Globalisation and the developing countries
Globalisation and the developing countries
Marx predicted globalisation of world capital over a century and a half ago. He pointed out that capital had an inherent tendency to expand, to seek areas of higher profit. Once it exhausts opportunities in one particular market,' it moves on to encompass other markets. Today the dominant view holds that globalisation, or spread of global capital and capitalism to far corners of the world, is inevitable. The process tends to link up the nation-states' economies into an integrated world economy. But it is a multidimensional phenomenon. It impinges not only on the world economy but also on the environment, public health and culture, indeed almost every facet of life.
However, the economic integration of the world is not accompanied by matching political integration. The process of creation of supranational bodies able to enforce agreed system of rules and laws on all states is, in comparison, slow. The international system remains an anarchic one, composed of nominally sovereign states. The leading advanced capitalist countries seek free movement of capital and goods. The movement of labour continues to be hampered by a plethora of rules, regulations and laws.
The form of capitalism that the advanced, capitalist world, led by its corporate sector, is trying to impose on the rest of the worldin essence, the neoliberal mantra of liberalisation, deregulation and privatisationis not conducive to the economic development of developing countries such as Pakistan, which are yet to establish a sound infrastructure and industrial base. Besides, it is certain to lead to tensions and conflict in inter-state relations and/or periodic global economic crises. A financial crisis hit the advanced capitalist world in 2008, sooner than expected.
The global crisis notwithstanding, Pakistan's economic problems are worsening by the day, due to reliance on the neoliberal paradigm, further confounded by its ruling elite's aimless policies, corruption, lavish lifestyle, resistance to positive change, and lopsided priorities.
Capitalism's survival and growth depends, in any case, on the patronage and protection of governments. Judicious regulation of the activities of big market players by governments is essential for the system to work, as is clear from the failure of the deregulation' experiment of the past few decades. Unbridled deregulation' in accordance with neoliberal thinking, particularly in banking and finance, were bound to lead to problems. That moment arrived in a big way in 2008 when financial systems in the advanced capitalist world faced a meltdown. Capitalism is in its worst crisis since the Great Depression of 1929. The economies of the advanced capitalist world are in particular distress! Economies of those developing countries dependent on exports to those countries are also affected badly. The IMF forecast contraction of the developed world's economies, and a reduction in the growth rate elsewhere.[1] The creed of market economy, which metamorphosed into greed economy, has received a big jolt. The huge inter-state and intra-state inequality that it promoted is pushing an increasing number of people across the globe below the poverty line. However, an organised effort is being made by governments in the advanced capitalist world to save capitalism. Nevertheless, a contradiction exists in the claims of the proponents of the market, who decry government intervention whilst the going is good, but call upon the government to save the market when things go awry, as they are bound to, from time to time.
Apart from this, the neoliberal paradigm has made the whole edifice topsy-turvy. It emphasises trade and finance, rather than production and manufacturing industry. This amounts to putting the cart before the horse. Trade follows production of goods, and finance has an important role in industry, but auxiliary, not primary. The rigmarole of financial instruments, hedging and risk management devices, not to speak of speculation and non-productive re-shuffling of financial investments that has taken centre-stage during the last few decades of the ascendancy of neoliberalism, has done more harm than good.
Besides, the developing states' economies have been severely harmed by premature liberalisation and deregulation, mindless privatisation of state entities and strategic assets. The integration' of their economies with the world economy has been a mixed blessing, good for some countries, devastating for others. The industry of many developing countriesPakistan, for examplehas got stunted as a result of unthinking patronisation of neoliberal policies. Many economists in the developing countries have merely been parroting the neoliberal mantra, and the presumed blessings of globalisation' under the neoliberal paradigmwithout understanding, and in some cases denying outright, its highly detrimental effects. Many of them have allowed their economies to become suppliers of raw materials, low value-added manufactures and low-skill jobs or merely markets for more developed countries. What they really need is to upgrade the skills of their people, establish industry, initially to substitute imports and at a later stage to export higher value-added products. Foreign Direct Investment is a good thing if it serves the needs of their economies, and worse than useless if it promotes the exploitation of their resources without adequate compensation or transfer of technology. What they need is to upgrade the knowledge and skill of their workforce, and open up avenues to utilise that knowledge and skill. The knowledge and skill gap with the developed world must be bridged in the quickest possible time. In this lies their only chance of meaningful survival, which means survival with dignity. Instead, most of them are turning their economies, partly under pressure, partly on the urging of the IFIs and the developed world, into consumption-oriented economies, markets for the industrialised world's surplus production.
