Introduction:
Beginning the 1990s the word
globalization is the most highly inflated and widely used concept, which
has confused the world not yet seen before in history. After the fall of
the East Block countries and thereby the disappearance of the Soviet Union
as a super power, it seems for every body that humanity has entered a new
era. Socialism as a system, which is synonymous with Stalinism, absence of
freedom and one party system which has suppressed hitherto the free will
and action of individuals, become a past thing which can be seen only in
historical museums. Capitalism and market economy of the American type
have triumphed. The schoolbook economics which asserts that human being is
by nature egoistic and is born with utilitarian aspiration has proved
before history. Collective ideas and forms of communal living suppress
individual freedom; and under socialism competition among individuals is
practically impossible. Such a system will inevitably lead towards a one
party system which rules its society only by dictatorial means. This is
the legacy of socialism which has proved to humanity in its existence in
the last 70 or so years, and at the end which has dug its own grave and
disappeared from the world politics.
The conclusion then is, there is one global order or global
economy, and humanity has no other aspiration other than implementing its
ideals in the market economy. Now the world market is open to everybody
and to every nation. Globalization is the only solution to the social and
economic disorder which is prevailing in this world. Humanity will be
freed from poverty, disease and hunger if it upholds the banner of
globalization. Period!!
In Ethiopia too, when I was there 10 years ago the word
globalization becomes almost the lingua franca of certain groups who were
running to be part of the EPRDF government. Even those, for some or any
other reason oppose the Woyane government globalization is the only
panacea which brings effective and permanent solution for our county's
economic and social crises. I read in the official newspapers that
globalization is a new chance and phenomena which we must use and which we
cannot escape it. As so many argued and the proclaimed socialism has
proved which was practised in our country, Ethiopia can see the true light
of civilization, when she undoubtedly accepts globalization as a sin qua
of social organization. In the idea of so many, especially prominent
individuals, after the destruction of the COMECON countries and the
disappearance of the Soviet Union as the contending super power, there is
only one glob and global economy which we must accept. Hence the world is
not seen any more divided into continents and nation states, which have
their history, culture and even to a certain extent their own national
economy. The world is now a small global village which opens the chance
for those who want to become real global player. The Internet and SMS
technologies have demonstrated that one can reach one part of the glob to
the other within minutes.
In our main capital city, Addis Ababa, seminars, symposiums and
workshops were organized, on one side to explain and preach about the
benefit of globalization; on the other hand to affirm and congratulate
that Ethiopia becomes a part of this global economy. Prominent economists
of Ethiopian and foreign origin, members of the aid organizations which
are operating in our country, and which have participated in the seminars
have tried to convince the new young leadership which has fought until the
seizer of power under the banner of Marxism-Leninism and socialism that
globalization brings real chance to Ethiopia.
After twelve or more years of forced globalization of the new type
the world is not better off than fifteen or twenty years ago. As we see
everywhere and the economic and social conditions in our country prove,
economic and social disorders have become part and parcel of the global
economic order. Even those capitalist countries and multinational
companies have become the victim of their own proclaimed globalization. In
order to understand why the propagated globalization could not bring the
desired result to humanity in general, and especially why globalization
stands against any meaningful civilization in particular, let's see the
true meaning and the inner contradictions of globalization as it has
developed through history in its various forms.
Definition and Development of Globalization
It is very difficult to give a coherent and precise definition of
globalization. According to
the school of thought which is one brought up and the ideology which one
stands for, globalization has different meanings. For
those who propagate that globalization is a new chance for all countries,
it is a friendly act which universalizes the ideals of market economy.
Through intensive internationalization of trade, production activities,
transfer of finance, capital and services all nations benefit, and wealth
will be equally distributed among different nations. Through the transfer
of technology, especially Third World Countries will have the chance of
modernizing their traditional societies. In order to effectively
materialize globalization, the hitherto existing division of labour must
be deepened, and the roles of those international organizations, IMF and
the World Bank must be strengthened. Only by accepting the frameworks of
these international organizations, Third World Countries will on one hand
pave the way for international investors to go to these countries and
invest their money and transfer their know-how, and on the other hand
traditional norms and institutions which have arrested the creative
activities of their people will be disappeared. If the principles and the
ideology of monetarism are fully accepted and implemented, market economy
will inevitably get the upper hand and real competition will be the rule
of these societies.
For the ideologists of globalization, globalization is not a
historical process and has nothing to do with the exploitation and
incorporating the resources of the Third World Countries. It is simply a
new chance and new phenomena of market economy which becomes inevitable
only because the western capitalist model at the end proves to be more
superior than other past and existing economic models. Other models
especially state regulated economic policies hinder individual freedom and
thereby technological innovation, and resources will be wasted. According
to the proponents of globalization market economy is the only efficient
institution which allocates resources according to the principles of the
mechanisms which are inherent in the system. Demand and supply and hence
prices which reflect real resources of a given economy will automatically
help the efficient allocation of resources among the different sectors of
a given economy. Through this built-in mechanism and individual
competition, the whole society will at the end maximizes its utility and
not as the other way round as other collective or state regulated models
do believe. In other words, a given society maximizes its utility only
through individual action (inductive model) and not through collective
actions (deductive model).
If one looks at the arguments of those forces which vehemently
support globalization, these arguments are not new. This is a part of
modernization theory which we have been brought up when we were in the
universities and which we have extensively studied.
