PHA-Exchange> RE: Globalisation is good for your health, mostly

[FCA Secretariat]

Please see the response to the article I sent earlier from David Legge below.  Other responses are linked from the article and at: http://www.bmj.com/cgi/content/full/323/7311/504

Good to see this debate coing up I think!

Belinda



Fair trade rather than free trade  3 September 2001 
     
David Legge, 
Associate Professor 
School of Public Health, La Trobe University, Melbourne, Australia 
Email David Legge: 
d.legge at latrobe.edu.au 

 The challenges of globalisation are complex and deserve better than the simplistic polemics of Richard Feacham1. Feacham characterises the position of anti-globalisation protesters as "Increasing global economic and social integration is a conspiracy by the rich and powerful to exploit the poor and underprivileged." He then proceeds to argue that: (i) globalisation facilitates economic growth; (ii) there are social and political benefits of globalisation; and finally (iii) that the protesters have no alternative policies. 

His argument is weak in logic, selective in its evidence, unbalanced in its coverage, sweeping in its generalisation and egregious in misrepresenting the people whom Feacham describes as anti-globalisation. Polemical sneering is no more constructive than breaking shop windows. 

A more accurate account of the concerns of the protestors would highlight the structured unfairness of the current global economic regime. It would highlight the opposition of the protestors to policies which are having the effect of making it even more unfair. 

Of course industry and trade are the sectors where wealth is produced and where the distribution of wealth is determined. If the income gap and the health gap are to be narrowed it must involve creating the conditions for productive industry and mutually beneficial trade. However, the structures and rules which currently determine the production and distribution of wealth are strongly biased in favour of the rich strata of the rich countries. Examination of trade in agriculture, commodities, manufactures, technology, capital and labour demonstrate how widening inequality is structured into the New World Order and the role of the World Bank, the International Monetary Fund and theWorld Trade Organisation in shoring up this structured unfairness. 

The regulation of global agriculture has involved one way trade liberalisation. Developing countries have been forced to stop supporting subsistence farming and to move to export production including the encouragement of agribusiness. However, the industrialised countries continue to subsidise and protect their own farming and in some cases dump subsidised products in Third World markets. Global trade in commodities is largely a buyers' market. There are many sellers and a small number of powerful buyers. There is tight price competition and with changing technologies many of the markets are quite static. Where producer countries have tried to get together as producer cartels they have faced threats and intimidation. 

Manufacturing globally is dominated by the big corporates and there is fierce competition between them in many of their markets. However, brand competition and technological innovation play a dominant role in these markets and the producers have some discretion with respect to price. This contributes to 'sticky pricing' where increases in input costs are passed on in prices but productivity savings flow to profit. Where poor countries, selling agricultural produce and other commodities, trade with rich countries, selling manufactures, technology and services, there tends to be a progressive deterioration in the terms of trade. Prices for agricultural products and commodities fall relative to the prices for manufactures. Farmers have to produce more to buy the same basket of imported goods. 

Trade in technology is likewise a one way street. Poor countries have to pay for patented know-how from the large corporates whose property rights are protected by the WTO. Poor countries are further disadvantaged by the barriers they face in producing new technologies; building a technologically trained workforce and building institutional capacity for research and development. The opposition of the large pharmaceutical companies to low cost generic manufacturing for AIDS drugs in Third World countries is a metaphor for the structured unfairess of the NWO. 

Like technology, access to capital is controlled in the heartlands of capitalism, by the transnationals (TNCs), banks and the money markets. Capital flows to poor countries are generally conditional upon free market reform and social stability and even then they carry a high premium for risk. The barriers to poor countries developing their own indigenous manufacturing are huge; not just the price of capital and technology but the exposure to cheaper imports consequent upon the forced dismantling of import protection. 

Labour markets are where free trade stops. Immigration barriers to the movement of labour mean that while the distribution of work is determined by the owners of capital and technology the movement of labour is tightly contained by national boundaries. Where capital chooses not to go there will be no work. The structured unfairness of this regime has two dimensions: the capacity of TNCs to take mass production to very low wage sites and secondly the protection of living standards in the rich countries. High level knowledge workers are of course the exception, competing in a labour market which is increasingly integrated globally and facing growing demand for their skills and commanding proportionately higher salaries. The ways in which the rich countries encourage the brain drain by selectively enticing and admitting knowledge workers and business immigrants provides a metaphor for the continuing flow of value from South to North. 

