Ats1326 Reader

School of Philosophical, Historical and
nternational Studies
Clayton and Caulfield Campuses

ATS1326
Contemporary worlds 2

Unit Reader

Unit Coordinators:

Clayton/Berwick Kate Murphy
Caulfield Rachel Stevens

Semester 2, 2011
ATS1326 Contemporary worlds 2
Prepared by:
Hannah Fulton
Clayton Campus
Monash University, 3800

Produced and Published by:
Faculty of Arts
Monash University
Clayton, Victoria, Australia, 3800
Revised & Printed July 2011

Copyright 2011

NOT FOR RESALE. All materials produced for this course of study are protected by copyright.
Monash students are permitted to use these materials for personal study and research only, as
permitted under the Copyright Act. Use of these materials for any other purposes, including
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Table of Contents

Weekly Tutorials and Readings

Week 01 Introduction .............................................................................................................. 4

Week 02 Economic globalisation ....................................................................................... 17

Week 03 Cultural globalisation ............................................................................................ 36

Week 04 Political dimensions of Globalisation: The State and the UN ......................... 74

Week 05 Political dimensions of Globalisation: Non-Government Organisations ...... 93

Week 06 The Environment .................................................................................................. 125

Week 07 Terrorism ................................................................................................................ 158

Week 08 Migration ............................................................................................................... 175

Week 09 International Crime ............................................................................................. 200

Week 10 China and globalisation .................................................................................... 231

Week 11 The backlash against globalisation .................................................................. 248

Week 12 Reflections ............................................................................................................ 267

Unit Schedule ........................................................................................................................... 279

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1. Introduction

Overview
There is no single universally accepted definition for globalisation, which can be interpreted
on a number of different levels. Economists may look at globalisation in a very different way
from historians or legal scholars. In addition, local experiences of globalisation may differ
from national or global ones. Anthony Giddens (The consequences of modernity, 1990) argues
that globalisation is the intensification of worldwide social relations which link distant
localities in such a way that local happenings are shaped by events occurring many miles
away and vice versa. Jan Aart Scholte (Globalization: A critical introduction, 1999) divides
globalisation into five processes: internationalisation, liberalisation, universalisation,
Westernisation and deterritorialisation. Steve Smith (The globalization of world politics, 2008)
suggests that with globalisation, political, economic, cultural, and social events become more
and more connected. Finally Martin Wolf (Will Globalization survive, 2005) defines
globalization as the integration of economies through markets across frontiers. This week,
we will start to produce our own definitions of globalisation.

Objectives
x Start to define globalisation
x Start to consider the different aspects of globalisation

Discussion points
1. How can we define globalisation?
2. What does globalisation mean to you?
3. Is globalisation a modern phenomenon? What came before globalisation?

Readings
Brown, Garret Wallace, Globalization is what we make of it: Contemporary globalization
theory and the future construction of global interconnection, Political Studies Review, 6:1
(January 2008), 42-53

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2. Economic globalisation

Overview
While many commentators predict positive outcomes from the globalising process, economic
globalisation is currently very uneven in character. The United Nations and other bodies
have observed a deepening divide between have and have-not economies. While
industrialised nations busily negotiate free trade agreements and stimulate regional growth by
reciprocal investment, other economies, such as those of Sub-Saharan Africa, appear to be
excluded from the benefits of globalisation. Perhaps then, it is more appropriate to speak of
only some markets as global, while others have remained regional and even local. This divide
between rich and poor is also observed within national economies, whether rich or poor:
unskilled workers and women, for example, are particularly vulnerable in the global economy,
as we shall explore further during the semester. Anti-globalisation protesters often claim
their aim to be not an overturning of the globalising process, but the institution of checks and
balances to ensure that these losers of globalisation are not left behind. Initiatives like the
United Nations Global Compact seek to ameliorate the negative impacts of the increasingly
powerful international business and corporate system on human rights. This week we will
discuss some of the economic implications of globalisation.

Objectives
x Examine the key actors in economic globalisation
x Reflect upon key trends in the world economy

Discussion points
1. Is the world economy dominated by a race to the bottom? What are the implications of
this trend?
2. How have women in particular been affected by the forces of economic globalisation?
3. Women have the most to gain but also the most to lose as economies become
internationally-interconnected. What do you make of this statement? Can you think of
any real-life examples that best describes this paradox?
4. Is poverty entrenched or diminished by globalisation?
5. How powerful are multi-national companies? Can they ever make states irrelevant?

Readings
Dollar, David and Aart Kraay, Spreading the wealth, Foreign Affairs (January/February
2002)

Ellwood, Wayne, The no-nonsense guide to globalization, London: Verso, 2001

Mazlish, Bruce, The multinational corporations: Ruling the globe? in The New Global
History, New York: Routledge, 2006

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David Dollar and Aart Kraay, Spreading the wealth, Foreign
Affairs (Jan/Feb 2002)

A Rising Tide
One of the main claims of the antiglobalization
movement is that globalization is widening the
gap between the haves and the have-nots. It
benefits the rich and does little for the poor,
perhaps even making their lot harder. As union
leader Jay Mazur put it in these pages,
globalization has dramatically increased
inequality between and within nations
(Labors New Internationalism,
January/February 2000). The problem with this
new conventional wisdom is that the best
evidence available shows the exact opposite to
be true. So far, the current wave of
globalization, which started around 1980, has
actually promoted economic equality and
reduced poverty.

Global economic integration has complex
effects on income, culture, society, and the
environment. But in the debate over
globalizations merits, its impact on poverty is
particularly important. If international trade and
investment primarily benefit the rich, many
people will feel that restricting trade to protect
jobs, culture, or the environment is worth the
costs. But if restricting trade imposes further
hardship on poor people in the developing
world, many of the same people will think
otherwise.

Three facts bear on this question. First, a long-
term global trend toward greater inequality
prevailed for at least 200 years; it peaked
around 1975. But since then, it has stabilized
and possibly even reversed. The chief reason
for the change has been the accelerated growth
of two large and initially poor countries: China
and India.

Second, a strong correlation links increased
participation in international trade and
investment on the one hand and faster growth
on the other. The developing world can be
divided into a globalizing group of countries
that have seen rapid increases in trade and
foreign investment over the last two decades
well above the rates for rich countries and a
nonglobalizing group that trades even less of
its income today than it did 20 years ago. The
aggregate annual per capita growth rate of the
globalizing group accelerated steadily from one
percent in the 1960s to five percent in the
1990s. During that latter decade, in contrast,
rich countries grew at two percent and
nonglobalizers at only one percent. Economists
are cautious about drawing conclusions
concerning causality, but they largely agree that
openness to foreign trade and investment
(along with complementary reforms) explains
the faster growth of the globalizers.

Third, and contrary to popular perception,
globalization has not resulted in higher
inequality within economies. Inequality has
indeed gone up in some countries (such as
China) and down in others (such as the
Philippines). But those changes are not
systematically linked to globalization measures
such as trade and investment flows, tariff rates,
and the presence of capital controls. Instead,
shifts in inequality stem more from domestic
education, taxes, and social policies. In general,
higher growth rates in globalizing developing
countries have translated into higher incomes
for the poor. Even with its increased inequality,
for example, China has seen the most
spectacular reduction of poverty in world
history which was supported by opening its
economy to foreign trade and investment.

Although globalization can be a powerful force
for poverty reduction, its beneficial results are
not inevitable. If policymakers hope to tap the
full potential of economic integration and
sustain its benefits, they must address three
critical challenges. A growing protectionist
movement in rich countries that aims to limit
integration with poor ones must be stopped in
its tracks. Developing countries need to acquire
the kinds of institutions and policies that will
allow them to prosper under globalization, both
of which may be different from place to place.
And more migration, both domestic and
international, must be permitted when
geography limits the potential for development.

The Great Divide
Over the past 200 years, different local
economies around the world have become more
integrated while the growth rate of the global
economy has accelerated dramatically.
Although it is impossible to prove causal
linkage between the two developments since
there are no other world economies to be tested
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against evidence suggests the arrows run in
both directions. As Adam Smith argued, a
larger market permits a finer division of labor,
which in turn facilitates innovation and
learning by doing. Some of that innovation
involves transportation and communications
technologies that lower costs and increase
integration. So it is easy to see how integration
and innovation can be mutually supportive.

Different locations have become more
integrated because of increased flows of goods,
capital, and knowledge. From 1820 to 1914,
international trade increased faster than the
global economy. Trade rose from about 2
percent of world income in 1820 to 18 percent
in 1914. The globalization of trade took a step
backward during the protectionist period of the
Great Depression and World War II, and by
1950 trade (in relation to income) was lower
than it had been in 1914. But thanks to a series
of multilateral trade liberalizations under the
General Agreement on Tariffs and Trade
(GATT), trade dramatically expanded among
industrialized countries between 1960 and 1980.
Most developing countries remained largely
isolated from this trade because of their own
inward-focused policies, but the success of
such notable exceptions as Taiwan and South
Korea eventually helped encourage other
developing economies to open themselves up to
foreign trade and investment.

International capital flows, measured as foreign
ownership of assets relative to world income,
also grew during the first wave of globalization
and declined during the Great Depression and
World War II; they did not return to 1914
levels until 1980 . But since then, such flows
have increased markedly and changed their
nature as well. One hundred years ago, foreign
capital typically financed public infrastructure
projects (such as canals and railroads) or direct
investment related to natural resources. Today,
in contrast, the bulk of capital flows to
developing countries is direct investments tied
to manufacturing and services.

The change in the nature of capital flows is
clearly related to concurrent advances in
economic integration, such as cheaper and
faster transportation and revolutionary changes
in telecommunications. Since 1920, seagoing
freight charges have declined by about two-
thirds and air travel costs by 84 percent; the
cost of a three-minute call from New York City
to London has dropped by 99 percent. Today,
production in widely differing locations can be
integrated in ways that simply were not
possible before.

Another aspect of integration has been the
movement of people. Yet here the trend is
reversed: there is much more international
travel than in the past but much less permanent
migration. Between 1870 and 1910, about ten
percent of the worlds population relocated
permanently from one country to another; over
the past 25 years, only one to two percent have
done so.

As economic integration has progressed, the
annual growth rate of the world economy has
accelerated, from 1 percent in the mid-
nineteenth century to 3.5 percent in 1960-2000.
Sustained over many years, such a jump in
growth makes a huge difference in real living
standards. It now takes only two to three years,
for example, for the world economy to produce
the same amount of goods and services that it
did during the entire nineteenth century. Such a
comparison is arguably a serious
understatement of the true difference, since
most of what is consumed today airline travel,
cars, televisions, synthetic fibers, life-extending
drugs did not exist 200 years ago. For any of
these goods or services, therefore, the growth
rate of output since 1820 is infinite. Human
productivity has increased almost unimaginably.

All this tremendous growth in wealth was
distributed very unequally up to about 1975,
but since then growing equality has taken hold.
One good measure of inequality among
individuals worldwide is the mean log
deviation a measure of the gap between the
income of any randomly selected person and a
general average. It takes into account the fact
that income distributions everywhere are
skewed in favor of the rich, so that the typical
person is poorer than the group average; the
more skewed the distribution, the larger the gap.
Per capita income in the world today, for
example, is around $5,000, whereas a randomly
selected person would most likely be living on
close to $1,000 80 percent less. That gap
translates into a mean log deviation of 0.8 .

Taking this approach, an estimate of the world
distribution of income among individuals
shows rising inequality between 1820 and 1975.
In that period, the gap between the typical
person and world per capita income increased
from about 40 percent to about 80 percent.
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Since changes in income inequality within
countries were small, the increase in inequality
was driven mostly by differences in growth
rates across countries. Areas that were already
relatively rich in 1820 (notably, Europe and the
United States) grew faster than poor areas
(notably, China and India). Global inequality
peaked sometime in the 1970s, but it then
stabilized and even began to decline, largely
because growth in China and India began to
accelerate.

Another way of looking at global inequality is
to examine what is happening to the extreme
poor those people living on less than $1 per
day. Although the percentage of the worlds
population living in poverty has declined over
time, the absolute number rose fairly steadily
until 1980. During the Great Depression and
World War II, the number of poor increased
particularly sharply, and it declined somewhat
immediately thereafter. The world economy
grew strongly between 1960 and 1980, but the
number of poor rose because growth did not
occur in the places where the worst-off live.
But since then, the most rapid growth has
occurred in poor locations. Consequently the
number of poor has declined by 200 million
since 1980. Again, this trend is explained
primarily by the rapid income growth in China
and India, which together in 1980 accounted
for about one-third of the worlds population
and more than 60 percent of the worlds
extreme poor.

Upward Bound
The shift in the trend in global inequality
coincides with the shift in the economic
strategies of several large developing countries.
Following World War II, most developing
regions chose strategies that focused inward
and discouraged integration with the global
economy. But these approaches were not
particularly successful, and throughout the
1960s and 1970s developing countries on the
whole grew less rapidly than industrialized
ones. The oil shocks and U.S. inflation of the
1970s created severe problems for them,
contributing to negative growth, high inflation,
and debt crises over the next several years.
Faced with these disappointing results, several
developing countries began to alter their
strategies starting in the 1980s.

For example, China had an extremely closed
economy until the mid-1970s. Although
Beijings initial economic reform focused on
agriculture, a key part of its approach since the
1980s has involved opening up foreign trade
and investment, including a drop in its tariff
rates by two-thirds and its nontariff barriers by
even more. These reforms have led to
unprecedented economic growth in the
countrys coastal provinces and more moderate
growth in the interior. From 1978 to 1994 the
Chinese economy grew annually by 9 percent,
while exports grew by 14 percent and imports
by 13 percent. Of course, China and other
globalizing developing countries have pursued
a wide range of reforms, not just economic
openness. Beijing has strengthened property
rights through land reform and moved from a
planned economy toward a market-oriented one,
and these measures have contributed to its
integration as well as to its growth.

Other developing countries have also opened
up as a part of broader reform programs.
During the 1990s, India liberalized foreign
trade and investment with good results; its
annual per capita income growth now tops four
percent. It too has pursued a broad agenda of
reform and has moved away from a highly
regulated, planned system. Meanwhile, Uganda
and Vietnam are the best examples of very low-
income countries that have increased their
participation in trade and investment and
prospered as a result. And in the western
hemisphere, Mexico is noteworthy both for
signing its free-trade agreement with the United
States and Canada in 1993 and for its rapid
growth since then, especially in the northern
regions near the U.S. border.

These cases illustrate how openness to foreign
trade and investment, coupled with
complementary reforms, typically leads to
faster growth. India, China, Vietnam, Uganda,
and Mexico are not isolated examples; in
general, countries that have become more open
have grown faster. The best way to illustrate
this trend is to rank developing countries in
order of their increases in trade relative to
national income over the past 20 years. The top
third of this list can be thought of as the
globalizing camp, and the bottom two-thirds
as the nonglobalizing camp. The globalizers
have increased their trade relative to income by
104 percent over the past two decades,
compared to 71 percent for rich countries. The
nonglobalizers, meanwhile, actually trade less
today than they did 20 years ago. The
globalizers have also cut their import tariffs by
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22 percentage points on average, compared to
only 11 percentage points for the
nonglobalizers.

How have the globalizers fared in terms of
growth? Their average annual growth rates
accelerated from 1 percent in the 1960s to 3
percent in the 1970s, 4 percent in the 1980s,
and 5 percent in the 1990s. Rich countries
annual growth rates, by comparison, slowed to
about 2 percent in the 1990s, and the
nonglobalizers saw their growth rates decline
from 3 percent in the 1970s to 1 percent in the
1980s and 1990s.

The same pattern can be observed on a local
level. Within both China and India, the
locations that are integrating with the global
economy are growing much more rapidly than
the disconnected regions. Indian states, for
example, vary significantly in the quality of
their investment climates as measured by
government efficiency, corruption, and
infrastructure. Those states with better
investment climates have integrated themselves
more closely with outside markets and have
experienced more investment (domestic and
foreign) than their less-integrated counterparts.
Moreover, states that were initially poor and
then created good investment climates had
stronger poverty reduction in the 1990s than
those not integrating with the global economy.
Such internal comparisons are important
because, by holding national trade and
macroeconomic policies constant, they reveal
how important it is to complement trade
liberalization with institutional reform so that
integration can actually occur.

The accelerated growth rates of globalizing
countries such as China, India, and Vietnam are
consistent with cross-country comparisons that
find openness going hand in hand with faster
growth. The most that these studies can
establish is that more trade and investment is
highly correlated with higher growth, so one
needs to be careful about drawing conclusions
about causality. Still, the overall evidence from
individual cases and cross-country correlation
is persuasive. As economists Peter Lindert and
Jeffrey Williamson have written, even though
no one study can establish that openness to
trade has unambiguously helped the
representative Third World economy, the
preponderance of evidence supports this
conclusion. They go on to note that there are
no anti-global victories to report for the
postwar Third World.

Contrary to the claims of the antiglobalization
movement, therefore, greater openness to
international trade and investment has in fact
helped narrow the gap between rich and poor
countries rather than widen it. During the 1990s,
the economies of the globalizers, with a
combined population of about 3 billion, grew
more than twice as fast as the rich countries.
The nonglobalizers, in contrast, grew only half
as fast and nowadays lag further and further
behind. Much of the discussion of global
inequality assumes that there is growing
divergence between the developing world and
the rich world, but this is simply not true. The
most important development in global
inequality in recent decades is the growing
divergence within the developing world, and it
is directly related to whether countries take
advantage of the economic benefits that
globalization can offer.

The Path Out Of Poverty
The antiglobalization movement also claims
that economic integration is worsening
inequality within countries as well as between
them. Until the mid-1980s, there was
insufficient evidence to support strong
conclusions on this important topic. But now
more and more developing countries have
begun to conduct household income and
consumption surveys of reasonable quality. (In
low-income countries, these surveys typically
track what households actually consume
because so much of their real income is self-
produced and not part of the money economy.)
Good surveys now exist for 137 countries, and
many go back far enough to measure changes
in inequality over time.

One way of looking at inequality within
countries is to focus on what happens to the
bottom 20 percent of households as
globalization and growth proceed apace.
Across all countries, incomes of the poor grow
at around the same rate as GDP. Of course ,
there is a great deal of variation around that
average relationship. In some countries, income
distribution has shifted in favor of the poor; in
others, against them. But these shifts cannot be
explained by any globalization-related variable.
So it simply cannot be said that inequality
necessarily rises with more trade, more foreign
investment, and lower tariffs. For many
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globalizers, the overall change in distribution
was small, and in some cases (such as the
Philippines and Malaysia) it was even in favor
of the poor. What changes in inequality do
reflect are country-specific policies on
education, taxes, and social protection. It is
important not to misunderstand this finding.
China is an important example of a country that
has had a large increase in inequality in the past
decade, when the income of the bottom 20
percent has risen much less rapidly than per
capita income. This trend may be related to
greater openness, although domestic
liberalization is a more likely cause. China
started out in the 1970s with a highly equal
distribution of income, and part of its reform
has deliberately aimed at increasing the returns
on education, which financially reward the
better schooled. But the Chinese case is not
typical; inequality has not increased in most of
the developing countries that have opened up to
foreign trade and investment. Furthermore,
income distribution in China may have become
more unequal, but the income of the poor in
China has still risen rapidly. In fact, the
countrys progress in reducing poverty has
been one of the most dramatic successes in
history.

Because increased trade usually accompanies
more rapid growth and does not systematically
change household-income distribution, it
generally is associated with improved well-
being of the poor. Vietnam nicely illustrates
this finding. As the nation has opened up, it has
experienced a large increase in per capita
income and no significant change in inequality.
Thus the income of the poor has risen
dramatically, and the number of Vietnamese
living in absolute poverty dropped sharply from
75 percent of the population in 1988 to 37
percent in 1998. Of the poorest 5 percent of
households in 1992, 98 percent were better off
six years later. And the improved well-being is
not just a matter of income. Child labor has
declined, and school enrollment has increased.
It should be no surprise that the vast majority of
poor households in Vietnam benefited
immediately from a more liberalized trading
system, since the countrys opening has
resulted in exports of rice (produced by most of
the poor farmers) and labor-intensive products
such as footwear. But the experience of China
and Vietnam is not unique. India and Uganda
also enjoyed rapid poverty reduction as they
grew along with their integration into the global
economy.

The Open Societies
These findings have important implications for
developing countries, for rich countries such as
the United States, and for those who care about
global poverty. All parties should recognize
that the most recent wave of globalization has
been a powerful force for equality and poverty
reduction, and they should commit themselves
to seeing that it continues despite the obstacles
lying ahead.

It is not inevitable that globalization will
proceed. In 1910, many believed globalization
was unstoppable; they soon received a rude
shock. History is not likely to repeat itself in
the same way, but it is worth noting that
antiglobalization sentiments are on the rise. A
growing number of political leaders in the
developing world realize that an open trading
system is very much in their countries interest.
They would do well to heed Mexican President
Vicente Fox, who said recently,

We are convinced that globalization is good
and its good when you do your homework,
keep your fundamentals in line on the economy,
build up high levels of education, respect the
rule of law. When you do your part, we are
convinced that you get the benefit.

But today the narrow interests opposed to
further integration especially those in the rich
countries appear to be much more energetic
than their opponents. In Quebec City last spring
and in Genoa last summer, a group of
democratically elected leaders gathered to
discuss how to pursue economic integration
and improve the lives of their peoples.
Antiglobalization demonstrators were quite
effective in disrupting the meetings and
drawing media attention to themselves. Leaders
in developed and developing countries alike
must make the proglobalization case more
directly and effectively or risk having their
opponents dominate the discussion and stall the
process.

In addition, industrialized countries still raise
protectionist measures against agricultural and
labor-intensive products. Reducing those
barriers would help developing countries
significantly. The poorer areas of the world
would benefit from further openings of their
own markets as well, since 70 percent of the
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tariff barriers that developing countries face are
from other developing countries.

If globalization proceeds, its potential to be an
equalizing force will depend on whether poor
countries manage to integrate themselves into
the global economic system. True integration
requires not just trade liberalization but wide-
ranging institutional reform. Many of the
nonglobalizing developing countries, such as
Myanmar, Nigeria, Ukraine, and Pakistan, offer
an unattractive investment climate. Even if they
decide to open themselves up to trade, not
much is likely to happen unless other reforms
are also pursued. It is not easy to predict the
reform paths of these countries; some of the
relative successes in recent years, such as
China, India, Uganda, and Vietnam, have come
as quite a surprise. But as long as a location has
weak institutions and policies, people living
there are going to fall further behind the rest of
the world.

Through their trade policies, rich countries can
make it easier for those developing countries
that do choose to open up and join the global
trading club. But in recent years, the rich
countries have been doing just the opposite.
Gatt was originally built around agreements
concerning trade practices. Now, institutional
harmonization, such as agreement on policies
toward intellectual property rights, is a
requirement for joining the WTO. Any sort of
regulation of labor and environmental standards
made under the threat of WTO sanctions would
take this requirement for harmonization much
further. Such measures would be
neoprotectionist in effect, because they would
thwart the integration of developing countries
into the world economy and discourage trade
between poor countries and rich ones.

The WTO meeting in Doha was an important
step forward on trade integration. More
forcefully than in Seattle, leaders of industrial
countries were willing to make the case for
further integration and put on the table issues of
central concern to developing nations: access to
pharmaceutical patents, use of antidumping
measures against developing countries, and
agricultural subsidies. The new round of trade
negotiations launched at Doha has the potential
to reverse the current trend, which makes it
more difficult for poor countries to integrate
with the world economy.

A final potential obstacle to successful and
equitable globalization relates to geography.
There is no inherent reason why coastal China
should be poor; the same goes for southern
India, northern Mexico, and Vietnam. All of
these locations are near important markets or
trade routes but were long held back by
misguided policies. Now, with appropriate
reforms, they are starting to grow rapidly and
take their natural place in the world. But the
same cannot be said for Mali, Chad, or other
countries or regions cursed with poor
geography i.e., distance from markets,
inherently high transport costs, and challenging
health and agricultural problems. It would be
naive to think that trade and investment alone
can alleviate poverty in all locations. In fact,
for those locations with poor geography, trade
liberalization is less important than developing
proper health care systems or providing basic
infrastructure or letting people move
elsewhere.

Migration from poor locations is the missing
factor in the current wave of globalization that
could make a large contribution to reducing
poverty. Each year, 83 million people are added
to the worlds population, 82 million of them in
the developing world. In Europe and Japan,
moreover, the population is aging and the labor
force is set to shrink. Migration of relatively
unskilled workers from South to North would
thus offer clear economic benefits to both.
Most migration from South to North is
economically motivated, and it raises the living
standard of the migrant while benefiting the
sending country in three ways. First, it reduces
the Souths labor force and thus raises wages
for those who remain behind. Second, migrants
send remittances of hard currency back home.
Finally, migration bolsters transnational trade
and investment networks. In the case of Mexico,
for example, ten percent of its citizens live and
work in the United States, taking pressure off
its own labor market and raising wages there.
India gets six times as much in remittances
from its workers overseas as it gets in foreign
aid.

Unlike trade, however, migration remains
highly restricted and controversial. Some critics
perceive a disruptive impact on society and
culture and fear downward pressure on wages
and rising unemployment in the richer
countries. Yet anti-immigration lobbies ignore
the fact that geographical economic disparities
are so strong that illegal immigration is
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growing rapidly anyway, despite restrictive
policies. In a perverse irony, some of the worst
abuses of globalization occur because there is
not enough of it in key economic areas such as
labor flows. Human traffic, for example, has
become a highly lucrative, unregulated
business in which illegal migrants are easy prey
for exploitation.

Realistically, none of the industrialized
countries is going to adopt open migration. But
they should reconsider their migration policies.
Some, for example, have a strong bias in their
immigration rules toward highly skilled
workers, which in fact spurs a brain drain
from the developing world. Such policies do
little to stop the flow of unskilled workers and
instead push many of these people into the
illegal category. If rich countries would legally
accept more unskilled workers, they could
address their own looming labor shortages,
improve living standards in developing
countries, and reduce illegal human traffic and
its abuses. In sum, the integration of poor
economies with richer ones over the past two
decades has provided many opportunities for
poor people to improve their lives. Examples of
the beneficiaries of globalization can be found
among Mexican migrants, Chinese factory
workers, Vietnamese peasants, and Ugandan
farmers.

Many of the better-off in developing and rich
countries alike also benefit. After all the
rhetoric about globalization is stripped away,
many of the policy questions come down to
whether the rich world will make integrating
with the world economy easy for those poor
communities that want to do so. The worlds
poor have a large stake in how the rich
countries answer.

24
Wayne Ellwood, The no-nonsense guide to globalization, London:
Verso, 2001

THE BRETTON WOODS TRIO
The Great Depression of the 1930s lead to
the birth of Keynesianism and the
interventionist state. As World War Two
ends, the victors put together a new set of
rules for the global economy. This postwar
financial architecture includes the World
Bank, the International Monetary Fund
(IMF) and the General Agreement on
Tariffs and Trade (GATT). But as Third
World nations emerge from centuries of
colonialism these institutions are seen
increasingly as pillars of the status quo.
AS WORLD WAR TWO was drawing to a
close, the worlds leading politicians and
government officials, mostly from the
victorious Allied nations (Britain, Canada,
Australia, New Zealand and the United States)
began to think about the need to establish a
system of rules to run the postwar global
economy.
Before the widespread outbreak of the
war in 1939 trading nations everywhere had
been racked by a crippling economic
depression. When the US stock market crashed
in 1929 nations turned inward in an attempt to
pull themselves out of the steep skid. But
without a system of global rules there was no
coherence or larger logic to the beggar-thy-
neighbor polices adopted worldwide. High
tariff barriers were thrown up between
countries with the result that world trade nose-
dived, economic growth spluttered and mass
unemployment and poverty followed. As a
result the 1930s became a decade of radical
politics and rancorous social ferment in the
West as criticism of laissez-faire capitalism and
an unchecked market economy grew.
Scholars like Karl Polanyi helped to
reinforce a growing suspicion of a market-
based economic model which put money and
investors at the center of its concerns rather
than social values and human wellbeing. To
allow the market mechanism to be the sole
director of the fate of human beings and their
natural environment, would result in the
demolition of society, Polanyi wrote in his
masterwork, The Great Transformation.
Polanyi was not alone in his distrust of
the market economy. Other thinkers like the
influential Cambridge-educated economist John
Maynard Keynes were also grappling with a
way of controlling global markets, making
them work for people and not the other way
around. Keynes both admired and feared the
power of the market system. With the memory
of the Great Depression of the 1930s still fresh
in his mind he predicted that, without firm
boundaries and controls, capitalism would be
immobilized by its own greed, and would
eventually self-destruct. As it happened only
World War Two turned things around. The War
set the factories and farms humming again as
millions of troops were deployed by all sides in
the conflict. Armaments manufacturers, aircraft
factories and other military suppliers ran 24-
hour shifts. Years later, as the war wound down,
government policy makers began to think about
how to ensure a smooth transformation to a
peacetime economy.
It was Keynes radical notion of an
interventionist state to which governments
turned in an effort to set their economies back
on a steady keel. Until the worldwide slump of
the 1930s the accepted economic wisdom had
been that unemployment was a normal
condition of the free market. The economy
might go up and down according to the normal
business cycle but in the long run, growth (and
increased global trade) would create new jobs
and sop up the unemployed.
Keynes was sceptical of this orthodoxy,
suggesting that the economy was a human-
made artefact and that people acting together
through their government could have some
control over its direction. Why not act now, he
suggested, since in the long run were all
dead. His approach offered a way out for
governments who found themselves helplessly
mired in economic stagnation.
In The General Theory of Employment,
Interest and Money published in 1936, Keynes
argued that the free market, left on its own,
actually creates unemployment. Profitability,
he said, depends on suppressing wages and
cutting costs by replacing labor with
technology. In other words profits and a certain
amount of unemployment go hand-in-hand. So
far so good, at least for those making the profits.
But then Keynes showed that lowering wages
and laying off workers would inevitably result
in fewer people who could afford to buy the
25

goods that factories were producing. As
demand fell, so would sales, and factory
owners would be forced to lay off even more
workers. This, reasoned Keynes, was the start
of a downward spiral with terrible human
consequences.
To prime the economic pump Keynes
suggested governments intervene actively in
the economy. He reasoned that business owners
and rich investors are unlikely to open their
wallets if the prospects for growth look dim.
When the economy is in a tailspin then it is up
to government to step in by spending on
public goods like education, health care, job
training, roads, dams, trains and railways. And
by wading in with direct financial support to
the unemployed.
Even if governments had to go into
debt to kick-start economic growth Keynes
advised politicians not to worry. The price was
worth it. By directly stimulating the economy,
government could rekindle demand and help
reverse the downward spiral. Soon companies
would begin to invest again to increase
production to meet the growing demand. This
would mean hiring more workers with more
money in their pockets. As jobs increased so
would taxes. Eventually, the government would
be able to pay back its debt from increased tax
revenues raised from a now healthy, growing
economy.
Desperate Western governments were
quick to adopt the Keynesian solution to
economic stagnation. In the US the New Deal
policies of the Roosevelt administration were
directly influenced by Keynes. The American
Employment Act of 1946 accepted the federal
governments responsibility to promote
maximum employment, production and pur-
chasing power. The British Government, too,
in 1944 accepted as one of its primary aims the
maintenance of a high and stable level of
employment after the war.
Other countries like Canada, Australia
and Sweden quickly followed. Keynes
influence spread and people began to believe
that economics was finally a manageable
science in the service of human progress.
We are witnessing a development
under which the economic system ceases to lay
down the law to society and the primacy of
society over that system is secured. Thus
wrote Polanyi in a moment of supreme
optimism just before the end of the war.
BRETTON WOODS
It was this assurance and confidence that
delegates from 44 nations brought to the
postcard-pretty New England resort village of
Bretton Woods in July 1944. The aim of the
Bretton Woods Conference was to erect a new
framework for the postwar global economy a
stable, cooperative international monetary
system which would promote national
sovereignty and prevent future financial crises.
The purpose was not to bury capitalism but to
save it. The main proposal was for a system of
fixed exchange rates. In the light of the
depression of the previous decade floating rates
were now seen as inherently unstable and
destructive of national development plans.
Keynes influence at Bretton Woods
was significant. But despite his lobbying and
cajoling he did not win the day on every issue.
In the end the huge military and economic clout
of the Americans proved impossible to
overcome.
The Conference rejected his proposals
to establish a world reserve currency
administered by a global central bank. Keynes
believed this would have created a more stable
and fairer world economy by automatically
recycling trade surpluses to finance trade
deficits. However his solution did not fit the
interests of the United States, eager to take on
the role of the worlds economic powerhouse.
Instead the Conference opted for a system
based on the free movement of goods with the
American dollar as the international currency.
The dollar was linked to gold and the price of
gold was fixed at $35 an ounce (28g). In effect
the US dollar became as-good-as-gold and in
this one act became the dominant currency of
international exchange.
Three governing institutions emerged
from the gathering to oversee and coordinate
the global economy. These were not neutral-
economic mechanisms: they contained a
powerful bias in favor of global competition
and corporate enterprise. And each had a
distinct role to play:
THE INTERNATIONAL MONETARY
FUND (IMF)
The IMF was born with a mission: to create
economic stability for a world which had just
been through the trauma of depression and the
devastation of war. As originally conceived it
was supposed to facilitate the expansion and
balanced growth of international trade and to
contribute to the promotion and maintenance of
26
high levels of employment and real income.
A major part of its job was to oversee a
system of fixed exchange rates. This was
supposed to stop countries from devaluing their
national currencies to get a competitive edge
over their neighbours a defining feature of
the economic chaos of the 1930s.
Another part of the Funds mandate
was to promote currency convertibility to
make it easier to exchange one currency for
another when trading across national borders
and in this way to encourage world trade.
And finally the new agency was to act
as a lender-of-last-resort supplying
emergency loans to countries which ran into
short-term cash flow problems. Keynes idea
was to set up an International Clearing Union
which would automatically provide
unconditional loans to countries experiencing
balance-of-payments problems. These loans
would be issued no strings attached and their
purpose would be to support domestic demand
and maintain employment. Otherwise countries
feeling the pinch would be forced to balance
their deficit by cutting off imports and
smothering their domestic economy.
Keynes argued that international trade
was a two-way street and that the winners
(those countries in surplus) were as obligated as
the losers (those countries in deficit) to bring
the system back into balance. In fact, Keynes
suggested that pressure be brought to bear on
surplus nations so they would be forced to
increase their imports and recycle the surplus to
deficit nations.
But Keynes view did not prevail.
Instead a proposal put forward by US Treasury
Secretary Harry Dexter White became the basis
for the IMF. The International Clearing Union
idea disappeared. IMF members would not
automatically receive loans when they tumbled
into deficit. Instead members would have
access to limited loan amounts which were to
be determined by a complex quota system.
When a country joins the IMF it is
assigned a quota which is calculated in Special
Drawing Rights (SDRs), the Funds own unit
of account. Quotas are assigned according to a
country's relative position in the world
economy which means that the most powerful
economies have the most influence and clout.
The US for example has the largest SDR quota
at about 27 billion. The size of a members
quota determines a lot, including how many
votes it has in IMF deliberations and how much
foreign exchange it has access to if it runs into
choppy financial waters.
Balance-of-payments loans are at less
than the prevailing rate and members are
supposed to use and repay them within five
years. The issue of whether the IMF could
attach conditions to these loans was lost in the
verbiage of the original Bretton Woods
agreement. But Harry Dexter White was very
clear six months later when he wrote in the
journal Foreign Affairs that the Fund would not
simply dole out money to debtor countries. The
IMF would force countries to take measures
which under the old gold standard would have
happened automatically.
While the framers of the Bretton
Woods agreements supported a gradual
reduction of trade barriers and tariffs they were
less enthusiastic about allowing the free
movement of capital internationally.
Keynes, Britains delegate to the
meeting, advocated a balanced world trade
system with strict controls on the movement of
capital across borders. He held that the free
movement of all goods and capital, advocated
most powerfully by the US delegation, would
inevitably lead to inequalities and instabilities.
THE WORLD BANK (INTERNATIONAL
BANK FOR RECONSTRUCTION AND
DEVELOPMENT)
One of the other key goals of the Bretton
Woods Conference was to find a way to rebuild
the economies of those nations that had been
devastated by World War Two. The
International Bank for Reconstruction and
Development (IBRD) was created to spearhead
this effort. The Bank is funded by dues from its
members and by money borrowed on
international capital markets. It makes loans to
members below rates available at commercial
banks. Its initial mandate was to provide loans
for economic infrastructure which included
things like power plants, dams, roads, airports,
ports, agricultural development and education
systems. The Bank poured money into
reconstruction and development in Europe after
World War Two. But it was not enough and it
was not fast enough to satisfy the United States
whose booming industries were in need of
viable markets. In response the US set up its
own, much looser, Marshall Plan which
directly provided dollars to European nations,
largely in the form of grants rather than loans.
As Europe gradually recovered in the
1950s the IBRD turned its interest to the
newly-independent countries of the Third
World where it became widely known as the
World Bank. As Southern countries sought to
27

enter the industrial age the Bank became a
major player throughout the region. According
to the stages of growth economic theory
popular at the time, developing nations could
achieve economic 'take-off only from a strong
infrastructure runway. It was part of the
Banks self-defined role to build this
'infrastructural capacity and this it did
enthusiastically by funding hydroelectric
projects and highway systems throughout Latin
America, Asia and Africa.
But despite the Banks concessional
lending rates it was clear early on that the very
poorest countries would have difficulty
meeting loan repayments. So in the late 1950s
the Bank was pressured into setting up the
International Development Association (IDA).
This wing of the Bank was to provide soft
loans with very low interest or none at all
and so head off attempts by the new countries
of the Third World to set up an independent
funding agency separate from the Bretton
Woods institutions which could operate under
UN auspices. The Bank also established two
other departments: the International Finance
Corporation, which supports private-sector
investment in Bank-approved projects, and the
Multilateral Insurance Guarantee Agency,
which provides risk insurance to foreign
corporations and individuals who decide to
invest in one of the Banks member countries.

GENERAL AGREEMENT ON TARIFFS
AND TRADE (GATT)/WORLD TRADE
ORGANIZATION (WTO)
The GATT established a set of rules to govern
global trade. Its aim was to reduce national
trade barriers and to stop the competitive trade
policies that had so hobbled the global
economy prior to World War Two. Seven
rounds of tariff reductions were negotiated
under the GATT treaty the final Uruguay
Round began in 1986.
In March 1994, following completion
of the final round of talks, politicians and
bureaucrats gathered in Marrakech, Morocco,
to approve a new World Trade Organization
(WTO) which was to replace the more loosely-
structured GATT. The WTO, unlike the GATT,
has the official status of an international
organisation rather than a loosely-structured
treaty. It has 137 member states and 30
observers and vastly expands GATTs
mandate in new directions. The text of the
WTO agreement had 26,000 pages: its sheer
physical size is a hint of both its prolixity and
its complexity. It includes the GATT
agreements which mostly focus on trade in
goods. But it also folds in the new General
Agreement on Trade in Services (GATS) which
potentially affects more than 160 areas
including telecommunications, banking and
investment, transport, education, health and the
environment.
From the outset GATT was seen as a
rich mans club dominated by Western
industrial nations which were slow to concede
their position of power. The WTO continues
this tradition of rich world domination. Rubens
Ricupero, current Secretary-General of the UN
Conference on Trade and Development
(UNCTAD) is frank in his assessment of the
multilateral trading system. It is a matter of
concrete evidence he says that global trade
rules are highly imbalanced and biased against
developing countries'. Why is it, Ricupero asks,
that developed countries have been given
decades to adjust their economies to imports
of agricultural products and textiles from the
Third World when poor countries are pressured
to open their borders immediately to Western
banks and telecommunication companies?
As a case in point he mentions the
multifiber arrangement (MFA) on textiles
under which industrial countries are allowed to
impose quotas restricting clothing and textile
imports from developing nations. The MFA
developed from a waiver which the US
demanded on behalf of its domestic cotton
industry in the late 1950s. By the time the MFA
is dismantled Ricupero notes it will already
have lasted 50 years, a long time for a
temporary concession which was to allow US
producers to adjust to cheap textile imports
from abroad.
In contrast, according to the UN
Development Program (UNDP), developing
countries have been much more willing to
abandon once-popular import substitution
policies and reduce trade barriers. India, for
example, reduced its tariffs from an average of
82 per cent in 1990 to 30 per cent in 1997.
Brazil chopped average tariffs from 25 per cent
to 12 per cent over the same period and China
lowered them from 43 per cent in 1993 to 18
per cent four years later.
The WTO pursues its free trade agenda
with the single-minded concentration of the
true believer. Nonetheless there is a growing
unease about the organizations globalizing
agenda. Critics are especially wary of the new
Dispute Settlement Body (DSB) which gives
the WTO the legal tools to approve tough trade
sanctions by one member against another,
28
especially on nations which might disagree
with the organizations interpretation of global
trade rules. Any member country, acting on
behalf of a business with an axe to grind, can
challenge the laws and regulations of another
country on the grounds that they violate WTO
rules.
It used to be that if the GATT wanted
to discipline one of its members for not playing
according to the rules, every member had to
agree. The WTO has considerably more power.
The dispute settlement panel is comprised of
appointed experts who hear the case behind
closed doors. If the DSB decides on sanctions
the only way to escape them is if every member
opposes them a virtual impossibility. In
effect the WTO regime is one of trade ber
alles. Environmental laws, labor standards,
human rights legislation, public health policies,
cultural protection, food self-reliance or any
other policies held to be in the national
interest can be attacked as unfair
impediments to free trade.
Already there have been some cases
where the WTO has effectively struck down
national legislation in its pursuit of a level
playing field. The recent WTO decision
against the European Union (EU) over the
importing of bananas is a case in point. The
WTOs most favored nation clause demands
that similar products from different member
countries be treated equally. Under the terms of
the Lom Convention (agreement) the EU had
promised to give preference to bananas from
former European colonies in Africa, the
Caribbean and the Pacific. In general these
banana growers tend to be small farmers who
are less dependent on pesticide-intensive
plantation methods than the giant US
companies like Dole and Chiquita.
The Europeans stressed that this was a
matter of sovereign foreign policy in relation to
former colonies while the US argued that EU
tariffs prohibited American banana companies
in Central America from reaching lucrative
markets in Europe. The WTO decided on
behalf of the US, ruling that the European
preference was unfair. Meanwhile, small island
nations in the Caribbean, so dependent on
income from the banana trade, are worried the
decision will cut off a guaranteed market and
destroy their industry. All nations have the
right to use the DSB to pursue their own
economic self-interest. But the fact is that the
worlds major trading nations are also its most
powerful economic actors and so the tendency
is for the strong to use the new rules to
dominate weaker countries.
The national treatment clause
basically says that a country may not
discriminate against products of foreign origin
on any grounds whatsoever. And in so doing it
removes the power of national governments to
develop economic policy which serves the
moral, ethical or economic interests of their
citizenry. For example, if goods are produced
by children in sweatshop conditions that
doesnt enter the equation. And. the same is
true if a foreign factory fouls the air and
poisons the water, if poverty wages are paid to
the workers who produce the stuff, or if the
goods themselves are poisonous and dangerous.
According to WTO rules any country
that refuses to import a product on the grounds
that it may harm public health or damage the
environment has to prove the case scientifically.
So Canada, the worlds biggest asbestos
producer, has petitioned the WTOs dispute
panel to force the European Community to
import the known carcinogen once again. And
when the European Union (EU) refused
imports of hormone-fed beef from North
America, the US took the case to the WTO
arguing that there was no threat to human
health from cows fed hormones. The EU ban
on hormone-fed beef applied to their own
farmers as well as foreign producers but that
made little difference. The WTO panel decided
in favor of the US, effectively ruling that
Europeans had no right to pass laws that
supported their opposition to hormones. The
EU was ordered to compensate producers in the
US and Canada for every year of lost export
earnings. And in retaliation the US imposed
100 per cent tariffs on a range of European
imports including mustard, pork, truffles and
Roquefort cheese.
Meanwhile, the giant US-based
shipping company, United Parcel Service
(UPS), has been lobbying Washington to take
Canadas government-run postal service to the
WTO dispute panel. UPS says that Ottawa is
unfairly subsidizing Canada Post and therefore
poaching potential customers. Ottawa in its turn
has announced its intention to prohibit the
export of fresh Water from Canada by a
California-based company.
And so it goes in the topsy-turvy new
world of economic globalization. Those
institutions which first emerged from the
Bretton Woods negotiations half a century ago
have become more important players with each
passing decade. It is their vision and their
agenda which continue to shape the direction of
29

the global economy. Together, they are
fostering a model of liberalized trade and
investment which is heartily endorsed by the
worlds biggest banks and corporations. A
deregulated, privatized, corporate-led free
market is the answer to humanitys problems,
they tell us. The proof, though, is not so easily
found.

30
Bruce Mazlish, The multinational corporations: Ruling the
globe? in The new global history, New York: Routledge, 2006

The Cold War is a segment of recent history,
usually treated in traditional fashion by
historians as an episode in international
relations; I have suggested that the Cold War
also deserves treatment as a context for the rise
of globalization. The appearance in the course
of present-day globalization of two major new
actors, the multinational corporations (MNCs)
and the non-governmental organizations
(NGOs), requires a somewhat different
treatment. They are actors in the process of
globalization, rather more than, as with the
Cold War, the complex context in which
globalization made its appearance. Needless to
say, they did not emerge full-blown from Clios
forehead in the post-WWII period. Both had an
existence before present-day globalization in
various shapes and forms. Only after 1945,
however, do they become preeminent players
on the global scale.

As such, they share the stage with nation-states,
which continue to be the central actors even in
the global epoch. Some commentators see the
MNCs as displacing the state in importance. I
think it more useful to look at the evolving
relationship between the two, and to study the
MNCs in their own right (reserving the study of
the NGOs for the next chapter). There is, of
course, an enormous literature on them, starting
with the definitional problemwhat is an
MNC?and advancing to the questions of
their change over time, their shift in terms of
geographical place, their transformation during
the process of globalization, and so forth. For
example, there seems to be a general shift from
trading companies to resource extraction, then
to manufacturing, and then to service and
financial service companies as the dominating
types of MNCs, a shift which is gradual and in
which the earlier forms do not disappear but
persist as part of a larger whole.

My aim is not to tackle the MNCs per se, but to
bring to bear on them the perspective of New
Global History. And even here only in terms of
a limited optic, more to show how the
perspective works than to give a total picture.
Specifically, I will treat the MNCs as much
more than mere economic actors; their actions
have profound impacts on and implications for
the rest of society. Even here, however, I will
not focus on MNCs in their entirety, which
could range from the environment to
consumerism and all points in between, but
rather on the MNCs in regard to the problem of
governance. For they are the new Leviathans of
our time, and consequently have great political
as well as economic power; indeed, in the eyes
of some, as noted, they can claim to rule the
world.

I will seek entrance to the realm of MNCs,
therefore, by first asking the question: who
rules the globe? A simple and clear answer
exists to this rather simple-minded question: no
one state, party, person (although for the
religious minded the answer might be God).
This conclusion is especially true in what we
are labeling a global epoch or an Age of
Globalization. Here we are confronted
increasingly with flows and processes, difficult
to control or even to understand. These
amorphous entities seem to escape the power
and authority of existing institutions, and to
transcend their restraining boundaries. (Indeed,
we can perceive that these amorphous flows
and processes pose challenges to the national
state as well as to the international system.)

In the fictional universe of the sci-fi writer
Isaac Asimov, for example, in his book I Robot,
a couple of corporations do, in fact, take on the
role of ruling the globe. For our part, we need
not go to that extreme, but simply examine the
actual way in which MNCs have increasingly
come to dominate our societies. They are
clearly one of the ruling forces in our world,
challenging, supplanting, or collaborating with
more established institutions, such as the
nation-state. As the name multinational
suggests, they are still connected to nations,
though the nature of the connection has been
rapidly changing. In this setting, we need to
recognize the MNCs, as suggested earlier, as
Leviathansusing the term in imitation of the
sovereign state treated by Hobbes in an earlier
timenow taking on, potentially or in practice,
the power and authority of more traditional
structures.

31

(1)
The importance of MNCs was made
dramatically evident in the UN statement, noted
above in Chapter 2, that of the 100 largest
possessors of GDP over 50 were corporations.
In this view, these MNCs are wealthier and
thus potentially more powerful than 120 to 130
of the nation-states. Though this measure is, in
fact, as previously noted, misleadingthe
figures given in regard to the MNCs are based
on revenue rather than value added, i.e., the
way in which GNP is measuredit symbolizes
an important truth: when the corporate
revenues of a company such as Exxon-Mobil or
Wal-Mart are greater than the GDP of a
country such as Austria, for example, our
traditional conceptions of who rules the world
must be closely reexamined.

The simplest definition of an MNC, sometimes
also called a transnational enterprise, is a firm
that controls income-generating assets in more
than one country at a time. A more complicated
and meaningful definition would add that an
MNC has productive facilities in several
countries on at least two continents with
employees stationed worldwide and financial
investments scattered across the globe.

Taking 1600 as our starting point, we found the
English East India Company and its Dutch
counterpart, plus a small number of others, as
our early examples. Plotting a curve, we see
very slow, almost flat, growth through the
decades until 1914, when we can number about
3,000. Growth subsequently occurs very
gradually until in 1969 we can count 7,258, and
then there is an explosion with the curve rising
to 18,500 in 1988, 30,400 in 1992, 53,100 in
1987, 59,902 in 1999, and 63,000 at the turn of
the century!

Aided by technologyimproved
communication via satellites and other devices,
faster transportation, and so forththe MNCs
have grown by leaps and bounds in the process
we call globalization. Large and small, coming
into and going out of existence with some
rapidity, these business enterprises have rushed
past national boundaries and transcended
existing power relations. While they vary in
typesome are state related, for
examplemost are on the model of the
American private corporation. This certainly is
so on principle; in fact, of course, there are all
kinds of mixed modes. Still, overwhelmingly,
they are not public entities, though grounded in
public and national law. As many of their
CEOs have declared, the primary loyalties are
to globalized companies rather than to the
countries in which they are headquartered.

The phenomenal growth of the MNCs is
marked by increasing concentration at the top,
characterized by mergers and acquisitions
resulting in huge corporations. We seem to be
in a sort of post-Westphalian stage: in the
seventeenth and eighteenth centuries this stage
was marked by the absorption and
disappearance of various political state bodies,
i.e., principalities, provinces, and so forth;
today a similar process is taking place only
now in regard to our new economic Leviathans.
Thus, of the Fortune 500 list of a few decades
ago, 33 percent no longer existed in their own
right ten years later. Fifteen years later, in 1995,
another 40 percent were gone. What stands out,
however, is the steady persistence of the
growth in MNCs and their power.

At this point, we have a relatively nuanced and
calculable picture of MNCs and their historical
development. Although still sketchy, this
picture allows us to return better informed to
the question of whether and in what ways the
MNCs, with their werewolf appetite for
expansion, to use Marxs phrase, are able to
translate their economic power into other
formscultural, political, socialas well. It is
to this question that we now turn directly.

(2)
In the broadest sense, the MNCs have an
impact on almost every sphere of modern life,
ranging from issues of personal identity to
issues of community, from policymaking on the
environment to international security, and from
the future of work to the future of the
nation-state, and beyond the state to regional
and international bodies and alliances. Impact,
however, is not the same thing as controlling
power.

The first thing to be said is that MNCs are
corporations, that is, legal entities created by
the state. In theory at least, the state controls
the corporations, can subject them to taxes, and
can entangle them in regulations and
restrictions. In practice, however, as a result of
globalization and its market arrangements, the
MNC can often escape these bonds by
rigging the state, that is, using the
corporations financial strength to buy the
32
government apparatus through corruption and
campaign contributions. More fundamentally,
in its search for low labor costs and favorable
tax codes, the global corporation can move its
operations in order to escape onerous state con-
trols. In this sense, it is rootless and so
amorphous that it cannot be captured by
national state institutions. In turn, its currency
and market manipulations fall into a vacuum,
where no international body has authority. In a
word, the MNCs are masterless.

Now it should be clear that this last statement is
somewhat hyperbolic; yet it points in the right
direction. With this said, however, masterless
does not equate with masterful. Indeed, the case
can be made that the MNCs are the
beneficiaries of a system of institutions such as
the IMF and the World Bank that has been set
up by states, and specifically the United States.
The international financial regime encapsulated
in the terms of the Bretton Woods system is, in
this view, a prerequisite for the economic and
political power exercised by the MNCs as,
under the regimes umbrella, they shape the
process of globalization. On such a reading, the
state and MNCs reign together.

MNCs can influence the state in particular
instances, for example, affecting and perhaps
determining government policy in regard to
nationalistic takeovers, such as Venezuela.
Influence is obviously exercised when CEOs
shuttle in and out of governments, most
egregiously in the USA in terms of the
military/industrial complex. Again, however,
we must emphasize how general and difficult to
grasp firmly such versions of rule necessarily
are. By themselves, MNCs rule only in the
most shadowy of fashions. It is as part of a
system that they exercise what powers they
have. And that system is both a national one
and a global one. It is especially, I would argue,
in the latter realm that our new Leviathans are
most powerful.

Opposition to them also often takes a global
form. Worldwide protests and
anti-globalization movements are the
counterweights to the powers of the MNCs.
After all, MNCs sometimes undermine national
government efforts to control their own
economies, may use foreign investments to dic-
tate dependent governments actions, can
promote consumerism in ways deleterious to
the health and welfare of the client nation, and
so forth. MNCs can also be accused of tilting
the North/South scales further in favor of the
former. Operating on a global scale, MNCs are
opposed by global anti-globalists, often with
the aid of various international
non-governmental organizations (INGOs ) and
NGOs.

Such opposition is made stronger by the very
nature of the MNCs. They are
non-representative and non-accountable, or, if
they are, only so to their shareholders. As
participants in ruling the globe they are not
seen as legitimate in part for the reason just
given. While themselves sovereign, in the sense
of being relatively free from external control,
they are hardly transparent as governments are
supposed to be. Questions of democratic
governance abound. lf, in fact, MNCs exercise
partial rule in our global society, must they be
held to account for their policies and actions,
and these be made known to world opinion?

