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.
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:
- Fiscal discipline.
- Elimination of state subsidies and reorientation of public expenditures for education, health and infrastructure.
- Reduction of marginal tax rates and broadening of the tax base.
- Liberalization of interest rates.
- Competitive monetary exchange rates (devaluation).
- Liberalization of commerce.
- Reduction of restrictions on direct foreign investment.
- 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.”
Juris Doctor Professor
University of Puerto Rico-Río Piedras
Author: Proyectos FPH
Published: January 16, 2008.
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