Globalization and Polarization

by Kanes
Unequal benefits of globalization, in particular of trade and investment referred to earlier, have tended to bring about polarization of the world and society. Globalization has widened the gap between the developing and developed countries and between the newly industrialized economies and other developing countries. In the past 30 years, the vast majority of developing countries - about 84 out of 108 - have either stayed in the lowest income quintile or fallen into it from a higher one. Between 1990 and 1995 alone, GNP per capita of low income countries fell from 1.79 per cent of the GNP per capita of high income countries to 1.72 per cent. Average per capita income of Africa for instance, fell from 14 per cent of the average income per capita of developed countries in 1965 to just 7 per cent in 1995.

The increasing disparity between newly industrialized economies and other developing countries is illustrated by the fact that between 1990 and 1995 GNP per capita of Singapore increased by 140 per cent, of Hong Kong by 100 per cent and of South Korea by 80 per cent whereas the average GNP per capita of low income developing countries as a whole rose by only 23 per cent and of low middle- income developing countries by only 9 per cent. Per capita GNP of India, actually declined from $350 to $340. In Sub-Saharan Africa average economic growth in 1980-1990 was 1.7 per cent a year and in 1990-1996 only 2.0 per cent a year. By contrast, average annual economic growth of East Asia was 7.7 per cent in 1980-1990 and 10.2 per cent in 1990-1996. The share of agriculture in the GDP fell and that of industry rose in East and South Asia between 1980 and 1996 whereas it was the opposite in Sub-Saharan Africa. Between 1980 and 1996 the share of agriculture in total output rose from 22 per cent to 24 per cent and that of industry declined from 35 per cent to 30 per cent. Globalization appears to have backfired in Sub-Saharan Africa.

Increasing Income Inequality
Apart from widening the income gap between countries, globalization has also increased income inequality within countries: the rich have grown richer and the poor poorer. In the United States for example, since 1986 when the gulf between incomes of the rich and poor began growing, the average income of households in the bottom 20 per cent rose by only 8 per cent whereas that of the top 20 per cent rose by 44 per cent and of the very top 5 per cent by 60 per cent. In the United Kingdom, between 1979 and 1988, the share of total income of the lowest 20 per cent of households fell from 5.8 per cent to 4.6 per cent whereas that of the highest 20 per cent rose from 39.5 per cent to 44.3 per cent.

The same process of income polarization operates in the developing countries which have been globalized and achieved high economic growth. In Malaysia, for instance the share of income of the lowest 20 per cent of the population is 4.6 per cent while that of the highest 20 per cent is 53.7 per cent; in Thailand, the share of the lowest 20 per cent is 5.6 per cent and that of the highest 20 per cent 52.7 per cent. South Asia, which is less liberalized has a more egalitarian distribution of income. In India, for example, the share of income of the lowest 20 per cent of the population in 1994 was 9.2 per cent while that of the highest 20 per cent was 39.3 per cent. In Sri Lanka in 1990, the share of income of the lowest 20 per cent was 8.9 per cent while that of the top 20 per cent was 39.3 per cent- same as India.

Increasing Insecurity and Uncertainty
Globalization tends to increase job and income insecurity. While technological advances, mergers, acquisitions, downsizing and relocation of industries, tend to create unemployment and lower wages in some sectors in the developed countries, unrestricted imports, as mentioned earlier, are threatening the livelihood of farmers, craftsmen and factory workers in the developing countries. Unemployment rate in July 1998 was 19.6 per cent in Spain) 11.7 per cent in Belgium, 11.9 per cent in France, 12.9 per cent in Italy and 11.0 per cent in Germany. All these countries have low economic growth which globalization has not been able to arrest. As a result of automation and information revolution large firms are now in the habit of downsizing - an euphemism for mass corporate firings - and throwing thousands of workers into unemployment. The German auto industry, for example, has cut more than 100,000 jobs since 1991. The high unemployment rates and the possibility of industrial relocation, further have enabled transnational corporations particularly in Europe, to put pressure on their workers to work longer hours for less money by threatening to move to low wage economies.

Transnational corporations are accused in several countries of overexploiting natural resources and workers with no concern for the environment and human welfare. Nearly all the mining companies have come under fire for ecological devastation and for violent crimes against indigenous people while other transnationals like Disney, Mattel, Nike and Wal Mart have faced public attacks for the working conditions of their contractors' factories in Asia and Latin America. Further, their sheer size and global network enables them to violate national laws and regulations; they can for instance, lower their tax liability by using transfer pricing to shift profits from a higher tax country to a low tax one and make it difficult for governments to raise revenue. They can threaten to shift their factories elsewhere and coerce governments to change policies to suit their interests.

Culture
Globalization and the free market are actually the workings of laissez faire economics where the strong and more advanced countries have the freedom to trade and invest to maximize their benefits often at the expense of the weaker and less developed countries. The free market may create wealth, but is inequitable in distributing it. It respects liberty, but not equality and fraternity, glorifies the individual at the expense of the community, divides people into winners and losers, rewards the winners and marginalizes the losers. It does little to provide the poor and the weak with access to primary health care, education, clean water, sanitation, housing and employment. It utilizes the modern media to stimulate consumption habits and build a consumerist society that enslaves the people to money and material things and trap them in debt. It propagates a culture that glamorizes wealth, affluence, avarice and selfishness that its calculated to undermine the traditional culture of South Asia which ennobles the virtues of moderation, goodness, altruism, sacrifice and compassion to others. It is not a socialist but one of the world's most prominent capitalists - George Soros - who has recently warned of the free market threat to contemporary civil society in these words; "I now fear that the untrammeled intensification of laissez faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat".

Conclusion
It may be that globalization is unstoppable but we need to get more control over it to ensure that it delivers equal benefits to all and does not marginalize some countries and some people. The problem facing South Asia is that of living with globalization without being overwhelmed by it, using the opportunities it offers, to find appropriate niches in the global market without exposing itself to its negative and destructive influences and without losing the power to determine the development strategies that suit it best. Globalization does not mean that market forces must be given unfettered freedom, for there is no inevitability that poor South Asian countries will converge with the rich countries under the globalizing forces of the market. According to UN statistics there are 515 million absolutely poor people, (below $1 a day in 1985 dollars). 395 million illiterate adults and 77 million people who are not expected to survive to age 40 in South Asia. It would be a mistake to think that this widespread poverty, disease, illiteracy can be eradicated in the near future by relying entirely on the free market forces of globalization. Globalization does not mean that the State should abdicate its key role and all State intervention should cease for then the globalizing forces of the free market will benefit some and marginalize others. Unlike governments, transnational corporations owe no loyalty to societies or nations and need not respect any social values. They can never be substitutes for governments. High economic growth in South Asia therefore requires a dynamic public sector paying a leading role in economic activity. The rejection of centralized management of the economy for its inefficiency under socialism is not an invalidation of the moral rationale underlying State intervention, which is the paramount need for equalizing opportunities and ensuring social justice which are endangered by globalization. Economic growth of course is indispensable but not any economic growth - certainly not growth that increases inequality. Economic growth must be pro-people, pro poor.

The crux of the problem of globalization was summed up in the final communique of the recently concluded summit meeting of the Non-Aligned Movement in South Africa as follows:

"Whilst globalization holds out the promise of prosperity, it brings with it, severe challenges for the developing countries. The promise of prosperity has not touched the vast majority of the world's population, especially in the least developed countries. In this lies the seed of a dangerous new process of uneven development".