In the strange ways of history, the MNCs have
been heavily invested in creating the NGOs,
and beyond them the global civil society of
which they are a part, and which together hold
the MNCs accountable and call their legitimacy
into question. In the eighteenth century,
economics and trade were seen as constituent
parts of civil society. Now, in the view of most
theorists, they stand outside that circle. In fact,
however, it is the MNCs that have provided the
satellites that permit and foster global
communication and the computer websites that
facilitate the spread of the NGOs and their
messages. The devil, as it is seen by many
people, must be given its dues, and recognized
as providing the antidote, at least potentially, to
its possible poisonous effects.

Among these poisonous effects are the
polluting of the atmosphere by unregulated
MNCs. Here again, however, the negative must
be placed against the positive encouragement
of global environmental groups that result from
the MNCs fostering of the communication
revolution. As yet, the negative effects of the
Bhopals and Exxon Valdeses badly outweigh
the positive, but it can be argued that the global
world which the MNCs are helping to construct,
even if in unintended fashion, carries the seeds
of better things to come.

Whatever power MNCs exercise, they cannot
command armies (except, perhaps, in the shape
of private security forces), they cannot levy
taxes on a population, and they are unable to
33

pass laws in a legislative body, as the state is
able to do. Thus it is difficult to measure the
MNCs power in the usual terms. To borrow a
phrase from Joseph Nye, who speaks of the
soft power of the USA, i.e., its spread of its
culture and authority, which permeates society,
perhaps we can speak of MNCs as exercising
their rule through soft power.

Whatever effective dominion is exerted by
MNCs is largely tied to their role in the process
of globalization. The latters persistence is
itself tenuous, in the sense that a nuclear
explosion by a terrorist organization (for
example, acquiring the weapon on the black
market and transporting it in the hold of a
container ship) or a breakdown of the
worldwide computer system engineered by
hackers or hostile powers could cause much of
globalization to come to a sudden stop. Thus,
the rule of MNCs, such as it is, requires the
failure of such efforts, as well as of
anti-globalization sentiment, to derail the
globalization effort that undergirds the
corporate regime.

(3)
Putting aside doomsday scenarios (and
excluding anti-globalization from this category),
we must take the world as it is and return to the
question: who currently rules that world? Let us
approach this question now with MNCs in
mind by taking a slightly different tack. I want
to ask: is there a global elite in which the
corporations are a/the core element? While
there may not be a ruling class, as Marx and
others had it, there can be little doubt that
traditional economic and political elites have
existed in the past, as depicted by various
studies. In general, these elites have taken the
form of national elites. With globalization
transcending national sovereignty in many
ways, is the emergence of a global elite a new
addition?

On the assumption that such an elite is coming
into existence, we need to ask who comprises it,
and how they exercise their power and for what
purposes. Is such an elite homogeneous, though
we know it to be made up of different
segmentssuch as business, media,
militaryand how do these segments relate to
one another? Do the MNCs and their
executives play a dominant role? In attempting
to answer these questions, we must remember
that, needless to say, the nation-state has not
been disappearing, or even withering away, and
we need to inquire into the ways national and
then regional elites form part of a global elite.

A few comments can be hazarded. The first is
that the existence of English as the new lingua
franca enables members of the global elite to
communicate with one another easily. Thus
they inhabit roughly the same linguistic world.
Next, and without question, this elite is
overwhelmingly male. Females do exist in the
global elite, but they do not play a major role,
and certainly do not lead. Gradual change may
be ahead, but even that is problematic.

One reason why change is possible, however, is
that members of the global elite go to more or
less the same schools. And todays business
and legal schools are increasingly manned by
women students. This potential, however,
generally runs up against what is called the
glass ceiling. Another choke point is in the
meeting places of the elites, such as golf clubs
and other supposedly recreational settings. The
exclusion of women is not just a matter of
rights but of power. A glance at the attendees
of other venues of power, such as the Trilateral
Commission or Davos, shows the same
preponderance of men.

An Asian counterpart of Davos is BOAO
Forum for Asia CEO Summit, whose meeting
in 2005 was held in Hainan, PR China. Here,
too, the attendees were almost all men. What is
of further interest is how little overlap between
the members of Davos and of BOAO there
seemed to be. A conscious effort was certainly
made to keep the meeting Asian in focus, with
the USA, for example, excluded. A quick
glance at the invitees, however, suggests that
the same sort of interests are represented at the
Hainan meeting as at Davos, with equally
impressive backgrounds in the corporate world.
In both settings, the business and governmental
world meet and exchange views as to how
national and global policies are to be
formulated and to go forward, both in their
regional domains and more globally.

Whichever part of the world they live in,
members of the global elite have similar
lifestyles. There are even periodicals that tell
them where to stay, what clothes to wear, what
restaurants to patronize, and whom to know.
Though as yet there is no manual of the CEO
la the manuals of the courtier of an earlier age,
the equivalent is available. The result is a
34
cosmopolitan leadership, easily recognizing
one another in the corridors of power. Busi-
nessmen, lawyers, accountants, management
consultants all speak the same language and
wear the same suits.

To make the global elite more concrete, a
colleague, Elliott Morss, advanced the
hypothesis that there is not one but four global
elites. He argued that the first derives its status
from social and family backgrounds; the
second from its power to develop and
implement profit-making ideas, e.g., Microsoft;
the third from a top position in a state, e.g.,
president of France, or a global organization,
such as the World Bank; and the fourth from its
role as managers of global organizations.

Yet there is no conspiracy among these
members of the global elite to rule the world.
The result, however, when we add in military
leaders, is in fact a hand covered in velvet
influencing and guiding our global society. It is
not particularly a visible hand. This fact
accords with the nature of globalization as a
matter of flows and processes, where power is
not located in fixed institutions, other than as
they foster globalization itself. It is instead a
kind of virtual power, growing naturally out
of the information revolution of our time. Here,
it would seem, we finally have an answer to our
question of who rules the world.

(4)
I want to conclude by reiterating my argument
that MNCs do not rule the world as such, or at
least not by themselves. While they make up a
large part of the global elite, they are not alone
in its composition. Instead, MNCs are in a
ceaseless though not inevitable competition and
cooperation with other factors, creating the
globalization that sets the conditions of rule. If
I am right about our present-day version of the
invisible hand, the problems of our time may
nor be so much located in the rulers of our
world but in the fact that there is no ruler as
such.

Even when MNC leaders are linked to military
leadersthe famous military-industrial
complex that President Eisenhower warned
againstas well as the other sets of leaders
mentioned, the result is not a world simply
liven by them and the institutions they head. In
an Age of Globalization it appears that a
headless rider is in the saddle, with great power
but little control. It is a scary thought, but one
in accord with many of the facts to be found in
the course of other work in New Global
History.

35
3. Cultural globalisation

Overview
Debates about globalisation often revolve around anxieties for the future of the distinctiveness
of nations and ethnic and indigenous groups. Many commentators have expressed concern
that traditional cultures are threatened by the forces of globalisation, which leads to the
dominance of American cultural products (primarily film, music and television). It has been
argued that one of the consequences of globalisation will be the end of cultural diversity and
the triumph of a uni-polar culture. In particular, critics identify the ability of transnational
corporations (McWorld) to effect potentially far-reaching changes to traditional cultures,
and note the disappearance of local and indigenous languages as English becomes the
language of a globalised culture. In debates about cultural globalisation or
Americanisation, pro-globalisation voices stress the diversity of capitalism and dont see
anything wrong with US products being popular. Other scholars writing on globalisation view
it as initiating a process of hybridisation or cosmopolitanisation of culture rather than
straightforward Americanisation. This week we will debate the cultural aspects of
globalisation.

Objectives
x Assess the influence of globalisation on culture
x Examine the different models of cultural globalisation

Discussion points
1. How do you define culture? Who or what creates culture? Is culture static?
2. How has the growing interconnectedness of the worlds cultures changed the nature of
gender ideology?
3. Is a new global culture forming? Is this simply a product of Western/American cultural
hegemony? Is a hybrid culture forming?
4. Is globalisation destroying cultural diversity?
5. Is Australia an exporter or an importer of culture? What are the implications of this?
6. Are countries like Japan taking over from the United States as primary producers of global
culture? What are the implications of this? Do countries like Japan export values and
ideas?

Readings
Tomlinson, J., Cultural globalisation: Placing and displacing the West, in H. Mackay and T.
OSullivan (eds), The media reader: Continuity and transformation, London: Sage, 1999,
167-172

Watson, James L., McDonalds in Hong Kong, in Frank J. Lechner and John Boli (eds), The
globalization reader, Malden: Blackwell, 2004, 125-132

Dubecki, Larissa, Australian faces vanishing from the telly? Youre not wrong, Narelle, The
Age, 31 July, 2004

36
Wong, Wendy Suiyi, Globalizing manga: From Japan to Hong Kong and beyond, in
Frenchy Lunning (ed.), Mechademia 1: Emerging worlds of anime and manga, Minneapolis:
University of Minnesota Press, 2006, 23-45
37
J. Tomlinson, Cultural globalisation: Placing and displacing the
West, in H. Mackay and T. OSullivan (eds), in The media reader:
Continuity and transformation, London: Sage, 1999, 167-172.

The argument that equates globalisation with
Westernisation can be outlined quite briefly
though it contains some crucial assumptions
which will be unpacked presently. It goes like
this. The culture that is currently emerging via
globalisation is not a global culture in the
utopian sense. It is not a culture that has arisen
out of the common experiences and needs of all
of humanity and it does not represent a
confluence of divergent cultural practices. It
does not draw equally on the worlds many
cultural traditions. It is neither inclusive,
integrative, pluralist, balanced nor, in the best
sense, synthesising. Rather, globalised culture
is the enforced installation, worldwide, of one
particular culture, born out of one particular,
privileged historical experience. It is, in short,
simply the global extension of Western culture.
The broad implications of this, and the causes
of critical concern, can be understood in,
roughly, four ways. First, the process is seen as
homogenising; bringing standardised,
commodified culture in its wake and
threatening to obliterate the worlds rich
cultural diversity. Second, it is argued that it
visits the various cultural ills of the West its
obsession with consumption practices, the
fragmentation of cultural identity, its loss of
central, stable consensual cultural values on
to other cultures. Third, both of these
tendencies are seen as particular threats to what
are regarded as the fragile and vulnerable
traditional cultures of peripheral, Third
World nations. Fourth, the process is viewed
as part and parcel of wider forms of domination,
such as those involved in the ever-widening
grip of transnational capitalism and those
involved in the maintenance of post-colonial
relations of (economic and cultural)
dependency.
These arguments will be recognised as
belonging to a familiar critical tradition that
predates the current discourse of globalisation:
the critique of Western cultural imperialism.
Indeed, the discourse of cultural imperialism
tended to set the scene for the initial critical
reception of globalisation in the cultural sphere,
casting the process as an aspect of the
hierarchical nature of imperialism, that is the
increasing hegemony of particular central
cultures, the diffusion of American values,
consumer goods and lifestyles (Friedman,
1994: 195). Although, the general concerns of
this critique are important and although it
established crucial connections between
politicaleconomic analysis and cultural
critique, the critique of cultural imperialism is a
deeply problematic theoretical stance. The
various problems arising from this peculiarly
ambiguous and often confused critical
discourse have since been widely discussed
(Boyd-Barrett, 1982; Schlesinger, 1991;
Tomlinson, 1991, 1995, 1996; Sinclair, 1992;
Thompson, 1995). In so far as the general
stance that casts cultural globalisation as
Westernisation draws implicitly on the
assumptions of the cultural imperialism thesis,
it is subject to many of the same objections.
There is not space here to recapitulate all these
criticisms, many of which are familiar to
cultural studies. Instead I will restrict myself to
discussing two of the most common objections
to the general idea of Westernisation with a
view to distinguishing them from the specific,
rather different line of criticism I follow later.

The first is that Westernisation is a rather
problematic conceptual category. When people
talk about Westernisation they are referring to
a whole range of things: the consumer culture
of Western capitalism with its now all-too-
familiar icons (McDonalds, Coca-Cola, Levi
Jeans), the spread of European languages
(particularly English), styles of dress, eating
habits, architecture and music, the adoption of
an urban lifestyle based around industrial
production, a pattern of cultural experience
dominated by the mass media, a range of
cultural values and attitudes regarding personal
liberty, gender and sexuality, human rights, the
political process, religion, scientific and
technological rationality and so on. Whilst all
these aspects of the West can be found in
various combinations throughout the world
today, they do not constitute an indivisible
package. Although it is correct to argue, as
Cornelius Castoriadis (1991) does, that social
modernity comes as a package and not as a
menu from which cultures may select, this
does not imply that the transition from tradition
to modernity has to follow, slavishly, the
38
pattern of the West. The routes to and through
modernity (Therborn, 1995) and the strategies
for entering and leaving modernity(Garcia
Canclini, 1995) are clearly not restricted to
those taken by Western nation-states. To take
but one example, an acceptance of the
technological culture of the West and of aspects
of consumerism may well co-exist with a
vigorous rejection of its sexual permissiveness
and its generally secular outlook, as is common
in many Islamic societies.
Discriminating between various aspects of what
is totalised as Westernisation reveals a much
more complex picture: some cultural goods
have a broader appeal than others, some values
and attitudes are easily adopted while others are
actively resisted or found simply odd or
irrelevant. And all this varies between societies
and between different groupings and divisions
within societies such as class, age, gender,
urban/rural groups. The first objection to the
idea of Westernisation therefore is that it is too
broad a generalization. Its rhetorical force is
bought at the price of glossing over a multitude
of complexities, exceptional cases and
contradictions. This criticism also connects
with another one: that ironically the
Westernisation/homogenization/cultural
imperialism thesis itself displays a sort of
Western ethnocentrism (Hannerz, 1991;
Tomlinson, 1991, 1995). Ulf Hannerz puts this
point nicely: The global homogenization
scenario focuses on things that we, as observers
and commentators from the center, are very
familiar with: our fast foods, our soft drinks,
our sitcoms. The idea that they are or will be
everywhere, and enduringly powerful
everywhere, makes our culture even more
important and worth arguing about, and
relieves us of the real strains of having to
engage with other living, complicated, puzzling
cultures. (Hannerz, 1991: 109)
A second set of objections concerns the way in
which Westernisation suggests a rather crude
model of the one-way flow of cultural influence.
This criticism has rightly been the one most
consistently made of the whole cultural
imperialism idea. Culture, it is argued, simply
does not transfer in this linear unidirectional
way. Movement between cultural/geographical
areas always involves translation, mutation and
adaptation as the receiving culture brings its
own cultural resources to bear, in dialectical
fashion, upon cultural imports (Appadurai,
1990; Robins, 1991; Tomlinson, 1991; Garcia
Canclini, 1995; Lull, 1995). For Latin America,
Jesus Martin-Barbero (1993: 149) describes
how the steady, predictable tempo of
homogenizing development (is) upset by the
counter-tempo of profound differences and
cultural discontinuities.
A number of things follow from this argument.
Most basically it implies that the
Westernisation thesis severely underestimates
the cultural resilience and dynamism of non-
Western cultures, their capacity to indigenise
Western cultural imports, imbue them with
different cultural meanings, and appropriate
them actively rather than be passively swamped.
It also draws attention to the counter-flow of
cultural influence from the periphery to the
centre, such as the case of world music (Abu-
Lughod, 1991) or some spheres of media
production (Sinclair, 1992). Indeed, the core
periphery model itself tends to disguise such
counter-flows of cultural (and even political
economic) influence and it is on this basis that
the model has recently been questioned by
critics from the periphery. For instance,
Nestor Garcia Canclini (1995: 232) criticises
the concentric figuration of power relations in
the model as the abstract expression of an
idealised imperial system and calls for a far
more nuanced, dialectical view of the processes
of cultural interpenetration.
This dialectical conception of culture can be
further developed so as to undermine the sense
of the West as a stable homogeneous cultural
entity. As Nederveen Pieterse (1995: 54) puts it:
It . . . implies an argument with Westernisation:
the West itself may be viewed as a mixture and
Western culture as creole culture. This is an
important, if controversial, argument which I
do not have the space to explore fully here.
However, it is worth noting one aspect of this
increasing hybridisation of cultural
experience in the West as it becomes more and
more connected, via globalisation, with non-
Western societies. This is the very practical
consequences of the globalisation of capital: its
displacement of huge numbers of people from
their homes in Asia, Africa or Latin America to
the West as either refugees or labour migrants.
As Stuart Hall puts this:
Driven by poverty, drought, famine, economic
underdevelopment and crop failure, civil war
and political unrest, regional conflict and
arbitrary changes of political regime, the
accumulating foreign indebtedness of their
governments to Western banks, very large
39
numbers of the poorer peoples of the globe
have taken the message of global
consumerism at face value, and moved
towards the places where the goodies come
from and where chances of survival are higher.
In the era of global communications, the West
is only a one-way airline charter ticket away.
(Hall, 1992: 306-7)
The politicaleconomic impact of such
migrations is a much-discussed feature of the
general process of globalisation: presenting
Western nation states with both cheap
exploitable labour and the threat of
demographic invasion. The growing anxiety
in the developed world over these population
movements can be seen, for example, in the
notoriously heavy policing of the US
Mexican border, and in the current debate
about Fortress Europe. However, the cultural
implications of such population flows for the
West are likely to be more complex and,
eventually, more significant.
It has been argued that such flows and the
more general postcolonial diaspora represent
a sense in which the Other has installed itself
within the very heart of the Western metropolis,
[t]hrough a kind of reverse invasion, the
periphery has now infiltrated the colonial core
(Robins, 1991: 32). Robins draws the
implication that the self-confident, stable
cultural identity of the West is being threatened.
Through this irruption of empire, the certain
and centred perspective of the old colonial
order is confronted and confused (1991: 33).
The cultural interpenetration that globalisation
brings, then, implies a collapse of both the
physical and the cultural distance necessary to
sustain the myths of Western identity (and
superiority) established via the binary
oppositions and imaginary geographies (Said,
1978) of the high-colonial era.
While such criticisms take some of the wind
out of the sails of the Westernisation argument,
at least in its most dramatic, polemical
formulations, they do not entirely resolve the
issue of the contemporary cultural power of the
West. It can still be argued that, when all is said
and done and all these criticisms met, Western
cultural practices and institutions remain firmly
in the driving seat of global cultural
development. No amount of attention to the
processes of cultural reception and translation,
no anthropological scruples about the
complexities of particular local contexts and no
dialectical theorising can argue away the
manifest power of Western capitalism, both as
a general cultural configuration (the
commodification of everyday experience,
consumer culture) and as a specific set of
global cultural industries (CNN, Times-Warner,
News International). Is not this evidence of
some sort of Western cultural hegemony? What
ensues from this is a critical stand-off. Both
positions are convincing within their own terms
but do not seem precisely to engage. This could
be read as another instance of the familiar
divergence between political-economy and
culturalist approaches but I do not believe we
inhabit such discrete theoretical universes. It is
surely possible to establish a more
sophisticated, hermeneutically sensitive
account of cultural globalisation whilst
maintaining a keen critical sense of the power
geometry involved.
To take the argument a little further, I focus
below on one particular, largely implicit;
assumption that seems to be embedded in the
idea of globalised culture as Westernised
culture. This is the assumption that the process
of globalisation is continuous with the long,
steady, historical rise of Western cultural
dominance. By this I mean that the sort of
cultural power generally attributed to the West
today is seen as of the same order of power
that was manifest in the great imperial
expansion of Europe powers from the
seventeenth century onwards. Accordingly, this
implicit understanding of globalised culture
would see the massive and undeniable spread
of Western cultural goods Coca-
colonisation as broadly part of the same
process of domination as that which
characterised the actual colonisation of much
of the rest of the world by the West. I do not
mean that no distinction is made between the
coercive and often bloody history of Western
colonial expansion and the soft cultural
imperialism of McDonalds hamburgers and
Sesame Street. But these and many other
instances of Western cultural power are often
lumped together totalised by the term
Westernisation, giving rise to an impression
of the inexorable advance of Western culture.
This particular totalising assumption needs to
be unpacked and critically examined for two
reasons. First, because it mistakes the nature of
the globalisation process and second because it
overstates the general cultural power of the
West. I do not deny that the West is in a certain
40
sense culturally powerful but I want to
suggest that this power, which is closely
aligned with technological, industrial and
economic power, is not the whole story. It does
not amount to the implicit claim that the way
of life of the West is being installed, via
globalisation, as the unchallengeable cultural
model for all humanity.

41
James L. Watson, McDonalds in Hong Kong, in Frank J.
Lechner and John Boli (eds), The globalization reader, Malden:
Blackwell, 125132

McDonalds in Hong Kong

[. . .] how does one explain the phenomenal
success of American-style fast food in Hong
Kong and, increasingly, in Guangzhou the
two epicenters of Cantonese culture and cuisine?
Seven of the worlds ten busiest McDonalds
restaurants are located in Hong Kong. When
McDonalds first opened in 1975, few thought
it would survive more than a few months. By
January 1, 1997, Hong Kong had 125 outlets,
which means that there was one McDonalds
for every 51,200 residents, compared to one for
every 30,000 people in the United States.
Walking into these restaurants and looking at
the layout, one could well be in Cleveland or
Boston. The only obvious differences are the
clientele, the majority of whom are Cantonese-
speakers, and the menu, which is in Chinese as
well as English.
Transnationalism and the Fast Food
Industry
Does the roaring success of McDonalds and its
rivals in the fast food industry mean that Hong
Kongs local culture is under siege? Are food
chains helping to create a homogeneous,
global culture better suited to the demands of
a capitalist world order? Hong Kong would
seem to be an excellent place to test the
globalization hypothesis, given the central role
that cuisine plays in the production and
maintenance of a distinctive local identity. Man
Tso-chuens great-grandchildren are today avid
consumers of Big Macs, pizza, and Coca-Cola;
does this somehow make them less Chinese
than their grandfather?
It is my contention that the cultural arena in
places like Hong Kong is changing with such
breathtaking speed that the fundamental
assumptions underlining such questions are
themselves questionable. Economic and social
realities make it necessary to construct an
entirely new approach to global issues, one
that takes the consumers own views into
account. Analyses based on neomarxian and
dependency (center/periphery) models that
were popular in the 1960s and 1970s do not
begin to capture the complexity of emerging
transnational systems.
This chapter represents a conscious attempt
to bring the discussion of globalism down to
earth, focusing on one local culture. The
people of Hong Kong have embraced
American-style fast foods, and by so doing
they might appear to be in the vanguard, of a
worldwide culinary revolution. But they have
not been stripped of their cultural traditions,
nor have they become Americanized in any
but the most superficial of ways. Hong Kong
in the late 1990s constitutes one of the worlds
most heterogeneous cultural environments.
Younger people, in particular, are fully
conversant in transnational idioms, which
include language, music, sports, clothing,
satellite television, cybercommunications,
global travel, and of course cuisine. It is
no longer possible to distinguish what is local
and what is not. In Hong Kong, as I hope to
show in this chapter, the transnational is the
local. [. . .]
Mental Categories: Snack Versus Meal
As in other parts of East Asia, McDonalds
faced a serious problem when it began
operation in Hong Kong: Hamburgers, fries,
and sandwiches were perceived as snacks
(Cantonese siu sihk, literally small eats); in
the local view these items did not constitute the
elements of a proper meal. This perception is
still prevalent among older, more conservative
consumers who believe that hamburgers, hot
dogs, and pizza can never be filling. Many
students stop at fast food outlets on their way
home from school; they may share hamburgers
and fries with their classmates and then eat a
full meal with their families at home. This is
not considered a problem by parents, who
themselves are likely to have stopped for tea
and snacks after work. Snacking with friends
and colleagues provides a major opportunity
for socializing (and transacting business)
among southern Chinese. Teahouses, coffee
shops, bakeries, and ice cream parlors are
popular precisely because they provide a
42
structured yet informal setting for social
encounters. Furthermore, unlike Chinese
restaurants and banquet halls, snack centers do
not command a great deal of time or money
from customers.
Contrary to corporate goals, therefore,
McDonalds entered the Hong Kong market as
a purveyor of snacks. Only since the late 1980s
has its fare been treated as the foundation of
meals by a generation of younger consumers
who regularly eat non-Chinese food. Thanks
largely to McDonalds, hamburgers and fries
are now a recognized feature of Hong Kongs
lunch scene. The evening hours remain,
however, the weak link in McDonalds
marketing plan; the real surprise was breakfast,
which became a peak traffic period (more on
this below).
The mental universe of Hong Kong
consumers is partially revealed in the everyday
use of language. Hamburgers are referred to, in
colloquial Cantonese, as han bou bao han
being a homophone for ham and bao the
common term for stuffed buns or bread rolls.
Bao are quintessential snacks, and however
excellent or nutritious they might be, they do
not constitute the basis of a satisfying (i.e.,
filling) meal. In South China that honor is
reserved for culinary arrangements that rest,
literally, on a bed of rice (fan). Foods that
accompany rice are referred to as sung,
probably best translated as toppings
(including meat, fish, and vegetables). It is
significant that hamburgers are rarely
categorized as meat (yuk); Hong Kong
consumers tend to perceive anything that is
served between slices of bread (Big Macs, fish
sandwiches, hot dogs) as bao. In American
culture the hamburger is categorized first and
foremost as a meat item (with all the attendant
worries about fat and cholesterol content),
whereas in Hong Kong the same item is
thought of primarily as bread.
From Exotic to Ordinary: McDonalds
Becomes Local
Following precedents in other international
markets, the Hong Kong franchise promoted
McDonalds basic menu and did not introduce
items that would be more recognizable to
Chinese consumers (such as rice dishes,
tropical fruit, soup noodles). Until recently the
food has been indistinguishable from that
served in Mobile, Alabama, or Moline, Illinois.
There are, however, local preferences: the best-
selling items in many outlets are fish
sandwiches and plain hamburgers; Big Macs
tend to be the favorites of children and
teenagers. Hot tea and hot chocolate outsell
coffee, but Coca-Cola remains the most popular
drink.
McDonalds conservative approach also
applied to the breakfast menu. When morning
service was introduced in the 1980s, American-
style items such as eggs, muffins, pancakes,
and hash brown potatoes were not featured.
Instead, the local outlets served the standard
fare of hamburgers and fries for breakfast.
McDonalds initial venture into the early
morning food market was so successful that Mr.
Ng hesitated to introduce American-style
breakfast items, fearing that an abrupt shift in
menu might alienate consumers who were
beginning to accept hamburgers and fries as a
regular feature of their diet. The transition to
eggs, muffins, and hash browns was a gradual
one, and today most Hong Kong customers
order breakfasts that are similar to those offered
in American outlets. But once established,
dietary preferences change slowly: McDonalds
continues to feature plain hamburgers (but not
the Big Mac) on its breakfast menu in most
Hong Kong outlets.
Management decisions of the type outlined
above helped establish McDonalds as an icon
of popular culture in Hong Kong. From 1975 to
approximately 1985, McDonalds became the
in place for young people wishing to
associate themselves with the laid-back,
nonhierarchical dynamism they perceived
American society to embody. The first
generation of consumers patronized
McDonalds precisely because it was not
Chinese and was not associated with Hong
Kongs past as a backward-looking colonial
outpost where (in their view) nothing of
consequence ever happened. Hong Kong was
changing and, as noted earlier, a new consumer
culture was beginning to take shape.
McDonalds caught the wave of this cultural
movement and has been riding it ever since.
Anthropological conventions and
methodologies do not allow one to deal very
well with factors such as entrepreneurial flair or
managerial creativity. Ethnographers are used
to thinking in terms of group behavior,
emphasizing coalitions and communities rather
than personalities. In studies of corporate
culture, however, the decisive role of
management or, more precisely, individual
managers must be dealt with in a direct way.
This takes us into the realm of charisma,
leadership, and personality.
Thanks largely to unrelenting efforts by Mr.
43
Ng and his staff, McDonalds made the
transition from an exotic, trendy establishment
patronized by self-conscious status seekers to a
competitively priced chain offering value
meals to busy, preoccupied consumers. Today,
McDonalds restaurants in Hong Kong are
packed wall-to-wall with people of all
ages, few of whom are seeking an American
cultural experience. Twenty years after Mr. Ng
opened his first restaurant, eating at
McDonalds has become an ordinary, everyday
experience for hundreds of thousands of Hong
Kong residents. The chain has become a local
institution in the sense that it has blended into
the urban landscape; McDonalds outlets now
serve as rendezvous points for young and old
alike. [. . .]
Sanitation and the Invention of
Cleanliness
Besides offering value for money, another key
to McDonalds success was the provision of
extra services, hitherto unavailable to Hong
Kong consumers. Until the mid1980s, a visit to
any Hong Kong restaurants toilet (save for
those in fancy hotels) could best be described
as an adventure. Today, restaurant toilets all
over the territory are in good working order and,
much to the surprise of visitors who remember
the past, they are (relatively) clean. Based on
conversations with people representing the full
range of social strata in Hong Kong,
McDonalds is widely perceived as the catalyst
of this dramatic change. The corporation
maintained clean facilities and did not waver as
new outlets opened in neighborhoods where
public sanitation had never been a high priority.
Daniel Ng recalled how, during the early years
of his business, he had to re-educate employees
before they could even begin to comprehend
what corporate standards of cleanliness entailed.
Many workers, when asked to scrub out a toilet,
would protest that it was already cleaner than
the one in their own home, only to be told that
it was not clean enough. McDonalds set what
was perceived at the time to be an impossible
standard and, in the process, raised consumers
expectations. Rivals had to meet these
standards in order to compete. Hong Kong
consumers began to draw a mental equation
between the state of a restaurants toilets and its
kitchen. In pre-1980s public eateries (and in
many private homes), the toilet was located
inside the kitchen. One was not expected to see
any contradiction in this arrangement; the
operative factor was that both facilities had to
be near the water supply. Younger people, in
particular, have begun to grow wary of these
arrangements and are refusing to eat at places
they perceive to be dirty.
Without exception my informants cited the
availability of clean and accessible toilets as an
important reason for patronizing McDonalds.
Women, in particular, appreciated this service;
they noted that, without McDonalds, it would
be difficult to find public facilities when they
are away from home or office. A survey of one
Hong Kong outlet in June 1994 revealed that
58 percent of the consumers present were
women. For many Hong Kong residents,
therefore, McDonalds is more than just a
restaurant; it is an oasis, a familiar rest station,
in what is perceived to be an inhospitable urban
environment.
Whats in a Smile? Friendliness and
Public Service
American consumers expect to be served with
a smile when they order fast food, but . . . this
is not true in all societies. In Hong Kong people
are suspicious of anyone who displays what is
perceived to be an excess of congeniality,
solicitude, or familiarity. The human smile is
not, therefore, a universal symbol of openness
and honesty. If you buy an apple from a
hawker and he smiles at you, my Cantonese
tutor once told me, you know youre being
cheated.
Given these cultural expectations, it was
difficult for Hong Kong management to import
a key element of the McDonalds formula
service with a smile and make it work. Crew
members were trained to treat customers in a
manner that approximates the American notion
of friendliness. Prior to the 1970s, there was
not even an indigenous Cantonese term to
describe this form of behavior. The traditional
notion of friendship is based on loyalty to close
associates, which by definition cannot be
extended to strangers. Today the concept of
public friendliness is recognized and
verbalized by younger people in Hong Kong,
but the term many of them use to express this
quality is friendly, borrowed directly from
English. McDonalds, through its television
advertising, may be partly responsible for this
innovation, but to date it has had little effect on
workers in the catering industry.
During my interviews it became clear that
the majority of Hong Kong consumers were
uninterested in public displays of congeniality
from service personnel. When shopping for fast
food most people cited convenience,
cleanliness, and table space as primary
44
considerations; few even mentioned service
except to note that the food should be delivered
promptly. Counter staff in Hong Kongs fast
food outlets (including McDonalds) rarely
make great efforts to smile or to behave in a
manner Americans would interpret as friendly.
Instead, they project qualities that are admired
in the local culture: competence, directness,
and unflappability. In a North American setting
the facial expression that Hong Kong
employees use to convey these qualities would
likely be interpreted as a deliberate attempt to
be rude or indifferent. Workers who smile on
the job are assumed to be enjoying themselves
at the consumers (and managements) expense:
In the words of one diner I overheard while
standing in a queue, They must be playing
around back there. What are they laughing
about?
Consumer Discipline?
[A] hallmark of the American fast food
business is the displacement of labor costs from
the corporation to the consumers. For the
system to work, consumers must be educated
or disciplined so that they voluntarily
fulfill their side of an implicit bargain: We (the
corporation) will provide cheap, fast service, if
you (the customer) carry your own tray, seat
yourself, and help clean up afterward. Time and
space are also critical factors in the equation:
Fast service is offered in exchange for speedy
consumption and a prompt departure, thereby
making room for others. This system has
revolutionized the American food industry and
has helped to shape consumer expectations in
other sectors of the economy. How has it fared
in Hong Kong? Are Chinese customers
conforming to disciplinary models devised in
Oak Brook, Illinois?
The answer is both yes and no. In general
Hong Kong consumers have accepted the basic
elements of the fast food formula, but with
localizing adaptations. For instance,
customers generally do not bus their own trays,
nor do they depart immediately upon finishing.
Clearing ones own table has never been an
accepted part of local culinary culture, owing in
part to the low esteem attaching to this type of
labor. [. . .]
Perhaps the most striking feature of the
American-inspired model of consumer
discipline is the queue. Researchers in many
parts of the world have reported that customers
refuse, despite education campaigns by the
chains involved, to form neat lines in front of
cashiers. Instead, customers pack themselves
into disorderly scrums and jostle for a chance
to place their orders. Scrums of this nature were
common in Hong Kong when McDonalds
opened in 1975. Local managers discouraged
this practice by stationing queue monitors near
the registers during busy hours and, by the
1980s, orderly lines were the norm at
McDonalds. The disappearance of the scrum
corresponds to a general change in Hong
Kongs public culture as a new generation of
residents, the children of refugees, began to
treat the territory as their home. Courtesy
toward strangers was largely unknown in the
1960s: Boarding a bus during rush hour could
be a nightmare and transacting business at a
bank tellers window required brute strength.
Many people credit McDonalds with being the
first public institution in Hong Kong to enforce
queuing, and thereby helping to create a more
civilized social order. McDonalds did not, in
fact, introduce the queue to Hong Kong, but
this belief is firmly lodged in the public
imagination.
Hovering and the Napkin Wars
Purchasing ones food is no longer a physical
challenge in Hong Kongs McDonalds but
finding a place to sit is quite another matter.
The traditional practice of hovering is one
solution: Choose a group of diners who appear
to be on the verge of leaving and stake a claim
to their table by hovering nearby, sometimes
only inches away. Seated customers routinely
ignore the intrusion; it would, in fact, entail a
loss of face to notice. Hovering was the norm
in Hong Kongs lower-to middle-range
restaurants during the 1960s and 1970s, but the
practice has disappeared in recent years.
Restaurants now take names or hand out tickets
at the entrance; warning signs, in Chinese and
English, are posted: Please wait to be seated.
Customers are no longer allowed into the
dining area until a table is ready.
Fast food outlets are the only dining
establishments in Hong Kong where hovering
is still tolerated, largely because it would be
nearly impossible to regulate. Customer traffic
in McDonalds is so heavy that the standard
restaurant design has failed to reproduce
American-style dining routines: Rather than
ordering first and finding a place to sit
afterward, Hong Kong consumers usually
arrive in groups and delegate one or two people
to claim a table while someone else joins the
counter queues. Children make ideal hoverers
and learn to scoot through packed restaurants,
zeroing in on diners who are about to finish. It
45
is one of the wonders of comparative
ethnography to witness the speed with which
Hong Kong children perform this
reconnaissance duty. Foreign visitors are
sometimes unnerved by hovering, but residents
accept it as part of everyday life in one of the
worlds most densely populated cities. It is not
surprising, therefore, that Hong Kongs fast
food chains have made few efforts to curtail the
practice.
Management is less tolerant of behavior that
affects profit margins. In the United States fast
food companies save money by allowing (or
requiring) customers to collect their own
napkins, straws, plastic flatware, and
condiments. Self-provisioning is an essential
feature of consumer discipline, but it only
works if the system is not abused. In Hong
Kong napkins are dispensed, one at a time, by
McDonalds crew members who work behind
the counter; customers who do not ask for
napkins do not receive any. This is a deviation
from the corporations standard operating
procedure and adds a few seconds to each
transaction, which in turn slows down the
queues. Why alter a well-tested routine? The
reason is simple: napkins placed in public
dispensers disappear faster than they can be
replaced. [. . .]
Children as Consumers
[. . .] McDonalds has become so popular in
Hong Kong that parents often use visits to their
neighborhood outlet as a reward for good
behavior or academic achievement. Conversely,
children who misbehave might lose their after-
school snacking privileges or be left at home
while their siblings are taken out for a
McDonalds brunch on Sunday. During
interviews parents reported that sanctions of
this type worked better than anything they
could think of to straighten out a wayward
child: It is my nuclear deterrent, one father
told me, in English.
Many Hong Kong children of my
acquaintance are so fond of McDonalds that
they refuse to eat with their parents or
grandparents in Chinese-style restaurants or
dim sam teahouses. This has caused
intergenerational distress in some of Hong
Kongs more conservative communities. In
1994, a nine-year-old boy, the descendant of
illustrious ancestors who settled in the New
Territories eight centuries ago, talked about his
concerns as we consumed Big Macs, fries, and
shakes at McDonalds: Abak [uncle], I like it
here better than any place in the world. I want
to come here every day. His father takes him
to McDonalds at least twice a week, but his
grandfather, who accompanied them a few
times in the late 1980s, will no longer do so. I
prefer to eat dim sam, the older man told me
later. That place [McDonalds] is for kids.
Many grandparents have resigned themselves
to the new consumer trends and take their
preschool grandchildren to McDonalds for
midmorning snacks precisely the time of
day that local teahouses were once packed with
retired people. Cantonese grandparents have
always played a prominent role in child
minding, but until recently the children had to
accommodate to the proclivities of their elders.
By the 1990s grandchildren were more
assertive and the midmorning dim sam snack
was giving way to hamburgers and Cokes.
The emergence of children as full-scale
consumers has had other consequences for the
balance of domestic power in Hong Kong
homes. Grade school children often possess
detailed knowledge of fast foods and foreign
(non-Chinese) cuisines. Unlike members of the
older generation, children know what, and how,
to eat in a wide variety of restaurants.
Specialized information is shared with
classmates: Which chain has the best pizza?
What is ravioli? How do you eat a croissant?
Food, especially fast food, is one of the leading
topics of conversation among Hong Kong
school children. Grandchildren frequently
assume the role of tutors, showing their elders
the proper way to eat fast food. Without
guidance, older people are likely to disassemble
the Big Mac, layer by layer, and eat only those
parts that appeal to them. Hong Kong adults
also find it uncomfortable to eat with their
hands and devise makeshift finger guards with
wrappers. Children, by contrast, are usually
expert in the finer points of fast food etiquette
and pay close attention to television ads that
feature young people eating a variety of foods.
It is embarrassing, I was told by an 11-year-old
acquaintance, to be seen at McDonalds with a
grandfather who does not know how to eat
properly.
Many Hong Kong kindergartens and
primary schools teach culinary skills, utilizing
the lunch period for lessons in flatware
etiquette, menu reading, and food awareness
(taste-testing various cuisines, including Thai,
European, and Indian). Partly as a consequence,
Hong Kongs youth are among the worlds
most knowledgeable and adventurous eaters.
One can find a wide range of cuisines in
todays Hong Kong, rivaling New York City
46
for variety. South Asian, Mexican, and Spanish
restaurants are crowded with groups of young
people, ages 16 to 25, sharing dishes as they
graze their way through the menu. Culinary
adventures of this nature are avoided by older
residents (people over 50), who, in general,
have a more restricted range of food tolerance.
Ronald McDonald and the Invention of
Birthday Parties
Until recently most people in Hong Kong did
not even know, let alone celebrate, their
birthdates in the Western calendrical sense;
dates of birth according to the lunar calendar
were recorded for divinatory purposes but were
not noted in annual rites. By the late 1980s,
however, birthday parties, complete with cakes
and candles, were the rage in Hong Kong. Any
child who was anyone had to have a party, and
the most popular venue was a fast food
restaurant, with McDonalds ranked above all
competitors. The majority of Hong Kong
people live in overcrowded flats, which means
that parties are rarely held in private homes.
Except for the outlets in central business
districts, McDonalds restaurants are packed
every Saturday and Sunday with birthday
parties, cycled through at the rate of one every
hour. A party hostess, provided by the
restaurant, leads the children in games while
the parents sit on the sidelines, talking quietly
among themselves. For a small fee celebrants
receive printed invitation cards, photographs, a
gift box containing toys and a discount coupon
for future trips to McDonalds. Parties are held
in a special enclosure, called the Ronald Room,
which is equipped with low tables and tiny
stools suitable only for children. Television
commercials portray Ronald McDonald leading
birthday celebrants on exciting safaris and
expeditions. The clowns Cantonese name,
Mak Dong Lou Suk-Suk (Uncle McDonald),
plays on the intimacy of kinship and has helped
transform him into one of Hong Kongs most
familiar cartoon figures. [. . .]

Conclusions: Whose Culture Is it?
[. . .] Having watched the processes of culture
change unfold for nearly thirty years, it is
apparent to me that the ordinary people of
Hong Kong have most assuredly not been
stripped of their cultural heritage, nor have they
become the uncomprehending dupes of
transnational corporations. Younger people
including many of the grandchildren of my
former neighbors in the New Territories are
avid consumers of transnational culture in all of
its most obvious manifestations: music, fashion,
television, and cuisine. At the same time,
however, Hong Kong has itself become a major
center for the production of transnational
culture, not just a sinkhole for its consumption.
Witness, for example, the expansion of Hong
Kong popular culture into China, Southeast
Asia, and beyond: Cantopop music is heard
on radio stations in North China, Vietnam, and
Japan; the Hong Kong fashion industry
influences clothing styles in Los Angeles,
Bangkok, and Kuala Lumpur; and, perhaps
most significant of all, Hong Kong is emerging
as a center for the production and dissemination
of satellite television programs throughout East,
Southeast, and South Asia.
A lifestyle is emerging in Hong Kong that
can best be described as postmodern,
postnationalist, and flamboyantly transnational.
The wholesale acceptance and appropriation of
Big Macs, Ronald McDonald, and birthday
parties are small, but significant aspects of this
redefinition of Chinese cultural identity. In
closing, therefore, it seems appropriate to pose
an entirely new set of questions: Where does
the transnational end and the local begin?
Whose culture is it, anyway? In places like
Hong Kong the postcolonial periphery is fast
becoming the metropolitan center, where local
people are consuming and simultaneously
producing new cultural systems. [. . .]

47
Larissa Dubecki, Australian faces vanishing from the telly?
Youre not wrong, Narelle, The Age, 31 July, 2004

Australian Content On TV

Even before the free trade agreement is
signed off, Australian TV content is on
the wane, writes Larissa Dubecki.
Skippy must be turning in his bush kangaroo
grave. Gloomy predictions about the death of
Australian culture have shadowed the free trade
agreement with the US.
The entertainment industry has mobilised in
numbers not seen since the Logies over fears
that concessions in the agreement will erode the
viability of local drama production.
Australias nostalgia-infused tradition of
television dramas from Bellbird and Number
96 to Neighbours and Blue Heelers would,
they argue, be annihilated by a flood of US
imports.
But statistics released this week by the ABS
reveal that, despite existing local content quotas,
television stations slashed spending on local
drama and comedy by half in the three years to
2003 from $319 million to $160 million.
Lifestyle, sport and reality television cheerful,
popular, and relatively cheap to make are on
the ascendancy. But will it be at the expense of
a unique sense of cultural identity, forged in
part by cultural cornerstones such as A Country
Practice and The Sullivans, SeaChange and
Home and Away?
Television has been an important medium for
forging a distinct Australian identity, says
Swinburne University senior media lecturer
John Schwartz. It goes back to shows like
Matlock, Homicide and Division 4 they have
given an Australian voice, an Australian fiction
and identity. Hearing Australian voices and
watching scenarios that are peculiarly
Australian cant be underestimated in the
development of a national psyche, and a
common bond.
It was the perceived importance of reflecting
our history and culture back to us that
prompted the first Australian content
regulations in the 1960s, ensuring the
commercial networks put money into making
Australian drama, childrens programs and
documentaries.
The FTA would allow for the present 55 per
cent local content rules for free-to-air TV, but
the key issue vexing the entertainment industry
is the lower ceiling for pay TV and future
digital free-to-air channels.
The economic bottom line is that drama is
expensive and commercial networks are in the
business of making a profit. According to
media analysts, an hour of drama would cost a
network between $400,000 and $500,000 to
make, while the cost of importing an hour of
US drama would be about $50,000.
Australian audiences have signalled their
indifference to local drama with their remote
controls, preferring slick US imports CSI and
Law and Order over Stingers and Blue Heelers.
Not so, says Steve Allen, managing director of
media buying agency Fusion Strategy, who
argues the success of the ABCs Kath & Kim
shows audiences want social comedy that
captures our language and social mores.
Historically we do care if we are watching
local or overseas product, because Australian
productions are nearly always well represented
in the top 20 ratings programs of the week, he
says.
Channel Ten runs the most imported product
because its cheap and, up until just recently it
has been the third station, after Nine and Seven.
We do connect better and broader with local
product.
RMIT University senior lecturer in finance and
economics Jonathan Boymal argues that
amorphous conceptssuch as identity, culture
and a national voice cant be measured by
quotas, percentages and viewing time. The
quota is a very blunt instrument. It doesnt, and
cant, differentiate between high and low-
48
quality programming. Why should Australians
have to watch low-quality television simply
because it is Australian?
But, according to Dr Ben Goldsmith, a lecturer
in screen studies at the Australian Film
Television and Radio School, programs sink or
swim on their own merits despite their origin.
A show like Hey Dad, while it was far from a
critical success, was watched by a lot of people
and lasted a long time because of that. It
wouldnt have continued to be made without
getting the ratings simply because it was an
Australian show, he said.
The regulations dont support the perpetuation
of unpopular programs. Ratings figures reveal
the programs Australian audiences deem
relevant change over time. At the turn of the
century drama was king, while audiences now
tend to tune into home improvement and
lifestyle shows.
Last week the reality television juggernauts of
Big Brother, The Block and Australian Idol
accounted for five of the top 10 ratings spots.
The director of Queensland University of
Technologys creative industries research
centre, Professor Stuart Cunningham, suggests
that, rather than dismissing reality TV as an
inferior cultural product, it should be seen as a
new outlet for a distinctly Australian cultural
expression. There is cultural value in both
Neighbours and Big Brother, says Professor
Cunningham. Drama is not the acme of
cultural expression; in that sense, its a valuable
form but not necessarily better than reality
TV.

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4. Political dimensions of Globalisation: The
State and the UN

Overview
Since the nineteenth century, the nation state has been the most basic unit of world politics.
In weeks 4 and 5, we will consider whether globalisation requires new forms of governance
to replace the nation-state based international system. We will start off by looking at the role
played by states and international organisations like the United Nations in a globalised world.

Objectives
x Assess the role of the state in a globalised world
x Examine the role of international organisations like the United Nations

Discussion points
1. Is globalisation and the move towards regional/international collaborative governance
undermining national government? Or is it the most sensible model to work towards?
2. How would you assess the success of the United Nations? What are its strengths and
limitations? Can it police the world effectively?
3. Was the US intervention in Iraq justified? Did the war in Iraq render the United Nations
irrelevant?
4. Is effective and mutually cooperative global governance possible? Are global politics
essentially anarchic?
5. Should the preservation of state sovereignty and territorial integrity remain fundamental
principles of world politics?

Readings
Brown, Bartram, Barely borders: Issues of international law, Harvard International Review,
26:1 (2004)

Wolf, Martin, Will the nation-state survive globalization? Foreign Affairs, 80 (Jan/Feb 2001)

Roberts, Adam, The United Nations and international security, in Robert Art and Robert
Jervis (eds), International politics: Enduring concepts and contemporary issues, New York:
Longman, 2007

74
Bartram S. Brown, Barely borders: Issues of international law
Harvard International Review, 26:1, 2004

International Law and the War in Iraq

Was the US-led attack on Iraq justified? The
question comes from all corners of the globe,
and answers are varied. Our collective response
should be to cooperate in thoughtfully
examining the practical constraints and legal
limits to military intervention. The issue is not
black-and-white, but multifaceted, and only by
addressing it head-on can our international
community hope to reach a consensus that will
cement genuine autonomous international
security for all.
As a cornerstone of international law for more
than 350 years, the principle of non-
intervention protected a range of different
interests. Originally, it protected the sovereign
prerogatives of the crowned heads who ruled
Europe. While monarchies are not totally
obsolete, the principle of non-intervention is
now more likely to protect the democratic
systems of self-determination and popular
sovereignty. It has always helped to promote
international peace and stability by
discouraging the use of force against the
territorial sovereignty and political
independence of states. Today, both the reasons
for the principle and the necessary exceptions
to it can best be understood in terms of human
rights.
When the current system of international law
began to develop in Europe, it was built upon
new rules of sovereignty and non-intervention.
This system, unlike that of the hierarchical
Holy Roman Empire that preceded it, is
founded on the idea that each state is
independent and has the same set of sovereign
rights. Those who took responsibility for order
and justice within the territorially-based state
had all the rights of sovereignty under
international law, including the exclusive right
to make and enforce laws within that state. The
principle of nonintervention promotes the
peaceful coexistence of autonomous sovereign
states by banning each of them from the use of
force within the territory of the others.
International law recognizes each states rights
of sovereignty and territorial integrity but
cannot guarantee that other states will respect
those rights. The international legal system is
weak in that it lacks the centralized legislative
and judicial organs and coercive executive
powers to enforce the rule of law at the national
level. Due to this weakness, states must often
rely upon self-help to protect their rights under
international law. The classic form of self-help
is self-defense.
The Right of Self-Defense
The most notable exception to the general
principle of non-intervention stems from the
right of self-defense. Customary international
law develops when the behavior of states over
time indicates they have accepted a rule of law.
Under that law, two essential conditions limit
the right of states to use force in self-defense.
First, the use of force must be necessary. In an
1841 letter to British Minister of Foreign
Affairs Henry Stephen Fox, US Secretary of
State Daniel Webster described this
requirement as a necessity of self-defense,
instant, overwhelming, leaving no choice of
means, and no moment for deliberation. The
second requirement is that the acts of self-
defense must be proportionate to the threat.
This customary standard does not condition the
right on a prior armed attack.
The rules of international law are built upon the
premise that states, like people, have a natural
right to defend themselves against the
imminent threat of harm. Article 51 of the UN
Charter states that [n]othing in the present
Charter shall impair the inherent right of
individual or collective self-defense if an armed
attack occurs against a Member of the United
Nations. To the extent that self-defense is an
inherent right, the use of force in preemptive
self-defense could be justified even without a
prior armed attack. This topic raises difficult
issues of how to define and apply workable
legal standards in matters affecting national
security.
Intervention on Behalf of Human Rights
Proponents see humanitarian intervention as a
fundamental exception to the principle of non-
intervention. The basis for this exception is the
idea that the governments of sovereign states
hold rights under international law only if they
fulfill certain obligations, including the
75
obligation to respect the fundamental rights and
interests of the governed. As far back as 1625,
Hugo Grotius noted in The Law of War and
Peace that those rulers who provoke their
people to despair and resistance by unheard of
cruelties, having themselves abandoned all the
laws of nature, they lose the rights of
independent sovereigns, and can no longer
claim the privilege of the law of nations. This
view was reinforced by developments at the
national level, including such watershed events
as the 1688 Glorious Revolution in England,
the 1776 American Revolution, and the 1789
French Revolution. These events redefined the
relationship between state and individual under
both national and international law. The
monarchies who exercised sovereignty in 17th
century Europe were all sidelined or replaced.
The values of democracy and popular
sovereignty that brought such profound
domestic changes had an effect upon
international law as well. These changes
accelerated in the 20th century as international
law moved farther away from its original focus
on the state-centered rights of sovereignty and
began to stress respect for fundamental
freedoms as a standard of governmental
legitimacy. Nonetheless, the doctrine of
humanitarian intervention remains quite
controversial especially since the adoption of
the UN Charter in 1945.

Intervention and Aggression
One key rationale for the principle of non-
intervention is to promote the order and
stability that are essential to the full enjoyment
of human rights through local governmental
rule. In his 1941 four freedoms speech, US
President Franklin Roosevelt looked forward to
a world in which all would enjoy freedom
from fear, once armaments had been reduced
to the point at which no nation will be in a
position to commit an act of physical
aggression against any neighbor, anywhere in
the world. The concepts of aggression and
intervention are quite distinct, if related. Unlike
intervention, which may at times be justified,
aggression is an international crime that is
unjustified by definition. Several members of
the Nazi High Command were convicted of
crimes against peace, defined by the
Nuremberg tribunal as planning, preparation,
initiation or waging of a war of aggression, or a
war in violation of international treaties,
agreements or assurances. In 1974, the UN
General Assembly adopted a resolution
defining aggression as the use of armed force
by a State against the sovereignty, territorial
integrity or political independence of another
State, or in any other manner inconsistent with
the Charter of the United Nations. The
significance of this resolution is limited,
however, because Article 39 of the Charter
clearly states that Security Council alone is to
determine the existence of aggression. The
definition merely restates the language of
Article 2(4) of the UN Charter and does
nothing to resolve the inherent ambiguities.

