Global Economy

Global Economy
Sarah Anderson and John Cavanagh.

Media would have it that executives agonize over how to save a rain forest or develop a life saving drug.
The actual picture is different. While the corporate managers travel first class from one finance capital to another, laborers risk their lives sneaking across borders in search of employment, teen age girls stitch garments and assemble toys in 12 hour shifts, Brazilian and Indonesian villages are destroyed by logging companies, Detroit and other towns are wiped out by outsourcing.
Commercials are not set around shantytowns of Mumbai with open sewers.
Most of the nations of the world are dwarfed by corporations which tell them what to produce and how much to pay workers. The MNCs are motivated solely by profit and not accountable to any one (they bring down the economy in cycles and demand that governments bail them out with tax payer money)
International trade agreements ostensibly designed to promote human rights and preserve cultural diversity. But all they accomplish is to ease accumulation of wealth in a few hands.
The only way out is solidarity in the working class.

Introduction: Corporate Globalization
Global corporation operating in dozens of countries on all continents produce what we eat, drink, wear, drive and watch. For those who can afford, they offer a dazzling variety of goods and services, and move trillions of dollars at the speed of lightening.
Most governments have facilitated corporate led globalization entailing movement of goods with ever decreasing regulation.
But a backlash is gaining strenght across the world and a debate is raging between proponents and opponents if it helps or hinders the aspirations of the majority of the people. The former point to the benefits to consumers, and to workers who find jobs in factories. The detractors point to the adverse effects on equality , natural resources, work, food, communities, culture and democracy.
A 2004 survey by the U of Maryland showed that fewer than 20% of Americans favor promotion of globalization, and the majority felt it was bad for American workers.(1)

Chap1
Economic globalization consists of flow of goods and services, capital and people across national boundaries. It has occurred through know history, but it is undergoing a stunningly rapid change.
History:
Prior to Columbus (pre 1492), most economic activity was local.
Armies, from earliest history, covered long distances for conquest, many returned with booty and slaves, though quite a few stayed put in conquered territories and intermarried with the local population.
Travelers, explorers, Vikings, Marco Polo (and earlier mass migrations, American Indians are believed to have walked across from Asia, Aryans supposed to have spread from central Asia to India and Europe. Far Eastern people colonized Hawaii) traveled great distances and brought back exotica, fruits, spices and crafts. In the 15th century Ming dynasty Chinese emperors built a fleet which brought back zebras, and giraffes from Africa.
Chinese and Arab traders sailed across the seas of Middle East and North Africa.
But hazards of travel kept most of the people at home.
Colonization and Empire: 1492-1945
Columbus introduced sugar, oranges and other European products into the West Indies and Americas, and colonists started extracting gold and other minerals, while treating the natives abyssimally.
During the 15th century European governments started financing explorations and conquered vast territories, undermining industries there reducing them to suppliers of raw material and labor, while restricting manufacturing to their own countries. Specifically the quite advanced textile industry in Iran, India and Philippines was destroyed as was the iron and steel industry in India. Narcotics like opium were forced on Chinese.
(Religion went hand in hand with enslavement of native populations. Preachers went as advance guard, and when the native did not fall in line, gunboats were sent to chastise them and take over their country)
Genocidal practices were perpetrated on North and South Americans. Millions died of infectious diseases brought and in many cases deliberately spread by Europeans. American Indians had had no exposure and immunity to small pox. Cases are on record of pox virus impregnated blankets being given as ‘gifts’ to native Americans. More died in mines they were forced to work in for the European quest of minerals.
Plantations to grow cotton, sugar cane, coffee , tea and bananas destroyed forests in Brazil (Portuguese) in 16th century and others in the Caribbean (the decimation of trees continues to this day).
Genocidal practices exterminated the local population. Slaves had to be brought in, 13 million shipped between 1444 and 1870, at least 2 million died in transit due to murder, disease and malnutrition.
Colonies were transformed into exporters of minerals and agricultural products and importers of finished goods.
The practices continued till WW II. Post WW II some countries have taken great strides in technology and have industrialized (China and India) and have started competing with developed regions of North America, Europe and Japan. OPEC nations made huge amounts of money from oil export, but have ‘invested’ most in Western economies or wasted it on luxuries.
Former communist countries fell into the trap of abrupt deregulation (early 1990s and other imperatives of free market, and their economies collapsed from which they have not recovered yet (2008). (China did not toe the line and prospered).
40 countries have light industry like assembly, packing and processing. 60 countries, mostly in Africa have little by way of industry or technology. (Even after winning independence, their resources are controlled by multi-national corporations. Post-Apartheid South African economy is still controlled by the 15-20% whites. Nelson Mandela, the pioneer of what some one has aptly described as ‘board room revolution’ has a statue in front of the British parliament house. Robert Mugabe of Zimbabwe who insisted that the British fulfill their promise to compensate his country for allowing the 3% whites to keep their vast land holdings is uniformly castigated and his country reduced to the brink of collapse).
Global flows:
Under pressure from MNCs, most countries have liberalized trade by lifting barriers to trade and services. (But non-tariffs restrictions like subsidies to US agriculture, which LDCs are not allowed, dumping of cheap products to destroy native manufacture work as effectively for the rich countries).
Service Industry.
Between 1980 and 2002 US export of services like travel, banking, insurance, R&D, education and training , computers, IT, broadcasting, entertainment and publishing grew from 17 to 30% of US exports.
Illegal Trade:
Drugs-$ 400 a year (10).
Weapons:
No reliable statistics available, but governments sold ‘light’ weapons-assault rifles, mortars, grenades and land mines, to all comers as they downsized their militaries post cold war.
People trafficking networks.
Per UN, 4 million fall prey to flesh traders, sweat shops, and virtual slavery of domestic service every year, generating profits of $ 5-7 billion.
Endangered species:
Interpol estimate worth $ 6-10 billion a year.
Trade Protection:
Notwithstanding the free trade mantra, most protections do not advance social goals like environment, public welfare or jibs, but promote narrow corporate interests.
