(A paper prepared by Kamal Malhotra, Co-Director, Focus on the Global South, Chulalongkorn University Social Research Institute, Bangkok, Thailand in November 1997 for Action Aid UK’s Development Context Project.)
1. The Fast Changing External Global and Regional Contexts
The past 15 years have seen some of the most rapid paces of change in both the external global and regional environments (eg. Asia) in recent human history.
The ” Third World” external debt crisis which emerged in the early 1980s; the subsequent fundamental restructuring of economies and societies through the enforcement of structural adjustment programs (SAPs) in over 100 countries around the world; the rapid economic growth “miracle” of first and second generation Newly Industrializing Countries (NICs) in East and Southeast Asia and its current unravelling in important economic and financial respects; the dramatic continuing transition of many countries from command communism and socialism to market economies; and the end of the Cold War are but some examples of the momentous changes that have taken place globally and regionally during this relatively short period in world history.
The supposed victory of the neo-liberal economic and political agenda; its associated accelerating economic globalisation and regionalisation processes and agendas; their concomitant processes of privatisation, and the weakening and fragmentation of the nation state as the fundamental unit of sovereignty (under the onslaught of both economic globalisation and economic liberalisation, which while not the same, are twin, closely related processes) in an increasing number of critical areas (eg. business, investment and capital flows, the environment, human rights and possibly even social development); the revolution in computing and other aspects of information technology; corporate transnational unilateralism and capital flows of unprecedented magnitude unevenly spread around the globe which are increasingly dwarfing the role of ever-diminishing Overseas Development Assistance (ODA); and escalating regional and intra-national conflict in the absence of new, appropriate, global, regional or national mediation institutions or mechanisms in a post-Cold War world are just some additional aspects of this new scenario which some have called the New World Order and others the New World Disorder.
2. Do These Trends Relate to Globalisation?
The current dominant processes of globalisation are led by the forces of market economics and finance. These processes have had and continue to have an overarching, overwhelming and pre-eminent role in both stimulating and determining many of the dramatic trends just described, especially since those that are related to trade, investment and other financial and economic flows and arrangements have been predominant among them.
As a direct result of the current dominant processes of economic globalisation under way, for example, total private capital flows ( foreign direct investment, portfolio speculative capital and others) to developing countries have increased a phenomenal sixfold from US$ 48 billion to US$ 244 billion in just this decade i.e. between 1990 and 1996.
Global ODA during the same period, on the other hand, has declined to around
US$ 40 billion from US $ 61 billion with the global total of ODA in 1996 representing less than private capital flows to just one Asian country i.e. the People’s Republic of China (PRC) which received a record US $ 42.3 billion that year.
The astonishing increase in the magnitude of such private capital flows has also resulted in a ratio between such flows and ODA of 6:1 in 1996, a dramatic reversal from the 0.79: 1 ratio just six years earlier.
Moreover, more than US$2000 billion is said to be transferred around the world everyday as a result both of the computing and information technology revolution and significant deregulation and liberalisation of financial markets and capital flows.
A larger and larger part of this consists of short-term capital flows so that even portfolio speculative capital or equity flows (“hot money” ) to developing countries in 1996 exceeded global ODA, having grown rapidly after financial liberalisation took hold in many “emerging market” countries in the early 1990s. Asia alone accounted for 53% of such flows in 1995 with significant negative, volatile currency and other financial and economic impacts on SE Asian countries over the past few months when it has as rapidly flown out (as in Mexico in 1994). Indeed, the role and impact of short-term, speculative portfolio capital in the 1990s is becoming increasingly important in “emerging market” countries in particular, (where it largely concentrates), and has contributed to both a short-term “boom” and now a big “bust”.
The increasing global magnitude and impact of short-term capital is vividly illustrated by the following statistic : of the approximately US$ 244 billion private capital which flowed to developing countries in 1996 only US $ 129 billion was longer-term foreign direct investment (FDI).
Moreover, the concentrated nature of total private capital flows can be understood when one realises that even FDI, which because of its long-term and more productive investment nature, is widely regarded as more beneficial than short-term speculative capital, is heavily skewed with most flowing to the same 12-15 “emerging market” developing countries, most of which are in East and Southeast Asia. India is the only South Asian country in this group and total FDI to Africa (which has 32 of the least developed countries in Sub-Saharan Africa alone) remained small at just US $ 5 billion in 1996 (skewed mainly to South Africa and Nigeria). Indeed, the African total should be contrasted with total FDI to developing countries in South, East and Southeast Asia which rose by 25% to US $81 billion in 1996, representing two-thirds of all FDI into developing countries. Even among the world’s least developed countries, Cambodia, the Lao People’s Democratic Republic and Myanmar in Asia claim three of the top six positions as the largest FDI recipients.
While total global FDI (to both industrialized and developing countries) was US $ 349 billion in 1996 according to the same report, it is important to remember that FDI captures only a part (perhaps just one quarter) of the total volume of financial resources going into international production. When the total amount of the latter is taken fully into account, the actual value of investments made by transnational corporations (TNCs) abroad is estimated by UNCTAD to be around US $ 1.4 trillion.
As a result, approximately 70% of global trade is controlled by just 500 TNCs and a mere 1% of TNCs are responsible for half the total FDI in the world.
The growth of TNCs has, indeed, been dramatic in the last three decades. In 1970, there were only 7000 of them globally, by the beginning of the 1990s they had grown to 37000, ( 24,000 of which had home bases in the fourteen largest Organisation for Economic Cooperation and Development–OECD–countries) while in 1996, their numbers stood at approximately 44000 with 280000 foreign affiliates. While accounting for such a high proportion of global FDI, these corporations account for less than 5% of global employment, even when their sub-contractors are included. Worse still, only one-fifth of the people employed by TNCs in the early part of this decade (eg. 15 million in 1990) were in developing countries .