The UN Charter
According to Article 2(4) of the UN Charter,
All Members shall refrain in their
international relations from the threat or use of
force against the territorial integrity or political
independence of any state, or in any other
manner inconsistent with the Purposes of the
United Nations.
This language makes clear that the use of force
can be justified under certain circumstances but
invites debate on what those circumstances
might be. A strict reading might suggest that a
violation occurs whenever one state uses force
on the territory of another. Another
interpretation is that forcible intervention is not
prohibited unless it compromises the territorial
integrity or political independence of a state in
a way fundamentally inconsistent with the
purposes of the United Nations. Of course, the
ambiguity of this UN Charter standard is no
coincidence. It reflects the degree of consensus,
or lack thereof, among the key framers of the
UN Charter in 1995, namely the United States
and the USSR. After almost 60 years of change
in the international system, it is now time to
develop an improved and clarified standard on
intervention that has become a burning issue
along with the problem of terrorism.
The UN Charter recognizes only two explicit
exceptions to the prohibition on the threat or
use of force: It may be used in self-defense as
mentioned in Article 51 and the UN Security
Council may authorize its use to protect or
restore international peace and security as
specified in Articles 39 through 42. Like other
parts of the Charter, this broad prohibition
reinforces the sovereign rights of the state. The
Charter also affirms that the United Nations
itself lacks the authority to intervene in the
domestic jurisdiction of its members unless the
Security Council, as referred to above, decides
that international peace and security are at risk.
This much of the Charter seems to support the
view that state sovereignty should preclude any
76
intrusive international action for the protection
of human rights.
On the other hand, the UN Charter also heralds
the emergence of a new international law of
human rights that challenges the traditional
concept of sovereignty. The Charter states in
the Preamble and Article 1(3) that promoting
and encouraging respect for human rights is
one of the basic purposes of the United Nations,
thereby signifying that human rights have
become a matter of international concern and
not merely a question within the domestic
jurisdiction of states. The concept of an
international law of human rights redefines
state sovereignty by recognizing that the people
within the state have rights under international
law that the government of the state has the
obligation to respect. This reconfiguration
marks a radical departure from the traditional
state-centric view of international law.
International human rights treaties have
solidified the status of human rights as part of
international law. But who will protect these
human rights when the national government
fails to respect and protect them? More
importantly, who will act to prevent genocide
and other shocking atrocities against civilians?
In practice, the Security Council rarely
authorizes the use of force for any purpose, so
the issue arises as to whether a state or group of
states, acting without the authorization of the
Security Council, can validly claim a right to
intervene for humanitarian purposes. The
recent practices of states in this regard may
foreshadow the development of new rules of
customary international law on humanitarian
intervention, but there is still no global
consensus on these rules.
The governments of many states, especially
those that are small, militarily weak, non-
democratic, or non-western, are understandably
concerned that they might be targets of
humanitarian intervention. They may feel that
their sovereignty depends upon a strict
interpretation of Article 2(4) which precludes
humanitarian intervention without the sanction
of the Security Council. Even when forcible
intervention is the only way to protect the
human rights of innocent civilians, it still may
not be worth the costs. Officially recognizing a
right of humanitarian intervention could
destabilize the world by undermining the
prohibition on the use of force. The values at
stake are truly momentous, and the debate
continues on the status of humanitarian
intervention under current law. The NATO
bombing of Serbia to assist the Albanian
Kosovars reopened consideration of this issue,
even before recent events in Iraq.

Justifications for the Iraq War
One can briefly consider the 2003 intervention
in Iraq to illustrate how different justifications
for intervention may be used, or abused. A
number of different legal justifications have
been offered. The first is that the coalition acted
to enforce a series of earlier Security Council
resolutions calling for Iraq to eliminate its
weapons of mass destruction. The problem with
this argument is that it claims the legitimacy of
the Security Councils authority for an
intervention that the Council very carefully and
specifically declined to authorize. While a long
series of Security Council resolutions support
the view that there were legitimate international
objectives to be achieved in Iraq (WMD
disarmament among them), but this is separate
from the issue of whether forcible intervention
was justified in pursuit of these, or any other,
objectives.
Could intervention in Iraq be justified by the
right of self-defense? US President George W.
Bush argued before the invasion that Iraqs
weapons of mass destruction posed a threat to
the United States that was unacceptable in a
post-September 11 world. There had been no
prior armed attack by Iraq against the United
States, and the Security Council had declined to
authorize the use of force, so the US-led
coalition intervened on its own authority
based on evidence of an imminent threat.
Although Article 51 of the UN Charter does not
authorize the use of force in the absence of a
prior armed attack, it is reasonable to conclude
that the preemptive self-defense can be justified
in extremis. Even so, there will always be
questions about the imminence of the threat if
not the proportionality of the response. This is
particularly true of the intervention in Iraq. The
armed intervention in Afghanistan can more
easily be justified as necessary for self-defense.
Given the many reports of massive human
rights violations by Saddam Husseins regime,
some have attempted, at least after the fact, to
justify the invasion as an exercise in
humanitarian intervention. But there are
reasons to doubt that this was the principal
motivation for US intervention in Iraq, and
these questions compound concerns about the
legality of any act of forcible intervention not
authorized by the Security Council.
77
Humanitarian intervention is controversial due
to doubts about its legality, and also because, in
practice, there are typically unanswered
questions concerning the popular will of the
local people, the level of atrocities that warrant
intervention, the responsibility for civilian
casualties resulting from the intervention, and
the possible ulterior motives of the intervening
state. Oversight by more effective international
institutions could help address these concerns
but may not be on the horizon. There are
difficult issues of where to draw the line
balancing stability and non-intervention on the
one hand and the risks and benefits of
intervening for human rights on the other. One
of those risks is that, in the worst case scenario,
humanitarian intervention could itself become a
pretext for aggression or oppression.

The Difficulty of Formulating a Clear
Standard
It is extremely difficult to formulate hard,
complete, and fair rules governing such
fundamental matters as the right of self-defense
and the right of humanitarian intervention. The
ambiguity of the UN Charters language on
nonintervention and self-defense is illustrative
of the difficulties involved. The ideal moral
standards sometimes referred to as natural law
can never be completely and perfectly captured
in the concrete standards of positive (man-
made) law. It is nonetheless important to
develop and refine the standards of that law to
the greatest possible extent.
When a vague doctrine can be invoked by
states to justify the use of force, they will be
tempted to overuse and abuse it. This is
threatening to other states, particularly when
those claiming this license are the most
powerful states. Without clear legal standards
to limit it, the practice of humanitarian
intervention threatens both to allow powerful
states to dominate the less powerful and to
undermine the friendly relations among states
in general. However well-intentioned a policy
of forcible intervention may be, the benefits
may become outweighed by the adverse impact
on overall international peace and security.
Realistic legal standards need to be flexible
enough to accommodate the compelling
humanitarian and security interests involved,
yet concrete enough to permit the identification
and condemnation of clear violations.
A Human Rights Perspective on
Intervention
It would be naive and perhaps foolhardy to
insist on a rigid and idealized version of
international law banning armed intervention in
all circumstances. If international law is to
remain relevant, its rules must adapt to
conditions in the contemporary world. A
combination of economic, social, and
technological forces has made the world more
interdependent than ever in terms of economics,
culture, and security. At the same time, the
values of human rights and popular sovereignty
have transformed the relationship between the
state and the individual. In light of all this, the
rules of international law governing
intervention and non-intervention need to be
updated and clarified.
These rules, even as they stand today, can best
be understood in terms of the human rights they
seek to protect. A basic non-intervention rule is
needed to discourage aggression and promote
the global order and stability essential for the
protection and enjoyment of all human rights.
But non-intervention is a very state-centered
principle. It assumes that national governments
alone are responsible for human rights as well
as all other matters internal to the state.
Possible exceptions to the principle become
relevant only when states fail to live up to these
responsibilities.
In human rights terms, the line between internal
and external matters is not always clear. When
a national government prepares or launches an
attack on another state, or allows others on its
territory (such as terrorists) to plan such attacks,
then the right of self-defense may trump the
principle of non-intervention. Similarly, the
natural rights of people may justify
proportionate acts of forcible intervention in
the targeted state. When the government of a
state dramatically fails to respect, protect, and
ensure the human rights of its own populace,
whether due to loss of government control, or
worse yet, due to state policies of oppression
and persecution, then humanitarian intervention
may be both legal and appropriate. Despite the
inherent difficulty of formulating and updating
them, it is imperative to develop new and
improved rules in this area, reflecting the
realities of the early 21st-century world.
78
US Exceptionalism
Some believe it would be impossible or even
counterproductive to formulate better rules
circumscribing the rights of self-defense and
humanitarian intervention, especially as they
might apply to the United States. Their
reasoning is based on US exceptionalism: the
idea that the United States should get special
treatment and remain free from the legal
restraints applied to other states. In many ways,
the United States is a unique global power
because its economy is overwhelmingly
dominant, because no comparable military
power exists in the world, and, because US
capacities are often essential for the success of
UN peacekeeping and other uses of force by
multilateral institutions. Some conclude that the
United States should retain absolute freedom of
action, not only for its own sake but also for
that of the international community since often,
only the United States has the power and the
will to act.

The problem with the exceptionalist argument
is that it ignores the rights, concerns,
perceptions, and reactions of other states and
therefore the ultimate costs of such a policy. A
country that draws too freely upon
extraordinary exceptions to the rules will
inevitably pay a price in terms of its reputation
and ability to mobilize international support.
No state can claim a unique exemption from
accountability and law without being perceived,
at least by many, as unprincipled and
opportunistic. Only those strongly convinced
that the United States is a completely
benevolent power will find this extreme form
of exceptionalism to be palatable.
If the US government believes international
standards on the use of force are inadequate or
too indefinite to safeguard legitimate state
interests, it need not renounce the right to
protect them. Instead, it should propose
clarifications to the legal standards. The
argument that no fair and effective international
standards are possible is fatalistic and
inadequate. In the past, the United States has
stepped forward to provide leadership in
defining legal standards applicable to self-
defense, war crimes and other important
matters of national and international security.
The US government should provide similar
principled leadership today.
US influence will be greater and US security
will ultimately be enhanced if the US
government participates in the development of
more effective international laws and
institutions, rather than attempting to stake out
a special place beyond legal restraint. At some
time in the future, another state with
overwhelming military power may claim the
right to forcibly intervene in the United States.
It would be prudent, for both humanitarian
reasons and future self-interest, for the United
States to help build a workable international
law of intervention before that day comes.

History Will Be the Judge
Serious consequences hinge on any decision to
intervene, especially if the intervention is
condemned as illegal or proves to be ill-advised.
Having intervened in Iraq on its own authority,
with very limited international support, the
United States now bears broad responsibility
for all that ensues there. This responsibility
weighs heavily upon this country in economic,
military, political and human terms.
Failure to intervene can have its own costs. An
imminent threat to national security, left
unchallenged, could explode into a real crisis
like that of September 11, 2001. In 1994, the
world ignored warnings of possible genocide in
Rwanda until it was too late and over 500,000
people were massacred, a failure to act that
brought shame to all those who could have
prevented the tragedy. Sometimes intervention
is the right policy.
But given the specific dangers to which
civilians may be exposed and the general
possibility that the use of force may undermine
international peace and security, the burden
must be on the intervener to justify armed
action. As incidents of intervention increase in
frequency, the justification for such actions will
be under even more scrutiny and criticism.
Rarely will an international court have
jurisdiction to rule upon the legality of any
particular act of intervention. These judgments
are usually left to world public opinion and,
ultimately, to history.
Thomas Jefferson wrote the Declaration of
Independence out of a decent respect for the
opinions of mankind. It was then important
that the fledgling United States be seen not as a
lawless group of revolutionists and lawbreakers,
but as a thoughtful society motivated by the
need to establish a legitimate and independent
state. The worlds view of the United States
remains relevant today. It is important to any
state seeking to guarantee its own security that
it not be seen as the aggressor.
79
Restoring human rights through armed
intervention is difficult even when a quick
military victory can be achieved. Local
resentment of outside domination can
complicate the realization of political
objectives such as stability, prosperity and
democracy. The involvement of the United
Nations and other credible international
institutions may help. Recent events in
Afghanistan and Iraq show that some such
international support will eventually be needed
to bring ambitious policies of intervention to a
positive conclusion.

80
Martin Wolf, Will the nation-state survive globalization?
Foreign Affairs, 80 (Jan/Feb 2001)

Abstract (Summary)
The modern form of globalization will not spell the end of the modern nation-state. Today's
growing integration of the world economy is not unprecedented. Similar trends occurred in
the late nineteenth century. The proposition that globalization makes states unnecessary is
even less credible than the idea that it makes states impotent. If anything, the exact opposite is
true, for at least 3 reasons: 1. The ability of a society to take advantage of the opportunities
offered by international economic integration depends on the quality of public goods. 2. The
state normally defines identity. 3. International governance rests on the ability of individual
states to provide and guarantee stability.

DEFINING GLOBALIZATION
A SPECTER is haunting the world's
governments the specter of globalization.
Some argue that predatory market forces make
it impossible for benevolent governments to
shield their populations from the beasts of prey
that lurk beyond their borders. Others counter
that benign market forces actually prevent
predatory governments from fleecing their
citizens. Although the two sides see different
villains, they draw one common conclusion:
omnipotent markets mean impotent politicians.
Indeed, this formula has become one of the
cliches of our age. But is it true that
governments have become weaker and less
relevant than ever before? And does
globalization, by definition, have to be the
nemesis of national government?

Globalization is a journey. But it is a journey
toward an unreachable destination the
globalized world. A globalized economy
could be defined as one in which neither
distance nor national borders impede economic
transactions. This would be a world where the
costs of transport and communications were
zero and the barriers created by differing
national jurisdictions had vanished. Needless to
say, we do not live in anything even close to
such a world. And since many of the things we
transport (including ourselves) are physical, we
never will.

This globalizing journey is not a new one. Over
the past five centuries, technological change
has progressively reduced the barriers to
international integration. Transatlantic
communication, for example, has evolved from
sail power to steam, to the telegraph, the
telephone, commercial aircraft, and now to the
Internet. Yet states have become neither weaker
nor less important during this odyssey. On the
contrary, in the countries with the most
advanced and internationally integrated
economies, governments ability to tax and
redistribute incomes, regulate the economy, and
monitor the activity of their citizens has
increased beyond all recognition. This has been
especially true over the past century.

The question that remains, however, is whether
todays form of globalization is likely to have a
different impact from that of the past. Indeed, it
may well, for numerous factors distinguish
todays globalizing journey from past ones and
could produce a different outcome. These
distinctions include more rapid
communications, market liberalization, and
global integration of the production of goods
and services. Yet contrary to one common
assumption, the modern form of globalization
will not spell the end of the modern nation-state.

THE PAST AS PROLOGUE
TODAY'S GROWING INTEGRATION of the
world economy is not unprecedented, at least
when judged by the flow of goods, capital, and
people. Similar trends occurred in the late
nineteenth and early twentieth centuries.

First, the proportion of world production that is
traded on global markets is not that much
higher today than it was in the years leading up
to World War I. Commerce was comparably
significant in 1910, when ratios of trade
(merchandise exports plus imports) to GDP hit
record highs in several of the advanced
economies. Global commerce then collapsed
during the Great Depression and World War II,
but since then world trade has grown more
rapidly than output. The share of global
81
production traded worldwide grew from about
7 percent in 1950 to more than 20 percent by
the mid-1990s; in consequence, trade ratios
have risen in almost all of the advanced
economies. In the United Kingdom, for
example, exports and imports added up to 57
percent of GDP in 1995 compared to 44
percent in 1910; for France the 1995 proportion
was 43 percent against 35 percent in 1910; and
for Germany it was 46 percent against 38
percent in the same years. But Japans trade
ratio was actually lower in 1995 than it had
been in 1910. In fact, among todays five
biggest economies, the only one in which trade
has a remarkably greater weight in output than
it had a century ago is the United States, where
the ratio has jumped from 11 percent in 1910 to
24 percent in 1995. That fact may help explain
why globalization is more controversial for
Americans than for people in many other
countries.

Second, by the late nineteenth century many
countries had already opened their capital
markets to international investments, before
investments, too, collapsed during the interwar
period. As a share of GDP, British capital
investments abroad averaging 4.6 percent of
GDP between 1870 and 1913 hit levels
unparalleled in contemporary major economies.
More revealing is that the correlation between
domestic investment and savings (a measure of
the extent to which savings remain within one
country) was lower between 1880 and 1910
than in any subsequent period.

Historical differences exist, however. Although
current capital mobility has precedents from the
pre-World War I era, the composition of capital
flows has changed. Short-term capital today is
much more mobile than ever before. Moreover,
long-term flows now are somewhat differently
constituted than in the earlier period.
Investment in the early twentieth century took
the form of tangible assets rather than
intangible ones. Portfolio flows predominated
over direct investment in the earlier period (that
trend has been reversed since World War II);
within portfolios, stocks have increased in
relative importance to roughly equal bonds
today. And finally, before 1914, direct
investment was undertaken largely by
companies investing in mining and
transportation, whereas today multinational
companies predominate, with a large
proportion of their investment in services.

Todays high immigration flows are also not
unprecedented. According to economists Paul
Hirst and Grahame Thompson, the greatest era
for recorded voluntary mass migration was the
century after 1815. Around 60 million people
left Europe for the Americas, Oceania, and
South and East Africa. An estimated ten
million voluntarily migrated from Russia to
Central Asia and Siberia. A million went from
Southern Europe to North America. About 12
million Chinese and 6 million Japanese left
their homelands and emigrated to eastern and
southern Asia. One and a half million left India
for Southeast Asia and Southwest Africa.

Population movement peaked during the 1890s.
In those years, the United States absorbed
enough immigrants to increase the U.S.
population from the beginning of the decade by
9 percent. In Argentina, the increase in the
1890s was 26 percent; in Australia, it was 17
percent. Europe provided much of the supply:
the United Kingdom gave up 5 percent of its
initial population, Spain 6 percent, and Sweden
7 percent. In the 1990s, by contrast, the United
States was the only country in the world with a
high immigration rate, attracting newcomers
primarily from the developing world rather
than from Europe. These immigrants increased
the population by only 4 percent.

As all of this suggests, despite the many
economic changes that have occurred over the
course of a century, neither the markets for
goods and services nor those for factors of
production appear much more integrated today
than they were a century ago. They seem more
integrated for trade, at least in the high-income
countries; no more integrated for capital
above all for long-term capital-despite
important changes in the composition of capital
flows; and much less integrated for labor.

So why do so many people believe that
something unique is happening today? The
answer lies with the two forces driving
contemporary economic change: falling costs
of transport and communications on the one
hand, and liberalizing economic policies on the
other.

82
THE TECHNOLOGICAL
REVOLUTION
ADVANCES in technology and infrastructure
substantially and continuously reduced the
costs of transport and communications
throughout the nineteenth and early twentieth
centuries. The first transatlantic telegraph cable
was laid in 1866. By the turn of the century, the
entire world was connected by telegraph, and
communication times fell from months to
minutes. The cost of a three-minute telephone
call from New York to London in current
prices dropped from about $250 in 1930 to a
few cents today. In more recent years, the
number of voice paths across the Atlantic has
skyrocketed from l00,000 in 1986 to more than
2 million today. The number of Internet hosts
has risen from 5,000 in 1986 to more than 30
million now.
A revolution has thus occurred in collecting
and disseminating information, one that has
dramatically reduced the cost of moving
physical objects. But these massive
improvements in communications, however
important, simply continue the trends begun
with the first submarine cables laid in the last
century. Furthermore, distances still impose
transport and communications costs that
continue to make geography matter in
economic terms. Certain important services still
cannot be delivered from afar.

Diminishing costs of communications and
transport were nevertheless pointing toward
greater integration throughout the last century.
But if historical experience demonstrates
anything, it is that integration is not
technologically determined. If it were,
integration would have gone smoothly forward
over the past two centuries. On the contrary,
despite continued falls in the costs of transport
and communications in the first half of the
twentieth century, integration actually reversed
course.

Policy, not technology, has determined the
extent and pace of international economic
integration. If transport and communications
innovations were moving toward global
economic integration throughout the last
century and a half, policy was not and that
made all the difference. For this reason, the
growth in the potential for economic
integration has greatly outpaced the growth of
integration itself since the late nineteenth
century. Globalization has much further to run,
if it is allowed to do so.
CHOOSING GLOBALIZATION
GLOBALIZATION is not destined, it is chosen.
It is a choice made to enhance a nations
economic well-being indeed, experience
suggests that the opening of trade and of most
capital flows enriches most citizens in the short
run and virtually all citizens in the long run.
(Taxation on short-term capital inflows to
emerging market economies is desirable,
however, particularly during a transition to full
financial integration.) But if integration is a
deliberate choice, rather than an ineluctable
destiny, it cannot render states impotent. Their
potency lies in the choices they make.

Between 1846 and 1870, liberalization spread
from the United Kingdom to the rest of Europe.
Protectionism, which had never waned in the
United States, returned to continental Europe
after 1878 and reached its peak in the 1930s.

A new era of global economic integration
began only in the postwar era, and then only
partially: from the end of World War II through
the 1970s, only the advanced countries lowered
their trade barriers.

The past two decades, by contrast, have seen
substantial liberalization take root throughout
the world. By the late 1990s, no economically
significant country still had a government
committed to protectionism.

This historical cycle is also apparent in
international capital investments. Capital
markets stayed open in the nineteenth and early
twentieth centuries, partly because
governments did not have the means to control
capital flows. They acquired and haltingly
solidified this capacity between 1914 and 1945,
progressively closing their capital markets.
Liberalization of capital flows then began in a
few advanced countries during the 1950s and
1960s. But the big wave of liberalization did
not start in earnest until the late 1970s,
spreading across the high-income countries,
much of the developing world, and, by the
1990s, to the former communist countries.
Notwithstanding a large number of financial
crises over this period, this trend has remained
intact.

In monetary policy, the biggest change has
been the move from the gold standard of the
1870-1914 era to the floating currencies of
today. The long-run exchange-rate stability
inherent in the gold standard promoted long-
83
term capital flows, particularly bond financing,
more efficiently than does the contemporary
currency instability. Todays vast short-term
financial flows are not just a consequence of
exchangerate instability, but one of its causes.

Yet governments control over the movement
of people in search of employment tightened
virtually everywhere in the early part of the last
century. With the exception of the free
immigration policy among members of the
European Union (EU), immigration controls
are generally far tighter now than they were a
hundred years ago.

The policy change that has most helped global
integration to flourish is the growth of
international institutions since World War II.
Just as multinational companies now organize
private exchange, so global institutions
organize and discipline the international face of
national policy. Institutions such as the World
Trade Organization (WTO), the International
Monetary Fund (IMF), the World Bank, the EU,
and the North American Free Trade Agreement
underpin cooperation among states and
consolidate their commitments to liberalize
economic policy. The nineteenth century was a
world of unilateral and discretionary policy.
The late twentieth century, by comparison, was
a world of multilateral and institutionalized
policy.

TRADEOFFS FACING STATES
IRONICALLY, the technology that is supposed
to make globalization inevitable also makes
increased surveillance by the state, particularly
over people, easier than it would have been a
century ago. Indeed, here is the world we now
live in: one with fairly free movement of
capital, continuing (though declining)
restrictions on trade in goods and services, but
quite tight control over the movement of people.

Economies are also never entirely open or
entirely closed. Opening requires governments
to loosen three types of economic controls: on
capital flows, goods and services, and people.
Liberalizing one of the above neither requires
nor always leads to liberalization in the others.
Free movement of goods and services makes
regulating capital flows more difficult, but not
impossible; foreign direct investment can flow
across national barriers to trade in goods
without knocking them down. It is easier still to
trade freely and abolish controls on capital
movement, while nevertheless regulating
movement of people.

The important questions, then, concern the
tradeoffs confronting governments that have
chosen a degree of international economic
integration. How constrained will governments
find themselves once they have chosen
openness?

THREE VITAL AREAS
GLOBALIZATION is often perceived as
destroying governments capacities to do what
they want or need, particularly in the key areas
of taxation, public spending for income
redistribution, and macroeconomic policy. But
how true is this perception?

In fact, no evidence supports the conclusion
that states can no longer raise taxes. On the
contrary: in 1999, EU governments spent or
redistributed an average of 47 percent of their
GDPs. An important new book by Vito Tanzi
of the IMF and Ludger Schuknecht at the
European Central Bank underlines this point.
Over the course of the twentieth century, the
average share of government spending among
Organization for Economic Cooperation and
Development (OECD) member states jumped
from an eighth to almost half of GDP. In some
high-income countries such as France and
Germany, these ratios were higher than ever
before.

Until now, it has been electoral resistance, not
globalization, that has most significantly
limited the growth in taxation. Tanzi claims
that this is about to change. He argues that
collecting taxes is becoming harder due to a
long list of fiscal termites gnawing at the
foundations of taxation regimes: more cross-
border shopping, the increased mobility of
skilled labor, the growth of electronic
commerce, the expansion of tax havens, the
development of new financial instruments and
intermediaries, growing trade within
multinational companies, and the possible
replacement of bank accounts with electronic
money embedded in smart cards.

The list is impressive. That governments take it
seriously is demonstrated by the attention that
leaders of the OECD and the EU are devoting
to harmful tax competition, information
exchange, and the implications of electronic
commerce. Governments, like members of any
84
other industry, are forming a cartel to halt what
they see as ruinous competition in taxation.
This sense of threat has grown out of several
fiscal developments produced by globalization:
increased mobility of people and money,
greater difficulty in collecting information on
income and spending, and the impact of the
Internet on information flows and collection.

Yet the competitive threat that governments
face must not be exaggerated. The fiscal
implications of labor, capital, and spending
mobility are already evident in local
jurisdictions that have the freedom to set their
own tax rates. Even local governments can
impose higher taxes than their neighbors,
provided they contain specific resources or
offer location-specific amenities that residents
desire and consume. In other words, differential
taxation is possible if there are at least some
transport costs and there always are.

These costs grow with a jurisdictions
geographic size, which thus strongly influences
a local governments ability to raise taxes. The
income of mobile capital is the hardest to tax;
the income of land and immobile labor is
easiest. Corporate income can be taxed if it is
based on resources specific to that location, be
they natural or human. Spending can also be
taxed more heavily in one jurisdiction than
another, but not if transport costs are very low
(either because distances are short or items are
valuable in relation to costs). Similarly, it is
difficult to tax personal incomes if people can
live in low-tax jurisdictions while enjoying the
amenities of high-tax ones.

Eliminating legal barriers to mobility therefore
constrains, but does not eliminate, the ability of
some jurisdictions to levy far higher taxes than
others. The ceiling on higher local taxes rises
when taxable resources or activities remain
relatively immobile or the jurisdiction provides
valuable specific amenities just for that area.

The international mobility of people and goods
is unlikely ever to come close to the kind of
mobility that exists between states in the United
States. Legal, linguistic, and cultural barriers
will keep levels of cross-border migration far
lower than levels of movement within any
given country. Since taxes on labor income and
spending are the predominant source of
national revenue, the modern countrys income
base seems quite safe. Of course, although the
somewhat greater mobility resulting from
globalization makes it harder for governments
to get information about what their residents
own and spend abroad, disguising physical
movement, consumption, or income remains a
formidable task.

The third major aspect of globalization, the
Internet, may have an appreciable impact on
tax collection. Stephane Buydens of the OECD
plausibly argues that the Internet will primarily
affect four main areas: taxes on spending, tax
treaties, internal pricing of multinational
companies, and tax administration.

Purely Internet-based transactions
downloading of films, software, or music-are
hard to tax. But when the Internet is used to
buy tangible goods, governments can impose
taxes, provided that the suppliers cooperate
with the fiscal authorities of their
corresponding jurisdictions. To the extent that
these suppliers are large shareholder-owned
companies, which they usually are, this
cooperation may not be as hard to obtain as is
often supposed.

It is also sometimes difficult to locate an
Internet server. If one cannot do so, how are
taxes to be levied and tax treaties applied?
Similar problems arise with multinational
companies ability to charge submarket prices
to their subsidiaries abroad (so-called transfer
pricing within multinationals), which leaves
uncertain the question of how and in which
country to levy the tax. This scenario suggests
that classic concepts in the taxation of
corporations may have to be modified or even
radically overhauled.

The overall conclusion, then, is that economic
liberalization and technology advances will
make taxation significantly more challenging.
Taxes on spending may have to be partially
recast. Taxation of corporate profits may have
to be radically redesigned or even abandoned.

Finally, the ability of governments to impose
taxes that bear no relation to the benefits
provided may be more constrained than before.

Nevertheless, the implications of these changes
can easily be exaggerated. Taxation of
corporate income is rarely more than ten
percent of revenue, whereas taxes on income
and spending are the universal pillars of the
fiscal system. Yet even lofty Scandinavian
taxes are not forcing skilled people to emigrate
85
in droves. People will still happily pay to enjoy
high-quality schools or public transport. Indeed,
one of the most intriguing phenomena of
modern Europe is that the high-tax, big-
spending Scandinavian countries are leading
the new economy.

Governments will also use the exchange of
information and other forms of cooperation to
sustain revenue and may even consider
international agreements on minimum taxes.
They will certainly force the publicly quoted
companies that continue to dominate
transactions, both on-line and off, to cooperate
with fiscal authorities. But competition among
governments will not be eliminated, because
the powerful countries that provide relatively
low-tax, low-spending environments will want
to maintain them.

The bottom line is that the opening of
economies and the blossoming of new
technologies are reinforcing constraints that
have already developed within domestic
politics. National governments are becoming a
little more like local governments. The result
will not necessarily be minimal government.
But governments, like other institutions, will be
forced to provide value to those who pay for
their services.

Meanwhile, governments can continue the
practice of income redistribution to the extent
that the most highly taxed citizens and firms
cannot or do not wish to evade taxation. In
fact, if taxes are used to find what are believed
to be location-specific benefits, such as income
redistribution or welfare spending, taxpayers
will likely be quite willing to pay, perhaps
because they either identify with the
beneficiaries, fear that they could become
indigent themselves, or treasure the security
that comes from living among people who are
not destitute. Taxpayers may also feel a sense
of moral obligation to the poor, a sentiment that
seems stronger in small, homogeneous societies.
Alternatively, they may merely be unable to
evade or avoid those taxes without relocating
physically outside the jurisdiction. For all these
reasons, sustaining a high measure of
redistributive taxation remains perfectly
possible. The constraint is not globalization,
but the willingness of the electorate to tolerate
high taxation.

Last but not least, some observers argue that
globalization limits governments ability to run
fiscal deficits and pursue inflationary monetary
policy. But macroeconomic policy is always
vulnerable to the reaction of the private sector,
regardless of whether the capital market is
internationally integrated. If a government
pursues a consistently inflationary policy, long-
term nominal interest rates will rise, partly to
compensate for inflation and partly to insure
the bondholders against inflation risk. Similarly,
if a government relies on the printing press to
finance its activity, a flight from money into
goods, services, and assets will ensue and, in
turn, generate inflation.

Within one country, these reactions may be
slow. A government can pursue an inflationary
policy over a long period and boost the
economy; the price may not have to be paid for
many years. What difference, then, does it
make for the country to be open to international
capital flows? The most important change is
that the reaction of a governments creditors is
likely to be quicker and more brutal because
they have more alternatives. This response will
often show itself in a collapsing exchange rate,
as happened in East Asia in 1997 and 1998.

THE CONTINUING IMPORTANCE
OF STATES
A COUNTRY that chooses international
economic integration implicitly accepts
constraints on its actions. Nevertheless, the idea
that these constraints wither away the states
capacity to tax, regulate, or intervene is wrong.
Rather, international economic integration
accelerates the markets responses to policy by
increasing the range of alternative options
available to those affected. There are also
powerful reasons for believing that the
constraints imposed on (or voluntarily accepted
by) governments by globalization are, on
balance, desirable.

For example, the assumption that most
governments are benevolent welfare-
maximizers is naive. International economic
integration creates competition among
governments even countries that fiercely
resist integration cannot survive with
uncompetitive economies, as shown by the fate
of the Soviet Union. This competition
constrains the ability of governments to act in a
predatory manner and increases the incentive to
provide services that are valued by those who
pay the bulk of the taxes.

86
Another reason for welcoming the constraints
is that self-imposed limits on a governments
future actions enhance the credibility of even a
benevolent governments commitments to the
private sector. An open capital account is one
such constraint. Treaties with other
governments, as in the WTO, are another, as
are agreements with powerful private parties.
Even China has come to recognize the
economic benefits that it can gain from
international commitments of this kind.

The proposition that globalization makes states
unnecessary is even less credible than the idea
that it makes states impotent. If anything, the
exact opposite is true, for at least three reasons.
First, the ability of a society to take advantage
of the opportunities offered by international
economic integration depends on the quality of
public goods, such as property rights, an honest
civil service, personal security, and basic
education. Without an appropriate legal
framework, in particular, the web of potentially
rewarding contracts is vastly reduced. This
point may seem trivial, but many developing
economies have failed to achieve these
essential preconditions of success.

Second, the state normally defines identity. A
sense of belonging is part of the peoples sense
of security, and one that most people would not
want to give up, even in the age of
globalization. It is perhaps not surprising that
some of the most successfully integrated
economies are small, homogeneous countries
with a strong sense of collective identity.

Third, international governance rests on the
ability of individual states to provide and
guarantee stability. The bedrock of
international order is the territorial state with its
monopoly on coercive power within its
jurisdiction. Cyberspace does not change this:
economies are ultimately run for and by human
beings, who have a physical presence and,
therefore, a physical location.

Globalization does not make states unnecessary.
On the contrary, for people to be successful in
exploiting the opportunities afforded by
international integration, they need states at
both ends of their transactions. Failed states,
disorderly states, weak states, and corrupt states
are shunned as the black holes of the global
economic system.

What, then, does globalization mean for states?
First, policy ultimately determines the pace and
depth of international economic integration.
For each country, globalization is at least as
much a choice as a destiny. Second, in
important respects notably a countrys
monetary regime, capital account, and above all,
labor mobility the policy underpinnings of
integration are less complete than they were a
century ago. Third, countries choose integration
because they see its benefits. Once chosen, any
specific degree of international integration
imposes constraints on the ability of
governments to tax, redistribute income, and
influence macroeconomic conditions. But those
constraints must not be exaggerated, and their
effects are often beneficial. Fourth,
international economic integration magnifies
the impact of the difference between good and
bad states between states that provide public
goods and those that serve predatory private
interests, including those of the rulers.

Finally, as the world economy continues to
integrate and crossborder flows become more
important, global governance must be
improved. Global governance will come not at
the expense of the state but rather as an
expression of the interests that the state
embodies. As the source of order and basis of
governance, the state will remain in the future
as effective, and will be as essential, as it has
ever been.

MARTIN WOLF is Associate Editor and Chief
Economics Commentator at the Financial
Times. This paper is based on The Nation
State in a Global World, presented at the
Harry Oppenheimer Colloquium on
Globalization, funded by the Ernest
Oppenheimer Memorial Trust, in Stellenbosch,
South Africa, in February 2000. Excerpts will
appear in the winter 2001 issue of the Cato
journal.
87
88
89
90
91
92
5. Political dimensions of Globalisation: Non-
Government Organisations

Overview
Some scholars have argued that the process of globalisation has led to multi-national
companies and NGOs becoming more powerful than traditional states. In the past two decades,
there has been a transformation in world politics caused by the unprecedented growth of non-
governmental organisations or NGOs. These organisations have become enormously
influential actors on the world stage. The rise of NGOs raises a number of important questions:
How many NGOs actually exist and what is their purpose? Who is in charge of these
organisations? Where do they obtain financial support? Have they been a positive force in
domestic and international affairs? This week we will try to answer some of these questions.

Objectives
x Assess the role of NGOs in a globalised world
x Examine how NGOs operate and whether they have been an effective force

Discussion points
1. Have NGOs emerged as vital actors in world politics? Why?
2. NGOs can achieve what states are incapable of accomplishing themselves. Discuss.
3. Are NGOs dangerous because they lack accountability? Should NGOs be subject to more
regulation?
4. Have NGOs hurt the poor? Do you agree with Mallabys arguments?
5. NGOs have effectively become global multi-national companies and in the process have
lost any real sense of purpose. Discuss.

Readings
Mallaby, Sebastian, NGOs: fighting poverty, hurting the poor, Foreign Policy, 144
(September/October 2004), 50-59

Dichter, Thomas W., Globalization and its effects on NGOs: Efflorescence or a blurring of
roles and relevance?, Nonprofit and Voluntary Sector Quarterly, 28 (1999), 38-58

