Globalization & Its Discontents

Joan Roelofs

First I would like to say something about the term “neoliberalism.” The original liberal ideas supported freedom of speech, religion, and so forth, but also the notion that the economy should be free of government regulations, protections, and grants of monopoly. Adam Smith, Scottish philosopher, said in The Wealth of Nations, 1776, that everyone will be richer if the free market determines economic outcomes. He was opposed to any restraints on international trade. In Britain, this free market process was underway, and the result was chaos and inhuman exploitation, e.g., young children working in mines. The business class and aristocrats began to impose new regulations. As other countries industrialized, they too found laissez-faire not only unjust, but inefficient for business itself. Miserable starving workers were not very productive. Fear of socialism was another reason the governing elites helped to create “welfare states.” Eventually, when the working class got the vote, more protections were enacted. In the US, a developing nation, tariffs were imposed to protect industries, and state and local governments required licensing of many occupations and sanitary and environmental regulations. In the early period, Massachusetts even subsidized the production of hemp as a promising industry.

In the 20th century, after the Second World War, one of the goals of the United Nations was to create an international free trade system. Development of what were called “backward nations” was to occur with trade, aid, loans, and the investments of multinational corporations in the developing regions. Other institutions of globalization, e.g., the World Trade Organization, the European Union, and the North American Free Trade Agreement, also worked to “free” trade of tariffs, quotas, and restrictions. Subsidies of a nation’s domestic industries, and even those enacted to provide affordable food to the poor were considered violations of free trade. The liberal idea was enforced through courts of corporate lawyers and conditions imposed on loans, for example, from the United Nations World Bank and International Monetary Fund. Thus, “neo-liberalism,” an attempt to go back to the ideas of 18th century liberalism (if not the actual practices of nations), and to dismantle important aspects of the welfare state, protections for local industries in developing countries, and the newer environmental regulations.

I will talk of some of the disadvantages of globalization. I admit there are advantages, such as international human rights treaties that have enabled local activists to improve conditions for their fellow citizens. However, because the benefits of globalization are so widely described, I will employ a division of labor and state some of the problems that we don’t hear much about.

As a red-green, I have advocated a local economy as far as possible. Things that can be produced locally should be, even if imports are cheaper. Scientists and local residents could work together to figure out how to provide for clothing, housing, food, fuel, medicine, and entertainment from local resources. A very underutilized energy resource can be part of this process: human labor. This can be moderately extracted from all, with great gains for health. Currently, many are idle, or engaged in pointless exercise or hazardous games.

The problems of a globalized economy are many. Adam Smith, Scottish philosopher of capitalism and free trade, said that each country should produce what it can best sell to the rest of the world, and trade with other countries for its other needs. At the time, 1776, Britain was the only industrialized country, so it naturally, or perhaps unnaturally, had a competitive advantage over countries exporting natural resources.

The early triumph of the British industrial revolution, cheap textiles made with cotton produced by slaves, put the skilled weavers out of business, hence the Luddites. T-shirts and curtain material were exported to India and Africa, destroying local textile production, and creating fashions that were not really needed.

One problem with extreme specialization is that reduces the range of occupations available to citizens of a country; similarly, high value crops: coffee, cocaine, ganja, flowers, tropical fruits, and exotic vegetables lead to monoculture. Their higher prices tend to draw all resources, labor, and capital away from basic food production.

Ultimately, mechanization results in massive unemployment. Today, as factories can easily be imported, comparative advantage lies with those places that have the lowest labor and environmental standards. As competition constantly leads to new lows, abandoned production sites are another cost to communities. Ghost towns were also a feature of early industrialization, as water power yielded first to coal and then to electricity as power sources.

Another issue is the nature of the products that really sell well: historically, and today, guns and drugs, fossil fuels, lumber, and minerals. Drugs include coffee, tea, sugar, tobacco as well as harder stuff. Information technology has benefits as well as costs; entertainment and news services can drown out local cultures and perspectives. Industrialized agriculture and farmed fish have environmental and health effects for both exporting and importing countries.

Subsistence and mid-size farmers have a hard life, and have to contend with erratic weather and harsh market conditions. However, their work can be regulated and they can be paid a living wage, rather than be dependent on the returns for their crop. In France, the rules of free trade have been evaded by conservation subsidies to farmers, as the French do not want to abolish the countryside and eat only the cheaper imported food. In Mexico, farmers have been chased from the land by the more competitive industrialized agriculture. Some of them have migrated north; others have found jobs in the tourist industry, and often their diet comes from the only available source: processed food from convenience stores. Obesity is now an issue in poor as well as rich countries.