In addition to financial liberalisation and the revolution in computing and information technology, economic liberalisation was the key to these dramatic increases in private capital flows. Of the 599 changes in regulatory regimes relating to FDI made by governments between 1991 and 1996, 95% were in the direction of liberalisation. The rate of liberalisation treaties has been accelerating. In 1996, one bilateral investment treaty of this kind was concluded every day!
A cumulative result of these trends is illustrated by another astonishing statistic now commonly quoted by authoritative and credible sources. Of the world’s largest 100 economies today, only about half are nation states, the rest being TNCs.
In 1996, the latter had total sales from their affiliates in excess of US $ 6 trillion while the total stock of assets of TNCs globally is now in excess of US $ 8 trillion. The top 100 TNCs, ranked on the basis of their foreign assets, today control 20% of total global foreign assets of TNCs, and in 1995 had foreign sales in excess of US $ 2 trillion, foreign assets of around US $ 1.7 trillion and foreign employment of close to 6 million people. Only two (2%) of the top 100 TNCs (and that too for the first year ever in 1996), were TNCs from developing countries if the Republic of Korea is still counted as one. These are Daewoo of the Republic of Korea which was listed as number 52 and Petroleos de Venezuela S.A.
3. What is Globalisation?
The ordinary person on the street in both London and Bangkok identifies globalisation most with McDonalds and Coca Cola. In some ways, this characterisation is accurate, if incomplete.
The term “globalisation” is now commonplace and referred to frequently to explain a wide variety of trends and events in daily life. It sometimes almost appears as if globalisation is viewed as an explanation in itself. It is seen by many as an inevitable process, which like an act of nature, requires or allows no further debate or explanation. The term seems to have appeared from nowhere but its presence is now everywhere.
But what is it and where did it come from? Surprisingly few people appear to know where the term came from or even when or why. Its concept is now used everyday and yet so little is known about it. Even fewer people appear to realize that globalisation is not inevitable or an act of nature which has to be endured forever and cannot be averted, if people want or choose to.
According to the OECD, the term globalisation was first used in 1985 by Theodore Levitt. He used the expression to characterize the vast changes, described in the previous two sections of this paper, that have taken place over the last two to three decades in the international economy—— the rapid and pervasive economic and financial changes that have taken place in production, consumption and investment globally as a result of both economic and financial liberalisation, structural adjustment programs, and the dramatically diminshing role of the state in the economy.
Related to the above, the current dominant form of globalisation implies that decisions made in one (often geographically distant) part of the world have greater and greater direct and indirect impact on nation states and local communities in far away parts of the world. While this is now clearer to more people in relation to the environment, the distinguishing characteristic of the current market-dominated globalisation processes is that as a result of their continued acceleration, these impacts are increasingly and even more true of both economic and financial decisions as well. The current SE Asian financial crisis and its contagion effects on the Hang Seng index in Hongkong, on the stock markets in Wall Street, Japan and other parts of NE Asia, in Europe and even in Brazil are recent illustrations of this global integration in financial decision-making and its multiple impact. The resulting negative impact on exports to East and SE Asia from the US, Australia and other countries is yet to be fully felt but will be more tangible in 1998 and beyond (as recently admitted, in the case of the United States by the US Federal Reserve Chairman, Alan Greenspan, ).
The process of globalisation itself is clearly not new, especially in its greater internationalisation of trade aspects. Indeed, some scholars and practitioners argue that there was a more liberalized environment for the international movement of goods (trade), services and even labour in the post-Industrial Revolution 19th century. This is not incorrect.
So what is new in the process of globalisation as we have witnessed it in the last three decades of the 20th century, especially when we compare it with what happened 100 or more years ago? This paper argues that there are multiple, important differences which make both the current processes and their impacts fundamentally different from 19th century mercantilism.
Three important differences which make a world of difference in terms of impact between 19th century mercantilist practices and the economic globalisation processes of today are the latter’s character, the role of the computing and information technology revolution in facilitating both the speed and volume of financial transactions and the role of unfettered markets in the process.
Other related differences include the selective and self-serving interpretation of “free market” theory by the advocates of financial and economic liberalisation, integration and globalisation, the sharp contrast between totally mobile capital and the relative immobility of unskilled labour in the markets of today, and the diminished role of the nation state. Taken together, these add up to substantial differences in both processes and impact between 19th century mercantilism and late 20th century economic globalisation.
The character of today’s globalisation is determined and characterized by private capital flows, not just trade as in the last century. The increasing share of short-term speculative capital in this is another characteristic which is even more destabilising. The computing and information technology revolution have facilitated both the different character and dramatic volumes of such flows by providing the speed and technology to effect the staggering volume of daily transfers described in the previous section. Neither this speed or volume of financial transactions was possible in the
19th century since the technology did not exist.
Moreover, and most critically, governments of the now industrialized countries had significant control over their international trade policy in the 19th century and financial markets were not liberalized. Such trade policy was a major part of the colonial nation state’s strategy and even the founding charter of the Bretton Woods institutions in 1944 by the colonial states prohibited the International Monetary Fund (IMF) from pushing financial liberalisation through capital account liberalisation, a prohibition that IMF senior staff and key Board members are now trying to have overturned through a change in the IMF’s Articles of Agreement.
The roll-back of the nation state’s role in the pursuit of neo-liberalism at the behest of what was the Group of Seven industrialized countries (G-7, which is now the G-8 with the inclusion of the Russian Federation), OECD and international financial institutions (IFIs) such as the World Bank (WB) and IMF has, if not by design at least defacto, become akin to economic recolonization in the aftermath of structural adjustment programs (SAPs) in the 1980s and 1990s. These programs have dramatically eroded the capacity of the still newly-independent, previously colonized developing country nation states to formulate and implement independent macro-economic, trade and financial policy. They have, in country after country, led to the abdication of the state’s role to the “magic hand of the market” in sharp contrast to the situation that prevailed 100 years ago. This, naturally, is in the disproportionate interest of the previous colonial industrialized countries who have both much stronger state and market institutions which were built up over centuries under protectionist policies led by their governments till fairly recently.