Many things that otherwise would have been perceived merely as claims, have been upheld by events around the world. Here is a crisis of global proportions, in essence a systemic crisis of world capitalism, hastened and aggravated by the misdeeds of greedy investors,' speculators and middlemen of the financial system, especially in the industrialised world, where the financial systems are the least regulated. In the US, the Congress passed a $700 bailout plan in late 2008 to save the system from collapse.
After the disintegration of the Soviet Union, and especially since the terrorist attacks in America in September 2001, the sole superpower has tried to sustain its hegemony through military adventurism. It launched an open-ended war on terror' and invaded Afghanistan and Iraq. Hundreds of thousands of people have fallen victim to this gigantic folly, to which there is no end in sight. Finally it has contributed to the financial meltdown that we witness today. While the Western governments and media focus on extremists' and terrorists,' they do not tell their people that they were promoted by western governments and their surrogates in the Islamic world, during the jihad against the former Soviet Union in Afghanistan. After 9/11, a wrong strategy has only served to keep them in business longer than might otherwise have been the case. They are now fighting against their own creators rather than doing there bidding!
Unfortunately, Pakistani leaders, past and present, cannot escape the blame for helping unbottle the geniian action that led to the current unenviable situation for Pakistan. Since 1979, almost all Pakistani regimes have gone along with Washington's strategic aims in the region, with the consequences that we witness today. The war on terror' has had highly detrimental consequences for its people! It has become an albatross hung around the nation's neck. The financial costs of this war in FY 2008-2009 were Rs. 678 billion, up from 484 billion the previous year! The much-touted financial assistance' received from Washington and its allies is not even a fraction of the financial costs of this war. The political and human costs are in addition.
To return to our main subject, the world system theories give a good insight into understanding the contemporary world. Immanuel Wallerstein's world systems theory analyses the world holistically. It considers historical systems' in place of what is called society' in traditional social science. Systems are classified on the basis of economic production relations. Today's system is the capitalist world economy, in which capitalist production relations prevail. In the past there have been other systems, which he names localised mini systems' of pre-agricultural period and later world empires' based on the redistributive tributary' mode of production. In today's world economy' both state and non-state actors have a role in determining the course of events. The proper field of discourse that considers all these issues is political economy.
Some political economists divide the approaches to the study of international political economy into three different categories: Realist, Liberal and Marxist. According to Frieden and Lake, these three approaches differ in that they regard, respectively, nation-states, the individual, and classes (in society), as the units of analysis. The proponents of the liberal approach claim that economic relations, both at the international and domestic levels, are essentially harmonious, while the Marxist and the Realist approaches consider them to be conflictual. In the Marxist view, based on dialectic materialism, economics determines politics. Economics divorced from politics has no meaning. In the realist view, politics and power relations determine economics. The liberals regard economics and politics as independent of each other.
The liberal view is oversimplified and a little misleading, though useful as a starting point. It obscures reality, which is that political and economic conflict exists within, as well as among, nation-states. Such conflict in international political economy ought to be minimised. The realist view focuses excessively on power relations, views everything from the power standpoint, and ignores ethics altogether. The liberal view in economics that allows for government intervention, at least to provide public goods and bring about redistribution of resources to reduce inequality, has been superseded by the neoliberal view, the so-called mainstream' thinking today, which ignores social concerns almost completely, with the devastating results witnessed today.
