How the policies of globalization exploited the resources and economy of the developing countries

globalisation1

In last five decade of twentieth century has been perhaps the most remarkable in period of human history in terms of scientific development as we have unlocked countless secrets.

In this same period saw the creation of institution of global governance: the United Nations, the International monetary fund, the world bank, and the GATT which turned into World trade organization. The soul purpose of these global institution was stated that as to make world peaceful and prosperous for all. One of the most significant commitments of last five decade of twentieth century has been to economic growth and trade expansion, and we have been spectacularly successful in accomplishing the both. Global economic output expanded from $3.8 trillion in 1950 to $18.9 trillion in 1992, nearly a fivefold increase. And to achieve that economic growth and trade expansion, these institutions played significant role by making economies borderless and turn national and sovereign economies into global economy, through globalized economic model. In which globalization is at its center and the idea of ​​globalization is driven by the free market and open market policies. The idea of ​​globalization was propagated by saying that globalization would be the golden age for humanity. In terms of economic growth, new opportunities, zero hunger and poverty, global interconnectedness Etc. However, a bigger question arises here that, Are the promises of globalization seen on the ground? At what cost did this economic growth and trade expansion take place? Has this economic growth and trade expansion happened fairly? Has the benefit of this economic development been equally shared with the people of the lower income group?

Other such questions have also been raised from time to time. And the policies of globalization, and the impartiality of international institutions have been questionable with time to time. It is because even in the world’s affluent countries, high levels of unemployment, falling or real wages, greater dependence on part-time jobs without benefits, weaking and shrinking of the middle class, lacking of social and financial security among large section of the society. All those questions have become relevant on the globalized economic model, free and open market economy, in the COVID-19 pandemic phase and the pandemic has made us think about what needs to be done to absorb the times of crisis. Does the global economy help or the local border economy helps in difficult times?

To address these questions firstly we need to critically analyze the concept of idea of globalization, to understand how international institutions favour corporate class of western world.

With the help of case studies, we will try to understand the impact of globalization on developing countries.

Case 1 :-  Latin America

In Latin America between 1991 and 1995 wage gaps increased for six of seven countries of Latin America. Costa Rica is the only exception is Costa Rica, where education levels are relatively high.

In Mexico, where the rural poor are concentrated in food production and, income declined between 1986 and 1996 for every decile of the income distribution except the richest, where it increased by 15 percent.

The above data clearly shows that most of the Latin American countries have lost their sovereign production rights and the livelihoods of small owners have turned to laborers for large owners. Which results into increasing inequalities in the society. And production has been monopolized by corporates, leading to consolidation of wealth, resources and assets. The monopoly and accumulation of wealth distort the levelling playing field for the new enterprise and slowly the income gaps between rich and poor become huge, and shrining of middle class. Wherever the middle start shrinking the overall health of that economy start deteriorating. Thus, unemployment rate, inflation, interest rate etc. will start skyrocketing. And the exploitation done by the corporates is bear by the poor and the remaining middle class.

Case 2 :-  Costa Rica- How global institution favour corporates and west

Before the International Monetary Fund (IMF) and the world bank restructured Costa Rica’s economic policies in the name of easing its foreign debt problems, Costa Rica was widely known as a society that was more egalitarian than its neighbors. It had a strong base of small farmers and few of large Landholding characteristic of other Latin American societies. The policies imposed by the IMF and the world bank shifted the economic incentives away from small farms producing the things that Costa Rica eat toward large estates producing for export. As a consequence, thousands of small farmers have been displaced, their lands have been consolidated into large ranches and agricultural estates producing for export, and Costa Rica’s income gap is becoming more like that of rest of Latin America. The country is now dependent on the imports to meet the basic food requirements, and the foreign debt that structural adjustment was supposed to reduce has doubled. The IMF and world bank point costa Rica as a structural adjustment success story because economic growth has increased and the century is now able to meet its growing debt service payments.

In fact, the objective of the international institution is to promote and implement policies that are in favor of the interests of Western countries and large corporates of the world. These international organizations act as a security wall for the corporate if there is any social resistance. Because in the early 20th century anti-imperialist movements have risen up and shaken up the corporate empire. So in order to make the corporate control over the world last forever, international institutional framework has been established which acts as a sec0urity wall and makes the economies borderless.

