Critical Perspectives on Globalization and Neoliberalism in the Developing Countries

Critical Perspectives on Globalization and Neoliberalismin the Developing Countries

Richard L. Harris* and Melinda J. Seid*

ABSTRACT

This introductory article provides an overview of the contemporary effects of globalization and neoliberalism on the developing countries. It provides a critical examination of the effects these two contemporary forces are having on economic, political and social conditions in these societies at the beginning of the Twenty-first century. Through critically analyzing the contemporary nature, context and effects of globalization and neoliberalism in these societies, this article provides a critique of the contemporary global capitalist system and the adverse consequences suffered by the developing countriesas a result of their ‘integration’ into this system. This essay was the introduction to a special issue of the Journal of Developing Societies (Volume XVI, 2000) and the subsequent book published by Brill Academic Publishers (Leiden, 2001) entitled Critical Perspectives on Globalization and Neoliberalism in the DevelopingCountries.

Introduction

According to the conventional post-modernist perspective,

the meta-concepts and theories developed by Western intellectuals

in the nineteenth and twentieth centuries have created a false

* Global Studies Program, California State University MontereyBay, Seaside, California 93955-8001; and Health Science Program, California State University Sacramento, Sacramento, California 95819-6073, USA

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consciousness of reality based upon their reification of

universal concepts and totalizing theoretical notions founded on

historical and structural determinism. From a post-modernist

perspective, these reified concepts and deterministic theories

are regarded as invalid and outmoded images for understanding the

complex nature of the ‘post-modern’ conditions of the late

twentieth century and early twenty-first century. 1

In the post-modernist critique of modernist thought, the

events of the closing decades of the twentieth century exposed

the erroneous nature of the previously constructed ‘meta-

theories’ or ‘grand historical narratives’ that were developed

with the help of universal concepts such as social progress,

modernization, capitalism, socialism, imperialism, development,

underdevelopment, industrialization, human emancipation,

internationalism, etc. For the proponents of this perspective,

the incredibly complex, diverse and unpredictable nature of

contemporary life cannot be adequately explained by such meta-

theories and grand historical narratives, nor can contemporary

1 F.Schuurman, “Introduction,” in F. Schuurman (ed.), Beyond the Impasse: New Directions in Development Theory,London, Zed Press, 1993, pp. 23-29.

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reality be adequately perceived through the use of the universal

concepts upon which these theories are based.

The main problem with this perspective in so far as its

applicability to the contemporary developing countries2 is

concerned is that there is scarcely any evidence that these

countries are ‘post-modern’ or that they have moved into a ‘post-

modern era’.3 Most of the problems and issues addressed by the

so-called obsolete meta-theories and universal concepts of the

‘modernists’ persist in these countries. In fact, most of the

inhabitants of these countries live under conditions, which can

be more accurately described as ‘uneven modernity’ rather than

post-modernity.4 The complex social reality of these societies

is perhaps best thought of as a complex hybrid of ‘pre-modern’,

‘modern’ and ‘post-modern’ ideologies, practices and conditions.

2 The term “developing countries” will be used throughout this article to refer to those countries which have variously been referred to as “The Third World”, the “less developed countries”, the “underdeveloped countries”, and the “poor nations” (as opposed to rich nations); and which includes for the most part the countries classified by the World Bank as “low-income” and “lower middle-income” countries (categories based upon the gross national product per capita of these countries). See, for example, the classification of countries in: The World Bank, Global Economic Prospects and the Developing Countries, Washington, D.C., The World Bank, 1996. pp. 90-91.

3 Schuurman op cit., p. 27

4 John Beverley and J. Oveido, “Introduction,” in John Beverley et al (eds.), The Postmodernism Debate in Latin America, Durham, North Carolina, Duke University Press, 1995, p. 4.

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The ‘globalization’ or increasing integration of the

developing countries into the contemporary global capitalist

system has not propelled them into a new era of post-modernity.

Many of their ‘old’ problems and issues (analyzed in the fifties,

sixties, and seventies) continue to be contemporary problems and

issues. In fact, the contemporary effects of globalization,

perhaps best defined as the global expansion of late twentieth

century capitalism or what has been called “turbo-capitalism,”5

have aggravated most of the chronic problems of the developing

countries while adding new problems. Most of these problems are

still best characterized by the ‘classical’ or ‘modernist”

concepts of corporate capitalism, economic exploitation, social

inequality and social injustice.

In particular, the striking degree of extreme inequality

that exists between the privileged minorities and the

impoverished majority in these societies cannot be adequately

explained from a post-modernist perspective or the current

neoliberal ideology associated with contemporary global

5 see Edward Luttwak, Turbo-Capitalism: Winners and Losers in the Global Economy, New York, HarperCollins, 1999.

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capitalism.6 However, at the beginning of the Twenty-first

century, viewed from a critical global political economy

perspective, it is clear that the increasing integration of the

developing countries into the contemporary global capitalist

economy has accentuated the extreme inequality that characterized

these societies at the beginning of the twentieth century.