Indeed, the “free trade” theory of Adam Smith, Ricardo and others was based on a theory of perfect competition (which clearly does not exist in practice in the late 20th century) and very different market conditions than those which have prevailed in the last three decades. In particular, it was based on a leading role for the state over the market, the situation of Europe at that time, and premised on the relative immobility of capital, with full employment as an objective.
The theory’s current application in highly and increasingly concentrated, skewed and imperfect markets in both developing and industrialised countries and the neo-liberal economists’ premise that capital should be allowed to be fully mobile is, therefore, a serious distortion of original “free trade” theory in important respects. The current objective of maximizing financial and economic profit and international competitiveness is also increasingly at odds with Keynesian objectives of maximizing employment and social and economic welfare.
The advocacy of full global mobility for capital is also at odds with very restricted mobility for unskilled labour in the context of current processes of economic globalisation. In addition to creating a huge disjuncture between labour and capital and, therefore, being unsustainable in the long-term, such global policies are also grossly unjust because they consistently put profits before people. It is also an ironic fact that unskilled labour was more mobile 100 years ago relative to capital than it is today, in this era of globalisation.
To summarize this section, the current form of globalisation which is having multi-dimensional impacts on society and culture in addition to the nation’s polity and to the concept of nationhood itself, is being driven by market economics and neo-liberal financial processes.
As a result of these dominant features and the forms they have taken, the distinction between what is internal to a state and country and what is external is becoming increasingly blurred. Some commentators like Jonathan Freidman and David Korten highlight the role of TNCs as illustrating this best, with the former going as far as to portray globalisation as a pervasive hegemonic force led by borderless TNCs.
The truth is, perhaps, more complex but there is no doubt that both TNCs and those that control the world’s capital resources are key proponents, facilitators and beneficiaries of the current globalisation processes.
4. Globalisation’s Broad Impact
Who Benefits, Who Loses?
Globalisation per se is neither necessarily bad or good. Even the current form of economic and financial globalisation has both benefits and drawbacks, and so-called “winners and losers”.
But the question of good or bad should not be the most important one for an agency like ACTIONAID. The more important questions, as always, should be both who benefits and who loses, and what weightage ACTIONAID and society more generally should place on those who lose versus those who gain.
This and subsequent sections of this paper will, therefore, treat these latter questions as the core ones. They will also seek to analyse the impact of globalisation and its implications for the broad positioning of an agency like ACTIONAID from the perspective of its main intended partners and beneficiaries i.e. the poor, marginalised and voiceless majority in developing countries. They will analyse and care most about what has happened, and is happening to such population groups and ascribe a significantly higher weightage to this than to what is happening to the rich or middle classes of developing countries.
The Dominance of Those With Capital and the Dual Faces of North and South
A number of complex impacts are observable from this perspective.
Firstly, the current dominant forms of economic and financial globalisation in the context of their concomitant processes of liberalisation and integration are clearly of benefit to those with considerable amounts of accumulated capital or certain professional skills to sell or trade in the marketplace. Those without one or both to sell or trade such as the poor and already marginalised in both industrialized and developing countries are clearly being further disempowered and peripheralised by such globalisation processes.
This is true between countries (eg. traditional North and South), within countries (eg. the North and South within East and Southeast Asian countries) and among certain population, gender, age and skill groups globally (eg. non-indigenous versus indigenous peoples, men versus women, professional versus unskilled labour in both the traditional North and South, rich versus poor children).
Financial liberalisation, for example, has already resulted in a significant shift of resources and power in favour of those who have capital globally, thereby leading to a further concentration of capital in fewer and fewer hands. Full capital account liberalisation as demanded by the IMF, and even more starkly in Fukiyama’s vision of the “end of history” will, if implemented, therefore, represent the biggest single shift in the balance of power in favour of those who have already accumulated capital at the expense of labour globally.
The demand for full financial liberalisation and a multilateral agreement on investment (MAI) which is intended to give foreign investors the same rights as domestic investors in developing countries is being led by the OECD industrialised countries. It is being sought from developing countries in a telescoped period despite the fact that Western industrialized countries accumulated capital over centuries without such financial liberalisation till fairly recently (eg. the US instituted full capital account convertibility only in the early 1970s, Sweden only ten years ago, and Spain only in the early 1990s) and is bound to further exacerbate the traditional North South divide.
Nothwithstanding this continuing relevance of the traditional North South unequal power relationship and its exacerbation as a result of the current forms of trade and financial globalisation, power relationships can no longer be understood only in such purely traditional terms. This is because the current global processes of wealth, poverty and inequality creation are making the traditional divisions of North and South both less clear and less relevant for some purposes at the same time as they are exacerbating them for other purposes.
There is a rapidly growing North in the traditional South, especially in large parts of East and Southeast Asia (this growth will, no doubt, slow down as a result of the current financial and economic crisis but the essential point remains valid) while at the same time there is a rapidly growing South in the traditional North (eg. UK, USA) as evidenced both by the increase in the absolute number of people who are widely regarded as being below the poverty line in these countries according to their own official, national statistics and the big increases in relative poverty and inequities in terms of access of certain population groups to basic services (eg. health in the USA).
As a result, a definition of Global South and Global North is now emerging, becoming increasingly significant and is beginning to be used for some important purposes. For example, the Global North can be used to describe those who are economically able to participate in and benefit from regionalized and globalised financial and economic markets (regardless of where they live) while the Global South can be used to describe those who are being further excluded or marginalised from such participation and benefit.