Due to corporate driven economic policies there are many such example in other countries as well, where livelihood of the citizens has been affected.

  • In Thailand, in late 20th century ten million rural people face eviction from the land they live on to make way for commercial tree farms.
  • In Philippines, the government’s land reform program is systematically eroded by the conversion of prime agriculture land into industrial estates and country spend foreign exchange on rice import.
  • A millions of Mexican families displaced from their farms as a consequences of the north American free trade agreement
  • Tribal people for recognition ancestral land rights in the forests of eastern Malaysia, Indonesia and India.

The skepticism of policies of globalization, and questions about the impartiality of international institutions have grown ever since the pandemic hit the world.

The fairness and proactiveness of all international organizations from the United Nations security council to the World Trade Organization and the World Health Organization are questionable. We are following an economic model where globalization is at core and the idea of ​​globalization is driven by the force of market policies and imposed on the developing economies. Western countries claim globalization and market policies to be the most accurate economic model for the world trade and prosperity. Today the same western countries are taking economic steps against globalization and market policies. Like America is following the policy of American first, Britain has left the European Union and the escalating trade war in the world economy clearly shows that only the countries favoring globalization are now rejecting the economic system of globalization. However, the main reason behind the imposition of the policies of globalization on the developing countries is to run the developing economies according to the policies of free and open market so that the self-reliance of the developing countries can be ended. And by promoting consumerism, multinational companies can run the economy based on corporate interests rather than on human interests.

Western countries have linked the concept of globalization with democracy and have started pursuing the policies of globalization with democracy. This is the reason that in the last decade, the corporate world has increased its interference in the politics of the world rapidly. As a result, in most democracies of the world, the importance of money in the electoral process and the accountability of political representatives to the people was lost, and crony capitalists or their caretakers became the guardians of democracy. Due to which the social power in a democracy started to lag behind the state power. And the issues related to the public disappeared. We all know that western countries also claim themselves to be the greatest protectors of democracy. But the policies of globalization do not match with the democratic system, if seen clearly, the policies of globalization are against the democratic system. Because the foundation of democracy rests on the social system. On the other hand the globalization system is based on the policies of free and open Market. Therefore, simultaneously pursue of democracy, national self-determination, and economic globalization cannot be sustainable. When the social arrangements of democracies inevitably clash with the international demands of globalization, national priorities should take precedence. Economic and social inequality continued to grow in developing countries due to the non-matching of the policies of globalization with the social arrangement. Because social economy is important in a democratic system. In which the local economy works on a decentralized economic model between the government, corporate and society. Due to which business is also done and the possibility of accumulation of wealth and resources is minimal. Whereas the globalized economic model works on the money economy, meaning that the globalized economic model separates the society from the economy model and puts it in the bucket of the market alone. So sometimes corporate deliberately creates market for commodities. Therefore, economic boundaries must coincide with political boundaries. If not, then democracy becomes hollow façade. When economy becomes global and governments are national, then corporate and institutions functions largely beyond the reach of public accountability. Thus, in most of developing countries the rich are getting richer and the poor are getting poorer.

Moreover, Banking is also very important in the economic system of globalization. Because basically the route of investment passes through the bank.

The financial system has also changed due to globalization. And now the world’s financial markets have shifted to the one global model, and the private market for financial institutions and services continues to grow, which giving rise to a wave of privatization or mergers of national banks. Which simply means that the corporate wants to take over banking as well. Which mainly happened in developed countries. This puts the entire banking system at stake, as these private financial institutions are gaining ground parallel to the already existing nationalized financial system. E.g In US more than 500 banks merged or closed between September 1992 to September 1993.

If the private sector gets a foothold in the financial market, then it is like putting the control of the entire economy in the hands of the corporate, which certainly cannot be in the interest of the nation and the people. Because with the entry of the private sector, regulations were generally weakened, as the private sector run on profit making.

Even if we talk about facts, globalization has touched its peak in many dimensions, but even today in the world there are many problems like poverty, hunger, malnutrition etc., which remain so.