Those
forces who are opposing globalization in its existing form are diverse and
their ideological bases are different from one another. They have one
common appeal and one common ground which bring them together and fight
the prevailing global economy. According to the idea of these forces
globalization deepens the existing technological gap, and this in turn
distorts technological development in many Third World Countries. By using
this technological gap, western countries could manipulate the economies
of the backward countries and absorb more and more wealth which
marginalizes the majority of the people. At
the same time within different nation-states income inequalities between
the socially well off and the poor will be widened and as a matter of
fact, because of the luxurious lives of few individuals resource
plundering and resource transfer from the Third World Countries to the
capitalist west will be the rule of the system. Resources of the Third
World Countries will be controlled by few multinational companies, and
instead of equal development, unequal development and massive
pauperization will be enforced in these countries. As practices of the
last five decades prove, Third World governments will not have the
autonomy of controlling and regulating their own resources according to
the needs of their society. In short, under the name of market economy and
globalization, the majority of the people of Third World Countries will be
enslaved, and at the end non-governance will be the inevitable process of
such kind of global economic order. Hence
globalization in its existing form must be challenged and international
organizations must be reformed so as to empower Third World Countries so
that their bargaining power against the industrialized west will be
strengthened.
Among these opposing forces there are radical forces which share
more or less the same opinion, but differ in two major aspects. For the
radical forces the internationalization of capitalist order is a long
process which goes back to the 16th century. From the outset the growth
and expansion of capitalist economy on a global scale goes hand in hand
with the marginalization of the Third World Countries. Economic formations
and division of labours which have hitherto existed and functioned well
were destroyed, and in the name of international division of labour these
countries are compelled to produce raw materials and export to the
capitalist west without processing them. This in turn blocked from within
the development of technology and the rise up of a dynamic class. By that
the development of a coherent economy, a well-established and
sophisticated infrastructure, the development of cultural cities was
practically impossible. Secondly, in order to pave the way for the
exploitation of the Third World resources and deepen underdevelopment,
state structures must be oppressive and individual freedoms which allow
freedom of organization must be restricted. Only a small class or elite
which serves the interests of the capitalist west had access to enrich it
self. This system of exploitation has worked differently and in
modest forms more or less until the end of colonialism.
After the Second World War, and after the emergence of a new global
order under the auspicious of the USA, new international institutions are
installed which facilitate and fasten the existing international division
of labour by giving it new images and dynamism. In order to enhance and
smooth up the system of international trade a neo-liberally organised and
systematised ideology is necessary. Monetarist ideology became the new
bible of international trade, transfer of technology and diverse
agreements whose structures are very complex and which have the sole
purpose of blocking a science and technologically driven economic and
social development are accepted ideologies in all African countries.
According to the newly organised international economic order and by
upholding and deepening the old international division of labour, Third
World Countries should concentrate on few industrial activities which
satisfy the consumption needs of the elite class. This system of
industrial organisation which is detached from development and research (D
& R) is necessary to modernize the African economy. As we know and
wide empirical researches and studies demonstrate, this system of economic
activity which is enforced under the name of import-substitution
industrialization is concentrated in few cities and areas and absorbs
resources from rural areas to the very few cities which have �modernized
economic structures.� At
the same time resource transfer of various types and in complex forms from
the Third World Countries to the capitalist west has taken an
unprecedented scale. The buying up of patents for the imported
technologies, imports of intermediate products and other spare parts,
profit transfer via transfer price mechanisms which sore non verifiable
production costs by making expensive costs of the imported intermediate
products, the increasingly cheapening of raw material prices and thereby
the bad terms of trade between the industrial products of the capitalist
west and the exported raw materials have brought disastrous resource
transfer which narrowed the resource base of Third World Governments,
especially those of African countries. This process of resource transfer,
mechanism of extensive exploitation and systematic blockage of
technological development has entered a new era when internationalization
of production activity and internationalization of finance capital have
taken entirely different forms of wealth appropriation from the Third
World Countries. The oil crises of 1973/74 and the economic crises within
the various capitalist countries, and the introduction of a new monetary
mechanism which is regulated by supply and demand and the growing gap
between real capital investment and financial circulation of a casino type
have created a new situation for the reorganization of the world economy.
The so-called new international division of labour and the growing up of
international debt mechanism become the main instruments of globalization.
Now production must be organized in few selected countries and areas in
order to reduce costs, to open new market accesses and to fasten the
valorisation of capital on a higher scale.
Special
features of Globalization Before 1973/74
It is a common practice now days that globalization is associated
with capital movements of the 1990s. By that some forget the importance of
the international division of labour of the old type which still exists
and dominates the lives of so many Third World Countries. At the same time
the special consumption pattern which was introduced beginning the 1950s
has a great economic and social impact in appropriating the wealth of
especially so many African countries without inducing real development
from within. That means maintaining the old form of division of labour and
the internationalization of certain consumption pattern to bring the
African elite within the international hierarchical system to strengthen
exploitation and to block any meaningful development is part and parcel of
a global economic and political order. Therefore the new global economic
order cannot be conceivable without the old form of division of labour.
The reorganization of the world economy after the second world has
boosted the international trade on a scale not known before in history. So
many west European countries must reconstruct their economies, which have
boosted the demand for raw materials. On the other side those countries
which produce raw materials were compelled to modernize their economies.
Beginning the middle of the 1950s, especially so many African countries
have created favourable conditions for multinational companies to come and
invest. Such kind of investment is known
import-substitution-industrialization.
By accepting that this form of industrialization brings an over
whole industrialization and hence economic growth, so many African
countries began producing beverages, foodstuffs including sugar, textile
products, shoes and other not technology intensive products to satisfy
home demand. The idea was simple. African countries should not import
these products; they could produce themselves by importing technologies
from the capitalist west. The demand for raw materials on world market,
and the favourable prices have pushed so many African countries to engage
in such kinds of industrialization activity. The first phase of
modernizing the African economy comes to a halt when the demand for raw
materials is not growing any more. Various factors are responsible for the
slow down of modernization. 1.
The character of the industrialization itself is not suitable for the
development of new technologies. 2.
