displacement


Making of a Free Trade Regime

□ 1980s U.S. initiated Uruguay Round of GATT to liberalize agriculture and services□ 1948-80 General Agreement on Tariffs and Trade had

expanded trade by reducing tariffs on manufactured goods by 75%

□ Liberalization supported by “free trader” agro-exporting states, TNCs, and agribusinesses

□ Won acceptance from South,□ Uruguay Round redefined food security as best provided

through smooth-functioning world market□ Placed small farmers at comparative disadvantage □ Food security “governed” through the market by

corporate, rather than social, criteria © Sage Publications, 2011.

World Trade Organization (WTO)

□Created January 1, 1994□ Governs member states via liberalization

□ Sets rules to guarantee movement of goods, money and production across borders

□ Privilege corporate rights□ Guarantees treatment for TNCs equal to domestic firms □ Integrated dispute settlement mechanism, e.g. sanctions

□ Challenges national democratic processes □ Removed decision making in nontransparent tribunals in Geneva□ Integrated dispute settlement mechanism □ Threat of complaints against “trade-distorting measures” dilutes

national laws protecting human and environmental health □ Depoliticizes social impact of market reforms

□ Challenges national laws and regulations regarding environment, health, preferential trade relations, social subsidies, labor legislation


Agreement on Agriculture (AoA)

□ 1995: Advocated universal reductions in trade protections, farm subsidies and government intervention□ While Southern farmers face 30% collapse of world prices, U.S.

and European states retained subsidies □ 20-30 million people lost land

□ Liberalization consolidates a corporate food regime□ AoA: “Comparative disadvantage” for unprotected farmers

in the South□ Self-sufficiency not viable as a national strategy□ 88 low-income, food deficit countries spend half their foreign

exchange on food imports□ Oxfam: “How can a farmer earning US$230 a year (average per

capita income in LDCs) compete with a farmer who enjoys a subsidy of US$20,000 a year (average subsidy in OECD countries)?”

□ 40% of Kenya’s children work on export plantations supplying Europe’s food, but 4 million Kenyans face starvation


Trade-Related Investment Measures (TRIMs)

□ Aim to reduce “performance requirements” on foreign investment by host governments□ WTO uses TRIMs to:

□Manage cross-border movement of goods and services, to secure investor rights as if they have no political impact

□ Arguments in favor of TRIMs:□They reduce domestic content requirements that

misallocate resources, raise costs, penalize investment, burden consumers, slow technology, etc.

□They enhance conditions for transnational investment by reducing friction of local laws

□ Effects of TRIMs:□Meant to favor “integration” of investors with local

economy but rather push integration of local producers into world market


Trade-Related Aspects of Intellectual Property Rights (TRIPs)

□ Intellectual Property Rights: Rights given to persons over the creations of their minds

□ TRIPs Protocol: Protection of intellectual property by WTO□ Advocates: TRIPS simplifies protection across borders, promotes

innovation by guaranteeing profits from technological development □ Critics: Biodiversity and generic knowledges should remain

available to humankind as global “commons”□ Examples: frog secretion for painkiller, rosy periwinkle for childhood

leukemia and testicular cancer, , sweetener from West African berry, Indian neem tree, etc.

□ Global south contains 90% of global biological wealth but northern scientists and corporations hold 97% of patents

□ Biopiracy: Appropriation and commodification of genetic material by foreigners without payment or obligation; threatens livelihoods


Intellectual Property Rights Regime

□ Privileges governments and corporations and disempowers villagers by disavowing indigenous, collective knowledge rights

□ 1992 Convention on Biological Diversity □Confirmed national sovereignty over genetic

resources and nations’ entitlement to fair and equitable sharing of benefits

□How states interpret this right and obligation is controversial

□Possibility of sui generis system to recognize and secure collective rights for biodiversity


General Agreement on Trade in Services (GATS)

□1994: Opened markets for trade in services with rights for delivery of finance, telecommunications and transport

□2000: Far-reaching protocol to force governments to provide market access to foreign service providers □Restricts government funding of public works,

municipal services, and social programs □Every service imaginable: drinking water, health

care, education, social security, transportation, postal delivery

□Applies to government measures such as labor laws, consumer protection, subsidies, grants, licensing standards, etc.

In other words, GATS threatens to replace the social contract between corporation and consumer.


Ingredients of the Globalization Project

□Washington-based consensus among global managers/ policymakers favoring □ Market-based rather than state-managed development strategies□ Centralized management of global market rules by G-7 states□ Implementation of rules through multilateral agencies (World

Bank, IMF, and WTO)□ Market power concentrated in TNCs; financial power in TNBs□ Economic discipline (trade, financial) for states, varying by

geopolitical position, global currency hierarchy, debt load, resource endowments, etc.

□ Global development realized via new class, gender, race and ethnic inequalities

□ Resistance at all levels: marginal communities, state managers, and factions within multilateral institutions


Soc 222, 6th class

Education

Transcript of Soc 222, 6th class