Trade and Financial Integration in the Context of Globalisation
At the country level, an important impact of trade and financial liberalisation and integration in the context of globalisation which is increasingly evident is that even relatively strong developing country “emerging market” economies such as the first and second generation East and Southeast Asian “tigers” or “dragons” are not immune from major crises. There is no more vivid illustration of this than the current financial and underlying economic crises which have negatively impacted on Thailand, Malaysia, Indonesia and now even the Republic of Korea.
The crisis in Thailand, for example, is both a consequence of an outdated export competitiveness strategy based on cheap labour and low-end value products which is less and less sustainable as a long-term strategy, and premature and unregulated financial liberalisation which has compounded its underlying structural woes.
If countries that have had decades of high economic growth rates and still have relatively strong states and governments such as the Republic of Korea, Malaysia, Thailand and Indonesia are so vulnerable in this fast changing globalisation context, what chance do the much weaker, small developing countries of Sub-Saharan Africa, Latin America and the Caribbean or other parts of the Asia-Pacific have? If even the universalisation of primary education leaves an economically vibrant, medium-sized country such as Thailand both non-competitive in the context of globalisation, and without recourse to effective short to medium-term strategies apart from competitive exchange rate devaluation, what are the realistic prospects of countries which have neither invested in primary, secondary or tertiary education or research and development?
It should be clear from current events in East and Southeast Asia and from the above that in this new global context even economies that are relatively strong in growth terms but are small or medium-sized developing or even industrialized countries (eg. Sweden in the early 1990s after its capital account liberalisation) have less and less control over their destinies. Likewise, those with weaker economies or dependence on only low-end value added labour-intensive exports are likely to be even more vulnerable to external shocks than larger countries such as the US, China and India.
In addition, countries with higher dependency on export markets and external trade and financial flows (eg. Thailand whose trade as a % of GDP is approximately 80% and Malaysia, whose equivalent ratio is approximately 200%) are likely to be much more vulnerable than those that have large internal markets and for whom trade is a relatively small proportion of their GDP (eg. China, India). Moreover, since it is widely agreed that financial markets tend to exaggerate shocks and overreact negatively in times of crises, more damage than normal will be done to such external trade dependent countries in times of crisis (eg. the current exaggerated depreciation of some SE Asian currencies).
The Implications of Short-Term Financial Criteria for Judging Success
A major result and impact of current processes of economic globalisation which often goes unnoticed is the dramatic change in the criteria that global institutions, governments and most unfortunately, even ordinary citizens now regularly use to assess success. Economic and financial criteria dominate, and even these have greatly shifted from the fairly people-centered (eg. employment, social security) Keynesian criteria of the 1960s and 1970s to the single-minded international export competitiveness and financial criteria of conventional economic wisdom today.
Indeed, it is economic growth, not social development which is clearly at center stage and the mainstream globalisation paradigm which celebrates economic growth as an end in itself is in serious danger of marginalising or even subverting the social development agenda agreed in Copenhagen in 1995. There appears to be no clear recognition by either the powerful multilateral financial institutions or governments in either North or South that the social development agenda cannot be seen as subservient to or tackled separately from the economic reform agenda.
The current dominance of financial market criteria to judge success, in addition to marginalising social development objectives, leads to a natural bias in favour of short-term horizons and unemployment. The latter is because high employment impacts on interest rates in directions that financial markets do not like. Likewise, they do not like investments in health, education and children more generally because the gestation period for such investments to bear fruit (eg. 20 years) is too long for suc financial markets. They far prefer investments which bring quick returns in a week ,which is often their longest horizon.
As a result, a reduction in child allowances in Sweden in the last few years after the country’s self-imposed structural adjustment program led to a positive reaction from the financial markets according to Stefan de Vylder, a Swedish economist who has done very interesting work on the impact of macroeconomic policies on children, and who has more recently written a book on the impact of the Swedish budget on children.
These criteria are clearly perverse ones from the perspective of an agency such as ACTIONAID. Economic and financial reform policies should be seen as a means of achieving social development objectives as should an export competitiveness strategy. Such strategies and the criteria used to judge them should not be in contradiction to social development objectives or an end in themselves. This is, unfortunately, not the reality of current processes of economic globalisation and regionalisation.
Homogenisation of Consumer Culture and the Clash of Civilisations Thesis
The homogenisation in consumer cultures in place of diversity is another of the major impacts of the globalisation process. While most discernible in large urban metropoles, such a homogenised consumer culture is increasingly evident even in remote rural areas. Such a “McWorld” caters to desires more often than it satisfies needs and, as such, through advertising and other tools of expansionist commerce, serves to further accelerate and accentuate current patterns of economic globalisation through the creation of demand for the products of TNCs (eg. McDonalds, Coca Cola).
The cultural response to both economic globalisation and this homogenisation process has come in the form of a variety of fundamentalisms and narrow nationalisms (eg. Christian, Islamic, Hindu, Le Pen in France, armed militias in the US and elsewhere) whose regressive aspects are well known. The most potent of these has been the process of Islamic revivalism, a progressive and important part of which (but one which gets little international media attention or rigorous analysis compared to its regressive tendencies) is the desire of ordinary Muslims to reclaim the economy back into the hands of their communities.
While globalisation of the world’s economies and cultures is clearly producing serious risks of clashing civilizations, these have been overstated by many recent publications.
We need to reinforce the potential positive cultural aspect of increased globalisation ie. the discovery, through increased international travel and other forms of exchange involving ordinary citizens, of the richness in the diversity of different cultures; the dangers of attempting to homogenize them in a “McWorld” to cater primarily to the interests of expansionist commerce; and the recognition of the important and unprecedented opportunity provided by the communications technology revolution for direct people-to-people (as opposed to only government to government or big business to big business) contact and dialogue that globalisation also potentially brings to different cultures, societies and peoples.
The Communications and Information Technology Revolution: Does it Provide a Level Playing Field?