The tempo of the industrialization is not decided by the African
governments themselves. Most of the industries are run on joint-venture
basis. That means foreign managers have decisive impacts on the tempo and
the character of the industrialization. 3.
Most of the industries have weak back and forward linkages. That means
most of the input factors come from West Europe and America. The
production of such kinds of consumption goods are mainly designed to
satisfy the new elite. Because of the very low buying capacity of the
majority of the masses, most of the industries produce at very low
capacity. 4. Most of the
industries have weak capacity of absorbing labour. 5.
The competition among the raw material producing countries holds down
prices, since most countries begin exporting the same unprocessed
products. 6. Capitalist
countries begin rationalizing their industries, and this has reduced the
demand for raw materials. 7.
Due to the deteriorating terms of trade and the high oil prices of
1973/1974, most African countries must experience heavy trade balance
deficits. Though these
situations have reduced African share on the world trade, new mechanisms
have been created to make Africa more dependent on the global economy. The
new international debt mechanism and the growing role of international
finance institutions determine the tempo of the African economy.
Deepening Economic Crises and the New
International Division of Labour
To understand why the new international division of labour is a
necessary by-product of the existing capitalist system we should analyse
the process of capitalist organization more deeply, which pave the way for
the internationalization of capital on a very different scale.
After the end of the Second World War those western countries whose
economies were heavily damaged by the war began reconstructing their
economies with massive state intervention. Cities which were more or les
destroyed, infrastructures which were severely damaged, institutions which
could not function properly unless they are reorganized on new principles
and sprites, small and medium industries which were dispersed and the
owners were not known must be put into function so as to produce and
supply the necessary consumption needs of the society. For all these wide
range reconstruction activities, capitalist production process on purely
demand and supply principles was not sufficient instrument to bring the
economy on a basis which could regenerate itself. The intervention of the
state in the economy became an absolute necessary. Capitalist countries,
especially Germany must reorganize the banking system to raise the
necessary capital to finance small and medium size industries. The well
known reconstruction bank of West Germany was a good example how the
intervention of the state by allocating very cheap credit on a longer
period of maturity supports industrial activities which had higher
multiplier effects and which created jobs for millions of needy people. At
the same time the mobilization of all sectors of the people who were able
to work by allocating them according to their own merits to construct
houses and repair the damaged streets and other infrastructures was a good
example how a well organized society can stand up easily and build its own
economy in a very short time. This proved also that a pure laissez-fair
economic principle couldn�t work by itself unless a society organized on
certain principles and laws to develop a viable economy which is the
precondition of a sovereign nation-state.
The reorganization of the education system to bring a science
driven technological development and to create the basis of research and
development in all the universities and to widen the intellectual basis of
the society to stimulate a strong middle class which is conscious of its
class position was also a necessary criteria to bring social harmony in
the society and build a strong nation state. These and the above factors
have fastened the economic reconstruction of Western Europe after the
Second World War. The intervention of the state through various means has
not by any means hampered individual competitions which is the basis of
capitalism to develop on a higher scale. The technological development and
the transformation of accumulation process from extensive to intensive to
raise productivity is a good example how a systematic state intervention
could not as such disturb competition among the industries.
This systematic reorganisation of capitalism could not continue
like that. As the system expands and competition becomes fierce, big
companies are compelled to change their methods of production. The
rationalization of the industries becomes an inevitable process to reduce
costs and become competitive from within and outside. For this some
industries, especially big industries must borrow money from private
banks. This in turn has strengthened the role of the banks.
Notwithstanding this competition some small and medium size industries
which produce over 50% percent of the value-added must be overthrown out
of the market. Because of the neo-liberal ideology and the
internationalization of capital state interventions become fragile.
Restrictive money policy and high interest rates and the orientation of
the economic policy of the state more in line with the monetarist ideology
begin disturbing the whole economic setup. The concentration of industrial
and finance capital and their fusion means that certain groups could
dictate the policy of the state. On the other side the weakening of the
trade union movements which play greater role in controlling social
movements and develop good bargaining power to raise the loans of the
workers strengthens the ideologically motivated forces whose main aim is
profit maximization and blind competition on a higher scale. The strict
hierarchic reorganization of production activities and the hierarchic
managerial decision making process diminish workers rights and their
bargaining power. In cases of crises workers could lose simply their
working places. This in turn creates disequilibrium conditions in all
spheres of the economic activity. Structural and conjectural crises of the
economy which are characterized by destroying old forms of industrial
branches like coal, steel and iron industry and the up and down movements
of economic growth have opened ways for the new generation of capitalists
to handle the economy more in line with monetarist ideology.
In the history of capitalist development one could witness that
counter-revolution strategy from within creates disequilibrium economic
and social conditions which will hamper economic growth. The
monetarist policy of Mrs. Margaret Thatcher and the policy of President
Ronald Reagan which is widely known as Reaganomics are two decisive
economic policies which have wide consequences within their countries and
on international level. The privatization of state owned sectors, like
water supply and train system, the reduction of social welfare system and
the indirect transfer of wealth from the poor to the rich class and the
weakening of the role of the trade union movement is clear example how
monetarist ideology systematically destroys social harmony. A strict
monetary policy means also destroys old forms of technology and the
introduction of a new system of wealth acquisition without producing real
value-added. The so-called information society and the new economy are
vivid examples how monetarism paves the way to transfer wealth from one
part of the society to the other and from one sector of the economy to the
other. The north-south development gap and the concentration of capital
and new technologies in London starting the end of the 1970s is clear
evidence how monetarism creates disequilibrium situation in all sectors of
the economy and the society. On the international level too, monetarism
has wide range consequences by destroying real wealth and by creating a
new rentier class which absorbs the social wealth of the respective
society and transfer it outside its own border.
