IS GLOBALISATION ALWAYS A GOOD THING?

By Richard Cary (Feb 2005)

INTRODUCTION

Globalisation is possibly the most important and complex issue of our times, yet too
frequently it is simplified down to a pro Vs anti debate that focuses on whether
globalisation is a good thing and should proceed, or whether it is a bad thing and should
be halted in its tracks (if that is at all possible). By taking the current, neo-liberal (free
market) model as a given, we surrender the capacity to alter it, and in doing so miss the
unprecedented opportunity that globalisation offers to solve many of our current global
problems.
The neo-liberal position has essentially reduced the scope of economics to matters of
efficiency. It has separated itself from the concerns of equity, ecology, philosophy,
sociology and politics, which in reality, cannot and should not be separated. It has
created a world that is wonderfully efficient at producing manufactured and financial
wealth, and equally efficient at depleting meaning, quality, social bonds, and the very
ecology on which planetary life depends. Its central, powerful and very useful,
simplifying assumption (that the interests of the whole are met by individuals acting
purely on self-interest) has been taken as fact. The complexity of human society has been
stripped down to this assumption and rebuilt on its false foundation. This is surely what
happens when we make free-markets the arbiter of what is good, true and beautiful. It is
surely what happens when we make markets our master.
Is globalisation always a good thing? This essay will argue that it has the potential to be a
great thing, but only if we are able to move beyond the current model, whose basic
problem is that it is unbalanced. The current model fails to balance the excessive power
of global corporations with a corresponding level of global governance. It fails to
acknowledge the well-documented failings of free-markets and the essential role of
government in correcting this, and it fails to recognise the role of co-operation, as well as
competition, in the evolution of systems.

In nature, the requirement for balance is real. The process of evolution is not just about
survival of the fittest; it principally involves establishing co-operative communities at
progressively higher levels of complexity (Sahtouris 1998) and (Heylighen 2000).
Organisms start out in competition, and grow in number to the point where survival
demands that they must form a co-operative whole on an entirely new level of
complexity. The emergence of the nucleated cell, with its specialised division of labour,
is one such example in the evolution of life, as is the emergence of social levels; the tribe,
the nation, and now global human society.
The essential pattern, which runs through all evolutionary steps, is best described by one
of the core concepts of Ken Wilbers integral theory; that of transcend and include
(McIntosh 2004). When a new level emerges, it not only transcends the previous levels,
enabling it to solve higher order problems, and look after the whole, but importantly, it
continues to include what works from the previous levels, and look after the parts (Wilber
1996).
This essay will critically examine the current model of globalisation and attempt to
conceive of an alternate, integral model that includes the strengths of the current model
while transcending its limitations. It will present a balanced model that recognises that
economics lies wholly within the sphere of ecology and is the servant, not the master of
society.

THE WASHINGTON CONSENSUS

A particular brand of globalisation, based on neo-liberal economics, and which became

known as the Washington consensus, was vigorously promoted in the latter decades of
the twentieth century by number of core states led by the USA. Although it is argued that
we have now moved to a post-Washington consensus, it is the Washington consensus
that is the progenitor of the dominant characteristics of globalisation today (Santos
2002).
Through institutions such as the IMF, the World Bank, GATT and the WTO, trade and
foreign investment barriers were removed, and global capital flows increased. As a result,
most nations experienced a dramatic rise in trade as a proportion of GDP (a standard

indicator of the level of globalisation) (Anderson 2001). For developing nations, the
process also meant the imposition of certain conditions via structural adjustment
programs, involving deregulation of markets, privatisation, protection of property rights,
and a commitment to smaller government, focused on lowering inflation and sound fiscal
management, ahead of social policies.
The Washington consensus could be viewed cynically, as a celebration of the victory of
capitalism over communism (of free markets over central planning), and the offer of this
(now proven to be) superior system, to the rest of the world. The idea of economic
convergence provided the logic compelling many developing nations to take up the offer.

Economic Convergence:
Neo-liberal economic theory, explains Woodward (1998), predicts that economic
convergence will eventually equalise factor prices, productivity and income, and thereby
bring the benefits of the developed world to the developing world; Capital will be
attracted to countries that enjoy the comparative advantage of low wages. This will raise
the productivity of agriculture, as well as create a shift towards higher productivity labour
intensive industries, and result in a lift of the incomes of the poor.