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Dichter Globalization and Its Effects on NGOs
Globalization and Its Effects on NGOs:
Efflorescence or a Blurring of Roles and Relevance?
Thomas W. Dichter
This article begins by describing attributes of the NGOsector, including its phenomenal
growth, its newlegitimacy and reputation, and national and regional differences among
NGOs. It thendiscusses the tensions, tradeoffs, trends, and strategies posed by globaliza-
tionas the political economyinwhichNGOs operate is changed. It notes that inthe global
marketplace of altruism, NGOs risk seeing the positive promise of NGOglobalizationfar
outweighed by the dangers of commodification of their work. Finally, the author con-
cludes that a return to the roots of altruistic activism may prove the best strategy in
response to todays challenges.
The termNGOis close to a half-century old. It was first used in legalistic fash-
ion by the United Nations in 1950: Any international organization which is
not established by intergovernmental agreement shall be considered as a
non-governmental organization (ECOSOC resolution 288[X], Article 71).
The terms age is appropriate in that it reflects nearly the entire history of the
formal international development assistance endeavor, between the periph-
ery and the center of which NGOs have threaded their way.
DEFINITIONS
There is no single widely used definition or typology on NGOs; one must
choose from among the many that have evolved as NGOs themselves have.
But because the concern of this volume is international NGOs, one useful dis-
tinction is that between voluntary membership organizations and intermedi-
ate organizations.
Voluntary membership organizations include grassroots organizations
where members come from the same community (e.g., a registered vil-
lage womens group in Kenya), and organizations where the members
come fromdifferent communities but are linkedby a professional, relig-
ious, or other affiliation. The common characteristic of voluntary mem-
bershiporganizations is that theyworkfor the members owninterests.
Nonprofit and Voluntary Sector Quarterly, vol. 28, no. 4, Supplement 1999 38-58
1999 Sage Publications, Inc.
38
104
Intermediate organizations are neither membership based nor are they
fullyvoluntary. Theyhave part-time or full-time staff, seekfunding, and
deliver programs andservices topeople, communities, and/or tovolun-
tary membership organizations themselves. Internationally, there are
two basic types of intermediate organizations: (a) charitable welfare and
relief organizations, and (b) development organizations (although even
this distinction has become blurred, as will be noted below).
Though many wouldnowinclude voluntary membershiporganizations in
the broad termNGOs, this article is concerned primarily with internationally
oriented intermediate organizations (the term NGO will be used as a short-
hand for this). Incidentally, these are the organizations still most often gener-
ally thought of by the public when the term NGOs is used. The Cooperative
for Assistance and Relief Everywhere (CARE), Save the Children, Amnesty
International, Oxfam, ChristianChildrens Fund, PlanInternational (formerly
Foster Parents Plan), World Learning (formerly the Experiment in Interna-
tional Living), Catholic Relief Services, ActionAid, ChristianAid, Earthwatch,
andWorldVisionare examples of these NGOs. Theywere all foundedtowork
internationally.
The oldest of these NGOs generally began as relief and welfare organiza-
tions and evolved into development organizations concerned with poverty
alleviation, primary health care, the environment, education, legal rights for
women, human rights, and so forth. Nowadays almost all NGOs in interna-
tional development seek positive changethey exist to improve the lot of
people, whether their focus is poor or unjustly treated people, the state of
health of the earth, or the fostering of democracy. Even those NGOs specializ-
ing in disaster relief are no longer content with Band-Aid kinds of assistance.
Across the board, NGOs now seek lasting effects of their work, and it is this
trait that makes most of them developmental.
NUMBERS AND SIZES
Partly because the terminology around NGOs continues to change, there
are no reliable statistics about how many intermediate NGOs currently exist.
We do know that the Organization for Economic Cooperation and Develop-
ment (OECD) in the late 1980s listed about 4,000 NGOs among its advanced
economy members.
1
But the growth of NGOs of the intermediate type has
beeninthe developingcountries, andthere we have onlyspeculation. It is safe
to say, however, that the combined total of NGOs in the advanced economies
and the developing countries is at least in the tens of thousands.
One way to get a perspective onthe economic presence of NGOs globally is
toput theminthe context of the official development assistance industry. Offi-
cial development assistance to the developing countries is provided by multi-
lateral organizations like the World Bank, and by the foreign aid programs of
the member nations of the OECD, such as the United States Agency for
Globalization and Its Effects on NGOs 39
105
International Development (USAID). These advanced economies, plus the
multilateral organizations, plus NGOs themselves, have accounted for
between$60 billionand$65 billioninaidto developing countries annually for
about the past decade. There are no accurate numbers onNGOs, but anOECD
estimate for 1994 is that $5.7 billionpasses throughNGOs (Hulme &Edwards,
1996), whereas the WorldBank estimates that it might be as high as $10 billion
for the same year. Roughly, then, between10%and20%of all official develop-
ment assistance is provided by NGOs. As for the total of private and public
support for all intermediate NGOs working internationally, it is not likely to
be greater than$20 billion. Inshort, althoughthe place of NGOs inthe political
economy of development assistance has become more significant, in terms of
their economic presence in the global flow of capital from advanced to devel-
oping countries, the NGOcontribution is small and proportionally becoming
smaller.
The largest number of internationally oriented NGOs among the OECD
nations come fromthe United States. In 1996 there were 417 U.S. NGOs regis-
tered with USAID as organizations engaged in overseas relief and develop-
ment. The total support of these organizations was $7.2 billion, of which $4.8
billion (66.7%) was private support, the rest coming from public monies
(directly or indirectly). The number of U.S. NGOs engaged in partnership
withgovernment has increasedsteadilysince the 1980s. Of the total of $7.2 bil-
lion, $4.2 billionwent tooverseas programs andthe rest todomestic programs
(USAID, 1997).
Of these organizations, 237 (57%) had overseas program expenditures
under $2 million, 155 organizations (37%) hadoverseas expenditures between
$2 million and $40 million, and 25 (6%) had overseas program budgets over
$40 million. The top 25 alone accounted for $2.5 billion of overseas expendi-
tures, or 60% of the total for overseas programs of all 417 agencies.
With fewexceptions, NGOs didnot really exist outside the advancedecon-
omy countries until 25 years ago. But as globalization has spread certain val-
ues and ideas about development, the growth in numbers of indigenous
NGOs has been dramatic and the job of development and relief has begun to
be takenonbythem.
2
Inpartial response tothis phenomenon, manyadvanced
economyNGOs have beenchangingtheir roleinadditiontodirect interven-
tions indevelopment andrelief, theynowhave also become providers of tech-
nical assistance and often funding to indigenous NGOs. They have become
muchmore global thanever, inresponse tothe rise of the indigenous NGOs as
well as a number of other forces and factors that will be discussed below.
NATIONAL AND REGIONAL DIFFERENCES
It is of course understoodthat inthis newly global worldof NGOs there are
country-specific differences in governing legal regimes that determine how
NGOs andother nonprofits canbe registered, what they cando, andhowthey
can be financed. There are differences in terms of their colonial history and
40 Dichter
106
their philanthropic traditions, as well as cultural meanings attached to ideas
like civic responsibility, social action, and voluntarism that influence local
roles played by NGOs.
In Latin America, for example, the Catholic church has played a direct and
indirect role in the work of many NGOs, both those with an explicit political
reform agenda and those that work directly on economic or social develop-
ment (manyagricultural cooperatives were foundedwiththe helpof priests).
In much of sub-Saharan Africa until recently, what we in the advanced
economies have come to accept as a tripartite division of societys institutions
(corporate sector, public sector, and third or independent sector) hardly
existed. Until recently, the public sector inmost of postindependent Africa has
overwhelmingly dominated. Consequently, NGOs are a relatively new phe-
nomenon in Africa.
There are also economic differences that dictate the sources andamounts of
private money available for nonprofit NGOs, and likewise the nature/degree
of voluntarismand calling that those who staff NGOs bring to their work. All
these differences notwithstanding, hardly any NGOin international develop-
ment is immune to the challenges posed by globalization.
GLOBALIZATION OF WHAT?
Ten years ago were we to have asked what common characteristics NGOs
share, three things could have been said with some assurance: They are self-
governing, they are characterized by some degree of voluntary involvement,
and central to their organizational culture are values and ideologies (Brown &
Covey, 1986). But at the end of the 1990s even these assertions do not hold up
well. Globalizationhas beena mixedblessingfor NGOs. As theyhave evolved
into a worldwide movement, their influence has grown. This has brought
them new opportunities and raised expectations placed on them. As they
struggle to meet these, the special characteristics they had in common are
eroding.
INFLUENCE
The influence of advanced economy NGOs has spread globally. The
growth of developing country NGOs is in part a response to that influence as
well as a response to the globalization of the idea of democracy. In the past 10
years the relationship between governments and NGOs has also become
globalized, certainly in the sense that nowalmost every government incorpo-
rates NGOs into their public rhetoric (if not their planning) in much the same
waythey are seen increasingly as partners, as implementers of programs or
deliverers of services.
As NGOs have growninnumbers andstrength, andespeciallyas theyhave
tried to become more developmental, their voice has begun to be heard by
107
governments and multilateral policy makers (e.g., the Food and Agricultural
Organization [FAO], UNICEF, the International Fund for Agriculture and
Development [IFAD], the International Labor Organization [ILO], and the
World Bank).
For some time, major foundations like Ford, Rockefeller, Carnegie, andoth-
ers have been leaders in setting the policy agenda domestically as well as
internationally. There is also little question that NGOs which implement the
kinds of programs that a foundation like Ford might fund have been at the
forefront of several movements that, once considered marginal, are now part
of modern day development discourse. In the realms of peoples participa-
tion, the role and importance of women in development, the environmental
movement, and the carryover of the notion of sustainability fromthe physical
to the financial and social organizational realm, NGOs have led with promi-
nent voices. There is little doubt that significant elements of U.S. foreignpolicy
(e.g., positions on human rights, the rights of and involvement of women,
child labor, and the environment) have been influenced by NGOs.
Watershed conferences in the past 20 years have either been instigated by,
dominated by, or heavily influenced by NGOs. The Alma Ata conference on
Primary Health Care in 1978 is an example. It was NGOs at that conference
who put the importance of breast feeding on the international health agenda,
which in turn led to a decline in the use of infant formula feeding in the devel-
oping countries, thus eliminating a major source of disease among infants
(because dry formula was frequently mixed with contaminated water). The
1992 Rio conference on Environment and Development was influenced
stronglybyNGOs, andthe termsustainable development became part of the pol-
icy lexicon. At the 1995 Beijing Conference on Women, the NGOs, meeting
separately, got far more news coverage than the official conference itself.
NGOs have had technological influence in almost every sector. They have
pioneeredtechniques in diverse fields such as childnutrition, special needs in
the classroom, bilingual education, the introduction of energy efficient cook-
stoves, agricultural processing, irrigation, improvements in water andsanita-
tion systems, micro-hydro electric systems, and so on (Conroy & Litvinoff,
1988). There are bynowcountless examples of NGOs influencingnational and
global policies on health, the environment, and social development. They
have influenced policy in forestry. They have shown governments the value
of native crops and thus influenced national trade policy. They have shown
government-subsidized credit programs the developmental importance of
nonsubsidized interest rates. Through the microcredit movement, NGOs
have begunto convince commercial banks that poor people without collateral
can repay small loans.
As NGOs have gained influence and prominence in the development
industry, the bar of achievement has beenraised. Not just others expectations
of them but their own expectations of themselves have grown (at least if one
reads their mission statements).
3
Not surprisingly, there are those who are
nowexamining the actual track record of NGOs on the ground. The record of
42 Dichter
108
lastingchange turns out tobe thin. Andfor the first time, there are a number of
voices who ask whether international NGOs can really make a substantive
difference at all in the lives of the poor.
The developmental impact of [private] agencies in terms of lasting solutions to poverty,
exclusionandinjustice have yet tobe found. Andthis is not because the investigators of the
studies did not try. The hard truth is that the goals they set and aspire to are beyond them.
The problems they address are too complex. The agencies size and institutional position
does not give sufficient leverage on the larger forces and systems which keep the poor
poor; and their financial dependence on government does not allow them the auton-
omy to challenge the self interest of Northern countries that stand in the way of
change. . . . Through their existing development and relief projects on the ground they are
not goingto be the catalysts andforce for povertyalleviation, inclusionandsocial justice in
the new world order. (Fowler & Biekart, 1996, p. 132)
There are perhaps three aspects of globalization that create a set of Hob-
sons choices for many NGOs: (a) Expectations about NGOs on the part of
governments and multilateral agencies have risen and are increasingly uni-
versally shared. The very relationshipbetween NGOs andgovernment has it-
self become blurred and a darker, negatively productive, side of the
relationshiphas emergedas worrisome. (b) The roles of many advancedecon-
omy NGOs, especially American, vis--vis developing country NGOs and
other governments, are increasingly blurred; for example, once grant recipi-
ents, they nowalso provide grants. (c) Finally, the political economy, andpar-
ticularly the funding marketplace inwhichNGOs live, has become less secure
andthus more openlycompetitive. As a partial result of this, the values base of
NGO culture has changed and become blurred. Indeed, it is argued here that
the most important blurring nowoccurring among NGOs is that between the
culture of the for-profit and the nonprofit world. Each of these three aspects
will be dealt with in turn.
EXPECTATIONS
NGOs relatively new legitimacy and reputation (roughly in the past 20
years) has been basedon a contrast with both the private andthe public sector
in terms of the will, talent, and capacity to accomplish social good. Countless
papers emphasize the assumed comparative advantages of NGOs: They are
innovative, nimble, and flexible; adjust quickly to change and to local differ-
ences; and operate close to those they wish to benefit (because they are able to
listenandinterestedinlistening). Their services (whentheyprovide them) are
lower in cost and more cost-effective, their staffs and leaders are highly moti-
vatedandaltruistic, andtheir independence of commercial andgovernmental
interests puts themin position to put pressure for change on those interests.
4
Because of these presumed (and largely unquestioned) traits, expectations
about NGOs have grown significantly in the past 20 years, especially on the
109
part of government and in direct proportion to the spread of thought and dis-
cussion about a smaller, more sustainable role of the state.
But ironically, as the expectations of the state have pulled closer in to real-
ism, expectations of NGOs have pushed in the opposite direction, often
beyond the real capacity of NGOs to meet these expectations effectively.
Whereas many NGOs write highly ambitious mission statements, quite a few
worry privately that they promise more than they can deliver. Many NGOs
are on one hand proud to be recognizedto have arrivedbut at the same
time are confused about their identity and function. The pressures to meet
new expectations are a growing burden, especially for the most prominent of
the international NGOs, and especially among the majoritythose who exist
to alleviate poverty.
The ambivalence and internal tension within these NGOs about what they
can/should take on, and how they can/should pay for it, is also matched by
continued, thoughoftenbelowthe surface, ambivalence onthe part of govern-
ment. For in fact many in government(s) continue to harbor private doubts
about NGOs.
A brief historical overview is necessary to understand why.
International NGOs are relativelynewactors incivil society. It is reallyonly
after World War II that we see a gradual, and then rapid, rise in the founding
of advancedeconomy NGOs devotedto social action in other countries, moti-
vatedperhaps in equal parts by a secular ethic of progress; a belief in ensuring
that in an interdependent world not just the rich move forward; and a feeling
(emanating from Judeo-Christian ethics) of paying something back for our
good fortune or, more simply, that helping others is the right thing to do.
American NGOs in the first postwar decades very much had a sense of a call-
ing. Their operations were alsocharacterizedbya degree of amateurism. They
raised much of their money privately from small contributors, and were gen-
erally content to believe (rather than prove) that what they did really helped
others. As such, it is important torecall that manyof the large AmericanNGOs
began at the periphery of the foreign aid establishment and remained gener-
ally unsung, unquestioned, and free to do good works as they saw fit. Their
ambitions were, compared to today, relatively modest. Many did not explic-
itly seek to create development initially, so much as simply to alleviate
distress.
Most NGOs were not taken very seriously by most government agencies
and all but totally ignored by multilateral agencies like the World Bank and
the United Nations agencies. At worst they were seen as bumbling do-
gooders motivated by heart more than mind. At bestwhen they were taken
seriouslythey still could not entirely avoid a reputation as utopian, antago-
nistic to government, and potentially obstructionist. In the 1960s and later,
when the human rights and environmental NGOs began to be founded, the
same negative viewnot onlypersistedbut was stronglyreinforced. NGOs and
government did not feel particularly comfortable with each other.
44 Dichter
110
These mutual discomforts take on different weight, depending on which
country one looks at. For example, generally today in developing countries
the newer the local NGO phenomenon is, the more wary government is of
them.
5
Also generally speaking, the character of the governing regime will
influence the extent to which NGOs can act freely.
The changing history of international development, along with changes in
the role and expectations of the state, reveal the rise in importance of NGOs
and their movement from the periphery of the establishment to the center.
In the 1950s and early 1960s, world development was seen both econo-
centrically and Euro-centrically. Capital investment in infrastructure (e.g.,
roads, ports, dams, electrical power) and industrial capacity was assumed to
be the force that wouldbringall other benefits (social andpolitical) inits wake.
In the later 1960s, 1970s, and early 1980s some degree of complexity was
rediscovered. Concerns about povertyandinequality, injustice andrights, the
degradation of the environment, and the need to conserve resources became
part of the development agenda, concerns which were propelled onto the
establishment agenda in part by NGOs. Impatience with trickle-down effects
grew, a sense that the poor cannot wait. Growthwas not goodenoughit had
to be growth with equity. Trickle down was seen as a patronizing view of
humandevelopment. There was the beginningof a major focus onbasic needs
and community level development, and a rediscovery of agriculture as a
source of livelihood. NGOs were particularlyactive inpromotingthe idea that
growth that did not benefit the poor was exploitative.
In the later 1980s and 1990s, a series of reality checks occurred, exacerbated
by the mid 1980s famines in Africa, the debt crisis in many developing coun-
tries, growing evidence of corruption and cronyism in developing country
governments, and the financial crisis in Asia. There was growing awareness,
especially in Africa, that decades of development assistance, much of it
embodying the new emphases of the 1970s and 1980s, had had little lasting
effect. There was much more awareness of the dangers of dependency crea-
tion through giving things away, expressed in the axiom teach a man to fish
insteadof giving hima fish. Recognitiongrewof the limits of centrally (state)
managed social and developmental engineering. There was more open dis-
cussion of corruption and of the policy environment in which development
interventions take place. There was budding recognition that development
without people having a stake in its outcomes is not sustainable. The very
notions of sustainability, self-sufficiency, and participation become wide-
spread. Again, NGOs were active in moving forward the dialogue on these
issues. And not surprisingly, given the nature of the issues, NGOs arose
throughout this period as perhaps the one universal hope for solving both the
problems of development generally and of inequitable development specifi-
cally. NGOs came to be seen, by donors and governments, not only as service
providers inlieuof government, but as the primarymechanismfor harnessing
social and human capital for social good.
6
111
NGOs couldplaythese newroles, for the first time definedas complements
to governments roles, because of those natural advantages cited earlier: (a)
their commitment, (b) their experience at the grassroots, (c) their organiza-
tional form (being unencumbered by heavy bureaucracy made direct action
much more plausible), and (d) their relatively low cost.
In developing countries, particularly those with nondemocratic regimes,
there developed two sides to governments view of NGO capacity to play a
role in development. The first viewwas positivethe NGOas agent, capable
of identifying local target groups for what (little) government programs may
have to offer, acting as intermediaries between communities and formal insti-
tutions. The second view was negativethe NGO as an incipient threat to
government, capable of, indeed often set out to do, consciousness raising and
quite good at creating participation at grassroots levels. To a fragile govern-
ment, they thus represent countervailing power.
In Latin America and Southeast Asia, NGOs have been involved in agrar-
ian reform, often opposing government or other establishment interests.
NGOs have prevented governments from razing slums, often able to get ser-
vices like electricity and water into illegal slums. In times of civil unrest and
war, NGOs are often the only organizations that all sides are willing to allow
unencumbered passage (Bosnia, Zaire, Somalia).
But the NGO record of aggregate achievement remains in doubt, in part
because so much of what they do cannot be measured and also because it is
still a relatively short spanof time during whichNGOs have beenat the center
of the world of development. Yet expectations about NGOs have reached the
point where some of their more tireless champions are indanger of placingthe
NGOpromise beyondits ownreach. These hopes vary fromseeing NGOs as a
major force ina newglobal order (Korten, 1990); as the genetic material for the
eventual democratization of the former soviet bloc countries; and much more
prosaically, but equally grand, as the likely future practitioners of virtually all
social action programs and permanent mediating structures enabling those
with little or no power to participate in the larger society (Hyden, 1983).
On the other hand, there are those who are pro NGO but less inclined to
cheerlead. They worry about NGOs losing their heart as they grow, worry
about them becoming an industry, and fear the professionalization of NGOs.
Some exhort NGOs to resist fad and fashion, and form coalitions instead of
competing with each other. In this way, they will be a more serious force for
good(Smillie, 1990). Still others wishNGOs were indeedbig enoughto fill the
new boots being cobbled for them, noting that for all their good work at the
local level, NGOs are really small-potato operators. Sheldon Annis, for exam-
ple, has pointedout that small scale andlocal can also mean insignificant, and
innovative can also mean temporary and unsustainable (Annis, 1987).
So, the first significant blurring in this new world is a blurring of clarity
between government and NGOs, and sometimes among NGOs, about who
should do what. As NGOs began to try to be partners with government, and
government began to take seriously their capacities, neither actor could
46 Dichter
112
remain what it was. At the same time, behind this blurring, underlying dis-
trusts andremnants of the differences inthe two cultures (NGOs andgovern-
ments) persist, adding tension to the shifttension that is not always
constructive.
Recalling the days when staying as far away from government was the
watchword for many NGOswhen the non in nongovernmental was decid-
edly operativethe trend of NGOs to become more like the world they used
not to be part of represents another aspect of blurring of borders. We are now
seeingtitles inthe literature like NGO-Government Relations: ASource of Life or a
Kiss of Death? (Tandon, 1991) and NGOs, States and Donors: Too Close for Com-
fort? (Hulme & Edwards, 1997).
As the expectations about NGOs rise andare translatedinto a funding rela-
tionship between government and many NGOs, a feedback loop phenome-
non seems to be occurring. Ironically, today those in both advanced economy
and developing country governments who remained ambivalent about
NGOs are being reinforced in their concerns. The successful few NGOs have
pumped up expectations of the many, in turn opening the way for newNGOs
to be formed. A large number of these have entered the picture for less than
honest reasons and the NGO field is now strewn with somewhat suspicious
newcomers. And so ambivalence has returned, symbolized again by new
acronyms in the lexicon: GONGOS, government organized NGOs; GRIN-
GOs, government run, inspired, or initiatedNGOs; QUANGOS, quasi-NGOs;
BONGOS, business organized NGOs organized as tax dodges or to create a
benevolent image for a company(Constantino-David, 1992); BRINGOS, brief-
case NGOs, which exist on paper only; BENGOS, bent or crooked NGOs; and
COMENGOS, NGOs whichdisappear andthenresurface elsewhere or later.
As for some of the more venerable and often larger NGOs, those from
whom much was expected and that often have delivered on those promises,
they are becoming more cautious, more bureaucratized, and less nimble and
bold, mirroring the very traits of the governments they disdained. They find
themselves, ironically, like floundering multiproduct multinational corpora-
tions, hiring consultants to help them find themselves again, to remind them
what business they are in, and to find acceptable ways to downsize and
become leaner.
7
Inthose countries where the NGOphenomenonhas truly explodedoften
the poorest countries and those most donor dependentit is not surprising
that much donor money (official development assistance from advanced
economy countries) has gone to NGOs and these have become large equiva-
lents of the largest U.S. and European NGOs. In South Asia alone, there are a
number of NGOs that have become larger than most advanced economy
NGOs. In Bangladesh, for example, there is the Bangladesh Rural Advance-
ment Committee (BRAC), Proshika and Grameen Bank; in India, the Self-
Employed Womens Association (SEWA) and Myrada; in Pakistan, the Aga
Khan Rural Support Programme (AKRSP) andthe Orangi Pilot Project (OPP);
and in Sri Lanka, Sarvodaya. The field keeps evolving, and as expectations
113
have led to bringing NGOs closer into relationship with government, the idea
of complementarity has gone further than anyone could originally have
expected. In Bangladesh, one national NGO, BRAC, has taken on the job of
running 30,000 primary schools on behalf of government, which has tacitly
said is not up to the task. It is thus not just a complement to government, but a
parallel structure. Whether this state of affairs will give way to destructive
competition remains to be seen.
Finally, there is some danger that the positive and dynamic tension which
has only recently begun to characterize NGO government relations (where
NGOs have been able to get government structures to be more sensitive to
issues of concern) could revert to a less positive state (Hanley, 1989).
THE BLURRING OF NORTH-SOUTH
NGO RELATIONSHIPS
THE REPLICATION MYTH
A blurring has also occurred in the relationship between northern
(advanced economy) and southern (developing country) NGOs. It is perhaps
the NGOs desire to have wider impact (scaling-up)noted above in Anniss
(1987) remarksthat has instigated that blurring.
Should NGOs be content to operate their own projectsstick to their knit-
ting as it werework locally, and be content with a modest but nonetheless
lasting contribution to change in local communities? Or should they work to
bring their experience to bear on the governments service delivery or policy
making in the hopes that there will be replication of their work andreal multi-
plier effects, a move ina sense to economies of scale inthe productionof social
change? The assumptions have been that if governments interacted and part-
nered more with NGOs that NGOs successful approaches could be adopted
by governments andthat official programs will become better attunedto pub-
lic needs (Clark, 1991).
Similar assumptions have propelled a deliberate movement of interna-
tional NGOs to partner with local indigenous ones. There too the hope has
been that this will enable replication and thus scaling-up.
American NGOs began to feel more frustrated about their limited reach
when government began taking themmore seriously. Especially with the end
of the cold war, the 1990s significantly widened the worlds sense of demo-
cratic spaceand because of that, American NGOs see the developing coun-
tries as filled with potential partners with which to replicate projects.
Behind many of these assumptions and hopes is a mechanistic notion of
change as science. It seems that in the push to scale-up through replication,
international NGOs are bleaching out the messiness of what they knowabout
social change, the artfulness of it, the peculiarity of each program in its own
time and place. For in fact there have been relatively few replications of
48 Dichter
114
successful models, because inevitably they have not been able to account for
all the variables that go into success, some of whichreside inthe mix of people
who run the local NGO and/or who are the hoped for beneficiaries of the
NGOs work.
If one of the norths motivations for north-south partnership lies in a self-
serving andmisguidedassumption about scaling-up, the souths motivations
for such partnerships are also sometimes self-serving. Developing country
(southern) NGOs for the most part live in nonphilanthropic space. To the
extent theythemselves want or needtoexpandonthe basis of serious funding,
they must go beyond their own borders to find it. That means connecting up
with the norths international NGOs. Fund seekers themselves, the advanced
economy NGOs are also increasingly fund grantors.
Southern NGOs face difficult trade-offs when seeking funds. With a few
exceptions, developing country NGOs want a national identity and con-
sciously reject the idea that they are international. They are nationalistic in the
best sensetheyfocus onenormous problems intheir owntroubledcountries
and see these clearly as their only priorities. But at the same time, they are
nationalistic in the dont tread on me sense. Their door may be open, but
there is an implicit keep out sign posted on it. They want credit for their own
work; they do not want to carry the water for the international NGOs, for
whomtheyhave oftenbeensubcontractors or grantees, but want torundevel-
opment projects and programs themselves. The globalization of concepts like
environmental protection or womens rights notwithstanding, there is fierce
debate about what these concepts mean, or more accurately, must mean
locally. Behind the global NGO fraternity, then, there is competition and
rivalry over money, turf, and influence.
Both the trend toward north-south partnership and the grantor-grantee
relationshiparise out of necessity ina sense. Nonprofit organizations, like for-
profit organizations, want to survive. That is built into the fact that although
they have different raisons dtre, they both have corporate egos. At the least,
they both have personnel and they are the first stakeholders. Thus, as NGOs
have movedtowardprofessionalization, jobs, careers, status, anda whole mix
of difficult to define personal stakes are now in play and give weight to the
survival instinct.
8
We do not have statistics on the number of employees in the
NGO subset. It is a reasonable guess, however, that more and more of those
whoworkinNGOs are paidemployees andnot volunteers, andthe number of
jobs at stake is significant. Finally, as the developing country NGOmovement
has expanded, in those developing countries where the number of educated
school graduates exceeds the number of job opportunities (most of them),
NGOs have become a coveted source of employment.
Finally, it has to be said that the blurring of borders between northern and
southern NGOs has a lot to do with a sometimes tension-filled shift in territo-
rial dominance. Northern NGOs, who used to have the field of action in the
developing countries to themselves and often lamented that they were not
working themselves out of a job, began in the 1980s to feel considerable
115
ambivalence as southern NGOs came into being. The survival imperative has
prevailed. Little thought was given to going out of business when direct field
action became superfluous (and moreover a source of conflict with southern
counterparts) for many international NGOs.
9
Instead, these NGOs have
sought new roles, and whether intended or not, funding has become one of
them. Because many northern NGOs have gradually shifted their support
source from small individual donors to larger grants from foundations and
government, they know what subtle power the grantor holds over grantee.
Many grants to southernNGOs are passedthroughthe northernonesa role,
by the way, which southern NGOs often asked their northern counterparts to
play. Inother words, there has beena somewhat hiddenif youcant beat em,
joinem aspect to the shift inthe relationshipandthe process is still going on.
But there are positive aspects to this, one of which is the globalization of
boards of directors, staffs, andevenmultiple sources of funding. Not just large
northern NGOs like CARE, but medium-size ones like Opportunity Interna-
tional or small ones like Katalysis North-SouthDevelopment Partnerships are
beginning to resemble networks or even extended families.
THE BLURRING OF THE POLITICAL
ECONOMY IN WHICH NGOS EXIST
THE TAKING ON OF FOR-PROFIT, COMMERCIAL VALUES
Perhaps the most important (and the most subtle) blurring taking place is
that between the cultures of the NGOs and the for-profit sector. There are
factual/economic reasons for this, as well as ideological ones. Some of the
forces at work are outlined here.
SOURCES OF MONEY
The most dramatic change on the official development assistance front in
the last 50 years has occurred in just the last 5 years or so: the shift in domi-
nance from official to private capital flows. This has occurred between 1989
and now, with the trend truly identifiable from 1992 on.
For example, in the period1983-1988, net private capital flows to the devel-
oping countries amountedto $15.1 billion, whereas net official flows were $29
billion. The ratio was 1.92 official:private. In the period1989 to 1995, the situa-
tionturnedonits head. Inthis period, net private capital flows were $107.6 bil-
lion with net official flows $21.4 billion for a ratio in favor of private flows of
5.02. In 1996 the trend moved geometrically: Net private capital flows were
$200.7 billionwithnet official flows a $3.8 billion, for a resultingratio infavor
of private flows of 205. Although these data are heavily skewed by the domi-
nance of Asia as the major recipient of private capital flows, the situation in
Africa shows that this is a dominant trend everywhere. In Africa, for the
50 Dichter
116
period 1983-1988 net private capital flows were $3.5 billion with net official
flows $5.0 billion. But there too during the 1989-1995 period the tide turned,
with net private capital flows totaling $7.2 billion whereas net official flows
were $6.0 billion (International Monetary Fund [IMF], 1997).
In other words, foreign direct investment by private capital has become the
main fuel for development funding in the developing world, far surpassing
official development flows (largely concessional loans and grants) and bank
loans. Readlarge, it is capitalismthe for-profit sectorthat is driving devel-
opment in an area where heretofore the public and the nonprofit sector
(NGOs), relatively recently allied with governments, had been in the drivers
seat.
Finally, we see a strong tendency of advanced economy governments to
pull back on their bilateral support of developing countries. Net disburse-
ments of official development assistance (ODA) by the OECD countries to all
lesser developed countries (LDCs) (OECDs term for developing countries,
which do not include the former east bloc countries), peakedat $43.3 billion in
1991. In 1992 they were $43.1 billion; in 1993, $39.3 billion; and there was a
small move up in 1994 to $42.18; but clearly for the first time in history, bilat-
eral development assistance is heading downward in terms of real dollars
(OECD, 1996). If we look at all sources (including the multilaterals) we see a
stronger pattern yet again peaking in 1991 at $61.8 billion (excluding the
former east bloc), hitting a low in 1993 of $56.8 billion and bouncing back
slightly in 1994 to $60.9 billion, still a drop from its high (OECD, 1996). The
trend continues downward, however, with 1996 down to $55.8 billion, a drop
of over 6% from 1995 (International Council of Voluntary Agencies [ICVA],
1998).
Fromthe 1970s on, official money was a major funding source for northern
NGOs as well as for large southern ones. In the early 1970s a very small per-
centage (as little as 1.5%) of NGOs support came from official donors,
whereas by the mid-1990s this source had grown to provide 30% of NGOs
total income (Hulme & Edwards, 1996). But the present proportion seems to
have stablilized.
For example, as of July 31, 1988 there were 205 U.S. NGOs registered with
USAID as potential recipients of U.S. government funding, and 31% of the
support for these organizations came from the government (USAID, 1988).
The USAID report for 1997, 9 years later (as noted in the introduction to the
chapter), lists 417 NGOs and their percentage of government support is 33%
(USAID, 1997).
Looking at NGOs in the development field as a global group, in 1989, for
example, for everydollar NGOs hadtospendondevelopment assistance, $.35
came fromgovernments. Andprivate philanthropic sources (nongovernmen-
tal), the traditional mainstay for many large U.S. NGOs (e.g., CARE, Plan
International, Catholic Relief Services, World Vision, Save the Children,
ChristianChildrens Fund) as well as for manysmaller NGOs inthe $1 million
to $10 million annual budget category, are not keeping up with past trends.
117
The mass public may continue to send $10 to $100 contributions to such
organizations, but by and large there is donor fatigue in most northern coun-
tries whenit comes to NGOs. It is also important to note that donor fatigue ina
realm that has never attracted truly mass public philanthropy is ominous. In
the United States, for example, less than 5%of individual giving goes to inter-
national work or to foreign organizations. Andeven within this narrowband,
donor fatigue is tiedtothe average givers sense that his or her full dollar is not
directly reaching the poor child in Africa or being effectively used to save the
rain forest in Brazil. The average giver may harbor inchoate doubts about the
overall value of her charity.
It is in this global financial context that the changes taking place among
NGOs must be viewed. Quite simply, the funding pie is shrinking just as the
growth of NGOs around the world continues to expand. For the developing
country NGOs this has dire implications. They cannot yet count on corporate
or foundation contributions locally, and certainly not on individual contribu-
tions (though in large diversified countries like India, this is changing as the
middle class grows). They must depend on some flow-through from interna-
tionally oriented foundations like Ford and others and from bilaterals and
large international NGOs, who are themselves squeezed.
There is a chickenandeggphenomenonhere as well. Whereas manydevel-
opingcountryNGOs came into beingto address genuine needs andwere thus
demand driven, the fact is that many also came into being because they were
aware that foundations, northern NGOs, and bilateral funders were looking
for local partners. As for the advancedeconomyNGOs, their expectations were
changed also by the rise in governments expectations of them. As their ambi-
tions followed, so did their funding strategies. Expansion and growth (fueled
by the new public source of funds) began to become an imperative similar to
that inthe for-profit corporate sector (growor die). Yet some 20 years later, the
larger political economy of development is undergoing a sea change that is
bound to cause serious problems for NGOs. One thing is clearcompetition
for funding has risen. One could argue, as is done in the corporate world, that
competition breeds more effective organizations. But in the development
world, where there is no clearly measurable product, the need for funding
(whichis not the same as moneythat comes fromsales of products) canleadan
NGO inadvertently to let image dominate substance and fundraising domi-
nate program.
THE COMMERCIAL ZEITGEIST
Indeed, many NGOs, largely because of competitive pressures around
money, have taken on aspects of the current commercial zeitgeist, beginning
to act as if they were corporations engaged in the world of commerce. Man-
agement andcorporate financial strategies have beentranslatedor adoptedin
whole cloth fashion by NGOs.
52 Dichter
118
TRANSFER FUNDRAISING
Smillie (1996), for example, talks about growing similarities between trans-
national NGOs (CARE, SCF, Plan, Oxfam, World Vision, etc.) and transna-
tional corporations. He notices an adaptation into the NGOworld of the phe-
nomenon of transfer pricing (in other words, taking advantage of being
global), and talks about transfer programming and transfer emergencies,
whereby an NGO demonstrates to donors that it is on the ground in many
places and so well positioned to be on the ground elsewhere if needed.
Not surprisingly, there are also transfer fund-raisingtransnational agen-
cies can take advantage of better matching grant formulae by opening offices
where the ratios are good, investing in fund-raising at a lower cost, and
requesting a match to the funds raised from a donor. An example is PLAN
International, which in 1991 raised $28 million in the United States but $58
million in the Netherlands. World Vision raised less than $1 per head in the
United States in 1991, but $1.50 in Australia and $1.78 in Canada (Smillie,
1996). Thus, new markets are aggressively tackled. This author has observed
the same tendency among at least two international NGOs which have come
up against donor saturation in their home countries. A marketing executive
for one of themexplainedthat by going to more naive countries (e.g., insouth-
ern Europe), the costs of recruiting new donors would be lowered and the
prospects of continuing to mine these for the foreseeable future that much
greater.
THE RHETORIC OF COMMERCE
Many NGOs have spent money and time on retreats where they have
examined their souls as well as their operational culture, with the tacit goal of
becoming more competitive. They have become conscious of their beneficiar-
ies as customers, andtheir funders as customers too. Another cultural transfer
from the commercial sector has been the emphasis on sticking to ones knit-
ting, focusing on a particular sector or specialty. Though some organizations
still do maintain a multisector, multiportfolio approach, they try to operate
these as independent units similar to the profit center concept in private cor-
porations. Competitionfor funding is one of the mainsources of the pressures
producing these changes. And it brings in its train the same kinds of newval-
ues that competition in the for-profit sector brings: (a) efficiency (among
NGOs this means professionalization), (b) customer satisfaction (among
NGOs this means accountability andbetter stewardship of public andprivate
funds), and (c) product differentiation (among NGOs this means specializa-
tion). But although the rhetoric of the reinvented corporation is taken on, the
issue of actual performance remains the dilemma for NGOs it always was. In
the end poverty alleviation is not a product, and this fact remains the funda-
mental flaw in these seemingly benign cultural transfers.
119
A highly cynical view is expressed by Sogge (1996):
Many assume they [the private agencies] are making good these claims (to alleviate pov-
ertyetc.). Funds have beenkept flowingonthat promise. Noagencyseems toquit the field,
andmore agencies professingsuchpurposes enter it everyyear. Yet this mayreflect not the
strength of performance, but one of gravest weaknesses; funding is only poorly linked
with actual outcomesif it is linked at all. Agencies are regarded chiefly for spending and
beingactive; theyare almost never punishedwhenthat spendingandthose activities come
to nothing, or entail unwelcome side-effects. . . . One reason is that agencies can just keep
moving. Staff can often escape into the future through a succession of short-gestation,
photogenic projects and partners. Sustainability becomes somebody elses problem. It is
easy to disclaim responsibilities of paternity of their projects, left in the care of local peo-
ple. . . . Moreover, aidfashions change, newstaff arrive, a newcrisis spot grips worldatten-
tion, and it is time to assemble a newportfolioappropriate technology is out, small scale
credit is in; public administrationis out, natural resource management is in; Somalia is out,
Rwanda is in, and so on. This continuity of discontinuity afflicts not only private aid
agencies of course, but it seems especially marked among them. (p. 16)
Brown and Kortens (1989) analysis of sector differences between the com-
mercial, the government, and the voluntary sectors offers useful insight into
the kind of cultural shift that is occurring among many NGOs engaged in de-
velopment (see Table 1).
In almost every respect, the defining characteristics of NGOs have drifted
toward the left-hand side of the chart: the commercial sector. To survive,
todays NGOhas beenforcedtobe more corporation-like andless church-like.
Its primary concern, though rhetorically still to actualize social visions, is also
to cater to a marketplace (of ideas, funders, backers, supporters). Therefore,
internally the idea of product and service and customer satisfaction has taken
hold. The Implicit Organization, to use Brown and Kortens (1989) term, of
todays NGOs is clearly more market thanclan/consensus, andsharedvalues
as the primary coordination mechanism have less clout now than negotiated
exchange. Most important, the role of moral obligationandprofessional ethics
as enforcement mechanisms has eroded. This is in keeping with the kinds of
people who now staff many NGOs. To the extent they come from the same
pool of youngprofessionals for whompersonal (career) motivations are a key,
there is a sense of reciprocity inherent in their taking a job with an NGO. For
more and more employees of NGOs (and this is the case in developing coun-
tries as well), an NGO job is a step in a career, often leading to the private or
public sector.
In the advanced economies, as we reach the stage where more and more
people are knowledge workers, one could argue that as the number of edu-
cated people grows, more jobs beyond the primary, secondary, and tertiary
kinds of occupations need to be created, new kinds of jobs that did not exist
before. Some of these are boundto be createdinthe thirdsector. Andthe stake
in protecting, preserving, and professionalizing these newjobs and functions
increases. Thus, one of the things that has largely gone out of the NGO world
is the voluntary character of staff. U.S.-based NGOs (and some prominent
54 Dichter
120
developing country ones) nowseek to hire MBAs and others with postgradu-
ate professional degrees, especially in management. A further irony ensues:
Those few(usually older) organizations that are still staffed by retired profes-
sionals who contribute their time to the cause are the organizations that are
increasingly out of the looporganizations that are seen by the new profes-
sionals as irrelevant and ineffective and indeed nondevelopmental. It is tell-
ing that such voluntary staff are seen in the end as mere do-gooders, a term
that has become one of denigration among those whose business it is to do
good.
CONCLUSION
As a consequence of the subtle cultural shift to private sector commercial
values, large numbers of NGOs nowexist inwhat one might call a global mar-
ketplace of altruism. Altruism is not only now an industry, in a sense it has
itself become commoditizedjust as other cultural andsocial phenomena have
(perhaps aninevitable effect of late capitalism). Andthe altruismmarketplace
is increasingly crowded. Competition among NGOs for attention, voice,
prominence, roles, even grassroots venues for their work (without stepping
on each others toes in the field), as well as government contracts, has become
intense. More andmore, NGOs take the pulse of their organizational healthby
checking with their fund-raisers first. The key question for many has become
not Are we doing a good job? but Are we continuing to grow our donor
base? Money has become a driving force, whereas once it was merely
assumed as a fairly readily available means to an end.
In the messy day-to-day real world, NGOs relatively new influence and
credibility may backfire. First, because of the legitimacy given to them(based
on an untested view of their effectiveness in solving societal problems), the
NGO world in many developing countries increasingly attracts a number of
free riders attracted to the prospect of getting donor funds. Interestingly, the
Table 1
Commercial Government Voluntary
Primary concern Produce goods and Preserve social order Actualize social visions
services
Implicit Markets Hierarchies Clan/consensus
organization
Coordination Negotiated Authority and coercion Shared values
mechanisms exchange
Enforcement Contracts and Supervision and rules Moral obligation and
mechanisms reciprocity professional ethics
Prototype Corporation Army Church
Source: Brown and Korten (1989).
121
free rider problem is occurring now in the developing world, the very place
where we inthe northwere hopingNGOs wouldrepresent the best of the new
civil society values.
Arecent andprominent article inIndia notes the risingtendencyof racket-
eers masquerading as voluntary organizations to siphonoff funds. It notes
the existence of ablacklist of corrupt NGOs totalingover 3,500 organizations.
The real problemis that no one, not even in Parliament, knows howmany NGOs there are,
howmuch funding they get, howmany are genuine and howmany bogus. . . . The reason
for the growing number of cases of fraud is the sheer amount of money thats available.
(India Today, 1997, p. 58)
And when local NGOs receive foreign funding, it comes with the aura of
luxury. The dynamic that ensues canbe complex. It is not uncommonindevel-
oping countries to see local government officials cadge rides in NGO jeeps
(funded by foreign governments or foundations) to see the very projects that
their own government agencies are involved with. At the same time, their in-
cipient jealousy is compounded: Not only are they envious that NGOworkers
have jeeps or motorcycles and reasonable per diems for stays away from
home, but they begin to see their own ineffectiveness negatively mirrored in
the NGOworker whose enthusiasmfor his work is in stark contrast to the de-
moralization of the long-time government civil servant. Thus, some govern-
ment officials will denigrate the accomplishments of local NGOs, and finally
intimidate and harass them (Tandon, 1987).
A further potential for backfire exists in the fact that internationally, the
official development assistance funding pie is shrinking. One result is that
funds fromsome donors are shiftingtoneedier regions and/or sectors andare
often earmarked for NGOs. Thus, there are new incentives for NGOs to enter
(and crowd) similar marketplaces.
10
When this occurs, because the measures
of success for NGOs are different than those in the commercial world, there is
no easy basis for the market to sort out goodfrombad. Finally, to continue the
syndrome, the new competitive demands in a crowded marketplace increase
the tendency to declare success before it is or really can be demonstrated.
Thus, manygenuine NGOs whohave workedinnovatively, andas a result are
on the road to success in promoting social good, risk becoming convinced
themselves by image messages meant for outsiders. Hype works in selling
widgets. In the long run it cannot work in selling social good.
Globalization is a two-edged sword. The positive promise of NGOglobali-
zation is far outweighedby the dangers of the commoditization of their work.
Moreover, the power of the for-profit private sector is beginning to have its
effects both on what NGOs can do and on the market of funds for NGOs. The
right niche for NGOs may well turn out to be what it was more or less at the
time when they were first recognized for their special skills. Their capacity to
do good by working for change quietly, locally, and modestly may well be
their last best hope.
56 Dichter
122
Notes
1. Led by the International Monetary Funds (IMFs) recent classification, the use of the three
terms developing countries (of which the IMF lists 127), countries in transition (28 former communist
countries), and advanced economies (also numbering 28) is replacing the widespread use of the
terms First and Third World.
2. This is not to say that advanced economy NGOs have not expanded. InterAction (1987), a
U.S. association of NGOs in the development assistance field, has shown a 47%increase in mem-
bership in the last 10 years, from 106 member NGOs in 1987 to 156 at the end of 1997.
3. One prominent NGO states that its mission is to work with poor . . . people to eradicate
poverty by overcoming the injustice and inequity that cause it. Many international NGOs have
similar mission statements.
4. See, for example, Fowler and Biekart (1996).
5. Insome countries (e.g., India, Kenya), anofficial visitor fromoutside is free tomake contact
with an NGO directly. In others (e.g., Morocco) it is considered improper for such an official to
talk to an NGO without first talking to and informing the government.
6. There are a number of different cuts at the phasing of the development industry since the
1950s, each with slightly different emphases. For example, see Griffin (1988) and Arndt (1987).
The above interpretation is the authors own.
7. The author has had personal experience with two prominent international NGOs, both
with annual budgets over $75 million and thousands of employees, which have undergone such
exercises.
8. The author has worked with NGOs of all types over the last 30 years. These contentions
come from personal experience.
9. The March 1987 London symposium on Development Alternatives: The Challenge for
NGOs, which brought together 120 participants from 42 countries, was perhaps the first public
emergence of the underlying tension between northern and southern NGOs.
10. For example, since the microcredit summit conference in Washington in early 1997, new
microcredit NGOs have begun to spring up (many without capacity to undertake such work),
sensing that official money will shift toward this sector. The World Bank, now decentralizing its
lending in India, for example, is planning major investments in NGOs and is already facing the
dilemma of discriminating between charlatans and real performers.
References
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129-134.
Arndt, H. W. (1987). Economic development: The history of an idea. Chicago: University of Chicago
Press.
Brown, D. L., & Covey, J. G. (1986). Organizational development in social change organizations: Some
implications for practice. Boston: Institute for Development Research.
Brown, D. L., & Korten, D. C. (1989, March 9). The role of voluntary organizations in development.
Concept paper prepared for the World Bank.
Clark, J. (1991). Democratizing development: The role of voluntaryorganizations. Hartford, CT: Kumar-
ian Press.
Conroy, C., & Litvinoff, M. (1988). The greening of aid. London: Earthscan.
Constantino-David, K. (1992). The Philippine experience in scaling-up. In M. Edwards &D. Hulme
(Eds.), Making a difference (pp. 137-138). London: Earthscan.
Fowler, A., &Biekart, K. (1996). Doprivateagencies reallymakeadifference? InD. Sogge, K. Biekart, &
J. Saxby (Eds.), Compassion and calculation: The business of private foreign aid (p. 132). London:
Pluto Press.
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Griffin, K. (1988, March 25-28). Thinking about development: The longer view. Paper presented at the
SID 19th World Conference, New Delhi, India.
Hanley, E. (1989). NGOs and government: Maintaining the dynamic tension. Unpublished manu-
script, University of Edinburgh, Department of Social Anthropology, Scotland.
Hulme, D., & Edwards, M. (1996). Beyond the magic bullet. West Hartford, CT: Kumarian.
Hulme, D., & Edwards, M. (1997). NGOs, states and donors: Too close for comfort? London:
Macmillan.
Hyden, G. (1983). No shortcuts to progress: African development management in perspective. Berkeley:
University of California Press.
India Today. (1997, November 17). p. 58.
InterAction. (1987). Member profiles. Washington, DC: Author.
International Council of Voluntary Agencies (ICVA). (1998). The reality of aid 1997-1998. Geneva,
Switzerland: Author.
International Monetary Fund (IMF). (1997, May). World economic outlook. Washington, DC:
Author.
Korten, D. C. (1990). Getting to the 21st century. Hartford, CT: Kumarian Press.
Organization for Economic Cooperation and Development (OECD). (1996). Geographical distribu-
tion of financial flows to AID recipients 1990-1994. Paris: Author.
Smillie, I. (1990). Government, the third sector and the third world. Unpublished manuscript.
Smillie, I. (1996). Interlude: The rise of the transnational agency. InD. Sogge, K. Biekart, &J. Saxby
(Eds.), Compassion and calculation: The business of private foreign aid. London: Pluto Press.
Sogge, D. (1996). Settings andchoices. InD. Sogge, K. Biekart, &J. Saxby(Eds.), Compassionand cal-
culation: The business of private foreign aid (p. 16). London: Pluto Press.
Tandon, R. (1987). The state and voluntary agencies in India. New Delhi: Society for Participatory
Research in Asia.
Tandon, R. (1991). NGO-government relations: Asource of life or a kiss of death? NewDelhi: Societyfor
Participatory Research in Asia.
United States Agency for International Development (USAID). (1988). Report of American volun-
tary agencies engaged in overseas relief and development registered with the Agency for International
Development 1986-1987. Washington, DC: Author, Bureau for Food for Peace and Voluntary
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tary agencies engaged in overseas relief and development registered with the Agency for International
Development 1997. Washington, DC: Author, Bureau for Food for Peace and Voluntary
Assistance.
Thomas W. Dichter is an independent consultant with 30 years of experience in international development.
He has managed and designed projects, directed a Peace Corps country program (Yemen), been vice presi-
dent of an NGO, a programofficer of a large international foundation, a researcher for a think tank (Hudson
Institute), and a consultant for many international agencies, including the UNDP, IFAD, USAID, and the
World Bank. From1994 to 1998 he was senior consultant to the World Banks Sustainable Banking with the
Poor project, an involvement that took him to NGO-run microfinance projects in Egypt, the Philippines,
Kenya, Malawi, Uganda, and India.
58 Dichter
124
6. The Environment

Overview
Environmental issues like global warming are intrinsically of global concern because the
environment has no borders and consequently the actions of nations impact on others.
Although the global impact of environmental problems like climate change are clear, the
nations of the world have been unable to organise a co-ordinated response. This week, we will
examine the Kyoto Protocol, which the United States (and initially Australia) rejected because
it does not apply the same restrictions to developing nations as it does to developed countries.
In addition, we will consider the new global security challenges posed by a changing climate.

Objectives
x Understand current debates about the environment and globalisation

Discussion points
1. Can nation states respond to environmental problems that cross state lines? What has
stopped nation states from acting effectively?
2. Which do you see as more important: economic growth or environmental sustainability?
How can developing countries balance these issues? Can international trade and
environmental protection ever be compatible?
3. How is climate change reshaping the world politically?
4. How should Australia contribute to combating climate change? What should be done?
What can realistically be done?
5. What are the connections between environmental sustainability and global security?

Readings
Schelling, Thomas, What makes greenhouse sense? Foreign Affairs (May-June 2002)

Vogler, John, Environmental issues, in John Baylis, Steve Smith and Patricia Owens (eds),
The globalization of world politics. Oxford: Oxford University Press, 2008, 350-368

Borgerson, Scott G., Arctic meltdown: The economic and security implications of global
warming, Foreign Affairs (March/April 2008)

125
Thomas C. Schelling, What makes greenhouse sense? Foreign
Affairs, May-June 2002

The Kyoto Protocol

The Kyoto Protocol should not be a partisan
issue. The percentage reduction of greenhouse-
gas emissions to which the United States
committed itself by signing the 1997 Protocol
to the 1992 UN Framework Convention on
Climate Change was probably unachievable
when the protocol was adopted. The protocol
then languished in Washington for the final
three years of the Clinton administration, which
chose not to present it to the Senate for
ratification. In accordance with a Senate
resolution calling for the full participation of
the main developing countries in the protocols
emissions-cutting requirements, that pause was
supposed to allow time for negotiation to bring
those countries on board. But nobody thought
any such negotiation could produce results, and
no negotiation was ever attempted. George W.
Bush, succeeding to the presidency three years
after the protocols signing, had some choices
and may not have made the best choice when
he rejected the plan outright last year. But the
one option he did not have was to submit the
protocol to the Senate for ratification.
The U.S. commitment to the protocol meant
cutting emissions significantly below their
1990 level by 2010 which required a 25 or 30
percent reduction in projected emissions levels.
Such a cut was almost certainly infeasible when
the Clinton administration signed the protocol
in 1997. Three years later, with no action
toward reducing emissions, no evidence of any
planning on how to reduce emissions, and no
attempt to inform the public or Congress about
what might be required to meet that
commitment, what might barely have been
possible to achieve over 15 years 1997 to
2012 had become unreasonable. The Senate
will not confirm a treaty unless it knows what
actions the commitment entails, and no
president could answer that question without a
years preparation. No such preparation appears
to have been done in the Clinton administration.
Bush, in stating that he would not submit the
treaty to the Senate, at least avoided hypocrisy.
In declining to support the Kyoto Protocol,
Bush outlined three concerns regarding any
future greenhouse-gas agreement. First, the
main developing countries need to adhere as
full participants, as the Senate had earlier
resolved; so far, developing countries have
made clear they have no intention of doing so.
Second, he cited the immense uncertainty about
the likely extent of climate change and its
impact on society. Third, he expressed a
preference for voluntarism over enforceable
regulation, even though he did not make clear
whether his voluntarism referred to domestic
or international commitments.
A FAIR DEAL?
There is no likelihood that China, India,
Indonesia, Brazil, or Nigeria will fully
participate in any greenhouse-gas regime for
the next few decades. They have done their best
to make that point clear, and it serves no
purpose to disbelieve them. Although their
spokespersons regularly allege that rich
countries are the most worried about climate
change, developing nations have the most to
lose from climate change. They are much more
dependent on agriculture and will therefore
suffer much more from global warming.
Constrained by poverty and technological
backwardness, their ability to adapt to climate
change is limited. The best way for developing
countries to mitigate global warming, therefore,
is through economic growth.
There are undoubtedly opportunities in those
countries for improved energy efficiencies that
may simultaneously cut carbon dioxide
emissions and improve public health; China,
for example, could easily reduce its dependence
on coal. But any major reductions in worldwide
carbon dioxide emissions over the next few
decades will have to be at the expense of the
rich countries. Calling for the immediate
participation of the big developing nations is
futile. Once the developed countries have
demonstrated that they can cooperate in
reducing greenhouse gases, they can undertake
arrangements to include developing countries
in a greenhouse-gas regime, aiding them with
economic incentives.
126
THE UNCERTAINTY PRINCIPLE
As Bush has emphasized, there are many
uncertainties in the greenhouse- gas debate. But
what is least uncertain is that climate change is
real and likely to be serious. In any case,
residual ambiguity about this question should
not delay essential research and development in
nonfossil energy sources, energy conservation,
and policies to exploit the most cost-effective
ways to reduce emissions.
A huge uncertainty that will make any lasting
regime impossible for many decades to come,
however, is how much carbon dioxide can
safely be emitted over the coming century. A
reading of the evidence including climate
sensitivity, regional climate changes, likely
severity of impact, and the effectiveness of
adaptation suggests that the highest ceiling
for carbon dioxide concentration, beyond
which damage would be unacceptable, is
probably between 600 and 1,200 parts per
million. (It is currently about 370 ppm.) Further
uncertainty exists about how much carbon
dioxide can be absorbed into various natural
sinks oceans and forests or sequestered
underground or deep in the ocean. Thus any
estimate of the level at which total carbon
dioxide emissions worldwide over the coming
hundred years should be capped is wide-
ranging, falling between 500 billion tons and 2
trillion tons. (Worldwide emissions are
currently approaching 7 billion tons, half of
which stays in the atmosphere.) In any event,
what is ultimately unacceptable depends on the
costs of moderating emissions, and these costs
are also uncertain.
As a result, any rationing scheme would
necessarily be subject to repeated revision and
renegotiation. It is noteworthy that the
Intergovernmental Panel on Climate Change
the international body, comprising more than a
thousand scientists from scores of countries,
that is the acknowledged (if controversial)
authority on the subject has never proposed
what concentration of greenhouse gases would
constitute unacceptable damage. Nor has any
other representative body yet dared to hazard
an estimate.
IN THE LONG RUN
The Kyoto Protocol had a short-term focus. It
assumed correctly that developed countries
could achieve significant reductions in
emissions fairly promptly. As the National
Academy of Sciences emphasized ten years ago,
there are a number of opportunities to reduce
emissions at little or no cost. They are mostly
one-time measures that are not indefinitely
exploitable. Had they been promptly attempted,
they might have made the Kyoto approach
feasible. Postponing these steps merely loses
time.
But the protocol was embedded in the 1992
Convention on Climate Change, which was
oriented toward the long term. So it has been
interpreted as heralding the beginning (for
developed countries) of a long-term decline in
carbon dioxide emissions. But any reasonable
trajectory of emissions in the future ought to
show a rise for some decades and a rapid
decline later in the century.
There are several reasons for such a trajectory.
First, the technologies needed to drastically
reduce fossil-fuel consumption through
alternative energy sources, greater energy
efficiency, and sequestration of carbon dioxide
or its removal from fuel are not developed.
Decades of investment are needed. The
necessary investments will not happen by
themselves; government action and support,
especially in arranging market incentives, will
be essential.
Second, it is economical to use durable
equipment until it is due for replacement; early
scrapping is wasteful. Much capital, such as
electric power plants, is very long-lived. Auto
fleets can turn over in 15 or 20 years, but most
industrial plants cannot. Furthermore, deferring
expenses saves interest on loans for capital
investment. Finally, the richer countries will
almost certainly have higher incomes in the
future and be better able to afford drastic
changes in energy use.
The economical trajectory for emissions over
the coming century will differ substantially
among the developed countries. Thus any
reasonable rationing scheme should
contemplate a timeline of at least a century, not
a few decades. But no possible consensus exists
on how much total emissions should be allowed
for the coming century. That confusion makes
any scheme of fixed quotas, including
emissions trading, out of the question.
In short, the Kyoto Protocols exclusive focus
on the short term neglected the crucial
importance of expanding worldwide research
and development of technologies to make
severe reductions feasible later in the century.
It also adopted a format incompatible with the
127
most economical trajectory of emissions over
time: a rise for some decades followed by a
sharp decline.
FREE TO CHOOSE?
The Bush administration has favored
voluntary measures over mandatory ones.
But it is not clear whether these terms referred
mainly to domestic or to international measures.
Domestically, a voluntary approach would
make the greenhouse question unique among
issues of environment and health, which fall
under government jurisdiction. The research of
the National Institutes of Health, for example,
is universally acknowledged to be essential;
leaving such research to the market or to
voluntary industrial altruism would not appeal
to anyone. The same approach should apply to
research on new low-carbon or non-carbon
energies or carbon sequestration. Major
replacement of fossil fuels or reductions in
energy demand, carbon dioxide containment
efforts, or investment in new technologies to
bring them about will not occur without serious
market incentives. Domestically, voluntarism
is an ineffectual approach that would put blame
only on firms that have no market support for
what they may be asked to do.

An international regime, in contrast, can be
only voluntary. Commitments will not be
enforceable. At best they may be honored,
because respectable governments prefer to keep
commitments. The U.S. government has a
strong aversion to any commitments it does not
think it will keep. And neither the United States
nor the other major developed countries will
likely accept serious sanctions for missing
emissions targets. There is talk of binding
commitments, as if commitment itself was
not binding, but there is no expectation of
penalties for shortfall.

HOT AIR

Emissions trading is popular, especially with
economists. Trading means that any nation that
underuses its emissions quota (commitment)
may transfer its unused quota (the excess of its
allowed emissions over actual emissions) to
any country that offers financial compensation.
The purchasing nation then uses its bought
allotment to increase its own emissions quota.
The idea is to permit emissions to be reduced
wherever their reduction is most economical.
Countries that have the greatest difficulty
(highest costs) in reducing emissions can
purchase relief from countries that are
comparatively most able to effect emissions
reductions.
When 2,000 economists, including some Nobel
laureates, circulated a recommendation a few
years ago that nations should adopt enforceable
quotas for carbon dioxide emissions and allow
the purchase and sale of unused quotas, the
concept was aesthetically pleasing but
politically unconvincing. Although emissions
should be reduced in those countries where
they can be cut most economically, the
economists proposed trading system was
perfectionist and impractical. The problem with
trading regimes is that initial quotas are
negotiated to reflect what each nation can
reasonably be expected to reduce. Any country
that is tempted to sell part of an emissions
quota will realize that the regime is continually
subject to renegotiation, so selling any excess
is tantamount to admitting it got a generous
allotment the last time around. It then sets itself
up for stiffer negotiation next time.
Still, the latest version of the Kyoto Protocol,
negotiated in November 2001, does
contemplate trading and even anticipates who
the sellers will be. It conceded carbon dioxide
emissions quotas to Russia and Ukraine
countries that, because of their depressed
economies, will keep their emissions relatively
low during the Kyoto time period. They will
have what is called hot air to sell to any
Kyoto participant willing to pay to remain
within its own commitment. This arrangement
may have been an essential inducement to get
Russia to ratify the Kyoto Protocol, and
countries that were not sure they would meet
their commitments on their own saw it as a
cheap safety valve.
It requires a sense of humor to appreciate this
latest modification of the Kyoto Protocol:
respectable governments being willing to pay
money, or make their domestic industries pay
money, to an ailing former enemy in the guise
of a sophisticated emissions-trading scheme.
The purpose is to bribe the recipient into
ratifying a treaty and providing governments a
cheap way to buy out of emissions
commitments, with the pretense that it serves to
reduce emissions in accordance with the
principle of comparative advantage.
PAST AS PROLOGUE
There is remarkable consensus among
economists that nations will not make sacrifices
128
in the interest of global objectives unless they
are bound by a regime that can impose
penalties if they do not comply. Despite this
consensus, however, there is no historical
example of any regime that could impose
effective penalties, at least with something of
the magnitude of global warming. But there are
historical precedents of regimes that lacked
coercive authority but were still able to divide
benefits and burdens of a magnitude perhaps
comparable to the demands of a global-
warming regime. (In this case, cutting
emissions is the burden; allowing emissions is
the benefit.) There are two interesting
precedents outside wartime. Both hold promise.
One is the division of Marshall Plan aid, which
began in 1948. The magnitude of the aid, as a
percentage of the national income of the
recipient countries, is not easy to determine
today, because most European currencies were
grossly overvalued after the war. But a
reasonable estimate places the aids value
anywhere from 5 percent to 20 percent of
national income, depending on the recipient
country.
For the first two years of the Marshall Plan, the
United States divided the money itself. For the
third year, it insisted that the recipient countries
divide the aid among themselves. Government
representatives therefore went through a
process of reciprocal multilateral scrutiny.
Each government prepared extensive
documentation of all aspects of its economy: its
projected private and public investments,
consumption, imports, exports, what it was
doing about railroads and livestock herds, how
it was rationing gasoline or butter, and how its
living standard compared to prewar conditions.
Each government team was examined and
cross-examined by other government teams; it
then defended itself, revised its proposals, and
cross-examined other teams. More aid for one
country meant less for the rest.
There was no formula. Rather, each country
developed relevant criteria. The parties did
not quite reach agreement, but they were close
enough that two respected people the
secretary-general of the Organization for
European Economic Cooperation and the
representative of Belgium (which was not
requesting any aid) offered a proposed
division that was promptly accepted. Of course,
the United States was demanding the countries
reach agreement on aid. Today, there is no such
angel behind greenhouse negotiations. Still,
the Marshall Plan represents something of a
precedent.
NATO went through the same process a year
later (1951-52) in its burden-sharing
exercise. This time, it involved U.S. aid and
included targets for national military
participation, conscription of soldiers,
investments in equipment, contributions to
military infrastructure and real estate, and so on.
Again, the process was one of reciprocal
scrutiny and cross-examination, with high-level
officials spending months negotiating. Again,
they did not quite reach final agreement. But
this time, three officials fashioned a proposal
that was accepted. After one more year, NATO
proceeded without U.S. aid except for the
contribution of U.S. military forces to NATO
itself.

With the possible exception of the reciprocal-
trade negotiations that ultimately created the
World Trade Organization (WTO), the
Marshall Plan and NATO experiences are the
only non-wartime precedents in which so many
countries cooperated over such high economic
stakes. They were not aesthetically satisfying
processes: no formulae were developed, just a
civilized procedure of argument. Those
examples are a model for what might succeed
the Kyoto Protocol if it fails or evolves into
something else. Their procedure is one that the
main developed nations might pursue prior to
any attempt to include developing nations.
NATO has been an enormous success; member
nations made large contributions in money,
troops, and real estate. They did it all
voluntarily; there were no penalties for
shortfalls in performance. And, without explicit
trading, they practiced the theory of
comparative advantage (in geographical
location, for instance, or demographics, or
industrial structure). It was an example of
highly motivated partnership, involving
resources on a scale commensurate with what a
greenhouse regime might eventually require.

The WTO experience is also instructive. It
involves a much broader array of nations than
NATO does, and it has its own system of
sanctions: the enforcement of commitments.
Because it is essentially a system of detailed
reciprocal undertakings, and because most
infractions tend to be bilateral and specific as to
commodities, offended parties can undertake
retaliation and make the penalty fit the crime
(thus exercising the principle of reciprocity). A
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judicial system can evaluate offenses on their
merits to authorize or approve the retaliatory
measure. Fulfilling or failing WTO
commitments is piecemeal, not holistic. There
is no overall target to which a WTO member
is committed. In contrast, if a greenhouse-
regime nation fails to meet its target, there is no
particular offended partner to take the initiative
and penalize the offender and if there were, it
might be difficult to identify an appropriate
reciprocal retaliatory measure.

PROMISES, PROMISES
One striking contrast between NATO and the
Kyoto Protocol deserves emphasis: the
difference between inputs and outputs, or
actions and results. NATO nations argued
about what they should do, and commitments
were made to actions. What countries actually
did raise and train troops; procure equipment,
ammunition, and supplies; and deploy these
assets geographically could be observed,
estimated, and compared. But results such as
how much each NATO nations actions
contributed to deterring the Warsaw Pact
could not be remotely approximated.

Like NATO, commitments under the WTOs
auspices are also made to what nations will do,
or will abstain from doing; there are no
commitments to specific consequences. No
nation is committed to imports of any sort from
anywhere; it is committed only to its actions --
such as tariffs and other restrictions, subsidies,
and tax preferences.

With the Kyoto Protocol, commitments were
made not to actions but to results that were to
be measured after a decade or more. This
approach has disadvantages. An obvious one is
that no one can tell, until close to the target date,
which nations are on course to meet their goals.
More important, nations undertaking result-
based commitments are unlikely to have any
reliable way of knowing what actions will be
required that is, what quantitative results will
occur on what timetable for various policies.
The Kyoto approach implied without evident
justification that governments actually knew
how to reach 10 or 15-year emissions goals.
(The energy crisis of the 1970s did not last long
enough to reveal, for example, the long-run
elasticity of demand for motor fuel, electricity,
industrial heat, and so on.) A government that
commits to actions at least knows what it is
committed to, and its partners also know and
can observe compliance. In contrast, a
government that commits to the consequences
of various actions on emissions can only hope
that its estimates, or guesses, are on target, and
so can its partners.

SPREADING THE WEALTH
Eventually, to bring in the developing nations
and achieve emissions reductions most
economically, the proper approach is not a
trading system but financial contributions from
the rich countries to an institution that would
help finance energy-efficient and decarbonized
technologies in the developing world.
Examples might be funding a pipeline to bring
Siberian natural gas to northern China to help
replace carbon-intensive coal, or financing the
imported components of nuclear-power
reactors, which emit no greenhouse gases.
Such a regime will suffer the appearance of
foreign aid. But that is the form it will
necessarily take. The recipients will benefit and
should be required to assume commitments to
emissions-reducing actions. Meanwhile, the
burden on the rich countries will undoubtedly
be more political than economic. Large-scale
aid for reducing carbon dioxide emissions in
China is economically bearable but enormously
difficult to justify to the American public, or to
agree on with Japan and the European Union.
While European countries are lamenting the
U.S. defection from the Kyoto Protocol, a
major U.S. unilateral initiative in research and
development oriented toward phasing out fossil
fuels over the next century would both produce
welcome returns and display American
seriousness about global warming.
The greenhouse gas issue will persist through
the entire century and beyond. Even though the
developed nations have not succeeded in
finding a collaborative way to approach the
issue, it is still early. We have been at it for
only a decade.
But time should not be wasted getting started.
Global climate change may become what
nuclear arms control was for the past half
century. It took more than a decade to develop
a concept of arms control. It is not surprising
that it is taking that long to find a way to come
to consensus on an approach to the greenhouse
problem.

130

THE GLOBALIZATION
OF WORLD POLITICS
An introduction to international relations

Fourth edition

John Baylis y Steve Smith y Patricia Owens

OXFORD
UNIVERSITY PRESS
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Scott G. Borgerson, Arctic meltdown: The economic and security
implications of global warming, Foreign Affairs (March/April 2008)

Summary: Thanks to global warming, the Arctic icecap is rapidly melting, opening up access
to massive natural resources and creating shipping shortcuts that could save billions of
dollars a year. But there are currently no clear rules governing this economically and
strategically vital region. Unless Washington leads the way toward a multilateral diplomatic
solution, the Arctic could descend into armed conflict.

The Arctic Ocean is melting, and it is melting
fast. This past summer, the area covered by sea
ice shrank by more than one million square
miles, reducing the Arctic icecap to only half
the size it was 50 years ago. For the first time,
the Northwest Passage a fabled sea route to
Asia that European explorers sought in vain for
centuries opened for shipping. Even if the
international community manages to slow the
pace of climate change immediately and
dramatically, a certain amount of warming is
irreversible. It is no longer a matter of if, but
when, the Arctic Ocean will open to regular
marine transportation and exploration of its
lucrative natural-resource deposits.

Global warming has given birth to a new
scramble for territory and resources among the
five Arctic powers. Russia was the first to stake
its claim in this great Arctic gold rush, in 2001.
Moscow submitted a claim to the United
Nations for 460,000 square miles of resource-
rich Arctic waters, an area roughly the size of
the states of California, Indiana, and Texas
combined. The UN rejected this ambitious
annexation, but last August the Kremlin
nevertheless dispatched a nuclear-powered
icebreaker and two submarines to plant its flag
on the North Poles sea floor. Days later, the
Russians provocatively ordered strategic
bomber flights over the Arctic Ocean for the
first time since the Cold War. Not to be
outdone, Canadian Prime Minister Stephen
Harper announced funding for new Arctic
naval patrol vessels, a new deep-water port, and
a cold-weather training center along the
Northwest Passage. Denmark and Norway,
which control Greenland and the Svalbard
Islands, respectively, are also anxious to
establish their claims.