-import barriers-tariffs, but increasingly non-tariff ban certain products, quotas.
-export promotion-Loan guarantees (US-Export-Import bank, Overseas Private Investment Corporation offers insurance to investor overseas). $ 7-8 billion per year subsidy to weapons exporters and much more to grain and cotton.
Patent Monopolies:
WTO and other ‘free’ trade agreements on intellectual property do anything but promote marker competition., other governments try to imitate. Rules are enforceable by trade sanctions.
International financial Flows:
For most of history finance has facilitate trade.
In the 19th and early 20the centuries, large private banks emerged in the US, Europe and Japan. They in, due course, extended their domain to other countries.
Now individual, corporation and funds of all kinds have joined banks. Foreign exchange transactions increased 1,335 % between 1980 and 2001, compared to 212 % in merchandise trade (17). Liberalization has helped along by removing the necessity of government approval for large loans or transfers. (The most drastic was the deregulation in Bill Clinton time, Media ownership reduced from 85 to 5 corporations and financial services deregulation in 1998, which led to the financial crisis of 2001and the meltdown of 2008).
Financial flows include public and private lending:
-Public from governments and WB, IMF etc
-Private-FDI, investor generally seeking management control of a business in another country-Ford and GM buying plants in Mexico.
-Portfolio investment-purchase of stocks, bonds and derivatives, generally not seeking management control, e.g. a US citizen buying few shares in a German co.
-Debt flow-commercial bank loans-A US bank loan to another country’s firm to buy equipment, the related government has to guarantee the loan, so in the case of default, (the government and not the co is liable as happened in the Asian crisis of 1998, and IMF was able to force government to undertake restructuring leading to destruction of local industry, loss of jobs, social and welfare services and fire sale of national assets to MNCs under the cover of privatization).
Financial flow and LDCs:
Developing countries’ share of FDI rose from 20% in 1990 to 34% in 1995-96, though public spending declined. (18). Capital influx in the LDCs, in the form of portfolio investment, also soared. But they soon leaned of the hazards of the fickle international capital. By 2003 FDI share of LDCs had dropped back to less than 20%, with almost 40% of their share going to China. Net portfolio outflows fell from $ 23 billion in 1997 to less than $5 billion in 2002 (19).( DC governments are like enforcers for MNCs, akin to strong arm men usurers have employed through history).
Chain Reaction of Global Financial Crisis:
Mid-1997 Western investors started pulling billion of dollars of ‘hot money’ from
Asian countries. Chain reaction of currency devaluations and stock market plunges followed and spread to Brazil and Russia. By the end of 1998, numerous countries were struggling with rampant unemployment, bankruptcies and consequent political unrest. 27 million lost jobs in 2 years in Philippines, Thailand, Indonesia, Malaysia and Korea (21). Compared to 1996 GDP in Thailand was 30% lower, 24% in Indonesia, 8% in Korea, 6% in Malaysia and Philippines.
Financial Crisis-signs of:
Devaluation. Brazil three weeks after Brazil devalued in January 1999, it took 2.00 in stead of 1.25 of its currency to buy $ 1.00 Governments try to avoid sharp devaluations by increasing the interest rate and using FC reserves to buy local currency. Big time speculators can undermine the currency by selling huge amounts of shaky currencies. (George Soros made more than 1.5 billon in 2 weeks during the Asian crisis of 1997 and similar amount from the European crisis of mid 1990s)
Stock market Plunge:
It was feared (or the market led to believe) that the bubble of decade long flooding of investment in Asian markets, was about to burst. Investors sold stocks abruptly. Stocks plunged. Predatory speculators bought them back immediately-at the low price, and sold them when they went up soon after when governments took corrective measure. The idea that MNCs and speculators got a bit of their own medicine in 2008 crash is fallacious. Their minions in Western governments took ‘loans from Mid east satraps, China and from their own tax payers).
Economic Growth-Negatives:
The rate of increase in GDP is the standard measure of growth. In 1996 the Asian region had 85 growth, by 1998 it had gone into negative, the worst was Indonesia which fell 15%.
Devaluation should make exports more attractive, if the market for the products continues to exist, but local currency is used to pay foreign debt and buy foreign products , so prices rise, budget deficit rises and debtors suffer due to consequent higher interest rates.
Stock market plunge leads to further outflow of capital as investors lose confidence.
Crisis nations import less, prices fall.. From 6/1997 to 8/1998 oil prices fell 30%, coffee 43% and gold 17% (17).
Debt crisis persists:
Financial flows to LDCs have largely been loans, bank knowingly made loans to dictators who kept a large part in their own pockets. People can’t pay, and corporations expropriate national assets and resources.
In 1996 IMF and WB launched a ‘on paper’ project of reducing debts of the most heavily indebted countries, but by 2004, only 38 countries had qualified, none of them got enough to bring debts to manageable level. And LDC debt grew 1995-2001 from 2.1 trillion to 2.3 trillion (annual payment of interest on loans, euphemistically called debt service, is several times the total yearly foreign aid/loan-net result loan keeps on rising). (24)
Debt, effect of:
On poor countries-(25)
-In 2001-2002 Zambia spent three times more on debt service than on health, though 20% Zambians affected by HIV.
-Half of Nigerians live under poverty line, still the country paid $ 190 million to rich countries in 2001-2002
-Niger the second poorest country in the world pays more in debt service than on health, though 46% of the population is undernourished.
On Rich countries-(26)
-Global warming as forests are plundered for export and cleared for crops.
-Job losses as LDCs can’t afford to buy products.
-Millions seek to immigrate.
Migration:
175 million have moved from one country to another (27). They send money back, $ 41.1 billion from the USA in 2003, up from $ 9.2 in 1985 (28). World wide it was $ 80 billion in 2002, far more than aid/loan. (29). Governments reduce restriction on the flow of goods and capital, and increase it on the flow of people, much more so since 9/11. Backlog of visa applicants to the USA increased from 3.9 million in 2000 to 6.2 million in 2..3(30).
