GLOBALIZATION

In an act of historical coincidence, it was on September 11, 1990, that the first President Bush stood before a joint session of congress to declare the dawn of a new age. The preceding year had brought about the effective collapse of the Iron Curtain that had divided Europe since World War II. A confident and optimistic American president saw before our nation and the world an era of historic transformation. It was time, declared the president, “to forge a new world order.” This new order would be based on democracy, the rule of law, and human rights. But to many within the administration and around the world what the president was really talking about was trade—the victory of capitalism and the transformation of the world into one giant free market.

The following decades have witness a fierce and at times violent debate about the nature of this new world order: who benefits, what are the rules of the game, what is the cost of entry, and is one giant world economy really a desirable or sustainable outcome? The phenomenon of “globalization” has come to define this era; it has become the prism through which almost every foreign policy decision is viewed. Access to oil and raw materials, markets and labor—these are the values that are driving the international system.

It has become fashionable in foreign policy circles to view an integrated world economy as a harbinger to a new age of peace and prosperity. This optimism is predicated on the belief that we will not fight with people we do business with; a system that is inter-dependant makes our old adversaries new allies in a drive to produce and consume. Some are not so sanguine. A world of unrestricted competitive capitalism is a zero-sum game, with clear winners and losers. As the gulf between the haves and the have-nots increases, and new technologies broadcast this disparity to people throughout the world, the potential for violent conflict may actually increase.

Harvard political scientist Samuel Huntington does not share the optimist’s view of globalization. “Increasing trade in the international system is, by itself, unlikely to ease international tensions or promote greater international stability,” he writes. “Some international conflicts will actually be exacerbated by the corrosive side effects of globalization.” These corrosive effects can be most clearly demonstrated by the ways in which the integrated world economy distributes wealth.

We live in a world with an unprecedented disparity between the rich and poor. Today, twenty percent of the world’s population consumes eighty percent of its resources, while another twenty percent subsists on less than one dollar a day. Thomas Homer-Dixon, the Director of the Peace and Conflict Studies Program at the University of Toronto, has calculated that the combined income of the world’s richest 225 people exceeds the income of the poorest forty-seven percent of the planet. For billions of people, the economic benefits created by the international system can be scarcely imagined. This vast population is also becoming increasingly aware of all they do not have. President Clinton warned on a trip through Africa that “global poverty is a powder keg that could be ignited by our indifference.”

The days when political leaders in the United States could stand up and say what is good for America’s major corporations is simply good for America, are over. William Greiter has written extensively on the global economy. In summarizing his central critique, he writes, “As the global system progresses along these lines, people will begin to grasp that enormous economic power is becoming concentrated in a very few hands and on a plane beyond national systems of accountability.” A statistic that flushes out Greiter’s observation is the fact that seventy percent of all global trade is controlled by just five hundred corporations, and these corporations are becoming less defined by any discernable national identity.

GLOBALIZATION AND THE NATION-STATE
“Sovereignty is not a physical fact. Sovereignty versus other considerations is one of the leading issues in world politics at the beginning of the twenty-first century.” -Zbigniew Brzezinski

The stark and deserted streets of Flint, Michigan, or other industrial cities in the American heartland, provide a telling visual for the costs of entry into the global economic system. One central advantage to the breaking down of trade barriers is it enables corporations to view the world as one giant labor pool. In setting up systems of production, these companies “arbitrage” their labor costs, scouring the globe for the cheapest workers, pitting one country’s workforce against another, with an eye for lowering the floor on wages and benefits.

In this sterile calculus, one American machinist is the equivalent of sixty Chinese machinists; one Frenchman, forty-seven Vietnamese. These stark wage disparities have naturally led to a flood of skilled employment draining out of the industrialized democracies, and into the Pacific Rim. Once viewed as a champion for the American economy, General Electric has shrunk its American workforce by over one hundred thousand jobs in the last decade, while tripling its revenues and profits, partly through outsourcing.

