Understanding Globalization, Particularly GlobalEconomics:
A Moral Imperative

James Lippke is retired from business and has served as a GEA Board membersince 1993. He was co-founder of World Broadcast News and occasionally writes on energy,electronics, and the environment.

Fifty thousand protesters descended on Seattle last November to block anew round of World Trade Organization talks. Third world leaders balked at any new WTOproposals, insisting that existing rules first be fixed. In April, Jubilee 2000 supporterscircled the Capitol in Washington DC demanding debt reduction for poor nations. Othersstreamed in later in the week to tell World Bank (WB) and International Monetary Fund(IMF) executives that their policies help only the rich and hurt the poor. The criticismis unfair, counter-protested the WB, since its very purpose is to rid the world ofpoverty.

To be sure, poverty exists. The WB’s World Development Indicators2000 report, released mid-April, says "a staggering 1.2 billion people subsist onless than a dollar a day." While the number of people living in poverty in East Asiadecreased since 1987, figures worsened in South Asia and Africa. And GNP per capita inEast Asia shrank in 1998 as a result of the financial crisis. While underweight children,an indicator of malnutrition, decreased from 32 percent in all developing countries toapproximately 27 percent during the 1990s, the decrease is smaller than was hoped, and inAfrica the proportion of underweight children increased.

While globalization has created new opportunities for the very poor toimprove their lives, it has also brought new risks and worsening rich-poor gaps. Theeconomies of five nations unexpectedly collapsed in the 1997-1999 time period. Mammothunregulated hedge funds promise to make the risk-taking rich wealthier but at the sametime topple entire countries. Russia, to date, seems lost in its transition to aglobalized free-market economy. Why? Too little help from Western democracies? Theascending Japanese economy, which bragged of surpassing the US not too long ago, went intoa funk in the '90s. Economists don’t seem to know what Japan needs to do to get backon track. Are we fixated on supply-side economics? How can the poor drive the demand andlive a little better?

Obviously there is no simple answer to avoiding economic disruptions anddisasters, or to achieving economic justice or greater fairness. Indeed, the answer mayhave to be different from time to time, as the world changes, as births climb or as thepopulation ages. But with so many challenges not being met, something is wrong. If it isthe values of those governing or directing the affairs of humankind, we must explorevalues. If it is misplaced priorities, let's get our priorities straight. If it is a lackof understanding of how the world is working for everybody, and therefore lack ofdirection given to our leaders, we need to gain understanding. It is a moral imperativeof these global times.

The intention of this article is to steer those who may feel overwhelmedor unempowered toward some grounding. Several readings are suggested.

For starters, we suggest two popular and very readable books, bothpublished in 1999: The Lexus And The Olive Tree: Understanding Globalization byThomas L. Friedman (Farrar, Straus, Giroux, ISBN 0-374-19203-0) and The Post-CorporateWorld: Life After Capitalism by David C. Korten (Kumarian Press, ISBN1-5767-051-5). If you want to go deeper, read The Return of Depression Economics byPaul Krugman (Norton, 1999, ISBN 0-393-04839-X).

The jacket of Korten’s book carries the praise of theologian JohnB.Cobb, Jr.: "If you want to understand what is really happening in the world, readDavid Korten. …[He] points to what must come next if human beings and other creaturesare to have a livable future." The jacket of Friedman’s book claims nearly thesame: "Essential reading for all who care about how the world really works."Publishers Weekly says, "It’s a standard for books purporting to teachGlobalization 101." And from the jacket of Krugman’s book: "For anyone withany level of economic background who wishes to understand the stunning events intoday’s global economy."

Whether you read Friedman or Korten first is of little import. However,the authors' premises and conclusions are completely opposite. Friedman says there is noalternative to turbo-charged global capitalism, the international system that hasreplaced the cold war system. Like it or not, you must put on the straitjacket it imposes,and you will eventually prosper. Korten argues that capitalism is a pathology afflictingdemocracies and market economies, and that there are alternatives. He says we have toexercise "mindfulness in the marketplace" to free ourselves of the order imposedby financial capitalism, which wreaks havoc with the lives of others.

