Globalization (2005)

Globalization: A Portrait of Exploitation, Inequality, and Limits

Arthur L. Dunklin Faculty Member, Kaplan University School of Business Senior Diversity and Equal Opportunity Specialist, Western Washington University adunklin@wans.net

Arthur L. Dunklin
Faculty Member, Kaplan University School of Business
Senior Diversity and Equal Opportunity Specialist, Western Washington University
adunklin@wans.net

Abstract

Twentieth- and Twenty-First Century globalization has left the world economically polarized between countries that enjoy heretofore unimaginable wealth and countries that are crippled by poverty. Globalization—as a tool of capitalism—necessitates these inequalities and the institutions of globalization perpetuate them. In addition to creating a massive gulf between the richest and poorest nations on earth, globalization serves to limit the dominance of any single nation-state. Moreover, although poor states are exploited in this globalized society, this exploitative capacity is limited by factors that reside largely outside the control of the rich nations.

Key words: Globalization, Inequality, World-Systems

Introduction

Few topics raise such heated debates as the issues surrounding globalization. This apparent move toward a world where states and societies increasingly behave as if they were operating in a global territory is seen by many as representing an emerging system of governance where international organizations—such as the International Monetary Fund (IMF), Transnational Corporations, the World Bank, and the United Nations—serve as agents working within a quasi-constitutional framework (Gill, 1998). Many see globalization and its associated issues as the fundamental challenges of our epoch (Held and McGrew, 2000).

How did the world get to this present state of interconnectedness? Some suggest that the nation-state has been a part of a larger international system for centuries and that international integration is an important part of a long-term trend (Chase-Dunn, 1998). Others say the contemporary state of affairs is a major transformation in world history, while still others dismiss globalization as a convenient myth constructed to justify the creation of a free market and spread of Anglo-American capitalism throughout the major economic regions of the world. Following the analysis of traditional Marxism, they assert that globalization is being used as a guise for expansionist capitalism (Held and McGrew, 2000).

In this paper I go beyond the debate about the existence of globalization and argue three key points. The first of these points is that globalization—as a tool of capitalism—necessitates inequality among states and the institutions of globalization perpetuate these inequalities. Second, globalization necessarily serves as asignificant limiter of the dominance of any single nation-state and reduces the significance of military superiority. Third, although globalization is designed to advance the interests of stronger nations at the expense of weaker states, its exploitative capacity is limited by factors that are largely external to core states.

Globalization as the Harbinger of Inequality

Proponents argue that globalization has provided life-saving opportunities for millions of people around the world. They often point to increased trade, new and better technologies, expanded media, and economic growth (Held and McGrew, 2000) as the tangible benefits of participating in a globalized economy. The dominant capitalist global marketplace (as the argument goes) has motivated some of the greatest innovations in world history, has led to the eradication of diseases, and has created wealth that far exceeds anything the world has ever known. Moreover, largely because of the social and technological advances made due to globalization, many people live longer and have higher standards of living (Stiglitz, 2002).

If this is all true, then why is it, then, that so many people around the world harbor such an intense dislike and even hatred for that country which they see as the face of the new global marketplace—The United States of America? The answer to this question can be discerned—at least in part—in the amount of inequality that has resulted from globalization, with the United States as its principle proponent. I argue that these inequalities are a necessary component of US-conceived globalization.

While the benefits of globalization are significant and many lives are better off because of it, the global capitalist society is wrought with inequalities. The United States—consisting of four percent of the world’s population—dominates all aspects of global free markets. Furthermore, the richest one percent of the world’s population controls as much wealth as much as the poorest fifty-seven percent (Chua, 2003). As the United States experienced rapid economic growth over the past two decades, many poor countries, including some that were already counted among the world’s poorest, experienced declining living standards. Per capita private consumption within the United States increased by 1.9 percent per year from 1980 to 1998, while during the same period, sub-Saharan Africa experienced a 1.2 percent annual decline (Sachs, 2001). The expansion of the global marketplace has left half the world’s population living on less than two dollars a day and more than a billion people are currently living on less than one dollar a day (Chua, 2003).