The structured unfairness of the New World Order is not an accident. It is a direct consequence of economic policies which have restructured the regulatory structures of the world economy in ways that favour the interests of the rich capitalist metropolis. These policies have been packaged separately for the poor world and the rich world. In the poor world they are called 'structural adjustment' and in the rich world they are labelled more generally as 'neoliberalism' ('economic rationalism' in Australia). However, despite the different packaging these two policy regimes are very similar. Structural adjustment packages, which are commonly forced on developing countries as a condition of debt relief generally include: 
ท re-orienting the economy to export markets (including withdrawal of support for subsistence agriculture); 
ท reducing import barriers; 
ท making the economy more attractive for foreign investment; 
ท creating more 'competitive' labour markets (weakening unions); 
ท moving to small government, including low taxes, reduced public sector provision (including reduced expenditure on health and education) and privatisation. 

Feacham's argument reduces the complexity of the global economy to a satisfyingly simple model. Global well-being depends on new wealth creation (reflected in economic growth). Wealth creation is driven by the development of new technologies (enhanced productivity); the opening of new frontiers of industrialisation (where people with energy and needs gain new access to technology and capital); the creation of new domestic markets (commodifying functions previously performed outside the market); and by the exploitation of natural resources. These developments are all best managed by market forces hence the need for deregulation and small government. 

It is a plausible story. It provides persuasive explanations for many of the transformations of history and has shown some predictive usefulness for policy-making. It is not wrong; it is just too simple. 

There are other dynamics operating in the global economy which also need to be acknowledged. The growth economy carries a continuing threat of global crisis due to an imbalance of accelerating productivity over constrained demand. Increasingly efficient production for increasingly global markets tends to reduce aggregate employment and therefore demand. Corporations see sluggish demand growth as a threat to profits and respond by strategies aimed at cost cutting (especially labour costs) and expanding market share (reflected in the rapid increase in mergers and acquisitions). Both strategies contribute to reducing the buying power of the workforce: cost cutting by replacing labour with technology and replacing high wage labour with low wage labour and the market share strategy through concentration of production (and reduced aggregate employment). The declining buying power of the labour force further threatens profits and reinforces the need for strategies of cost cutting and market share. 

However, the potential crisis are deferred because consumption levels are maintained (although not high growth rates) through other mechanisms including: 
ท increasing household debt in the North (as corporate profit is diverted from new investment, parked in the financial sector and available for consumer credit); 
ท bubble consumption among small shareholders (due to overly optimistic income expectations associated with inflated asset values); 
ท increasing consumption by the new global middle class, including wealthy minorities in low and middle income countries (relatively small proportionately but large in absolute numbers in the case of China, India, Indonesia, Brazil, Pakistan, Bangladesh, Mexico, etc); 
ท the continuing flow of funds from the economies of the South to the banks of the North through national debt repayment; 
ท the continuing flow of value from the South to the North through unequal and unfair trading relationships; 
ท the conversion of environmental assets into current income flows. According to this more complex analysis of the global economy the structured unfairness of the current regulatory regime is necessary to defer the crisis by maintaining the net flow of value from South to North. Continuing poverty, displacement and violence and wide inequalities are among the costs of maintaining these stabilising flows. 

It is not true to say that the protesters have no alternatives. A more complex understanding of the global economy points to a number of practical policy directions which might help to recreate the conditions for Health for All. Central amongst these is the building of positive discrimination into the regulation of global trade in favour of the poorer countries rather than the reverse. They include also the encouragement of South-South trading relationships through regional trade groups comprising countries with different assets but at broadly comparable levels of economic development. They also include a Tobin tax, and other initiatives directed to regulating the financial sector at a global level and decentering the export-led growth paradigm and moving to sustainable production. Importantly they include the cancellation of Third World debt. 

It is simply not true to say that the WTO's 142 member countries 'will try' to launch a new round of global trade negotiations. The directorate of the WTO, supported by the rich countries club, is arguing for a new round but there are many voices from the poor countries who are arguing for an alternative focus on promises which have been made but are yet to be implemented. The issues to be addressed in Doha are complex but the basic questions are clear: will the new rules which emerge from Doha create a fairer global trading regime or will they shore up the structured unfairness of the current regime; will the poor and dispossessed continue to carry the burden of stabilising the global economy? 

The challenges of globalisation are more complex than Richard Feacham suggests and they call for good faith, careful analysis and respect for facts. They also call for careful listening to people of different opinions. A cogent argument against a new round at Doha has been presented by Khor2. 

1. Feacham, R. Globalisation is good for your health, mostly. BMJ 2001;323:504-506 

2. Khor M. The multilateral trading system at the crossroads. Third World Network website (accessed 1 Sept 2001)