Friedman’s writing is chock-full of vivid stories from people he hasinterviewed as Pulitzer-prize-winning journalist for the New York Times. He coinsterms (such as the Electronic Herd) and freely uses metaphors. The Cold War was symbolizedby the wall which divided everyone; the symbol of the globalization system is the worldwide web which unites everyone. It is no longer the weight of nuclear missiles thatis important but the speed of your modem. The Lexus (the luxury car) symbolizeswealth. The Olive Tree represents roots. Friedman claims there has to be a balance betweenwealth and a sense of where one came from or belongs, but he implies everyone can own aLexus, if one get in tune with the forces of globalization.

Friedman asserts the more you let market forces rule, the more efficientyour economy will be. Destroy the old with new more efficient products or services.Globalization is the integration of capital, technology and information across nationalborders which "influences wages, interest rates, living standards, culture, jobopportunities, wars and weather patterns all over the world." Technology--computerization, microchips, satellites, fiberoptics, the internet-- has made it allpossible.

Friedman should be read even if you don’t find his descriptions ofhow the world works palpable. His interviewees run the world so what they think isimportant to know. Friedman acknowledges the "brutalizations" of open corporatecompetition and the conditionalities of the World Bank, the WTO and the IMF but he wouldreform these institutions, not terminate them, as the Fifty Years Is Enough movementwould. Basically, he agrees with the tenants* of the IMF and the straightjacket itimposes. Never mind that the straightjacket might be recessionary. After all, in the longrun, it’s a Golden Straightjacket.

*Privatize and make the private sector the engine of economic growth,eliminate monopolies, establish free markets by cutting tariffs on imports but don’tlet inflation in, then concentrate on exporting to cover trade imbalances from cheaperimports, remove restrictions on foreign investment flows, maintain investor confidence bykeeping interest rates high, let local currency devalue if confidence drops and invokeausterity (read unemployment) as necessary. Mandatory: shrink bureaucracy, eliminatecorruption, use international accounting standards.

We should not worry about this new globalization, says Friedman since itis governed by three beguiling democratizations: that of technology, finance andinformation. Democratization is good is it not? Technology is now democratic becausepersonal computers and cell phones are cheap and available or within range to all (nevermind that many global villages are without electricity). Information is democratic becausenobody owns the internet and anyone can access it. Finance is democratic because anybodycan buy stock or bonds of companies around the world, if not directly via a global mutualfund. And if a country’s bonds don’t perform well because of a drop in interestrate or currency devaluation, simply sell and buy elsewhere (where the nation-state hasdonned the straightjacket.) Those who trade thusly are the Electronic Herd. They buy andsell in the Supermarkets of the world (the stock markets of London, Frankfurt, Hong Kong,Singapore, etc.).

Evidence of this democratization of communications is found in theempowering of ordinary individuals making them a Superindividual in Friedman’s world.He declares private citizen Jody Williams a Superindividual for her accomplishment ingaining, first, non-governmental organizational- (through the internet) and then officialnational support for a treaty banning land mines (except for the U.S).

Such electronic democratization makes "revolutions from beyond"possible, which Friedman calls "globalution." He cites the stepping down ofSuharto in Indonesia a result of globalution. --information flowing in from the outsidedisapproving of his methods and practices. We’re tempted to call this cuteness"globaloney."

Friedman tries to build a case of globalization coming from the bottom upand not necessarily top down via power brokers. Even from street vendors in Bangkok. Hisexample, a cigarette seller who bought stock shares in a Thailand bank, now worthless withthe devaluation of the baht. She would welcome foreign banks that might bringinternational accounting standards! Friedman stretches credibility when he cites acrouched women on the streets of Hanoi weighing passerby’s on her bathroom scale.Friedman imagines, her unspoken motto was: "Whatever you’ve got no matter howbig or small –sell it, trade it, barter it, leverage it, rent it, but do somethingwith it to turn a profit, to improve your standard of living and get into the game."Such is Friedman’s captivation with globalization.

