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THE DOWNSIDE OF GLOBALIZATION

The tone was set by Surin Pitswana, former finance and foreign minister of Thailand and widely tipped to be the next prime minister. Pointing to the graveyard to globalization that Bangkok has become, he said 30 per cent of the high-rises in the city, which made it look from my 33rd storey hotel window like an Asian Manhattan, are lying empty and unoccupied. If in India the influx of foreign institutional investment engineered the wholly bogus boom of 1999-2000 which led to the inevitable bust of 2001-02, in the Association of Southeast Asian Nations it was the artificial boom in real estate that symbolized all that was wrong with the bubble that globalization there became. The Malaysians, both employee and employer representatives, damned the International Monetary Fund/World Bank/ World Trade Organization/Washington consensus for having pushed them unprepared into capital account convertibility, leading to the impairing of Mahathir Mohammad’s famed 2020 vision.

The top management expert from the Philippines, N. Confesor, tweaked me about my scepticism over official Indian poverty figures, saying the real poverty figure for her country was at least twice the official figure. But what took my breath away was the Chinese representative, Huang Ping, of the Chinese Academy of Social Sciences. Bluntly asking us to not be misled by the foreign direct investment inflows into his country (ten times ours, touching $44 billion annually), he estimated there were 115 million once-employed Chinese wandering the countryside looking for jobs. Heartbreakingly, he said in impeccable English, globalization had led millions of Chinese to go from being “landless to jobless; then homeless; now hopeless.”

Against this background, here are extracts from my presentation: “Sir, India is no stranger to globalization. For a century and a half, we were part of the most globalized, liberalized community in the world: the British empire and commonwealth. The benefits were enormous: the famed Indian railways; industrialization from modern textile mills to steel mills; the three great port cities of Bombay, Calcutta and Madras; schools and universities; modern structures of governance, such as the civil service, the rule of law, separation of the legislature, the executive and the judiciary; the oldest stock market in Asia; the first central bank, the Reserve Bank of India; a high ratio of exports to GDP; and large sterling balances at independence.

“But, we ended with an average annual growth rate of only 0.7 per cent per annum over the first half of the 20th century. Two-thirds of our people struggled for survival below the poverty line. The British came because we were the ‘sone ki chidiya’ — the golden bird. They left us the poorest country in the world. Imperialism began with a famine in the 1770s which killed a third of the population of Bengal. It ended with a famine in 1943 which killed 3 million people in Bengal alone. We, therefore, know there is an upside to globalization. We also know there is a downside.

“In the phase of socialism, 1950-1990, we raised our rate of growth from under 1 per cent to over 5.5 per cent. In the last decade of socialism, the Eighties, our annual average rate of growth was 5.6 per cent. In the first decade of reforms, 1992-2002, our economy has, indeed, grown faster — by all of 0.3 per cent per annum on average! Where is the globalization dividend'

“The background paper prepared by the ILO for this meeting tells us that the globalization dividend in India lies in the dramatic decrease in poverty over the decade of the Nineties. We are told that in India — the largest single contributor to global poverty — poverty has fallen ten points from 36 to 26 per cent over the decade of reforms. The claim was repeated yesterday by Mr Kazi of the World Bank.

“Yes, that is the official figure. My government arrived at it by changing the basis of calculation. Poverty statistics in India are measured on both an annual basis and a quinquennial basis. When successive official annual surveys through the Nineties showed that poverty had fallen dramatically in the last decade of socialism but was stagnating in the first decade of reforms, the basis of calculation was changed. Through this sleight of hand, the quinquennial survey flatly contradicted the annual surveys, but has given this commission the comfort of assuming that globalization leads to poverty reduction. Well, let me give the commissioners one more cause for discomfort. The only statistic in all Indian official statistics that is not derived from the national accounts but from national sample surveys is the poverty figure. The national accounts figure showed that in the last year of the last decade of socialism — 1989 — poverty had already fallen to 25 per cent. Alarmed at this success, the government which replaced Rajiv Gandhi’s at the end of 1989 changed the basis of poverty calculations and announced that our poverty level was 12 percentage points higher. It is from that revised figure of 37 per cent, and after yet another statistical fiddle, that the background paper has been able to triumphantly announce that 500 million Indians or whatever have been the beneficiaries of globalization! I request the commissioners to revisit the statistical story.

“We sceptics are sometimes somewhat patronizingly told that we must not attribute all that goes wrong to globalization. We should recognize that it is poor governance, not globalization that is the root cause of poor performance. I offer two points of reflection to the commissioners: one, please do not attribute everything that goes right to globalization and everything that goes wrong to poor governance. Two, remember that the adverse consequences of globalization aggravate the fall-out of bad governance. Good globalization requires good governance. therefore, the key question is: ‘Does globalization promote good governance'’

“Good governance must begin with justiciable fundamental rights and individual freedom within the framework of a democratic, liberal, plural polity. But has globalization worked best in a plural polity or better in monolithic or oligopolithic political systems' Lord Brett, chairman of the ILO Governing Council, told us that China has done better out of globalization than India because of three factors: land, labour, and quick decisions. India, he added, had two of those — land and labour — but not the third. Sir, our delays are not caused by national ineptitude but by a combination of parliamentary democracy, an independent judiciary and the right given to every Indian citizen to file a public interest litigation before the Supreme Court.

“Our dialogue has shown that globalization works better: for small populations than larger (with one massive exception I shall come to in a minute); for urbanized than rural-based economies; for higher than lower income groups;for externally-oriented than internally-oriented production; for less diversified than more diversified developing countries; and for economies, as Dr Surin in his outstanding intervention reminded us, with fewer natural resources, lower levels of entrepreneurship, lower levels of indigenous technology, less management skills, and for those with high levels of assembly line education. India has done badly because we have too few primary school children and too many world-class scientists and technologists, altogether too many Nobel prizes! Most important of all, globalization succeeds best the more authoritarian the political regime.

“So, is there at all a social dimension to globalization, or are there only social consequences of globalization' The enigmas remain: the market compels us to lower labour and environment standards; global treaties, however, oblige us to raise these standards; and WTO threatens to burn us at the stake if we do not! To grab the benefits of competitive globalization, we have to dismantle our social agendas: food security; subsidies; infant industry protection; reservations for small industry; cottage industry preferences. But to protect ourselves from the downside of globalization, we have to have strong social security nets. The perennial poor are not socially or politically destabilizing. It is the non-perennial poor, those who have known a better life and have now lost it for no fault of their own, who are the foot-soldiers of fascism. Globalization is based on labour market flexibility, which translates into armies of the non-perennial poor, the ‘upper poor’. Do we remain a poor democracy or will globalization make us a rich dictatorship'”

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