So many Latin American countries, especially Chile has practiced a
monetarist economic policy. Some Chilean economists, called the Chicago
boys who were master minded by Milton Friedman, have followed a strict
monetarist policy which enriched certain groups and pauperized the mass of
the population. The case of Argentina is another example how Harvard
educated neo-liberally oriented economists have destroyed the Argentinean
economy and threw many millions of people into poverty.
This also proves that being educated in one of the best
universities of the world could not make somebody to become socially aware
and an expert in his own field to solve very sophisticated social and
cultural problems. In this way monetarism becomes a worldwide phenomenon
which has infected so many Third World Economists who are directly or
indirectly interwoven with the international financial institutions. From
this on wards we experience a new kind of systemic economic crises which
has begun affecting the globe and throw the masses of the people to more
poverty.
In order to tackle the existing capitalist crises which has begun
showing symptoms of destabilization at the end of the 60s, and deepening
of the crises in the beginning of the 70s and the middle of the same year,
capitalist companies, and specially those multinational firms must find
ways which enhance production activity on a global scale and thereby
maximize their profits. State regulated economy which became part of the
general capitalist economic regulations of the Keynesian type in all major
industrial countries at the end of the Second World War, became slowly
obsolete. Heavy state spending especially via debt mechanisms
until the beginning of the 70s which have boosted industrial activities
in all major capitalist economies could not be continued. As unemployment
grows and the tax base of the states diminishes, capitalist states are
compelled to take more and more credits, on one side to pay heavy
transfers, and on the other hand to maintain the existing investments.
This can not be continued any more in its previous forms, since permanent
credits means that payments of debt services will grow up which create
disequilibrium between the income from tax and spending. This is one of
the major problems which all capitalist countries have faced at the
beginning of the 70s. On the other side the concentration of finance and
industrial capital in very few hands and the role of new managerial
economy which is becoming against new innovations and the slow destruction
of small and medium economic activities, all capitalist countries must
face new challenges. Since in some highly industrialized countries like
Germany, small and medium size industrial activities are the main backbone
of the economy, and pay over 50 % of the income tax, the slow down of
economic activities in these areas means that, income from tax and
consumption of the people will reduce which at the end destabilizes the
whole system. On the other side big companies which have wide range
advantages to evade tax payments, since the capitalist states themselves
have created them all the necessary means of tax manipulation, in case of
economic crises they start dislocating parts of their industrial
activities by leaving research and development activities at home. The
industrial dislocations, especially in the field of textiles, and other
not technologically intensive production processes in other areas of the
globe have by themselves major concerns for all capitalist countries.
On the international scale crises have emerged which jeopardize the
global economy and create intensive competition among the different
multinational firms, and of course among the capitalist countries
themselves. Under the Bretton Woods Agreement, all major currencies are
fixed and they can peg among themselves only by the margin of � 2%, where
as the Dollar which is backed by gold became the main reserve currency. At
the same time, under the agreement the United States of America has the
obligation to change the dollar reserves outside its own boundary into
gold, since America has the world's largest reserves of gold after the
Second World War. In the fifties and the sixties America has transferred
huge amounts of dollars to Europe and Japan for the reconstruction of
their economies. Beginning the 1960s Japan and Germany began competing
against America, and the trade balance of deficit of America is growing.
The permanent transfer of gold to these countries has diminished the gold
reserve of America. In 1971 the Nixon administration has unilaterally
declared that it is not abide any more by the Bretton Woods agreements
which is signed in 1944. In 1973 the fixed exchange rate system is
abandoned, and instead a flexible exchange currency system is introduced.
Not state regulations control the movements of currencies and capital
among different countries but demand and supply become the main
instruments which govern capital movements on a global level. The
oil crises of 1973/74 and the economic crises in all industrial countries
have boosted the movements of capital from one country to the other. Oil
producing Arab countries which have gained huge dollar reserves recycled
their dollar earnings, and invests in Euro-Dollar zone and offshore areas.
At the same time big companies have begun dislocating their money reserves
in areas where they maximize profits without investing in physical
economic activities. The door is opened for huge financial gambling on a
global scale. Internationalization of finance capital which is followed by
new financial instruments in order to absorb more and more money from the
glob become part of this money gambling which is completely detached from
real capital investments. The beginning of the 1970s is also the era of
tightening Third World Countries into a new global debt mechanism which
could absorb more and more of their resources to finance few developed
capitalist countries, by creating unequal development from within.
Internationalization of Finance Capital and Debt
The internationalization of finance capital which becomes dominant
in the eighties has two main aspects for the global economy. The present
globalization which is believed by many that it takes shape or starts in
the beginning of the 90s, cannot be understood unless one studies the
process of capitalist production processes and thereby the technological
revolution that has taken place at least since the end of the 60s as
analysed above. First of all the break up of the Bretton Woods system
enables finance capital to move freely from one area to the other in order
to search maximum profit. The forms of profit acquisitions take different
forms. Buying stocks or state bonds with the aim of selling at some day
and at the right time to gain extra money, money holders of various types,
individuals, industrialists, banks and insurance companies move their
money from one country to the other and from one company to the other
which yields the highest profit. Speculating on financial markets is a
kind of zero-sum game. All participants do not gain or earn extra profit
at the same time. Only at the expense of the many few investors with the
highest manipulative instruments do absorb the social capital of a given
society. Along side of these kinds of financial speculation, banks,
insurance companies and investment funds are engaged in currency trading.