POSITIVE RESULTS

Countries that were able to demonstrate a capacity to meet the conditions of globalisation
were able to attract foreign capital, and boost trade and growth. A number of former
communist bloc and Latin American countries experienced strong economic growth.
None, however, have been as impressive as the countries of East Asia in producing the
Asian economic miracle of the 1980s and 90s, which reduced poverty more rapidly
than ever before in human history (DAFT 2003). These economies were able to take
advantage of globalisation, chiefly because of better quality governance (regulation and
enforcement), higher savings rates, and greater investment in education than other
developing nations (DAFT 2003).
Not all developing nations, however, have been able to demonstrate globalisation
readiness. Sub-Saharan Africa, in particular, has remained with low growth, an inability

to attract sufficient development capital, and mired in crippling poverty, heavily

dependant on aid. A situation to which a free-marketer might respond, that essentially
what is needed is further structural adjustment, and more time for the adjustments to
work. This may in fact be a reasonably accurate assessment, but even if East Asias
growth results were to be replicated throughout Africa, the world would still be left with
a host of insoluble problems, due to intrinsic flaws in the free market model.

NEGATIVE RESULTS AND UNSOLVED PROBLEMS

The negative consequences and unsolved problems of Washington consensus (free

market) globalisation could be broken into problems of instability, inequality/poverty,
security, and ecology.

Instability:
Increased foreign investment (particularly short term, speculative funds) has made
countries vulnerable to financial panics like the Asian crisis of 1997, which put a
temporary halt to growth, and highlighted the need for tighter prudential controls.
Something more fundamental than just prudential controls, however, is needed if the
problem of the electronic herd is to be addressed. The vast majority of the herds
international capital flows consist of non-productive, short-term. speculative funds. These
could be substantially reduced by a relatively low level Tobin Tax on currency
transactions, without significantly impacting on productive, longer-term, investment
capital (Davies 2004). The tax would, of course, be highly unpopular within a financial
industry that depends on speculation to generate much of its profits.

Inequality/Poverty:
The current system manufactures inequality with breath-taking efficiency. Ironically, this
is largely because many markets are not as free as is claimed. Truly free markets are less
efficient at providing rent opportunities for the rich. The fact is that no countries have
benefited as much from globalisation as the already wealthy developed nations, and no
sector of the population has benefited as much as the already wealthy shareholders of

major multinational corporations. An already massive wealth chasm is growing within

countries (the average major US company CEO earns 419 times his average worker
(George 2000)) and between countries. There is no shortage of statistics to show that
inequality is growing, or how obscene it has become; the combined wealth of the worlds
three richest people now exceeds the combined wealth of the poorest 48 countries (Santos
2002).
Defenders of the system maintain that its policies promote growth, which then translates
into poverty reduction. While it is true that growth is promoted, and that without such
high levels of growth, poverty would probably be a lot worse, it is unclear, however,
whether poverty is in fact being significantly reduced.
A point that plainly emerges is that the lions share of wealth developed by high growth
policies is not being channelled into poverty reduction, but into fuelling further
inequality. The UN study by Woodward (1998) concludes that despite claims that
poverty reduction is a major priority of globalisation, it remains, in practice, no more than
a hoped for by-product, with the main priority clearly to enable the rich to get richer, as
the rules of the game are skewed heavily in their favour. Former World Bank chief
economist Joseph Stiglitz knows precisely when the rules, enacted by formerly wellintentioned international institutions such as the IMF and World Bank, were skewed to
serve the interests of, not just the major industrialised countries, but the commercial and
financial interests in those countries (Stiglitz 2002). It was in the 1980s, due to the
influence of the US treasury, under what became known as the Washington consensus.

Security:
Inequality of the magnitude that exists in todays world is fertile ground for a range of
security problems; At home we see the rise of gated communities for the wealthy and
internationally we see people smuggling and border patrols. If there is one issue more
current than globalisation it must be terrorism. But the two are not unrelated, inequality,
born of our current model of globalisation, surely provides significant impetus for
terrorism.