While the other Arctic powers are racing to
carve up the region, the United States has
remained largely on the sidelines. The U.S.
Senate has not ratified the UN Convention on
the Law of the Sea (UNCLOS), the leading
international treaty on maritime rights, even
though President George W. Bush,
environmental nongovernmental organizations,
the U.S. Navy and U.S. Coast Guard service
chiefs, and leading voices in the private sector
support the convention. As a result, the United
States cannot formally assert any rights to the
untold resources off Alaskas northern coast
beyond its exclusive economic zone such
zones extend for only 200 nautical miles from
each Arctic states shore nor can it join the
UN commission that adjudicates such claims.
Worse, Washington has forfeited its ability to
assert sovereignty in the Arctic by allowing its
icebreaker fleet to atrophy. The United States
today funds a navy as large as the next 17 in the
world combined, yet it has just one seaworthy
oceangoing icebreaker a vessel that was built
more than a decade ago and that is not
optimally configured for Arctic missions.
Russia, by comparison, has a fleet of 18
icebreakers. And even China operates one
icebreaker, despite its lack of Arctic waters.
Through its own neglect, the worlds sole
superpower a country that borders the Bering
Strait and possesses over 1,000 miles of Arctic
coastline has been left out in the cold.
Washington cannot afford to stand idly by. The
Arctic region is not currently governed by any
comprehensive multilateral norms and
regulations because it was never expected to
become a navigable waterway or a site for
large-scale commercial development. Decisions
made by Arctic powers in the coming years
will therefore profoundly shape the future of
the region for decades. Without U.S. leadership
to help develop diplomatic solutions to
competing claims and potential conflicts, the
region could erupt in an armed mad dash for its
resources.

151
GO NORTH, YOUNG MAN
The Arctic has always experienced cooling and
warming, but the current melt defies any
historical comparison. It is dramatic, abrupt,
and directly correlated with industrial
emissions of greenhouse gases. In Alaska and
western Canada, average winter temperatures
have increased by as much as seven degrees
Fahrenheit in the past 60 years. The results of
global warming in the Arctic are far more
dramatic than elsewhere due to the sharper
angle at which the suns rays strike the polar
region during summer and because the
retreating sea ice is turning into open water,
which absorbs far more solar radiation. This
dynamic is creating a vicious melting cycle
known as the ice-albedo feedback loop.

Each new summer breaks the previous years
record. Between 2004 and 2005, the Arctic lost
14 percent of its perennial ice the dense, thick
ice that is the main obstacle to shipping. In the
last 23 years, 41 percent of this hard, multiyear
ice has vanished. The decomposition of this ice
means that the Arctic will become like the
Baltic Sea, covered by only a thin layer of
seasonal ice in the winter and therefore fully
navigable year-round. A few years ago, leading
supercomputer climate models predicted that
there would be an ice-free Arctic during the
summer by the end of the century. But given
the current pace of retreat, trans-Arctic voyages
could conceivably be possible within the next
five to ten years. The most advanced models
presented at the 2007 meeting of the American
Geophysical Union anticipated an ice-free
Arctic in the summer as early as 2013.

The environmental impact of the melting Arctic
has been dramatic. Polar bears are becoming an
endangered species, fish never before found in
the Arctic are migrating to its warming waters,
and thawing tundra is being replaced with
temperate forests. Greenland is experiencing a
farming boom, as once-barren soil now yields
broccoli, hay, and potatoes. Less ice also means
increased access to Arctic fish, timber, and
minerals, such as lead, magnesium, nickel, and
zinc not to mention immense freshwater
reserves, which could become increasingly
valuable in a warming world. If the Arctic is
the barometer by which to measure the earths
health, these symptoms point to a very sick
planet indeed.

Ironically, the great melt is likely to yield more
of the very commodities that precipitated it:
fossil fuels. As oil prices exceed $100 a barrel,
geologists are scrambling to determine exactly
how much oil and gas lies beneath the melting
icecap. More is known about the surface of
Mars than about the Arctic Oceans deep, but
early returns indicate that the Arctic could hold
the last remaining undiscovered hydrocarbon
resources on earth. The U.S. Geological Survey
and the Norwegian company StatoilHydro
estimate that the Arctic holds as much as one-
quarter of the worlds remaining undiscovered
oil and gas deposits. Some Arctic wildcatters
believe this estimate could increase
substantially as more is learned about the
regions geology. The Arctic Oceans long,
outstretched continental shelf is another
indication of the potential for commercially
accessible offshore oil and gas resources. And,
much to their chagrin, climate-change scientists
have recently found material in ice-core
samples suggesting that the Arctic once hosted
all kinds of organic material that, after cooking
under intense seabed pressure for millennia,
would likely produce vast storehouses of fossil
fuels.

The largest deposits are found in the Arctic off
the coast of Russia. The Russian state-
controlled oil company Gazprom has
approximately 113 trillion cubic feet of gas
already under development in the fields it owns
in the Barents Sea. The Russian Ministry of
Natural Resources calculates that the territory
claimed by Moscow could contain as much as
586 billion barrels of oil although these
deposits are unproven. By comparison, all of
Saudi Arabias current proven oil reserves
which admittedly exclude unexplored and
speculative resources amount to only 260
billion barrels. The U.S. Geological Survey is
just now launching the first comprehensive
study of the Arctics resources. The first areas
to be studied are the 193,000-square-mile East
Greenland Rift Basins. According to initial
seismic readings, they could contain 9 billion
barrels of oil and 86 trillion cubic feet of gas.
Altogether, the Alaskan Arctic coast appears to
hold at least 27 billion barrels of oil.

Although onshore resources, such as the oil in
Alaskas Arctic National Wildlife Refuge, have
dominated debates about Arctic development in
Washington, the real action will take place
offshore, as the polar ice continues to retreat.
An early indication of the financial stakes and
political controversies involved is a lawsuit that
was filed against Royal Dutch/Shell in the U.S.
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Ninth Circuit Court. Filed jointly by an unusual
alliance of environmental groups and
indigenous whalers, the case has held up the
development of Shells $80 million leases in
the newly accessible Beaufort Sea, off Alaskas
northern coast. By 2015, such offshore oil
production will account for roughly 40 percent
of the worlds total. The Alaskan coast might
one day look like the shores of Louisiana, in
the Gulf of Mexico, lit up at night by the
millions of sparkling lights from offshore oil
platforms.

POLAR EXPRESS
An even greater prize will be the new sea-lanes
created by the great melt. In the nineteenth
century, an Arctic seaway represented the Holy
Grail of Victorian exploration, and the
seafaring British Empire spared no expense in
pursuing a shortcut to rich Asian markets. Once
it became clear that the Northwest Passage was
ice clogged and impassable, the Arctic faded
from power brokers consciousness. Strategic
interest in the Arctic was revived during World
War II and the Cold War, when nuclear
submarines and intercontinental missiles turned
the Arctic into the worlds most militarized
maritime space, but it is only now that the
Arctic sea routes so coveted by nineteenth-
century explorers are becoming a reality.

The shipping shortcuts of the Northern Sea
Route (over Eurasia) and the Northwest
Passage (over North America) would cut
existing oceanic transit times by days, saving
shipping companies not to mention navies
and smugglers thousands of miles in travel.
The Northern Sea Route would reduce the
sailing distance between Rotterdam and
Yokohama from 11,200 nautical miles via the
current route, through the Suez Canal to only
6,500 nautical miles, a savings of more than 40
percent. Likewise, the Northwest Passage
would trim a voyage from Seattle to Rotterdam
by 2,000 nautical miles, making it nearly 25
percent shorter than the current route, via the
Panama Canal. Taking into account canal fees,
fuel costs, and other variables that determine
freight rates, these shortcuts could cut the cost
of a single voyage by a large container ship by
as much as 20 percent from approximately
$17.5 million to $14 million saving the
shipping industry billions of dollars a year. The
savings would be even greater for the
megaships that are unable to fit through the
Panama and Suez Canals and so currently sail
around the Cape of Good Hope and Cape Horn.
Moreover, these Arctic routes would also allow
commercial and military vessels to avoid
sailing through politically unstable Middle
Eastern waters and the pirate-infested South
China Sea. An Iranian provocation in the Strait
of Hormuz, such as the one that occurred in
January, would be considered far less of a
threat in an age of trans-Arctic shipping.
Arctic shipping could also dramatically affect
global trade patterns. In 1969, oil companies
sent the S.S. Manhattan through the Northwest
Passage to test whether it was a viable route for
moving Arctic oil to the Eastern Seaboard. The
Manhattan completed the voyage with the help
of accompanying icebreakers, but oil
companies soon deemed the route impractical
and prohibitively expensive and opted instead
for an Alaskan pipeline. But today such
voyages are fast becoming economically
feasible. As soon as marine insurers recalculate
the risks involved in these voyages, trans-
Arctic shipping will become commercially
viable and begin on a large scale. In an age of
just-in-time delivery, and with increasing fuel
costs eating into the profits of shipping
companies, reducing long-haul sailing distances
by as much as 40 percent could usher in a new
phase of globalization. Arctic routes would
force further competition between the Panama
and Suez Canals, thereby reducing current
canal tolls; shipping chokepoints such as the
Strait of Malacca would no longer dictate
global shipping patterns; and Arctic seaways
would allow for greater international economic
integration. When the ice recedes enough,
likely within this decade, a marine highway
directly over the North Pole will materialize.
Such a route, which would most likely run
between Iceland and Alaskas Dutch Harbor,
would connect shipping megaports in the North
Atlantic with those in the North Pacific and
radiate outward to other ports in a hub-and-
spoke system. A fast lane is now under
development between the Arctic port of
Murmansk, in Russia, and the Hudson Bay port
of Churchill, in Canada, which is connected to
the North American rail network.

In order to navigate these opening sea-lanes
and transport the Arctics oil and natural gas,
the worlds shipyards are already building ice-
capable ships. The private sector is investing
billions of dollars in a fleet of Arctic tankers. In
2005, there were 262 ice-class ships in service
worldwide and 234 more on order. The oil and
gas markets are driving the development of
153
cutting-edge technology and the construction of
new types of ships, such as double-acting
tankers, which can steam bow first through
open water and then turn around and proceed
stern first to smash through ice. These new
ships can sail unhindered to the Arctics
burgeoning oil and gas fields without the aid of
icebreakers. Such breakthroughs are
revolutionizing Arctic shipping and turning
what were once commercially unviable projects
into booming businesses.

THE COMING ANARCHY
Despite the melting icecaps potential to
transform global shipping and energy markets,
Arctic issues are largely ignored at senior levels
in the U.S. State Department and the U.S.
National Security Council. The most recent
executive statement on the Arctic dates to 1994
and does not mention the retreating ice. But the
Arctics strategic location and immense
resource wealth make it an important national
interest. Although the melting Arctic holds
great promise, it also poses grave dangers. The
combination of new shipping routes, trillions of
dollars in possible oil and gas resources, and a
poorly defined picture of state ownership
makes for a toxic brew.

The situation is especially dangerous because
there are currently no overarching political or
legal structures that can provide for the orderly
development of the region or mediate political
disagreements over Arctic resources or sea-
lanes. The Arctic has always been frozen; as ice
turns to water, it is not clear which rules should
apply. The rapid melt is also rekindling
numerous interstate rivalries and attracting
energy-hungry newcomers, such as China, to
the region. The Arctic powers are fast
approaching diplomatic gridlock, and that
could eventually lead to the sort of armed
brinkmanship that plagues other territories,
such as the desolate but resource-rich Spratly
Islands, where multiple states claim
sovereignty but no clear picture of ownership
exists.

There are few legal frameworks that offer
guidance. The Arctic Council does exist to
address environmental issues, but it has
remained silent on the most pressing challenges
facing the region because the United States
purposefully emasculated it at birth, in 1996, by
prohibiting it from addressing security concerns.
Many observers argue that UNCLOS is the
correct tool to manage the thawing Arctic. The
convention provides mechanisms for states to
settle boundary disputes and submit claims for
additional resources beyond their exclusive
economic zones. Furthermore, UNCLOS sets
aside the resources in the high seas as the
common heritage of humankind, it allows states
bordering ice-covered waters to enforce more
stringent environmental regulations, and it
defines which seaways are the sovereign
possessions of states and which international
passages are open to unfettered navigation.

However, UNCLOS cannot be seamlessly
applied to the Arctic. The regions unique
geographic circumstances do not allow for a
neat application of this legal framework. The
Arctic is home to a number of vexing problems
that, taken in their entirety, make it a special
case. These unresolved challenges include
carving up the worlds longest uncharted and
most geologically complex continental shelf
among five states with competing claims,
resolving differences between Canada and the
rest of the world over how to legally define the
Northwest Passage, demarcating maritime
borders between the United States and Canada
in the Beaufort Sea and between Norway and
Russia in the Barents Sea, and regulating
vessels shielded behind flags of convenience
(which obscure the true origin and ownership
of the vessels) as they travel across numerous
national jurisdictions. Finally, increased oil and
gas exploration and the trans-Arctic shipping
that comes with it will pose serious
environmental risks. Oil tankers present a
particularly grave environmental threat, as
illustrated by three recent oil spills in the much
safer waters of the San Francisco Bay, the
Black Sea, and the Yellow Sea.

There are also a handful of unresolved issues at
play in the Arctic that are not covered under
UNCLOS. Between 1958 and 1992, Russia
dumped 18 nuclear reactors into the Arctic
Ocean, several of them still fully loaded with
nuclear fuel. This hazard still needs to be
cleaned up. Furthermore, the Arctic region is
home to one million indigenous people, who
deserve to have a say in the regions future,
especially as regards their professed right to
continue hunting bowhead whales, their safety
alongside what will become bustling shipping
lanes, and their rightful share of the economic
benefits that Arctic development will bring.
With the prospect of newfound energy wealth,
there is also growing talk of Greenland
154

petitioning Denmark for political independence.
Finally, there has been an explosion in polar
tourism, often involving ships unsuited for
navigation in the region. Last year, 140 cruise
ships carried 4,000 intrepid travelers for
holidays off Greenlands icy coast, a dangerous
journey in largely uncharted waters.

Although it is tempting to look to the past for
solutions to the Arctic conundrum, no perfect
analogy exists. The 1959 Antarctic Treaty,
which froze all territorial claims and set aside
the continent for scientific research, provides
some lessons, but it concerns a continent rather
than an ocean. Moreover, Antarctica is far
removed from major trade routes, and
negotiations unfolded in the entirely different
context of the Cold War. As a body of water
that links several large economies, the
Mediterranean Sea is somewhat similar to the
Arctic Ocean, but its littoral states have always
had clearer historical claims, and it has never
been covered with ice, at least not in human
history. There is simply no comparable
historical example of a saltwater space with
such ambiguous ownership, such a dramatically
mutating seascape, and such extraordinary
economic promise.

The regions remarkable untapped resource
wealth and unrealized potential to become a
fast lane between the Atlantic and Pacific
Oceans makes it a key emerging pressure point
in international affairs. At this critical juncture,
decisions about how to manage this rapidly
changing region will likely be made within a
diplomatic and legal vacuum unless the United
States steps forward to lead the international
community toward a multilateral solution.

NORTHERN EXPOSURE
Until such a solution is found, the Arctic
countries are likely to unilaterally grab as much
territory as possible and exert sovereign control
over opening sea-lanes wherever they can. In
this legal no mans land, Arctic states are
pursuing their narrowly defined national
interests by laying down sonar nets and arming
icebreakers to guard their claims. Russia has
led the charge with its flag-planting antics this
past summer. Moscow has been arguing that a
submarine elevation called the Lomonosov
Ridge is a natural extension of the Eurasian
landmass and that therefore approximately half
of the Arctic Ocean is its rightful inheritance.
The UN commission that is reviewing the claim
sent Russia back to gather additional geological
proof, leading Artur Chilingarov, a celebrated
Soviet-era explorer and now a close confidant
of Russian President Vladimir Putin, to declare,
The Arctic is ours and we should manifest our
presence while leading a mission to the North
Pole last summer.

Naturally, other Arctic states are responding.
Norway submitted its claim for additional
Arctic resources to the commission in 2006;
Canada and Denmark are now doing their
homework in order to present their own claims.
Ottawa and Copenhagen are currently at odds
over the possession of Hans Island, an
outcropping of desolate rocks surrounded by
resource-rich waters in the Nares Strait,
between Canadas Ellesmere Island and
Greenland. Even the United States, despite its
refusal to ratify UNCLOS, has for the past few
summers dispatched its sole icebreaker to the
Arctic to collect evidence for a possible
territorial claim in the event the Senate
eventually ratifies the treaty.

There are also battles over sea-lanes. Canada
has just launched a satellite surveillance system
designed to search for ships trespassing in its
waters. Even though the Northern Sea Route
will likely open before the Northwest Passage,
the desire to stop ships from passing through
the Canadian archipelago especially those
from the U.S. Coast Guard and the U.S. Navy
is the cause of much saber rattling north of the
border. Use it or lose it, Canadian Prime
Minister Harper frequently declares in
reference to Canadas Arctic sovereignty an
argument that plays well with Canadians, who
are increasingly critical of their southern
neighbor. So far, the delicate 1988 agreement
to disagree between the United States and
Canada over the final disposition of these
waters has remained intact, but the United
States should not underestimate Canadian
passions on this issue.

The ideal way to manage the Arctic would be
to develop an overarching treaty that
guarantees an orderly and collective approach
to extracting the regions wealth. As part of the
ongoing International Polar Year (a large
scientific program focused on the Arctic and
the Antarctic that is set to run until March
2009), the United States should convene a
conference to draft a new accord based on the
framework of the Arctic Council. The
agreement should incorporate relevant
155
provisions of UNCLOS and take into account
all of the key emerging Arctic issues. With a
strong push from Washington, the Arctic states
could settle their differences around a
negotiating table, agree on how to carve up the
regions vast resource pie, and possibly even
submit a joint proposal to the UN for its
blessing.

But even as it pushes for a multilateral
diplomatic solution, the United States should
undertake a unilateral effort to shore up U.S.
interests in the Arctic. The few in the United
States who still stubbornly oppose U.S.
accession to UNCLOS claim that by ratifying
the treaty Washington would cede too much
U.S. sovereignty and that customary
international law and a powerful navy already
allow the United States to protect its Arctic
interests. But these are not enough. The United
States is the only major country that has failed
to ratify UNCLOS, and Washington is
therefore left on the outside looking in as a
nonmember to various legal and technical
bodies. In addition to becoming a party to the
convention, the United States must publish an
updated Arctic policy, invest in ice-mapping
programs, and breathe new life into its
inefficient, uncompetitive shipyards, thus
enabling it to update the countrys geriatric
icebreaker fleet, as soon as possible.

The United States should also strike a deal with
Canada, leading to a joint management effort
along the same lines as the 1817 Rush-Bagot
Agreement, which demilitarized the Great
Lakes and led to the creation (albeit more than
a century later) of the nonprofit St. Lawrence
Seaway Development Corporation to manage
this critical, and sometimes ice-covered,
binational waterway. In the same spirit, the
United States and Canada could combine their
resources to help police thousands of miles of
Arctic coastline. Washington and Ottawa now
work collaboratively on other sea and land
borders and together built the impressive North
American Aerospace Defense Command, or
NORAD, system. They are perfectly capable of
doing the same on the Arctic frontier, and it is
in both countries national interests to do so.

There is no reason that economic development
and environmental stewardship cannot go hand
in hand. To this end, Canada could take the
lead in establishing an analogous public-private
Arctic seaway management corporation with a
mandate to provide for the safe and secure
transit of vessels in North American Arctic
waters while protecting the areas sensitive
environment. Shipping tolls levied by this
bilateral management regime could pay for
desperately needed charts (much of the existing
survey information about the Northwest
Passage dates to nineteenth-century British
exploration), as well as for search-and-rescue
capabilities, traffic-management operations,
vessel tracking, and similar services that would
guard life and property. Such a jointly managed
Arctic seaway system could establish facilities
for the disposal of solid and liquid waste,
identify harbors of refuge for ships in danger,
and enforce a more rigorous code for ship
design in order to ensure that vessels traveling
through the Northwest Passage have thicker
hulls, more powerful engines, and special
navigation equipment. The captains and crews
of these vessels could also be required to have
additional training and, if the conditions
warrant, to take aboard an agency-approved
ice pilot to help them navigate safely.

This bilateral arrangement could eventually be
expanded to include other Arctic countries,
especially Russia. The United States and Russia,
as an extension of the proposed Arctic seaway
management corporation, could develop traffic-
separation schemes through the Bering Strait
and further invest in the responsible
development of safe shipping along the
Northern Sea Route. Eventually, a pan-Arctic
corporation could coordinate the safe, secure,
and efficient movement of vessels across the
Arctic. Japan, which is vitally dependent on the
Strait of Malacca for the overwhelming
majority of its energy supplies, would be a
natural investor in such a project since it has an
interest in limiting the risk of a disruption in its
oil supply.

ITS EASY BEING GREEN
In 1847, a British expedition seeking the fabled
Northwest Passage ended in death and
ignominy because Sir John Franklin and his
crew, seeing themselves as products of the
pinnacle of Victorian civilization, were too
proud to ask the Inuit for help. At the height of
its empire, the United States sometimes sees
itself as invincible, too. But the time has come
for Washington to get over its isolationist
instincts and ratify UNCLOS, cooperate with
Canada on managing the Northwest Passage,
and propose an imaginative new multilateral
Arctic treaty.
156

Washington must awaken to the broader
economic and security implications of climate
change. The melting Arctic is the proverbial
canary in the coal mine of planetary health and
a harbinger of how the warming planet will
profoundly affect U.S. national security. Being
green is no longer a slogan just for Greenpeace
supporters and campus activists; foreign policy
hawks must also view the environment as part
of the national security calculus. Self-
preservation in the face of massive climatic
change requires an enlightened, humble, and
strategic response. Both liberals and
conservatives in the United States must move
beyond the tired debate over causation and get
on with the important work of mitigation and
adaptation by managing the consequences of
the great melt.

157
7. Terrorism

Overview
Terrorism has a long history. However, in its current forms it has also been viewed as a
reaction to the condition of the contemporary world, and to the effects of globalisation in
particular. Various commentators characterised the attacks of September 2001 as acts of
resistance to the leading role of America in the globalised economy, casting the Twin Towers
as symbols of globalisation. Michael Kimmel has argued that terrorists, like members of the
New Right, tend (whether Western or otherwise) to be young, lower-middle-class men
reacting against the economic privation and alienation wrought upon them by globalisation.
The 1995 bombing of a government office in Oklahoma City was understood as such: the
second worst terrorist act on United States soil, it was authored by a United States national,
Timothy McVeigh, a right-wing extremist apparently protesting against a liberal democratic
government.

We should remember that terrorism has not always been automatically associated with the
Islamic world before September 11, the activities of the Provisional Irish Republican Army
(in ceasefire since 1997) and other Irish paramilitary groups, as well as Basque paramilitary
groups, particularly Euskadi Ta Askatasuna (ETA) to name a few dominated the attention
of the world at various times. Many different kinds of terrorism have been identified,
including eco-terrorism, which is motivated by environmental concerns, and Christian
terrorism as exemplified by the bombing of abortion clinics.

An accepted definition of terrorism, though recognised to be a crucial element in attempts to
coordinate international collaboration to prevent it, remains elusive. Journalists, academics,
terror experts and global and national institutions all use a variety of definitions of terrorism.
The US-based Foreign Policy Association observes that various US government agencies
employ different definitions of the term, but notes that the most widely accepted definition is
probably that put forward by the US State Department, which defines terrorism as
premeditated, politically motivated violence perpetrated against noncombatant targets by
subnational groups or clandestine agents, usually intended to influence an audience.

Objectives
x Examine the concept of terrorism in historical perspective
x Gain an understanding of the difficulties involved in defining terrorism

Discussion points
1. How can we define terrorism? What are the problems involved in making an accurate
definition?
2. Is there something new about the current wave of terrorism?
3. What is the connection between globalisation and terrorism? Does globalisation cause
terrorism? Does globalisation facilitate terrorism? Can terrorism defeat globalisation?
4. What is the purpose of terrorism? Does terrorism ever succeed?

158
Readings
Armstrong, Karen, Resisting modernity, Harvard International Review, 25:4 (2004): 40-45

Karatnycky, Adrian, Under our very noses: The terrorist next door, National Review, 5
November 2001

Laqueur, Walter, Toward a definition, or Humpty Dumpty and the problem of terrorism, in
No end to war: Terrorism in the 21st century, New York: Continuum, 2003, 232-238

Davidson, Lawrence, Islamic fundamentalism: An introduction, Westport: Greenwood Press,
2003, 73-76

159
Karen Armstrong, Resisting modernity, Harvard International
Review, 25:4 (2004), 40-45

By the middle of the 20th century, pundits and
intellectuals in the West generally took it for
granted that secularism was the coming
ideology and that religion would never again
play a major role in public life. However,
within a few years, it became clear that a
militant piety had erupted in every major faith,
dragging God and religion back to center stage
from the sidelines to which they had been
relegated. The 1979 Islamic Revolution in Iran
showed the potential of this new form of faith.
Western observers were astonished to see an
obscure mullah overturning what had appeared
to be one of the most progressive countries in
the Middle East. Who ever took religion
seriously? cried a frustrated official in the US
State Department shortly after the revolution.
But the United States itself had recently
witnessed the rise of Jerry Falwell and his
Moral Majority, and a radical religiosity fuelled
the Arab-Israeli conflict on both sides.

Despite these symptoms, the secularist
establishment struggled to understand what was
happening, even though it was clear that this
so-called fundamentalism was becoming ever
more extreme. The atrocities of September 11,
2001, showed that the West can no longer
afford the old secularist disdain for religiously
inspired politics, and that scholars must now
study fundamentalism as attentively as any
other ideology.

Fundamentalism is an unsatisfactory word.
Conservative Protestant theologians coined it in
the early 20th century to describe their reform
movement: they wanted to go back to the
fundamentals of the faith. But people in other
religious traditions complain when this
Christian term is applied to their own
movements. Protestant fundamentalists, they
argue, were chiefly concerned about dogma and
theological belief, while Jewish or Muslim
traditionalists have different priorities.
Nevertheless, despite its inadequacy, the term
fundamentalism has become a shorthand way
of referring to a broad band of religious
movements in all the major faiths that bear a
strong family resemblance. While this short
survey shall be confined to fundamentalism in
Judaism, Christianity and Islam, it is important
not to forget the fundamentalism that has
erupted in Sikhism, Hinduism, Buddhism, and
Confucianism. There is also a form of secular
fundamentalism, which opposes all forms of
faith as belligerently as religious
fundamentalists attack secularism.

Religious fundamentalism represents a
widespread rebellion against the hegemony of
secularist modernity. Wherever a modern,
Western-style society has been established, a
religious counterculture has developed
alongside it in conscious rebellion. Despite the
arguments of politicians and intellectuals,
people all over the world have demonstrated
that they want to see more religion in public
life. The various fundamentalist ideologies
show a worrying disenchantment with
modernity and globalization. Indeed, every
single fundamentalist movement that I have
studied in Judaism, Christianity, and Islam is
rooted in a profound fear of annihilation. All
are convinced that the modern, liberal, secular
establishment wants to wipe out religion. Each
fundamentalist group has sprung up
independently; each even differs significantly
from other fundamentalists within their own
faith tradition. But at the root of all these
movements is the same visceral dread that is
rapidly being transformed in some quarters into
ungovernable rage. This should not surprise us;
culture is always contested, and the proud
secularism of Western modernity was almost
bound to inspire a strong religious reaction.

Not all religious conservatives are
fundamentalists. The US evangelist Billy
Graham, for example, is not a fundamentalist;
he would not describe himself as such, nor
would he be accepted in fundamentalist circles
as one of their own. Graham has always been
prepared to work with other Christians, while
fundamentalists are more radical separatists.

Fundamentalist movements usually follow a
similar pattern in all three faiths. First, they
take issue with their own co-religionists, who,
they feel, have made too many concessions to
modernity and are collaborating with the
enemy. Fundamentalism always begins as an
intra-religious dispute; only at a secondary
stage, if at all, does it attack a foreign foe.
Second, fundamentalists withdraw from the
mainstream to create an enclave of pure faith in
what they see as a godless world. Examples of
160
these embattled religious havens are the ultra-
Orthodox Jewish communities in Jerusalem and
New York or the ultra-Christian Bob Jones
University in South Carolina. The original
impulse behind these communities is defensive,
but from these sacred enclaves, some plan a
counter-offensive against the political or
religious establishment.

These counter-offensives are by no means
always aggressive assaults. Only a tiny
proportion of fundamentalists take part in acts
of violence or terror. Most are simply engaged
in an uphill struggle to lead what they regard as
truly religious lives in a society that seems
essentially and irredeemably hostile to their
faiths. Protestant fundamentalists in the United
States, tor example, confine themselves to
peaceful and law-abiding campaigns to
expunge liberal or heretical views from
school textbooks; the Lubavitcher Hasidim
have launched an outreach campaign to bring
secularized Jews back to religious observance.
But because all fundamentalists feel so
profoundly threatened, they are convinced that
they are engaged in a battle with the powers of
darkness. When people fight for survival with
this absolutist perspective, they can lash out
violently.

The Problem with Modernity
What about Western modernity has inspired
such fear? In the early 16th century, the
societies of Europe and their American
colonies began to evolve an entirely different
kind of civilization one without precedent in
world history. Instead of relying on a surplus of
agricultural produce, as previous societies had,
they developed an economy based upon
technology and the constant reinvestment of
capital. This would eventually liberate the West
from the constraints that necessarily
characterized agrarian cultures, but this
economic revolution required change at all
levels of society. The process was traumatic,
accompanied by bloody revolutions, wars of
religion, dictatorships, persecutions, ethnic
cleansing, exploitation of workers, and
despoliation of the countryside. Similar
upheavals continue in the developing world
today, where people are undergoing this painful
rite of passage, but are often having to
modernize far too rapidly and according to
somebody elses program rather than to their
own inner dynamic.

By the 19th century, a new kind of society had
emerged in the West to accommodate its new
economy. A more democratic system of
government was found to be necessary. In
order to keep the markets buoyant, more and
more people had to be brought into the
production process, even at a humble level as
printers, clerks, or factory hands. That meant
that they had to acquire a modicum of
education, and the more educated they became,
the more they demanded a say in government
decisions. In order to capitalize on all their
human resources, marginalized groups, such as
the Jews in some European countries or the
Catholics in England, had to be brought into the
mainstream. Thus it was found by trial and
error that the only type of society that could
succeed in this brave new world was one that
was democratic, tolerant, and secularist. A
government could no longer privilege one faith
and penalize others if it wanted to remain on
the cutting edge; scientists and inventors, for
example, needed the freedom to pursue their
ideas without the hindrance of a conservative
religious establishment. Thus religion, which
had been central to the old agrarian ethos, was
marginalized and sometimes even outlawed.

From these changes spring the fundamentalists
fear that modern society wants to purge itself of
religion. Modernity has been liberating and
productive, but it has its dark side. The new
tolerance was only skin deep. Some forms of
Jewish fundamentalism received a major
impetus from the Nazi Holocaust, when Hitler
tried to exterminate European Jewry. In the
Muslim world, modernity came not with the
independence of modernizing movements in
the West, but with colonial subjugation. What
took the West 300 years has had to be
accomplished in a mere 50, and secularization
has been so rapid that it has often been
experienced as an assault. When Turkish
President Kemal Ataturk modernized Turkey,
for example, he closed down all the maddrasas,
abolished the Sufi orders, and forced all men
and women to wear Western dress. These
reformers often wanted their countries to look
modern, even though only a small elite actually
understood the new ideas behind the social
changes. In Iran, the Shahs made their soldiers
walk through the streets, tearing off womens
veils and ripping them to pieces. In 1935, Shah
Reza Pahlavi ordered his soldiers to shoot at a
large crowd of unarmed demonstrators in one
of the holiest shrines in Iran protestors were
peacefully protesting against obligatory
161
Western clothes. Hundreds of Iranians died that
day. His son, Shah Muhammad, executed
theology students and tortured leading mullahs
to death. In such a climate, it is not surprising
that secularization was regarded not as
liberating, but as viciously destructive of faith.
It is also not surprising that the masses, who
had no Western education, but who witnessed
the bewildering and incomprehensible
transformation of their country, clung to the
traditional faith as a lifeline.

Even in the United States, where secularism
has been very good for religion, many in rural
areas feel belittled and colonized by the ethos
of the academic and political elite. Indeed,
arguably the first modern fundamentalist
movement was developed among US
Protestants in the newly industrialized north-
eastern cities during World War I, when it
became apparent that science could be applied
with lethal effect to modern weaponry. The
terror and alienation of fundamentalist
Protestantism is shown in its apocalyptic vision,
which sees the world as so wicked and
perverted that God has to smash it in a final,
fearful cataclysm. Even the benign institutions
of modernity international organizations like
the League of Nations and more modern groups
like the United Nations, the European Union,
and the World Council of Churches are seen
as infected by the Devil or the Antichrist. More
generally, fundamentalists are haunted by a fear
of anything approaching world government.
The global village is a threat to their identity,
and without this singularity they are nothing.

Addressing, Not Attacking
Incipient fundamentalism always becomes
more extreme when attacked. A telling example
of this dynamic can be found in the debate over
evolution in the United States. For US
Christian fundamentalists, evolution is more
than a mere scientific hypothesis; it is a symbol
of everything that is wrong with the modem
world. Like abortion, it seems to reveal the
destructive, murderous underbelly of modernity.
An evolutionist, they imagine, champions the
survival only of the fittest, convinced that
might alone is right.

The skirmish between these fundamentalists
and the liberal establishment during the 1925
Scopes Trial took place after some
fundamentalists tried to ban the teaching of
evolution in public schools, blaming the
practice for their radical alienation from
mainstream US society. The media subjected
the fundamentalists to such ridicule that they
slunk away from the trial, having suffered what
seemed to be a fatal defeat. But these
fundamentalists were simply withdrawing in
the time-honored way, leaving the mainstream
denominations, and founding their own
churches, bible colleges, broadcasting stations,
and publishing houses.

In fact, after the humiliation of the Scopes Trial,
these Christian fundamentalist groups became
more extreme. Before the trial, many had
inclined toward biblical literalism, but only a
small minority embraced the new Creation
Science; after the trial, they became militantly
literalistic, and Creationism became de rigueur.
Before the Scopes Trial, fundamentalists were
often on the left of the political spectrum;
afterwards, they swung to the far right, where
they have since remained.

The same pattern exists in Sunni Islam. Its
chief fundamentalist ideologue was Sayyid
Qutb, who was executed by Egypts President
Jamal Abdul Nasser in 1966. Qutb was one of
thousands of members of the Muslim
Brotherhood whom Nasser imprisoned without
trial in 1954. The Brotherhood had a small
terrorist wing, but the majority of those who
were incarcerated in Nassers concentration
camps had done nothing more incriminating
than hand out leaflets or attend a meeting.
Some were executed; others suffered mental
and physical torture and became radicalized.
Qutb went into the camp as a moderate; he had
hated the materialism and apparent decadence
of US society but was still committed to reform
rather than revolution. In the camp, however,
he became a fundamentalist. When he saw the
suffering of the Brothers even as Nasser vowed
to confine religion to the private sphere, he
could only judge secularism to be a great evil.
In prison, Qutb evolved an ideology that
inspires Sunni fundamentalists to this day
including Osama bin Laden, a second-
generation fundamentalist, who constantly
uses Qutbian imagery and concepts.

Fundamentalism becomes more extreme when
attacked because the assault convinces
fundamentalists that the establishment really
does want to eliminate them. The recent Israeli
attempts to assassinate Hamas leaders have
simply inspired a new spate of suicide bombing.
The invasion of Iraq by the United States has
162
opened a new terror front, and apparently
strengthened Al Qaeda, because it seems to
prove that the West has embarked on a new
Crusade against the Muslim world.

If it is counterproductive to try to suppress
fundamentalist groups, it is also unwise to
ignore them or to allow an originally secular
conflict to fester. History shows that
malcontent millennial movements become
more religious when they lose hope for a
conventional political solution.

After the Six Day War in 1967, there was a
religious revival in the Arab world, because the
Western ideologies of socialism and
nationalism seemed bankrupt. In their quest for
oil and a powerful strategic position in the
Middle East, Western governments have
inadvertently fuelled the rise of this extremism
by supporting undemocratic governments that
discourage opposition. Increasingly, the only
place where people can voice their discontent
has been the mosque. The Palestinians long
held out against this trend, retaining a secularist
ideology until 1987, when, despairing of the
political process, the Islamist parties emerged.
Once religion is brought into politics, positions
become absolute and more difficult to resolve.

This is evidenced in the Zionist
fundamentalism that came to the fore after the
Yom Kippur War of 1973, when Israelis felt
acutely vulnerable. Again, a fear of annihilation
led to a religious riposte. Zionism had for the
most part been a defiantly secular movement,
but after the shock of the war, many young
religious Zionists felt that the old ideology had
failed. They developed a strongly messianic
ideology, which looked forward to an imminent
messianic redemption, provided that Jews
retained their promised land. Those who inhabit
settlements in the West Bank and Gaza Strip
believe that they are fulfilling the ancient
prophecies and will hasten the redemption of
the whole world. They must not, therefore,
heed UN declarations or proposals to cede land
in return for peace. A few Zionists have
resorted to extremism. In 1979, some plotted to
blow up the Dome of the Rock, which is
believed to occupy the site of Solomons
temple, in order to halt the Camp David talks
and to hasten the advent of the Messiah. Yigal
Amir, who assassinated Israeli Prime Minister
Yitzhak Rabin in 1995, emerged from these
circles.

Fundamentalism as Modernity
Fundamentalism is frequently regarded with
disdain, and its methods are indeed often
nihilistic and abhorrent. However,
fundamentalism is inextricably tied to the
modern world, and, rather than being merely a
temporary aberration, it is here to stay.
Fundamentalist movements may hearken back
to a Golden Age, but they are essentially
modern and could have taken root in no time
other than the present. Christian
fundamentalists may claim to be reading the
Bible in a traditional way, but their literalist
approach is essentially the product of the
scientific age. In the premodern world, Jews,
Christians, and Muslims all relished highly
allegorical readings of Scripture, which, as the
Word of God, was infinite and capable of
multiple interpretations. Until the invention of
printing made it possible for every Christian to
have his or her own Bible and until universal
literacy made it possible for them to read it,
nobody could subject the Bible to the close and
detailed reading employed by fundamentalists
today.

Indeed, all fundamentalisms grow in a
symbiotic relationship with the secularism
against which they react. For example, the
secularist and socialist forebears of ultra-
Orthodox Jews, such as David Ben Gurion,
have profoundly shaped the ideology of the
religious Zionists. In the same way, Sayyid
Qutb was in many ways a man of the 1960s
his fundamentalism amounted to a Muslim
liberation theology while Ayatollah
Khomeini was a typical 1970s Third World
politician. These are not conventional
movements, but highly innovative ones.
Khomeinis revolutionary exegesis overturned
centuries of the most sacred Shia traditions,
and was as shocking for Muslims as the
prospect of the Pope abolishing the Mass would
be for Catholics.

Since the emancipation of women has been one
of the most prominent hallmarks of modernity,
fundamentalists in all traditions tend to
overemphasize womens traditional, secondary
role. But in doing so, they sometimes reveal the
darker sides of modernity. Some Muslim
women have used the custom of veiling as a
way of critiquing Western sexual mores; the
woman who covers herself challenges the
curious Western tendency to reveal all in
sexual matters. In the West, people often flaunt
their tanned, well-exercised, and expensively
163
fed bodies as a mark of privilege; they choose
their clothes to express their individuality.
Veiled women, who dress alike, stress the
values of equality and community instead. The
adoption of the veil does not always mean that
women have conservative views on gender
roles, but it is often a tacit assertion that one
does not have to look Western in order to be
modern. Islamic dress helps some women in
successfully making the rite of passage to the
modern world. In Egypt, for example, many of
the women who attend university are the first
members of their family to advance beyond
basic literacy and come from villages that are
still feudal in character.

Traditional dress can provide them with much-
needed continuity while they make their
adjustment to modern urban living.

People have always used religion as a means of
adapting to the modern ethos. Very few of the
American colonists who fought against Britain
could understand John Locke, nor could they
endorse the Enlightenment ideology of the
Founding Fathers of the United States, which
many regarded as blasphemous. Most were
Calvinists, and they developed a Calvinist
revolutionary rhetoric that enabled them to
fight alongside the followers of Thomas Paine.
Religion enabled them to contemplate some of
the alien ideas of modernity in a familiar
setting. Today some fundamentalist movements
are also modernizing in this way. In Iran, for
example, an ideal of Shia democracy has
emerged that is more congenial than its
Western secular form, which was badly
tarnished by US support of the Shah who had
denied his people basic human rights. There is
still a fundamentalist backlash, but while most
Iranians do not want Western-style secularism,
they have experienced and moved beyond
fundamentalism and are ready for the next
stage.

Others have moved beyond fundamentalism in
a less productive way. A form of post-
fundamentalism is emerging, fuelled less by
fear than by rage. In the United States, some
groups regard Jerry Falwells fundamentalism
as feeble. The Reconstructionists have devised
a form of Christian fascism, which looks
forward to Gods imminent destruction of the
US federal government in Washington, DC.
The Christian Identity network has also gone
beyond Christian fundamentalism. They are
also preparing for an apocalypse, and are in
training for the battle of the end of time. Some
venture out of their communities in the
wilderness of Montana to undertake raids
against the US establishment, especially
targeting doctors and nurses who work in
abortion clinics. In the Islamic world, bin
Laden may be a disciple of Qutb, but he has
abandoned Qutbs cautious, gradualist
approach. Muhammad Atta and the other
hijackers of September 11, 2001, seem to be in
a different league altogether. They drank
alcohol and frequented nightclubs, which are
hated symbols of modernity to more traditional
fundamentalists. It is as though they have gone
through religion to the nihilism at the heart of
some of the more desperate fundamentalist
visions.

All the great world religions insist that every
form of religiosity must lead to compassion.
Fundamentalists often fail this test: they are so
gripped by their fears of destruction that they
often downplay those passages in their
scriptures that speak of respect for the sacred
rights of others and emphasize the more
belligerent strains in their respective traditions.
Hence, they fail religiously. But they are
nevertheless a presence in our world. The fact
that these groups have mushroomed
spontaneously in a widespread rejection of the
modern ethos is disturbing. Their ideologies
reveal fears and anxieties that, as we now know
to our cost, no society can safely ignore.

164
Adrian Karatnycky, Under Our Very Noses: The terrorist next
door, National Review, 5 November 2001

As U.S. and British bombs strafe Afghanistans
sparse landscape, it is comforting to think that
we are striking at the heart of Islamic
extremism. Yet while Osama bin Ladens
network is clearly a major coordinating and
breeding ground for terror, not all the terrorists
who attacked America on September 11 were
the products of the Islamic Middle East and
South Asia. Many became extremists while
living in the West, sustained by fanatical
mullahs and organizations that operate openly
in our midst.

It is indeed reassuring to view the terrorists
who now threaten us as an exogenous threat
rooted in the Middle Easts Hobbesian
environment of obscurantism, poverty, and
repression but police and press investigations
offer evidence of a far more complex, and
ominous, picture.

The key hijackers, including Mohamed Atta,
were well-educated children of privilege. None
of them suffered first-hand economic privation
or political oppression. Equally important, it is
becoming clear that hundreds, if not thousands,
of graduates of bin Ladens schools for terror
are Muslims who have grown up and been
educated in the United States and Europe.

To understand the September 11 terrorists, we
should have in mind the profile of the classic
revolutionary: deracinated, middle class,
shaped in part by exile. In other words, the
image of Lenin in Zurich or London; or of Pol
Pot and Ho Chi Minh in Paris. Like their
Leninist revolutionary forebears, the terrorist
shock troops of al-Qaeda see their mission as
an international revolution in their case, to
create the khilafah, a global government under
Islamic rule. For them, Islamism is the new
universal revolutionary creed, and bin Laden is
Sheikh Guevara.

Mohamed Atta was the son of a moneyed
Egyptian lawyer and official, and those who
knew him have described him as a class snob
and snazzy dresser. Atta spent his last nine
years living in Germany and the U.S. While he
may have been linked to activist groups in
Egypt, there is nothing in his record that
indicates that he was a committed political
extremist or even deeply religious. Rather,
there is significant evidence that he came to his
fanatical beliefs in Hamburg home to as
many as 2,500 Islamic radicals in a community
of some 80,000 Muslims. No longtime Islamist
sleeper deposited from the East, he was
shaped by the environment of extremist Islamic
politics at a German technical university.

Another hijack leader, Ziad Jarrah, was the son
of well-off Lebanese parents who subsidized
his life in the West, wiring thousands of dollars
to support his academic studies and pilots
training. Educated in Lebanon at exclusive
private Christian schools, Jarrah played
basketball, drank alcohol, and while in the U.S.
drove a red Mitsubishi Eclipse. He is unlikely
to have been a committed Islamic radical in
Lebanon; he went to Germany soon after
concluding high school. Another key terrorist,
Marwan al-Shehhi, came from this same
Hamburg community, where, according to a
terrorism expert quoted in the Boston Globe,
there is a lot of peer pressure to embrace
radical Islam.

Counterintelligence operations and arrests
around Europe have confirmed that other
suspected plotters came to their radical views in
the West. Zacarias Moussaoui now being
held by federal authorities in New York
became radical in 1991 under the influence of a
Wahhabi group at his university in France.
Djamel Beghal, now under arrest in France, has
admitted to organizing a conspiracy to blow up
a U.S. cultural center. Beghal grew up in the
Paris suburbs and lived in London from 1997 to
1999, where he recruited future terrorists from
Muslims who had also grown up in Europe.

As the dragnet widens in Germany, France, and
Britain, more attention is being focused on the
significant network of religious political
groups. The website of the Islamist, London-
based al-Muhajiroun, Arabic for the emigres,
offers a global map of the organizations
branches in England, the U.S., Lebanon, and
Pakistan. A press release issued by the group
on September 16 screams, USA at War with
Islam. Among the groups slogans are USA,
You Will Pay and The Final Hour Will Not
Come Until the Muslims Conquer the White
165
House. Their goal is a world state under
Islamic rule.

Al-Muhajirouns spiritual leader, Sheikh
Omar Bakri Muhammed, is a Syrian cleric who
after the September 11 attacks issued a fatwa
branding Pakistani president Pervez Musharraf
an apostate and non-Muslim. Earlier fatwas by
the sheikh (who lives on the dole, courtesy of
British taxpayers) denounce as apostates
Muslims who run for office in Britain and
brand as sinners those Muslims who vote in
British elections. A February 2001 report in the
Guardian noted that Sheikh Bakri has openly
admitted to being responsible for sending as
many as 700 undergraduates to fight abroad,
mostly in Kashmir.

A mosque in Londons Finsbury Park is home
base for Supporters of Sharia (SOS), sharia
meaning the Islamic way of life and law. The
group is headed by Abu Hamza, a cleric who
lost both arms and an eye fighting in
Afghanistan. Such battle-hardened fanatics
have gravitated to the West in part because of
the freedom of maneuver and expression they
enjoy in democratic societies. Under the guise
of religious practice, they are now engaged in
the education of new generations of vengeful
fanatics, some of whom they inspire to learn
from bin Laden the arts of terror and war.
Hundreds of British Muslims already have been
recruited to fight in Afghanistan, the Balkans,
Kashmir, and Chechnya; many eventually
become part of the bin Laden terrorist network.

Conversion to extremist Islamism is a
significant phenomenon in the U.S. There are
many cases of young American-born Muslims
from secular or traditional Islamic families who
embrace radical beliefs, often through on-
campus political and religious networks.
U.S.-based radicals inspired by Sheikh Omar
Abdel Rahman were behind the murder of Meir
Kahane, the 1993 bombing of the World Trade
Center, and a plot to blow up New York City
tunnels and the U.N. complex. Jordanian
authorities stopped a terrorist attack on a 400-
room hotel in Amman. The ringleader was an
American-born Muslim, Raed Hijazi, who grew
up in a privileged family, studied business
administration at Cal State, and, according to
Jordanian prosecutors, got his taste of radical
Islamic teaching at a mosque near his
Sacramento campus, whose mullah inspired
him to join the mujaheddin in Afghanistan,
where he became acquainted with the bin
Laden network. A California Islamist website
(www.khalifornia.org) promoted the need for a
khalifa (a ruler who will build the worldwide
Islamic state under strict religious laws), and
this idea is routinely discussed at Muslim
student forums in the U.S.

All this makes clear that many of the terrorists
we are now confronting are a Western
phenomenon, existing inside the Islamic
diaspora that is an established fact of life in the
U.S. and Europe. In this sense, the terrorists
may have as much in common with the radicals
spawned in the U.S. and the industrial
democracies in the 1960s as with the shock
troops of Hamas or Hezbollah.

Like the leaders of Americas Weather
Underground, Germanys Baader-Meinhof
Gang, Italys Red Brigades, and Japans Red
Army Faction, the Islamic terrorists were
university-educated converts to an all-
encompassing neo-totalitarian ideology. Just as
the terrorists who plagued the industrial
democracies in the 60s and 70s lionized
Leninist guerrillas like Uruguays Tupamaros,
the Islamist terrorists are youthful members of
a bored middle class who have grown
contemptuous of soft and corrupt elites and
are drawn to the romance of revolutionary
guerrilla movements.

The Weather Underground and Baader-
Meinhof Gang, too, targeted government
buildings, military and police headquarters, and
banks and other symbols of our economic
system. And still other parallels are worth
keeping in mind. The terrorist gangs that
operated in the West received logistical and
financial support from the intelligence services
of the Communist bloc. Some of them found
refuge and remain to this day in Leninist
havens like Cuba and North Korea. Sudan,
Afghanistan, and Iraq play the same role for
Islamist terrorists.

And this means that the war against terrorism
will require relentless efforts within the borders
of the West even as it is prosecuted in the far-
flung outposts of the Islamic world. It means
that networks of terrorists may well be found
among students and scholars who today walk
the halls of Western universities and
congregate after hours in sundry political and
religious groups, not as sleepers ready to
act under orders, but as Islamic radicals minted
right here. This will pose key challenges for our
166
open societies as we seek to understand the
topology of the Islamic diasporas and their
religious, political, civic, and charitable
institutions, while preserving our own values of
tolerance.

It certainly is true that bin Laden and his
associates helped finance, train, and sustain the
terrorist-hijackers and must remain a top
priority. But it is wishful thinking for
Americans and Europeans to assume that
fighting terrorism is only a matter of smart
missiles, special-forces operations, the
uprooting of financial support networks,
pressure on terror-sponsoring states, and the
implementation of tighter border and
immigration controls.

The terrorist threat can be disrupted and
diminished with such techniques, if pursued
rigorously and relentlessly over a long time.
But it cannot be eliminated unless we are also
prepared for a comprehensive effort to
understand and interdict the threats emerging
on our own shores and throughout the Western
world. Such an effort must not be driven by
hysteria or ignorance, nor should it lead to
scapegoating or other injury to the millions of
law-abiding Muslims who are now part of the
West. Indeed, such a careful domestic
antiterrorism effort should be something that
decent Arab and Islamic groups not only
welcome but aid.

The long shadow of Osama bin Laden now
hovers over the West but it is joined by the
shadows of the many new bin Ladens, whose
despicable beliefs are taking shape in our own
cities, and suburbs, and schools.

