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Globalisation of economy

By Ac. Krtashivananda Avt.
In the quest for economic growth, free-market ideology has been embraced around the world with the fervor of a fundamentalist religious faith. Money is its sole measure of value, and its practice is advancing policies that are deepening social and environmental disintegration everywhere.

The economic profession serves as its priesthood. It champions values that demean the human spirit. It assumes an imaginary world divorced from reality, and it is restructuring our institutions of governance in ways that make our most fundamental problems more difficult to resolve. It has reduced economics to an ideological shield against intelligent introspection and civic responsibility, and infused the study of economics with a strong element of ideological indoctrination.

The Sanctification of Greed
The beliefs espoused by free-market ideologues are familiar to anyone who is conversant with the language of contemporary economic discourse:

• Sustained ‘economic growth’, as measured by gross national product, is the criteria of progress.

• ‘Free markets,’ unrestrained by government, generally result in the most efficient and socially optimal allocation of resources.

• ‘Economic globalization’, achieved by removing barriers to the free flow of goods and money everywhere in the world, spurs competition, increases economic efficiency, creates jobs, lowers consumer prices, increases consumer choice, increased economic growth, and is generally beneficial to almost everyone.

• 'Privatization', which moves functions and assets from government to the private sector, improves efficiency.

The primary responsibility of government is to provide the infrastructure necessary to advance commerce and enforce the rule of law with respect to property rights and contracts. These free-market ideological doctrines assume that:

• People are by nature motivated primarily by greed

• The drive to acquire is the highest expression of what it means to be human

• The relentless pursuit of greed and acquisition leads to socially optimal outcomes

• It is in the best interest of human societies to encourage, honour and reward the above values

The economic rationalists, market liberals and members of the corporate class are working hard to impose the above economic doctrines on the whole world. What is the result?

Global Income distribution
World population distribution of arranged by income:

Source: UNDP, Human Developement Report, Oxford University Press, New York 1992

On April 15, 1994, 115 countries of the world concluded the final treaty of the General Agreement on Trade and Tariff (GATT), and thus laid the ground rules of the World Trade Organization (WTO). The basic rules are:

• Trade Related Investment Measures (TRIM) 

• Trade Related Intellectual Property rights (TRIP) 

• Genral Agreement on Trade in Services (GATS) 

TRIM
This regulation abolished:
1. the requirement for national treatment 
2. the prohibition on Quantitative restriction 

The first point means identical treatment has to be extended to domestic products and to imports. With this clause, the difference between national enterprise and foreign enterprise is dissolved.

The second point means that the quantitative restrictions involving import licenses and quotas on imports and exports should be abolished. (NB: The Indian government recently abolished quota restrictions on 1423 items, against which Madanlal Khurana protested and was consequently marginalized by the ruling party.)

These two provisions will effectively allow full freedom for MNCs in undeveloped countries, and will drain the foreign exchange and also ruin the small-scale sector of those countries.

TRIP
According to the provision of TRIP, the Indian Patent Law of 1970 has to be amended, which the present government did with the help of opposition parties, and thus befooled the masses.

The Indian Patent Law of 1970 demands that separate patents have to be obtained for the process or the formula and for the product. Patents on essential items like agricultural products, human and veterinary medicines, surgical instruments, pesticides as well as defense and atomic energy-related items were prohibited. In some cases, the patent on a process was allowed even though the patent on the ensuing product was prohibited. This enabled the research scholars to invent new processes for the same product.

The new patent law in WTO extends the scope of patentability, thus restricting the scope to produce using modified processes. India was supposed to amend its patent law by 1999, which they did this year. For certain items such as food, chemicals, medicine and herbs, it has been extended for another five years. By 2003 all national patent laws will be superseded by international law.

With regard to plant varieties, India is allowed to have its own sui generis system, which can be applied up to the end of a ten-year period. WTO is free to devise stiffer “plant breeder rights” so that a global model can be uniformly applied to all member countries. This will drastically reduce farmers’ rights and curtail their freedom to retain protected seeds from their harvests or to exchange or sell such seeds. Every time they will have to purchase protected seeds from the transnational company.

Import of Patent Rights
Currently, patent holders must obtain a patent from the patent-granting country. According to the new laws of WTO, imports and locally produced products will be automatically allowed patent rights on an equal basis. This means that patents can be obtained not only for establishing manufacturing monopolies, but also to establish import monopolies. Patent holders will have no obligation to the national governments that confer the patent rights.

There will be no check on the import of patented products. They can be sold at a high transfer price without any price control. The impact of the new patent law will be extremely harmful on prices, especially of medicines. The cost of many medicines, including life-saving medicines, will increase by five to ten times.

Availibility
The availability of new drugs and medicines from indigenous sources will be greatly reduced. The effect of these new patent laws on local research and development and on small-scale pharmaceutical industries (SSI) will be extremely adverse. About 18,000 such industries may face bankruptcy and closure.