The flexible exchange rate mechanism has created fertile ground for
speculators to buy say to day cheap dollar and to sell it some other day
when the prise is high against yen or a German mark or any other hard
currency. There are other instruments of financial speculations which are
not worth to mention here but have destabilizing effects even for those
institutions and companies which partake in such kinds of financial
gambling. By being engaged in highly volatile assets, such as derivatives
and futures, big banks and insurance companies have lost huge amounts of
money at the end of the 1990s. It is believed that over $3 trillion are
moving world wide as speculation of different kinds every day where as
only goods and services worth $6.5 billion are bought and sold every day.
Beside this form of money gambling, borrowing on financial markets
has become the main source of industrialization, especially for few
selected countries. The military dictators in Brazil and South Korea, the
civilian government in Mexico and to a certain extent the military
dictatorship of Argentina which was highly interwoven in the 1970s with
the international finance capital have borrowed heavily to finance
industrialization. At the beginning of their borrowings, these countries
got all the credits without financial intermediaries, since from the banks
point of view giving huge amounts of money to these countries entails very
low risks. As the debt to these countries grew progressively, these
countries were not able to pay back the debt services as agreed. The
intervention of the IMF becomes a pre condition of new financial
agreements. New conditions were necessary to reduce the risks of these
banks. Special interest rate arrangements, debt-scheduling mechanism to
pay back the debts become special instruments of credit securing. In
addition to these arrangements, these countries must accept the bitter
medicine of the IMF, on one side which paved the way for massive repayment
of the debt, on the other hand which destroyed the financial and economic
resources of these countries. On the other side, in case of default,
especially American banks built huge reserves by declaring the money they
have borrowed as doubtful debts. The variable interest rate of the 1980s
which shot up the interest rate to 20% has dramatically changed the
bargaining power of these highly indebted countries. If we look the
progressive growth of debt which is accumulated in the last 20 years we
observe that how such kind of
debt mechanism has not only destroyed the economic bases of so many Third
World Countries, but also their social structures has changed to the
worst.
According to the United Nations the total debt of all Third World
Countries in 1980 was $567 billion. In 1986 the debt grew to $1, 0886
billion where as 6 years later the total debt grew to $1, 419 billion.
From 1980 to 1992 a total of $771.3 billion in interest and $890.9 billion
the original capital was transferred to the capitalist west. This means
that Third World Countries have transferred in twelve years all in all $1,
662.2 billion to western banks. This total transfer is three times more
than the total debt of 1980. In this way by creating such kinds of debt
mechanism and absorbing the social product of so many poor countries
western capitalist countries could dictate the direction and the tempo of
the development of these countries.
Borrowing money from financial market and issuing state bonds for
the sake of attracting foreign investors is very risky indeed. Though one
can prolong ones own debt by accepting new debt arrangements and draconian
economic policies, issuing state bonds to get more and more foreign
capital will have heavy negative consequences. Since speculators are
interested in short term and quick gains they move their capital where
they get the maximum profit. In this way the 1997/98 financial crises
which stroke so many Asian countries is due to the wild speculation what
Sorrow, one of the financial gurus and others have inflicted in these
countries which are heavily dependent on financial markets for their
massive industrialization.
On the second of July 1997, the American and European financial
institutions have devastated what some call the Asian miracle. Because of
the massive pressure from the financial market, the government of Thailand
was compelled to devalue its currency by 20 % and after few weeks by 50%.
The government of Philippine, Malaysia, South Korea and Indonesia have
followed suit and have devalued their currencies by 42%, 46%, 55% and 84%
successively. As a result of this devaluation speculators have moved
quickly their money and destroyed the wealth of these countries within few
weeks. Half of Thailand�s wealth which is valued in international money
is totally destroyed. In South Korea alone the BIP has diminished by about
7%, where as one year before it has grown in real terms by about 5,5%. The
rate of unemployment rose by about 5% from its previous level of 2, 7%.
The inflation rate grew from 4,4% to 8,5%. In Indonesia where
industrialization has not yet deeply rooted, the consequences are far more
damaging than South Korea where industrialization is a success story. In
1998 alone the production capacity of Indonesia has been reduced to a
historical level of -15%, where as one year before, the production grew by
+ 4,6%. Even worse is the rise of the unemployment which is amounted to
15%. According to the statistics of the IMF, until the end of 1998 about
24 million people have lost their jobs in these countries. In Russia and
in Latin American countries we have the same experience with more
destruction of human and real capital which has resulted in more poverty
and capital flight. Though the financial and the economic crises have such
kinds of consequences for these countries, western banks have profited
heavily. In comparison to the 1996 financial balance, the biggest German
bank, the Deutsche Bank has booked in its balance sheets a profit increase
of 52%. If we look also the debt problem of so many Third World Countries,
its negative impacts are manifold and destroy the entire social fabric
systematically.
In such kinds of internationalization of finance capital we could
observe two essential things which are very central for the global
economy. By borrowing huge amounts of money to these countries banks have
enriched themselves. In those highly indebted countries unequal wealth
distribution becomes a common phenomenon. Not only that:
Massive indebtedness and repression have become two sides of the
same coin. Secondly, those countries which have taken credit from the
financial markets have imported machines and raw materials and become
markets for the industrialized west. In this way the circuit of finance
capital is closed. The money
which is given as credit comes back to its original place.
The
Special Feature of the New International Division of Labour
As economic crises in the 70s have deepened, especially those
companies began dislocating parts of their machines and install them
especially in the so-called semi-industrialized countries. At home,
shrinking of credits due to non-profitability of money capital, saturation
of the market because households are over supplied with the necessary
durable goods, soaring up of production costs due to high oil prices have
at the end compelled companies to go to abroad and invest there. For these
to be materialized, certain pre-conditions must be fulfilled. Tax
exemption for a certain period, profit transfer without reinvesting at
least part of the profit where direct production is going to take place,
controlling workers right so that trade unions do not protest from time to
time not to hamper production processes, low wage payments etc. are the
few criteria for investments in those selected Third World Countries. As
stated above development and researches are not taking place in these
countries. Because of the absence of development and research it is
practically impossible to develope new technologies and products. Most of
the installed industries are functioning like assembly lines.