Europe:
Since 1968 EU citizens have had the right to live and work anywhere in any member state. (But they discriminate against Turkey and have not let it in, its citizens though white, are Muslims).
New Aspects of Globalization:
High tech assembly line-Trade and investment liberalization combined with improved communications and transport, have enabled companies to set up plants wherever the cost is the lowest.(1). Firms are increasingly using overseas subcontractors.
A workforce made up largely of women workers, often denied basic human rights, assemble imported components foe export abroad. A global assembly line is not new. What is new is that poorer countries like China and Mexico have the infra structure for practically any industrial operation, including high-tech, capital intensive products such as autos and aircraft. Ford and Boeing have set up manufacturing in low wage countries.
All in the family-International spread of production has resulted in a large share of trade between a global firm and its own overseas affiliates.(2).
Tax Rip off-Fix prices to maximize losses in countries with high taxes, and maximize profits in low tax countries, euphemistically called ‘transfer pricing’.
Free Trade in name only-Global corporations essentially trade between themselves, so the ‘supposed’ competition entailed in free trade does not help consumers.
Global Trade Pool-workers in rich countries are placed in competition with low wages with weak worker protection rights.
In 1975 top 15 exporters of manufactured goods were nearly all rich countries with only slight differential in wages, with Sweden at the high end, $ 7.18/hour to Japan at $ 3.00/hour (3). In 2002 Germany paid $ 24.1/hour and China $ 0.90/hour.
China has become an export powerhouse. Though the government maintains a strong role in the economy, in 2003 it received the largest FDI, $ 53.00 billion compared to the USA with $ 40.00 billion(4).
Between 1980 and 2002 its exports increased from $ 14.00 billion to $ 365 billion, with more than a 1/3 going to the USA, the latter’s trade deficit with china rose to $ 124.00 billion, a quarter of all its trade deficit.
Corporations in china have benefited from repression of labor which keeps the cost low. Though official estimate is $ 0.90/ hour, documented reports put them at as little as $ 0.15/hour, with hazardous working conditions, physical abuse, nonpayment of wages, living crammed 20 to a room under constant surveillance and intimidation.
Profits vs. Worker’s rights-AFL-CIO estimates that worker suppression artificially depresses wages in china by 46-86% (6). The US did not even raise the matter during negotiations of china’s entry into WTO in 2001. Membership extended China’s exporter’s access to world markets. In 2005 they were expected to gain further from phase-out of global textile and apparel quotas, with WB predicting that its share in world garment export will rise from 20% in 2003 to 50% by 2010. (7). It is making great strides in techno, it exported 3 times as much in computer/parts to the US than it did in footwear (8).
Outsourcing service jobs-Once a monopoly of Western countries, US firms are exporting high and low tech jobs-programming to call center jobs to mainly India. Low cost transmission of information has created new overseas opportunities for US corporations, giving them enhanced powers to reduce US wages with imminent threat of moving plants elsewhere (Delphi to Mexico).
India gets the giant’s share of US service sector outsourcing. In 2004, US firms accounted for more than 2/3 of the country’s $ 12.5 business in software and support services. It employed 1 million people, the number expected to rise to 4 million by 2008.(17). The jobs would move to cheaper locations, eventually.
Wal-Mart-Barbara Ehrenreich, efforts to rein it in “could be the central battle of the 21st century: Earth people versus the Wal-Martians.” (19). It is number one in the “race to the bottom” in wages and working conditions. (find current statistics. Global sales in 2003 $ 265.3 billion-in 2007 ?500 billion). Their pay on the average $ 9.00/hour to full time and $ 8.00 hour to part time, the latter make up 45% of the total. Wal-Mart workers receive, on average, $ 2103 per year in federal subsidies (20 congressional study).
It is a notorious union buster. In the US only the meat cutters in Texas won the right to unionization. Wal-mart closed its meat cutting operations.
Because of its tremendous clout, it can squeeze its more than 65,000 suppliers to cut costs (22). They often have to move operations to China and elsewhere.
The brunt falls mainly on overseas labor. The national labor committee found that in China’s Guangdon province worked up to 130 hours a week at 16.5 cents an hour with no health insurance to make toys for Wal-Mart. Until late it was able to even ban the union controlled by the communist party (25).
Communities-when Wal-Mart comes to town, locally owned businesses shut down. Iowa university study found that rural communities lost up to 47% of their retail trade.(260. In the urban areas a University of Illinois study found that a Wal-Mart coming to a Chicago neighborhood would cause a net job loss. State and local governments have spent more than 1 billion in subsidies to attract Wal-Marts to their communities (27).
Open Doors to FDI-
Until recently most nations placed restrictions on FDI especially on ‘strategic’ sectors like petroleum, banking and insurance. Under pressure of IMF and the WB there has been a flurry of ‘privatizations’ of state enterprises. In 1990s Trade Related Investment measures-Trims section of WTO has prohibited governments from imposing conditions on FDI like using local input and workers. NAFTA went much further and many countries have had to sign bilateral investment agreements similar to those in NAFTA (details of NAFTA measures later in the text).
Global Casino-thanks to liberalization money circulates around the world at a speed beyond the capacity of regulators to control. Flow of money across the borders, though somewhat less than the peak in late 1990s, still is on the average, about $ 1.20 trillion a day. About 1-2 % is for trade, the rest for speculation subject to rapid flight (29).According to Nobel prize winning economist Joseph Stiglitz, removal of restrictions imposed by IMF and the US Treasury was the , “single most important factor” in the global financial crisis of Asia in late 1990s (30).
Bio-technology-threatens to kill the diversity developed over 12,000 years, on which the health and sustenance of billions of the world’s poor depends. Chemical, Agribusinesses and Pharmaceutical companies have manipulated genetic codes. That has resulted in new resistant pests which have spread to weeds and non-GM crops, devastated crops and a plethora of lawsuits by Agribusinesses against poor farmers who have lost their living.
Biotech firms are using strong arm (and black mail of LDCs) to get total control over the world’s food supply. (hundreds of thousands of Indian and other LDC farmers have committed suicide, and their women have turned to beggary and sale of flesh).
