Since 1950 world trade has multiplied — depending on whose numbers you use — between twelve- and twenty-two-fold. Worldwide foreign direct investment has grown fifteen-fold since 1970. For foreign directinvestment to developing countries, the multiple is twenty. The daily turnover in foreign exchange markets was $15 billion in 1973. Now it is over $1.5 trillion. Technology production has multiplied six times, the international trade in technology nine times. In 1956 it was possible to have eighty-nine simultaneous transatlantic telephone conversations by cable. Today, by satellite and fiber optics, there are one million, plus faxes and e—mails.
All of this and much more is remarkable.
‘Why, then, is so much of Globalization and its promise slipping away? It isn’t simply a matter of failures and unforeseen contradictory forces. The most revealing measurement is the system’s own successes. Why? Because it increasingly feels as if even the promises fulfilled are not having the expected effect. A few questions will suggest the pattern.
Take the revolutionary explosion in money markets. Most of the foreign exchange movements are about speculation, not investment or wealth creation. The amounts involved are forty to sixty times that of real trade. Serious supporters of Globalization like Jagdish Bhagwati and partial critics like the economist Joseph Stieglitz and a growing number of others are horrified by what they see as a hijacking of the free trade movement to support open capital markets. As for the investments these capital markets may make in developing economies, the primary question must always be, whose purpose do they serve? The 1997 Asia meltdown included $100 billion abruptly invested from abroad and then abruptly withdrawn within a year. Those countries had long had enough local capital for their own investment needs. Their economies were artificially inflated and then deflated — a classic boom-and bust cycle, but imposed from the outside.
The question people are asking is. Do these open markets create growth? If they don’t, what do they do? The effect cannot he neutral.
More rarely discussed is the lack of a sensible relationship between the spectacular growth in trade and the modest growth in wealth. Perhaps today’s trade is not the same economic phenomenon as the trade of classic theory. Perhaps it can’t produce wealth as expected.
Perhaps the high percentage of new trade that is merely movements inside transnational’s does not create the same sort of wealth as the traditional sort across borders between separately owned corporations. The former isjust a matter of shipping and tax planning. The latter is all about buying and selling. If transnational’s have taken on some of the characteristics of empires, perhaps the old effect of colonies costing more than they are worth is also at play.
Is it possible that an over-obsession with trade — with the movement of goods and parts of goods — distracts us from the creation of wealth? Is it possible that trade taken out of a sensible economic and social equilibrium actually depresses wealth creation?
Is itpossible that a sizable portion of our growth in trade relates not to a revival of capitalism, hut to a decline into consumerism? Note how many of the leading modern economic historians equate Consumerism not with wealth creation and societal growth, hut with inflation and the decline of citizenship. Why? Because there is a constant surplus of goods that relate neither to structural investment nor to a concept of economic value, let alone to societal value. This in turn makes nonsense of the ideas of competition, comparative advantage and supply and demand.
Measuring success by gross domestic product is a dubious approach to life. But if you do, you discover that GDP growth per head over the last three decades has been quite modest — less than half that of the pre-Globalization quarter—century. It has been particularly subdued in the Western democracies, disastrous in both Latin America and Africa, and remarkable in large parts of Asia.
Trade — with or without the capital markets — is meant to s rye the economy. It is not a purpose. It is a service. If it does not serve, it may become a counterproductive distraction. It may even become an unusual form of inflation, one that we are not used to identifying, let alone measuring. And so we act as if something that is happening is not happening.
Klaus Schwab, the founder of the annual CEO gathering at Davos in Switzerland and a predictable echo of what the mainstream is thinking, now warns of “fragility” and of Globalization leading to “the first really synchronized world recession and the risks of economic imp1osion.” These days Alfred Eckes is quoting Keynes in the 1930s: “The age of economic internationalism was not particularly successful in avoiding war.” Eckes’s interpretation of Keynes is that “free trade, combined with capital mobility, was more likely to provoke war than to keep peace.”
