Globalization Concerns Grow

Calvert-Henderson Quality of Life Indicators in Context, originally posted at www.calvert-henderson.com, 2007

As I described in Building a Win-Win World (Henderson 1996), Beyond Globalization (Henderson 1999), and Ethical Markets (Henderson 2006) we now know that globalization brings both good and bad news. While globalization brings increased trade, economic growth, and spreading prosperity and democracy — these benefits are unevenly shared. Even mainstream economist, Joseph Stiglitz acknowledges these issues in Making Globalization Work (2006)- even calling for the overhaul of GDP and other national indicators, which I have advocated for 25 years. The July 2005 and June 2007 G8 Summits’ pledges to cancel the debt of 18 highly-indebted countries and double African’s aid by 2010 was belated response to the 2002 World Summit on Sustainable Development in Johannesburg, South Africa. There, 20,000 delegates, 700 business leaders, 40,000 civic groups and over 100 heads of State debated how to help the two billion people still lacking adequate food, shelter, clean water, health care and education. In our global village of instant communications, the disparity between rich and poor also led to the global civic campaign to “Make Poverty History,” which spurred the G8’s latest promises.

Similarly, civic groups now clamor for progress on reducing carbon emissions and have forced EU governments and the US to reduce their protection of their domestic farmers. Since April 2004, the World Trade Organization (WTO) agreed with Brasil’s complaint that US subsidies on cotton were unfair to farmers in developing countries. Issues of fairness, employee rights, and environmental protection are reshaping views on globalization. Yet at the failed Summit of the Americas in Argentina in Oct 2005, the issues were still unresolved and may derail the July 2007 meeting of the WTO. The globalization of pollution, infectious diseases and terrorism affects the very fabric of our daily lives. Gallup and other polls show a majority of Americans now believe the Iraq war has made them less safe. In Britain, 56% believe the London bombings were due to the British support of the US war in Iraq.

The rankings by the accounting firm A.T. Kearney, in its annual Globalization Index (see www.foreignpolicy.com) have the USA in seventh place. By one of its key indicators, Political Engagement, the USA ranks only 57th of the 62 ranked countries, below China and Pakistan. This is due to US nonparticipation in a group of international agreements, including the Kyoto Protocol, the Nuclear Non-Proliferation treaty, the International Criminal Court and others. The March 2006 Global Biodiversity Outlook shows negative trends for loss of species and habitats, while global warming is now covered almost daily by mass media.

The global grass roots backlash against globalization has quite sensibly demanded a broader agenda: to globalize democracy, environmental and consumer protection, human rights, decent work, and higher standards for corporate social accountability. Their critiques of the WTO’s narrow ideological approaches to world trade have become increasingly well reasoned and articulated. The problem with economic textbook theories that claim that more trade is always a win-win for everyone is its obsolescence. This may have been truer in the 19th century when British economist, David Ricardo theorized about nations’ comparative advantage (each country should concentrate on producing those goods for which its human and natural resources were most efficient and appropriate). The comparative advantage formula was predicated on capital staying within national borders and other factors, which no longer exist. In today’s global capital markets, “hot money” moves across borders at the click of a mouse and $1.5 trillion of currencies slosh around the planet every day in the world’s currency exchanges (an estimated 90% of these trades are speculative). This kind of financial and technological globalization leaves national governments less able to manage their domestic economies, job markets and social services. Companies are free to relocate their operations, outsource production to countries with cheaper labor and avoid taxes by moving offshore. And if capital is free to roam the planet, people are increasingly crossing borders chasing those jobs. Immigration became a hot issue in the USA and Europe and will remain so – another unanticipated issue of globalization. Business Week’s “Embracing Illegals” cover story (July 18, 2005) reported on the role of US businesses, both in employing illegal immigrants and selling goods and services to the USA’s 11 million undocumented immigrants.

Fast track trade-promotion authority for Presidents was ended on July 1st, 2007, but not before President Bush with help from some Democrats was able to sign some minor additional pacts that contained enforceable standards on labor and environment. The June 2006 failure of the WTO’s Doha Round increased the discord. Latin American countries, led by Brasil, pointed out that the orthodox formulas for “free” trade had proved disastrous widening gaps between rich and poor, throwing small businesses and farmers into bankruptcy and increasing debts. Even Mexico under NAFTA had seen 300 of its “maquiladora” plants move to China where wages were one quarter of those in Mexico. Other complaints included the unfairness of US steel subsidies and protection of farmers both in the US and Europe with these cheap products then “dumped” in developing countries. The intimidation of thousands of peaceful middle-class, professional and union protesters have brought human rights violation charges and public outrage.

Mumbai and Bangalore, India have become competitors to Silicon Valley. China, where an increasing number of the world’s goods are produced (see my “Globalization’s Surprises,” InterPress Service, December 2002), is scape-goated by many politicians. Yet, not only are some 2/3 of Chinese imports produced by US corporations that have moved plants to China, but retailers, including Wal-Mart, drive down prices of goods they purchase in China below even Chinese rock-bottom costs of production. Alarm grew in the US as major TV shows examined these issues. US low interest rates over the past decade, as well as tax incentives encourage more substitution of labor for capital equipment. This automates many processes formerly performed by people, such as the self-service trends in many industries analyzed by futurists Alvin and Heidi Toffler in their Revolutionary Wealth (2006).

Studies of global and domestic companies and their relative likelihood of closing plants and shifting them to cheaper countries show a mixed picture (The Economist “Footloose Firms” March 27, 2004). Global companies are more footloose, but also more durable against competitors. Local companies are more vulnerable. We might add that often those local companies are put out of business by the entrance of stronger global companies into local markets. As citizens grow to understand these issues and conventional “free trade” theories are discredited as obsolete, protests at trade summits will continue.

Globalization is now a key issue in the USA, Europe, Asia and Latin America. The World Social Forum, continues outlining viable and more humane forms of globalization. The former United Nations Secretary-General Kofi Annan initiated the UN Global Compact in 2000, inviting corporations to engage with its ten principles of good global corporate citizenship in promoting human rights, labor standards and environmental stewardship. Over three thousand companies have engaged with the Compact, including Calvert, our partner. Further, Calvert has been donating its social research services to the UN Global Compact, to promote socially responsible investing and business practices globally. It has been an honor for me to facilitate this important relationship. The World Bank also utilizes Calvert’s Social Research Department’s corporate, social and environmental performance criteria.

The need for international standards for corporate social responsibility and stricter accounting principles led in April 2006 to the pledge of pension funds in 16 countries — representing over $9 trillion in assets — to the Principles of Responsible Investing. Socially responsible investing is now at $2.1 trillion in the USA. The European Union mandate that pension plans disclose whether they offer beneficiaries similar socially-responsible investment choices, has spurred interest and many new conferences, as has the Hong-Kong based ASRIA group, founded by Tessa Tennant, former Chair of the UK Social Investment Forum. A conference in London, February 2004, was one of the first covering corporate social responsibility in China and many other such meetings now take place in the USA and China (www.CSRChina.com and www.syntao.com). Europe’s Triple Bottom Line conferences are held annually in many countries.

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