  • In the 1970s, world trade was only 25-30% of the world’s gross domestic product (GDP). And then the policies of globalization were adopted, which was greatly promoted by the western countries. Developing countries were forced to undertake so called economic reforms by liberalization, privatization and globalization through many international organizations like International Monetary Fund, WTO etc. The result was that world trade increased from 25-30% of world GDP to 60% just before the 2008 financial crisis. However, after 2008 world trade stagnated at 60% relative to world GDP. Which clearly shows that globalization has reached its peak. And it proves that the potential for world trade to grow to more than 60% of world GDP is now minimal. Despite globalization reaching its peak, many problems like poverty, hunger, malnutrition, etc. remain the same.
  • As per the world bank data, total foreign direct investment reached its peak in 2007, FDI accounted for 5.3% of world GDP and since 2007 the inward flow of FDI has been declining.
  • According to DHL global connectedness index 2020, the growth of globalization has flatten in last fiver years. In terms of trade, capital flow, information and international flow of people.

A Few findings to understand and also the justification for how the globalized economic model is unsustainable, exploitative and corporate centric.

  • For every new billionaire created during the pandemic — one every 30 hours — nearly a million people could be pushed into extreme poverty in 2022 at nearly the same rate, reveals a new Oxfam brief today. “Profiting from Pain” is published as the World Economic Forum — the exclusive get-together of the global elite in Davos — takes place for the first time face-to-face since COVID-19, a period during which billionaires have enjoyed a huge boost to their fortunes.
  • The brief shows that 573 people became new billionaires during the pandemic, at the rate of one every 30 hours. We expect this year that 263 million more people will crash into extreme poverty, at a rate of a million people every 33 hours.
  • Billionaires’ wealth has risen more in the first 24 months of COVID-19 than in 23 years combined. The total wealth of the world’s billionaires is now equivalent to 13.9 percent of global GDP. This is a three-fold increase (up from 4.4 percent) in 2000. “Billionaires’ fortunes have not increased because they are now smarter or working harder. Workers are working harder, for less pay and in worse conditions. The super-rich have rigged the system with impunity for decades and they are now reaping the benefits. They have seized a shocking amount of the world’s wealth as a result of privatization and monopolies, gutting regulation and workers’ rights while stashing their cash in tax havens. “Meanwhile, millions of others are skipping meals, turning off the heating, falling behind on bills and wondering what they can possibly do next to survive. Across East Africa, one person is likely dying every minute from hunger. This grotesque inequality is breaking the bonds that hold us together as humanity. It is divisive, corrosive and dangerous. This is inequality that literally kills.”
  • Oxfam’s new research also reveals that corporations in the energy, food and pharmaceutical sectors — where monopolies are especially common — are posting record-high profits, even as wages have barely budged and workers struggle with decades-high prices amid COVID-19. The fortunes of food and energy billionaires have risen by $453 billion in the last two years, equivalent to $1 billion every two days. Five of the largest energy companies (BP, Shell, Total Energies, Exxon and Chevron) are together making $2,600 profit every second, and there are now 62 new food billionaires.
  • Together with just three other companies, the Cargill family controls 70 percent of the global agricultural market. Last year Cargill made the biggest profit in its history ($5 billion in net income) and the company is expected to beat its record profit again in 2022. The Cargill family alone now has 12 billionaires, up from eight before the pandemic.
  • The pandemic has created 40 new pharma billionaires. Pharmaceutical corporations like Moderna and Pfizer are making $1,000 profit every second just from their monopoly control of the COVID-19 vaccine, despite its development having been supported by billions of dollars in public investments. They are charging governments up to 24 times more than the potential cost of generic production.

The extremely rich and powerful are profiting from pain and suffering. This is unconscionable. Some have grown rich by denying billions of people access to vaccines, others by exploiting rising food and energy prices. They are paying out massive bonuses and dividends while paying as little tax as possible. This rising wealth and rising poverty are two sides of the same coin, proof that our economic system is functioning exactly how the rich and powerful designed it to do.

From all the things written above, we can easily understand the consequences of globalization and market policies. Now comes how to address this and make our economic policy people centric instead of corporate centric.