We are often told that the communications and information technology revolution is the engine of globalisation and that one of the latter’s benefits has been the democratizing nature of some of the revolutionary changes in information and communications technology over the last decade. There is some truth in this because information access and use can no longer be as easily or totally controlled by dictators and authoritarian regimes and governments or even large corporate enterprises as a result of these changes.
Global and regional citizens campaigns and lobbying can now be launched, coordinated and maintained through the internet and by e-mail. For example, the Land Mines Campaign, which won the 1997 Nobel Peace Prize, would clearly not have gathered momentum as quickly and widely as it did over the past five years without the revolutionary changes in information and communications technology that the world has witnessed.
There is, however, also a darker side to this communications and information technology revolution. For example, as already discussed, it has greatly facilitated the movement of large volumes of speculative financial flows around the world with significant disruptive impact on “emerging market” developing countries.
More importantly, however, just as ownership and control over ships and shipping in 19th century mercantilism made the difference in trade competitiveness 100 years ago, ownership and control over communications and information technology play a major role in determining international competitiveness in the late 20th century.
A recent Panos UK study apparently shows how much more costly it is to use the internet in developing countries, and Africa in particular, compared with industrialized countries. To quote, “Panos compares a US researcher possessing a fixed link to a high speed multi-megabit-per second network to an African researcher connected to around 200 characters a second under an unstable telephone line. Whilst it will take a few seconds at no measurable cost for the US researcher to download dense information it might take 10 minutes at an international call rate for the African one”.
Abugre and Akabzaa argue in the same paper that as a result of huge ownership, control and cost differentials, a North-South divide is taking place in communications and information technology which threatens to deepen the already existing asymmetry in international competition between developing and industrializing countries, to the particular detriment of Africa.
It should also be noted that the asymmetries between policy advocacy and city based civil society organisations, on the one hand, and village based and often more grassroots organisations, on the other, are also increasing as a result of the information technology revolution, as is the gap between secondary educated and tertiary skilled professionals and those who remain illiterate or only have access to low technology or poorly resourced primary and secondary education.
The skill, information and knowledge gap between the poor and rich, and the privileged and underprivileged is, therefore, also being exacerbated by the current communication and information technology revolution. All of the above stated trends can hardly be said to be in the interests of economic democracy or changing the power balance in favour of those who were already poor, disenfranchised, marginalised or powerless before the onset of the information technology revolution and the current processes and patterns of globalisation which it has certainly fueled and served as an engine for.
Globalisation as a Force for Greater Democratization or Unaccountability?
As in the case of communications and information technology, globalisation is often presented as a force for greater political democracy around the world, and the move of more countries to market economies and away from dictatorships (eg. in Latin America) is cited as evidence in support of this assertion.
While it is true that more countries in the developing world have moved to formal, representative democratic systems over the last decade, and this is most marked in Latin America given its history of the last three to four decades, there appears to be no empirical evidence to suggest that this is a result of globalisation or because of a move to market-led economies.
In Asia, on the other hand, the empirical evidence is to the contrary, both currently and over the last two to three decades in East and Southeast Asia. For example, the move to a greater role for the market in countries in transition from central planning to market orientation (eg. China, Vietnam, Lao PDR, Mongolia) is based on the belief (based on the historical and still current experience of the first and second generation “miracle” economies of the region) that successful economic liberalisation can be undertaken without the need for any significant political liberalisation or democratisation process.
In Eastern Europe and the Russian Federation, economic liberalisation has been accompanied by formal democratisation (in terms of civil and political rights) but this has not guaranteed economic democracy or even resulted in substantive democracy as the popularity or reelection of erstwhile communist parties (in some countries) thinly disguised in new name or attire indicates. The sharply increasing economic inequities between population groups and the conversion of state assets and control rights into private assets and control rights can also be viewed as intensely undemocratic in both economic and political terms.
As a result, the attempts of those involved in forging the Washington Consensus to equate good governance and democratisation as almost synonomous with a move towards a greater role for the market must be critiqued and contested, not least because their thesis is not supported by empirical evidence. Indeed, as the data on TNCs and market concentration presented in an earlier section of this paper clearly shows, the overemphasis on a laissez-faire, market-led world system is actually shifting power away from formally elected, representative democratic governments.
Even if the democracies in many such countries have so far been formal rather than substantively democratic governments, they have clearly been bestowed with a certain degree of legitimacy through election processes, regardless of how corrupt and skewed in favour of those with money such elections tend to be in both developing and industrialized countries around the world. The current patterns of globalisation, however, are shifting the power traditionally wielded by states and such democratically elected governments substantially away from them and in the direction of totally unaccountable TNCs and mutilateral trade and financial institutions (WTO, IMF, World Bank) which are comprised of unelected technocrats.
In addition to the top executives of Wall Street investment banks and the top 100 TNCs, the newest and most explicit beneficiary of such a power shift through the instrument of multilateralism is the recently created World Trade Organisation (WTO). Established less than two years ago, its rules are already forcing democratically elected governments and national parliaments to change sovereign laws to conform to its agreements under threat of mandatory sanctions meted out by powerful but faceless and unelected bureaucrats and technocrats sitting in Geneva.
Similarly, the Bretton Woods institutions have gained in status and power in the multilateral system against other specialised bodies of the UN in the last three decades and negotiated an escape clause which allows them to be unaccountable to the UN General Assembly or its Economic and Social Council (ECOSOC) as early as 1947. Voting shares and rights in these Bretton Woods twins are based on capital contribution rather than on a one-country-one-vote system (as in the UN General Assembly), leading to their decision-making being dominated by the G-7 who, between themselves, control approximately 65% of the total voting power in the IMF and the World Bank. The role and power of such institutions, especially the IMF, is likely to increase even further if the latter’s Board of Governors agree to change its Articles of Agreement to allow it to use capital account liberalisation as a conditionality for future loans and its seal of approval.
