Cover of Puerto Rico en el mundo

Cover of Puerto Rico en el mundo

The question of whether globalization is a benign or per­verse phenomenon has given way to an intense and emotional international debate. Another debate is frequently argued in a less emotional, but no less intense manner: the question of whether globalization is a natu­ral, unavoidable, and irrevers­ible process, or if it is a product of decisions or conspiracies of governments, financial interna­tional institutions, multinational companies and interests groups; a product of decisions, which could, naturally, be modified or reversed.

The writer Mario Vargas Llosa is a known defender of one of these views. He argues that globalization is “a force as irre­versible as the metric system.” He also has said that “globalization is not, by definition, either good or bad. It is a reality of our time that has been created by several factors: technological and scien­tific development, the growth of companies, capitals, and markets and the interdependence that this has created among the different nations of the world.”

Despite being a great novel­ist, Vargas Llosa cannot also be expected to have a perfect un­derstanding of the complex po­litical economy of contemporary capitalism. However, the char­acterization of globalization that Vargas Llosa proposes reveals a fundamental confusion about the essential content of the global­ization concept. To explain this concept, it becomes necessary to explore what we could call the dual logic of globalization.

Mundialization is not necessary Globalization

Mundialization is not necessary Globalization

There are two different pro­cesses under the visible and measurable phenomena that are frequently used to define global­ization; each one with its concep­tual mark and its own operation logic and evolution. Although they are closely related, it is necessary to understand them separately. It may be useful to tell them apart semantically. In Spanish (and in French), they are differentiated by the words globalización (glo­balization) and mundialización (worldization); whereas in English, globalization is used for both concepts. There is, on one hand, a process of growing interaction among societies and economies that we could call worldization; a result of scientific and tech­nological progress, especially in information and communication technology. The best example is the Internet. This phenomenon, however, is more general: the progress as regards to informa­tion and communication allows an unprecedented exchange of ideas, values and culture. It also facilitates the movement of goods and services and even the frag­mentation and decentralization of the productive processes and pro­duction internationalization. This phenomenon is, truly, unavoid­able, irreversible, and also highly desirable. It holds the promise of a more integrated world; more understanding and, consequently, tolerant of its differences; richer in creativity because of the reciprocal fertilization of ideas, experiences, and cultural and social traditions; and economically more efficient due to the possibility of interna­tional specialization.

On the other hand, there is a group of national and internation­al policies that are both an answer to the previous process as well as an effort to organize, facilitate and guide it. These policies are accompanied by an ideology that tries to explain and justify them. This second phenomenon can be denominated globalization. Glo­balization is a political process at a national and international level that implies choosing political op­tions and routes of action. Con­sequently, in this second sense, globalization is neither unavoid­able nor irreversible, and in real­ity, has many clearly undesirable elements.

The explicit components of globalization policies are liber­alization, privatization, and de­regulation applied at national and international levels. At a national level, it is traditionally expressed in the Washington Accord and in the conditions imposed by the World Bank and the International Monetary Fund (IMF). At an in­ternational level, it is primarily expressed in the rules and disci­plines of the World Trade Organi­zation (WTO).

The justifying ideology behind these policies has two compo­nents: the ideology of economic liberalism and the ideology of economic globalism. According to the first, the free market always assigns resources effectively, and private companies are always the most efficient economic agents. In accordance with the second, frontiers are gradually less im­portant in the operation of the world economy and in dealing with national economic policies. In this view, the globalized world economy offers opportunities to companies of all countries in an increasingly unified world market. The task of the governments is to stimulate globalization in order to facilitate the access of transna­tional companies into the world market by reducing interference to the movement of goods, ser­vices, and capitals. According to this ideology, this will lead to an optimum assignment of resources at a global level and to the optimi­zation of the world`s well-being.

Globalization is the object of intense debates among the academic analysts. Who better embodies this than the American economist Joseph Stiglitz, profes­sor at Columbia University, former Vice-president and Chief Econo­mist of the World Bank, former President of the Council of Eco­nomic Advisors to the President of the United States, and Nobel Prize winner in Economic Sciences for the year 2001?

Other elements can be added to Stiglitz`s arguments. The fundamentalist liberal ideology contains an internal contradiction when stating that free markets as­sign resources and do so through the actions of private companies and in reference to international capital. This creates one of the most confusing premises of contemporary orthodox economic discussion, which tries to balance free competition and private mar­ket. Adam Smith said it first when he observed capitalism`s natural tendency towards creating mo­nopolies.