Health-Little research into possible harm of eating GM food has been done.
US based Monsanto is the most aggressive promoter of GM crops, and has produced such soybean, cotton, corn, and canola, accounting for 90% of bio-tech seeds planted in the world. Roundup pesticide developed for use with Monsanto GM seeds. Farmers who do not save and replant Monsanto seeds are charged with ‘seed piracy’. A Canadian farmer into whose field Monsanto Canola seeds had flown lost his case in the Canadian supreme court in 2004. Organic farmer through the world are scared as there are no regulations to control GM seed pollution.
Claims of Globalizers: Large US corporations contend that benefits far outweigh the costs.
Good Jobs-Global trade rules keep governments from protecting key industries by imposing import controls and from requiring that investors hire local workers and use local supplies. (in addition so called aid is neo-colonialism, buys non-competitive high price foreign goods, use expensive shipping of the donor).
Imports-US trade deficit rose from $25 billion, less than 1% GDP in 1980, to $547 billion, 5% of GDP in 2003 (2). US lost 4.2 million manufacturing jobs during the same period. (get new figures).
Research by the Economic Policy Institute in DC has found that job losses are primarily (59.1% between 1198 and 2003), due to trade deficit and due to automation as claimed by neo-liberals. (4).
Outsourcing-GE among the worst culprit, having cut its US work force by half between 1986 and 1998. In 1999 it employed 30,000 Mexicans, and its CEO made 141 million, 2 and ½ times the total salary of its Mexican workers (5). It also pressured its suppliers to move to Mexico.
New Jobs-Virtually all the new jobs are in the lower paying service sector. The US Labor department reports that only 26% of laid off manufacturing workers found new jobs which paid as well as their old jobs (7&8).
Global Blackmail and Greed-From 1990 to 2003, US real wages rose 7%, corporate profits by 103% and CEO salary by 274% (9). Globalization has weakened the power of workers. A Cornell university study documented threats to unions to restrain wages or the industries would be moved to low wage countries, such threats increased from 50% in early 1990s to 68% in 1999.
? Outsourcing good for American Workers-Cheer leaders of outsourcing claim that enhanced profits create jobs for US workers, but soft-ware jobs in the US dropped 16% between 2001 and 2004, most going to India whose export of soft ware has increased substantially. (12).
? More investment in environment-Rapid uncontrolled development of export industries in LDCs has vastly increased pollution. MNCs deliberately choose countries where environmental enforcement is lax.. IMF and WB force countries to pay loans even if it means deforestation, depletion of fishing stock, plantation expansion and open pit mining.
All four leading exporters of LDC world , value of exports 1980-2002, China $2.6 trillion, Mexico $ 1.7 trillion, Malaysia $ 1.2 trillion, Brazil $ 958 billion have significant export drive related environmental problems.
In DCs too environment is at stake, MNCs threatening for example California to gut 2003 rule limiting air pollution by lawn mowers under pressure from Briggs and Stratton, threatening to move to China (22).
Health-International rules keep governments from stopping imported food which used pesticides banned in the importing country.
Environmental regulators have their hands bound by such rules as “unfair barriers to trade”.
Pest invasion-After the loss of habitat loss, non-native species is the greatest threat to native plants and animals and costs $ 120.00 billion to the US in lost crops, forests and home infestations (23).
? Liberalization, good for the poor-China and India have significantly reduced poverty but not due to compliance with US, IMF and WB policies. China applies extensive restrictions, earning the lowest possible rating for trade openness, and in India the reduction in poverty has decelerated with open trade policies. The Harvard economist Dani Rodrik has pointed pout that countries with high import barriers did better in 0990s than the ones with low barriers. The Center for Economic and Policy Research has documented slower growth rates in LDCs in 1998-2000 when they were lifting the barriers (27), indicating that governments should have flexibility to develop own economic strategies, rather be forced to accept the ‘one size fits all’ dicta of IMF and WB.
People living on less than $ 2 a day has gone up in millions,1981 to 2001-South Asia 820 to 1,059, ( East Asia and Pacific 1151 to 868 million, China 858 to 596) Sub-Sahara Africa 288 to 514, Latin America and Caribbean 99 to 128, Europe and Central Asia 8 to 93, Middle East and North Africa 52 to 70. (28).
Globalization and rural poverty-MNCs pit workers against each other, put pressure on governments to slash spending for the poor and that contributes to destruction of natural resources, and has devastating effect on the agriculture sector, which employs about 70% of the LDC population. In the Indian state of Andhra Pradesh alone 3000 farmers committed suicide due to flood of cheaper foreign pal oil. (overall 200,000 Indian farmers committed suicide between 1998 and 2004)
Subsidy-The WB and IMF put pressure on LDCs to slash support for the farmers (while the US keeps on subsidizing its big farmers, squeezing small ones, so they have to work for WAL-Mart).
Export glut-causes prices to crash. Coffee crisis of early 2000s was due to expanded production in Vietnam. Poor farmers suffer an estimated 600,000 coffee workers lost their jobs in Central America alone (31). In addition the shift to export crops (and corn for fuel culpable for the current food supply crisis) reduces the availability of food.
? Free Trade helps consumers:
Globalization has expanded the variety of goods now available in malls all over the world. The US does get a third of its imports from poorer countries. But the traders hike the prices and keep the difference for themselves. A handful of corporations dominate the market for a particular product and cheap labor does not translate into cheap prices for the consumer. For example 4 firms control more than 60% of coffee market of the world. (Altria, formerly Philip Morris 25%, Nestle 24%, Sara Lee and Proctor Gamble 7% each. The result is that Americans paid only slightly less for a pound of coffee after the prices crashed (34). (US media controlled by 5 corporations since Bill Clinton, they were owned by 85 before him, so we do not get any such news over ‘mainstream media).
GM built a new facility for Suburban in Silao, Mexico which produced for the US market. GM wage bill plummeted, but the price of the vehicle continued to rise (35).
