ourVoices is a new podcast from openDemocracy's ourEconomy section, which explores the crisis of our economic system – and promotes intelligent debate about what should replace it.
The podcast brings together some of the most exciting thinkers from around the world, and gives a voice to those who are putting new economic ideas into practice from the ground up.
In this latest episode of ourVoices, Laura Basu speaks with a range of expert academics and public figures – including Jayati Ghosh, Yanis Varoufakis, Walden Bello and Ashish Kothari – to consider how the rules of today’s global economy are skewed in favour of large corporations and financial institutions.
Laura Basu: We are connected on a planetary scale. The same process that has allowed the coronavirus pandemic to spread so far so quickly – globalisation – also means that all our resources, our infrastructure, our food, energy, clothing, our electronic devices, almost everything human-made that we see around us, contains some component that someone from somewhere else has worked on. Our economy is global. It affects not only every human but also every animal, our climate and every aspect of our environment.
Yet most media coverage of the economy focuses on the national level, and when problems like global inequality, poverty or underdevelopment do get attention, they are often treated as the result of natural forces, or as resulting from corruption or bad governance in developing countries.
In this episode of ourVoices, we want to dig deeper into the structures of the global economy to understand why it is that some parts of the world have so much more wealth and power than others. We ask whether the global economic playing field is rigged in favour of rich countries at the expense of lower-income countries, and if so, what can be done about it?
Steven Pinker: For most of human history life expectancy at birth hovered around 30 years, but today it is more than 70 years in the world as a whole, more than 80 years in the more fortunate developed parts of the world. 200 years ago, no more than 10% of people in the world live above the line for extreme poverty. Today more than 90% do. For most of human history, everyone was illiterate, today more than 80% of the population is literate. Fewer people are dying in wars, fewer people are starving to death, fewer people are dying of infectious diseases. So as the world gets better and better, the coverage gets more and more negative. Of course there are problems, and many of them are horrendous. But acknowledging the world’s progress is not a matter of having a sunny disposition, or wearing rose coloured glasses, or seeing the glass as half full. It’s paying attention to the data, it’s paying attention to the cold, hard, objective facts. [source]
Laura Basu: Before the coronavirus pandemic, it was often claimed by public figures and academics, including Steven Pinker, that humanity has never had it so good, with a billion people lifted out of extreme poverty in the past 25 years, and the economic miracle of China showing that globalisation benefits everyone.
On the other hand, globalisation has come under growing criticism from the right recently, with claims that it has disadvantaged the working classes of the US and western Europe – some of the richest regions of the world – to the benefit of emerging countries where manufacturing jobs have been outsourced. This has led to the emergence of tariff wars and Donald Trump’s determination to make America ‘great again’.
Donald Trump: The United States lost over 3 million manufacturing jobs, nearly a quarter of all steel jobs, and 60 000 factories after China joined the WTO. And we have racked up 13 trillion dollars in trade deficits over the last two decades, but those days are over. We will no longer tolerate such abuse. We will not allow our workers to be victimised, our companies to be cheated, and our wealth to be plundered and transferred. [source]
Then again, back in the 1990s and early 2000s, globalisation was under attack from the left for basically the opposite reason. The global justice or anti-globalisation movement gained mass attention during the 1999 ‘Battle for Seattle’ against the World Trade Organisation. The movement argued that the world economic order was stacked in favour of rich countries and corporations, allowing them to extract value from the global south while outsourcing environmental harm.
Walden Bello is an academic and former politician in the Philippines, and was a leading figure in the global justice movement. He describes how the promise of free market globalisation in reality led to destruction and mounting poverty and inequality.
Walden Bello: It emerged out of a debate. First with institutions like the World Bank and the IMF that were in the forefront of the market-driven development paradigm, or the free-market paradigm. And this debate intensified with the emergence of the WTO in 1995. What these institutions were pushing was that, the more market the better, the more efficient the economy will be, the higher the growth and eventually the less poverty and inequality. This was very much associated with transnational corporations that were seeking to bring down market barriers, investment barriers that characterised many of the economies of developing countries. What we were contending was that the opposite was happening, the more you ‘liberalised’ (as they called it), the greater the poverty, the greater the inequality and the more economic stagnation.
Laura Basu: According to Oxfam’s latest report, the world’s 2,000 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Between 2017 and 2018 the wealth of the super-rich grew by $2.5 billion per day on average, while the bottom half of the world's population saw their wealth decline by $500 million a day over the same period.
