Globalization

Over the past 25 years,  the economic organization of the entire world has come under the sway of the global capital market under the terms of free trade and the economic restructuring of the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO). 

In no other period of human history has the global capital market exercised such dominance. How successful has it been?

There has been a staggering growth of social polarization on a worldwide scale. 

• There are 475 billionaires in the world. 

• Their wealth  =  combined incomes of more than 50 % of the world's population, + 3B billion people. 

This amassing of riches is accelerating. 

The number of billionaires in the US alone has increased from 13 in 1982 to 149 in 1996 and has increased since then.

According to the 1998 UN World Development Report, the

• 3 richest people in the world have assets exceeding the combined GDP of the 48 least developed countries
   

• 15 richest people have assets worth more than the total GDP of sub-Saharan Africa
   

• 32 richest more assets than the GDP of South Asia
   

• 84 richest people have assets worth more than the GDP of China with its 1.2 billion inhabitants

And what of the majority of the world's people?

• Of the 4.4 billion people in "developing" countries
   

  • almost 3/5 lack basic sanitation, 
     

  • 1/3 have no safe drinking water 
     

  • 1/4 have inadequate housing, 
     

  • 1/5 are undernourished, 
     

  • 1/5 have no access to decent health services.

Between 1960 and 1994 

the gap in the per capita income between the richest 1/5 of the world's population and the poorest 1/5 more than doubled, increasing from 30:1 to 78:1. By 1995 the ratio had risen to 82:1.

In 1997 the richest 1/5 of the world's population received 86 % of world income, 
   with the poorest 1/5 receiving just 1.3 %. 

More than 1.3 billion people are forced to subsist on less than $1 per day—a life-threatening situation. 

According to the UN, out of the 147 countries defined as “developing” ~100 had experienced “serious economic decline” over the past 30 years.

The impoverishment of whole populations over much of the world is not the consequence of “natural disasters” but is the direct outcome of the operations of financial markets and the imposition of “structural adjustment” programs by the International Monetary Fund (IMF) on behalf of the banks and major international financial institutions, with the aim of creating conditions for the protection and benefit of international capital.

Despite massive debt repayments, extracted at enormous social cost, the level of indebtedness of developing countries to international lending institutions continues to rise. 

• In 1990, the stock of total debt owed by developing countries was $1.4 trillion; by 1997 it was $2.17 trillion. 
   

• In Africa, total debt was $370 for every person on the continent. 
   

• In some countries the total level of debt was more than four times the GDP. 
   

• In 1998 Third World countries paid $717 million in debt service to the major financial institutions every day.
  

Russia badly hurt

And nowhere has the devastation been greater than in the former Soviet Union. Since 1989 it has been calculated that the Russian economy has been cut in half. In economic terms it is now no bigger than the Netherlands, with a loss of production greater than that inflicted in 1942 when much of the country was occupied by the Nazi invaders.

The birth rate has almost halved since 1985 and is exceeded by the death rate by a factor of 1.6, with the result that on present trends the Russian population will fall by one fifth over the next decade. 

At the turn of last century, the life expectancy of a Russian male aged 16 was higher than it is today. That is, despite two world wars, a civil war, famine, deaths in the purges and the Gulag, a 16-year-old male in 1900 had a 2 percent better chance of reaching 60 than he does in the year 2000.

In all corners of the world, social conditions are marked by deepening poverty and mounting inequality, resulting in the continuous eruption of human catastrophes. 

And in the midst of these social disasters the “New World Order” of the market has revealed its true face—the launching of brutal wars as the great powers once again strive for global mastery.

The connection between the domination of the “free market” and the use of military power was succinctly summed up in an article by the foreign editor of the New York Times, Thomas Friedman, published two years ago as the NATO onslaught against Yugoslavia was getting underway.

“The hidden hand of the market,” he wrote, “will never work without the hidden fist—McDonald's cannot flourish without McDonnell Douglas, the builder of the F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies is called the United States Army, Air Force, Navy and Marine Corps ... Without America on duty, there will be no America Online.”

Restructuring markets hurting Americans

Restructuring markets has always created misery for people in developing countries, but over the past 50 years its defenders have argued that at least in the wealthiest countries it has brought rising living standards for the majority of the working population. 

That is no longer the case. Economic expansion over the past 25 years has not only produced a deepening polarization of wealth, but an actual decline in the real income of the majority of wage earners. Nowhere is this global tendency more apparent than in the United States, considered to be the model for the “free market” economy.

It is estimated that real wage rates in the US are around 7 percent below what they were in 1973. Not even over the 25 years covering the Great Depression of the 1930s did real wage rates contract over such a prolonged period.

The decline in real incomes for the majority of workers is the outcome of an upward redistribution of wealth. 

In 1962 the bottom 90 % of the population received 69 % of income. 

By 1992 this had fallen to 59 %. 

In other words, in this period 10 percent of income was redistributed up the income scale, most of it ending up in the hands of the wealthiest 1 %. In absolute terms this amounts to about $700 billion a year.

The wealth of the Forbes 400 richest Americans grew by an average $940 million each from 1997 to 1999. 

Over the 12 years from 1983 to 1995, however, the net worth of the bottom 40 % of households declined by 80 %. Rather than a  “trickle down” effect advocated by the free market proponents, the numbers reveal we have an “upward suction” process.

The combined net worth of the Forbes 400 was $1 trillion in September 1999, up from $738 billion the year before. 

Just 1/5 of that increase, around $48 billion, would have been enough to bring all Americans officially designated as living in poverty (about 15 % of the population and 25 % of all children) up to the poverty line.

In other words not only has the broad majority of the population become worse off in relative terms, it has become worse off in absolute terms as well; real incomes have declined.

This disparity is felt in both developed countries and in the "developing" world. 

It is caused by the move to "globalization", the creation of  "free markets" and the move toward the creation of trading blocks like the EU, NAFTA, WTO, and FTAA. 

These trading agreements have been designed to protect the interests of a small group of organizations, international banking organizations and some transnational companies, to the detriment of most national governments and the vast majority of people in the world.

globalization puts domestic policies on the side of capital

Unregulated globalization puts government's domestic policies decisively on the side of capital. In an economy that is growing based on its domestic market, rising wages help everyone because they increase purchasing power and consumer demand - which is the major driver of economic growth in a modern economy. But in an economy whose growth depends on foreign markets, rising domestic wages are a problem, because they add to the burden of competing internationally.

Globalization of capital works to the benefit of transnational companies but to the detriment of nations, wage earners and the environment.