Average 1996 wages for GM, Mexico $1.54/hour, in the USA 18.96/hour. Sticker price of Suburban 1994 $21,000 to $24,500 ; in 1996 $23,500 to $31,000, though in 1996 it produced 80,400 Suburbans in Mexico and 83,000 in Wisconsin USA.
? Equalization through Globalization
According to the WB, liberalization reduces inequality, but a growing body of research shows otherwise.
Inequality within countries- According to WB researcher Branko Milnovic, there was significant increase in inequality in poor countries which lifted trade/investment barriers (37). The average income of the poorest 10% dropped from 30.7% of the national average in 1988 to 23.23% in 1998, whereas that of the richest 10% rose from 274.5% to 313.8% (38).
Between countries-the gap in per capita income between the thirty richest and thirty poorest countries rose from 17:1 in 1980 to 27:1 in 2002 (41).
In 2003 the wealth of world’s 587 billionaires (1.9 trillion) was greater than the combined incomes of the poorer half of the population of the world (42).
Dragging the bottom down-In the US high school graduates earn far less than they did, adjusted for inflation, 1970s. Most economists attribute 25% of the fall in wages to iimport competition from low wage countries, by employers moving to low wage countries or employing recent immigrants.
In LDCs between 1981 and 2001 people living on less than $2.00 a day increased except in East Asia (45).
What is good for GM is good for the rest of us-GM CEO Charles Wilson in 1952 in testimony in Armed Services committee-global firms have little national loyalty now. They wield enormous political influence, but offer declining share of revenues and jobs, while becoming increasingly difficult to regulate.
Declining taxes-Since 1960, the share of federal tax revenues of the most powerful US corporations has dropped by nearly 2/3rd (48.). they paid 23.2% in 1960, and 8% in 2003. US General Accounting Office, 61% of all US corporations did not pay any taxes between 1996 and 2000(49).
Since 1968 top ten US manufacturing firms have dropped 28% jobs while sales have gone up by 133% (50).
Sweat Shops: The US developed that way.
It was struggles against sweat shops, rather than the shops themselves that led to better working conditions in the US. Many labor union activists lost their lives, and made other sacrifices for minimum wage and 40 hour week.
Sweat shops lead to a vicious cycle of malnourishment, poor education, hazardous working conditions, and more poverty and inequality.
They run away-Nike began production in Japan in 1967, and when wages began rising took off to South Korea and Taiwan in 1972, and in turn in 1986 to China and Thailand. In 1994 started some production in Vietnam, but in 2003 China was still producing 38% of Nike shoes.
Privatization? offers better services :
IMF makes this claim (53). WB claims that this would reduce corruption (54).
More than a 100 countries have privatized most of their state owned enterprises, including essential services like water supply, health care and education.
Privatization has also been pushed through trade negotiations to open up local services to foreign services.
The argument is that public entities become bloated as they are insulated from competition. But profit driven corporations slash jobs, cut services, attack labor unions, offer services only to rich customers, and consistently fail to offer affordable services to the poor. (At one point water had been privatized in Bolivia. People were penalized even for collecting rainwater).
Pitfalls of Privatization:
Senegal-In 1999 the country was forced to sell part of its electricity system, in return for debt relief, to a Canadian company. Frequent blackouts followed as the promised modernization did not materialize. GDP fell by 1.5-2%.
Haiti-IMF in its own 1999 report states that the country had privatized 89% of schools and the quality of education in the schools was lower than in public ones. Only 8% of teachers in private schools had full professional qualifications compared to 47% in public ones (56).
Manila-In 1997 WB forced the city to sell its water system to a Filipino-British and US Bechtel consortium which had promised a 74% cut in charges. By 2003, it had raised them by 500% (57).
Unnerved by world wide protests WB and IMF have taken to advising governments to keep ownership of infra-structure and only sell management of services. That has not done much for providing services to the poor, either.
Corruption of Privatization:
Joseph Stiglitz, “In country after country, government officials have realized that they no longer needed to be limited to annual profit skimming. By selling a government enterprise below market price, they could get a significant chunk of asset value for themselves rather leaving it for subsequent officeholders (58). (In Pakistan CJ Iftikhar Chaudhury blocked the sale of the steel mill proposed by the then PM Shaukat Aziz. He went running to Musharraf who ‘defunctionlized’ the CJ. In this one instance, it ended up in removal of a dictator, though in most cases, officeholders get away with the loot, as Shuk and Mush must have got away with other privatizations).
Russia’s privatization is the most glaring example. The number of billionaires went up from 0 in 1993 to 24 in 2003, more than in Japan (59).
Between 2001 and 2004 more than 120 US executives faced criminal charges (60).
Iraq and Halliburton:
March 2003-Halliburton subsidiary Kellogg Brown and Root were given a non-competitive contract of $7 billion over 2 years (61).
January 2004-Defense department audit found that Halliburton had overcharged for fuel deliveries (62).
January 2004-Halliburton employees caught taking $ 6 million in bribes (63).
May 2004-Pentagon audit revealed that Halliburton had charged $ 160 million for meals never served to troops (64).

June 2004-Halliburton employees reported that the company instructed them to overcharge for their services, and abandon rather than repair expensive equipment (65).
August 2004-Pentagon auditors found that Halliburton had failed to account adequately for $ 1.8 billion in charges for feeding and housing troops (66).
Fighting Terror with Free Trade:
Free markets and free trade are key priorities of our national security strategy (White house National Security Strategy (67).
Since 9/11 US officials have used the calamity to push US corporate trade agenda.
Trade negotiations held behind closed doors, and contrary to US law requiring negotiators to consult with outsiders advisory committees are stacked with only big business representatives.
Under NAFTA private foreign investors have the right to sue governments in secretive international tribunals over laws that might diminish their profit. And that includes public interest legislations.
The US government has used free trade as a cover for loosening restrictions on arms exports, which doubled between 1987 and 2000. After 9/11 arms poured in HR abuser countries such as Uzbekistan and Kenya.