Elsewhere he does acknowledge there can be big losers. Those who lost ajob, or can’t get a job because a factory moved to a land of lower wages. But he doesnot think any backlash will produce an alternative ideology --they will simply log therest of the rain forest until gone then camp on the roadside and rob. Friedman’sanswer: Nation-states do have to provide skills for employment and safety nets when thejobs move. Rich nations have to offer help –to make globalization sustainable."Our job as citizens of the world is to make certain that a majority of people alwaysfeel that advancing issues are leading the declines," referring to the stock market.He argues for America to assume a disproportionate burden until everyone benefits.

The homogenization of culture as result of globalization is lamented byFriedman. "We cannot hope to preserve every culture in the world just as it is. Andwe cannot want a culture to be preserved if it lacks the internal will and cohesion to doso by itself… [but] in a world without walls, even some very robust cultures aresimply no match of the forces of the Electronic Herd. They need help to survive"…or we will end up with only one animal in the zoo." Friedman sees help,on this score, coming from James Wolfenson , president of the World Bank, and theBank’s cultural lending program. Friedman hopes for not absorption but more efficientcultural exchange.

While Friedman claims capitalism is the only answer with the demise ofcommunism, David Korten, in The Post Corporate World, says, "Yes, communism iscertainly dead," but, referring to capitalism’s miracle economiescollapsing in the face of global financial instability, asks "is capitalismnext?"

Korten makes a compelling and well-documented case that capitalism’sclaims to being the engine of wealth creation, the champion of democracy and theembodiment of the market economy are unfounded. In Korten’s view capitalism is apathology that afflicts democracies and market economies (unless there is vigilant publicoversight); the consolidation of economic power under a handful of global megacorporationsis a victory for central planning –not the market economy; that the alternative tothe new global capitalism is a regional system of democratically-governed market economiesthat honor basic market principles of the sort actually advocated by Adam Smith. InSmith’s world, capital was expected to be generated at home and re-invested at home–not flying around the world leaving unemployed workers from wherever it took off.

Korten distinguishes between real wealth and paper wealth, somethingFriedman ignores. As Korten explains, "We operate on the mistaken belief that themoney we use to buy stock or mutual fund shares goes into financing future productiveoutput. However, in all but the rare instance in which we are buying shares sold in aninitial public offering, not a penny of our money goes to the company whose shares we arebuying …when I buy shares through my broker, it goes to the person who sold theshares, not the company I’m presumably buying. I’m simply betting that in thefuture someone else will be willing to pay me more for that piece of paper than I paid forit… in truth the stock market is a sophisticated gambling casino with the uniquefeature that through their interactions, the players inflate the prices of the stock inplay to increase their collective financial assets and thereby their claims on the realwealth of the rest of society." He shows how Thailand’s real productive sectors,agriculture and industry, before the Asian financial melt-down did not get any of theforeign money that flooded in. That all went into high return bonds invested in overpricedreal estate, until the bubble burst.

Korten is convinced our current system is destined for social andenvironmental collapse. His alternative is to build market economies around life’swisdom and life-serving purposes. Life is frugal and sharing, it resides in communities,it rewards cooperation and relies on diversity, creative individuality and sharedlearning. From this Korten postulates the system design elements of a post-corporateworld: 1. Human-scale self-organization, 2. Village and neighborhood clusters, 3. Townsand regional centers, 4. Renewable energy self-reliance, 5. Closed cycle materials use, 6.Regional environmental balance, 7. Mindful livelihoods, 8. Interregional electroniccommunication, 9. Wild spaces.

In other chapters Korten spells out rules for mindful, healthy markets--profit is not the overriding goal of economic life. Healthy markets feature stakeholderownership, rooted capital, human-scale enterprises, balanced trade, and ethical cultures.Bringing values back to economic life has to be an inescapable part of our search for lifeafter capitalism.( See Korten’s article, this issue. Page x, for more on his hopefulalternative.)

Korten observes that for a time the world’s financial and industrialelites forged a near-seamless consensus affirming the righteousness of greed and theunregulated global market. Cracks are now appearing. He cites billionaire GeorgeSoros’ article in the Atlantic Monthly, January 1997 entitled "TheCapitalist Threat," in which Soros denounces the self-destructive ideologicalrigidity of capitalism, labeling it a threat to open society. Soros continues to drawattention to the inherent instability of global financial markets and the need for someregulation.