Another example of the blurring of corporate national identity is that of the Boeing 777 “Dreamliner.” For decades, the U.S. government has acted as almost a marketing agent on Boeing’s behalf. Yet, when the company announced is plans to build its new flagship airplane, the production was dispersed throughout twelve different countries. The corporation’s major capital investment over the last decade has been a state of the art production facility outside Ganghzou, China. Over the last decade, Boeing has been effectively exchanging thousands of Seattle machinists being paid $50,000 a year with health insurance and pensions, for Chinese workers making $600 a year with no benefits at all.

All told, between 1980 and 2005 American production jobs shrank by thirty-seven percent, while offshore production increased by almost an equal amount. In that same timeframe, Fortune 500 firms shed an additional four million jobs. These are jobs that are not coming back.

In addition to the arbitraging of labor costs, corporations also enjoy the benefit of skirting the environmental, health, and safety regulations that for decades have been a cost of doing business in the industrialized democracies. Under the rules of the World Trade Organization, an entity created in the 1990s to help regulate international trade, up to eighty percent of environmental regulations in the United States could be ruled illegal within the international trade system.

All this leads to the questions: what is a nation, after all, if commerce has eroded the meaning of national boundaries? What does it mean to our system of government, if corporations have the incentive to find ways of doing business that avoids the prerogatives and laws of countries?


DEMOCRACY AND THE INDIVIDUAL
“In America the confidence in the omnipotence of markets has been transformed into a foreign policy that assumes internationalizing markets is tantamount to democratizing them.” -The Case Against the Global Economy

This is not the first time in history to introduce the concept of unified world economy. The centuries of European adventuring around the world that has come to be know as the “Colonial Era” was largely driven by commercial interests. Columbus was not on a scientific expedition when he stumbled upon the Americas. He was looking for a more efficient route to supply the growing European appetite for spices. He was on a trade mission.

The collective memory of this era, and its accompanying violence and exploitation, may not be in to forefront of thinking in the industrialized world. But it is the prism through which much of the world continues to view Western motivations and behaviors when it comes to commerce and trade. Hernando de Soto is an economist who has spent his career studying development patterns in some of the world’s poorest regions. He writes, “Most people in developing nations view capitalism as a private club, a discriminatory system that benefits only the West and the elites who live inside the bell jars of poor countries.”

To many in the developing world, the project of globalization is simply another form of economic colonialism. This view seems to be validated in the form of direct investment that multi-national corporations are making in the less developed regions. The largest private investment ever made on the continent of Africa, a $3.5 billion pipeline, is designed to drain energy off of the continent, not foster development within it. And the paradigm of wage arbitrage, which pits one labor pool against another, serves to lower the incomes of the world’s manufacturing workers.

A case can be made—especially in China and Singapore—that the outsourcing of manufacturing from the industrialized world has led to higher standards of living. Indeed, many of the manufacturing jobs in China offer a significant step up the economic ladder, and can mean the end to a life of rural poverty. But the question remains as to whether this form of capitalist development brings an attendant increase in political freedoms and human rights. The record on this account is bleak. China and Singapore continue to rank among the world’s most repressive regimes in terms of political freedom and human rights, according to the organization Freedom House.

William Greiter in his book One World, Ready or Not tries to dispel the notion that capitalism and democracy are somehow wed, or that the historic trajectory of the West is bound to sweep across the globe, freeing billions in the process. He writes, “The great multi-nationals are unwilling to face the moral and economic contradictions of their own behavior. Indeed, one of the striking qualities about global enterprise is how easily free market capitalism puts aside its supposed values in order to do business.”



TOO MUCH STUFF
Perhaps the most striking feature of the globalization project is its wondrous ability to create stuff. By effectively utilizing the world’s cheapest labor pools, and skirting costly environmental and safety regulations, multi-national corporations have become more productive in manufacturing goods than would have been even imaginable to generations past. The stocked isles of inexpensive goods at Wal-mart and other box stores are a testimony to massive efficiencies of scale and low-cost production.