It should be clear, then, that the last two to three decades over which the current patterns of accelerating economic globalisation have taken root, have seen power and authority consistently and exponentially move away from states and formally elected parliaments and democratic governments to unelected and increasingly unaccountable and technocratic transnational corporations and multilateral financial and trade institutions. This is clearly not a healthy trend for global democratic governance.
Globalisation and Civil Society
Ironically, the growth and facilitation of potential global development alliances amongst different types of civil society groups, both between and within individual countries (eg, development NGOs, trade unions, human rights groups, environment groups) and between like-minded civil society groups in the traditional North, South and East may well be the one clear positive outcome of current processes of economic globalisation.
Such processes, while still relatively incipient and weak relative to the forces at work in the mainstream globalisation paradigm, are beginning to happen at a much faster pace and on a much wider variety of issues than ever before partly as a result of the communication and information technology revolution and its facilitation of the global campaigning, advocacy and lobbying work already discussed.
Equally if not more importantly, the rapidly growing Global North in the traditional South, especially in East and Southeast Asia and some parts of Latin America, and the rapidly growing Global South in the traditional North, should enhance the possibilities of building a global civil society movement for social justice and against poverty, which unites groups and organisations around the world to develop a broad public understanding that poverty is unnecessary and that it is rooted in injustice.
This should now be more possible because current patterns of economic globalisation are also leading, through parallel and related processes, to the globalisation of poverty and injustice, transcending traditional North-South borders. This should, for example, make it increasingly possible for people in the traditional North to directly witness the impact of poverty, inequity and injustice in their own countries and understand their structural causes, including the similarity of the latter with the processes that cause poverty, inequity and injustice in the traditional South.
The creation of a distinguishable global north and south as distinct from the traditional north and south should also allow us to move closer to Chris Roche of Oxfam UKI’s vision of “a more global view of development problems built upon alliances of competent agencies having wide experience and bringing complementary resources and skills to bear—such alliances must be made up of a wide variety of non-governmental agencies, people’s organisations ,women’s movements, environmental groups as well as those human rights, peace and lobbying organisations who are dealing with the broader issues.”
5. Globalisation Trends in the Future, Their Likely Impact and Opportunities For Harnessing the Process for Development
There is nothing to suggest that the current patterns of globalisation will, in and of themselves, reverse themselves or fundamentally change in the next two to three decades. Yet, as already indicated, current forms of globalisation are neither inevitable or an act of nature. Neither is Fukiyama’s vision of “the end of history” (eg. a total financial liberalisation nirvana for the ultimate individualist) inevitable or even likely.
An optimistic, not unlikely scenario is that the economic liberalisation pendulum will swing back towards greater regulation, resulting in the slowing down of liberalisation measures after the next few decades. Indeed, even a pre-eminent capitalist and “currency speculator” such as George Soros and his arch-enemy, Dr. Mahathir Mohamad, Prime Minister of Malaysia, despite their recent exchange of insults such as “moron” and “menace to his own society” respectively, agree on the need for more regulation of current processes of economic and especially financial liberalisation !
It is also likely that greater roles will be played both by civil society organisations and a reformed and hopefully more socially activist state as the pitfalls and failures of an over-reliance on the market become more evident to a larger number of people. The current SE Asian “tiger cub” crisis could and should serve as a reminder to policy makers that even relatively strong economies that are regarded as “miracles” by mainstream pundits and have been in the ascendant, can fall swiftly.
While it is unclear whether the “new protectionism”, however desirable for Europe or even the bigger countries and groupings in Asia can, in practice, work for the benefit of globally weaker countries such as those in Sub-Saharan Africa, it is now unlikely to be achievable in our lifetime or even in the next generation. However, recent official conferences such as the seminar on the theme “International Solidarity and Globalisation: In Search of New Strategies”, jointly arranged by the Swedish Government and the Colombian Presidency of the Non-Aligned Movement in Stockholm between October 27-28, 1997, (attended by approximately 40 senior government officials including some Finance Ministers), indicate that there is official recognition and concern about some of the current processes and outcomes of globalisation even in mainstream circles.
There was agreement among participants at the Stockholm conference that while globalisation has created new wealth and rapid growth in some parts of the world and for some population groups, not everybody or every country has been included in the process. Key questions that the seminar sought to address included the following: “how can a growing number of people and countries, all over the world, best reap the benefits of the globalisation process?” and “…..there is an increasing need to develop instruments ….to prevent and mitigate the negative effects we are currently beginning to experience.”
The seminar participants agreed on three key issues: firstly, there must be “globalisation from below” as a parallel to the current “globalisation from above” to ensure that the standard of living of all people can be improved; secondly, globalisation must be transformed into a process of inclusion, rather than of exclusion as it is today since the global economy cannot survive in a world of poverty, conflict and exclusion; and thirdly that new international norms and multilateral institutions need to be developed that can enable global and democratic governance for the 21st century.
The World Bank Group President, Mr. Wolfensohn’s recent address to the Board of Governors of the World Bank Group at the IMF/Bank Annual Meetings in Hong Kong, China was also clear recognition from an institution that has enthusiastically promoted current patterns of globalisation that the poor, marginalized and powerless are currently being excluded from its benefits.
These mainstream concerns and proposals, while useful, still appear to operate on the assumption that globalisation and the laissez-faire capitalist drive can be humanised and harnessed for positive, people-centered development. So do the critiques and proposals of George Soros and Dr. Mahathir Mohamad. Humanising capitalism also appears to be a recurring theme in ACTIONAID’s Collaborative Leadership and Advocacy Group (CLAG) literature.
The current evidence suggests, however, that this belief may be too optimistic and naive. Bolder alternatives will need to be pursued by agencies such as ACTIONAID if they are serious about making a strategic and meaningful difference to the plight of the poor and powerless.