[Clip from TRT on 2019 Oxfam Report] [source]
It’s also important to remember that the poorest people in the global south tend to be a lot poorer than the poorest in the global north. According to the World Bank, even the economic miracle that is China has a per capita GDP of around $9000, while in the US it’s $60,000. In Uganda it is $600. And inequality within developing and emerging countries has risen even more than in developed countries.
While the mainstream narrative to explain these imbalances focuses on corruption and bad governance in lower-income countries, others claim that the rules and structures of the world economy are rigged in favour of rich countries. From this perspective, it is impossible for so-called third world countries to ‘catch up’, because the wealth of the first world is achieved at the expense of the underdevelopment of the third world. One’s gain is the other’s loss.
These global imbalances function through a mix of state and corporate power. Transnational corporations are the big winners in today’s global economy. They seek to operate above national borders, and this is how they come to exert pressure on elected national authorities, extract value from across the globe, and avoid paying taxes. However, while these corporations are transnational, most are headquartered in the ‘triad’ of the US, western Europe and Japan. And nation-states tend to push the interests of their own large corporations.
Economist Jayati Ghosh describes this kind of globalisation as a new form of imperialism, which replaced earlier forms of imperialism that were more based on direct conquest and domination.
Ghosh spoke to me about some of these global rules and regimes, beginning with the rules on intellectual property set by the World Trade Organisation, or WTO:
Jayati Ghosh: The most evident legal agreements are of course those from multilateral organisations like the WTO, for example intellectual property rights. Now the proliferation of different kinds of intellectual property rights, patents on all kinds of things – different kinds of trademarks, different kinds of industrial design control and so on – they all mean that certain kinds of companies, usually based in the developed world, can control technologies, and control knowledge. Sometimes all kinds of things are treated as intellectual property that aren’t knowledge that these companies have created. Let’s say farmers using seeds in southern India. They have traditionally used these seeds, but now they are told no, the patent for this seed is owned by a multinational company. You can’t get their permission to plant it. Farmers traditionally keep aside part of their harvest to use as seeds for the next year, but now they’re told no, that is infringing on the intellectual property rights of a particular company.
Laura Basu: Another important area in which the global economic architecture privileges transnational corporations in ways that drain resources away from the global south is through tax avoidance:
Jayati Ghosh: Now that’s another very big thing. It’s another way in which the international architecture almost encourages multinationals to prey on the rest of society. Now we have these global corporations, and they can choose when and where and if they pay taxes. How does that work? It works because multinational corporations typically tend to set up offices in their jurisdictions of the countries that have very low taxes. That’s no surprise, but what is a surprise is where these tax havens are. Everyone thinks these tax havens are all those little islands - Cayman Islands, Panama etc, but they’re not the worst offenders. The worst offenders are countries like the UK, with Jersey, Guernsey etc, the Netherlands which is a very major tax haven, Switzerland which is a very major tax haven, Ireland which is a very major tax haven, and certain states in the US like Delaware for instance that have very low tax rates.
Laura Basu: In all these cases, corporate lobbyists play a key role in making the rules, and in deciding how they will be applied. Attempts to correct some of these imbalances – for example, subsequent changes to rules on intellectual property or agricultural subsidies – are often watered down or contain small print that ends up failing to solve the problem.
Within the WTO, there is a mechanism by which countries can resolve investment disputes with each other. However, these again can be skewed, with powerful countries fighting for their big corporations. And treaties negotiated outside of the WTO – Like NAFTA and its replacement or bilateral treaties – often contain Investor State Dispute Settlements – or ISDSs – which mean that corporations can even take governments to court directly.
Academic and activist Raj Patel tells us more.
Raj Patel: And that's one of the greater dangers of trade agreements. When you hear trade agreements, really what you're hearing is mechanisms for companies to sue, that's why they're very keen on these agreements. And while the US has stymied the World Trade Organization by not appointing any new judges to its Dispute Settlement body, the USMCA is a renewal of that kind of commitment to ensuring that there are ways for companies to get their pound of flesh.
And sometimes these trade agreement issues are very tightly enmeshed with, as you say, what the World Bank and the IMF are up to. Because if countries are heavily in debt (and I mean, obviously the US is a heavily indebted country, but it's the kind of country that doesn't have to worry about its debt because it can just print more money) such as low income countries and former colonies, they have to cede sovereignty to the World Bank and the International Monetary Fund.