While we may be aware of the human and environmental costs of natural resource extraction, for example, oil and gas, mineral mining, and forestry, there is little that the ultimate consumer can do about it. In Australia, Canada, the US, throughout Africa, and elsewhere, uranium mining is a job for indigenous people; the wastes are also inflicted on their communities. Extraction of gold and other minerals has poisoned the lands of Latin America and elsewhere. Now that the balanced economy of Mongolia has disintegrated, international mining companies are rapidly digging up the country.

As for the items that we purchase individually, it is hard to research all the conditions of their production. Some organizations have done this for a few products, shoes, or fish, but even in these cases, the producers keep shifting locations and practices, so the information is quickly outdated.

Tourism is one of the largest items in international markets. Certainly it has educational benefits, but it is also extremely energy intensive and polluting. It can provide a good living for artists, musicians, and cultural workers, but it also requires armies of cab drivers, waiters, and janitors. Tourism is a very competitive industry, and some countries
find their comparative advantage in providing juvenile sex tourism. Another lure is gained by stripping forests and agricultural land to create golf courses.

Countries of the European Union, which now import most of their food, furniture, and clothing, are heavily dependent on tourism. They also import labor for service and factory work. Even so, the leading social democratic nations have major weapons export industries: France, Germany, Spain, Sweden, Switzerland, and the Netherlands.

Many places have very little to offer in the international market. Toxic waste sites are attractive to foreign corporations; not for the communities and workers that will operate them. Another handy earner of foreign exchange is the harboring of off-shore corporate headquarters for tax evasion purposes. Even Bermuda has resorted to this, as its fine beaches do not have enough zing for younger tourists.

The banana war has contributed to a strange export: citizenship. The war began in 1996, when the head of Chiquita bananas complained to the World Trade Organization that
it was a violation of free trade for the European Union to give a preference, a very small quota, to bananas from former colonies. For some islands in the Caribbean, for example,
Dominica, St. Lucia, St. Vincent, Trinidad, and Jamaica, bananas produced on small family farms were an important part of the economy. They could not compete in price with
the Chiquita and Dole U.S. based corporations. The WTO eventually ruled that the preferences had to stop, and also those for the sugar exports of St. Kitts. There was some hope in developing a niche by exporting organic bananas, but that was dashed when the large corporations started selling them. With island tourism a declining industry, St. Kitts, Antigua, St. Lucia, Dominica, and Grenada are now selling citizenship. In St. Kitts, the cost is $50,000 in processing fees and the purchase of a house worth at least $400,000.  The wealthy buyers can obtain tax evasion benefits as well as visa free entry to many countries, especially those of the European Union.ii

The political costs of globalization are often unremarked. Democratic choice is more difficult to exercise when major decisions are made at higher levels, remote from ordinary citizens. For example, the NAFTA decision regarding Metalclad’s construction of a toxic waste plant. The local community didn’t want it and its govenment refused to issue a permit, but the rules of NAFTA denied locals any choice in the matter.

Even local and national laws must be ignored for foreign corporations according to trade agreements, especially evident in Canada’s experience with NAFTA.  For example, it had a regulation: no toxic pesticides may be imported for landscape purposes.  That was ruled an unfair practice and imports had to be allowed, and fines were imposed.  Mexico had a tax on drinks with added high fructose corn syrup but not those with cane sugar.  This resulted in enormous fines paid to US sugar corporations as well as the repeal of the tax.  Under these agreements, corporations can sue foreign governments for “restraint of trade.”

The European Union and the common currency impose financial limitations on member countries, despite what might be best for their citizens. The North Atlantic Treaty Organization promotes militarization and participation in aggressive wars. Its bases create local service economies but demand exemption from environmental and criminal laws. The United Nations, despite its great promise and outlawing of war, has not been able to end aggression in foreign policy.

Yet another way democracy has been weakened is the very attractiveness of participation in international governmental organizations, their task forces, and the non -governmental organizations that shadow them. Local political parties and activities have declined—that is not where the action is—and so are neglected by the leading activists who would rather travel the world in the hopes of doing some good.

This paper was presented as part of a panel discussion with Gregory Diamant and Cliff DuRand hosted by the Center for Global Justice on January 19, 2017.