Some would suggest that the declining economic position of poor countries is caused by poor governance, the failure to modernize, or cultural depravity. However, the necessity of economic differentials is deeply rooted in US ideology. When viewed in light of the advice of Adam Smith—who is widely hailed as the father of free markets—the exploitative nature of US-conceived globalization is brought into sharp focus. In Wealth of Nations Smith (1991) asserts that the mercantile system ‘…discourages the exportation of the materials of manufacture, and of the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations in all foreign markets…’ and ‘It encourages the importation of the materials of manufacture in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities (p. 577)’.

Poor states, operating in the periphery of the global economy, are essential to the capitalist mode of production (Chase-Dunn, 1998). Historically, these states have served a very important function in terms of the shifting of raw material to the core and the division of labor. Developed countries benefited by selling cheap, capital-intensive consumable products for high prices. Peripheral countries, on the other hand, sold the tools of production to the core at low prices and imported finished products from the core. The thought was that since there would always be a demand for consumables, richer countries would be assured a continued market for their higher-priced goods. Also, the exportation of labor-intensive, higher priced finished products to poorer states caused these poorer states to have less circulation of money in their own economies (Smith, 1994).

However, the age of post-industrial globalization has brought significant changes to the relationship between rich and poor states. The emergence of post-industrial information society leaders—particularly the United States—has created a marketplace that is significantly different from that advised by Adam Smith. In this new age, where the transfer of information to and from remote parts of the world is nearly instantaneous, US corporations outsource significant portions of their manufacturing base to poorer countries around the globe. US dominance of information technology serves as a tool with which it may exploit poor countries’ low-wages workers, weaker environmental laws, and other factors to perpetuate its dominance of global markets. No longer are states in the periphery merely viewed as potential consumers of high priced US goods. They now serve as the inexpensive labor for the production of goods to be sole by US manufacturers at higher prices in global markets.

The maintenance of this relationship between rich and poor states is largely achieved through the manipulation of the institutions of globalization. Using institutions such as the World Bank and the International Monetary Fund (IMF), the U.S. and other Western nations press smaller, less economically secure nations to open their markets to free trade while protecting the weaker segments of their own economies (Stiglitz, 2002). This double standard has been demonstrated in the U.S. timber and steel industries and more recently in its sugar industry. Even as it worked to create a free trade zone with Central America, the United States acted aggressively to protect its sugar industry by seeking to exempt it from the agreement.

Many would argue that no country is actually forced to submit to agreements advocated by the West. However, for poor countries that require economic aid from the West and from global institutions in the form of loans and closer alliances with the stronger nations, submitting often appears to be the only option. The policies of global economic institutions are often closely aligned with the interests of the wealthier nations and loans are often contingent upon those poorer countries submitting to the neo-liberal capitalist policies of the West. These policies often cause countries with underdeveloped markets to liberalize prematurely (Stiglitz, 2002).

The neo-liberal policies of the IMF require poorer states to minimize the role of government and remove or reduce regulations in order to become more attractive to foreign investors. Further, IMF rules often require that they pay off their debt in a timely manner. In order to do this, these poorer states must increase their exports. Because of the large number of countries that are forced into the market place, the prices of their commodities are forced downward. The end result is often poor nations remaining poor or getting poorer (Stiglitz, 2002). Moreover, many of the rules imposed by the World Trade Organization (WTO) prevent developing countries from adopting measures that have long been used by richer countries. For example, the China-World Trade Organization agreement that limited China from subsidizing its agriculture sector stripped that country of a measure that the U.S., Japan, South Korea, and European countries have long used to protect segments of their economies (Wade and Wolf, 2002).

Some have suggested that these harmful actions are cause by a lack of understanding of financial markets. However, wealthier nations appear exempt from many of the harmful policies advocated by global institutions of governance. In Globalization and Its Discontents, Stiglitz (2002) recounts a situation where (IMF) economists suggested that the U.S. would encounter increased inflation if its unemployment dropped below 6 percent. Their prescription was to increase interest rates. However, the U.S. Federal Reserve Board ignored the IMFs recommendation. Although interest rates dropped to below 4 percent, inflation did not increase. The IMF was wrong and the Federal Reserve was right. While the strong United States could ignore the IMFs recommendations with impunity, poorer states do not enjoy this luxury. However, although the United States exercises significantly more leverage in world affairs and autonomy over its own economic decisions, it too is significantly limited by globalization.