167
Walter Laqueur, Toward a definition, or Humpty Dumpty and
the problem of terrorism, in No end to war: terrorism in the 21st
century, New York: Continuum, 2003, 232-238

The Problem of Definition

After thirty years of hard labor there still is no
generally agreed definition of terrorism. On the
contrary, as far as the media are concerned,
circumlocution has become the order of the
day. This is not surprising because there is no
universally accepted definition as to what
fascism or communism is or democracy and
nationalism or virtually any other political
phenomenon. Terrorism more perhaps than
most concepts has generated widely divergent
interpretations. An author writing in the 1980s
listed more than a hundred definitions, and
since then there have been numerous additions.
These difficulties could have been foreseen
from the very beginning and not just because it
was unlikely that terrorists and their well-
wishers would ever agree with their victims
about the nature of their actions, nor would
Indians and Pakistanis, Israelis and Palestinians,
Spanish and Basque, and all the other parties
involved. The term terrorism has now
everywhere a bad, negative connotation in
contrast, for instance, to guerrilla, which
enjoys a far more positive reputation. There are
books about guerrilla productions of plays and
movies and even guerrilla marketing. There are,
to the best of my knowledge, no texts about
terrorist marketing. For this reason terrorists,
with a very few exceptions, have tried hard not
to be labeled as such, and some writers too
have shown great inventiveness choosing
neutral terms such as militants, activists,
commandos, raiders, resistants, insurgents,
urban guerrillas, or in the worst case, gunmen.
(But gunmen do not always use guns, quite
apart from the fact that some of the gunmen are
gunwomen; gunpersons would be a more
accurate term.) A new entry in Rogets
Thesaurus is needed to find further synonyms
for terrorism.
There are other obstacles to overcome in the
search for a definition of terrorism. It is a very
old phenomenon and it has changed its
character and meaning over time and from
country to country. It is most unlikely that any
contemporary definition of terrorism would
even come close to describing terrorism in
1850 or 1930, just as a definition of democracy
in ancient Greece would be of little help with
regard to democracy in the modern world.
According to title 22 of the United States
Code, terrorism is premeditated, politically
motivated violence perpetrated against
noncombatant targets by sub-national groups or
clandestine agents, usually intended to
influence an audience. But the politically
motivated has become debatable over time, or
at least insufficient, and the noncombatants is
certainly no longer true. Most terrorist groups
in the contemporary world have been attacking
the military, the police, and the civilian
population. For this reason, the definition
suggested by an Israeli author proposing to
name terrorists those who aim to attack
randomly the civilian may not be very helpful
in the real world.
In the past, it was frequently true that
terrorists tried to influence an audiencethe
famous propaganda by deed concept of
nineteenth-century anarchists. But if terrorists
can kill thousands of people and cause
immense material damage, as the possibility to
defeat the enemy by arms alone becomes more
feasible, the psychological weapon is no longer
that important.
The attempts to find a definition go back to
the days of the League of Nations in 1937 (all
criminal acts directed against a state . . . and
intended to create a state of terror in the minds
of particular persons or the general public).
But this definition was found wanting even at
the time and was never generally accepted. A
UN definition proposed in 1999 argued that
terrorism consisted of criminal acts intended to
provoke a state of terror, and these were in any
circumstances unjustified whatever the
considerationsthat of a political,
philosophical, ideological, racial, ethnic
religious, or other nature. But this too was
rejected by many governments who found the
condemnation too sweeping. The United
Nations has not agreed on a definition of
168
terrorism and for obvious reasons never will. It
is frequently argued that terrorists should be
treated according to the Geneva conventions
signed after World War II and the two
protocols added in 1977; these conventions,
however, do not mention terrorism, and even if
they would it would still not be clear who will
be the bona fide terrorists entitled to
protection under these conventions. The
tendency in international law has been toward
establishing rules to enforce restraint in war,
whereas the prevailing tendency among
terrorist groups is, on the contrary, to shed
restraints which are not in their interests.
Furthermore, international law concerning the
rules of war is, by necessity, lagging behind
technological developments in warfare; it was
formulated before weapons of mass destruction
became widely accessible.
When the Arab states gathered in 1989 and
again in the 1990s to talk about terrorism, there
was similar dissent. Syria and several other
countries insisted that the armed fight against
foreign occupation was not terrorism but
justified struggle for national liberation. But
such reservations, even if justified, made it
clearly impossible ever to agree when terrorism
was terrorism and when it was national
liberation: many Lebanese citizens would
regard the Syrian military presence in Lebanon
foreign occupation whereas the Damascus
government clearly would not.
An academic expert (A. P. Schmid)
suggested in 1992 a simple expedent: namely,
to consider an act of terrorism the peacetime
equivalent of a war crime. But this would have
meant that the perpetrators of an attempt to kill
Adolf Hitler in the 1930s (or Pol Pot or any
other postwar dictator) would have to be judged
war criminals, hardly a plausible proposition.
The Central Intelligence Agency has been
mainly preoccupied with international terrorism,
which it defined as conducted with the support
of foreign governments or organizations and/or
directed against foreign nations, institutions, or
governments. The CIA has also published
valuable annual surveys, but the self-imposed
restriction on dealing with international
terrorism led to many anomalies. If for
instance an Egyptian terrorist group ambushed
and killed a group of foreign tourists, this
would be listed in its surveys, but if the victims
were Egyptians it would not be included. (What
if the tourists had dual nationality?) Countries
in which terrorism was endemic such as Sri
Lanka and Colombia would not qualify under
the category of international terrorism, unless
of course they also engaged in international
activities such as smuggling drugs.
The search for a definition received fresh
impetus after the events of September 2001
when new legislation was introduced in many
Western countries. The European Union
proposed a draft according to which terrorism
was considered: an act aimed at seriously
altering or destroying the political, economic,
and social structure by member countries, a
rather clumsy attempt of definition because a
social revolution could be peaceful as well as
violent. Terrorism was defined as an organized
act of violence or threat of violence that caused
terror and fear such as killing, assassination, the
taking of hostages in airplanes and ships, and
the use of bombing aiming at advancing
political aims. The same draft also went into
considerable detail as far as punishment for
murder and other crimes was concerned. This
provoked the ire of the human rights advocates,
for they feared that urban violence might be
interpreted in too sweeping a way. What if a
legitimate demonstration would turn a little
violent? Would it be considered an act of
terrorism and punished accordingly?
Such concerns were often divorced from
realities. Even though Britain under a Labor
government had introduced a Prevention of
Terrorism Act in 1974, it had remained in fact
the country in which terrorists had almost
unlimited freedom of maneuver, not only with
regard to freedom of speech and organization
but also as far as their personal safety was
concerned. The same was true in Germany
where mosques (and, to a certain extent, even
cultural centers) enjoyed something akin to
extraterriroriality; the security forces could
observe how young men were indoctrinated
and even enlisted for armed struggle but they
could not intervene. Terrorists wanted for
murder in their home countries such as Egypt
or for terrorist conspiracy in Italy and the
United States were not extradited. Even Syria
had been more forthcoming in regards to
extraditing Egyptian terrorists without much
fanfare.
Why should the issue of definition be of
such importance? It is, of course, of no
consequence in nondemocratic societies where
terrorists (or persons suspected of terrorism)
can be detained and sometimes executed for
crimes of state, such as treason, without much
regard for legal niceties. It is of importance in
Western societiesin the arrest and the legal
169
prosecution of terrorists. But even in this
context, the definition of terrorism is of limited
significance only because terrorists are
normally sentenced for crimes committed, such
as murder or kidnapping, and not for terrorist
opinions voiced. It is only when membership in
a terrorist organization becomes a crime that
the definition of terrorism is of importance.
Several misconceptions have obfuscated the
issue. A great deal of mischief has been caused
by trying to define terrorism in the light of
current events or events in one country only.
Terrorism at the present time is mainly
religious Islamic in character, but thirty years
ago it was preponderantly left-wing and at
other times it emanated from the extreme right.
Terrorism has been in certain conditions
justified. Even the Catholic Church recognized
that tyrannicide was admissible in certain
circumstances. Resistance against a brutal
dictatorship in which no other means of redress
existed cannot be condemned on moral or any
other grounds. But this refers mainly to past
periods in which terrorism was the ultima ratio,
the last resort of those striving for freedom.
Nineteenth-century terrorists went out of their
way not to hit innocents; latter-day terrorists
had no such scruples but on the contrary often
targeted the innocent. More recently, terrorism
has often become the prima ratio of small
groups trying to impose their extreme views on
a dissenting majority.
According to an old and widespread
sophism, one mans terrorist is another mans
freedom fighter. This is true in the sense that
criminals and victims will seldom agree on the
nature of a crime; quite frequently people do
not agree about a traffic accident. It is as true as
saying that St. Francis and Mother Teresa had
many admirers, but so had Hitler and Stalin and
that therefore there is not really much to choose
between them. But there is no room for moral
relativism (or nihilism) in a civilized society,
and there are yardsticks by which to measure
human actions. Eichmann and Pol Pot, even if
they had sympathizers, will not be proposed for
sainthood.
Why the great coyness concerning the use of
the word terrorism and terrorists? Why the
use of ludicrous terms such as armed struggle
or Red Army or guerrilla or Red Brigade?
This was not always the case. The Russian
revolutionaries of a century ago were far less
sensitive and openly talked about their terrorist
struggle. Boris Savinkov, the head of the
terrorist organization of the Russian Social
Revolutionaries, called his recollections,
published before World War I, Memoirs of a
Terrorist. It became a classic and was
translated into many languages. Why should
Western media eighty years later think such a
choice of terms impermissible? It had, of
course, to do with the change that has taken
place in terrorist practice; it was one thing to
plan the assassination of a dictator or a police
chief, which would generate support at least on
the part of some of the public. The
indiscriminate murder of innocent people, of
small children and elderly people, does not
make for good public relations. In other words,
the new terrorism is different from the old, and
while todays terrorists want to practice it, they
resent the label. The media were quite willing
to respect their sensitivity.
There have been, as always, a few
exceptions when ideologues of terrorism have
made no bones about their views and strategies.
Thus, for instance, Sheikh Azzam bin Ladens
teacher, who has been mentioned more than
once in these pages:
We are terrorists, and terrorism is our friend
and companion. Let the West and East know
that we are terrorists and that we are
terrifying as well. We shall do our best in
preparation to terrorize Allahs enemies and
our own. Thus terrorism is an obligation in
Allahs religion.
There is the unfortunate and often ridiculous
practice in some of the media to call a spade
not a spade but an agricultural implement. It is
understandable that, to give but one example,
international news agencies such as Reuters
feel uneasy about the use of the term terrorist
because it might offend the terrorists and
perhaps even endanger their correspondents in
Gaza, on the West Bank, and other parts of the
world. But it would have been more honest if
Steven Jukes, head of the Reuters news
department, had admitted that the use of terms
such as militants or activists to identify
terrorists is motivated by fear and perhaps also
the wish not to lose customers, rather than the
desire to be objective and tell the truth. The
British Broadcasting Corporation (BBC)
followed a more. selective policynot using
the term terrorist in the Middle East but
feeling free to use it in other parts of the world.
The Chicago Tribune decided to forgo the use
of the term terrorism because it is
tendentious and propagandistic, and because
todays terrorist sometimes turns out
tomorrows statesman. By the same token,
every political term could and should be
170
dismissed as tendentious and even
propagandistic, and while todays terrorist may
indeed be tomorrows statesman, this does not
change the fact that at one stage he practiced
terrorism. Reuterss decision provoked a great
deal of cynical comment: Why not call Jack the
Ripper an amateur abdominal surgeon and
Timothy McVeigh (of Oklahoma City fame) a
person who left a volatile cargo in a nonparking
zone? Why not redefine Pol Pot a recruiter for
farming work or Eichmann an activist
demographer? Like Humpty Dumpty, some of
the media decided that when they use a term it
means just what they choose it to mean.
But the issue is, of course, a serious one. To
call a terrorist an activist or a militant is to
blot out the dividing line between a suicide
bomber and the active member of a trade union
or a political party or a club. It is bound to lead
to constant misunderstanding: If an Indian
journal publishes statistics about political
activists killed in Jammu and Kashmir in the
1990s, the figures do not refer to people who
have killed but were killed: candidates in
elections. If Reuterss head office in London or
that of the Chicago Tribune were destroyed in a
bomb attack or if their staff male and female,
would have their throats cut by a group of
invaders while sitting at their desks, it is
unlikely that their colleagues would call the
perpetrators activists.
Another red herring frequently encountered
is the argument that the whole preoccupation
with terrorism by small groups of people is
misplaced because terrorism exercised by
governments has been far more bloody, causing
far more victims. This too is perfectly true, for,
to give but two obvious examples, the terror
exercised by Nazi Germany and Stalinist
Russia, not to mention the aggressive wars
waged, has caused far more victims than all
terrorist groups in history. This argument has
been used by the terrorists themselves, arguing
that there is no difference between their
activities and those by governments and states.
It has also been employed by some
sympathizers, and it rests on the deliberate
obfuscation between all kinds of violence, of
which there has been a great deal in the history
of mankind ever since Cain killed his brother
Abel. This argument ignores the fact that the
very existence of a state is based on its
monopoly of power. If it were different, states
would not have the right, nor be in a position,
to maintain that minimum of order on which all
civilized life rests. It would not be entitled to
apprehend thieves or murderers; it would not
even be entitled to collect taxes and enforce
traffic regulations such as driving on the right
(or the left) side of the road. It would, not, of
course, be entitled to have a foreign policy,
except of course the right of giving some of its
revenue to other, less fortunate countries.
Lastly, there has been a tendency to refrain
from the use of the term terrorism not so
much for political reasons but because of
ignorance. In the 1970s and 1980s, the term
urban guerrilla was widely used in order to
identify terrorists, partly perhaps because the
term guerrilla seemed more value-free and
objective, but largely no doubt because of
genuine lack knowledge. The difference
between terrorist and guerrilla is not a
semantic one but one of essence. The strategy
of guerrillas is to establish bases (sometimes
called foci) usually far away from the populated
centers of a country and the reach of the
authorities, so-called liberated zones in which
the guerrillas build their own institutions such
as schools, openly conduct propaganda, and
mobilize the populationin fact, a
countergovernment. These liberated zones are
gradually expanded; the military units are
drilled and equipped, and they grow in size and
engage in battle with the government troops
until they prevailor are defeated. This was
the strategy of Mao and all the other major
guerrilla movements in the period after World
War II. Such open activities are, of course,
impossible in big conurbations (even less in
small towns) because the terrorists cannot
operate in major units. They have nowhere to
hide and to retreat and would invite defeat by
the government forces. The true guerrilla
leaders such as Che Guevara have been
opposed in principle to military operations in
cities; the towns were for them the graveyard
of the revolutionariesnot only for tactical
reasons but also because of the temptations of
life in the big cities.
True, in some instances, such as the
Algerian war of liberation, guerrillas also
engaged in urban terrorism; in Ulster the IRA
tried to establish (not very success fully)
liberated zones in cities such as Belfast, and al
Qaida has tried its luck in all kinds of
operations including terrorism and guerrilla
tactics. The same is true for the Chechen in the
Northern Caucasus. But these have been the
exceptions rather than the rule. An urban
guerrilla is a contradiction in terms; the use of
the term is either based on ignoring what
171
terrorism and guerrilla mean or it is
deliberately misleading, an attempt to improve
the image of the terrorist.
With all these misunderstandings, deliberate
and involuntary, it is still true that, as Brian
Jenkins has put it, people reasonably familiar
with the terrorist, phenomenon will agree 90
percent of the time about what terrorism is, just
as they will agree on democracy or nationalism
or other concepts. In fact, terrorism is an
unmistakable phenomenon, even if the search
for a scientific, all-comprehensive definition is
a futile enterprise. Many years ago I wrote that
any definition beyond the systematic use of
murder, injury, and destruction, or the threat of
such acts, aimed at achieving political ends
will result in controversy, and arguments will
go on for ever. The position of the student of
terrorism is not unlike that of a physician
dealing with a disease, the exact causes of
which remain unknown to this day, or a drug of
which it is not known how precisely it
functions. But this will not prevent him from
diagnosing the disease, or from prescribing the
drugs that are applicable.
172
Lawrence Davidson, Islamic fundamentalism: An introduction,
Westport: Greenwood Press, 2003, 73-76

Terrorism and Islam

Long before the attacks on the World Trade
Center and Pentagon, most Americans saw the
Moslem and Arab world as violent and hostile.
Research done on American mass media
presentations of the Middle East, Arabs, and
Muslims by noted scholars has demonstrated a
consistent tendency among Americans to
portray the peoples of the region as primitive
and aggressive. As Jack Shaheen, a scholar
noted for his studies of Arab images, has put it
in reference to television, the media tends to
perpetuate four basic myths about Arabs: they
are all fabulously wealthy; they are barbaric
and uncultured; they are sex maniacs with a
penchant for white slavery; and they revel in
acts of terrorism.
Reinforcing these television images are print
media sources such as newspapers, magazines,
and journals that focus attention on the alleged
violent nature of Islam and its practitioners.
The historian Edward Said has observed that
such sources (as part of overall media coverage)
lead Americans to view the Islamic world . . .
reductively, coercively, oppositionally . . .
[presenting] Islam as a resurgent atavism,
which suggests not only the threat of a return to
the Middle Ages but the destruction of what is
regularly referred to as the democratic order in
the Western world.
As a result of these negative stereotypes,
some Americans have adopted a theory of
conspiratorial violencethe belief that there
exists a world wide Islamic terrorist
infrastructure that is responsible for such
disparate acts of violence as the World Trade
Center bombings in 1993 and 2001, various
airplane hijackings, attacks on U.S. military
installations in Lebanon in 1983 and Saudi
Arabia in 1997, and the like.
There are several reasons why Americans
have come to view Middle Easterners in
general and Muslims in particular in these
negative ways. One important reason is the
prevailing ignorance of Middle Eastern culture
and history, as well as the Islamic religion.
These subjects either are not taught in
American schools or are often presented in a
biased fashion. Michael Suleiman, a political
scientist who has studied American high school
textbook presentations of Arabs and Muslims,
has concluded that they present them as
backward, primitive, uncivilized people
who . . . appeared warlike, powerful, barbaric
and cruel. In addition, while the number of
Middle Easterners and Muslims in the United
States is growing they still constitute a small
minority. Thus, most Americans do not have
the direct contact with these groups that might
help overcome negative images.
Other observers have speculated that the
collapse of communism in eastern Europe has
helped focus American attention on the anti-
Western activities of Islamic fundamentalist
organizations. As this theory goes, for those
Americans who want or need enemies, the post
of chief ideological rival became vacant with
the demise of the Soviet Union in 1990.
Therefore, the tensions and frictions that had
long existed between the West and Muslim
lands, except in the case of the Arab-Israeli
conflict, and had been overshadowed by the
American fixation on the Soviets, could now
claim attention. The alleged desire of the
communists to conquer the world was readily
replaced by the fearful notion of worldwide
Islamic jihad. As David Ignatius, a long-time
commentator on U.S. foreign policy, has put it,

The Cold War has barely ended, but already
the search seems to be on for a new global,
universal enemy around which the United
States can orient its foreign policy . . .
Topping the global list has been our all-too-
reliable nemesis: fundamentalist Islam. Islam
seems in many ways to fit the bill, enemy-
wise: Its big; its scary; its anti-Western; it
feeds on poverty and discontent; it spreads
across vast swaths of the globe that can be
colored green on the television maps in the
same way that communist countries used to
be colored red.

Finally, another reason Americans have come
to view Muslims as violent and evil stems
from an ignorance of their countrys foreign
policy in the Middle East. Most Americans,
including many politicians, assume that the
United States pursues policies that promote
democracy in the region. This is often not the
173
case. The United States has long supported,
both diplomatically and militarily, authoritarian
and repressive governments such as those in
Egypt, Iraq (before the invasion of Kuwait),
Jordan, Saudi Arabia and the Gulf area, Iran
prior to the Islamic revolution, and elsewhere.
In 1953 the CIA was directly involved in the
overthrow of the popular and constitutionally
appointed Iranian Prime Minister Muhammad
Mossadegh. In 1957 the United States was
involved in an unsuccessful attempt to
overthrow the Syrian government. In 1958
President Dwight D. Eisenhower sent U.S.
Marines to Beirut in order to support a minority
government considered friendly to America. In
1983 President Ronald Reagan intervened in
the Lebanese civil war on the side of minority
Christian parties. The results of this last
adventure were disastrous and included the
death of hundreds of U.S. Marines and some
diplomats, and an increase in kidnappings and
terrorism directed at Americans.
Often, the United States has switched sides
in the Middle East, attacking today those we
armed and trained yesterday. For example,
prior to Iraqs invasion of Kuwait, the
American government materially aided the
dictatorship of Saddam Hussein because of its
animosity toward Iran. Then, following the
Gulf War, the United States pressured the
United Nations to impose draconian sanctions
on Iraq that contributed to the deaths of many
Iraqi citizens, particularly children. We thus
generally weakened the same population we
hoped would overturn the Iraqi government.
During the Afghan war against the Soviet
Union, America helped arm, train, and supply
Muslim fundamentalist fighters, including
Osama bin Laden and his followers. Later,
during the war in Afghanistan, the United
States allied with Pakistan despite the fact that
this country had armed and supported the
Taliban regime. While each of these alliances
seemed expedient at the time, in the long term
they hurt U.S. interests and certainly
contradicted the ideals America was supposed
to represent. Finally, the United States has long
armed and diplomatically protected (largely
through the use of its veto in the UN Security
Council) the State of Israel. This support has
facilitated Israeli behavior in the Palestinian
occupied territories that is often considered
oppressive, expansionist, and in the opinion of
many scholars and legal experts, in violation of
international law.
The peoples of the Middle East, Muslim and
otherwise, are well aware of these U.S. policies
and actions even if Americans are not. This
history has convinced some Islamic
fundamentalist groups that the United States is
an active ally of those governments they
believe are responsible for the regions ills and
thus is an enemy. Therefore, when they take up
arms against these regimes it is but a small step
to seeing the United States and its
representatives as legitimate targets.
The American peoples ignorance of both
Middle East history and their own
governments actions in the region means that
they are unaware of what might motivate some
Middle Easterners to become so angry that they
might take up terrorism. Thus the attacks of
September 11, 2001, seemed to many
Americans to come without a discernable cause.
The ubiquitous question following that event
was Why do they hate us? President George
W. Bushs answer to that question was,
variably, the attackers and their sponsors hate
liberty, or they are jealous of our freedoms,
or they are just evil-doers. These assertions
seem dangerously naive. The former mayor of
New York City, Rudolph Giuliani, in his
speech to the United Nations on October 2,
2001, asserted that the motivations of the
attackers were irrelevant. He explained that
those who practice terrorismmurdering or
victimizing innocent civilianslose any right
to have their cause understood by decent people
and lawful nations. Yet seeking to understand
motives and the historical context of actions is
not the same as justifying those actions. And,
such an understanding is necessary to any
effective, long-term response. If the United
States is to change attitudes in the Middle East
and therefore minimize the possibility of future
terrorist attacks coming from that region,
Americans must come to an understanding of
both sides of the present divide. If the United
States is to insist on civilized behavior, the end
of actions that harm innocent people and the
promotion of human rights and freedoms such
as democracy, then it best be sure that it too
follows the rules it insists others follow.

174
8. Migration

Overview
Although humans have been migrating for thousands of years, migration, both legal and
illegal, has increased steadily in the last 50 years. At present around 150 million people are
living outside their country of origin, including 15 million refugees. More than 21 percent of
the Australian population, 17 percent of the Canadian population and 11 percent of the U.S.
population are foreign born. People migrate for many reasons social/cultural, economic,
political/security and even environmental. While some choose to migrate, others are forced to
do so, and where they move from and to is influenced by push factors (including extreme
poverty, political conflict, drought, famine, etc.) and pull factors (political stability,
employment opportunities, high wages and living standards).

Whether they move because of the desire for improved living standards or are fleeing
persecution or environmental disasters, migration has a significant impact upon both the
country of arrival and the country of origin. For the country of origin the migration of both
skilled and unskilled labour can severely limit its capacity to participate in a global economy.
For the country of arrival, migrants bring social and economic benefits. According to the
United Nations Population Division, during the first half of the 21st century, the populations
of most developed countries are projected to become smaller and older as a result of below-
replacement fertility and increased longevity. Without migration it is predicted that these
declines and the ageing of populations will be even greater. Many migrants are also employed
in sectors and positions which cannot be filled by the native population.

One of the contradictions of the contemporary world is that while globalisation encourages
the free flow of trade and information, the free flow of people has been largely resisted. In
many developed countries migration is considered by some to be a danger rather than an asset,
and border controls have become tighter as countries seek to regulate who enters their
territory. This week we will consider how globalisation has transformed the movement of
people. We will look particularly at the black market that moves millions of people around the
globe each year.

Objectives
x Examine how globalisation has transformed the movement of people

Discussion points
1. How has globalisation transformed the movement of people? What does a globalised
world mean for migration?
2. How does gender affect the nature of migration?
3. While globalisation encourages the free flow of trade and information, the free flow of
people has been largely resisted. Discuss.
4. Why are slavery and people trafficking booming in the 21st century? How do trafficking
networks exploit globalisation? What can be done to halt or control illegal migration and
people trafficking?
5. What impact does large-scale migration have on domestic politics? Should migration be
allowed to become a political issue?
175
Readings
Naim, Moises, Why is slavery booming in the 21st century?, in Illicit: How smugglers,
traffickers and copycats are hijacking the global economy, New York: Doubleday, 2005

Chin, Ko-Lin, Clandestine immigration to the United States, Philadelphia: Temple University
Press, 2000

176
177
178
179
180
181
182
183
184
185
186
187
188
189
Ko-Lin Chin, Clandestine Immigration to the United States,
Philadelphia: Temple University Press, 2000

Chapter 3: The Social Organization of
Smuggling
Unlawful entry of Chinese nationals into the
United States is not a recent phenomenon.
After the Chinese Exclusion Act (1882), a
result of widespread racism against the Chinese,
barred Chinese from entering the United States
(Saxton 1971; Salyer 1995), illegal smuggling
brought some twenty thousand Chinese into the
country annually in the last years of the
nineteenth century (Tsai 1986; Storti 1991). In
one method, Chinese immigrants fraudulently
claimed that they were children of naturalized
Chinese (Sung 1967). Some Chinese women
were also brought into the United States to
work in the brothels of San Franciscos
Chinatown (Martin 1977).

In more recent years, family members living in
the United States have helped illegal
immigrants. After the United States established
formal relations with China in 1979, many
overseas Chinese began to visit their families
and relatives in China and were shocked by the
level of poverty there. Out of sympathy or guilt,
or simply to impress their long separated
families and friends, the overseas Chinese gave
money or expensive gifts to their relatives
(Kwong 1997), no doubt leaving a lasting
impression on the local Chinese that all
overseas Chinese were well-to-do. This
perception inspired other Chinese to start going
abroad in the early 1980s. At the beginning,
most Chinese were brought into the United
States across the Canadian or Mexican borders
(Myers 1996).

As already mentioned, in the wake of the 1989
Tiananmen Square violence, political asylum
was extended to Chinese students in the United
States. Later, as U.S. government officials
became concerned about human rights
conditions in China, they also granted political
asylum to most Chinese who could demonstrate
that they were persecuted under Chinas
one-child policy (Sing Tao Daily, September 2,
1992). The U.S. governments lenient
immigration policy, coupled with the
indifferent attitude of local Chinese authorities
toward illegal immigration, resulted in an
influx of illegal Chinese immigrants in the
early 1990s.

As illegal Chinese immigration to the United
States exploded in the early 1990s, Chinese
smugglers reacted by developing more daring
methods. Instead of transporting a relatively
small number of immigrants via air, they
discovered a way to move hundreds of illegal
immigrants by ship across the Pacific Ocean.
Sea smuggling was developed in 1989, and it
expanded rapidly over the next three years
before subsiding in the aftermath of the Golden
Venture incident.

THE SMUGGLERS
Little is known about the people and
organizations involved in smuggling Chinese to
the United States. Law enforcement authorities
know little about human smugglers individual
characteristics, such as their country of origin,
immigration status (if they are in the United
States), or occupation. They are also uncertain
whether smugglers are members of Chinese
triads, tongs, or street gangs. Nor is there much
data on the structure of people-trafficking
organizations. How, for example, are traf-
ficking rings organized? How are smugglers
linked to Chinese government officials? How
do they develop smuggling routes? Moreover,
there is no credible information on the
connection, if any, between human smuggling
and heroin trafficking, although American
authorities assume that some Chinese crime
groups are involved in both (U.S. Senate 1992;
Myers 1994).

My subjects often distinguished between big
snakeheads and little snakeheads. Big
snakeheads (or arrangers/investors), often
Chinese living outside China, generally invest
money in a smuggling operation and oversee
the entire operation but usually are not known
by those being smuggled. Little snakeheads, or
recruiters, usually live in China and work as
middlemen between big snakeheads and
customers; they are mainly responsible for
finding and screening customers and collecting
down payments.

190
Big Snakeheads
According to a Chinese police officer I
interviewed, there is no typical big
snakehead:

Big snakeheads can be categorized according
to their education level, citizenship, and
closeness to Chinese government officials.
There are well-educated and poorly educated
big snakeheads, foreign-based and China-based
big snakeheads, and good and bad big
snakeheads. In general, big snakeheads who
help people to sidu [to leave China legally and
enter another country illegally] are closely
associated with Chinese authorities because
they need to obtain passports and other travel
documents [e.g., exit permits] from
government units. Big snakeheads who help
people to toudu [to leave China and enter
another country both illegally] are unlikely to
be affiliated with authorities because they do
not need to acquire travel documents for their
clients. Some big snakeheads are basically
con men whose main purpose is to cheat
customers out of their down payments. Finally,
there are snakeheads who know they are unable
to smuggle people to the United States, yet
they guarantee their customers safe arrival in
the United States. These snakeheads smuggle
people out of China by any means and then sell
them to snakeheads in transit points for the
final leg to America.

Some of my respondents said that all contacts
were made through little snakeheads and that
they never met their big snakeheads. A female
big snakehead explained why big snakeheads
generally do not deal directly with their clients:

At the very beginning, I was involved in
smuggling people from Fuzhou to Hong Kong.
During that time, I always talked to my clients
face to face. Once, I brought a small group of
people to Shenzhen and was about to help them
enter Hong Kong. All of a sudden, my clients
guarantors and relatives in Hong Kong changed
their minds and said they were not going to pay
the smuggling fees on my clients behalf. I had
no choice but to bring those would-be
immigrants who were already in Shenzhen back
to their villages in Tingjiang. Since I had to
spend money transporting them from Tingjiang
to Shenzhen, I was supposed to keep the down
payment, which was about $2,500 per person.
Yet I returned to everybody half of their down
payments. Nevertheless, my clients were not
happy; they wanted the entire down payment
back. Therefore, there was a major disagreement
among us. My clients called and threatened me.
Later, when I visited Tingjiang, a group of
people stopped me and forced me to return their
money. Since that incident, I made up my mind
that I would not interact directly with my clients
anymore. I asked an assistant to deal with my
clients, and I remained behind the scenes.

Some of my subjects did not even know who
their big snakeheads were. Subjects who did
meet, or who knew, their snakeheads had
mixed impressions. Most tended to see them as
respected business people rather than as
criminals. According to a twenty-five-year-old
male from Changle: Big snakeheads are
mainly wealthy business owners. Thats why
people trust them. They are not criminals. Big
snakeheads have got to have a good
reputation.

Snakeheads were often Chinese Americans
closely connected to authorities in the Fuzhou
area. Originally from the area, these
snake-heads played an active role in
contributing money to their hometowns,
according to many of my respondents. A
twenty-five-year-old male construction worker
from Fuzhou City considered his snakehead a
small capitalist who had returned to China and
made generous donations to improving the
local infrastructure.

Many respondents thought of snakeheads as
philanthropists and appreciated their services.
The $30,000 fare to America was worth it, in
their opinion. In the words of a
forty-three-year-old male from Tingjiang, I
look at human smuggling as benevolent work
because a snakehead can help people out of
their predicament. A nineteen-year-old woman
from Changle described snakeheads as good
people because, in a way, they help China solve
her overpopulation problem.

Respondents who encountered no hardships on
their voyage normally had only good things to
say about their snakeheads, especially if they
were well-treated once they reached New York.
A forty-four-year-old male from Tingjiang
described his experience:

[One of] my snakeheads was a classmate of
mine who was living in Hong Kong. He
obtained a Chinese passport for me and helped
me to get to the first transit point. After I
arrived in New York City, another person and I
were kept in [another] snakeheads house
where the two of us shared a bedroom. The
meals were good, and we were allowed to
watch TV and talked to each other. The [New
York] snakehead treated us very well; he
prepared meals for us every day. He even said:
191
If you are short of a couple of thousand
dollars dont worry. Pay me later when you
have the money. Besides, everything went
very smoothly on the way to America. We
lived and ate well throughout the trip. We were
also able to enjoy ourselves. For instance, in
Bolivia, we visited quite a few tourist
attractions. Before we left Bolivia, the
snakehead there even threw us a farewell party.
Everybody in the group considered this to be a
nice trip.

Other respondents, however, saw their
snakeheads as ordinary people out to make
money. A few regarded big snakeheads as self-
ish, untrustworthy people who cared nothing
for the needs and feelings of their customers.
Respondents who were unhappy with their
snakeheads felt they had been misled or lied to.
Some were told that they would fly to the
United States but were later coerced into taking
the sea route or crossing the rugged
China-Myanmar border. Some who were
smuggled by sea had been told that they would
be transported on luxurious ocean liners. One
snakehead promised that the ship would be
furnished with a theater, a free bar, and a
swimming pool.

After arriving in New York City, some subjects
were forced to pay more than the price set in
China and overcharged for phone calls to China.
Some snakeheads sold their clients to other
snakeheads at various transit points when they
were unable to obtain fraudulent travel
documents for them.

Most of my respondents, however, viewed big
snakeheads as smart and capable business
people with power, wealth, good reputations,
and connections. They were described as
people who were paitou (had an aura of wealth),
lihai (shrewd), youbanfa (highly capable),
kekao (reliable). Most big snakeheads were
Fuzhou-born overseas Chinese living in the
United States, Hong Kong, or Thailand, though
Taiwanese in Taiwan, Brazil, Panama, and
Bolivia were also said to be active in human
smuggling. My respondents also said that a
small number of high-ranking or retired
Chinese officials were involved in smuggling.

Little Snakeheads
Little snakeheads, also called lakejia
(recruiters), are often local Chinese rather than
overseas Chinese. All kinds of people
seemingly can become little snakeheads,
including low-level government employees,
close friends or relatives of big snakeheads, the
unemployed, and even housewives. Most of my
respondents saw them as opportunists primarily
interested in encouraging people to immigrate
while downplaying the hardships and
associated dangers.

Quite a few of my respondents expressed
outrage when asked about their little
snakeheads, feeling they had been fooled.
Because little snake-heads are paid a fee for
each passenger they recruit, they often mislead
their potential clients by guaranteeing a safe
and comfortable passage to America. Most
people in the Fuzhou area have never been
even to Beijing or Shanghai, let alone abroad,
and are gullible. A twenty-four-year-old female
teacher who had an arduous boat trip and
border crossing from Mexico said, The little
snakehead told me that it was going to be a safe
trip. You can say he glamorized everything
about the trip. He sounded tian hua luan duo
[flowers dropping from the sky, all very rosy]
when he tried to persuade me to leave China.

Although several respondents thought their
little snakeheads had kept their promises, most
were much more positive toward the big
snakeheads who were relatively inaccessible to
them than toward the little snakeheads with
whom they had to deal directly. Their greatest
displeasure, however, was reserved for crew
members and enforcers on smuggling ships and
debt collectors in New York City.

GROUP CHARACTERISTICS
A smuggler I interviewed in 1994 insisted that
nobody really knows how many Chinese
smuggling groups exist worldwide, but she
guessed approximately fifty. Other estimates
vary widely, from only seven or eight (Sing
Tao Daily, July 14, 1990) to as many as twenty
or twenty-five (Chan et al. 1990; Burdman
1993b). According to some observers, Chinese
people-trafficking groups are well organized,
transnational criminal enterprises that are active
in China, Hong Kong, Taiwan, Thailand, and
the United States (Myers 1992; U.S. Senate
1992; Burdman 1993b), but there are little
empirical data to support this observation.

A smuggler I once asked to characterize a
Chinese smuggling network said, Its like a
dragon. Although its a lengthy creature,
various organic parts are tightly linked.
According to my subjects, in addition to big
192
and little snakeheads, a smuggling organization
includes many roles:

1. Transporters. Transporters in China help
immigrants traveling by land or sea make
their way to the border or smuggling ship.
Transporters based in the United States are
responsible for taking smuggled immigrants
from airports or seaports to safe houses.
2. Corrupt public officials. Chinese
government officials accept bribes in return
for Chinese passports. Law enforcement
authorities in many transit countries are also
paid to aid the illegal Chinese immigrants
entering and exiting their countries.
3. Guides and crew members. Guides move
illegal immigrants from one transit point to
another and aid immigrants entering the
United States by land or air. Crew members
are employed by snakeheads to charter or
work on smuggling ships.
4. Enforcers. The enforcers, themselves mostly
illegal immigrants, are hired by big
snakeheads to work on the smuggling ships.
They are responsible for maintaining order
and for distributing food and drinking water.
5. Support personnel. These are local people at
the transit points who provide food and
lodging to illegal immigrants.
6. Debt collectors. A U.S.-based debt collector
is responsible for locking up illegal
immigrants in safe houses until their debt is
paid and for collecting smuggling fees.
There are also China-based debt collectors.

According to data collected in New York City
and the Fuzhou area, a close working
relationship links the leaders and others in the
smuggling network, especially the snakeheads
in the United States and China. More often than
not, all those in the smuggling ring belong to a
family or extended family or are good friends.
If a smuggling group is involved in air
smuggling, the group may also need someone
to work as a snakehead in such transit points as
Hong Kong or Thailand.

When I visited Fuzhou, I interviewed a number
of people who belonged to a ring that smuggled
Chinese by air. A woman in charge of a
government trade unit in Fuzhou City recruited
customers and procured travel documents. She
interacted only with government officials who
helped her obtain travel documents; her
assistant dealt with customers directly,
recruiting, collecting down payments, signing
contracts, and so forth. She recruited a partner,
a childhood friend and member of the Public
Security Bureau, who was responsible for
securing travel documents for the smuggling
rings clients. A female relative in Singapore
acted as a transit point snakehead. She traveled
to countries such as Thailand, Indonesia, and
Malaysia to set up transit points in those
countries.

The primary leader and investor in the ring,
based in New York, was responsible for
subcontracting with members of a
Queens-based gang to keep immigrants in safe
houses and collect their fees after arrival in the
United States. If the fee was to be paid in China,
the female snakeheads assistant in China
would collect it. It was unclear to me how
profits were distributed among members of the
smuggling ring or how money was actually
transferred from one place to another.

Most smuggling groups reportedly specialize in
either air or sea smuggling. According to
Zhang and Gaylord (1996), only groups with
ties to organized crime groups in Asia engage
in the complicated, large-scale operations of
sea smuggling, but snakeheads involved in air
smuggling may venture into sea smuggling. A
thirty-two-year-old housewife from Fuzhou
City who left China by boat alleged that her
snakehead was involved in both.

Not all sea smugglers are affiliated with
criminal groups, Zhang and Gaylord
notwithstanding. A forty-year-old male store
owner from Changle described his female
snakehead, who specialized in sea smuggling,
as a Taiwanese with a good reputation who
came to China to be a snakehead. She was
involved in sea smuggling for the first time
when I was recruited by her. After that, she
transported several boatloads of people to the
United States.... She visited Fuzhou often. After
our ship arrived in Los Angeles, her husband
and a group of people picked us up.

Some U.S. authorities are convinced that
Chinese smugglers of immigrants also bring
heroin from southeast Asia into the United
States (U.S. Senate 1992). Senator William
Roth, Jr., the Delaware Republican who
directed a Senate investigation of Asian
organized crime, claimed that some human
smugglers are former drug dealers (Burdman
1993b), and there is some evidence to support
this view. One of the first groups of Chinese to
be charged with human smuggling had
193
previously been indicted for heroin trafficking
(Centre Daily News, May 9, 1985), and a
Chinese American who owned a garment
factory in New York Citys Chinatown was
charged with both heroin and human trafficking
(Sing Tao Daily, October 10, 1992). Moreover,
during an undercover operation, Chinese
smugglers offered heroin to federal agents
posing as corrupt immigration officers in
exchange for travel documents (DeStefano
1994). U.S. officials also claim that smuggled
Chinese are asked by snakeheads to carry
heroin into the United States, presumably to
finance their illegal passage (Chan and Dao
1990d). Mark Riordan, INS assistant officer for
Hong Kong, suggested that smugglers make
even more when illegals who cant raise the fee
carry heroin in exchange for their trip (Chan
and Dao 1990b: 14).

I asked my respondents whether their
snakeheads asked them to carry drugs or to
commit crimes to subsidize their illegal passage.
Of the three hundred respondents, only one
admitted that he was asked by his snakehead to
transport two bags of opium from the Golden
Triangle to Bangkok, Thailand. None of those
who left China by sea saw any illicit drugs
aboard the sea vessels. It is not clear whether
human smugglers are typically involved in
heroin trafficking. Based on my interviews, I
conclude that only a small number are.

OPERATIONAL FEATURES
To fully understand how a human smuggling
group functions, one would want detailed
information about their several operations.
How do smugglers in China find and screen
their clients? How do they obtain passports and
visas for their clients? How do they arrange sea
vessels to transport their clients to the United
States or to a transit point? How do smugglers
in China coordinate with smugglers at transit
points along the way? How do smugglers at
final transit points coordinate with traffickers in
ports of entry? Do smuggling rings
occasionally work together or do they work
independently? I was unable to obtain such
specific data in the course of my research and
can only describe in general how the process
worked for my subjects.

Contacting and Screening Clients
Of the three hundred respondents, only eleven
said they were initially approached by little
snakeheads. The majority (74 percent) initiated
contact with their little snakeheads through
friends or relatives in China (see Appendix B,
Table 4). Some subjects (12 percent) found
their snakeheads through relatives and friends
living abroad. About 30 percent of those who
reached the United States in 1988 and before
found their foreign-based snakeheads through
friends and relatives who were living abroad.
My data suggest that smugglers began moving
their recruiting activities from abroad to China
in the early 1990s, primarily by hiring friends
and relatives in China to recruit customers. By
various accounts, big snakeheads normally pay
recruiters or little snakeheads somewhere
between $500 and $1,000 per recruit (Burdman
1993a).

As we have seen, little snakeheads were usually
family members, relatives, or good friends of
big snakeheads. When little snakeheads had
trouble recruiting customers themselvesoften
the case with sea smuggling, when hundreds of
customers must be recruited within a short
periodthey turned to family members and
friends to act as a second tier of little
snakeheads. Occasionally, my subjects said,
snakeheads asked former clients now in the
United States to recruit friends and relatives in
China.

Preparing for the journey
The U.S. media have reported that since 1989,
when modern smuggling by sea began,
smugglers have allowed many of their
customers, without the need of a guarantor or a
down payment, to board smuggling ships
(Lawrence 1993; Y. Chan 1993b), but only
twenty-eight (9 percent) of my subjects were
allowed to leave China without a guarantor or a
down payment, and some had to have both. It
appears, however, that from 1989 to 1993 these
requirements were not strictly enforced, and by
1993 the need for a guarantor was not as
critical as it had been before 1989. Especially
for those smuggled by ship, a down payment
was usually sufficient.

The average down payment of my respondents
was $3,069, but the mode was $1,000.
According to a subject who left China by ship,
the down payment was made this way: Once I
got on the ship, I turned over my identification
card to the little snakeheads and they went to
194
my home, collected the $1,000, and returned
my identification card to my family.

After down payment is made and/or the name
and address of a guarantor is provided, the
smuggler and customer may sign a contract.
Many rules are stipulated in these contracts, but
it is not clear how closely the signing parties
follow them. One chilling aspect of these con-
tracts is the understanding by both parties that
the smugglers can hold their clients hostage if
the clients, upon arrival in America, do not
come up with the smuggling fee.

After a contract is signed, there is a waiting
period before departure. About 20 percent of
my subjects waited a week or less, and more
than half waited less than a month. Only about
15 percent had to wait for more than three
months. The average waiting period remained
at about two months between 1988 and 1993,
but waiting times differed significantly with
smuggling method. The average waiting period
was twenty-nine days for subjects who left
China by ship, forty-six days for those left by
United States by land, and seventy-three days
for those who left by air.

Smuggling Fees
My respondents paid an average of $27,745 for
their illegal passage, ranging from a minimum
of $9,000 to a maximum of $35,000. The aver-
age smuggling fee in 1988 was $22,956 and
increased about $2,000 each year after that,
with the exception of 1992 and 1993. By 1993,
the average smuggling fee was $29,688 (see
Appendix B, Table 5). Of the three routes, air
travel was the most expensive ($29,070),
followed by the sea route ($27,560). The least
expensive was the land route ($26,276).
Between 1988 and 1993, the smuggling charge
for the air route increased the most (from
$23,500 in 1988 and earlier to $31,230 in
1993).

ORGANIZED CRIME, GANGS, AND
THE HUMAN TRADE
Law enforcement and immigration officials in
the United States have asserted that Chinese
triads, tongs, and street gangs are involved in
human smuggling (U.S. Senate 1992) and
claim that Hong Kong-based triads are
responsible for the massive movement of
undocumented Chinese to the United States via
Hong Kong (Torode 1993a). As Bolz (1995:
148) put it, Triads have taken over the
smuggling of illegal immigrants from smaller
mom and pop organizations as an
increasingly attractive alternative to drug
trafficking because it promises multibillion
dollar profits without the same severe penalties
if caught.

There is indeed evidence that certain triad
members are involved in the human trade. One
human smuggler has testified in court that a
triad member in Hong Kong was involved in
human smuggling (Torode 1993c), and
authorities in California are convinced that the
California-based Wo Hop To triad was
responsible for the arrival of eighty-five
undocumented Chinese on a smuggling boat
discovered near LongBeach, California, in
1992 (Sing Tao Daily, March, 6, 1992).
However, no triad member or organization,
either in Hong Kong or the United States, has
ever been indicted for human smuggling.

U.S. authorities have also claimed that the
U.S.-based tongs or community associations,
especially the Fukien American Association,
are active in the human trade, citing the
testimony of New York City police at the 1992
U.S. Senate hearings on Asian organized crime
(U.S. Senate,1992). Leaders of the Fukien
American Association, however, have denied
that their organization has ever been involved
in the illegal alien trade. The president of the
association in 1992, labelled by journalists the
Commander-in-Chief of Illegal Smuggling,
announced at a press conference that his
organization does not have control over
certain individual members and therefore can
not be held responsible for their illegal
activities. It is unfair to blacken the name of the
Fukien American Association as a whole based
on the behavior of some non-member bad
elements which are not under the control of the
Association (Lau 1993: 5).

Since 1991 U.S. authorities have also asserted
that Chinese and Vietnamese street gangs are
involved in smuggling. After a 1991 article in
the San Francisco Examiner linked Asian
gangs and human trafficking (Freedman, 1991),
numerous media accounts depicted Chinese
gangs in New York City as collectors of
smuggling payments. Gang members allegedly
picked up illegal immigrants at airports or
docks, kept them in safe houses, and forced
them to call their relatives to make payments.
For their services, gangs reportedly were paid
195
between $1,500 to $2,000 per smuggled
immigrant. None of these news articles implied
that gangs were involved in transporting
immigrants from China to America (Strom
1991).

After the Golden Venture incident, U.S.
immigration officials and law enforcement
authorities began to view Chinese gang
members not as service providers to
smugglers but as smugglers themselves who
were capable of transporting hundreds of illegal
immigrants across the Pacific Ocean (Lay 1993;
Wang 1996) and charged that the Fuk Ching
gang was responsible for the Golden Venture
tragedy itself (Burdman 1993b; Faison 1993a;
Gladwell and Stassen-Berger 1993b; Treaster
1993). According to the authorities, the gang
not only invested money in the purchase of the
Golden Venture, but also was directly involved
in recruiting prospective immigrants in China.

In a crack-down on Chinese gangs, members of
the White Tigers, the Green Dragons, and the
Fuk Ching were indicted for transporting peo-
ple from borders and coastal areas to New York
City and collecting debts for human smugglers.
According to court materials in a murder case
involving the Fuk Ching gang, Ah Chu, a
snakehead paid a member of the Fuk Ching
$500 a head to pick up five illegal immigrants
near the Mexican border. Ah Chu also gave this
gang member $150,000 to go to California,
where he paid a group of Mexicans $500 for
each illegal alien they brought in. According to
the gang member, Ah Chu was not a member
of the Fuk Ching but a partner or friend of the
big boss, Ah Kay. The gang member also made
two trips to Boston to pick up illegal aliens,
transporting seven people by van from Boston
to New York on each trip. For this and for
serving time in another case, Ah Kay allegedly
paid him $10,000 (Superior Court of New
Jersey 1995).

At the trial, a street-level leader of the Fuk
Ching acknowledged that his gang boss paid
him $3,000 for transporting 130 illegal
immigrants from Boston to New York in a
Ryder truck, adding that his gang had smuggled
three hundred immigrants from China to the
United States. Another Fuk Ching defendant
testified that he received $200 to $300 a week
for watching the customers. No Chinese gang
members, however, not even members of the
Fuk Ching gangwho were widely believed to
be the most active in human traffickingwere
charged with transporting illegals from China
to the United States. Nevertheless, U.S.
authorities completed an undercover operation
called Operation Sea Dragon and concluded
that a highly sophisticated, compartmentalized
network of Asian gangs in different parts of the
United States was deeply involved in human
smuggling (Branigin 1996: A12).

When asked what role Chinese gangs play in
the human trade, a Chinese American
immigration officer told me that in the past,
Chinese gangs had only collected fees for
smugglers but that more recently they have
been getting into the smuggling business
themselves. They now plan the trips, invest
the needed capital, and collect the debt in
America.

Although tongs and gangs allegedly are
involved in the human trade, little is known
about the nature and extent of their
involvement, other than what is suggested by
these anecdotal accounts. Nor is it clear
whether smuggling operations are sponsored by
tongs and gangs jointly or carried out by
individual members on an ad hoc basis. Some
observers, including some law enforcement
authorities, disagree that smuggling
organizations are closely linked with gangs or
tongs and regard the connection as, at best,
haphazard. One Hong Kong police officer
claimed that Some of these people are in triads,
but it isnt so organized. Its just a question of a
couple of people with the wherewithal to put
together a criminal scheme to smuggle illegal
immigrants (DeStefano et al. 1991: 8).
Another observer concluded that Contrary to
popular belief, people who deal in this business
are normally shop or business owners, not gang
or Mafia members (The Nation, November 9,
1994: A2).

Asked by a reporter how he was related to
members of organized crime, a New-York
based smuggler denied any connection between
snakeheads and gang members:

What do you mean by members of organized
crime groups? These people [debt-collectors]
are nothing more than a bunch of hooligans who
like to bully people in Chinatown. These guys
are getting out of control; they are willing to kill
people for money. Yet, people like us who are in
this business could not conduct our business
without them. Most illegal immigrants are decent
people; however, there are also some criminals.
If I dont hire thugs to collect money, I may not
196
get paid.... When the immigrants I smuggle
arrive here, my debt collectors will go to the
airport to pick them up and lock them up
somewhere. They collect the smuggling fees, and
I pay them $2,000 per immigrant (Nyo 1993:
54).

Willard Myers has also concluded that
traditional organized crime groups such as the
triads, tongs, and gangs do not dominate the
human trade. In criticizing U.S. law
enforcement strategies against the trade in
Chinese human smuggling, Myers (1994: 4)
has suggested that Chinese transnational
criminal activity is carried out as a form of
entrepreneurial activity by and among persons
who are linked by language (dialect group) and
lineage (ancestral birth place), who may or may
not be a member or affiliate of an organization
recognized by law enforcement.

The testimony of my respondents, while a
limited sample, tends to support the conclusion
that human smuggling is not closely associated
with organized crime, as has commonly been
alleged in criminological literature (Maltz
1994). No doubt members of triads, tongs, and
gangs are, to a certain extent, involved in
trafficking Chinese, but I believe that their
participation is neither sanctioned by nor even
known to their respective organizations. Triads,
tongs, and gangs are frightening terms that are
often used to generate panic and can result in
discrimination against ethnic and racial
minorities. The organized crime and gang
problem is perpetuated by the law enforcement
community to justify greater investment in the
traditional criminal justice apparatus. The
media contribute to this view because
organized crime and gang problems are easily
sensationalized for public consumption. My
data, however, suggest that the Chinese trade in
human smuggling is not a form of organized
crime but rather a business controlled by
many otherwise legitimate groups, both small
and large, working independently, each with its
own organization, connections, methods, and
routes. A smuggler once told me, Its like a
Chinese story about eight angels crossing a sea:
every angel is extremely capable of achieving
the goal due to her heavenly qualities. No one
of these groups, however, dominates or
monopolizes the lucrative trade. When U.S.
authorities in New York indicted eighteen
Chinese for human trafficking, they found that
these people belonged to five smuggling groups,
with several defendants belonging to more than
one group (DeStefano 1994).
I also found, contrary to the assertions of Myers
(1994), Hood (9 1997), and Zhang and Gaylord
(1996), that immigrant smuggling is not
necessarily dominated by ethnic Chinese from
Taiwan but is a global business initiated by
Chinese Americans of Fuzhou extraction and
supported not only by Taiwanese but also by
Chinese and non-Chinese in numerous transit
countries. In short, the human trade is in many
ways like any other legitimate international
trade, except that it is illegal. Like any trade, it
needs organization and planning, but it does not
appear to be linked with traditional organized
crime groups.

GOVERNMENT CORRUPTION AND
HUMAN TRAFFICKING
Reasoning that China is a tightly controlled
society, U.S. authorities have suspected
Chinese law enforcement authorities, as well,
of involvement in the smuggling of immigrants
to the United States (U.S. Senate 1992;
Burdman 1993c; Engelberg 1994). In such a
well-policed state, how could smugglers
covertly transport tens of thousands of people
and escape the notice of Chinese authorities?
They must either be accepting bribes or be
actively involved themselves in transporting
people out of China.

An officer of the INS enforcement division told
me that People in the Fujian Public Security
Bureau have to be involved in alien smuggling.
They take bribes from smugglers and either
turn a blind eye on illegal immigration or
provide logistical support. The INS has
evidence to show that Chinese law enforcement
authorities are behind alien smuggling. Some
of my subjects made the same point. A female
immigrant who was deported back to China by
Mexican authorities told me that a group of
smugglers transported her and hundreds of
others from Fuzhou City to a seaport on
Chinese military trucks. She believed that the
military trucks were used by the snakeheads to
avoid inspection by local authorities.

There are many legitimate channels available to
Chinese citizens who wish to travel
abroadfor instance, advanced study, leaving
China as exported laborers, participating in an
official or business delegation, visiting relatives
abroad, or joining a Hong Kong or Macau tour.
It is reported that Chinese government officials
and government-owned travel agencies are
actively facilitating the departure of a large
197
number of Chinese immigrants through such
means (Burdman 1993c). To understand how
allegedly corrupt officials might be involved in
the human trade, one needs to examine the
nature and operation of some of the
government-sponsored labor and economic
affairs organizations in the Fuzhou area.

In China, there is a fine line between illegal
immigration and legally exported labor (United
Daily News, May 12, 1989). In the coastal areas
there are numerous government-sponsored
labor-export companies that work closely with
foreign-based labor-import companies to move
tens of thousands of Chinese workers overseas,
mainly to Southeast Asian countries where
there is a labor shortage (Kwong 1997). It is
not always clear however, which components
of their operations are legal and which are
illegal, nor is it always clear whether these
companies are involved in the human trade on
an organizational level or whether individual
employees are involved unbeknownst to their
employers.

Whatever the case, those of my subjects who
left China with the aid of a labor-export
company professed satisfaction with the
companys services. A thirty-five-year-old
computer clerk from Fuzhou City told this
story:

I sought help from a company, a government
agency specializing in exporting labor, to leave
China. The company worked along with a
company in Singapore to help people leave
China as laborers. When I got in touch with the
company, it was agreed that I should pay the
company $2,000 for a passport and an
application fee. After I reached the United
States, I would pay an additional $26,000.
They told me it would take about seven days to
get to the United States and it would be safe.
After the meeting with the company, I left
China within twenty-four days. I flew to
Singapore from Fuzhou, with a Chinese
passport and a Singapore visa. They were all
genuine documents. After staying in Singapore
for two weeks, the Singapore company
provided three of us with photo-sub Singapore
passports [passports on which the original
holders picture is replaced with the respon-
dents picture] to fly to Los Angeles via
Germany.