Looking from
its face value, it seems that this kind of internationalization of
production processes is beneficial for those Third World Countries which
have been selected as new Eldora do of profit maximization. The fact that
jobs have been created, one thinks that the income generated from this
production activity will benefit the individual and at the end boosts the
economy in general. But if we look at the matter very closely, economic
development which brings the society together and supports new inventions
and investment activities are not possible. First of all the industries
which are planted in these countries are detached from development and
research. Secondly, in most cases managerial posts are occupied by persons
elected by the mother company. Native persons have rear chances to take
high posts. That means, how it is produced, what is produced, and for whom
it is produced are decided by the managers which are assigned by the
mother company. The
industries are not backward linked with raw material producing economic
sector. As most industries are extensions of the mother companies almost
all inputs come from the country where the mother company has its legal
registration sit. That means industries in the host country which are
specialized in intermediate products have no any chance of selling their
semi processed products. As studies demonstrate that the prices of semi
processed input factors which are imported from the home country of the
main company are put deliberately expensive to increase the general
production cost so as to keep profit down. This is part of transfer prise
mechanism to avoid tax payment at home. The industries are not dependent
for credits on the banking sector in the host country. In this way the
circulation of money will be hampered. At the same time since the workers
wage are very low, payments do not take place through the banking system
of the host country. Beside this, due to the very low wage direct
producers could not buy and consume what they produce. Because of the
absence of effective demand and disarticulated economic activity general
capital accumulation is impossible and the development of a coherent home
market will be blocked. In general, such kind of the new international
division of labour does not induce an equal development by opening the way
for new investment activities and by distributing wealth through diverse
mechanisms among the society.
If we look at the most celebrated direct investment which is
directly associated with the new international division of labour, almost
80 % of the direct investment is taking place among the capitalist
countries themselves. Only 20 % of the direct investment goes to the
so-called Third World Countries. From this 20 %, almost 70 % of the direct
investment flows to few selected areas. China, Mexico, India, Brazil and
some Asian countries could get benefit from the internationalization of
production processes. Only about 8% of the direct investment is directed
to African countries south of the Sahara and certain Arab countries. That
means Africa�s role in attracting new investments and its integration
into the international market is very limited. In the coming years too,
due to the prevailing economic, social, political and military crises, the
attracting of new investors will be impossible. That means Africa�s role
in the global economy is very marginal and will remain for a longer period
at very low level unless African governments follow a different line of
development policy which benefits all sectors of the population.
The New Economy and the New Type of Globalization
What is the characteristic feature of the new type of
globalization? In order to
understand the new global economy it is important to recapitulate some of
its basic characters which underline it as real solution to the economic
and social crises of the world.
After the fall of the socialist block countries market ideologists
have taken offensive action to make believe the world that only market
economy and the ideology of monetarism are real solutions for the global
economic and social disorder. We are told that full-fledged privatization
and lifting up state regulations and interventions in the economy are two
vital preconditions for the full materialization of market economy. The
budget deficit and the deepening crisis in all major industrial countries
at the end of the 1980s facilitated these situations and encouraged
capitalist states to sell out state controlled service sector with the
belief that they reduce the growing budget deficit. Reduction of social
benefits and saving as a new ideology of resource reallocation from the
�non productive to the productive class� are seen two important
economic instruments which vitalize economic activity and create new
employment opportunity. But
this belief could not work. Instead a new ideology of shareholder value
mentality has developed which could satisfy the very few wealthy people
which partake in the new financial gambling. Instead of investing in real
economic sector, big companies have transferred huge amount of money to
the financial market with the aim of acquiring more and more profit.
Investment funds and other financial institutions have developed new
financial instruments and optimization methods which help them to absorb
more and more money from the glob.
Beside this, big companies, especially telecommunication companies,
began expanding on global level to become real global player. In order to
control or swallow other related companies, on one hand they have issued
more and more bonds in order to absorb the social capital from many
countries, and at the same time they have borrowed huge amount of money
from banks. This situation has intensified competition among the different
big companies which wanted to control more of the world resources and
dominate the lives of millions of peoples. In
this way many big firms which have presented the highest bid could buy or
merge with other firms with the sole aim of becoming bigger and bigger and
control big market shares. Merging with other companies, swallowing others
and controlling big market shares and producing more and more shareholder
values without investing in physical activities become the new character
of the 1990s. Some big companies which are producing services and other
physical goods, by being attracted by short-term gains, they have left
their traditional roles as supplier of goods and services, and began
concentrating to allocate their resources on the global financial markets.
Enron one of the biggest suppliers of Energy is a good example how the
managers have destroyed the energy sector and concentrated on financial
gambling. Mannesmann one of the leading traditional steel producing
companies in Germany has shifted its role and become supplier of mobile
phones. Mannesmann is again over taken by one of the most aggressive
mobile phone suppliers, Vodafone, which has its main sit in England.