Globalization and violence:
Pro-globalization policies have sparked protests. World Development movement reported that between 2000 and 2002, 96 persons were killed in LDCs in protests against WB and IMF.
Chap 4 Drivers of Globalization:
Philip Morris sells over 2.6 billion cigarettes every day. Each cigarette has a blend of tobacco from 70 nations.
GM, Ford and Chrysler pushed the US to create inter-state highway, which led to development of suburbs and atrophy of public transport system. Major car and truck firms consume over 60% of oil, 50% of rubber, 65% of iron, 505 of carpeting and 20% of electronics and aluminum produced in the country (1).
Giant firms such as these drive the world economy and affect the lives of most of the world’s population and every national economy, and steer the agenda of all governments, and have directed the global institutions to meet their interests.
Top corporations-UNO report; there were 7,000 MNCs in 1970. In 2004 there were 64,000, with 870,000 affiliates (2).
Top 200-Between 1983 and 2002, the combined sales of the largest 200 corporations were the equivalent of 28.1% of World GDP, while their employees comprised only 0.82% of the world’s workforce (3).
LDC’s GDP and top 200 Firms:
Money spent on discount goods in Wal-Mart in 2003 was greater than GDPs of 174 countries.
Philip Morris (now Altria Group) sale of cigarettes in 2003 higher than GDP of 148 countries.
Home Depot grew from 200 stores to 1500 between 1994 to 2004, with sales greater than GDP of 147 countries.
Growing economic power of corporations has led to excessive political influence which undermines democracy and undercuts the economic interests of the broader society through monopolies.
The US has reduced its antimonopoly activities (especially during bill Clinton time with removal of restriction on monopoly control of media, deregulation of finance industry and NAFTA). This is ironic as post WW II US had broken up big business combines of Germany and Japan under the pretext that they were incompatible with democracy.
No international body to counter global monopolies exists.
Agriculture:
Globally-
Top ten firms control 1/3 of seed market, more than ½ of biotech and 80% of agrochemical market (6).
In the US-
Top 4 control more than 80% of beef packing, corn and soybean crushing market, more than 60% of grain facilities, flour mills and soybean trading, and more than 50% of broiler chicken and pork packing (7).
Giant firms exert pressure on suppliers to reduce wages, worsen working conditions and environment (Wal-Mart routinely demands suppliers to move manufacturing to China to reduce costs).
Price Fixing-A Purdue University economist estimated that the Archer Daniels Midland producer of 54% of US Lysine, a livestock feed additive, and three Asian producer of feed-grade Lysine overcharged producer and feed companies by 65 to 140 million between 1992 and 1995 (8).
In 2004 a jury awarded $ 1.3 billion to a group of cattle breeders against Tyson/IBP for manipulating the market to lower price for suppliers (10).
Monopoly-One case against Seminis Vegetable Seeds Inc and LSL biotech for entering an agreement to produce long shelf life tomatoes which reduced competition in the development and sale of vegetable seed 911).
Big Pharmaceutical Firms:
% of Global market-Pfizer 12, GSK 8, Merck 6, AstraZaneka 5, J&J 5, Aventis 5, BMS 4, Novartis 4, Roche 4, Wyeth 4
In later 1970s, the top twenty firms accounted for only 5% of the world drug sales. Following a frenzy of sales, by 2002 they controlled more than 75%. By 2004 top ten controlled 57% with sales of $352 billion (12).
They have tremendous influence over public policies and have benefited enormously from government funded research. They have successfully resisted addressing the most pressing public needs, concentrating on profit alone, focusing on drugs for baldness and impotence. Pfizer sold 1.9 worth of Viagra in 2002 alone.
They block efforts to make medication more affordable; Novartis has not allowed its leukemia drug, Glivec to be sold cheaply. In South Korea the company refused to sell the drug at the price set by the government. It used Glivec as a wedge in India against the country’s practice of authorizing generic drugs (13).
Lobbying-Large corporations and finance houses employ expensive and influential lobbyists like former legislators, bureaucrats and political party officials. They pool their resources and contribute heavily to political campaigns.
Corporate Coalitions:
They used one of the most expensive and expansive lobbying efforts to have NAFTA passed in 1993. The driving force was a coalition called ‘USA*NAFTA. They enlisted 35 Fortune 500 companies to whip up support in 50 US states. More than 2000 member corporation gave back up support.
Economic Growth and American Job Coalition formed in 2004 to defend corporations against public outrage over outsourcing of US jobs, but this group of 200 companies is the leading opponents of outsourcing US government contracts, and in 2004managed to block such legislation in over 24 states.
Permanent Business Groups:
Business Roundtable-The Club of the CEOs of 150 leading US firms is the driving force behind campaign coalitions.
US Chamber of Commerce-the biggest business organization in the world, represents more than 3 million forms, its members held more than 700 meetings with US congressmen or aides in 2003.
US Council for International business- Makes representations on behalf of firms to WTO, ILO, OECD.
National foreign Trade Council- Working to overturn the 1789 Alien Tort Claims Act, which is being used to sue US corporations for HR abuses committed abroad.
National Association of Manufacturers-The largest association of industry, with 14,000 members and 350 member association, one of the ten most influential advocacy groups per Fortune Magazine.
Coalition of Service Industries promotes liberalization of services through trade agreements.
Think Tanks-Five major ones had a budget of 110 million.
Heritage Foundation is Far right, and issues annual “index of economic freedom” to rank countries on liberalization.
Institute of International Economics-Promotes further liberalization.
American Enterprise Institute, the think tank of Fortune 500, is the major backer of free trade and received 23% of its revenue from corporations.
CATO Institute advocates severe limitations on government interference in the market. Thinks even IMF is a market meddler.
Brookings Institute produces pro-globalization analysis.
Public Institutions:
The great depression of 1930s resulted in collapse of stock markets, widespread shutdown of factories, closure of banks, and trade flow collapsed as nations erected protectionist barriers.
