February 12, 2007	Monday	Muharram 23, 1428

FOR over a decade, globalisation has been celebrated as the great economic event of our era. Its protagonists, with the IMF and the World Bank as principal cheer leaders, heralded it as the age of modern science, advanced technology, global communications and knowledge-based information.

It has been oversold as a panacea for accelerating the growth of the world economy and for resuming the stalled process of development in poorer countries.

It has defined what national governments can (and can’t)-and should (and shouldn’t) do. While technology created the enabling environment, liberalisation was ordained necessary for making globalisation work. Yet, recently its downsides are becoming glaringly apparent. The world is waking up to the after-effects of the heady wine of globalization.

Nowhere was this more apparent than in this year¹s World Economic Forum (WEF) meeting at Devos, in the Swiss Alps, where the main protagonists ­ with a sprinkling of dissenters -- congregate each winter. It echoed the rising crescendo of discontent about globalisation around the world, a gospel which is the underlying philosophy of this body of business and political elites.

Since the mid-1980s, country after country has sworn allegiance to the Ten Commandments of Washington Consensus, removing exchange controls, reducing tariffs on goods and services, promoting exports, reducing budget deficits, privatising industries, slashing subsidies, welcoming foreign investment, reducing capital controls and giving autonomy to its central bank and reducing the role of the government and the private sector, in general.

All this was done in the hope of accelerating growth and reducing poverty -­ a chimera still being chased by most developing countries who followed these injunctions under the guidance and veiled threats of international financial institutions and the world donor community.

Domestically, the pitch for globalisation has been a bit more subdued. It was argued that it was no longer possible for people to be `cocooned’ within their own boundaries and to live in the `lost paradises’ of the past.

Globalisation was considered indispensable for benefiting from the `positive opportunities’ in knowledge, science and technology, without compromising the national interest. To make such a vision more palatable, it was endeavoured to sanitise many of the injunctions of the Washington Consensus by establishing `the ownership’ of these measures, through cosmetic and peripheral efforts to include poverty alleviation, education, health and other issues, almost as an afterthought to the main agenda of elitist growth.

In recent years, globalisation has acquired a schizophrenic personality, almost like Dr Jekyll and Mr Hyde. Some view it as a virtuous and integrative phenomenon capable of ending the current disparities in economic development, discord on religious and ideological distinctions and weaving the world into a seamless, homogeneous entity.

The other extreme view is that globalisation is that it is a malicious conspiracy to reverse the process of decolonisation of the developing world and re-establish western hegemony.

In this context, it is necessary to dispel the myth of an immaculate Western conception of globalization. The notion that the global movement of ideas and technology is unidirectional - from west to east or from north to south --is contradicted by the historical record of globalisation. Over thousands of years, global interaction and interdependence have enriched world economy, well-being and culture through travel, trade, capital and labour flows, and dissemination of culture, knowledge and understanding (including that of science and technology).

These global inter-relations have often been very productive in the advancement of different countries. Neither have they necessarily taken the form of increased Western influence Indeed, as Amartya Sen and others have persuasively shown, the active agents of globalisation have often been located far from the West.

However, the current discourse about the merits or otherwise of globalisation, relates to a limited phase of its modern re-incarnation, particularly the current more intense phase of globalization beginning in the early 1990s.

During this period, rapid developments in the fields of information technology and telecommunications coincided with the end of the cold war and the proclamation of the Washington Consensus as the guiding principle of economic policy for all aspirants of integration into the global economy. That globalisation has been an engine of growth in the world economy during the last quarter century is indisputable. It is its downsides, that have aroused concern recently.

Among the important downsides has been the unprecedented rise in income equality both within and between nations, which has become increasingly obvious to both analysts and activists by the end of 1990s. According to a World Bank study, global income inequality is probably greater than it has ever been in human history, although there is some debate about whether it is getting worse or getting better.

Currently, the richest one per cent of people in the world receives as much as the bottom 57 per cent. The ratio between the average income of the top five per cent in the world to the bottom 5 per cent increased from 78 to 1 in 1988 to 114 to 1 in 1993. Theoretically, economists have differed whether globalisation will lead to convergence or divergence in per capita incomes, with the neoclassical theorists favouring the former outcome and the post-modern endogenous growth theorists and the neo-Marxian dependency theorists strongly favouring, for different reasons, the divergence outcome.