Ecology:
Our current economic system produces such problems as global warming, loss of
biodiversity, deforestation, resource depletion, and continual flows of waste beyond the
assimilative capacity of our ecosystems. It encourages people to grab far more of the
earths resources than they need, and to grab them quickly before someone else does. In
the pursuit of growth, rarely is the distinction made between activities that enhance the
environment and society, and activities that degrade them. As long as the level (as
opposed to the quality) of growth is high, everything is considered fine.
Where destructive effects are local and immediate, the system is certainly more capable
of imposing corrective measures, but where these effects are global and slowly
cumulative, such as with global warming, it lacks the capacity to respond.
Boyce (2001) notes that, in economic activities that degrade the environment, there are
winners and losers, and poses the question; Why are the winners able to impose costs on
the losers? The main reason, of course, is that the losers are future generations, and are
therefore not here to defend themselves. Howarth (2004) calls on philosophy and Kant to
inform todays economics about the distinction between preferences (to which market
economics pays so much attention) and duties (about which it seems to care little). It is
our duty to ensure that the earths ecosystems are non-diminished from one generation to
the next.

WHATS WRONG WITH THE MODEL?

Truly Free Markets:

Its not that markets are always too free; in some respects they are not free enough.
Barriers to competition, which allow individuals and firms to prosper at the expense of
the majority, exist in many markets. The opportunity to accumulate great wealth usually
depends on being sheltered from full competition (Stewart 2000). By and large, such
rent opportunities are only available to the already wealthy, who, public choice theory
informs us, vigorously defend them through lobby groups and political donations.
It is not always wealthy sectors of society, however, that attempt to maintain protection
from free competition. Less skilled workers in developed countries desperately cling to

their own trade barriers even while their governments call for the dismantling of other
barriers around the world. Larsen (2000) and Granville (2000) argue that the highest
priority for poverty reduction must be to proceed with further reform, and allow
developing nations freer access to the remaining protected areas (such as agriculture and
textiles) of wealthy nations. For the sake of fairness and efficiency, such reforms should
certainly proceed, but not without adequate programs to facilitate employment creation in
new industries.

Social Markets:
A free-market reformer would likely stop at this point, and avoid the most crucial market
reforms. This is the need to socialise markets; to direct them, through price adjustments,
to produce social outcomes (outcomes which are truly good for the whole).
Stewart (2000) explains that while markets are magnificent tools for converting
individual self-interest into whole group (social) interest, they can only do this job to the
extent that they can fully capture their effects on others. In the case of positive effects
(externalities) such as education, national defence, parks, and many other kinds of social
infrastructure, it is impossible for the market to provide full payment to an entrepreneur
who might attempt to offer these services. He will find, that in defending the whole
nation, for example, only some will be willing to pay the cost. Most will free ride on
his service (Stewart 2000). Such goods and services with positive externalities will be
undersupplied in an economy that relies on the market to do so. It therefore falls on
government to supply them directly, or to create a true social price in the market,
through corrective subsidies.
Even more crucial (because of our multiple, global, ecological crises) is the situation
regarding negative externalities (negative effects which are not captured by pricing in the
market). For example, given the choice between coal-produced electricity and solar
electricity, a consumer will choose coal because they dont have to pay for the effect (of
greenhouse gas emissions) that it produces, even though these emissions are a real cost
(detriment) to society. If, on the other hand, the cost of this externality is included
(internalised) into a true social price, coal electricity becomes more expensive, the
market now favours solar, and thus, a social outcome is achieved.

Imbalance:
It must be stressed that economics fully accepts that markets fail in the area of
externalities, and that it is the role of government to correct this failure. The current,
politically dominant, free market doctrine, however, conveniently ignores this
understanding, in its bid to shrink the role of government and leave markets underregulated and absolved from their social duty. Although some of the blame for this
situation must go to the politicians themselves, some must also go to political systems
that are open to influence from moneyed interests, to a media, which pedals simplified
half-truths on behalf of their wealthy owners, and to a citizenry that tolerates this. These
actors are, however, only acting within a framework that largely compels them to behave
this way. The root cause is, I believe, the fundamental imbalance in global power.
The inability to produce social outcomes arises almost inevitably because our
society, at present, is not yet fully global, and consequently, severely imbalanced.
Markets and corporations operate on a global level, yet effective governance only
exists on a national level, thus forcing nations into a predominately competitive
rather than co-operative relationship with each other.
No matter how socially progressive a national government, it is not in the position to
implement market reforms such as negative externality taxes, or significant social
programs, as these would place its corporations at a comparative disadvantage to those of
other nations. The mobility offered by economic globalisation, allows corporations to
move (or threaten to move) their operations to countries where the social obligations are
less. The race to the bottom, as it is known, ensures constant downward pressure on
corporate taxes and regulations, and social programs.
The free market argument that such a trend is conformation of the natural superiority of
their position is untrue; it merely reflects that we are in a transitional period in our
evolution, where global power is not yet balanced, but lies squarely in favour of
multinational corporations.