Post WW II leaders wanted to prevent such a collapse occurring again. US emerged from the war relatively unscathed, and commanded ½ of the world’s industrial production and 4/5th of its gold reserves, its negotiators used its economic strength to assure its dominance (14).
The institutions created were; World Bank for production, IMF for finance, and GATT for trade. WTO succeeded the last in 1995.
In 1944, British and American negotiators created the WB in a conference in Bretton Woods in NH to help with post WW II reconstruction, and IMF to oversee the International financial and monetary order. GATT was set up last.
IMF:
Early on it rushed funds to Tanzania when the price of cotton plummeted. Between WW II and IMF, while all currencies were pegged to the US dollar, it helped with loans when currencies were under pressure. In 1971, Nixon un-pegged currencies.
During 1980s IMF- moved to protecting private investors and banks rather than helping LDCs avoid currency crises, started pushing more stringent conditions on the countries that received loans. In 1960s and 70s it loaned hundreds of billions of dollars to LDCs for ecology damaging projects like dams, for 5 star hotels and nuclear plants. Much of the money went into the pockets of dictators and corrupt officials of all kinds, and by 1980s much of it could not be repaid. In 1982 Mexico was the first large country to declare that it could not service (pay interest on) its loans. IMF in concert with the US treasury department, and banks told it and other such countries that they would not get new loans to repay old ones (thus compounding the debts twice-See Confessions of An Economic Hit man-John Perkins) till they agreed to an IMF Reform package (which entailed selling national assets at fire sale rates, reducing budget deficit by cutting down on welfare, education, health and employment, liberalizing trade and imports, destroying national industry and agriculture, deregulating everything and making a few rich at the cost of making every one else, especially women, children and the poor, miserable).
If IMF does not give a country its stamp of approval, it gets cut off from all credit sources, including WB, regional development banks and private resources. WB does the same.
IMF and WB do not function like UN agencies on a ‘one nation, one vote’ system. Voting power is pegged to the size of economy and on financial contribution to the WB.
IMF/WB reforms are called SAP ‘Structural adjustment programs’. Stung by criticism and unpopularity IMF/WB have started claiming commitment to poverty reduction. This has turned out to be empty rhetoric.
Zambia-In 1994 it declared that it could not hire an additional 9,000 school teachers it needed, not because it did not requisite funds, but because IMF/WB had put a cap on the % of GDP that could be spent on wages.(15).
Croatia-IMF fought against a law for closing retail stores on Sundays and national holidays as ‘jeopardized free market competition..’ (16).
Uganda-rapidly privatized 4/5 of state enterprises. IMF declared it a success story. Poverty increased from 7 to 9 million between 2000 and 2004 (17).
Financial Casino of IMF:
In 1990s IMF and US treasury l9inked up to force Latin American and Asian nations to liberalize inflow of foreign capital. Billions poured in making a few millionaires. In December 1994 in Mexico and in July 1997 in Asia, billions flew out, and with crash of stock markets and steeply falling currencies, making millions into paupers. (George Soros made $1.5 billion in 2 weeks during the Asian crisis, buying currencies when low, and selling them when they rose with IMF promise of emergency aid).
IMF grudgingly stopped insisting that governments stop controlling capital inflows. It has, however, not allowed imposition of tax on foreign exchange transactions.


WB:

It employs 10,000, has offices in 109 of 184 member countries, and lends more than $20.00 billion a year. It has SAP similar to IMF, and lends for dams and power plants, and funds agricultural modernization programs. The Bank’s article of agreement, however, state that the principal goal is “to promote foreign private investments”. The US treasury has claimed that for every dollar it contributes to WB, US corporations receive $1.30 in procurement contracts” (18).
WB controversies:
-Financed 550 dams valued at $86 billion in the last 60 years, which have displaced 10 million people and have had devastating effect on ecology.(19). World Commission on Dams found that the Pak Mun Dam in Thailand caused 60to 80% decline in the fish catch upstream of the dam.
-Climate Change-the institute for Policy Studies has calculated that between 1992 and 2003, WB financed fossil fuel extraction and power plant projects which will eventually release over 50 billion tons of CO2, twice the amount from energy consumption for the entire world in 2001. The largest beneficiary is Halliburton of Richard Cheney, VP of the USA 2000 to 2008 (21).
-Chad-Cameroon Pipeline, financed with $3.7 billion in June 2000, without ever offering a comprehensive social or environmental impact study. Friends of Earth contend that 2000 gallons of oil per day could leak from the 600 mile pipeline per day (22). European and US companies given oil contracts are exempt from paying Chad taxes.
-Argentina failure, once the much touted star pupil of IMF/WB, has had to rely on WB/IMF loans to pay interest on its massive loans incurred by military dictators. In early 1990s, it liberalized trade and fiancé and privatized virtually all public service. IMF forced it to peg its currency to US dollar, when the value of US dollar began to rise in mid 1990s, the competitiveness of Argentinean exports fell. Privatization led to the loss of health care for millions. Other welfare benefits went down the drain too.
It resulted in deadly public riots in December 2001. the country became the largest defaulter to private banks in history. GDP plummeted 11% in 2002, and unemployment rose to 20%. People rummaged for food in garbage.
IMF advised more cuts in public spending, to back down only when Argentina threatened to default to all lenders. Growth restarted only when the country rejected IMF advice on spending and renationalized some services.
WTO:
Post WW II government negotiators proposed an International Trade Organization with social goal of balancing liberalization of global trade with stimulating full employment, and the principle that poorer nations deserved special treatment in trade to close the gap between the poor and the rich nations.
The US senate vetoed the proposal. A much smaller GATT was formed which aimed at reduction of trade barriers in goods and services, with no measure for full employment, in stead it dictated that all countries must treat all goods from all countries on equal grounds.
Tobacco Companies went to work starting in 1980s. They made large contributions to political parties and candidate in the US. The US government threatened the governments of Japan, Taiwan, South Korea and Thailand to open their markets to tobacco or face sanctions and charges under anti-discriminatory laws of GATT. National Bureau of Economic Research found that cigarette consumption rose by 10% in the 4 countries in 1991 (24).