Empirically, the divergence hypothesis seems to be winning the day, with income inequality between nations contributing far more to global income inequality than income inequalities within nations.

In its multifaceted form, globalisation takes place through global movements of ideas, people, capital, goods and technology that different regions of the world have tended, by and large to benefit from, as a result of progress and development occurring in other regions. Global economic interactions bring general benefits but they can also create problems for many vulnerable and disadvantaged sections of the population whose predicament does not receive adequate attention in the present phase of globalisation.

In the past as well as to a large extent in the present, these inequities--both between and within nations-- were often resolved through violence or the display of excessive power. In recent times the upsurge of protests against globalisation such as those in Seattle against WTO and similar outpourings of anger and dissent in other metropolises of the world hosting the meetings of IMF World Bank, WEF and other international organizations, have provided a safety valve of sorts. Since 2001, these protests have been channelised under the aegis of the World Social Forum (WSF) born in Porto Allegre, Brazil, with the inspiration of its populist president, Lula da Silva.

These fora have played an important role in drawing attention to problems of inequality and injustice created by the unevenness of the globalisation process. The real debate on globalization today is not so much about efficiency of markets or the importance of modern technologies but, quintessentially, it is about the asymmetry of power of which the world is now much less intolerant than during the days of cold war.

One of the important debates at this year’s Davos meeting was the asymmetric distribution of gains not only among countries of different regions and at different stages of development, but also within the developed world. While the focus of discontent about globalisation in the past has been on those adversely affected by globalisation in developing countries, especially the poor, the concern in Davos this year was about the fear of a backlash from people who have been at the receiving end of the globalization stick in the developed countries.

The current backlash against globalisation stems from the fact that, although it is not a zero-sum game, the losers, who usually far outnumber the gainers, will rightly resist changes that make them worse off, both absolutely and relatively.

The gainers in advanced economies include skilled workers whose jobs cannot be easily outsourced, while those in developing countries, include Chinese, Indian and other emerging market workers who are joining the global economy and whose incomes are rising. They also include countries with scarce resources such as commodities (especially oil), as well as owners of real and financial capital and financial assets in general across the globe.

But the list of losers is not less extensive and is numerically larger, unskilled workers in advanced economies, skilled workers whose jobs can be outsourced, anxious middle classes whose real wages have grown less than productivity and whose jobs are not as secure as in the past; middle income countries (such as Mexico, South Africa, etc.) whose competitiveness is threatened by the rise of China and other Asian low cost low wage producers; poor farmers in China, India and other developing countries whose relative and absolute poverty may be increasing. Africa has virtually been bypassed by the current phase of globalisation.

A disquieting feature of the present phase of globalization, especially among the `leading’ globalisers, is the rising functional inequality in incomes, in addition to the personal incomes inequality. The share of capital/profits in income is rising and that of labour is falling, while the income differentials between high and low skilled workers is rising, along with the increasing concentration of real and financial wealth and rising returns on them.

According to Stephen Roach, chief economist of Morgan Stanley, the share of national income in the West that flows to workers drop to historic lows, even as the share flowing to companies profits has climbed to a record high.

Over the 25 years between 1979 and 2004, the top one per cent of the US population has seen its average, inflation-adjusted, after-tax income rise of $554,000, or 176 per cent, according to official data. The middle fifth saw an inflation-adjusted, after-tax rise of $8,500, or 21 per cent, over the same period, while the bottom fifth saw an increase of $800, or six per cent.

This has created apprehensions of a possible backlash against globalisation in the developed countries from those who have adversely suffered from globalisation and often blame the developing countries for their predicament, especially China and India, which have become global centres for manufacturing and IT services respectively. This perception promoted in the popular media is, of course, quite tendentious as the real reason for their situation is the inability of their governments to redistribute incomes from rising corporate profits and executives’ incomes to real wages and to provide social security and health care benefits.

Part of the reason for the worsening of economic conditions in the United States were the looming macroeconomic problems of a housing bubble, higher interest rates and the high price of oil, which were adversely affecting the middle class.

Globalisation is not merely an economic phenomenon, but a much broader political and social issue which requires a reshaping of global and local power structures to realise its full potential. Unfortunately, institutional mechanisms for such a restructuring are a long way from being established.

sm_naseem@hotmail.com