Globalization as a an Inhibitor of Absolute Dominance

While globalization is heavily weighted in favor of the more economically stable states of the West, it also limits the ability of any single state to exercise absolute dominance. One characteristic of globalization is economic and political interdependence, which allows countries to influence policies and economic decisions made by other countries. In a recent situation, Microsoft was found to be operating within the boundaries set by U.S. antitrust laws and allowed to continue doing business as usual. However, the British government weighed in and levied heavy penalties against the U.S.-based technology giant for violating antitrust laws in that country. This inability for any one state to set the parameters within which these firms operate has transformed sovereignty into the shared exercise of power, thus weakening individual states’ power (Held and McGrew, 2000).

The checks placed on transnational corporations represent only one means by which globalization prevents any single state from exercising absolute dominance. A number of international organizations—UN, OPEC, WTO, and IMF—have the ability exert influence on the political and economic sovereignty of individual states (Held and McGrew, 2000). Even the large and dynamic U.S. economy is susceptible to actions taken by these organizations. The recent examples of OPEC acting to increase and decrease oil production demonstrate how the actions of these organizations may have global economic and political consequences. The organization’s decision to increase or decrease production had a direct impact on the cost of fuel in the U.S. and that impact reverberated throughout the nation’s political and economic environments.

The interconnectedness of national economies in today’s global environment may be a more potent means of exerting pressures on countries than military might and while the US is certainly the dominant economic power, it is not the only economic power to contend with. The hegemonic status of the United States, in terms of its economic supremacy, has been challenged by the Japanese in the 1980s and is likely to be increasingly challenged by the Europeans and Chinese as the twenty-first century progresses. Furthermore, while New York is important to capital flows to emerging markets, so are London, Frankfurt, and Tokyo. Moreover, if the image of the United States changes from that of defender and stabilizer to that of aggressor—as may already be happening in some parts of the world—it may lose the influence that comes from providing military protection to others (Nye, 2000). The influence that comes from economic alliance could be lost to other economic powers.

Beyond its economic impact, globalization transcends national borders and limits the political and coercive actions individual states take within their own borders, thus further limiting the dominance of any individual state. To a large extent, this authority now rests in the global arena. The events of September 11, 2001 brought into sharp focus how the occurrences in one country can have a direct and significant impact on another. Thus, states and global institutions insert themselves into the domestic affairs of sovereign states in the name of global security. In the past quarter century, this has been demonstrated, to different degrees, in regions from the Korean Peninsula to Yugoslavia and from Germany to the Middle East. Moreover, states’ claim to a monopoly on the legitimate use of force within their boundaries has come under increasing attack in recent years. As demonstrated in Kosovo and Iraq, where a major part of the justification for military intervention was the treatment of the citizenry, national sovereignty no longer equates to a monopoly on the legitimate use of force within state boundaries.

While US military power has been placed on display a number of times over the past quarter century and remains an effective deterrent against aggression, the effects of globalization has significantly limited its importance. The interconnectedness of national economies, world opinion, and the number of states with nuclear arsenals that have the capability to reach the US and its allies all combine to greatly limit the ability of the United States or other countries and world bodies to use military force in many parts of the world. Although the United States continues to spend significantly more on its military defense than all other countries, its ability to use its military machine as a means of influencing other countries is likely to continue diminish as the effects of globalization continue to increase the impact occurrences in one country have on others.