Meanwhile, a growing number of highly respected figures speaking outside of the Western democracies are turning their backs on theoretica1ly scientific interpretations of global success such as trade statistics and cumulative GDPs. What they see are real people whose actual standard of living apparently must drop in order for them to appear to rise in Western-style statistics. How can that be? For example, these people may have been living a life beyond such measurements — perhaps rural lives. They are therefore technically existing on zero income. Then they move to a desperate urban slum where dirty water, sewage and alienation are the norm. But in such a place, even a dollar’s worth of income can be measured. And so Western measurement systems say they have taken a step forward and upward.
What emerges from examining this sort of reality is that generalizations about free trade or even about protectionism are not terribly useful. Each comes in many forms. Each has its uses, in particular circumstances for particular lengths of time.
The Jordanian intellectual Prince Hassan now calls for a redefinition of “poverty in terms of human well—being rather than in terms of monetary wealth.”9 Malaysia has developed a Growth with Equity model. The Bhutanese, with their hard—headed yet ironic style, work behind something called GNI I Gross National I happiness. And China is now focused on a quality—of-life approach in the place of GDP. Why?
The easy answer is that none of these nation—states 9ees itself as an outpost of Western economic theory. Each regards itself as a centre and one with urgent needs. These needs have nothing to do with Globalization and everything to do with strengthening their particular nation—state by focusing, as in the case of China, on their explosive levels of poverty, but in a more stable and locally appropriate manner.
The outcomes of their market modernization will most probably he a stronger conviction of shared national belonging and a more confident exporting of what they think their national model is. Or as the writer and now Indian foreign minister K. Natwar Singh describes his country s view of its own economic reforms: “We are too large to he pushed around, too proud to be camp-followers and too independent to be clients.”’
Spiritual leader and development activist, the Aga Khan, has his ear to the ground in a broader spectrum of places than almost any other international figure. He is a sharp observer of what is actual happening in the world. And when asked to describe what he sees, his focus is not on the economic success story of Globalization with positive trickle—down and welcome side effects. Instead he talks of “a world of increasing dissension and conflict and focuses in the “failure of democracy as our single greatest problem: “nearly 40 percent of LN member states are failed democracies. That is the greatest risk we face and the preconditions for dealing with this are first, a healthy civil society and second, “pluralism.”
And if all of this sounds like an anti Western point of view, you can listen to Vaclav Havel, the Czech writer and political leader, a hero if modern democracy, strongly pro free market, calling on Europe to act “as inspiration for other parts of the world in order to counter the dangers of globalization.” How? “I don’t understand why the most important deity is the increase of gross domestic product. It is not about GDP. It is about the quality of life, and that is something else.
Once you leave the hothouse of Western economic theorists and advocates, the world looks quite different —— not at all the neat object of market—driven measurement.
Has then the whole Globalist ideology been a failure? Not at all. It’s just that when normal people look at our situation they do not see a balanced relationship between the promise and the outcome. And they do not see a successful broader outcome, in good part because a growing assertion of economic wealth is matched by a growing realization of shrinking funds for the common good and greater instability in individual lives. Much of that instability is of economic origin. The mismatch between a spectacular growth in paper wealth, a marginal growth in real wealth and shrinking public and social capacities suggests some new form of inflation — a vaporization of money through an over-obsession with consumption economics ant a whole range of imaginary market activities as highlighted by the money markets and the world of mergers and acquisitions.
In the midst of this growing feeling of discomfort with the evolution of events, sensible people like Samy Cohen, the director of France’s international research centre (CERI), remind us that “the retreat of the state is neither general norirreversible,” even inside Europe.’ And one of the central reasons for this illusion of general irreversibility is that the Globalization movement has produced myriad market-oriented international binding agreements at the global level and not a single binding agreement in the other areas of human intercourse — work conditions, taxation, child labor, health and SO on. The deep imbalance of the movement, how ever successful in its own terms, cannot help but provoke unexpected forms of disorder. Excerpted from ‘The collapse of Globalism and the Reinvention of the world’ Page 21 -25.