Tuesday, June 07, 2005

globalization and the Church's response (part 4)

The next major and important component of globalization that I will blog about is economics. After the French and Dutch rejection of the European Union's (EU) constitution last week, Robin Cook, who used to serve in British Prime Minister Tony Blair's cabinet until 2003, commented in the Guardian that "What Europe needs are credible figures with a political future who can convince the public that the European Union is a necessary, effective response to the pressures of a globalised economy." Indeed, a significant effect of globalization can be seen and felt in the realm of economics, and what the EU needs is a good front-man who can "sell" anew to the European people the benefits economically of fostering a closer union. Part of "selling" the EU is knowing all about how the trend toward globalization is driven by profits.

Etienne Perrot in her piece in the publication Concilium writes that revenue is the ultimate driving force behind internationalization: profit drives the push toward globalization. "The development of internationalization can be understood only in the light of the invention of revenues…Revenues appear as a right to take advantage of global economic wealth," she writes ("The General Dimensions of Globalization and its Critics." Concilium. page 22).

Hand-in-hand with profit, there are other areas in economics where we can see globalization active, areas such as exchange rates, exports, private capital flows, the rise of multinational corporations, outsourcing, and the formation of regional trading blocs. Each of these areas will be briefly dealt with in this posting.

Exchange rates
In the area of exchange rates, the average daily turnovers, according to David Held's book Globalization/Anti-Globalization, is up to $1.2billion. Moreover, exchange rates in country could have a direct impact on the economy of another.

An interesting news report from the Wall Street Journal six months ago said that Latin American countries stand to gain from a weak American dollar: an indication of how interconnected the economies of the world are today. A weaker dollar according to the report would make repayment of the South American countries' debts easier. With an external debt totaling about $735.7 billion according to the IMF, "some companies are moving to repay loans with cheaper dollars" (Matt Moffett, "Latin America Is Aided By Weaker Dollar," Wall Street Journal, December 3, 2004). However a lower dollar could also make exports from Latin American countries much more expensive as for instance Americans would have to pay more for Latin American exports. The demand for their exports could decrease due to their higher cost.

Another globalizing trend in economics is in the area of exports. Exports as a percentage of gross domestic product (GDP) in Western Europe for instance rose to 35.8% in 1998 from a mere 8.7% in 1950. The figures have also been steadily rising in other parts of the world. In Asia, the figure is 4.2% of GDP in 1950 compared to 12.6% in 1998. The figure is also going up in Latin America: from 6.0% of GDP, the percentage in 1998 is 9.7%.

And this has been the trend in most areas in the world, except in Africa where there has actually been a decline. In 1950, the percentage of GDP from merchandise exports was 15.1%. In 1998, the figure dropped to 12.6%. Overall, around the world, the percentage of GDP coming from exports rose from 5.5% (in 1950) to 17.2% (in 1998). These numbers show however that, in most parts of the world, the share of income of many nations that come from exports have been steadily rising.

Capital flows
Other facts and data show that the growth of globalization may also be found in the capital flows to developing countries. For instance, in 1993, the figure was about $200billion; and in 2000, the figure is roughly $250billion (State of the World 2002: A Worldwatch Institute Report on Progress Toward a Sustainable Society, W.W. Norton & Company: New York, 2002, page 187).

An article from the Economist last year however explored the pluses and minuses of such flows within a country. Historically, capital flows--which includes bank lending, investment in public or private bonds, investment in equities, direct investment in productive capacity--have been helpful for countries. "History suggests that the most successful developing countries, at least up until the First World War, benefited enormously from foreign capital. And everybody agrees that the flow of capital from one rich country to another is wholly beneficial for both sides" ("Survey of global finance," Economist. May 3, 2003, page 6). However, the same article acknowledges that there are drawbacks to increased capital flows within a country. As it turns out, benefits will come for a country if its economy itself is running well, and if the country's economic policies are working well. Financial integration brings with it, therefore, mixed blessings.

Multinational Corporations
The rise of multinational corporations, or MNC's, has also been another indication of the reality of globalization. For instance, in the year 2000, there were 60,000 MNC's worldwide with 820,000 foreign subsidiaries selling $15.6 trillion of good and services and having twice as many employees as in 1990. Also, related to MNC's, Held writes that "Multinational corporations now account, according to some estimates, for at least 25 percent of world production and 70 percent of world trade, while their sales are equivalent to almost 50 percent of world GDP."