The fact that globalization has increased the interconnectedness of national economies directly affects the ability of the United States to take military action in many parts of the world. US attacks on countries with heavy investments in the American economy would have significant domestic economic repercussions. This is particularly significant considering the amount of foreign investments in the US economy. The Commerce Department calculated that at yearend 2002 the value of foreign investments in the United States exceeded the value of US investments abroad by $2,387,211 million, up from $1,979,906 million at yearend 2001 (US Embassy, 2003). While these foreign investments in the US economy serve to support the American standard of living, it also makes the United States vulnerable to economic downturns in countries that are far removed from its shores. Additionally, these heavy investments also make the US more vulnerable to economic protest against the use of US military force. In recent years, wealthy Middle-East investors took action to withdraw funds from the US economy in what was purported to have been a protest against US aggression in the region. While, this incident did not significantly affect US economic health, should countries such as China, Saudi Arabia, and other countries with deep investments in the US economy register similar protests, the US economy could be significantly affected.

Even among states that are not likely to disinvest in the US economy as a means of protest, the United States must use its military force in a way that considers world opinion. While US Presidents and Congress alike repeatedly assert the duty to use military force in a way that tends to American interests even when allies disagree, their actions indicate an awareness of the need to consider world opinion. The current war in Iraq demonstrates the significance of world opinion. In this case, the Bush administration used significant political capital attempting to sway world opinion prior to invading Iraq. Once the war began, the administration focused its energies on portraying the war as a multinational action that had support from a large portion of the world. The significance of world opinion was further highlighted by the foreign visits the President and Secretary of State made to other countries in an effort to reinforce the US commitment to collaborative efforts to address the world’s ills.

While world opinion has the real potential to influence the use of American military power, the proliferation of nuclear weapons provides an additional check on American military power in the current global environment. Nuclear-armed states such as China, Russia, India, Pakistan, and North Korea restrict the United States’ ability to use military force to impose its will in some parts of the world. Further, the real possibility of nuclear weapons proliferating into the hands of other states that are considered hostile to American foreign polity poses additional risks to US military leverage. In addition to the death and destruction that would result from such an attack, the economic impact of a nuclear attack anyplace in the world would have far reaching consequences in an environment where activities in one country have direct implications for other countries around the world.

Globalization as a Limited Means of Exploitation

The terrorist attacks of September 11, 2001 reminded many—while informing others—that not only is the world smaller in terms of communication flows and the export and import of goods and services, but it is also smaller in terms of the reach of global terror. No longer can vast oceans to the east and west and militarily benign neighbors to the north and south isolate a country from the reach of international terrorist organizations. Moreover, the currently unfolding response to worldwide terror provides an equally compelling portrayal of a world with universal problems that must be addressed through global means. Even the most economically and militarily powerful country on earth cannot defeat this threat by force. By breeding and supporting terrorist groups, countries residing in the periphery of the global economic order will force those countries that have benefited most from globalization to reduce the gap between the richest and poorest countries on earth.

The current approach to this threat is to seek out and arrest or kill terrorists while attempting to deny them the funding required for the execution of mass murder. However, the terrorist attacks on the United States also showed how these massive attacks can be executed without the need for significant monetary resources. Moreover, hostility to the institutions of globalization is being demonstrated by young and old in those countries that are exploited. Thus, the discontentment with globalization may be replenishing the terrorist pool even as the US and its allies seek to arrest or kill those who currently operate.

As they begin to recognize the impact the disparity between rich and poor nations is having on their ability to live in peace, richer nations—the US in particular—have engaged in a campaign to present themselves as having compassion for the poor and disadvantaged of the world. From pledges to increase funding for aids vaccines to contributions to tsunami victims in Asia, the United States seeks to replace the image of a greedy, selfish nation with that of a compassionate one. However, the structural mechanisms that perpetuate inequality remain firmly in place. Moreover, the US continues to spend only a small percentage of its GNP on foreign aid to those countries most in need and the entire continent of Africa remains largely ignored. The implications of such large disparities in living standards are significant and are likely to lead to increased resistance to global capitalism. Additionally, attacks on symbols of power are likely to increase just as they did in the decades following the great expansion of trade and investment in the last decades of the nineteenth century (Bata and Bergesen, 2002).