The fallacy of corporate self-governance:

Corporations argue, through their channels of media and favoured politicians, that they
can, through corporate social responsibility (CSR) programmes, be responsible citizens
who need less, not more, governing. An understanding of the market, however, reveals
the lie in this argument; it is certainly in the interests of corporations to appear to be good
citizens, and thereby extract a premium for their products. But it is also in their interests
to actually do only what improves profitability. As Stewart (2000) points out, in a
competitive market, a firm cannot stay in business if it makes decisions where morality
overrides profitability. The market insists that morality be left out of decision-making,
and without social pricing there is nothing to guide it to moral or social outcomes.
Nor is it the role of well-intentioned NGOs to govern corporations. They are underfunded, outnumbered, and lack crucial inside information. Brand crusader Naomi Klein
admits that corporate watchers really only have the resources to go after a few high
profile brands such as Nike with their campaigns (Legrain 2002 and Bhagwati 2004).
However, even if NGOs and internet empowered corporate watchers did have the
resources to do a more thorough checking and reporting job, would the community be
motivated enough to pay attention? And further, asks Legrain (2002), is it democratic?
NGOs have a role in providing information, but corporate governance and market
regulation is surely the function of elected government, not unelected NGOs, and
certainly not corporations themselves.

AN ALTERNATE MODEL

In summary, an alternate approach would continue with the same reforms (at national
level) that might be made by free-market reformers. It would press ahead with;

Dismantling remaining trade barriers.

Political and legal reforms aimed at eliminating corruption and removing links
between economic power and political power (eg. ban donations to political
parties).

Market reforms to promote fair competition and remove rent opportunities.

It would then deviate sharply from a free market to a social market agenda, with reforms
that only become possible with the emergence of effective global governance. These
include;

Minimising destabilising speculative capital flows through a Tobin Tax.

Creating social markets by internalising externalities. Full social pricing in all

markets is not something that would ever be fully realised. It should be considered
an ongoing project, involving continual research to establish true costs and
benefits of goods and services. The journey could start with a worldwide carbon
tax to attempt to account for the cost of CO2 emissions on global warming. Such a
process is, in fact, already underway with the European Commissions ExternE
project (European Commission 2003).

A wealth re-distribution system that balances the need for incentive and equity.
James Yunkers world economic equalisation program (WEEP), for example,
would provide funds to help poor countries develop their productive capacity,
rather than consumption, and therefore avoid welfare dependency (Glossop 2004).

CONCLUSION

We cant solve problems by using the same kind of thinking we used when we created
them Albert Einstein

Global governance is required to balance global markets and corporations. It is only

through such balance that a true globalisation, one allowing an entirely new level of cooperative functioning, becomes possible. And it is only through a higher level of cooperative functioning that we can solve our current global problems.
To date, our predominately competitive global functioning has produced tremendous
growth, but it has not been productively channelled. Instead we see obscene wealth,
waste, self-indulgence, and greed alongside crippling poverty and lack of opportunity,
and we see an environment that is unvalued and mindlessly degraded, because the
mechanism to address global inequality and to direct global markets to social outcomes
(global governance) is lacking.

An alternative model of globalisation must be based on the core concept of integral

theory, transcend and include. It would include what works from previous stages of
development, even while transcending those stages by evolving to higher, more cooperative, stages. What works in the current stage are markets, for allocating resources,
satisfying individual wants, and providing the motive force for effort and innovation.
Therefore global markets must form the economic foundation for the next developmental
stage, but the next stage must transcend their limitations (inequality and socially
destructive outcomes) through effective global governance.
An integral model would also include the parts (citizens, communities, nations) even
while transcending them to benefit the whole (world). In this way it is possible to have
stronger and more cohesive local communities within a global society (or glocalisation
envisaged by (Wilpert 2001, Poletti and Ogilvy 2002, and May2000)).
It is not the point of this essay to pretend that some degree of global governance doesnt
already exist. It does, its just not effective (Yunker 2004). Nor is it to pretend that a truly
democratic global government is achievable in the near future. There are enormous
practical barriers to such a thing (Butler 2004 and Svizzero etal 2004). The point is to
show that effective global governance (capable of balancing the power of corporations,
socialising markets and redistributing wealth) is essential if we are ever to claim
globalisation as the truly good thing it could be. Until that point is reached, however, we
are left with only a transitional model of globalisation that must appear to many to be far
from good.

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