All three approaches have to be used, in varying degree, to study and comprehend contemporary international political economy. Only the Marxist approach, however, provides the insight to comprehend and address the problems inherent in capitalism. But the Marxist socialist view need neither be feared nor turned into dogma. It should be used to understand and explain the many problems political economy is faced with and to help resolve those problems. This is being done now, as the fear of Marxism, and Communism, that formerly clouded thinking in the capitalist world, has been mitigated somewhat. In a recent issue of Foreign Policy, Leo Panitch says: "Marx identified how disastrous speculation could trigger and exacerbate crises in the whole economy. And he saw through the political illusions of those who would argue that such crises could be permanently prevented through incremental reform." Any system that endeavours to minimise socio-economic inequality must have an in-built mechanism to redistribute incomes and resources in such a way as to benefit the maximum number of people. Complete equality cannot be attained, but there should be an endeavour to create a society where the basic essentials of lifefood, health and educationare ensured to the individual, so that we can come as close as possible to an environment of equality of opportunity. In current milieu, the utilities and banking should not be privatised. They should instead be regarded as semi-public, if not public, goods. They should be put firmly in the public sector. A lesson should be learnt from the miserable performance of privatised utility companies such as the KESC! [6]
Huge multinational corporations and the powerful governments that back them determine many outcomes under globalisation. One of the foremost issues is to prevent monopolies, oligopolies and cartels from coming into existence. Cartels such as OPEC came into being mainly to counter the monopolies and cartels of the industrial world that supply capital goods and sophisticated manufactured products. A great gap has existed for a long time in the prices of industrial goods and finished products on the one hand and raw materials on the other, leading to highly unfavourable terms of trade for producers of the latter. Any readjustment in the prices of commodities and finished products leads to a major shift in the distribution of wealth among nations! In the case of food, an important role in the process is that of the multinational firms which have a stake in developing bio-engineered foods and other crops, agrochemicals, fertilisers, pesticides, and so on. Not the least sinister is the role of smugglers, hoarders and exporters who stand to profit at the expense of people when they smuggle or export essential items from regions where they are needed most. But if you go by the market economy approach, smuggling, strictly speaking, should be welcome because, fundamentally, it is dictated by the market. It is a kind of unofficial free trade!'
An important but difficult issue is that of Intellectual Property Rights' or IPRs. Some people in the industrialised countries try, through IPRs, to create monopolies not only in manufactured products, but also in natural products like seeds and plants or indigenous knowledge that has existed for hundreds or thousands of years. An attempt has been made to study this complex issue from the perspective of the Global South.'
For developing countries such as Pakistan, the impact of globalisation much depends on the course followed by their leaders in the economic and political realms. The approach and policies of the Pakistani leadership, present and that of the near past, some main characters of which have already left the country for greener pastures, leave much to be desired. Some of them were imported from abroad, and as soon as their task' was finished, they hastened to return to their hideouts abroad. This alone speaks volumes for the stake they had in this country's development and its future!
Would they change the culture of living beyond means? Or of pampering the dominant elite? Will a much-needed culture of hard work, learning, acquisition of knowledge and technological skills, innovation and creativity, be promoted? Pakistan's dominant elite constantly talks of Foreign Direct Investment, trying to make it appear as a panacea for all economic ills, but transfers and helps transfer capital abroad! This was brought out most clearly in 2008, when the rupee suddenly lost value massively due to capital flight.
Can economic development be achieved simply through foreign aid, through periodic begging of a few billion dollars in loans at great political cost? If corruption continues unabated, the loans obtained are not spent for productive ends, are used to finance unproductive ventures and the exorbitant lifestyle of the ruling classes, they would only add to Pakistan's debt burden. How do friends' react when they find that the people begging for loans' on behalf of their state are also engaged in shopping for property and investing their own money in foreign lands? How long would they keep depending on so-called friends' that merely facilitate the government of Pakistan to secure loans from the IFIs in return for fighting the West's strategic wars?
There is no shortcut to economic development. It can only be achieved through proper planning, laying down the right priorities, establishing indigenous industry, and above all, by encouraging creativity, innovation and hard work. It demands that we develop our human and physical resources and infrastructure, maintain and enhance our agricultural potential through introduction of new techniques, and carry out mineral prospecting for hidden wealth. Above all, it requires that the ruling elite put on hold for some time their acquisitive instincts, and propensity to indulge in lavish living and waste. The aim should be self-reliance in basic factors in the shortest possible time. Loans must be used only to finance productive ventures, such as establishing basic industry and laying down essential infrastructure. [].
[ Liberal 'Intelligentsiacracy' or Global Injustice Production Services' in Global Enterprise Global Ambassador Seeks To Unite the World Used Farm Tractors and What to Do When Purchasing One The Best GDI - Global Domains International Team is the GDI Fast Track Team-Web Success Group U.s. Report Said That Greece Could Trigger The Next Wave Of Global Economic Crisis And Turmoil Things To Remember When Purchasing Tiles Solar Eclipse on Sunday July 11 is Opening another Window to Global Awakening The Women's Global Leadership Conference 2010 Call Center Industry Of The Philippines; Before, During And After Global Recession My Data Team Global Data Entry - A Simple Way To Earn Well From The Comfort Of Your Own Home Is Technology the Cause of Global Indifference? World Of Warcraft As A Globalized World Games