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Sunday, June 27, 2010

Negative Effects of Globalisation

Introduction
In the first week of the Our World in Crisis? course, each group held a debate on Globalisation. The topic was "Globalisation is a good thing". Find some arguments favouring Globalisation at this post. This post presents arguments opposing globalisation.

An Australian example of the negative effects of globalisation

At this time one of the major issues raging in Australia involved powerful globalisation issues. The government had proposed an extra tax on the "super profits" of mining companies. Not surprisingly the multi-national mining companies that were making the huge profits objected and mounted a powerful public campaign against the government. The mulit-national mining companies campaign was strongly supported by the multi-national media (News Limited) and the conservative oppostion parties. The government decided that it could not withstand such a powerful (and extremely well funded campaign) so it came to an agreement with the mining companies under which the companies would pay much less tax.

What was disturbing about this episode was how it was handled by the media, that reported with glee the gladitiorial contest but ignored the wider implications for national sovereignty and democratic government. Clearly here was and example where a national government was thwarted by powerful international companies but no one in the media seemed particularly concerned by this limitation of national sovereignty.

Laura Tingle has an interesting take on though more in the context of Australian politics and media than from a global perspective.

Theoretical arguments against globalisation

The main arguments supporting Globalisation are free market neo-liberal ones. The critiques of Globalisation involve attacks on the neo-liberal agenda.

One of the major critics of Globalisation is Joseph E. Stiglitz, whose book Globalization and its Discontents is a powerful attack on globalisation.

Stiglitz particularly attacks the interventions of the International Monetary Fund (IMF) and considers that the policies pursued by the IMF are based on neoliberal assumptions that are fundamentally unsound:

Behind the free market ideology there is a model, often attributed to Adam Smith, which argues that market forces--the profit motive--drive the economy to efficient outcomes as if by an invisible hand. One of the great achievements of modern economics is to show the sense in which, and the conditions under which, Smith's conclusion is correct. It turns out that these conditions are highly restrictive. Indeed, more recent advances in economic theory --ironically occurring precisely during the period of the most relentless pursuit of the Washington Consensus policies--have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly. Significantly, there are desirable government interventions which, in principle, can improve upon the efficiency of the market. These restrictions on the conditions under which markets result in efficiency are important--many of the key activities of government can be understood as responses to the resulting market failures.

The point, according to Stiglitz is not that neo-liberalism is always incorrect, but rather that it has to be applied carefully and in accordance with the culture and history of individual countries.

As W.W. Norton states:


The main tenet of the book is simple, and goes something like this: pro-globalization
policies have the potential of doing a lot of good, if undertaken properly and if
they incorporate the characteristics of each individual country. Countries should
embrace globalization on their own terms, taking into account their own history,
culture, and traditions. However, if poorly designed—or if a cookie-cutter approach is followed—pro-globalization policies are likely to be costly. They will increase
instability, make countries more vulnerable to external shocks, reduce growth, and
increase poverty.

The problem, according to Stiglitz, is that globalization has not been pushed
carefully, or fairly. On the contrary, liberalization policies have been implemented too fast, in the wrong order, and often using inadequate—or plainly wrong—economic
analysis. As a consequence, he argues, we now face terrible results, including
increases in destitution and social conflict, and generalized frustration. The culprits are the IMF and its ‘‘market fundamentalists,’’ the ‘‘Washington Consensus,’’ and the US Treasury.

Not surprisingly the strongest critics of Stiglitz are from the neo-liberal camp. For one example follow this link.

The video below is a brief excerpt from an extended interview with Stiglitz. For the full interview follow this link.



Another strong critic of Globalisation is Noam Chomsky.

The video below is the sound track of a brief talk on globalisation.



I particularly liked the poem quoted by Chomsky:

The poor complain; they always do
But that’s just idle chatter
Our system brings reward to all
At least all those who matter.

Poem by a Canadian economist (Gerald Helleiner)

For Helleiner the development of a just and effective global economic system is a work in progress. See this link for details.

The most important implications of the globalisation of world markets, then, are: the pressing need for development of appropriate policies, at national, regional and community levels, for optimal use of the global economy in the interest of national, regional and local human welfare and development; and, perhaps even more difficult, the greatly increased need for improved arrangements for global economic governance.

Given the limitations of our knowledge and the enormous diversity of national, regional and local circumstances, it is difficult to generalise about the former; that, in turn, implies the need for global governance and rules systems that eschew over-harmonisation and ‘one-size-fits-all’ approaches.

Market forces are powerful, and can be so for good. But, left unchecked, they can yield socially deleterious outcomes... Markets may be important and market incentives can indeed be powerful, but they are neither all-pervasive, nor do they solve all problems. In their proper context, with appropriate safeguards and institutions, markets and their incentives can do much good. It is also, of course, well-known that great harm can be done when governments try to replace or outdo markets in circumstances where they do not have the capacity effectively to do so.

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