In any country, the inclination of the country’s economic policies towards corporate has increased. The middle class of the country has suffered the most due to this. Because when economic policies start being made in the interest of the corporate, then economic inequality starts increasing rapidly in the country. The result of which is that the purchasing power of most of the middle-class people of the country starts decreasing, which directly affects the whole economic situation. And the economy of the country keeps on weakening. Only the government can give the right direction to this whole situation.

Let us take an example of Britain how government intervention helped:-

The years between the world war I and world war II, when there was no overall growth in Britain’s national income. Which made it politically necessary to control the forces of capitalism. The government introduced the heavy taxes on top incomes and control wages. As a consequence, the real purchasing power of of most wage-earner households improved.

Similar patterns were experienced in the United Sates. The consequence of the depression of the 1930s and world war II made necessarily to take political action, that resulted in a significant redistribution of income and built a strong middle class that came to seen as a hallmark of America’s economic strength and prosperity. Therefore, redistribution of the wealth is need of the hour.

These are some possible steps that can be taken:-

  1. LEGISLATION SHOULD BE MADE FOR WEALTH TAX :-

The recent Covid-19 pandemic has exacerbated economic inequalities.              While on one hand crores of people were losing their jobs, their income was decreasing, while on the other hand some corporate houses were earning in crores a day. According to IIFL wealth – Hurun report, Adani group earning 1002 crore a day during the time of covid-19 pandemic. Moreover, the report titled ‘The State of Inequality in India’ said, People earning Rs 25,000 per month fall in top 10% of wage earners in India.  From these two reports, we can understand what is the situation of economic inequality in the country. Therefore, to reduce economic inequality in the country, wealth tax should be enforce on top 1%. Eg Argentina adopted a one-off special levy dubbed the ‘millionaire’s tax’ and is now considering introducing a windfall tax on energy profits as well as a tax on undeclared assets held overseas to repay IMF debt. The super-rich have stashed nearly $8 trillion in tax havens. Wealth tax is also necessary because due to the proximity of the corporate to the government, at present the corporate tax has been reduced.

As per the Oxfam report, by Introduce permanent wealth taxes to rein in extreme wealth and monopoly power, as well as the outsized carbon emissions of the super-rich. An annual wealth tax on millionaires starting at just 2 percent, and 5 percent on billionaires, could generate $2.52 trillion a year —enough to lift 2.3 billion people out of poverty, make enough vaccines for the world, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.

  1. The corporate and political nexus must be broken. So that the importance of money can be reduced from the electoral process.
  • A certain number should be earmarked for advertisement in newspapers, hoardings etc. by political parties. Because many political parties spend more amount on advertising than the total amount of the project. This will help in reducing the use of money power in the electoral process.
  • Political parties should tell what will be the mechanism to fulfil the promises of the manifesto. How and in what time they will fulfil all the promises made by the political parties in the manifesto. For this, political parties should issue a white paper. And that white paper should be registered with the Election Commission. So that the authenticity of the manifesto can be made. And if the manifesto promises are not fulfilled by the party during its tenure, then the promises of the manifesto are considered as misleading information to the voters.
  1. At present, there are seven states (M.P, Chhattisgarh, Jharkhand, Haryana, Andhra Pradesh, Telangana, Punjab) in the country in which the income tax of Chief Ministers, Ministers and in many states the income tax of all the MLAs is also paid from public money. In addition, MPs and MLAs get pension according to the number of times they get elected. This is a double burden on public money which needs to be stopped. Therefore, for that, The Salary, Allowances and Pension Act for MPs and MLAs should be amend, so that all MPs and MLAs get only one pension. And there should be a ban on paying income tax of Chief Ministers, Ministers and MLAs in any state of the country with public money.
  2. The National Disaster Relief Fund should be expanded and climate change should be included in it. Through which the government should give financial assistance to small farmers when agricultural production is reduced due to climate change, heat wave etc. and also allocate funds for crop diversification.
  3. Minimum Support Price Guarantee Act should be implemented.
  4. Spreading of any kind of fake news by all types of news broadcasters should be considered as a crime and strict law should be made to stop the spread of fake news. There should be a separate tribunal for fake news cases on the lines of NGT.
  5. Model code of examination and national employment policy should be formed to curb the paper leak in the recruitment process and guaranteed employment.

Tarun Kumar is an activist

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