Yet, ironically, this success may also be one of the greatest liabilities to the world economy. The trend of outsourcing manufacturing away from the industrialized democracies to the Pacific Rim, has the net effect of removing middle class consumers from the market, one worker at a time. As an example, the Boeing machinist in Seattle could actually afford to fly on the planes he or she were helping build; their Chinese counterpart cannot.

The global system has been fixated on low cost production, and has developed remarkable technologies and strategies to deliver an abundance of goods to the market. But it is failing to generate new consumers with sufficient incomes to buy them. Since the 1950s the United States has served as the world’s “buyer of last resort.” America’s burgeoning middle class of the mid to late twentieth century could be counted on to consume the spare capacity within the global economy. This middle class has been the effective engine, the market, for the globalization project. As this middle class begins to shrink due to job losses, so too does stability of the system.

Between 1989 and 2005, eighty percent of male workers in the United States saw their wages stagnate or decline. Entire manufacturing enterprises have been shuttered, and communities of workers forced to find other means of employment, often at a fraction of their previous income. This is no doubt a stress on the workers and their families, but it also brings an element of fragility to the system as a whole.

The auto industry is a good example. As automobile production has shifted to lower cost regions around the world, productivity has shot up, while consumer demand has decreased. Each year the auto industry manufactures almost forty percent more inventory than there are consumers to buy. As an example, in 2000 the industry delivered 79 million vehicles, and was only able to sell 57 million. More than 20 million vehicles found no consumer with a sufficient income.

Peter Schavoir, a one-time director of strategy at IBM, frames the problem this way, “You can’t become so efficient that all this stuff is made without any middle class labor content. Because then you have nobody with the money to buy anything.”


PLAYING POKER ON THE TITANIC
“What an astonishing thing it is to watch a civilization destroy itself because it is unable to reexamine the validity, under totally new circumstances, of an economic ideology.” -James Goldsmith

One final element that deserves to be explored within the globalization project is the very ability of the earth’s environment to sustain it. This is no small point. The success of the capitalist model of the 20th century was predicated on an almost endless supply of cheap energy and raw materials. The wealth the system created was for the most part through a process of transferring “natural capital” into financial capital. We cut down trees and burned oil in an effort to grow the economy.

Between 1970 and 2000 the world lost approximately one-third of its natural resources wealth. This includes hardwoods from the Amazon, crude oil from Saudi Arabia, fish stocks off New England, top soil in India. The list goes on. It is a law of thermodynamics that can apply to economic development: you cannot get something out of nothing. Everything the capitalist economic system depends upon comes with a cost.

What is ominous is to watch as over two billion people in India and China begin to aspire to the energy and resource intensive lifestyle that we in the West have come to take for granted. While it is true that bringing this population into the system may solve the shortage of viable consumers, it could also collapse the world’s biosphere. Today, we in the United States consume on average more than ten times the energy per capita than China or India. Yet as these two developing nations look to grow their economies they are following the same resource and energy intensive strategies that have proven so effective in the West.

There are two serious problems with the prospect of bringing China and India along this path to development. First is the growing scarcity of energy and raw materials. The “easy” energy that fueled the post-war economic miracle in the West has been heavily depleted, and what remains of this easy energy continues to be a major flashpoint for international conflict. As India and China enter the geopolitical competition for Middle East or West African oil, for example, they bring with them a heightened potential for inter-state violence that could destabilize the international trading system.

But more ominous is the prospect of what success could look like if these two emerging economies continue to develop along this path. The overwhelming scientific consensus regarding global climate change, and the role of fossil fuels and industrialization in driving it, leaves the planet in a very tenuous position. Most climate scientists believe that we need to start immediately to reduce global carbon emissions if we are to stave off the worst effects of climate change. But instead of any real prospect for reducing emissions, we are actually on the verge of significantly increasing them as the world’s developing nations strive to build industrial economies dependant on the same energy and resource strategies that created this looming crisis.