Related to MNC's is employment outsourcing. A new book by by Thomas L. Friedman called The World Is Flat mentions outsourcing as another characteristic of globalization. In a review of this book by Warren Bass of the Washington Post, the reviewer says:

"The reason that Indian accounting firms are expected to do about 400,000 American tax returns this year, that small U.S. hospitals have their CAT scans read in the wee hours by Indian or Australian radiologists known as the 'Nighthawks,' or that the Chinese port city of Dalian is taking outsourced work from its former imperial masters in Japan, Friedman argues, is that the world is undergoing 'one of those fundamental changes -- like the rise of the nation-state or the Industrial Revolution' -- that transform the roles of individuals, governments and societies. The world was flattened, he writes, by 10 forces, including the fall of the Berlin Wall and the discrediting of Soviet-style command economies; the 1995 Netscape IPO, which opened up the Internet for easy browsing; the dot-com era overinvestment in the fiber-optic cables that such globalizing hubs as Bangalore and Shenzhen, China, rely upon to cheaply transmit data around the planet; search engines like Google, most of whose queries are now no longer in English; and such flat-world 'steroids' as PalmPilots, tiny laptops and the wireless technology that lets one of Friedman's colleagues merrily e-mail from aboard a Japanese bullet train."

All of these could be seen as indications of a growing globalization.

Trading blocs
Another aspect of globalization is the formation of regional trading blocs or customs unions such as the European Union, which has emerged from a trading bloc to a community that has been gradually forming into a military and a political union. Of course, with the recent rejection by France and the Netherlands of the EU's proposed constitution, there are now questions as to how Brussels will respond and go forward with integration. But according to Held, "regionalism has largely facilitated and encouraged economic globalization since it principally takes the form of open regionalism in which the liberalization of national economies (for instance, the Single European Market) takes precedence over protected markets."

Another trading bloc is the Association of Southeast Asian Nations (ASEAN). Comprised of Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand, it is now considering including Cambodia, Laos, Myanmar, and Vietnam. However, the road to greater openness in trade in the form of lower tariffs seems to be a long way still for the nations that constitute ASEAN. Tariff cuts for instance which were already agreed upon in the past are yet to be implemented. Also, bilateral agreements between ASEAN countries and countries outside the trading bloc are going on. According to the Economist, "several members are pressing ahead with bilateral trade agreements that pre-empt and, in the eyes of some, undermine collective negotiations" ("More Effort Needed." Economist. July 31, 2004, page 35).

The success then of any globalizing venture such as the formation of a free trade zone among the ASEAN countries still depends very much on the cooperation and the discipline of each member country to the cause. ASEAN member states ironically are undermining the very organization that could help in their own economic advancement, according to some economists.

The price of globalization
These are only some of the economic trends and statistics that reflect a growing globalization. However, oftentimes the price of economic and financial globalization is steep for developing countries. J. Milburn Thompson in his book Justice and Peace points out, using a term by Tomas Friedman of the New York Times, that a country's entrance into the global market can be like a "Golden Straightjacket." There are rules and policies which either the IMF or the World Bank may prescribe to a country in exchange for the country's receipt of foreign loans or assistance: "maintaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restrictions on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privatizing state-owned industries and utilities, opening its industries…" (Thompson, J. Milburn. Justice and Peace. Orbis Books: New York, 2003. page 36).

Implementing these policies would oftentimes give an administration very little room in which to make other policies, as their policies basically have already been crafted for them from the outside. And sometimes these policies call on the citizens to make enormous sacrifices.

So, a question that should come up are the ethical concerns that emerge from this globalizing trend. Is globalization merely all about profits and money, or is there an ethical or even moral component to globalization.

Ethical concerns related to globalization are what the Rev. John Coleman, SJ addressed in his recent speech at the University of San Francisco on Oct. 12, 2004. He mentions for instance the unethical selling of basic necessities such as water in Brazil at exorbitant prices. But what is interesting in Coleman's words are his mention of the three blind spots or lacunae in Catholic social teaching concerning globalization. The three he mentions are: global governance, multinational corporations, and the environment.

At the next and last installment, I will take a quick look at each of these three blind spots.

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