In order to get part of the cakes big banks are compelled to
restructure their internal services and began concentrating to shift from
credit allocation to financial asset management and financial gambling on
the global markets. Certain big banks have emerged with other banks and
some have overtaken other banks and began concentrating on areas where
they could get the highest profit. From within, such banks, like the main
German bank, Deutsche Bank, has expelled over 15 000 Employees. Part of
the money which is saved in this way is shifted to the new managers. The
salaries of some managers rose to 5 fold. For his service of destructing
thousands of job places, the manager of the Deutsche Bank earns a salary
of � 6. 5 Million yearly. In America where the role of multinational
companies more visible, as study shows the salary of the managers has
grown in the 1990s by over 2000%, where as the salary of workers in the
same years has risen by only 10%. The financial bubble of the 1990s has
made the rich richer and the poor poorer. If we look at the statistics,
which is issued by the Executive Intelligence Review of March 2000, the
wealthiest 1% of the US population owns 42% of all stocks, where as 9% of
the next wealthiest owns 42 % of the stocks. That means 84% of all the
stocks is owned by 10% of the population. The aggregate stock value for
these years amounts to equivalent of $13 trillion. At
the same time 1% of the US population controls 35% of the wealth of the
country, where as the next 9% owns 33% of the wealth of the country. The
remaining 90% of the population must fight to get only 1/3 of the
remaining wealth. The change of the strategy of some big Banks and their
shifts from credit allocation to asset management has wide range
consequences for small and medium industries which are dependent for
credits from these banks. From the Banks point of view dealing with small
companies which take credits not in millions of Euro, but in some hundred
thousands of Euro is too much work which does not yield the maximum profit
they need. With the introduction of new credit arrangements called Basel
II, which opened the way to the Anglo American rating agencies which
control the profitability and financial liability of small and medium
industries, these small firms will be over thrown out of the market and
millions of Employees will lose their jobs. This is one of the negative
consequences of the new globalization, which western governments could not
control but still propagate that there is no way out of this kinds of
globalization. This is also one of the main causes of the rising
unemployment in so many industrialized countries.
The new managerial class which earns exorbitant salaries for its
destructive activity is also one of the main supporters of global war to
destroy the social fabrics of Third World Countries and control their
strategic raw materials like diamond, platinum and other raw materials
which could be used for the production of high tech instruments and war
materials. This same class which acts during the day time as gentle man is
one of the distributors of bad cultures across the globe and engages in
heavy sexual abuses, especially those small girls from Eastern Europe are
its victims. By using its social and economic status, it corrupts so many
politicians from the former Soviet Republic and other Eastern Block
countries. This situation has helped him to control the resources of these
countries. The managers of the West and their politicians by propagating
that only market economy is the only solution for real economic growth and
income distribution, they have used the new emerging class, which is now
in defensive position, especially in Russia to destabilize the whole
system. When president Putin has taken bold measure, and has arrested the
chief of one of the oil giants because of financial fraud and who has
links with high-ranking officials in Washington, western politicians have
shouted that Russia is heading towards dictatorship. These politicians of
the West, who have double moral standards, forget that 12 years of market
economic policy could not benefit the majority of the Russian people.
To have clear images and understanding the market economic reforms
of Russia, after President Yelzin has taken the power and introduced whole
sale privatization, the situation for the Russian people become very
destructive. According to the calculation made by Mr. Sergei Glazeyv, one
of the most astounding economists of Russia, the share of wages fell from
74% to 43.4% in the year between 1990 and 1996, while income from
entrepreneurial activity rose to 38.7%. If we look the general situation,
only 2% of the Russian population, the so-called oligarchs control about
80% of the Russian resources. As a result of this blind privatization
policy the lives of the majority of the Russian people have degraded in
unprecedented scale not known at least in the last 50 years of communist
leadership. From 1990 onwards Russia experiences due to mal nutrition,
increasing alcohol consumption and wide spread of sexual diseases like
syphilis, gonorrhoea and others massive depopulation. Children are among
those which are massively affected by this policy of market reforms.
Socially transmitted diseases among children have increased by tenfold
from 1993-1996, and among adolescents by 6.8 folds in the same years. The
increasing crime rate, the spread of mafia type organizations and the
massacring of those patriotic forces which are fighting for massive
intervention of the state to protect Russian wealth and raise the living
standards of the ordinary people become part and parcel of this kind of
global economic order. All
these facts what we know and what we read in blacks and whites are
forgotten by these civilized western politicians who associate that human
destruction and lose of national sovereignty must be taken into account if
one wants to bring a market oriented economic growth. As one prominent
expert of Germany said, due to the integration of East Block economies in
the global economy, the new elite of the East has learned how to steal
money and resources from its people rather than producing new wealth which
brings better living standards for the ordinary people. Instead, by
opening new neo-liberal super markets which are overwhelmed by western
products and consuming them, it could uplift itself from its ordinary
people.
The global economy of the 1990s has also created a new situation
for the so-called new economy sector to become real global player by
attracting more and more of social capital from ordinary people. Internet
and biotech firms and other private mass media companies which are
producing garbage to destroy the mentality of the youth have issued bonds
worth of billions of dollars which are not matching with their real
capital assets. So many ordinary people who were manipulated by the new
brokers and believed that they will be come rich within a couple of months
or years have thrown their saved money on the financial markets. The
shooting up of stock prices, which are fictive than real have cheated so
many ordinary people. As the new economy sector is showing its limits and
is no more expanding as it is expected, stock prices began falling with
the result of destroying hundreds of billions of dollars. This kinds of
financial gambling which could not be controlled by the respective
governments, has also consequences for insurance companies which have
absorbed pension funds from companies in their respective countries. So
many ordinary workers have lost their years of saved money. This is
especially the case in the United States of America, where pension fund is
the main instrument of pension for old people.
Third World Countries have also become the victim of such kinds of
globalization. Some governments in Third World Countries have sold
strategic service sectors with the aim of attracting new investors.
Telecommunication service, water supplies and others were bought by
western companies. Instead of investing in new telephone lines to reach
the majority of the masses, they began crushing the unprofitable branches
to concentrate on few selective areas which yield the highest profit. New
water supply lines are not installed either to supply households with
clean water. In other areas, western companies have bought the entire
company and destroyed the existed links with raw material distributing
sectors, and began importing raw materials from their countries. In this
way so many peasants who used to produce raw materials for certain
companies in their own countries became the victim of this kind of
aggressive globalization. The case of Poland is a vivid example how
American companies destroyed the lives of many peasants.