Global alliance building amongst like-minded and intentioned civil society groups in both North and South must also accelerate and be based not on an aid resource transfer paradigm but on an agenda which is a more genuine alternative to merely humanising laissez-faire capitalism and current forms of globalisation if we are to have any chance of serving the interests of those we work on behalf of. Proactive rather than the current largely reactive strategies will be necessary if we are to have any realistic chance of achieving this.
6. Implications for ACTIONAID’s Broad Positioning
ACTIONAID’s Board, senior corporate directors and staff need to understand the fast changing global and regional contexts in which the organisation works and the dominant processes of globalisation not only for their own sakes but because they have major implications for its broad current and future organisational and program positioning. It will, however, not be enough for ACTIONAID and other similar agencies merely to understand the significant changes in the broad external environment. They equally need to understand the emerging context for NGOs, especially Northern grant-making ones, and the types of changes such agencies will need to make if they wish to remain relevant and effective in the 21st century.
The Emerging Context for NGOs
The context for NGOs in the second half of the 1990s and well into the 21st century will continue to change rapidly for a multiplicity of interacting reasons.
The main reasons for this include: (a) the dramatic changes in the external environment and the current patterns and processes of globalisation and regionalisation which provide the overarching context for all NGO activity (these have been discussed at length in this paper); (b) related to the previous point, the changing roles and relationships between states, the market and civil society; (c) the increasing inadequacy, crisis and indeed bankruptcy of the dominant aid resource transfer paradigm which most grant-making Northern NGOs (NNGOs) like ACTIONAID are an active, sizeable and important part of; (d) the evolving and changing relationships between Southern and Northern NGOs due to factors both in the external environment and ongoing internal changes in their dynamic interaction; and (e) the related emerging changes and challenges in the relationships between NGOs (both Northern and Southern) that prioritize humanitarian and poverty reduction concerns, and the broader social movement for change dealing with larger social justice issues such as human rights, gender, and environment, (of which humanitarian and development NGOs like ACTIONAID are only a small, partially representative but highly visible part).
These changes raise many important issues both for the roles of NGOs in the New World Disorder and for relationships between NGOs in the traditional North and South. These include:
are NGOs, as Fowler says, “ordained to be ladles in the global soup kitchen”, institutions that will provide the global social safety net necessary to further the New Policy Agenda in the post-Cold War international system?
what are the implications for the roles of Northern NGOs (NNGOs) of increasing inequality and a growing South in the traditional North? How will/ should this affect both their work at home and their partnerships with NGOs in the South?
what are the implications for relationships between Northern and Southern NGOs and for the possibility of policy influence in the changed global environment, particularly one which is witnessing the incremental and instrumental (even if not fundamental) opening up of the multilateral development banks (eg. World Bank) and some parts of the United Nations system to NGO concerns and participation?
In this new context, agencies such as ACTIONAID will need to metamorphose from being primarily humanitarian relief and development operational and financial grant-making organisations. This will be especially necessary if the agency’s Board agrees and approves the final CLAG report recommendations which state that the organisation’s “primary objective for doing advocacy work should be to address the fundamental causes of poverty” and achieve the five objectives listed.
Such a metamorphosis will entail radical and painful institutional surgery to some parts of the current organisational structure of ACTIONAID and to the attitudes and work methodologies of many of its staff. Many of the latter will need to be chosen with different attributes and job descriptions (to the current ones). However difficult, such changes will be inescapable if ACTIONAID is serious about achieving the CLAG vision and advocacy objectives.
Why is this the case, and what will such a metamorphosis mean for ACTIONAID in practical terms? Many but not all of the changes that it will need to make in the process of transition from where the organisation is currently positioned to where CLAG would like to see it go are, in essence, no different from the ones which ACTIONAID will need to achieve if it wishes to establish more genuine “partnerships” or , better still, “development alliances” with its Southern and Northern counterpart organisations in response to current dominant patterns of globalisation.
These will need to include the following:
Working in the UK and the North. It is necessary for ACTIONAID to place an increased emphasis on doing social justice and development work in the UK, the European Union, and other parts of the traditional North if the CLAG advocacy agenda is to be taken seriously and if the organisation is to truly become part of a North-South alliance of agencies working on similar issues in their respective countries.
This is essential because it is increasingly clear that whether it likes it or not, legitimacy in partnership relationships on a common advocacy agenda with many SNGOs will only be possible to achieve if ACTIONAID is seriously and more substantially engaged with the poverty and social justice problems in the UK, especially as these continue to escalate as a result of current patterns of globalisation.
Such an engagement can be achieved in a variety of ways. It does not necessarily imply starting a direct, project-based poverty alleviation program in the UK. Nevertheless, the onus of demonstrating a more intense, appropriate and effective engagement with traditional Northern publics and policymakers will rest with ACTIONAID.
Such engagement should, at the very least, involve a more substantial relationship of development education, mobilization and conscientization of Northern publics about international development problems and issues, their lifestyles and their role in contributing to global poverty and injustice. To enable this, concrete examples of poverty and injustice in the UK should be used by ACTIONAID. These should be increasingly possible to find in this era of accelerating economic globalisation and homogenisation.
Such engagement should also lead to the establishment of strategic alliances with progressive worker’s, women’s and other groups in the UK.
Public Education in the North. ACTIONAID needs to place much more emphasis than it currently does on development education and awareness raising of working class and other disadvantaged and discriminated against population groups in the UK and the traditional North (eg. migrants, victims of jobless growth and unemployment, urban poor workers). The key focus of such ACTIONAID programs should be on interpreting the work of their Southern partners and broader “Global South” development issues to these groups with a view to raising awareness leading to action and subsequent changes in the latter’s attitudes. It should also lead to new alliance building between ACTIONAID and organisations of such groups in the traditional North and between the latter and those in the traditional South who are equally affected by the newly emerging instrumentalities of current globalisation processes (eg. WTO) which will impact on them similarly.
