December 15, 2003	Monday	Shawwal 20, 1424

At present, the size of income produced by the global economy is $22 trillion, showing an enormous increase in the volume. It is accompanied by unprecedented accumulation of wealth.

This raises the question of effectiveness of global boom reaching the poor and marginalized, and brings home the need to understand the mechanisms regulating the distribution system of global prosperity? Before this query is answered, it looks essentials to highlight the paradox of development.

In the emerging global economy, a balance of power between the nation state and private business is changing. As such, rising transnational organization systems define the strategic space in the contemporary economies and the global consumer markets define the change in national tastes which gives more power to non-state entities.

Ironically, lots of public and private resources are being allocated for setting up global financial systems and a negligible amount is going for the improvement of environment and working conditions. Formation of international mechanisms for cross-border trades is giving birth to private institutionalized space for inter-state financial dealings which raises the question of accountability of these mechanisms. As a result, the government institutions have lost power in so many ways.

The answer to the above queries is that the emerging paradox for development has introduced its own culture of prosperity that has led to unbundling of national territory and ascendance of sub-nation at the same time.

The World Bank considers anyone earning less than one dollar a day, as a poor person. According to Amartya Sen, however, poverty has to do more with “social exclusion” and denial of equal opportunities than the level of income. Poverty to some other thinkers is a multi-disciplinary and spatial issue and policies designed by various agencies are sector specific. Hence, a prime task is to find a link between these dimensions for designing effective interventions.

At present, 30-40 cities pre-dominantly manage the global economy. Consequently economic disparities among and within the countries have increased and we need to understand the nature of the process which contributes to inequity. For example, globalization of commerce, production and finance in successive stages has led to hyper circulation of capital by stage and has built an environment of concentration of economic power. Concentration of economic power becomes visible.

In the US alone, 1000 mergers worth $1.5 trillion took place in 1998; similarly, Mitsubishi Company is 7th in terms of revenue size in global economy after the US, Germany, Japan, the UK, Italy, and France, while corporate have large revenues than 25 countries at the top. Nevertheless, the role of state in trans-border transactions has increased at the same time. As unfortunate this is, though, development is promoting economic polarization; as such, the price of a pair of Nike shoes, for example, is $200. Interestingly enough, its subcontractor gets as much as 50 cents of the total price of the shoes. Similarly, Michael Jordan is paid $30 million annually for sponsoring the shoe and his earning from this contract alone is equal to the wage bill of the whole labour force producing Nike shoes in Indonesia.

In this context, the importance of state as a regulator of capital and labour has increased going in hand with the LDCs’ attraction because of cheap labour and low or no environmental regulations and weak labour laws. National borders permit free flow of capital restricting independent flow of labour because of critical role played by the state.

Impulsive consumption is another hallmark of our development pattern, which results in negative savings and increased use of storage space in order to keep the consumption items not in use. An average American owes credit equivalent to four months salary to credit card companies. At the same time, downsizing is taking place to increase the productivity.

The phenomenon of new spatial economic patterns is yet another basic ingredient of global paradox for development which is, in fact, promoting economic polarization i.e., rich households in poor regions and extreme poverty in affluent societies. Emergence of cross border mega-urban regions and fast development corridors came to existence that includes Seoul — North West Japan and South East China and Hong Kong. That has virtually put the national economy in the number of people below poverty line (50 per cent in Indonesia). Likewise, entrenchment of rural poverty — landless pushed back to rural area. New patterns of international migration; return of migrants to native villages with adverse economic consequences and a new surge for out migration now affect almost every nation-state on the globe.

Manipulation of markets by financial capital is another characteristic feature of global economy. Asian economies were considered to be immune to economic shocks unlike Latin American and the US economies.

Due to existence of extremely large size hedge funds invisible linkages in the global economy are much stronger than they appear in reality. Under the current wave of industrial revolution we have moved from competition to competitive cooperation. A case in point is Toyota Corporation which is following agglomeration policy to achieve economies of scale.

This is in line with the principle of liberalization. Diversification policy to achieve economy of scope became the order of the day. However, not all countries are plugged into this change. For instance, 80s has been a lost decade for Latin America and the same is true for Africa.

We are now in an informational society which has three characteristic features: first, economic competitiveness, socio-cultural integration and political representation: 1980s have witnessed rapid globalization in the form of inter-regional trade and direct foreign investment (DFIs). Middle class has also become an important social force in the global economy.

Consequently, emergence of world cities, growth triangles, mega-urban regions and urban corridors are distinctive features of development promoted by globalization.

These centres have emerged both spontaneously and by design. There is free flow of capital and goods and restricted flow of labour across a border which makes the role of governments and literacy very important in determining the impact of development.

In this perspective, a dire need arises to look for alternatives and develop a framework for resilience, which must address the issue of reversing appropriation of production in agriculture by agri-businesses and returning production of major inputs used by agriculture to agricultural economy. Two alternatives for development, for instance, are very much important such as ‘high road and low road to development’.

High road is taken by the “learning regions” having a sustainable economic advantage due to their specialization in knowledge creation and development of network structure of production which enables them to contract out labour-intensive work to less developed regions and keeps their control on production and income distribution because of their supervisory role.

Economies taking low road to development base their production on use of local technology, cheap currency, cheap labour and cheap production and lack incremental innovation. High road challenges the low road model.

High road economies focus on the development of soft infrastructure (institutions) whereas low road economies give importance to hard infrastructure (public works).