In a world where such a gap exists between the richest and poorest peoples on earth, conflict is a natural outcome. The concentration of military strength in the hands of the dominant power has historically maintained relative stability (Wallerstein, 1979). However, in an age where an aircraft can be taken and used as a weapon for massive destruction against the most powerful nation on earth, military strength alone will no longer maintain stability. The current approach to world terror neglects to consider the systemic problems caused by global inequality. Although, some of those who carry out these acts do so out of religious fundamentalism, many hate the West—and the U.S. in particular—due to the policies advocated by core states that have created and perpetuated significant inequalities. Many see the US as controlling the global economy, either directly or through puppet organizations such as the IMF or the World Bank (Chua, 2003).

While the US cannot maintain its hegemonic status forever (Wallerstein, 1979) and states will continue to shift between the core and semi-periphery, a more equal distribution of wealth will not occur on its own. In the current age of advanced technologies where images of American wealth are beamed across the globe, conflict is a natural outcome of such dramatic inequalities. Unless capitalism is managed in a way that takes more consideration for weaker states, extreme poverty will likely continue to exist (Stiglitz, 2002). This will benefit no one and core states have much to loose. Today, globalization is being challenged around the world (Stiglitz, 2002). Meetings of the institutions of globalization–the World Bank and the IMF—are met with intense violence and outrage. Those who see globalization as a force that has brought poverty to large parts of the world will continue to oppose it unless something is done to narrow the gap between the rich and the poor. If ideology continues to take precedence over pragmatism, conflict is an inevitable outcome. Just as other market-dominant minorities in history, the United States and other core states will always provoke intense resentments (Chua, 2003). The age of terrorism has brought with it the possibility that richer countries will be awakened to the plight of those countries that live in the periphery observing the displays wealth exhibited by the rich nations operating in the core of the world system. No longer is narrowing the gap between rich and poor countries merely the humane and benevolent thing to do, it has become a matter of self-preservation for the rich countries.

The current form of foreign aid the US provides to poorer countries is not only inadequate in amount, it is also inadequate in form. The use of dollars, medical aid, and food supplies ensures these poor countries will remain at the mercy of rich Western nations—the US in particular—and global institutions such as the World Bank and the IMF. The ability to effect real and lasting change is rooted in the development and proliferation of new technologies. Thus, if the rich nations of the Western truly desire to close the economic gap between rich and poor nations, they must help poor countries develop the technologies that are more likely to lead to real change.

Moreover, the current design of the global marketplace favors the stronger markets of the West and of those countries that are allied with the United States. Even with its strong overall economic position, the US continues to protect the weaker segments of its economy from pure competition. To narrow the gap between the richest states and those that are unable to provide basic sustenance for their masses, the US should advocate for economic policies that are friendlier to poor states. Similar measures have been used throughout history. However, those efforts primarily targeted those states in which the US recognized a strategic military or economic interest.

Additionally, many of the poorest countries in the world are governed by rogue regimes that hoard large amounts of wealth while the majority of the population lives in poverty. Many of these regimes have been supported by the US to further its own interest. Thus, current move to appoint Karen Hughes to articulate American values to the rest of the world fails to address the true causes of anti-American sentiment. It is the failure to live up to its espoused values that causes many to hate the United States. The US articulates a love for freedom and human rights while supporting monarchs and dictators when it is necessary to further its own interests. A nation’s values are more accurately depicted by what it does than by what it says. Accordingly, other nations view America’s values through its actions. Too often, what they see is a rich and greedy nation that is only concerned about its own self-interests.

Conclusion

Few, if any, countries remain unaffected by globalization. While some countries have reaped the benefit of wealth the likes of which the world has never seen, others have grown poorer (Chua, 2003). Globalization has created an economically polarized world that is unsustainable over the long term. While protests from poor countries are not new, those protests have been largely ignored by countries with the wherewithal to create change. Inequality has not only been accepted as a byproduct of the current form of globalization, it has served as a necessary component of the global order. However, the gulf that exists today between the richest nations and the poorest ones have begun to reveal the limits of the exploitative capacity of globalization. Moreover, these limits are largely imposed by states residing in the periphery. Self-preservation dictates that wealthier nations narrow the economic gap between the rich and the poor.

 

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