And the IMF and World Bank will offer helpful solutions like, “well why don't you drop down this forest and export it? Or why don't you get this oil out of the ground and sell it on the international market for dollars, then use those dollars to pay back the loans that you owe us.” And those kinds of ostensibly well meaning sound macroeconomic advice, ends up being just a way for foreign investors to deepen their hold on local economies, but also allow a dominant bourgeoisie to get itself involved in the natural resource economy and to freeze the status quo of a country in the Global South, in a way that perpetuates the misery not only of its working class, but indigenous people, and locks entire countries into these these post-colonial relationships of domination.
Laura Basu: Indeed, many of the rules of the global economy are not made in publicly accountable spaces but behind closed doors in lawyers’ offices. This is particularly true when it comes to finance. Jayati Ghosh explained how the rules of finance are made in the jurisdictions of just two cities.
Jayati Ghosh: So global finance now is governed by all kinds of rules. And the rules that matter are really the rules of only two places in the world. London and New York. These are the rules that govern the way that finance operates everywhere in the world, whether you’re talking about Ghana, or Brazil or Vietnam or wherever. And how did that happen? It really happened because all the capital flows, they all demand different kinds of guarantees. Let’s say you’re lending. Let’s say you’re a bank that actually provides loans to someone in a developing country. You will insist when you’re drawing up that loan that the legal validity of that loan is with reference to a particular set of laws. 95% of these are the laws of the city of New York, or the city of London. This is partly because these places have big financial lobbies, but it’s also because these jurisdictions have laws that are really very favourable to capital.
Laura Basu: For Ghosh, basic steps can be taken to correct these extreme global imbalances, what she calls ‘imperialism gone wild’. People can get together to put pressure on their governments to get out of unfair trade and investment treaties, and push for mechanisms to resolve sovereign debt.
There are also practical ways to start tackling tax avoidance. Ghosh is part of a commission that advocates a unitary tax on multinational corporations, so that each country gets its fair share no matter what accounting tricks companies try to play.
Economist and politician Yanis Varoufakis has in recent years been at the forefront of calls for a new global economic architecture. He suggests updating alternative proposals put forward by John Maynard Keynes at the 1944 Bretton Woods conference, when new rules for international trade were established in the wake of the Second World War. At the heart of this vision is an international clearing union that would help balance global financial flows. Varoufakis spoke to me about the clearing union.
Yanis Varoufakis: So the idea of a clearing union is really very simple. God forbid we do not want to have a common currency in the sense of all of us having the same money in our pockets. But what would be nice to have, and this is the basic idea of John Maynard Keynes from 1944 - which we’re massively updating - is that we have a common unit of account, and all our trade is denominated in that common unit of account. It’s not American, it’s not British, but it’s something like a synthetic currency to which all of us contribute. And imagine a situation where all trade is denominated in that, and we have an agreement that any country that has more than a certain percentage of its GDP in deficit, or surplus, is taxed a little bit per transaction. And all of that goes into a common fund, from which we invest in parts of the world that need investment in order to rebalance. That is the basic idea, instead of the dominance of the dollar and Trump. The international clearing union is not going to fix everything, but what it is going to fix is the tendency of global capitalism to blow up, and have huge austerity in certain countries, and problematic growth in others.
Laura Basu: The clearing union is part of an ambitious wider plan to transform global capitalism, that also includes national investment banks, changing property rights, and a global universal basic dividend.
Yanis Varoufakis: We need public investment banks to grab the excess liquidity, the excess money, and put it into good use. In technological change that is amenable to the green transition that we all need. And thirdly, very importantly, changing property rights. We have a proposal for a universal basic dividend, not income. We think that, let’s start with 10% of shares from large companies that go into a global equity fund, from which the dividends that accumulate then are distributed in the form of universal basic dividend – everyone gets the same, because in a sense we have created that capital together. If you increase this from 10 to 20, 30%, what you eventually end up with is a market-based socialism.
Walden Bello has another vision for transforming the global economy, what he calls ‘deglobalisation’. In these times of Donald Trump and trade wars, the term deglobalisation can bring to mind images of isolationism and aggression. But Bello’s vision arose out of the global justice movement, and is based on ideas of embedding the market into community values instead of communities being held hostage to the markets; production for domestic markets, economic democracy, and living harmoniously with the environment.