Other voices in understanding economic globalization

Friedman and Korten’s books are good starting points in understandingthe workings of globalization , but a serious reader may want to go further. MIT economistPaul Krugman goes beyond Friedman and Korten in analyzing the seven economies thatcollapsed in 1997-1998 . His book, The Return of Depression Economics is highlycritical of the IMF and conventional wisdom and sees an "eerie resemblance to theGreat Depression of the Thirties." He probes in depth Japan’s slump, thecalamity that occurred virtually overnight to the smaller Asian countries, the crisis ofBrazil and the Hedge Fund collapse of the "masters of the universe," andexplains why these catastrophes happened , how the victims can recover and how we canprevent them from happening again. Crony capitalism, now a popular cause of recentfailures, is nonsense, says Krugman.

Krugman does spend a lot of time on the Confidence Game in markets andsees a clear double standard on what is acceptable in wealthy nations and what is not fordeveloping countries. This double standard has inverted the once respectable Keynesiancompact. Krugman writes "faced with an economic crisis, countries are urged to raiseinterest rates, slash spending and increase taxes" the exact opposite of what got theUS out of its great depression. He says there is "something shocking about the mentalinflexibility of many influential people."

With the critics of the that "unholy" trinity of the WB, IMF andthe WTO gaining voice (most recently in the form of the report of the InternationalFinancial Institution Advisory Commission, known as the Meltzer Report after it chairman)and gaining visibility, as in Seattle and Washington DC, it is time for those of us silentout of ignorance to understand and take a stand for justice and human development theworld over. These three books are reasonable starters: Friedman as cheerleader forglobalization, Krugman on more careful examination, Korten as prophet of redirection for asustainable future. There is much, much more available. See Suggested Reading below. Thislist reveals the bias of the West and overly relies on the access to the world wide web.We urge readers from other countries and cultures to send to GEA their favorites so we canall gain more diverse understanding.

On the WTO, the Bretton Woods Institutions and the South. A 24phistory by Walden Bello, Univ. of the Philippines, on how the South (G-77) lost to theNorth (G-7), http://www.focusweb.org or< www.wtowatch.org/wtowatch/library>.

For a shorter recent article by Bello on reform or abolish the WB and IMFand the Meltzer report, http://www.igc/gateway/pnindex.html

For another comment on the Meltzer Report and other reform possibilitiessuggested by the Financial Market Center, www.fmcenter.org,read article by Wm. Greider in The Nation, April 24, 2000. This issue is devoted toglobal finance, Jubilee 2000 debt forgiveness, and global trade.

To read the IFI Meltzer Report directly, download

http://phantom-x.gsis.cmu.edu/IFIAC/Report.html.

For insider information, read Joseph Stiglitz, former chief economist atthe WB, currently chief critic of the IMF and the US Treasury Dept., in the April 17, 2000issue of The New Republic, or download from<http://thenewrepublic.com/041700/stiglitz041700.html

For the official line from the WB, go to www.worldbank.org

For the official line from the IMF, go to www.imf.org

For WorldBank/IMF –50 Years is Enough, and Mobilization for GlobalJustice, go to

www.a16.org/action.html . For another critique, www.globalexchange.org/economy/econ101/.

Z Magazine. For continuing critical analysis of Capitalist Globalismin Crisis read Robin Hahnel in Z Magazine. Three parts. All downloadable.

http://www.zmag.org/zartucke.cfm?Url=articles/dec98hahnel.htmfor part I

Third World Network. An independent not-for-profit network oforganizations and individuals involved in issues related to development, the Third Worldand North-South Issues. Publishes Third World Economics and other relatedmaterials, TWN, 228 Macalister Road, 10400 Penang, Malaysia. <http://www.twnside.org.sg

Other Sources (an incomplete sampling). For intellectual and Christiansocial action The Center Of Concern, 3700 13th Street, N.E. Washington, D.C 20017 (hasstudy materials on WTO, debt, WB and IMF). "Globalization for Beginners, United for aFair Economy, 37 Temple Place, Boston, MA 02111. Finance & Development, published(free) by the IMF, Washington DC 20431.

   [Last update of this page: October 04, 2000]