It may well turn out that our planet simply cannot support an economic system that depends on such intensive consumption of energy and resources. The globalization project is built on the premise that it makes economic sense to produce goods halfway around the globe; that American consumers should be buying waste baskets made in China and apples from Chile. But there are serious questions as to how long such a system can sustain itself, and what it will mean to global stability once we run into the truly uncompromising ecological constraints the planet places before us.

Billionaire investor James Goldsmith thinks we may already have reached the end of this road, we just haven’t noticed. With our economic models so focused on quarterly output and profits, we may be blinded to a larger picture that surrounds us. He writes in the Financial Times of London, “A system that feeds on itself cannot keep eating forever.” To use a rather stark analogy to what we may be experiencing today, he observes, “In hindsight, some of capitalism victories may be a bit like winning at poker—on the Titanic.”

QUESTIONING OUR ASSUMPTIONS
“Globalization is not something we can hold off or turn off. It is a force of nature—like wind or water.” -President Bill Clinton

On November 30, 1999, the globalization project was given a new face as tens of thousands of protesters clogged the streets of downtown Seattle. The occasion was the meeting of the World Trade Organization. Business and political leaders were met by unruly throngs representing divergent groups of environmentalist, labor unions, human rights advocates, or some who simply wished to protest any system of global authority whatsoever. It was an image that flashed back to the violent protests of 1960s, with heavily armed police firing teargas into crowds and young people being beaten with batons. The images seemed to capture a large and growing population who feel disaffected from the international system—and this in the richest nation on earth.

In the Cold War era, it was easier to define what we as individuals, and our nation collectively, represented. It was an ideological struggle between freedom and repression. But as the international trading system emerged as the dominant paradigm to world affairs, it has become increasingly difficult for individuals to understand where they stand, what values “we” represent, or where these trends are leadings us.

To be fair, there is lingering hope that the globalization project will eventually benefit the world’s poor. Some see the opening up of borders and the free flow of goods and services to offer a more level playing field in the world’s economic order. Secretary General of the United Nations, Kofi Annan, stated that “the main losers in today’s very unequal world are not those who are too exposed to globalization, but those who have been left out.” Some of the most enterprising leaders in Africa today view global trade to be the long-awaited panacea to the continent’s suffering. And to millions of workers across the Pacific Rim, the explosion of international production and trade have brought jobs, modern infrastructure, educational opportunities—in essence, an entrée into the modern world.

But to critics, the fragility of the system is what is most troubling. Over the last decades, the world has invested trillions of dollars in the global trade infrastructure—an investment based on a series of assumptions. These assumptions include the basic economic viability of global production. Our system has been weaned on the ready availability of cheap energy that allows goods to be transported ever-greater distances around the world. But as energy becomes more scarce and costly in the coming decades, transportation costs may cause a sudden shock to the system. According to the economic forecast of the organization World Markets, that day of reckoning may already be upon us. Their annual report for 2008 states, “In fact, the explosion of global transport costs has effectively offset all the trade liberalization efforts of the last three decades.”

Beyond the economic costs, the globalization project depends on a world at relative peace, in which countries and regions can be depended upon to cooperate. The continuation of global trade requires not only peace and stability, but the absence of any pandemic disease that could stop the flow of goods overnight. Finally, the export of terrorism as a weapon of political dissent opens the world’s trading infrastructure to be likely and vulnerable targets for those disenfranchised by the system.

Eleven years to the day after President Bush stood so confidently before the country to declare the dawn of a new era, a group of nineteen men indoctrinated in an anti-Western ideology, and living lives largely removed from the benefits of globalization, chose for the targets of their terror and destruction two of the most visible signs of the global economic system—the twin towers of the World Trade Center.