Walden Bello: Well, we were arguing this at a number of dimensions. At the ethical, philosophical level we were saying that you could not let the market drive society, and what we were calling for at that level was the re-embedding of the market in society. At the domestic market level we were calling for stronger state protections, in terms of safeguarding human welfare. And as a corollary, we said that civil society needed to be a restraint on the state, to really make sure that democracy flourished. At the international level, we were saying that we needed protections for the domestic economy, for the domestic market. That meant that we favoured tariffs, that we favoured regulations on trade that were not merely health regulations etc but regulations that would control the destabilising effects of imports, for instance, on the domestic economy – in terms of bankrupting industries and creating tremendous unemployment. We also said you really needed very strong controls on investment, so that transnational investors wouldn’t end up taking over the economy. So we were saying we needed a series of safeguards in the national economy and the national market.
This perspective did not mean, as many people who were critical of us thought, that we were thinking about delinking national economies from the international market. No, we were not saying that. We were for a healthy integration into the international economy, a healthy balance between the international and the domestic economy.
Laura Basu: According to environmentalist Ashish Kothari, to really get to grips with global economic injustice, we need to challenge not just corporate driven globalisation but the entire idea of economic development. From this perspective, development itself is a form of neocolonialism that has wreaked havoc on both people and planet. Kothari began by telling me what development has come to mean:
Ashish Kothari: So, essentially what it has meant across the world is three or four things. Firstly, that material progress is very much needed for this path of development. Every country has to go through this – that means greater exploitation of nature, greater exploitation of nature etc. Secondly, it means that everybody has to move from being traditional to modern. This project of modernity basically means everybody has to mold themselves in the way in which the United States and Europe has molded itself. It meant also that it was ok for nature to be exploited and people to be exploited because eventually everybody would benefit – supposedly, from this project of development. And it therefore meant that if industrialisation was happening at the expense of somebody, of some human beings, it was all fine. If you look for instance at Margaret Thatcher’s famous dictum, “there is no alternative” – it meant there was no other way to go. We have all been sold this dream, that if we do this, we can all be prosperous, we can all live the American way of life etc.
Laura Basu: Kothari argues that we should abandon the idea of development and instead embrace postdevelopment. The field of postdevelopment argues that there are already existing alternatives to development, ways of organising societies that respect both the autonomy of communities and the environment. For Kothari, there exists a wide diversity of economic and political systems that provide positive alternatives to development, but they share some basic universal principles.
Ashish Kothari: At the core of this diversity there is a common thread of values, of ethics. Saying that the economy should be based on caring and sharing, not on greed. Saying that I will live my life, and assert my identity, but as part of a collective, and be responsible to that collective. Commons instead of selfishness and privatisation. There are a whole bunch of these, generosity, diversity, autonomy, freedom, simplicity, values or ethics that show themselves in one way or another in these alternatives.
Laura Basu: These alternative ways of being in some cases survive from the past and in others emerge in the present. An often-cited example of an older tradition that provides an alternative to development is the indigenous practice of Sumak Kawsay or ‘Buen Vivir’, which means ‘good living’, in harmony with our communities, ourselves, and our environment. The concept of Buen Vivir was even embedded into the Ecuadorian constitution under the Presidency of Rafeal Correa. Similar concepts are Swaraj from India and Ubuntu from southern Africa. An example of a newly emergent alternative to development is the degrowth movement.
These other ways of living are not just theoretical but being put into practice by communities around the world, for example women farmers practicing agroecology in India. Kothari and his colleagues have launched a website, the Global Tapestry of Alternatives, to allow these different communities to network with each other and share skills, knowledge and experience.
I asked Kothari about the received wisdom that the global south needs to pursue development projects – with the economic expansion and ecological destruction that comes with them – in order to overcome poverty.
Ashish Kothari: I think we don’t need the same models for meeting people’s needs in the Global South that the Global North has used. Again let's take agriculture. Instead of going into the chemical industrial agriculture that causes huge carbon emissions and all sorts of other problems, small organic based farming can actually create food security and sovereignty without creating the same ecological and climate problems. We can do the same with energy, decentralised renewables can actually meet people’s energy needs without causing the same sort of problems that centralised systems have caused, that fossil fuels have caused. So I think in every sector you can actually find these sorts of alternatives that will undermine this argument that the Global South’s rise above deprivation and poverty will actually have a huge ecological and environmental impact on the earth.
In our era of global pandemic, escalating ecological breakdown, inequality and division, it’s essential to get to grips with the global economic and political structures driving these processes. And, whether it is by putting pressure on our governments to tax corporations properly or back out of toxic trade treaties, demanding more democratic structures, or by getting involved with alternative community economies on the ground, there are ways we can all be part of creating something new.
Freddie Stuart: Thank you for listening to this ourVoices podcast from openDemocracy. If you enjoyed this podcast, and would encourage others to listen, head to iTunes, subscribe and leave us a review.
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