African countries, which are not themselves global players, by
accepting the structural adjustment program and liberalizing their foreign
trade they become simply markets for foreign products rather than
attracting new investments which produce new wealth. In so many African
countries, where structural adjustment program has been taken as the
official economic policy of the some governments, we observe real
resources transfer from these countries to the West, in the form of debt
repayments, bad terms of trade and importing high class goods for the
elite which has adjusted itself to the new global order. As a result of this, many small and medium size industries
must be destroyed. Banks could not become effective. Black markets of
various types become the rule of so many African countries. Abuse of
power, mismanagement and capital flight to the civilized West, and
stealing of strategic raw materials have eroded the economic bases of so
many African countries. At the same time few people who have good contacts
with their governments and western countries become rich without working
hard. As we see, in so many African countries the gap between the rich and
the poor is widening every day. .
All in all, as it is propagated globalization could not
bring the desired result for the majority of the people of the world. As
we see and the social conditions in so many Third World Countries prove,
the situation of the people in these countries is worse than 20 years ago.
Migration from the rural areas to the few cities, and rising up of new
slum areas, growing criminality rate, sexual abuse of small girls, high
mortality rate of children, spread of new kinds of drugs which could
destroy the thinking ability of the youth and which are smuggled from the
West, etc. become the inherent contradiction of the new global economic
order. In light of this degradation of human conditions, the governments
of so many Third World Countries become more and more oppressive and
engage in systematic killings of so many young people. In
so many countries the situation is out of control. Non-governance becomes
the rule of so many Third World Countries.
The structural adjustment policy which has been practiced in our
country since the last 12 years have also resulted in massive shifts of
wealth from the poor to the very few rich which become wealthy in a couple
of years. As a result of blind liberalization foreign products overwhelm
the Ethiopian market. The Ethiopian producers are pushed, and the country
becomes simply a consumer society which blocks the creative activity of
the masses. As I have clearly showed somewhere the trade balance deficit
is growing everyday and the country is compelled not to engage itself in
strategic areas which have multiplier effects for the entire economy.
Instead some Indian businessmen who are investing in certain areas are
distorting the economic setup of the country. The two Indian businessmen
who become very rich are producing plastic bugs. Only those who do not
understand what political economy means allow the production of such kinds
of material which do not have any economic values for the society. First
of all plastic bags are not healthy and it is very difficult to recycle
them. Even in western countries so many people are not willing to buy
plastic bugs. Secondly, in a country like Ethiopia where we do not have
much awareness for the environment, as I am well informed, the bugs are
thrown everywhere. This shows how our politicians and experts do not
bother for the well being of our society. In other areas too, there are no
control systems and institutions, which follow and report to the people
the negative consequences of such kinds of economic activities.
Not considering the negative consequences of market
orientation of this type, the EPRDF government is in its last phase to
present the necessary formalities so that Ethiopia becomes the member of
the WTO. In an economy, where about 80% of the population is subsistence
farmer and the main backbone of the country is agriculture, I do not
understand the advantage of becoming the member of WTO. It is not only
unwise, but also destructive to go ahead with this plan, which will
undermine our efforts of building a society based on science and
technology. Before it is too late, all patriotic forces must protest
against this blind action of the EPRDF government.
The
way out of this destructive global economic order is to control ones own
resources and to work out an economic policy which is based on physical
economic principles which could brings real civilization. If we take
Ethiopia as an example, the situation is more fertile than a decade ago.
The development of new culture, in the field of art, music and drama is
very encouraging which we should exploit to bring mass movements. The
human and the material resources which our country possesses, and which
become more and more visible now a days could be easily used to transform
our society within two decades. In order to bring radical changes which
benefit over 90% of our people, we have to discard the policy of the IMF
and the World Bank, and control those forces which are working with these
pro fascistic organizations. Though the situations seems for many that our
country�s problem is insurmountable, the situation is not that much
bleak. The EPRDF government, which becomes more and more the puppet of the
American imperialism, and which has proved its aggressiveness and
incapacity is not a force which can control our society any more. In the
last 12 years our people have fought back all the conspiracies instigated
by the American imperialism and its puppets to destroy Ethiopia as a
nation-state. They have tried to undermine its written language, and they
have advised those confused forces to introduce divide and rule system
what the government calls Kilil. They have sided with the government of
Isayas and supported him to start a war against our country. The young
generation which firmly believes in its motherland has persistently fought
this indirect aggression of the West. Now the time has come to pay tribute
for this patriotic force that lost its lives for his mother land by
building a new spirit of Ethiopianism in which all nationalities live in
harmony, prosperity and everlasting peace. It is our duty to seize this
opportunity.
Fekadu Bekele Ph
D
Books of Reference
________________________
Aglieta, Michel (1979):
A Theory of Capitalist Regulation: The US Experience, London
Alexander, Schubert (1985):
Die International Verschuldung, Frankfurt am Main
(The International debt)
E.S, Brett (1983):
International Money Capitalist Crises, London
Eric, Toussaint(1999):
Profit oder Leben, K�ln
(Profit or Living: Neo-Liberal Offensive and the International
Debt Crises)
Jackie, Roddicke(1988):
The Dance of the Millions. Latin America and the debt Crises,
London
J�rg, Huffschmid(1999):
Politische �konomie der Finanz M�rkte, Hamburg
(The Political Economy of Financial Market)
Klaus, Busch(1974):
Die Multinationale Konzerne: Zur Analyse der Welt Bewegung
Des Kapitals, Frankfurt am Main
(The Multinational Companies: Analysis of the World Capital
Movements
Sergei, Glazyev(1999):
Genocide: Russia and the New World Order, Washington
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