Davos Elites Have Reason to Worry About Globalization Backlash
The Arizona Republic, January 30, 2001
Knight-Ridder/Tribune Media Services, January 26, 2001
It's that time of the year again, when 3000 members of the global elite gather for five days at the remote Swiss Alpine resort of Davos, to schmooze, make deals, and try to put a human face on globalization for the press.
Funded by more than 1000 of the world's largest corporations, this year's meeting of CEO's, political leaders, and academics is aware that not everyone agrees with their basic premises. Among the items for discussion: "Addressing the Globalization Backlash."
An honest discussion of this topic might begin by asking why globalization has failed to deliver the goods-- or services. Among economists, it is well known that the last two decades of rapidly expanding international trade and investment have coincided with a sharp slowdown in economic growth. From 1960-1980, the average country had real income growth, per person, of 83 percent. In the last two decades (1980-2000), this growth was only 33 percent.
In other words, despite all the hand wringing at Davos about "the poor being left behind in the global economy," it is not just the poor who have lost out. It is the vast majority of people, in the vast majority of countries-- including the United States, where the median wage (adjusted for inflation) is about the same today as it was 27 years ago.
Of course most of the poorer countries have been hit harder. In Africa, real income per person actually fell by 15 percent over the last two decades (1980-2000), after increasing by 34 percent in the previous twenty years. And Latin America saw its growth slow from a 75 percent gain in the first period to only 7 percent in the second.
It is not difficult to see how globalization might have contributed to this result. In the previous era, national governments exercised more control over their economic policies. This enabled them, in many cases, to pursue economic development strategies that increased the productivity of their own labor force: through investment in industry, education, or necessary infrastructure such as power and electricity. Over time, this increasing productivity laid the basis for higher living standards for the entire population.
The most rapidly growing economies of the last half-century-- countries like South Korea or China-- had extensive state planning, industrial policies, and public investment. They did not succeed in raising living standards by simply opening their domestic markets to foreign trade and investment-- as low to middle-income countries are now coerced into doing by the International Monetary Fund, the World Bank, and the World Trade Organization.
The IMF and the World Bank have been especially damaging in this era of globalization, since they have developed a cartel for credit in much of the world. This enables them to impose very destructive economic policies in dozens of countries.
We need look no further than California to see how reckless de-regulation in areas of vital infrastructure-- in this case electricity-- can damage an economy. Multiply this by 50, imagine tens of billions of dollars being drained out of California to a foreign country, and you get an idea of the kind of economic harm that the IMF and the Bank can inflict on borrowing countries.
The leaders at Davos would have us believe that the loss of national economic sovereignty is an inevitable result of the "global economy," and represents historical progress. But this is not true.
The whole concept of the "global economy" is actually a gross exaggeration. More than 80 percent of the world's goods and services are produced for national or local markets. In the United States, the number is 87 percent, and our government is not constrained by global markets in deciding its major economic policies. It has, however, used international commercial agreements such as NAFTA and the WTO to drive down wages here.
It is not global markets themselves, but global institutions such as the IMF, World Bank, WTO and the corporations represented at Davos that have-- quite deliberately-- curtailed national economic sovereignty in the era of globalization. We should not be surprised that the result has been poorer economic performance, since these institutions are not accountable to any electorate. This is especially true for lower income and transitional economies that have been most subjected, in this era, to the dictates of foreign decision-makers.
Meanwhile, ten thousand of globalization's opponents, representing non-governmental organizations from throughout the world, are meeting at the World Social Forum in Porto Alegre, Brazil to discuss alternatives to the Davos agenda. If there is a future for global economic co-operation, this is where we will find it.