It is possible that employees of these state-run
labor-export companies are bribed by
snakeheads behind the backs of company
officials. A government employee from Fuzhou
City said:

In China, I worked for a government agency [a
labor-export company]. The main purpose of
the agency was to make money by means of
assisting people to go abroad as export labor. I
used my position in the company to help a
friend obtain tourist passports. My friend told
me he was only helping his friends and
relatives to immigrate. I wasnt quite sure what
he was doing exactly. Later, I learned that
those who left China with the passports I
provided to him had attempted to go to the
United States illegaly via a third country. How
did that happen? Well, while they were
attempting to board a plane in Indonesia with
fake travel documents, they were arrested and
deported back to China. The Public Security
Bureau investigated the case and discovered
that I was the one who supplied them with the
Chinese passports. They accused me of being a
snakehead. My boss ordered me to quit while
the investigation was going on. I had nowhere
to appeal. In China, the punishment for being a
snakehead is severeequal to the punishment
for murderers and drug traffickers. After
evaluating all my options, I decided to flee
China.

Government employees may play another role
in facilitating the illegal movement of Chinese.
Since China adopted the open-door policy and
implemented economic reforms in the late
1970s, the government has sent many official
delegations abroad to strengthen international
ties. Human smugglers seized the opportunity
to bribe the people who decide the makeup of
these official delegations. A forty-four-year-old
male from Changle explained how his big
snakehead got him and others included in a
business delegation to the United States by
writing to officials at the local governmental
department in charge of the visit.

Reports of government employees
involvement in smuggling have also appeared
in the Chinese media, as when a newspaper
reported that four high-ranking Xian City
officials had been convicted of trafficking in
people. According to the report, the officials
knowingly allowed twenty-three people from
Fuzhou to leave China with official passports
as members of a business delegation. The
report revealed that smugglers paid the
chairpersons of the citys Economic Affairs
Committee and Foreign Affairs Committee
about $90,000 for making the arrangement
(Wen Wei Pao, November 6, 1993). Another
Chinese media account revealed that the
198
director of the Public Security Bureau angrily
denounced some labor export companies for
helping Chinese to go abroad illegally, [who]
were in reality slave traders who were only
interested in collecting a certain amount of
money from the immigrants and allowed the
people they helped export to run wild in the
world community (Zi 1993: S5). In a 1997
media account, 150 officers and soldiers of the
Shenzhens Border Patrol Army who were
bribed by human smugglers were arrested for
allowing more than 8,000 Chinese citizens to
leave China illegally (World Journal, October
17, 1997).

According to a number of my respondents,
their snakeheads were either former or current
Chinese government employees. One described
his snakehead as a government employee
working as a middleman for a big snakehead
who was his relative. The snakehead of
another respondent was a government official
responsible for recruiting customers locally
[who] referred them to his younger brother who
lived abroad.

Government officials in transit countries are
allegedly bribed by human smugglers as well,
either to look the other way or to provide help
to immigrants (DeStefano 1997). When asked
whether smugglers make kickbacks to
immigration police in Thailand, one smuggler
replied, Thats the essential part of the
business (The Nation, November 9, 1994; A2).
One of my respondents said that public officials
assisted him in Thailand. Because we had no
documents, we were arrested by the Thai police
and detained for seven days. Later, our
snakehead bribed the Thai officers to release
us. Another respondent recalled how he
passed through Thailand: I got past Thai
immigration by means of maiguan (buying
checkpoint). That is, my snakehead slipped a
$100 bill in my passport. A Thai immigration
officer took the money, stamped my passport,
and I went through.

Immigration officers in other countries were
also reported to have accepted bribes from
smugglers. In 1993, immigration officers in
Hong Kong were involved in a bribery case
involving people trafficking (Gomez and
Gilbert 1993) and in 1995 an immigration
officer stationed at the Buenos Aires airport
was arrested for aiding Chinese smugglers
(World Journal, October 14a, 1995).

Some of my respondents reported that Mexican
authorities played an important role in
facilitating the movement of Chinese to the
United States via Mexico. A corroborating
newspaper account reported an incident in
which Mexican authorities, presumably after
being bribed, allowed Chinese immigrants in
their custody to escape. There were about
300 Chinese confined in a detention center in
Mexicali. They were not worried at all because
they had been told by their snakeheads that
their Mexican guards would all fall asleep,
after which they would be transported to the
airport for deportation. One night, as predicted
by the snakehead, all the guards suddenly
disappeared, and the Chinese escaped. They
all eventually crossed the border and entered
the States (World Journal, August
25,1993:A1). The Washington D.C.-based
American Interagency Working Group (1995)
has also concluded that the trade in illegal
immigrants is supported by rampant corruption
among officials in various transit countries
such as Belize, Panama, Guatemala, and the
Dominican Republic.

There is no shortage of evidence that
government officials, both within China and at
various transit points, help to facilitate the
clandestine movement of people abroad. Let us
now look more closely at the specific means by
which illegal immigrants make their way from
China to the promised land of America.

199
9. International Crime

Overview
Criminal activities that straddle across the borders of states, kingdoms, or regions have
existed for millennia. While the collapse of the Soviet Union and Chinas opening up have
significantly contributed to the strengthening and/or creation of numerous international
criminal organisations, global crime has existed alongside legal international commerce for
centuries now. The modern traits of globalisation have merely enabled the establishment of
alliances among criminal organisations especially those involved in the drug trade, the
illegal arms trade, and the trafficking of humans. In fact, some scholars argue that
globalisation has benefited criminal networks more than it has benefited nation-states. This
week, we take a closer look at how globalisation has aided and abetted the internationalisation
of crime. In our readings we will focus in particular on the international drug trade.

Objectives
x Examine the impact of globalisation on crime

Discussion points
1. How does globalisation facilitate the growth of international crime?
2. How and to what extent has globalisation affected the ability of states to diminish global
criminal activities?
3. What is the relationship between the drug trade and development in an increasingly
interconnected world?
4. How has Afghanistan become one of the main focal points of the international drug trade?
What do you think ought to be the best and most realistic way forward in order to reduce
ordinary Afghans reliance on the poppy crop?
5. How does the drug trade help fuel international conflict?

Readings
Kan, Paul Rexton, Drugging Babylon: The illegal Narcotics Trade and Nation-Building in
Iraq, Small Wars and Insurgencies Vol. 18, No.2, 216 230, June 2007, pp. 216 230

Labrousse, Alain, Drugs: The Major Obstacle to Afghan Reconstruction?, in M. Jelsma, T.
Kramer, and P. Vervest, Trouble in the Jungle: Opium and Conflict in Burma (Silkworm
Books: Thailand, 2005), pp. 175 192

Neighbour, Sally, Talibans Heroin Inc., The Australian, May 21 2010

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10. China and globalisation

Overview
We often think of China as one of the great winners in the process of globalisation. Chinese
goods have reached into every corner of the globe, often displacing local manufacturers, and
China as a whole has achieved remarkable growth rates that have been sustained for two
decades. However, we need to look beyond the traditional image of China as global success
story to consider some of the implications of globalisation on the ground. This week, we will
also consider whether the Chinese government has been able to manage or control
globalisation. Can the government of China, or indeed any government, extract the positive
economic benefits of globalisation without accepting any of the destabilising political and
social currents that globalisation also brings? In particular, we will look at the Chinese
governments attempt to control the internet, which is often considered to be one of the
primary tools of globalisation.

Objectives
x Examine the impact of globalisation on China
x Consider whether China has been one of the great beneficiaries of globalisation

Discussion points
1. Has China benefited from globalisation? Is China the great winner in a globalised world?
2. Has the Chinese state been able to manage/control globalisation? Will it be able to
continue to do so in the future? Can the government of China, or indeed any government,
extract the positive economic benefits of globalisation without accepting any of the
destabilising political and social currents that globalisation also brings?
3. How does gender shape the experience of globalisation in China?
4. Has globalisation led to better conditions for Chinese workers?
5. What threats does globalisation pose to China?

Readings
Fallow, James, The connection has been reset, The Atlantic Online, March 2008

Hu, Jintao, Why China loves globalization, The Globalist, 7 June 2005

Chan, Anita, A race to the bottom: Globalisation and Chinas labour standards, China
Perspectives, 46 (2003)

James Fallows, The connection has been reset, The Atlantic
Online, March 2008

Many foreigners who come to China for the
Olympics will use the Internet to tell people
back home what they have seen and to check
what else has happened in the world.

The first thing theyll probably notice is that
Chinas Internet seems slow. Partly this is
because of congestion in Chinas internal
networks, which affects domestic and
international transmissions alike. Partly it is
because even electrons take a detectable period
of time to travel beneath the Pacific Ocean to
servers in America and back again; the trip to
and from Europe is even longer, because that
goes through America, too. And partly it is
because of the delaying cycles imposed by
Chinas system that monitors what people are
looking for on the Internet, especially when
theyre looking overseas. Thats what
foreigners have heard about.

Theyll likely be surprised, then, to notice that
Chinas Internet seems surprisingly free and
uncontrolled. Can they search for information
about Tibet independence or Tiananmen
shooting or other terms they have heard are
taboo? Probablyand theyll be able to click
right through to the controversial sites. Even if
they enter the Chinese-language term for
democracy in China, theyll probably get
results. What about Wikipedia, famously off-
limits to users in China? They will probably be
able to reach it. Naturally the visitors will
wonder: Whats all this Ive heard about the
Great Firewall and Chinas tight limits on the
Internet?

In reality, what the Olympic-era visitors will be
discovering is not the absence of Chinas
electronic control but its new refinementand
a special Potemkin-style unfettered access that
will be set up just for them, and just for the
length of their stay. According to engineers I
have spoken with at two tech organizations in
China, the government bodies in charge of
censoring the Internet have told them to get
ready to unblock access from a list of specific
Internet Protocol (IP) addressescertain
Internet cafs, access jacks in hotel rooms and
conference centers where foreigners are
expected to work or stay during the Olympic
Games. (I am not giving names or identifying
details of any Chinese citizens with whom I
have discussed this topic, because they risk
financial or criminal punishment for criticizing
the system or even disclosing how it works.
Also, I have not gone to Chinese government
agencies for their side of the story, because the
very existence of Internet controls is almost
never discussed in public here, apart from
vague statements about the importance of
keeping online information wholesome.)

Depending on how you look at it, the Chinese
governments attempt to rein in the Internet is
crude and slapdash or ingenious and well
crafted. When American technologists write
about the control system, they tend to
emphasize its limits. When Chinese citizens
discuss itat least with methey tend to
emphasize its strength. All of them are right,
which makes the governments approach to the
Internet a nice proxy for its larger attempt to
control peoples daily lives.

Disappointingly, Great Firewall is not really
the right term for the Chinese governments
overall control strategy. China has indeed
erected a firewalla barrier to keep its Internet
users from dealing easily with the outside
worldbut that is only one part of a larger,
complex structure of monitoring and censorship.
The official name for the entire approach,
which is ostensibly a way to keep hackers and
other rogue elements from harming Chinese
Internet users, is the Golden Shield Project.
Since that term is too creepy to bear repeating,
Ill use the control system for the overall
strategy, which includes the Great Firewall of
China, or GFW, as the means of screening
contact with other countries.
In America, the Internet was originally
designed to be free of choke points, so that
each packet of information could be routed
quickly around any temporary obstruction. In
China, the Internet came with choke points
built in. Even now, virtually all Internet contact
between China and the rest of the world is
routed through a very small number of fiber-
optic cables that enter the country at one of
three points: the Beijing-Qingdao-Tianjin area
in the north, where cables come in from Japan;
Shanghai on the central coast, where they also
come from Japan; and Guangzhou in the south,
where they come from Hong Kong. (A few
places in China have Internet service via
satellite, but that is both expensive and slow.
Other lines run across Central Asia to Russia
but carry little traffic.) In late 2006, Internet
users in China were reminded just how
important these choke points are when a seabed
earthquake near Taiwan cut some major cables
serving the country. It took months before
international transmissions to and from most of
China regained even their pre-quake speed,
such as it was.

Thus Chinese authorities can easily do
something that would be harder in most
developed countries: physically monitor all
traffic into or out of the country. They do so by
installing at each of these few international
gateways a device called a tapper or
network sniffer, which can mirror every
packet of data going in or out. This involves
mirroring in both a figurative and a literal sense.
Mirroring is the term for normal copying or
backup operations, and in this case real though
extremely small mirrors are employed.
Information travels along fiber-optic cables as
little pulses of light, and as these travel through
the Chinese gateway routers, numerous tiny
mirrors bounce reflections of them to a separate
set of Golden Shield computers.Here the
terms creepiness is appropriate. As the other
routers and servers (short for file servers, which
are essentially very large-capacity computers)
that make up the Internet do their best to get the
packet where its supposed to go, Chinas own
surveillance computers are looking over the
same information to see whether it should be
stopped.

The mirroring routers were first designed and
supplied to the Chinese authorities by the U.S.
tech firm Cisco, which is why Cisco took such
heat from human-rights organizations. Cisco
has always denied that it tailored its equipment
to the authorities surveillance needs, and said
it merely sold them what it would sell anyone
else. The issue is now moot, since similar
routers are made by companies around the
world, notably including Chinas own
electronics giant, Huawei. The ongoing
refinements are mainly in surveillance software,
which the Chinese are developing themselves.
Many of the surveillance engineers are thought
to come from the militarys own technology
institutions. Their work is good and getting
better, I was told by Chinese and foreign
engineers who do oppo research on the
evolving GFW so as to design better ways to
get around it.
Andrew Lih, a former journalism professor and
software engineer now based in Beijing (and
author of the forthcoming book The Wikipedia
Story), laid out for me the ways in which the
GFW can keep a Chinese Internet user from
finding desired material on a foreign site. In the
few seconds after a user enters a request at the
browser, and before something new shows up
on the screen, at least four things can go
wrongor be made to go wrong.

The first and bluntest is the DNS block. The
DNS, or Domain Name System, is in effect the
telephone directory of Internet sites. Each time
you enter a Web address, or URL
www.yahoo.com, lets saythe DNS looks up
the IP address where the site can be found. IP
addresses are numbers separated by dotsfor
example, TheAtlantic.coms is 38.118.42.200.
If the DNS is instructed to give back no address,
or a bad address, the user cant reach the site in
questionas a phone user could not make a
call if given a bad number. Typing in the URL
for the BBCs main news site often gets the no-
address treatment: if you try news.bbc.co.uk,
you may get a Site not found message on the
screen. For two months in 2002, Googles
Chinese site, Google.cn, got a different kind of
bad-address treatment, which shunted users to
its main competitor, the dominant Chinese
search engine, Baidu. Chinese academics
complained that this was hampering their work.
The government, which does not have to stand
for reelection but still tries not to antagonize
important groups needlessly, let Google.cn
back online. During politically sensitive times,
like last falls 17th Communist Party Congress,
many foreign sites have been temporarily shut
down this way.

Next is the perilous connect phase. If the
DNS has looked up and provided the right IP
address, your computer sends a signal
requesting a connection with that remote site.
While your signal is going out, and as the other
system is sending a reply, the surveillance
computers within China are looking over your
request, which has been mirrored to them. They
quickly check a list of forbidden IP sites. If
youre trying to reach one on that blacklist, the
Chinese international-gateway servers will
interrupt the transmission by sending an
Internet Reset command both to your
computer and to the one youre trying to reach.
Reset is a perfectly routine Internet function,
which is used to repair connections that have
become unsynchronized. But in this case its
equivalent to forcing the phones on each end of
a conversation to hang up. Instead of the site
you want, you usually see an onscreen message
beginning The connection has been reset;
sometimes instead you get Site not found.
Annoyingly, blogs hosted by the popular
system Blogspot are on this IP blacklist. For a
typical Google-type search, many of the links
shown on the results page are from Wikipedia
or one of these main blog sites. You will see
these links when you search from inside China,
but if you click on them, you wont get what
you want.

The third barrier comes with what Lih calls
URL keyword block. The numerical Internet
address you are trying to reach might not be on
the blacklist. But if the words in its URL
include forbidden terms, the connection will
also be reset. (The Uniform Resource Locator
is a sites address in plain Englishsay,
www.microsoft.comrather than its all-
numeric IP address.) The site FalunGong.com
appears to have no active content, but even if it
did, Internet users in China would not be able
to see it. The forbidden list contains words in
English, Chinese, and other languages, and is
frequently revisedlike, with the name of the
latest town with a coal mine disaster, as Lih
put it. Here the GFWs programming technique
is not a reset command but a black-hole loop,
in which a request for a page is trapped in a
sequence of delaying commands. These are the
programming equivalent of the old saw about
how to keep an idiot busy: you take a piece of
paper and write Please turn over on each side.
When the Firefox browser detects that it is in
this kind of loop, it gives an error message
saying: The server is redirecting the request
for this address in a way that will never
complete.

The final step involves the newest and most
sophisticated part of the GFW: scanning the
actual contents of each pagewhich
stories The New York Times is featuring, what a
China-related blog carries in its latest update
to judge its page-by-page acceptability. This
again is done with mirrors. When you reach a
favorite blog or news site and ask to see
particular items, the requested pages come to
youand to the surveillance system at the
same time. The GFW scanner checks the
content of each item against its list of forbidden
terms. If it finds something it doesnt like, it
breaks the connection to the offending site and
wont let you download anything further from
it. The GFW then imposes a temporary
blackout on further IP1 to IP2 attemptsthat
is, efforts to establish communications between
the user and the offending site. Usually the first
time-out is for two minutes. If the user tries to
reach the site during that time, a five-minute
time-out might begin. On a third try, the time-
out might be 30 minutes or an hourand so on
through an escalating sequence of punishments.
Users who try hard enough or often enough to
reach the wrong sites might attract the attention
of the authorities. At least in principle, Chinese
Internet users must sign in with their real
names whenever they go online, even in
Internet cafs. When the surveillance system
flags an IP address from which a lot of bad
searches originate, the authorities have a good
chance of knowing who is sitting at that
machine.
All of this adds a note of unpredictability to
each attempt to get news from outside China.
One day you go to the NPR site and cruise
around with no problem. The next time, NPR
happens to have done a feature on Tibet. The
GFW immobilizes the site. If you try to refresh
the page or click through to a new story, youll
get nothingand the time-out clock will start.

This approach is considered a subtler and more
refined form of censorship, since big foreign
sites no longer need be blocked wholesale. In
principle theyre in trouble only when they
cover the wrong things. Xiao Qiang, an expert
on Chinese media at the University of
California at Berkeley journalism school, told
me that the authorities have recently begun
applying this kind of filtering in reverse. As
Chinese-speaking people outside the country,
perhaps academics or exiled dissidents, look for
data on Chinese sitessay, public-health
figures or news about a local protestthe GFW
computers can monitor what theyre asking for
and censor what they find.

Taken together, the components of the control
system share several traits. Theyre constantly
evolving and changing in their emphasis, as
new surveillance techniques become practical
and as words go on and off the sensitive list.
They leave the Chinese Internet public unsure
about where the off-limits line will be drawn on
any given day. Andrew Lih points out that
other countries that also censor Internet
contentSingapore, for instance, or the United
Arab Emiratesprovide explanations
whenever they do so. Someone who clicks on a
pornographic or anti-Islamic site in the
U.A.E. gets the following message, in Arabic
and English: We apologize the site you are
attempting to visit has been blocked due to its
content being inconsistent with the religious,
cultural, political, and moral values of the
United Arab Emirates. In China, the
connection just times out. Is it your computers
problem? The firewall? Or maybe your local
Internet provider, which has decided to do
some filtering on its own? You dont know.
The unpredictability of the firewall actually
makes it more effective, another Chinese
software engineer told me. It becomes much
harder to know what the system is looking for,
and you always have to be on guard.
There is one more similarity among the
components of the firewall: they are all easy to
thwart.

As a practical matter, anyone in China who
wants to get around the firewall can choose
between two well-known and dependable
alternatives: the proxy server and the VPN. A
proxy server is a way of connecting your
computer inside China with another one
somewhere elseor usually to a series of
foreign computers, automatically passing
signals along to conceal where they really came
from. You initiate a Web request, and the proxy
system takes over, sending it to a computer in
America or Finland or Brazil. Eventually the
system finds what you want and sends it back.
The main drawback is that it makes Internet
operations very, very slow. But because most
proxies cost nothing to install and operate, this
is the favorite of students and hackers in China.

A VPN, or virtual private network, is a faster,
fancier, and more elegant way to achieve the
same result. Essentially a VPN creates your
own private, encrypted channel that runs
alongside the normal Internet. From within
China, a VPN connects you with an Internet
server somewhere else. You pass your
browsing and downloading requests to that
American or Finnish or Japanese server, and it
finds and sends back what youre looking for.
The GFW doesnt stop you, because it cant
read the encrypted messages youre sending.
Every foreign business operating in China uses
such a network. VPNs are freely advertised in
China, so individuals can sign up, too. I use one
that costs $40 per year. (An expat in China
thinks: thats a little over a dime a day. A
Chinese factory worker thinks: its a weeks
take-home pay. Even for a young academic, its
a couple days work.)
As a technical matter, China could crack down
on the proxies and VPNs whenever it pleased.
Today the policy is: if a message comes
through that the surveillance system cannot
read because its encrypted, lets wave it on
through! Obviously the systems behavior
could be reversed. But everyone I spoke with
said that China could simply not afford to crack
down that way. Every bank, every foreign
manufacturing company, every retailer, every
software vendor needs VPNs to exist, a
Chinese professor told me. They would have
to shut down the next day if asked to send their
commercial information through the regular
Chinese Internet and the Great Firewall.
Closing down the free, easy-to-use proxy
servers would create a milder version of the
same problem. Encrypted e-mail, too, passes
through the GFW without scrutiny, and users of
many Web-based mail systems can establish a
secure session simply by typing https: rather
than the usual http: in a sites addressfor
instance, https://mail.yahoo.com. To keep
China in business, then, the government has to
allow some exceptions to its control efforts
even knowing that many Chinese citizens will
exploit the resulting loopholes.

Because the Chinese government cant plug
every gap in the Great Firewall, many
American observers have concluded that its
larger efforts to control electronic discussion,
and the democratization and grass-roots
organizing it might nurture, are ultimately
doomed. A recent item on an influential
American tech Web site had the headline
Chinese National Firewall Isnt All That
Effective. In October, Wired ran a story under
the headline The Great Firewall: Chinas
Misguidedand FutileAttempt to Control
What Happens Online.

Lets not stop to discuss why the vision of
democracy-through-communications-
technology is so convincing to so many
Americans. (Samizdat, fax machines, and the
Voice of America eventually helped bring
down the Soviet system. Therefore proxy
servers and online chat rooms must erode the
power of the Chinese state. Right?) Instead, let
me emphasize how unconvincing this vision is
to most people who deal with Chinas system
of extensive, if imperfect, Internet controls.

Think again of the real importance of the Great
Firewall. Does the Chinese government really
care if a citizen can look up the Tiananmen
Square entry on Wikipedia? Of course not.
Anyone who wants that information will get
itby using a proxy server or VPN, by e-
mailing to a friend overseas, even by looking at
the surprisingly broad array of foreign
magazines that arrive, uncensored, in Chinese
public libraries.

What the government cares about is making the
quest for information just enough of a nuisance
that people generally wont bother. Most
Chinese people, like most Americans, are
interested mainly in their own country. All
around them is more information about China
and things Chinese than they could possibly
take in. The newsstands are bulging with
papers and countless glossy magazines. The
bookstores are big, well stocked, and full of
patrons, and so are the public libraries. Video
stores, with pirated versions of anything. Lots
of TV channels. And of course the Internet,
where sites in Chinese and about China
constantly proliferate. When this much is
available inside the Great Firewall, why go to
the expense and bother, or incur the possible
risk, of trying to look outside?

All the technology employed by the Golden
Shield, all the marvelous mirrors that help build
the Great Firewallthese and other modern
achievements matter mainly for an old-
fashioned and pre-technological reason. By
making the search for external information a
nuisance, they drive Chinese people back to an
environment in which familiar tools of social
control come into play.

Chinese bloggers have learned that if they want
to be read in China, they must operate within
China, on the same side of the firewall as their
potential audience. Sure, they could put up
exactly the same information outside the
Chinese mainland. But according to Rebecca
Mac Kinnon, a former Beijing correspondent
for CNN now at the Journalism and Media
Studies Center of the University of Hong Kong,
their readers wont make the effort to cross the
GFW and find them. If you want to have
traction in China, you have to be in China, she
told me. And being inside China means
operating under the sweeping rules that govern
all forms of media here: guidance from the
authorities; the threat of financial ruin or time
in jail; the unavoidable self-censorship as the
cost of defiance sinks in.

Most blogs in China are hosted by big Internet
companies. Those companies know that the
government will hold them responsible if a
blogger says something bad. Thus the
companies, for their own survival, are
dragooned into service as auxiliary censors.
Large teams of paid government censors delete
offensive comments and warn errant bloggers.
(No official figures are available, but the censor
workforce is widely assumed to number in the
tens of thousands.) Members of the public at
large are encouraged to speak up when they see
subversive material. The propaganda ministries
send out frequent instructions about what can
and cannot be discussed. In October, the group
Reporters Without Borders, based in Paris,
released an astonishing report by a Chinese
Internet technician writing under the
pseudonym Mr. Tao. He collected dozens of
the messages he and other Internet operators
had received from the central government. Here
is just one, from the summer of 2006:

17 June 2006, 18:35

From: Chen Hua, deputy director of the
Beijing Internet Information Administrative
Bureau

Dear colleagues, the Internet has of late been
full of articles and messages about the death of
a Shenzhen engineer, Hu Xinyu, as a result of
overwork. All sites must stop posting articles
on this subject, those that have already been
posted about it must be removed from the site
and, finally, forums and blogs must withdraw
all articles and messages about this case.

Domestic censorship is the real issue, and it is
about social control, human surveillance, peer
pressure, and self-censorship, Xiao Qiang of
Berkeley says. Last fall, a team of computer
scientists from the University of California at
Davis and the University of New Mexico
published an exhaustive technical analysis of
the GFWs operation and of the ways it could
be foiled. But they stressed a nontechnical
factor: The presence of censorship, even if
easy to evade, promotes self-censorship.

It would be wrong to portray China as a tightly
buttoned mind-control state. It is too wide-open
in too many ways for that. Most people in
China feel freer than any Chinese people have
been in the countrys history, ever, a Chinese
software engineer who earned a doctorate in the
United States told me. There has never been a
space for any kind of discussion before, and the
government is clever about continuing to
expand space for anything that doesnt threaten
its survival. But it would also be wrong to
ignore the cumulative effect of topics people
are not allowed to discuss. Whether or not
Americans supported George W. Bush, they
could not avoid learning about Abu Ghraib,
Rebecca Mac Kinnon says. In China, the
controls mean that whole topics inconvenient
for the regime simply dont exist in public
discussion. Most Chinese people remain
wholly unaware of internationally noticed
issues like, for instance, the controversy over
the Three Gorges Dam.

Countless questions about todays China boil
down to: How long can this go on? How long
can the industrial growth continue before the
natural environment is destroyed? How long
can the super-rich get richer, without the poor
getting mad? And so on through a familiar list.
The Great Firewall poses the question in
another form: How long can the regime control
what people are allowed to know, without the
people caring enough to object? On current
evidence, for quite a while.

The URL for this page
is http://www.theatlantic.com/doc/200803/chi
nese-firewall


Hu Jintao, Why China loves Globalization, The Globalist, 7 June 2005

While many nations are increasingly wary of globalization, Chinas President Hu Jintao has
a very different perspective. As he lays out in this Globalist Document, China sees
globalization as the key to economic development and securing a better future for its 1.3
billion people.

With surging economic globalization, China
and Asia are quickly becoming a new growth
engine for the world, while the global boom is
also generating more important opportunities
for China and Asia.

China is an ancient civilization with a history
dating back over 5,000 years. The Chinese
people have made a major contribution to
human progress by creating the splendid
Chinese civilization with hard work and
ingenuity.

The city of Beijing, with its long history of
over 3,000 years, stands testimony to that effort.
It became the nations capital over 800 years
ago.

A short distance from the Great Hall of the
People is the world-renowned Forbidden City.
First built some 600 years ago, the former
Imperial Palace is the largest and most
complete existing ensemble of ancient royal
architecture in the world.

From Beijings time-honored past and the
majestic Forbidden City itself, people can learn
vividly the originality, greatness and profound
richness of the Chinese civilization and feel for
themselves the vigor, resilience and pioneering
spirit of the Chinese nation.

Return to greatness
Beginning in the mid-19th century, China was
reduced to dire misery as the country suffered
one humiliating defeat after another and the
people languished in poverty and starvation as
a result of brutal foreign aggressions and
corrupt and incompetent feudal rulers.

Refusing to submit to a fate of agony and woe,
the Chinese people fought back persistently and
finally built up a New China under the
leadership of the Chinese Communist Party.

Staggering statistics
Since 1949, when the New China was
proclaimed and particularly since the
implementation of reform and the opening-up
program pioneered by Mr. Deng Xiaoping in
1978 China has undergone a profound
transformation never seen in the country before.

In a short span of 26 years from 1978 to 2004,
Chinas GDP increased from $147.3 billion to
$1.6494 trillion with an average annual growth
rate of 9.4%. Its foreign trade rose from $20.6
billion to $1.1548 trillion, averaging an annual
growth rate of over 16%.

Chinas foreign exchange reserve increased
from $167 million to $609.9 billion. The
number of rural poor has dwindled from some
250 million to 26 million.

The overall national strength of China has
increased remarkably and the quality of life of
its people improved steadily. While inheriting
and carrying forward their proud past, the 1.3
billion Chinese people are writing a new
chapter in history as they march of one mind on
the road of building socialism with Chinese
characteristics.

High expectations
We in China have identified the goal for the
first 20 years of this century. That is to firmly
seize the important window of strategic
opportunities to build a moderately prosperous
society of a higher standard in an all-round way
for the benefits of our over one billion people.

By 2020, we will quadruple Chinas GDP of
2000 to approximately $4 trillion with a per
capita level of some $3,000, and further
develop the economy, improve democracy,
advance science and education, enrich culture,
foster greater social harmony and upgrade the
texture of life for the people.


Putting the people first
We are deeply aware that China, for a
considerably long period of time to come, will
remain a developing country.

The population figure of 1.3 billion alone will
make the fulfillment of the above goal a
formidable challenge and we must be prepared
for a long and uphill journey ahead.
To realize this goal, we must uphold the
scientific approach in achieving the economic
and social development of the country.

We must put the people first, making the
fundamental interests of the broadest masses of
people our point of departure and endeavoring
to satisfy their growing material and cultural
needs to pursue the comprehensive
development of man.

Focus on reform
We must focus on economic development as
our central task, making development our top
priority and facilitating all-round progress in
economic, political and cultural aspects and in
the building of a harmonious society.

We must stick to the direction of reform for a
socialist market economy, step up institutional
innovation, deepen reforms aimed at
galvanizing the creative vitality of society and
increase the inherent dynamics for economic
and social development.

Opening doors
We must adhere to our basic policy of opening
to the outside world, building a more open
marketplace and allowing the country to
participate more broadly in international
economic and technological cooperation and
competition with still wider and higher
dimensions.

We must follow a new course of
industrialization, endeavor to overhaul the
economic structure, quickly transform the ways
of economic growth by improving its quality
and efficiency, vigorously develop the circular
economy and build a resource-effective and
environment-friendly society.

We will thus blaze a trail of development
characterized by higher productivity, a
comfortable life for the people and a
sustainable eco-system.

We believe, as long as we firmly follow the
path of development that is consistent with
Chinas national conditions, we will be able to
realize our goal and play a greater and more
role in the promotion of world peace and
common development.

A win-win situation
China and the rest of Asia and the world at
large are closely related when it comes to
development. A developing China will, as
always, generate cooperation opportunities with
win-win results for other countries in Asia and
the world over.

By the end of 2004, China had attracted a total
of $562.1 billion in FDI, approved the
establishment in China of more than 500,000
foreign-funded enterprises and created a huge
import market of some $560 billion annually.

Blazing trails
At present, most countries and regions have
had enterprises with investment in China, and
over 400 firms out of the Fortune 500 have
invested in China. The number of R&D centers
set up by foreign investors in China has
exceeded 700.

As China becomes more developed, its
cooperation with the other countries and their
corporations of various types is bound to
increase in scale.

China will keep opening up its market, find
new ways of using foreign capital, improve
legislation and regulations for encouraging and
protecting foreign investors, revamp foreign
economic management, step up protection of
intellectual property rights and create an even
better environment for trade and economic
cooperation with the rest of the world.

Let us join hands and work together to
contribute a greater share to world peace and
common development.

Adapted from President Hu Jintaos speech at
the Fortune Global Forum on May 16, 2005.


Anita Chan, A race to the bottom: Globalisation and Chinas
labour standards, China Perspectives, 46 (2003)

The Chinese government rejoiced on the
occasion of gaining World Trade Organisation
membership in November 2001. There was an
expectation in Peking that once the country
became integrated into the world economy, it
would be on the right track to attain economic
prosperity. There might be some bumps along
the way: some industries and agriculture would
suffer, affecting employment, but as a whole, it
was predicted, China would gain. Employment
has been a major concern in China, and the
governments best sell was that foreign
investment would increase and the labour-
intensive manufacturing sector would gain:
according to one estimate, 2.8 million
additional jobs in textiles and 2.6 million jobs
in the garment trade, as the constraints of
quotas for garments and textiles end.

As predicted, foreign investment has been
flowing into China in the past year at the
expense of its South-East Asian neighbours and
the tiger economies of Hong Kong, Taiwan,
Korea and even Japan. Hong Kong and Taiwan
have been the nurturers of Chinese export
industries for more than a decade, only to
discover now that some of their own industries
are being hollowed out. As one observer,
William Greider, describes it, China is
sucking away jobs. Globalisation, he writes,
is entering a fateful new stage, in which the
competitive perils intensify for the low-wage
developing countries. In the race to the
bottom, China is defining the bottom.

In other words, though employment in the low-
wage industries in China may be expanding,
the wages of the workers in these industries are
not rising, and for many of them have been
falling. What within the Chinese system allows
it to lead in this race to the bottom in labour
standards? First, let us examine the empirical
evidence showing that, when compared with
other developing export-oriented countries,
wages in China are very low relative to the cost
of living.

Chinese wages in comparative
perspective
There is a popular image that the global divide
in competition in world trade is between the
developed and underdeveloped countries. I
would like to argue here that increasingly the
competition, particularly in the labour-intensive
industries, is largely among countries in the
developing world. The intense competition in
wages among these countries is well illustrated
by Figure 1, which shows the minimum legal
wage in a number of countries around the
world as of 1999.

This shows an enormous gap between the
minimum wage in the United States and those
of developing countries in Asia and Central
Americawith the US minimum wage at least
twenty times higher. Faced by cheap labour
abroad in this era of global production, labour-
intensive industries are basically finished in the
US and in most other high-wage nations. Such
goods continue to be produced there only to a
marginal extent by using illegal immigrants and
home workers, sweated at a wage well below
the legal minimum wage.

Competition in these labour-intensive
industries lies instead today among the
countries of the third world. All of the
minimum legal wages in the developing
countries in Figure 1 hovered around US$30-50
a month. This is equivalent in China to 240-400
yuan a month. The legal minimum wage in
Shenzhen, the Chinese city with the highest
minimum wage, was equivalent to only US$42.
China has set its minimum wage standards very
low, to the point that it is even competitive with
Vietnam and Cambodia, two countries where
the cost of living is lower than in China. In
Mexico, El Salvador and Nicaragua, the wage
levels are slightly higher than Asian wages, but
this competitive disadvantage is largely
cancelled out by the proximity of Central
America to the American market.

When China first instituted a minimum legal
wage system in the early 1990s, it had the good
intention of protecting workers in the export
sector. But soon the function of the minimum
wage changed character. It simply became the
amount that employers reported to the
government they had paid their workers in the
labour-intensive export industries; they rarely
pay assembly-line workers above the monthly
legal minimum wage. The great majority of the
workers in this sector are migrant workers from
the countryside, and as can be seen from Figure
2, they are not sharing in the standard of living
of the urban population.

It can be noted from this table that the setting
of a minimum wage level is extremely
decentralised in China. In most Western
countries there is only one nationwide
minimum wage, but in China there are
hundreds. Each city or even a district in a city
can set its own minimum wage based on a
formula provided by the central government.
This takes into account the cost of living in the
locality, the prevailing wage, the rate of
inflation etc., and it is adjusted each year. The
table shows that these minimum wages have
been rising every year, but when these
increases are compared with the annual
consumer price indexes for each of these cities,
it becomes evident that the rises in the
minimum legal wage only kept pace with
inflation. In other words, even though the
Chinese economy is rapidly developing, in real
terms the minimum wages have remained level
throughout the 1990s.

As can be seen in Figure 2, the cities in
Guangdong province and other big cities along
the coast have the highest cost of living and
consequently the highest minimum wages.
Elsewhere in China, the minimum legal wages
are lower, which poses a threat to the coastal
region. The results of this threat, as I shall
explain, are shown in Figure 2.

Legally, the minimum wage in each locality is
not simply supposed to keep up with inflation.
According to the international standard
employed by the Chinese government, the
minimum wage of a locality should be set
within the range of 40% to 60% of the average
wage in that locality. This Figure uses 40% as
the cut-off point to see whether the minimum
wages officially set by various localities have
reached this standard in past years. 1993 was
the only year in which all of these minimum
wages fulfilled the Chinese governments own
criterion of reaching at least 40% of the
average wages. Since 1993, in most localities,
the minimum legal wages did not attain even
this 40% mark, in direct violation of the
national directive requiring that it do so.
Instead, with only a few exceptions (see the
squares shaded in grey), the general trend in
minimum wages has been one of stagnation or
steady decline when compared to the incomes
of urban residents. This results, for example, in
the minimum legal wage in Peking declining
from 36.7% of Pekings average wage in 1994
to only 27% in 1999; and in Shenzhen city
from 40% in 1993 to a bit under 24% in 1999.
This means the income gap between the regular
urban population and the migrant workers kept
on widening in the 1990s.

Another important conclusion that can be
drawn from Figure 2 is that globalisation
scarcely leads to improved wage conditions for
the workers who make goods for export
compared to the populace at large. Guangzhou
and Shenzhen, the two cities that have the
highest average income in the country, and the
first cities in China that the central government
allowed to woo foreign investment, have the
lowest minimum wage to average wage
percentage. In these two cities it did not even
reach 30%. The worst of all the nine cities is
Shenzhen, the most famous model in China of a
special export zone. The percentages in these
two cities have been consistently the lowest of
the nine cities since 1997, dropping to a low of
23.8% in 1999. On the other hand, in the
interior of China the minimum legal wage in
the city of Chongqing, which is the least linked
with the global economy, reached that mark of
40% in 1999. These figures reflect a very
worrying trend. As a region becomes more
prosperous, it violates the national guidelines
and seeks to maintain its attractiveness to
foreign capital by keeping its minimum wage
level low, in order to compete with other
localities in China in selling the labour of
migrant workers. The benefits of globalisation
in accordance with this competitive logic have
not, and will not, trickle down to those who
make the products.

What is even worseand is not revealed by
this tablewhile on paper the local
governments comply with the central
governments decrees about raising minimum
wage levels annually to adjust to the average
urban wage and inflation, in reality the wages
of the migrant industrial workers are often
considerably lower than the official standards.
For one thing, the minimum wage, set by the
month, does not reveal the illegally long hours
worked by migrant workers to attain that

minimum. According to a survey I conducted
in Chinas footwear industry, the average
workday there amounts to about 11 hours each
day, often with no days offthat is, about an
80-hour workweek. Nor do the official statistics
take into consideration the staggering amount
of wages owed but not paid to migrant workers.
Of the 51,000 cases of workers complaints
lodged by letters and by personal visits to the
Shenzhen authorities during 2001, 43% related
to unpaid wages. One Chinese newspaper
article described the non-payment of wages as
having become a custom in Guangdong
while another described it as an incurable
disease. When the illegally long work hours
and these unpaid wages are taken into account,
a sizeable proportion of the workers are making
considerably less than the minimum legal wage.

In short, as China develops, the benefits have
not trickled down to the assembly-line workers
from largely rural backgrounds who make the
exported goods. Indeed, their situation has
even worsened since the Asian financial crisis
of 1997-98; the downturn intensified
competition with South-East Asian labour,
which had become much cheaper in the wake
of currency devaluations. Among the reasons
why China is attractive to foreign investors,
who have been rushing into China at the
expense of its Asian neighbours, is that local
Chinese authorities have been able to hold
down wages by turning a blind eye to
violations of Chinas own labour regulations
and laws. The central government normally
does not intervene.

Competition within China between different
regions exacerbates the problem of low wages.
And the central government has intervened in a
way that encourages even lower pay. Though
migrant workers wages in Guangdong
province are very low, the central government
has been worried that Guangdong is pricing
itself out of the international market. The
government therefore has started to encourage
foreign capital to move inland, to places where
the pay is even lower. The owner of an
Australian toy company who sources some of
her merchandise from China noted
enthusiastically to me this past year that she is
now contracting toy production at factories
further north and away from big cities. The
products, she said, are just as good and cheaper.

Mexico: Chinas main competitor
The geographic race to the bottom that operates
within China also operates in an international
context. In the 1990s Chinas main competitor
for the American garment market was Mexico,
on the other side of the globe. Since the
signing of the North American Free Trade
Agreement (NAFTA), Mexico has gained a
large number of new clothing factories. Today
China and Mexico are competing neck and
neck for the American market, each supplying
around 15% of all apparel imports to the US.
Mexico enjoys two substantial advantages over
China: it is next door to the US (and hence can
meet a faster turnover rate for orders) and it
enjoys an absence of quota restrictions due to
NAFTA. As a result, Asian investors who serve
as the subcontractors for the name-brand
Western multinationalsand these are
particularly South Koreans and Taiwanese
became increasingly active there in the 1990s,
even moving apparel production out of Asia to
Mexico. Along the US-Mexican border
assembly plants called maquiladoras have
mushroomed, employing about a million
migrant workers in various labour-intensive
industries. This number is still small compared
to the 12 million in Guangdong province alone,
but it represents a 150% increase in Mexico
since 1990.

As in China, expansion in employment does
not mean rising wages for Mexican migrant
workers. The minimum legal wages there are
almost double that of Shenzhen, and this
produces pressures on Mexican wage trends. In
the manufacturing sector, real wages dropped
by 20% during the 1990s. According to the
International Labour Organisations estimate,
the migrant workers wages in Mexicos
apparel industry shed 28% of their purchasing
power in the period between 1994 and 1999.
Despite this drop in real wages, the
maquiladoras recently have been losing ground.
As trade barriers continue to fall due to the
WTO, the middleman firms from Taiwan and
South Korea have begun shifting production
back to Asia, particularly China. The numbers
of maquiladoras swelled from 120 in the 1970s
to 3,700 in 2000, but have dropped by 500
factories since then. Pressures are therefore
tightening on Mexican enterprises to more
vigorously compete with Chinas long working
hours and bargain-basement wages. This also
explains why Mexico was the last country to
sign a trade agreement with China, delaying
Chinas entry into the WTO. Mexico knew that
when the trade barriers are removed, it would
have much to lose. But the international
pressure was too great for Mexico to stand its
ground.

There are numerous reasons why Chinese
wages can be kept so competitive compared to
other countries. First, it has an almost
inexhaustible supply of cheap labour from the
countryside. Second, the decentralisation and
deregulation in wage-setting under Chinas
economic reforms has enabled local
governments to turn a blind eye to labour
exploitation. Third, there is no autonomous
union movement in sight in the foreseeable
future to fight to preserve wage levels, and the
Chinese government is intent on making sure
that none is allowed to arise.

There is also a fourth fundamental reason
Chinas so-called hukou system, or household
registration system, which prevents an
uncontrolled rural-to-urban influx of population.
This works in similar ways to the pass system
under South Africas former system of
apartheid. To be sure, the two systems differ
markedly from each other in origin and
ideology. The South African pass system was
intertwined with a history of racism,
colonialism and the development of South
African capitalism, all of which favoured the
control of movement of African people to
provide greater political security and enhanced
efficiency in the use of black labour. The
ideology on which the system was based was
white supremacy, and apartheid was the
cornerstone of the state-building project of the
South African white ruling elite after World
War II.

The hukou system in China has a very different
history. It was established after the Communist
Party came to power in 1949. To ensure that
the planned economy met the basic needs of the
urban population, a rationing system was
instituted in the 1950s, which in turn required
the registration of people. As ration coupons
could only be used in the locality where they
were issued, this automatically restricted the
geographical mobility of all people, not just
peasants. To reside in a different locality, one
needed a special temporary certificate.

This system of passes has been retained to the
present day. The constraints this system places
on the geographical mobility of migrant
workers, and the means by which this can drive
down wages and other labour standards today,
is what is similar to what prevailed in South
Africa. In China it is there by default. It was in
place before it had its present function. It
simply continued to be used, when it was found
to work well under a greatly changed economic
system.

In this transitional period from socialism to
capitalism, the temporary work permits
required under the hukou system act like sluice
gates controlling the influx of labour into urban
centres. The hukou system helps to regulate the
flow, letting in more labourers when needed
and driving them out when their number
exceeds demand, or when the number stretches
local facilities to the limit. When workers lose
their working ability due to industrial accidents,
or when they have become too old by the age
of about thirty to keep up with the break-neck
work intensity, the pass system enables cities to
ship them back to the countrysidebecause
without a job a migrant has no right to stay in
an urban area. This kind of labour flexibility
cannot be as easily imposed on the local urban
population.

As more and more state factory workers were
laid off in the nineties, some urban
governments placed tighter restrictions on job
opportunities for the immigrants. One category
of jobs after another, especially in the service
industries, was reserved only for local residents.
In 1993, 40,000 rural migrants in Shanghai
were detained and deported; but as the cities
clamped down on opportunities, this rose in
1996 to 80,000, and in 1997, 100,000. There
are, however, regional differences in how
strictly local governments enforce
the hukou system. In areas where the supply of
labour does not exceed demand by a large
margin, the police and local government are
considerably more relaxed about the presence
of migrants. This is the case in Chengdu in
Sichuan province and Fuzhou, Fujian.

For local governments, allowing migrants to
come in from the countryside can be lucrative.
Migrant workers generate local tax revenues by
attracting companies that want cheap labour,
but because of the hukou system the local
government has no obligation to pay anything
for the welfare of these temporary sojourners.
They are not eligible for any of the medical,
housing or unemployment benefits available to
the local urban populace. Nor are the workers
from the countryside allowed by Chinas pass

system to bring their families with them, and
thus the urban government has no additional
educational expenses to meet either.

Despite this system of permits, the enormous
bureaucratic edifice that was erected to control
the influx of migrants has not been able to stem
the flow, just as had occurred in South Africa.
It is impossible to estimate the exact number of
Chinese peasants surging out of poor regions in
search of jobs, but a range of between 50 to 80
million is often cited. In the week immediately
after the Chinese New Year, when migrant
workers who have gone home for the festival
return to the cities, bringing with them relatives
and friends, the effect on transport is dramatic.
For instance, in a matter of days Guangzhou,
the largest city in South China, suddenly has to
handle several million migrant workers
descending upon it in trains and buses. In early
2002, before the Chinese New Year, the
Guangdong provincial government, in the hope
of dampening this vast simultaneous inflow,
announced that factories should not recruit new
migrants at that time of year; but 5.2 million
migrants nonetheless poured in after the New
Year, a quarter of a million more than the year
before.

This large volume of people looking for low-
end jobs drives down wages and working
conditions and allows these migrants to be
exploited by employers, who can pay them the
lowest possible wages. New arrivals, in
particular, desperate to recoup the amount they
have invested in transport expenses and in
applying for the array of necessary documents
and certificates before leaving home, will take
any job available.

Here is the case of one migrant reported in a
Chinese newspaper. The young migrant was
informed by a friend that if he went to
Shenzhen he would find a job. But he was
advised that before he left he had to apply for a
number of documents. These included a
border region pass (at 120 yuan, taking six
months), a personal identity card (another 80
yuan, taking one month), an unmarried status
certificate (60 yuan, valid for one year) and a
certificate to prove that he was not born out of
quota (45 yuan, valid for one year), all of these
totalling 305 yuan. To put this into perspective,
the minimum wage in Shenzhen in 2000 was
547 yuan for a full months work, and this
young man would be lucky if he could enter a
factory that would pay him as much as that
minimum wage.

On arrival in Shenzhen, armed with all these
documents, he thought he could become a
legal migrant worker and could begin
working without a problem. But the factory
demanded 300 yuan as a deposit before it
would give him the job. He then had to spend
40 yuan for a work permit, and another 300
yuan for a temporary residence permit. In short,
on arrival at his destination he had to spend
another 640 yuan. In all, without including
transport costs, he had to spend almost twice as
much as the monthly wage. Most new migrants
therefore are usually in debt after they first
arrive in a city.

According to official statistics, each of the
three or four million migrants in the Shenzhen
Economic Zone on average spends 600 yuan a
year on certificates. Migrant workers have to
carry these documents with them at all times or,
if caught without them, may be held in
detention. To possess all of the necessary
certificates, one needs to have proof of a job,
and so there is a nervous race to secure one.
The deposit that this particular migrant needed
to pay to the employer is symptomatic of the
desperate situation of most migrant workers.
Paying a substantial deposit has become a
common practice at the foreign-funded
factories. At first sight, the practice seems
paradoxical. Instead of the employer paying a
worker for the work he or she performs, the
worker first has to provide a payment to the
employers as surety for the job. The deposit
obliges the worker to remain at the factory, or
he or she forfeits it. To all intents and purposes
the worker is bonded labour.

Another practice used by many unscrupulous
employers is not to pay a portion of the wages
every month, promising to pay the withheld
portion at the end of the year. In this situation,
the longer a worker has worked, the more
money he or she is owed by the employer, and
the more difficult it is for the worker to leave.
This leaves the worker vulnerable, scared to
forfeit all of these unpaid wages when facing
poor treatment at the hands of managers.

Finally, and perhaps most effective of all, it is a
widespread practice among employers to take
away the migrant workers documents. Without
these, under Chinas system of permits, the
workers could not look for another job even
when the working conditions in a factory are
intolerable and they desperately want to quit.

Workers dormitories, usually located within
the factory compound, extend management
control over workers lives beyond work hours.
Movement into and out of the factory
compound can be monitored and controlled.
Disciplining workers is easier because there is
near-total control over them. Especially in the
factories in China managed by Taiwanese and
Koreans, where the discipline is so strict that
the management style can be described as
militaristic. In some of the bigger factories that
I have visited, workers are even marched to and
from meals and to and from dormitories in tight
military-style squads.

With migrant workers so controlled and cowed,
physical abuse has become pervasive in some
of the factories owned and managed by
Taiwanese, Koreans and Hong Kong Chinese,
and acute occupational health and safety
problems are also commonplace. A startlingly
high incidence of severed limbs and fingers has
been recorded. In Shenzhen city alone, there
were over 10,000 certified cases in 1999 among
a migrant population of some three to four
million.

The system of permits needs an enforcement
agentin this case the police. Under
the hukou system, much as in apartheid-era
South Africa, detention by the police if caught
without the necessary papers is an inherent part
of the system. Their behaviour towards migrant
workers has become associated with corruption
and abuses of power. Detention is associated
not only with fines and deportation from the
city, but also with mistreatment, physical
violence and forced bribery. With so many
migrants pouring in, the arrests are essentially
random. In much of Guangdong, people who
seem to be of rural origin are simply pulled off
the streets and roughed up, sometimes for no
particular reason. Among ten young migrants
whom I interviewed recently in Shenzhen, five
said they have been picked up by the police
within the several months they had been there,
a few of them more than once; and nine out of
the ten knew of a friend or relative who had
been detained.

Many migrants do not have all the right papers
on them because they are not aware of what
they need. Others are too poor to buy them all.
But oftentimes, through no fault of their own,
their documents are kept locked up by their
employer; or they have left a factory without
being able to get their documents back because
the employer did not want them to leave. As a
result of the latter, borrowing documents from
friends and purchasing forged ones off the
street have become very common, as it was in
South Africa. According to one survey
conducted by a government labour bureau in
Guangdong, 80% of foreign employers openly
admitted that they did not care whether the
documents were fake or not, as this did not
affect production. The infringement of
regulations being so widespread implies tacit
approval has been granted by the local
authorities and police.

Yet this does not stop the police from detaining
migrants arbitrarily. Police stations consider
this a profitable business, because bail, fines
and forced bribes, also imposed arbitrarily, can
amount to several hundred yuan. Even
neighbourhood committees that have no power
of detention get into the act. Some have been
detaining migrant workers and charging bail.
The practice has become so out of hand in the
past couple of years that the central government
in January 2002 issued a decree reducing the
fee for a temporary resident permit to 5 yuan a
year nationwide, to enable migrants to afford
one and thus avoid detention. And in March
2002 the Guangdong provincial government
passed regulations emphasising that the
detention of vagabonds should be restricted
to beggars and not applied to migrant workers
who do not have the right papers on them. But
rather than obediently comply with the
regulations, the provincial police responded by
declaring that they have done a good job in
sheltering beggars and vagabonds; and
reaffirmed the necessity of rigorously
implementing the pass system, without
mentioning that they were continuing to detain
and abuse large numbers of migrant workers. In
a few months local-level governments and the
police came up with new fees to make up for
the loss in revenues and private incomes.
Proclamations of new policies do not mean
elimination of the hukou system. Those who
gain from the system are not going to desist so
easily.

As can be seen, the Chinese hukou system and
the pass system under apartheid in South Africa
generated quite similar outcomes. They
produced a large, vulnerable underclass living
in constant insecurity, accompanied by daily

discrimination, repression, hardship and denial
of their human dignity.

In light of these circumstances, it becomes
possible to perceive how the Chinese hukou
system can keep wages down more easily than
in Mexico. As already noted, in Mexico the
workers who produce for export are, as in
China, largely migrants from the countryside,
and the majority similarly are female. But there
is a major difference. Almost all of the Chinese
female migrant workers are single women in
their late teens or early twenties who, because
of the household registration system, cannot
bring their families with them. Many factories
make sure that only single women are recruited
by asking to see their officially issued identity
certificates, which in keeping with the Chinese
states strict family-planning policy require that
the marital and family planning status of each
woman is listed. Since the workers are poor
single women living in dormitories,
management only needs to pay them enough
for their individual survival.