The conflict between the free and private market is particularly intense when it refers to transna­tional companies, whose tenden­cies to create monopolies is exacerbated by the size and breadth of their operations. The suspicion, not only of those against the WTO, the IMF, and the World Bank, but also of rigorous and impartial analysts, is that globalization, as a group of policies geared towards facilitating worldization, is primar­ily directed to allowing the expan­sion and penetration of transna­tional capital, and that when this objective enters in conflict with the free market, it is the interest of the transnational market which prevails. This is why including the topic of intellectual property, for example, to the WTO -an institu­tion that is the opposite of the free market, as its objective is to create monopolies,- is generally seen as a product of the pressure exerted by U.S pharmaceutical compa­nies. Likewise, the exclusion of the topics of competition policies and legislation from WTO nego­tiations, policies and legislation that aim to prohibit monopolies and aid in implementing the liber­alization of labor reform -in lieu of the speedy progress in the liberal­ization of financial services, – can be perceived as a product of the power of international capital to establish the negotiating agenda of the WTO.

We now arrive at the final cri­tique of the globalization ideolo­gy, and perhaps the most relevant to politics. The ideology of eco­nomic globalism is erroneous in its description of the reality of the contemporary economy which, instead of integrating itself into a unique economic sphere, con­tinues to function on the premise of national borders and national economic participants. The vast majority of today`s economic transactions occur within national territories. Hence, the nationality of those who control the capital is an increasingly important topic of political debate, not only in developing countries, but also in industrialized countries.

In other words, the globalist ideology neglects -or hides- the fundamental focus of the prior political economists such as Smith, Marx, and Ricardo, who be­lieved that all economic processes have political consequences and are influenced, in turn, by political forces and power struggles.

The political economy of glo­balization has returned to the foreground through the reemer­gence of economic nationalism. The phenomenon appears more evidently in Latin America, but has manifestations in other continents as well, even in developed coun­tries. It implies a reaffirmation of the importance of national econo­mies and the national economic participants in the globalized world. It rejects the notion that the location of production and property and control over the productive capacity lacks importance. On the other hand, it affirms the validity of development projects encouraged by national partakers, managers, and workers, and ac­companied by a State whose role is to provide the institutional and judicial framework for the organi­zation of the markets, to promote investments and the productive use of resources, and to correct deficiencies in the market when public costs and social benefits do not coincide with private costs and benefits.

This answer is not exempt of dangers: nationalism can reject the possibilities that worldiza­tion offers, or it can even create intolerance and xenophobia. An effort should be made because, as outlined by the United Nations Conference on Trade and Devel­opment (UNCTAD) in 2004, this much needed, rediscovered na­tionalism should be an “open na­tionalism that defends legitimate national interest before an inter­dependent world society, where the ultimate goal is the movement of goods and ideas, sharing goals and aspirations, building social and economic projects, and main­taining dialogue and the coexis­tence of cultures and values.”

In the political circles of the global economy, common references are made to the Washington Consensus. The expression was coined by the economist John Williamson, a researcher of the Institute for International Economics in Washington D.C., in an article published in 1990. The article defines the economic policy reforms that Washington considers desirable for Latin America By ”Washington” he means the U.S. Congress, high members of the executive branch, economists and officers of the international financial institutions, the economic agencies of the U.S. federal government and the capital”s principal Think Tanks.

According to Williamson, the Consensus contains ten points:

  1. Fiscal discipline.
  2. Elimination of state subsidies and reorientation of public expenditures for education, health and infrastructure.
  3. Reduction of marginal tax rates and broadening of the tax base.
  4. Liberalization of interest rates.
  5. Competitive monetary exchange rates (devaluation).
  6. Liberalization of commerce.
  7. Reduction of restrictions on direct foreign investment.
  8. Privatization.
  9. Deregulation.
  10. Guarantees of property rights.

In an article published later, Williamson recognizes that the term became “a synonym of neo-liberalism,” or what George Soros calls “market fundamentalism.”

Carlos Fortín
Juris Doctor Professor
University of Puerto Rico-Río Piedras

 

Author: Proyectos FPH
Published: January 16, 2008.

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