WTO:
US government started planning to replace GATT with a larger organization with greater powers. Negotiations were completed in 1994, WTO came into being in 1995.
In additions to focusing on tariffs as GATT did, WTO worked to eliminate non-tariff barriers which include health, environment and public interest regulations, as well any laws which give advantage to local firms over foreign ones. Any member can challenge another member country’s laws. Cases are heard in camera in Geneva. An adverse finding will lead to sanctions if the country does not amend laws.
In December 1999, tens of thousands of public campaigners converged on Seattle to protest against WTO. The next meeting was held in Qatar Doha with plans for a new round which was held in Cancun Mexico in 2003 where the streets were filled with protestors. Inside the negotiating halls, the government delegations fought too.
Several blocs of LDCs led by Brazil, South Africa and India rejected DC proposals especially in the field of investment which would have opportunities for expansion to Western corporations. They argued that Western countries should open their markets by cutting agriculture subsidies.
Environment: WTO challenged US Clean air Act. The US caved in, and weakened cleanliness standards required of gas importers. WTO also challenged US Dolphin and sea Turtle protection and Japanese ban on invasive species bearing fruit, and European restrictions on hormone-injected beef.
Unions formed the majority of protestors in Seattle, contending that WTO grants sweeping privileges to corporations, and does not strengthen internationally recognized labor laws, and also oppose the negotiations to lift barriers to trade and investment in services especially in public health and education..
A farmer took his own life by stabbing himself in the chest in Cancun, protesting against dumping of subsidized food in poorer counties by corporations. US family farm groups have also condemned WTO for favoring large agribusinesses.
HIV: Health activists have condemned Intellectual Property Rights rules (TRIPPS) of WTO. These rules allow monopoly ownership of life saving drugs. In 2000, the US government challenged Brazil’s effective program of providing generic Aids drugs at import cost. Under public pressure the US withdrew the complaint.
Teachers: WTO’s General Agreement on Trade in Services (GATS) disallows discrimination against services providers from any member country, but it also limits on restrictions on the number of service suppliers in a particular sector even if for environmental reasons, and there are strong fears that GATS could expand privatization of water, education, health and other essential public services. US officials claim that public services are excluded from GATS rules, yet once a government privatizes a service and places it under GATS rules, reversing the step would be very difficult, as the case would go to a WTO tribunal which are controlled by corporations.
Disputes are technically between governments but officials usually act as corporate agents. In the banana war between EU and the US, because the former preferred bananas grown in the former colonies in the Caribbean and Africa, the US acted on behalf of Chiquita, a US company with extensive banana plantations in Latin America. CEO of the company, Carl Linder and his associates had given $5 million to US political campaigns between 1991 and 1998 (25).
NAFTA between the US, Canada and Mexico, is WTO plus, and came into effect on January 1, 1994, and goes further than other agreements to lift barriers between the very rich US and very poor Mexico. In 1994 Mexico’s average manufacturing wage was $2.13/hour to US $13.14/hour.
Mexican exports increased from $50 to $140 billion, FDI into the country went up from $11 billion in 1994 to $21 billion in 2001, but real manufacturing wages fell by 7% (27), in spite of a productivity gain of nearly 50% (28).
Flight to China: Mexico lost 35% of export assembly job losses of 235,000 to China between 2000 and 2003, as wages are even lower in China.
Between 1994 and 2003, US trade deficit from NAFTA countries went up from $13 billion to $92 billion (29).
US Layoffs. US Labor department found that more than ½ million US workers lost their jobs as their firms had shifted production to Mexico. The criteria used are too narrow otherwise the number would be much higher. Women ( 67% against 47% of the general workforce) and colored people ( colored 54% against 27% of general workforce) are the worst affected, as apparel industry is the worst affected and they make up a disproportionate portion of the industry’s employees (30).
Investor Sue: In the past they could sue for ‘direct appropriation, e.g. if the government took over private land to build a highway, now under NAFTA they can sue if any government act diminishes the value of FDI, including environment and public health regulations.
The first lawsuit was by a US corporation Ethyl over a Canadian ban on sale or use of MMT, a gasoline additive and a suspected neurotoxin. Canadians caved in, withdrew the ban and paid $13 million as compensation. Investor tribunals have ruled in favor of investors (all US) to the tune of over 22.5 million (31).
Larger Free Trade Area:
In 1994 US and collaborators in the Western Hemisphere launched negotiations for Free Trade Area of the Americas which would included all of Latin America plus the Caribbean except Cuba.
NAFTA curse:
-US corn export to Mexico doubled in the first seven years (32).
-Mexico lost 1.3 million agricultural jobs between 1993 and 2000 (32). Rural poverty increased from 79 to 82 % in the first 4 years (33).
-Price of corn paid to producers fell by 50%, price of tortillas rose by 200% due to monopoly pricing (35).
-the number of illegal immigrants from Mexico to US grew from 2 million in 1990 to 4.8 million in 2000 (36).
-US border guards increase from 4,000 to 9,800 (37). Subsidies: About 50% of the billions in subsidy goes to the largest 10% (38).
-the profit of the two largest corn producers, Cargill and Archer Daniels Midland rose by 28 and 233% in the first 10 years of NAFTA (39).
Responses to Globalization:
It is not inevitable. Campaigns operate on local, regional and international levels.
Kofi Annan, Pope John Paul II, Mary Robinson, Luiz Inacio Lula DA Silva, Nelson Mandela, Aung San Suu Kyi, and Joseph Stiglitz have all raised their voices.
Governments have taken advantage of post 9/11 atmosphere and have increasingly used police and other security forces.
Organizations, trade unions and HR groups have protested at WTO meetings with limited success. Groups like World Social forum, International Forum on Globalization, Hemispheric Social alliance, The interfaith Center For corporate Responsibility, consumers against GM food, labeling GM initiatives, Rugmark to prove that child labor was not used, movements to curb conspicuous consumption, Student movements are all contributing. Many small rural localities have successfully kept Wal-Mart out of their areas.