GATS
According to this clause, all restrictions on banking, insurance, telecommunications and air transport have to be repealed. This will enable the MNCs to control the entire economic infrastructure of any underdeveloped or developing country.

IMF-WB-WTO: The unholy trinity
So far, IMF (International Monetary Fund) and WB (World Bank) have tried to control the economies of developing countries using the leverage of loans. This works only if the country asks for a loan. By introducing the WTO laws, the MNCs will now control the trade and services of a country. Even the national budget of any country will be dictated by this trinity vis-à-vis the MNCs.

IMF-WB	WTO
Reduction of budgetary subsidies	Reduction of subsidies
Removal of subsidies for agricultural inputs	Reduction of support for  domestic agriculture
Removal of food subsidies	Removal of PDS
Persuance of liberal econmic policies	Persuance of free trade by  developing countries
Promotion of foreign investment	Removal of restrictions on  MNC´s in utilities
Import liberalisation	Repeal of laws on import
Privatisation of utilities	Entry of MNC´s in utilities
Privatisation of banking sector	Lifting restrictions on entry  of foreign investors

With the introduction of so-called globalization, economic control will be passed on to MNCs, and whatever basic infrastructure exists will be ruined instead of enhanced. Abnormal hikes in the prices of essential commodities increase the gap between rich and poor, and gradually increasing dependence on foreign money and expertise are the symptoms that India, for example, is already displaying by inviting economic colonization.

Instead, India needs to expand and strengthen its basic industrial sector. Small-scale industries, artisans’, farmers’, handloom, weavers’ and cottage industries should be encouraged through decentralized planning and by increasing credit facilities.

Prout policy on globalisation
An economic system can remain viable only so long as society has mechanisms to counter abuses of either state or market power and the erosion of the natural, social and moral capital that such abuses commonly exacerbate.

The market produces a socially optimal outcome when the government and the civil society are empowered to act to maintain the following six conditions for market efficiency, which contradicts monopoly of economic power. Markets cannot produce them. But without these, a market cannot function efficiently.

1. Fair Competition: Those who hold monopoly power compel the legislators to rewrite the rules in their favor. Only a firm government hand can restrain the inexorable tendency towards monopolization. Politicians are rarely willing to exert such a strong hand, however, without crisis, and hence it demands an active and well-organized civil society. This means the general population must have a high level of understanding and must be ready to demand fair laws.

2. Moral Capital: Although market theory assumes self-interested individuals, but the real world markets often reward greedy, dishonest and immoral behavior. Neither a society nor a market economy can function efficiently without a moral foundation.

3. Public Goods: Many investments and services that are essential to the public welfare, such as investment in basic scientific research, public security and justice, public education, roads, defense and other such infrastructures, are not supplied by the market but rather are used by it. These are the social costs of production.

4. Full Cost Pricing: In so-called free market economies, a producer tries to externalize social and environmental costs in order to increase profit. Without governmental intervention, no company likes to pay the social costs of its produce.

5. Just Distribution: In a market system, there is a strong tendency, especially during periods of economic expansion, for the owners to increase their wealth and income while the income of laborers lags far behind. A market in which economic power is unjustly distributed will allocate resources in an unjust and socially inefficient manner. Market efficiency and institutional legitimacy depends upon governmental intervention to constantly restore the equity that the forces of market inexorably erode.

6. Ecological Sustainability: As the human economy grows to fill its ecological space, limiting the scale of economic subsystems to maintain an optimal balance with nature becomes necessary for the survival of species. The government must hence set limits and ensure that appropriate signals are sent to the market.

We can clearly see that a market freed from governmental restraint is inherently unsustainable because it erodes its own institutional foundations. Hence what is needed at this stage is a regulated market and not a free market.

New Economic Order
In 1975, observing the success of OPEC, Third World countries meeting at the United Nations demanded changes in the structure of international trade so as to bring equality between rich and poor nations. Professor Tinburger proposed the Restructuring of International Order (RIO) for this purpose. RIO goals are:

• to bring parity between rich and poor countries in the prices of exported goods,

• to facilitate industrialisation with idigineous raw material, and

• to reduce the influence of MNCs.

Since 1991 NEO fizzled out making way for WTO. 

PROUT proposes the following strategies to ward off the dangers of the current economic globalization:

• Introduction of economic democracy to counter monopoly of economic power

• To create self reliant economic units

• Formation of economic community amongst equally developed countries

• Like EEC, ASEAN, ANDEAN, SAARC etc. The North Atlantic Free Trade Association (NAFTA) already caused disaster in Mexican economy. Free market between rich and poor countries will bring economic disaster to poorer country. Hence it cannot be supported

• Production should be reoriented based on domestic consumption and indigeneous raw material

• Encourage small scale industries and mechanise the agriculture in developing and underdeveloped countries

• Encourage labour intensive industries

• Curtail the monopoly of economic power

• Eradicate corruption

Proutists should expose the hypocrisy of the present political power structures and vigilantly expose the growing dangers of economic colonization.

Copyright The author 2001