Expanding and Strengthening Northern Constituencies. Related to and based on the above, there is an urgent need for ACTIONAID to enlarge its organised constituency in the UK. A solid, educated and socially and politically aware constituency from different societal strata in both the Global North and South of the UK will be the best guarantor of the longevity and sustainability of ACTIONAID’s relevance and work.
De-operationalisation from the South. The cessation of Northern presence on-the-ground in developing countries has been welcomed, at least rhetorically, by many NNGOs as evidence that they have “done themselves out of a job” by nurturing Southern NGO (SNGO) capacity. Yet many operational NNGOs view this change as a threat to their size, viability, profile and institutional survival— a survival that has depended on a long-standing direct operational role in the South.
While ACTIONAID is not operational everywhere, it still is in many places and needs to move away from such a role in the near future. While such a de-operationalisation will no doubt have implications for both the knowledge needed from the “field” for the agency’s policy influencing work and for traditional donor accountability, these reasons should not be used by ACTIONAID as an excuse for inaction. There are effective and credible ways to overcome these obstacles if NNGOs have the political will and genuine desire to achieve “development alliances” with their SNGO partners.
Such a changed role should be accompanied by more serious and appropriate capacity-building of SNGOs and people’s organisations (POs) by ACTIONAID.
From Project to Program and Institutional Funding and From an Emphasis on Funding to “Non-Funding” Support. This will be necessary because project funding, (which still remains the dominant form of grant-making for most NNGOs ) in addition to being time bound and activity centered, by its very nature precludes discussions about broader issues of vision and alliance building for advocacy and policy influencing.
While this does not imply that the funding role of ACTIONAID is totally unnecessary or that all current partners require significantly less funds in the short to medium-term, it does imply that the traditional and dominant style of grant-making should reduce. Moreover, funding support to partners should be strategically redirected to concentrate on certain types of organisations with whom funding is only one (hopefully, smaller and smaller) part of a broader relationship which is based on equal respect for other non-monetary types of contributions in a mutually prioritized strategic development alliance.
Redefining The Policy and Advocacy Role. Another change should involve developing policy capacity in the South and redefining ACTIONAID’s institutional role in policy advocacy and lobbying, focusing more on mobilizing ,synthesizing and disseminating information (which is often more readily available in the North) rapidly and in popular form to POs and SNGOs, rather than primarily doing direct advocacy in the South or “on behalf of the South.”
In the current globalisation context, it will also be essential for ACTIONAID to operate as one organisation with a cohesive, agency-wide global advocacy agenda and strategy (as long as there is adequate flexibility to implement this in a decentralized and region-specific way). This, however, will necessitate significant changes in the way that the organisation currently appears to work because such an arrangement is considerably different from the decentralised, inconsistent and often autonomous advocacy agendas and strategies that some parts of ACTIONAID currently appear to pursue, sometimes unilaterally and in contradiction to other parts of the organisation.
Mutual Transparency and Accountability. Mechanisms of accountability, thus far, have been primarily one-way rather than mutual (eg. from SNGOs to NNGOs). This remains a major arena for change and will require subordinating institutional imperatives which prioritize accountability to Northern donors, Boards and the UK Charity Commission to the broader vision and goals of building a global movement for social change which is based on mutual trust, respect and transparency amongst its members, regardless of whether they are from the South or North.
These changes, if implemented, are likely to imply considerable metamorphosis, including financial and organisational downsizing and the lowering of profile in some traditional areas (eg. project grant-making, direct field operations, emergencies) while simultaneously raising profile in other less traditional areas (eg. advocacy, non-funding roles, social activism in the UK).
While this may well imply some reduction in fund-raising from some ACTIONAID traditional donor sources, it will lead to increased funds from non-traditional sources and does not imply a lowering of organisational profile. Indeed, if handled well, such a shift could lead to a change in profile which is sharper and clearer and not all things to all people. Likewise, it should lead to an increase in the size of ACTIONAID’s informed, educated and activist constituency.
Reductions in the amounts of overall fund-raising as a result of such changes will not be critical as long as the amount of funds raised in absolute dollar or sterling value remain significant. This should be possible if ACTIONAID is successfully able to fill the market niche that such a change provides. It will also need to successfully present and market a sharper profile than it currently does.
If ACTIONAID is serious about the implementation of the CLAG recommendations, then it should, perhaps, have “solidarity begins at home” as a motto. This is because many of the major implications of both the CLAG recommendations and this paper, if accepted, will require ACTIONAID to direct more development education, constituency building and public policy attention and resources to its home country, the United Kingdom.
However, I should quickly clarify that the implications of globalisation for the broad positioning of ACTIONAID suggested in this paper do not imply a shift to what has been traditionally regarded as solidarity work. Such work, much like traditional charity work, has too often been uncritical and counter-developmental, sometimes resulting in inverse and perverse relationships between groups in the South and the North. The analysis and suggestions in this paper will, if accepted, hopefully, allow ACTIONAID to go much deeper than traditional solidarity work. It should also allow it to become even more long-term developmental in nature and lead to more honest, strategic and effective development alliances between it and other like-minded and similarly motivated and visionary organisations.
This is all the more necessary because development NGOs such as ACTIONAID appear to have had less impact on the public perception (except, perhaps, during times of humanitarian emergencies) than their counterparts in the environment, women’s, or even human rights movements. This is even more evident in an era of accelerating globalisation. Strategic alliances among all such groups in the future will, therefore, be vital.
Such alliances are particularly urgent in the context of current globalisation trends and the demands of the formidable global transformation agenda which is resulting from its mainstream processes of poverty, wealth and inequality creation in both the traditional North and South. However, such alliances cannot and will not emerge unless development NGOs such as ACTIONAID exhibit both the boldness of vision and the political will to change in the types of ways suggested in this paper.