In Mexico the context is different. While most
of the women workers in the maquiladoras are
migrants from poorer regions, many of them
have come with their families, since there is no
pass system, and quite a number are single
mothers. Very often these women workers are
the sole bread-winners. Since they live with
their families, a part of their waking hours has
to be spent on unproductive chores (from
managements vantage point): in commuting,
in household tasks such as cooking, taking care
of the old and the young. No matter how
ruthless, there is a limit to the amount of
overtime work that management can squeeze
out of these Mexican workersfewer hours
than with the young single women in
dormitories in China.

There are also legal pressures in Mexico to pay
workers a bit more so that they can provide for
part of their families livelihood. The Mexican
Labour Law states that The minimum wage
must be sufficient to satisfy the normal
necessities of the head of the family in the
material, social and cultural order, and to
provide for the obligatory education of his
children . This article echoes Article 25 of the
Universal Declaration of Human Rights of the
United Nations. It is similar to the concept of a
living wage. Although in reality the minimum
wage levels set in Mexico are far below the
standard stipulated in the law, the notion of a
wage that can provide for a family exists.
No such concept of a living wage exists in
the Chinese discourse on wages, nor is it
stipulated in the Chinese Labour Law. Even the
migrant workers protests do not centre on how
low the wages are, but instead revolve mainly
around the issue of unpaid wages. Only when
workers have not been paid for several months,
when the situation becomes desperate, do the
workers begin to protest. Local governments in
Guangdong province occasionally launch
campaigns, especially just before Chinese New
Year, to collect unpaid wages or unpaid
payments for overtime work. But these brief
campaigns to collect money owed to workers
are only the tip of the iceberg. The expectation
of adequate labour standards is much lower in
China than in Mexico.

In China, the official trade union is an arm of
the Party-state. It has little autonomous space to
protect labour rights. In fact, because of the
massive influx of foreign capital and the rapid
rate of industrialisation, the trade unions
efforts, even when undertaken with good will,
face a near-impossible task. A parallel situation
used to exist in Mexico, where the trade unions
were affiliated with the government. But since
the defeat in the last election of the former
ruling party, the Institutional Revolutionary
Party, there is now a fledgling independent
trade union movement. This is challenging the
old unions authoritarian and pro-management
practices with the help of North American trade
unions and the anti-sweatshop movement. This
anti-sweatshop movement is composed of trade
unions, NGOs, labour advocates, university
students, human rights groups and church
groups. It grew rapidly in the 1990s and has
become a force that can no longer be ignored
either by multinational corporations or
governments.

Ripples of the anti-sweatshop movement have
spread to Asia, and China. The concept of
corporate social responsibility is just beginning
to circulate in China. The factories there that
are run by contractors from Taiwan, Hong
Kong and South Korea are now feeling
pressure from the Western multinationals that
they supply. The multinationals have nervously
begun to urge them to upgrade their labour
conditions. But the factories being monitored
by the multinationals are just a small minority
of the better and bigger factories, among the
thousands and thousands of factories that
subcontract production. The potential role of
the state becomes important here. A willingness
by the Chinese government to enforce its own
laws would be much more effective than
sporadic monitoring. But the Chinese
government has not yet awakened to the
growing pressures emanating from the West for
improved labour standards in the export
industries.

A few weak rays of hope have emerged in the
past two years elsewhere in Asia. Three
countries, Cambodia, Vietnam and more
recently Thailand, have expressed interest in
improving labour standards within their borders
to attract foreign capital. Cambodia has signed
a bilateral agreement with Washington that
accepts linking labour standards to trade and
has agreed to let the ILO monitor progress. The
Vietnamese government has publicly
encouraged its factories to try to raise standards
in order to acquire the certifications issued by
an American-based organisation that verifies
labour standards for Western corporations. The
Thai government is currently engaged in talks
with this organisation about operating training
programmes to upgrade labour standards in
Thailand. That is to say, three Asian countries
are now taking a new direction in their
industrial development strategies. They are
trying to attract foreign investment and trade by
raising labour standards instead of depressing
them.

It is not clear whether Peking is aware of this
new strategy adopted by its Asian neighbours.
But so far, China has not shown any signs of
changing its policy of low labour standards.
The government has not publicly addressed the
issue of corporate social responsibility, unlike
the Vietnamese government. The Guangdong
provincial government has tried to alleviate
some of the most blatant abuses, but no
fundamental change in policy has been adopted.
Let me quote here the director of the human
rights programme in Asia for Reebok:

Who enforces Chinese labour law? Nobody. If
it were enforced China would be a much better
place for millions of people to work in. But it is
ignored more than in any other country I work
in.

There have been a few reforms of the
Chinese hukou system, but only to allow
successful people with considerable money or
education to apply for an urban hukou. The
controls over the unskilled migrant workers
who work on the production lines and
construction sites, imposed by the pass system,
remain the same. And the police seem
adamantly against any changes. The hukou pass
system seems likely to remain in place for the
foreseeable future, and China will continue to
dominate the worlds export market, to the
point that the new initiatives taken by Vietnam,
Cambodia and Thailand may possibly collapse
under the weight of Chinese competition.

11. The backlash against globalisation

Overview
In 1999, the governments of the world met in Seattle as part of the WTO ministerial
conference to discuss global trade and ways to better integrate the worlds economy. The talks
generated an enormous demonstration in which fifty thousand people took to the streets to
protest against the World Trade Organisation and, more generally, the impact of globalisation.
Many scholars take the events in Seattle as the beginning of an anti-globalisation movement.
Since 1999, this movement has gathered strength as globalisation continues to generate a
violent backlash. This week we will examine why globalisation has created such opposition
across the world.

Objectives
x Understand the movements that have formed to oppose globalisation
x Consider why globalisation has prompted such a backlash

Discussion points
1. Is globalisation sustainable? Can it be made sustainable?
2. What sort of groups oppose globalisation? Why does globalisation unite so many groups
together in opposition? Do you agree with Bhagwatis criticism that opposition stems
more from nostalgia and sterile theory than from economic reality?
3. Are the marginalised and dispossessed groups in societies across the world destined to
remain victims of globalisation?
4. Can globalisation be made fairer or more equitable? How?
5. Is globalisation being blamed unfairly for all of the worlds problems?

Readings
Micklethwait, John and Adrian Wooldridge, The globalization backlash, Foreign Policy
(Sept/Oct 2001)

Bhagwati, Jagdish, Coping with antiglobalization: A trilogy of discontents, Foreign Affairs
(Jan/Feb 2002)

Goodman, James, Protest and globalisation: Prospects for transnational solidarity,
Annandale: Pluto Press, 2002

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249
250
251
252
253
254
255
Jagdish Bhagwati, Coping with antiglobalization: A trilogy of
discontents, Foreign Affairs (Jan/Feb 2002)

Abstract (Summary)
Globalization is doomed to controversy thanks to a trio of misapprehensions. The opposition
stems more from nostalgia and sterile theory than from economic reality. Globalizations
occasional downsides should still be addressed. Doing so requires imaginative institutional
and policy innovation. Corporations should be defended against ignorant, ideological, or
strategic assaults. Corporations generally do good, not harm. Social good is
multidimensional, and different corporations may and must define social responsibility, quite
legitimately, in different ways in the global economy.

Globalization a focal point of hostile passions
and sometimes violent protests has become a
phenomenon doomed to unending controversy.
Advocates cite its virtues and its inevitability.
Opponents proclaim its supposed vices and
vincibility. Central to many of the protests
against it is a trilogy of discontents about the
idea of capitalism, the process of globalization,
and the behavior of corporations. And all three
of these discontents have become interlinked in
the minds of many protesters. Globalizations
enemies see it as the worldwide extension of
capitalism, with multinational corporations as
its far-ranging B-52s.

As the twentieth century ended, capitalism
seemed to have vanquished its rivals: fascism,
communism, and socialism. The disappearance
of alternative models of development provoked
anguished reactions from the old anticapitalists
of the postwar era, who ranged from socialists
to revolutionaries and remained captive to a
nostalgia for their vanished dreams.
But globalization has also fallen afoul of a
younger group of critics. And the nostalgia of
the fading generation cannot compete with the
passions of these younger dissidents, who were
so evident on the streets at recent world
economic gatherings in Seattle, Washington,
Prague, Quebec City, and Genoa, and who have
made themselves heard on college campuses in
movements such as the antisweatshop coalition.

Far too many of the young see capitalism as a
system that cannot meaningfully address
questions of social justice. Many of these
youthful skeptics seem unaware that socialist
planning in countries such as India, which
replaced markets system-wide with quantitative
allocations, worsened rather than improved
unequal access. Such socialism produced
queues that the well connected and the well
endowed could jump, whereas markets allow a
larger number of people to access their targets.
Capitalism is a system that, paradoxically, can
destroy privilege and open up economic
opportunity to many but this fact is lost on
most of the systems vocal critics.

THE PERILS OF EDUCATION
Many of todays young, virulent anticapitalists
experienced their social awakenings on
campuses, in fields other than economics.
English, comparative literature, and sociology
are all fertile breeding grounds for such dissent.
Deconstructionism, as espoused by the French
philosopher Jacques Derrida, has, with its
advocacy of an endless horizon of meanings,
left the typical student of literature without
anchor. Derridas technique is to deconstruct
every political ideology, including Marxism.
Typically, however, it is capitalism that
becomes the focus of these efforts, not
Marxism. And this process often has nihilistic
overtones, with the paradoxical result that
many of its followers now turn to anarchy.
Within sociology, new literary theory and old
Marxist thought have equal influence on many
students. These students have contempt for
economic defenses of capitalism, asserting that
economics is about value whereas sociology is
about values. Economists retort that as citizens
they may choose ends, but as economists they
choose the means for harnessing humanitys
basest instincts through appropriate
institutional design to produce public good.

The presumption made by many of its radical
students that sociology is a better guide to
ethics than is economics is also misplaced.
Certainly sociologys related discipline, social
anthropology many of whose adherents now
256
find their voice in nongovernmental
organizations (NGOs), foundations, and the
World Bank traditionally leans toward
preserving cultures, whereas economics is a
tool for change. But if reducing poverty by
using economic analysis to accelerate growth
and thereby pull people up into gainful
employment and dignified sustenance is not
moral, and a compelling imperative, what is?

Apart from academic theory, other sources that
today are propelling the young into
anticapitalist attitudes can be found in new
technologies: cable television and the Internet.
These innovations help explain the dissonance
that now exists in many of globalizations
critics between empathy for the misery of a
distant elsewhere, and an inadequate
intellectual grasp of what can be done to
ameliorate that distress. The resulting tension
then takes the form of unhappiness with the
capitalist system within which we live and
anger at its apparent callousness.

As the philosopher David Hume observed,
ordinarily our empathy for others diminishes as
we go from our nuclear to our extended family,
to our local community, to our state or county,
to our nation, to our geographical region, and
then to the world. But thanks to television and
the Internet, the world now often seems closer
than our immediate neighbors. These
technologies have brought images of far-off
suffering into our homes. And when todays
young people see and are anguished by poverty,
civil wars, and famines in remote areas of the
world, they have no way to cope with it in
terms of rational, appropriate action. In 1999,
for example, kids protesting the World Trade
Organizations Seattle meeting dressed as
turtles to denounce the organization unaware
that the WTOs judicial body had recently ruled
in the turtles favor. True, there are several
serious NGOs with real knowledge and
legitimate policy critiques, but they are not the
ones agitating in the streets.

DEMONIZING CAPITALISM
Anticapitalism has turned into antiglobalization
among left-wing students for reasons that are
easy to see but difficult to accept. The notion
that globalization is merely an external
manifestation of the internal struggles that
doom capitalism and that globalization is also,
in essence, the capitalist exploitation of weak
nations provides an explanation linking the
two phenomena that resonates among the
idealist young on the left. Capitalism, they
argue, seeks globalization to benefit itself and,
in the process, harms others abroad.
Central to this perspective is the notion that
monopolies for that is how multinational
corporations are often described today in
antiglobalization literature are at the heart of
the problem. Such monopolies, it is argued,
exploit rather than benefit people abroad.
Globalization is thus seen as a rapacious force
that delays the demise of capitalism at home
and harms innocents living abroad. Such
attitudes, of course, grossly exaggerate the
strength of corporations, which, even when
large, undercut one another through
competition. Multinationals political power is
similarly often stifled by economic and national
competition.

Yet the antiglobalists insist that multinationals
must necessarily be bad, because global
integration without globally shared regulations
must surely make things too easy for
international corporations. Multinationals seek
profits by searching for the most likely
locations to exploit workers and nations, the
protesters argue, thereby putting intolerable
pressure on their home states to abandon their
own gains in social legislation, leading to a
supposed race to the bottom. But appealing
as this scenario may appear to some, it does not
withstand scrutiny. Much recent empirical
work shows that the evidence for this supposed
race to the bottom is practically nonexistent.
There are plenty of explanations for why
corporations do not rush in to pollute rivers and
the air even when there are no laws on the
books to prevent them. Aside from economic
reasons for not choosing environmentally
unfriendly technology, the main check is
provided by the fear of a bad reputation. In
todays world of CNN, civil society, and the
proliferation of democracy, multinationals and
their host governments cannot afford to alienate
their constituencies.

FRAGILE ALLIANCES
The recent successes of the forces of
antiglobalization can also be explained by the
fortuitous alliance struck between young
agitators, conventional lobbies such as the labor
movement, new pressure groups such as the
environmentalists, and human rights crusaders.

257
Seattle saw these groups merge and emerge as
a set of coalitions. The Teamsters and turtles
faction included unions, students, and
environmentalists. Meanwhile,
environmentalists teamed up with blue- collar
unions into a green and blue alliance. Labor
standards was supplanted by labor rights as
a rallying cry, heralding the alliance of human
rights activists and the unions. And the growth
of the antisweatshop movement on university
campuses was accomplished by students
returning from summer internships with
organized labor, who then brought their fellow
students and their views into an alliance with
the unions.

Although these partnerships have made the
antiglobalizers more effective, however, the
alliances themselves remain fragile. Thus after
the September 11 attacks on the World Trade
Center, the coalition between unions and
students started to fragment, as campuses
turned against the subsequent war and the
unions came out for it. The turn toward
violence by student protesters in Seattle,
Quebec City, and Genoa also prompted union
misgivings: the rank and file of the labor
movement are not sympathetic to such tactics.
The fissures are now many, and the negative
antiglobalization agenda is not sufficient glue
to hold these disparate groups together if they
head off on different trajectories.

Still, the antiglobalization movement will
remain an irritant on many fronts unless the
numerous false and damning assumptions it
entails about capitalism, globalization, and
corporations are effectively countered with
reason and knowledge in the public arena. This
has yet to be accomplished; it is truly
astonishing, for example, how widespread is
the assumption that if capitalism has prospered
and economic globalization has increased while
some social ills have worsened, then the former
phenomena must have caused the latter.

The chief task now before those who consider
globalization favorably, then, is to confront the
notion implicit in many of the intellectual and
other underpinnings of antiglobalization
sentiment that while globalization may be
economically benign in the sense that it
increases overall wealth, it is socially malign in
terms of its impact on poverty, literacy, gender
equality, cultural autonomy, and diversity. That
globalization is often not the enemy of social
progress but rather a friend is not that difficult
to argue, once one starts thinking about the
matter deeply and empirically. Take
corporations again: Have they hurt women, as
some claim? Japanese multinationals, as they
spread throughout the world during the years of
Japanese prosperity, took Japanese men with
them. But these men also brought their wives:
to New York, Paris, London, and other cities in
the West, where the Japanese housewives saw
for themselves how women could lead a better
life.

This experience transformed many of these
women into feminist agents of change.

Meanwhile, as the economists Elizabeth
Brainerd and Sandra Black have shown, wage
differentials against women have decreased
faster in industries that compete internationally,
for such industries simply cannot afford to
indulge their biases in favor of men. Women in
poor countries also benefit when they find jobs
in global industries. Some feminists complain
that young girls are simply exploited by
multinationals and sent back home as soon as
they are ready for marriage, picking up no
skills in the process. But ask these same girls
about their experiences and one finds that the
ability to work away from home can be
liberating as is the money they earn.

Nonetheless, campus antisweatshop activists
still accuse international corporations of
exploiting foreign workers. But studies, such as
that by Ann Harrison of Columbia Universitys
School of Business, show that in some
developing countries, multinationals pay their
workers more than 10 percent above the going
wage, at least in their own factories (as distinct
from those of subcontractors or suppliers of
components and parts, who may pay only the
prevailing wage).

HOW GOOD IS GOOD ENOUGH?
The common apprehensions about
globalizations social impact are mistaken, then.
But it is not sufficient to retreat to the argument
that globalization is only helpful by and large
or more or less. Globalizations occasional
downsides should still be addressed. Doing so
requires imaginative institutional and policy
innovation. For instance, the insecurity that
freer trade seems to inculcate in many even if
not justified by economists objective
documentation of increased volatility of
employment needs to be accommodated
258
through the provision of adjustment assistance.
In poor countries that lack the resources to pay
for such assistance themselves, such programs
must be supported by World Bank aid focused
on lubricating the globalization that this
institution praises and promotes.

With the growth of civil society, there is also
legitimate impatience with the speed at which
globalization will deliver on the social agendas.
Child labor, for example, will certainly
diminish over time as growth occurs. In this
sense, globalization is part of the solution, not
the problem. But people want progress to go
faster. Still, the way to improve globalization is
not through trade sanctions, which remain the
obsession of Congress and certain lobbies;
sanctions are a remedy that threatens
globalization by disrupting market access and
tempting protectionists.

Of course, in cases of abuse that spark huge
moral outrage, a widespread resort to trade
sanctions might work. But in other cases,
suasion, especially for social agendas that
appeal to our moral sense, surely has a better
chance of succeeding. This is particularly true
now thanks to CNN and the NGOs. A good
tongue-lashing from such outlets is more likely
than sanctions to advance progressive social
agendas. Indeed, sanctions may not just be
unproductive; they may even be
counterproductive. In one case, the sheer threat
to exports embodied in the proposed 1995
Harkin Child Labor Deterrence Act led to
children being laid off from Bangladeshi textile
factories. Female children then wound up with
even worse employment: prostitution. Contrast
this with the International Program for the
Eradication of Child Labor run by the
International Labor Organization. This effort
eschews sanctions, working instead to reduce
child labor by coordinating with local NGOs,
interested aid donors, and cooperative host
governments. The program ensures that
children get to their schools, that schools are
available for them in the first place, and that
impoverished parents who lose a childs
income are financially assisted when necessary.

A great upside of the use of moral suasion is
that it joins the two great forces that
increasingly characterize the twenty-first
century: expanding globalization and growing
civil society. Partnership, rather than
confrontation, can lead to shared success, and is
certainly worth the hassle.
Finally, corporations should be defended
against ignorant, ideological, or strategic
assaults. Corporations generally do good, not
harm. Again, however, the question has to be,
Can they help us to do even more good? Purists
say that shareholders, not corporations, should
be the ones to do the social good. But that
argument makes little sense. Nonprofit
corporations aid societys underprivileged.
Columbia University uses its student and
faculty resources to assist the poor in Harlem.
Meanwhile, Microsoft and ibm similarly assist
the communities in which they function. More
corporations today need to do just that, each in
its own way. Pluralism is of the essence here:
no NGO, or government, has the wisdom or the
right to lay down what corporations must do.
Social good is multidimensional, and different
corporations may and must define social
responsibility, quite legitimately, in different
ways in the global economy. A hundred
flowers must be allowed to bloom, creating a
rich garden of social action to lend more color
to globalizations human face.

Jagdish Bhagwati is University Professor of
Economics at Columbia University and Andre
Meyer Senior Fellow in International
Economics at the Council on Foreign Relations.

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12. Reflections

In the final week, we will reflect on the nature of globalisation and consider whether it will
continue to expand.

Objectives
x Reflect on the nature of globalisation
x Consider whether globalisation is still inevitable

Discussion points
1. Is the twenty-first century destined to be the century of globalisation?
2. In balance, is globalisation positive or negative?

Wolf, Martin, Will globalization survive?
(www.iie.com/publications/papers/wolf0405.pdf)

James, Harold, The future of gobalization: A transatlantic perspective, June 2008,
(www.fpri.org/enotes/200806.james.futureglobalizationtransatlantic.html)

267
Martin Wolf, Will globalization survive? Third Whitman
Lecture, Institute for International Economics, Washington D.C.,
April 5, 2005
Source: (www.iie.com/publications/papers/wolf0405.pdf)

[I]t is worth bearing in mind that, despite
numerous warnings issued in the early
twentieth century about the catastrophic
consequences of a war among the European
great powers, many peoplenot least investors,
a generally well-informed classwere taken
completely by surprise by the outbreak of
World War I. The possibility is as real today as
it was in 1915 that globalization, like the
Lusitania, could be sunk.
Niall Ferguson, Sinking Globalization,
Foreign Affairs

Ours is not the first age of globalization. The
decades before the First World War were
remarkably similar to our own era. Under the
aegis of the United Kingdom and stimulated by
a host of technological advances, the world
enjoyed an era of liberal trade, remarkably free
movement of people, and almost entirely free
movement of capital. The world also enjoyed
an unprecedented rise in prosperity. According
to the economic historian, Angus Maddison,
real GDP per head rose at a rate of 1.3 percent
a year in the world as a whole between 1870
and 1913. This is not far short of the
improvement of the past three decades. As
table 1 shows, only Asia and Africa, both
victims of colonialism, failed to share in the
rising prosperity.

Then came the war. Norman Angell, in his
notorious book, The Great Illusion, published
in 1910, argued persuasively that war was a
ruinous folly. He hoped to persuade people that
nothing could come from a European war but
mutual ruin. His hopes failed. Many have since
condemned him for his innocence. But if one
reads his book, one will find not that he thought
war impossible, but that he thought it insane.
He hoped people would prove rational. People,
as is their wont, disappointed him. That war
began the ruin of the first globalization. The
economic disarray of the interwar years, the
failure of the United States to assume the
responsibilities of power, the weariness and
weakness of the United Kingdom and France,
the bitterness of the Germans, and the
Bolshevik triumph in Russia completed the job.
The failure of the first liberal orderthat of the
19th centuryled to 30 years of catastrophe.
Never again was the motto under which I
wrote my book, Why Globalization Works.

Since then, we have recreated a better liberal
international orderone that extends
opportunities to the world as a whole. It is our
duty to our descendants not to throw away this
golden opportunity once again. Yet the fact that
we should not do something does not mean that
we will not do so. Globalization is fragile, for a
simple reason: A global market economy
depends on the support of states. States provide
the security of property and person on which all
complex exchange depends. But states are
necessarily territorial. The loyalties they create,
evoke, or reflect are steeped in humanitys
characteristic tribalism.

In the remarks that follow, I wish to extend this
argument by first analysing the driving forces
of globalization and then looking at its
achievements and failures before examining the
risks that lie ahead. I conclude with what we
can do to minimize those risks. But when I say
we, I really mean you: the United States.

What Drives Globalization
I define globalization as the integration of
economies through markets across frontiers.
It is driven, in turn, by two forces: the reduction
in the costs of transportation and
communications and economic liberalization.
The reduction in the costs of transportation and
communications is a consistent tendency in
human history, though one that has accelerated
over the past two centuries. Economic
liberalization, however, is far from consistent.
On the contrary, the last two centuries have
seen two upswings and one huge downswing.

268
Falling Costs of Transportation and
Communications
Changes in transportation and communications
technology create opportunities for increased
commerce and are, in turn, created by them.
This is not a new phenomenon. The railway,
the steamship, the refrigerator, and the
telegraph created the opportunities for the
integration of the 19th and early 20th centuries.
The railway made the shipping of commodities
in bulk over land feasible for the first time in
history. With the steamship, tens of millions of
people could cross the oceans with easeand
did so.

The first transatlantic cable was laid in 1866.
This, argues professor Kevin ORourke, was
the most important breakthrough of the last
200 years for the capital markets. No other
innovation, he writes, including the late
nineteenth-century invention, the telephone, or
its late twentieth-century equivalent, the
Internet, has had comparable impact on the
speed of information flows and capital market
integration.

The 20th century added the container ship, the
giant tanker, and the airliner. It also added
radio, television, transcontinental telephony,
the satellite, the computer, and the Internet.
New opportunities have been created and, again,
they have been exploited. They are to be seen
in 24-hour financial markets, mass tourism, and
the global interconnection of production that
has spawned the multinational corporations of
today.

Economic Liberalization
In the long run, then, the world seems bound to
become more globalized because opportunities
have grown enormously. But history tells us
that this does not mean a never-ending rise in
integration. In the 19th century, a rising ride of
liberalism reached its highest point in the last
one or two decades of the century. Thereupon a
combination of powerful forces reversed the
tide. I define those forces as the four Is:
geopolitical insecuritythe rivalry among the
great powers that culminated in two world wars;
macroeconomic instabilityabove all the
Great Depression; protectionist interests
particularly important in the United States in
1930, when the Smoot-Hawley tariff was
enacted; and collectivist ideasnationalism,
imperialism, socialism, and communism. By
1945, the integrated world economy had
disappeared.

After World War II, liberalization began anew,
though haltingly, in Western Europe and across
the Atlantic under the wise leadership of the
United States. By the late 1960s, the success of
a small number of relatively outward-looking
east Asian economies was becoming more
visible. By the late 1970s, the failures of state
planning and nationalization were also
becoming evident. This set the stage for what
must be the most dramatic period of economic
liberalization there has ever beena process
that has, in a quarter of a century, brought
something like a billion additional people
within the purview of the global market.

Think of the headlines alone: the
transformation of Mao Zedongs China into
what is, almost certainly, the most
internationally open large country in history;
the collapse of the Soviet empire; and the end
of Indias license raj. These events alone
transformed the economic lives of about 2.8
billion people. But this was not all. Economic
liberalization also swept across much of Latin
America. In all these cases, moreover, what
happened was not just liberalization at the
border. As has usually been the case, the move
towards the market has been simultaneously
internal and external. There have been
exceptions: The United States was one in the
19th century, when it combined high protection
against imports with laissez-faire at home. But
when countries decide to adopt the logic of the
market, they normally do so both domestically
and internationally. Once one has accepted that
market relations make sense among domestic
residents, it is hard to argue that foreigners
must be excluded. A countrys international
transactions are, after all, just the aggregate of
the individual transactions by its residents.
Moreover, because the motivation for such
transactions is the same as for transactions with
fellow residents, they are just as likely to
contribute to the welfare of those who
undertake them. This is the logic of
international integration.

It is impossible in a short space to examine this
liberalization in detail. But let us take one
example: China. Between 1992 and 2002, the
weighted average tariff on Chinese imports fell
from 40.6 percent to 6.4 percent. In effect,
China, within just ten years, moved from
having import barriers comparable to those of
269
todays high income countries in the early
1950s to levels close to the current ones of the
high-income countries. And, since a tax on
imports is also a tax on exports, Chinas
exports exploded: Between 1999 and last year,
exports rose from $200 billion to not much
short of $600 billion. What we are seeing here
is nothing short of a global market revolution.

Globalizations Record
What has been the result of the interaction of
these twin forces, the declining costs of
communications and the move to the market?
Summarized briefly, two big things have
happened over the past two and a half decades:
The first is a huge rise in the integration of the
goods producing sectors of economies, and the
second is a still bigger increase in foreign direct
investment (see figures). These are two aspects
of one thing: the integration of production
across frontiers by transnational companies.
They have, in the process, created something
quite new: specialization of production within
manufacturing on the basis of specific sources
of comparative advantage.

Yet it is also important to be clear about what
has not happened. Two things, in particular, are
almost certainly less globalized than a century
ago: labor markets and long-term capital
markets.

The former is shown by the fact that the
proportion of the worlds population living in
countries other than the country of birth is
about 3 percent now, against about 10 percent
in the late 19th century. It is also shown by the
historically unprecedented gaps in real wages
across the planet for people with much the
same skills.

The latter is shown by the failure to generate
consistent large net capital flows from rich
countries to poorer ones. In fact, over the past
seven years, the net flows have gone in the
opposite direction, from the developing world
to the worlds richest country. The failure to
create the basis for stable net flows of capital
from the rich world to the poor one is, I would
argue, the greatest single failure of the second
age of globalization.

If we turn to human welfare, what is our
assessment?

x Globalization has brought large economic
gains to many parts of the world, above all
to Asia, which has successfully exploited
the ladder of development created by labor-
intensive manufactures.
x Globalization has brought about huge
reductions in the number of people in
extreme poverty. According to the latest
World Bank data, the proportion of the east
Asian population living on less than a
dollar a day at purchasing power parity fell
from 56 percent in 1981 to 16 percent in
2001. This is the biggest and fastest
reduction in extreme poverty in world
history.
x The relatively rapid growth of Asian
developing countries has almost certainly
reduced global inequality among
households for the first time since the
1820s.
x Globalization has brought big gains to the
developed countries as well. Recent work
by the Institute for International Economics
suggests that the gains to the United States
alone amount to $1,000 billionalmost 10
percent of GDP. For the United Kingdom,
the gains must be far greater.
x Globalization has not worked well for
Africa or much of Latin America. For this
there are three reasons: the resource curse,
persistent protectionism in agriculture, and
the weak supply conditions in these
countries. In addition, for these countries,
the entry of China into the world economy
is a massive shock, both positive and, in
some cases, negative.

My conclusion then is that we have done quite
well, but we must do better. For this reason, I
strongly support the idea of a big push on
Africa. It is also why we must do what we can
to encourage the rest of Latin America to learn
from Chiles success, not Argentinas failure.

Threats to Globalization
Doing better would be excellent. But we can
also do far worse. The international economic
integration of the late 19th century went into
reverse. Is the present move towards integration
likely to suffer the same fate? To answer this
question, one needs to take account of the
differences and similarities between these two
epochs. The breakdown last time was the
consequence of the combined force of
270
protectionist interests, antiliberal ideas,
economic instability, and international rivalry.
How likely are the same four horsemen of the
apocalypse to return?

Protectionist Interests
The first force underlying the disintegration of
the earlier form of globalization was
protectionist interests, shown most decisively
in the United States in the interwar years. The
highly protectionist policies of the worlds
biggest and most successful economy
undermined liberalism elsewhere.

Yet these forces have happily been
significantly modified and ameliorated by
contemporary economic developments.

The rise of the internationally integrated
transnational company has reduced the ability
(and willingness) of producers to wrap
themselves in national flags. It is no accident
that protectionist interests are strongest in
predominantly nationally owned and operated
industriessuch as steel and agriculture. Is a
Toyota factory in the United States less or more
American than a General Motors factory in
China? Is Goldman Sachs in Frankfurt less or
more American than HSBC in New York? The
answer to such questions is: Who knows?
Modern companies have global interests. The
same is true for many of their most valued
employees. Nationalists find the cosmopolitan
attitudes of companies and many top-level
employees objectionable. A significant
consequence, however, is the breakdown in the
ability and willingness of companies to
collaborate with trades unions on their demand
for protection. Developing countries have been
affected by the same trends. Inward foreign
direct investment and intraindustry trade
diffuse traditional protectionist interests. The
concept of a purely national business sector has
become increasingly irrelevant and, just as in
industrial countries, this diffuses protectionist
lobbying.

The increase in service sector employment and
the decline in employment in manufacturing
has, along with the rise in the portion of the
population in retirement, reduced the share of
the voters whose jobs are directly vulnerable to
import competition. Consumers have also
become accustomed to foreign products. They
may, as workers, complain about imports. But
they still like the products foreign companies
provide. Many in high-income countries
express concern about the decline in relative
wages and employment opportunities of the
unskilled. But the political power of unskilled
workers has diminished. Moreover, the
consensus of economists, disputed by only a
minority of politicians, is that this decline in
opportunities reflects changes in technology,
not in trade.

In addition, the existence of multilateral
institutions and a web of strong international
commitments makes it far more difficult for
protectionist interests to capture legislatures, as
they once did. There is too much at stake for
countries to reverse the commitments they have
made. Even the Bush administration, wedded
though it is to unilateralism, has never said that
it should ignore its obligations under the World
Trade Organization (WTO), even though it is
the most binding multilateral economic
commitment the United States has.

Collectivist Ideas
A second element in the 20th century collapse
of the liberal international order began, at home,
with the rise of antiliberal ideas. There are
parallels today between groups then and now,
particularly with what the former chief
economist of the OECD, David Henderson, has
called new millennium collectiviststhe
groups who unite to protest against global
capitalism. But this group of protesters is very
differentand much less intellectually
coherentthan the opponents of liberalism of a
century ago. The antagonists of liberalism then
converged around two ideas: radical socialism
and racially-defined nationalism. Both groups
called for control of the state over the economy
and primacy of the collective over the self-
seeking individual. Both sought powerand
knew what they wanted to do with it. That
made them extraordinarily dangerous.

The intellectual origins of todays antiliberal
movement are far more diverse. They include
environmentalists, development lobbies,
populists, socialists, communists, and
anarchists. These groups are united only in
what they oppose. They are rooted in no
cohesive social force, such as the organized
working class. They largely reject party politics.
They offer no alternative way of running an
economy. They are split in their objectives. Part
of what some protesters saynotably on the
hypocrisy of the advanced countries and the
271
plight of the poor is valid. But a political
movement cannot beat something with nothing.
A movement that offers only protest is unlikely
to triumph.

Economic Instability
The decisive event in the collapse of the
integrated economy of the late 19th and early
20th centuries was the Great Depression in the
United States and the financial and exchange
rate crises that rolled across the world in the
1930s. In developing countries, financial and
exchange rate crises have come with depressing
frequency over the past two decades.
Substantial financial and exchange rate crises
also erupted among the other advanced
economies in the 1980s and early 1990s. Japan
is still struggling with the aftermath of its
bubble economy, while the United States has
also suffered a huge stock market bubble,
which reached its maximum extent in 2000.

All these are signs of significant financial
instability. Yet it is almost impossible to
believe that the outcome will be another 1930s.
The move to floating rates has, as Max Corden
foresaw, significantly reduced the risk of such
crises. The woes inflicted upon Argentina by
the collapse of its currency board at the end of
2001 should, therefore, be viewed as the end of
an era rather than as the beginning of a new one.
Its crisis has also had remarkably little effect on
other emerging-market economies. Much of the
transfer of resources to developing countries is
now taking place in the longer-term, more
sustainable form of foreign direct investment.
For all these reasons, the likelihood of massive
waves of financial crises in emerging-market
economies has declined. It is also striking that,
despite these crises, no significant country has
reversed its commitment to liberal trade or even
to freedom from exchange controls. That even
includes Argentina. Today, such policies are
seen as a dead endthe quickest way to join
Castros Cuba or Kim Jong-ils North Korea in
far from splendid isolation.

Yet I cannot leave the question of global
economic instability without touching upon
what is both the strangest and most disturbing
feature of the world economyits dependence
for macroeconomic stability on explosive rises
in US current account deficits. The United
States has, in essence, become the worlds
borrower of last resort. Since it is the worlds
most creditworthy debtor and the issuer of the
worlds most trusted currency, it is better
placed to play this role than any other country.
In the process, the United States is making it
possible for the world to run at tolerably high
levels of economic activity, by absorbing the
excess savings of Japan and continental Europe
and accommodating the mercantilism of
emerging Asia. In addition, it has been
substituting its own excellent credit for the poor
credit of weak emerging market economies,
which would otherwise have surely been the
worlds principal borrowers. That has
eliminated the big financial crises of the 1990s.
Yet this solution to the adding-up problem
for the world economy itself carries two big
risks: rising protectionist sentiment in the
United States, and, at some point, a brutal and
sudden correction, as the rest of the world
decides that its holdings of dollar claims are
excessive and, not least, too vulnerable to the
depreciation that must occur if the US current
account deficit is to fall sharply as a share of
GDP. The chance of a hard landing, with
unpredictable political consequences in the
United States and among the creditors, though
not 100 percent, is not zero either, and, as I
have frequently argued, the odds increase with
each passing year.

International Rivalry
Yet the most important cause of the 20th
century breakdown was the collapse of
harmonious international relations, as rivalries
among the great powers and the rise of
communism and fascism fragmented the globe.

In his gloomy article, Ferguson, too,
emphasizes the geopolitical dangers, pointing
to five parallels between the United States
today and the United Kingdom a century ago:
overstretched, physically and financially; great
power rivalry, with China now in Germanys
role; an unstable alliance system, with the
disintegration of the transatlantic relationship;
rogue regimes (then Serbia, now Iran and North
Korea); and revolutionary organizations (then
the Bolsheviks, now al-Qaeda). I believe he is
right: the breakdown in economics starts from a
breakdown in global politics.

For the moment, however, the situation is
different, in four fundamental respects.
272

x There is a single undisputed hegemon, the
United States, and little chance of a war
among the great powers in the near future,
except just conceivably between the United
States and China over Taiwan. Yet China is
not, at present, powerful enough to be a
rival of the United States.
x Second, all the great powers have largely
abandoned the atavistic notion that
prosperity derives from territorial gains and
plunder rather than internal economic
development and peaceful exchange. One
of the striking features of todays war
against terrorism is that all the worlds
great powers are on the same side.
x Third, all the great powers share a
commitment to market-led economic
development and international economic
and political integration.
x Fourth, global institutions and habits of
close cooperation reinforce the
commitment to cooperation.

All these are powerful differences between the
world of nearly a century ago and todays
world. Against this, we must note two obvious
parallels. The breakdown of the early 20th
century occurred, in part, because of the
pressures to accommodate rising powers in the
global economic and political order. The rise of
China will, in time, create comparable
pressures. If the United States remains wedded
to notions of global primacy rather than of a
shared global order, conflict with a rising China
would seem virtually inevitable. Indeed, John
Mearsheimer, professor of political science at
the University of Chicago, argues that conflict
(though not war) is inevitable tout court: the
United States, he argues, will not tolerate a
strategic rival. War would then ensue for
exactly the same reason that Thucydides
thought it arose between Athens and Sparta:
The status quo powers feared the rise of a rival,
while the rising power resented the pretensions
of the incumbents.

In addition, Chinas rise will force
uncomfortable economic adjustment on the rest
of the world. These are already creating
protectionist pressures, notably so in the United
States. It is not, alas, impossible to envisage a
spiral of mutual hostility that undermines the
commitment to a liberal international economic
order.

Today, however, instead of such a breakdown
in relations among the worlds most important
powers, we confront an alternative threat:
mega-terrorism. Some fear that terrorist
outrages on the scale of the attacks on New
York and Washington of September 11, 2001
or even bigger oneswill end the commitment
to open borders. It is not difficult to envisage
the devastating impact the smuggling of a
nuclear device into a country on a container
ship would have on confidence in open borders.
Closely related fears concern the development
of weapons of mass destruction by regimes
hostile to the liberal world order in general and
the United States in particular. At worst, such
regimes might collaborate with terrorists to
inflict vast, and virtually untraceable, damage
on civilized states. Fear of what might come
across borders must act as a tax on
globalization. If countries had to be sure of the
safety of every shipment and person that
crosses their borders, much of todays
globalization would become impossible. Yet
that would also hand the victory to the terrorists
and their sponsors. At present, it does not
appear that the worlds response to September
11 will be to close borders. That would only
exacerbate the desperation in the worlds less
economically successful countries. Global
cooperation to control terrorists and improved
security measures seem a more appropriate and
effective route. But the danger is a genuine one.
It cannot be ignored.

Resource Insufficiency
Power is not the only asset whose availability
creates a zero-sum relationship. So does the
supply of finite resources. While most countries
now understand that wealth is created by
production and exchange, not plunder, that is
not so obviously true of access to raw materials,
particularly fossil fuels. If one accepts that the
supply is, indeed, finite, then more demand by
new consumers makes other consumers
unambiguously worse off. In recent years,
incremental demand for oil from Asia has
exceeded incremental demand from North
America by two to one. This is one of the
explanations for todays high prices. If one
combines this with the fact that the politically
unstable Gulf region seems set to become an
ever more important source of this vital fuel,
the potential for disruption and even conflict is
not small. Why, Americans might reasonably
ask, should they bear the price of ensuring oil
to China at the same (high) price as the one
273
they pay themselves? The search for vital raw
materials was a motivating force behind
territorial expansion in the first half of the 20th
century. It could easily become so again in the
years ahead.

So What Is To Be Done?
Globalization is not inevitable. It depends on
politics. In todays world, it depends above all
on US politics. Without successful US
leadership at a time of huge upheavals, the
present globalization may founder, just as the
last one did. I suggest three priorities:

First, a big effort must be made to ensure that
the weakest and poorest countries are in a
position to share at least some of the benefits of
the global economy and advancing
technologies. It is too easy to imagine that, by
the middle of this century, as many as 1.5
billion to 2 billion people will live in countries
whose real incomes per head are less than a
hundredth of those in the richest. Such a world
cannot possibly be stable.

Second, an equally big effort must be made to
fix the sources of global macroeconomic
instability. In the long run, it will be important
for emerging-market economies to pursue
policies that allow them to borrow in their own
currencies. More importantly, China must be
told firmly that the Asian mercantilist strategy
will not work for a country of its scale. At the
very least, it should run a current account
deficit equal to the net inflow of foreign direct
investment.

Third and most important, the United States
must find a way to deal with the three principal
long-term sources of geopolitical instability:
dependency on oil from the Gulf region;
Islamic fundamentalism; and a rising China. In
none of these cases will the United States be
able to achieve what it wants on its own. In all
cases, however, the outcome will depend on US
leadership.

Progress or relapsethe choice is largely, but
not entirely, the United States. History will
judge. We can only warn. Peace, prosperity,
and harmonious international relations are
neither normal nor natural. They must be
worked for by every generation. Ours is no
exception.
274
Harold James, The future of globalization: A transatlantic
perspective, June 2008
Source:http://www.fpri.org/enotes/200806.james.futureglobalizati
ontransatlantic.html

Harold James is Professor of History and International Affairs at Princeton University and
the Woodrow Wilson School of Public and International Affairs. This essay is based on his
presentation at the 8th Transatlantic Editors Roundtable, Reviving Transatlantic
Cooperation: A Roundtable on Terrorism, International Order, and Global Challenges, held
in May 2008 at the Union League in Philadelphia.

Are we at a turning point in the development of
globalization? Is the twenty-first century going
to be very different from the late twentieth
century?

Remember Friday, March 14, 2008: it was the
day the dream of global free-market capitalism
died. For three decades we have moved
towards market-driven financial systems. By its
decision to rescue Bear Stearns, the Federal
Reserve, the institution responsible for
monetary policy in the US, chief protagonist of
free-market capitalism, declared this era over.
It showed in deeds its agreement with the
remark by Josef Ackermann, chief executive of
Deutsche Bank, that I no longer believe in the
markets self-healing power. Deregulation has
reached its limits.

Until very recently, globalization appeared to
be quite robust. It seemed easily to have
survived the shock of 9/11. There has been no
repeat of the contagious emerging market crises
of 1997-98. The credit market anxieties of 2007
produced little echo in Asian emerging markets,
with the result that many commentators began
to speak of a decoupling. The resilience of
the world economy is sometimes, but
erroneously, interpreted as a demonstration of
the inexorable character of globalization. In
reality, there are great vulnerabilities.
Many of the former advocates of globalization
in the business and political world of the
advanced industrial countries are now deeply
worried, because in their countries
globalization seems to be responsible both for
job losses and pay reductions, as well as for
apparently illegitimate rewards for the owners
of scarce resources, in particular superstars
with a reputation, whether sports or
entertainment stars, or CEOs who market
themselves like superstars. Whereas until
recently the most dramatic effects of
globalization were seen in the market for
unskilled labor, and consequently most policy
thinkers simply saw better training as an
answer, it has become clear that skilled service
jobs (most conspicuously in computer software
but also in medical and legal analysis) can also
be outsourced. Consequently, the gigantic
Western middle class the great winner of the
twentieth centuryis now extremely alarmed
by the prospect that it might be overtaken by an
even larger (and harder working) middle class
in emerging market countries. The result is not
only a political backlash, but also an intense
populist concern in the rich industrial countries
with corporate governance, corporate abuses,
and the excesses of executive pay. The new
backlash naturally terrifies business leaders,
who want to devise some appropriate response
that will not hurt them too much. Events such
as the World Economic Forum, formerly
parodied as the fiesta of pro-globalization
fanatics, are now packed with presentations by
globalization critics and choruses about
corporate social responsibility. It is hard to find
defenders of classical rule-bound liberalism at
events such as Davos: the readiness with which
global captains of business embrace their
opponents reminds me rather of the way in
which the Florentine ruling and banking house
of Medici sponsored the most vociferous and
radical critic of commercial culture, the
Dominican friar Girolamo Savonarola.

In other words, the worlds globalizers are
suffering a collective loss of nerve. They are
right to be uncertain and nervous. There is
nothing inexorable about globalization. Past
episodes ended badly. One of the comfort
blankets that modern people sometimes clutch
is the idea that there was only ever one big
simultaneous world depression, produced by
such an odd confluence of causes as to be quite
unique: the legacy of World War I and of the
275
financial settlement of reparations and war debt;
the chaotic banking system of the largest
economy of the world, the United States; and
inexperience in handling monetary policy in a
world that was still pining for metallic money.
Since these circumstances were so unique, they
cant occur again. Historians should say that
this reasoning may be quite wrong.

A great deal of the historically informed
literature on globalization makes the point that
there were several previous eras of increased
worldwide integration that came to a halt, and
were reversed, with painful consequences. The
most familiar precedent for modern
globalization is that of the late nineteenth and
early twentieth centuries, that ended
definitively with the interwar Great Depression.
But there were also earlier epochs of
integration: the Roman empire, the economic
rebound of the late fifteenth and early sixteenth
centuries (the economic backdrop to the
Renaissance), or the eighteenth century, in
which improved technology and increased ease
of communications opened the way to global
empires (for Britain and France). All of these
previous globalization episodes ended, almost
always with wars. Globalization is often
supposed to have produced a universalization
of peace, since only in a peaceful world can
trade and an interchange of ideas really flourish.
But in practice globalization of goods and
capital and people often leads to a globalization
of violence.

The world of the new millennium is very
different from the world of the 1990s, in which
the globalization paradigm best captures the
movement of world events.

In the world of globalization, small states do
best, because they are more flexible and can
adjust easily to rapidly changing markets. The
winners of the 1990s were small states such as
New Zealand, Chile, and Dubai, or in Europe,
Ireland, the Baltic Republics, Slovenia, and
Slovakia. But such states are vulnerable, and
the historical stage of the past is littered with
small and successful globalizers that lost out
because of power politics: the Italian city states
of the Renaissance, the Dutch Republic, or in
the twentieth century, Lebanon or Kuwait.

In todays world, it looks as if the new winners
are big states with large population and rapid
growth: Brazil, Russia, India and Chinathe
so-called BRICs (which might be termed Big
Really Imperial Countries). Recently, Russian
Foreign Minister Sergei Lavrov argued that
for the first time in many years, a real
competitive environment has emerged on the
market of ideas between different value
systems and different models. In other words,
there is a newly vibrant power-driven and
authoritarian model of development.

The BRICs project power more easily, but they
also need to project power to compensate for
their weaknesses. Three obvious flaws that
afflict these big globalizers much more than the
small globalizers who had done so well earlier
are: First, how can these highly populous
countries integrate their poor and ill-educated
underclass (in China and India mostly rural) as
they engage with world markets? Second,
China and Russia have financial systems that
lack transparency, while Brazil and India are
financially underdeveloped: these flaws put
further integration in the world economy at risk
and make for a vulnerability to financial crisis.
Third, Russia is already facing massive
demographic decline and an ageing and
sickening population; China faces the near
certainty of a Japanese-style demographic
downturn from the 2040s as a belated legacy of
the one-child policy. Flawed geopolitical giants
have in the past been a source of instability
(Germany before World War I is an obvious
analogy). There are good reasons to see them
presenting increased risk in the twenty-first
century future.

In a world in which there is a new preference
for power, even moderate size states, such as
the traditional big European states or Japan, are
not big enough to act effectively on their own.
The helplessness is especially visible in current
debates over European energy policy. Britain,
France or Germany (let alone the much smaller
central European countries) cannot tackle
issues such as the pipeline without a collective
negotiating stance. The resulting sense of
impotence adds to the political paralysis,
especially in countries that emphasize the
centrality of democratic control. There is a
curious echo of the mood at the previous turn
of the century. In 1891, the German economist
Gustav Schmoller wrote

Anyone far sighted enough to realize that the
history of the twentieth century will be shaped by
the competition between the Russian, British,
American, and perhaps also the Chinese world
empires and by their aspirations to make all other,
smaller states dependent on them will also see in a
276
central European customs association the nucleus
that will save from destruction not only the political
independence of these states but also the superior
and ancient culture of Europe.

What about financial globalization? There are
two aspects which make me think that the
intrusion of power into the globalization
process has major consequences. One is the
emergence of a new form of concentrated
wealth in the form of the Sovereign Wealth
Funds (SWFs). The central driver of late-
twentieth-century globalization were the capital
markets. But in the new millennium, capital
markets are no longer effectively an arena in
which outcomes result from the interplay of
millions of independent guesses, decisions or
strategies. Instead, the central banks of
emerging markets and new sovereign wealth
funds provide so much of the market that they
have come to dominate it. When entities of
such a size make decisions, they are bound to
act in a strategic way. All the parties begin to
suspect political manipulation.

Even without the politics, the simple size of the
SWFs makes them a major actor in financial
markets. With a capital of at least $2.5 trillion,
they are larger than the world total of hedge
funds, and are large enough to move global
markets. They have in part funded the big
expansion of global stock markets over the past
five years. The total world stock market
capitalization was only $20.4 trillion in
September 2002, but is currently $63 trillion
(October 2007). In effect, the flow of savings
from emerging markets has driven the global
equities boom that followed the collapse of the
dot-com bubble, so that big emerging market
states are directing the capital flows that are
used to finance payments and budget deficits of
the worlds industrial economies.

The second concerns the setting in which
financial institutions operate. Again, we can
and should learn from the past, and in particular
from episodes when globalization collapsed. In
1931 a small country crisis in Austria,
following the collapse of the Vienna
Creditanstalt, set off ripples that brought
financial crises to all of central Europe, and
then to Britain and the United States.

The risks that blew up the early-twentieth-
century version of financial globalization are
even more acute at the beginning of the twenty-
first century. There has been a rapid
proliferation of small offshore financial centers
that practice new forms of financial
intermediation. The most striking, but not the
only example, is Iceland.

In the new millennium, a rapid financial
liberalization meant that Icelandic banks
expanded very rapidly into international
activities. As recently as 2001, foreign loans
were less that 4 percent of bank lending. There
was a sharp crisis of confidence in the summer
of 2006. But at that time, the rating agency
Moodys referred to the banks assets as
consisting of high-quality external foreign
investments. Bank profits were high; and the
risk-based capital adequacy calculations
showed a steady improvement. Despite the
tremors of 2006, foreign money continued to
pour in through 2007, though the current
account deficit fell from the record level of 27
percent in 2006 to 13 percent.

The Icelandic Big Three banks grew so quickly
that they became impossible for the domestic
government to rescue. In 2007, the assets of
Glitnir amounted to $47.4 billion, of
Landsbanski $49.1 billion, and of Kaupthing
$63.6 billion. Compare this to the GDP of
Iceland of $15.6 billion (2006). But Iceland is
not alone. Switzerlands UBS had at the end of
2007 assets of $2018 billion, again round about
five times Swiss GDP ($413.9 billion).
Germany? Deutsche Bank had assets of Euro
2,020 billion, only slightly less than the
German GDP (2,420 billion).

In a world of pure financial globalization, such
figures should not matter, as long as the risks
are properly assessed and the assets are sound.
The calculation changed on March 14, 2008, as
a response to the bailout of Bear Stearns. Bear
Stearns showed Americans, as Northern Rock
had shown the British, that in the end the
government was so nervous about the
possibility of financial panic that it would stand
behind the entire banking system. This has
brought a relatively rapid restoration of
confidence. We now know that the really bad
problems of big countries will be socialized, as
they were in Japan in the 1990s. In Japan, this
cost 15 percent of GDP; the estimates are that it
will be some 7 percent of U.S. GDP.

International banks located in smaller centers
are in a much more difficult position than over-
stretched investment banks at the core. Their
host governments simply cannot afford a Bear
277
Stearns type of bailout, since it would involve
not a percentage but a multiple of GDP.
Financial crisis and the need for bailouts has
brought back the state, but it is the big and
powerful state.

In the interwar period, there was some political
recognition of the particular problems of small
countries and their capacity to pose a systemic
threat. The newly established Bank for
International Settlements did give a small loan
to Austria in 1931, but it did not cover even the
very first and grossly under-estimated
calculation of the Creditanstalt losses. But the
BIS did not have the size or the legitimacy to
undertake bigger rescue operations.

In the aftermath of the contagious Asian crises
of 199798, which bore some similarities to the
central European debacle of 1931, critics on
both the right and the left criticized the big
bailouts orchestrated by the IMF. As a
consequence, the IMF has been scaling back on
its activities, and it is widely perceived as being
marginal to global financial stability. The result
is that there isas in the early 1930s no
politically realistic way of preventing small
inadequately regulated offshore centers
developing into a risk for the whole world
economy. The risks of globalization have
increased.

Both the rise of the SWFs and the new
importance of big countries as the last backstop
of the financial system have changed the way
electorates and politicians view globalization.
The pendulum is indeed swaying away from
the marketplace, which has inherently
democratic qualities, and toward big states and
big power. And in many parts of the world that
means a new authoritarianism.
278
UNIT SCHEDULE

Topic Week beginning Topic Assignment Due Date
1 25 July Introduction to
Contemporary Worlds 2

2 1 August Economic Globalisation
3 8 August Cultural Globalisation
4 15 August Political Dimensions of
Globalisation the
State and the United
Nations
Assignment 1
Due
Thursday
18
th
August
5 22 August Political Dimensions of
Globalisation Non-
Government
Organisations

6 29 August The Environment In-class Test
1

7 5 September Terrorism
8 12 September Migration
9 19 September International Crime Assignment 2
due
Thursday
22
nd
September
Mid-Semester break
26 September-30 September
10 3 October China and
Globalisation

11 10 October The Backlash against
Globalisation
In-class Test 2
12 17 October Reflections

279

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