Most contemporary observers of the current global situation

are struck by this increasing inequality that has accompanied the

growth of the global capitalist economic system. For example,

David Korten, a former proponent now turned critic of global

capitalist development, has observed that:

...the great majority of the benefits of global economic

growth have gone not to the poor but to those who already

have more than they need--often far more. According to the

1997 UNDP Human Development Report, in 1960 the share of

global income enjoyed by the wealthiest 20 percent of the

world’s people was thirty times the amount shared by the

poorest 20 percent. The ratio more than doubled during the

thirty years of official development efforts. It reached 6 William Robinson, “Latin America and Global Capitalism,” Race & Class, Vol. 40, Nos. 2/3 (1998/99), p. 126.

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sixty to one in 1991 and rose to seventy-eight to one in

1994. The more successful capitalism becomes in the

consolidation of its triumph...the faster the gap grows.7

It is difficult to ignore the economic, political and social

inequality suffered by the impoverished majority of the

inhabitants of most of the developing countries at the outset of

the third millennium. In fact, because social, economic and

political disparities are so ubiquitous and extreme in most of

these societies, one can argue that inequality should be the main

explanandum (i.e., focus of explanation) of any intellectual

effort that seeks to explain the recent historical development

and contemporary conditions of these societies.8

Any serious attempt to explain the extreme inequalities that

are to be found in most contemporary developing countries must

inevitably lead to a critical examination of the relations of

capitalist production and distribution that predominate in these

countries today. Moreover, it is difficult to ignore the

proposition that inequality is part of the essential nature of

7 David Korten, The Post-Corporate World: Life After Capitalism, San Francisco, Berrett-Koehler Publishers, 1999, p.79.

8 Schuurman op cit., p 31.

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capitalist development. To quote another contemporary observer

of the present system, Edward Luttwak: “allowing turbo-capitalism

to advance unresisted disintegrates societies into a small elite

of winners, a mass of losers of varying affluence or poverty, and

rebellious law-breaking rebels.”9 Another observer who is an

admirer of the current system, The New York Times’ foreign

affairs columnist Thomas Friedman, unsympathetically describes in

his recent book on globalization the ‘losers’ by using such

graphic metaphors as “turtles” and “roadkill.”

There are a lot of turtles out there, desperately trying to

avoid becoming roadkill. The turtles are all those people

who got sucked into the Fast World when the walls came down,

and for one reason or another now feel economically

threatened or spurned by it. It is not because they don’t

have jobs [sic!]. It is because the jobs they have are being

rapidly transformed, downsized, streamlined or made obsolete

by globalization. And because this same globalization is

9 Luttwak, op. cit., p. 236.

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also forcing their governments to downsize and streamline,

it means many turtles have no safety net to fall into.10

Thus, both critics and admirers of the current global capitalist

system agree that there are many losers (‘turtles” and

“roadkill’) in this system, even if they don’t agree on the

reasons for this.

The classical Marxist (‘modernist’?) perspective on

capitalism provides an explanation that still seems quite

convincing, despite its Eurocentric limitations. According to

this perspective, the motive forces associated with the

accumulation of wealth that underlie the capitalist system drive

individual capitalists and capitalist enterprises to expand their

accumulative activities and overcome all geographic, cultural and

political barriers that obstruct their path.11 These same forces

also motivate individual capitalists and capitalist enterprises

to concentrate and centralize their control over the various

means whereby wealth is accumulated. In this process, there are

many losers and increasing inequality.10 Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization, New York, Farrar-Straus-Giroux,

1999, p. 271

11 See, for example, the work of Harry Magdoff, Globalization to What End? New York, NY, Monthly Review Press, 1992.

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Even though he analyzed an earlier epoch of capitalist

development and global expansion, Karl Marx’s characterization of

the effects of the centralization of capital seems to fit the

contemporary scene quite well.

Hand in hand with this centralization, or this expropriation

of many capitalists by few, there develops, over an ever-

extending scale, the cooperative form of the labor process,

the conscious technical application of science, the

methodical cultivation of the soil, the economizing of all

means of production, the entanglement of all peoples in the

net of the world-market, and with this, the international

character of the capitalist regime.12

Marx’s analysis of the concentration and centralization of

capitalist production not only accounts for the “entanglement of

all peoples in the net of the world-market,” it also accounts for

the degradation of both the natural and human resources upon

which this economic system depends.

12 Karl Marx, Capital: A Critique of Political Economy, Volume I, The Process of Capitalist Production, New York, International Publishers, 1987, pp. 714-715.

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Capitalist production, by collecting the population in great

centers, and causing an ever increasing preponderance of

town population, on the one hand concentrates the historic

motive power of society; on the other hand, it disturbs the

circulation of matter between man and the soil, i.e.,

prevents the return to the soil of its elements consumed by

man in the form of food and clothing; it therefore violates

the conditions necessary to the lasting fertility of the

soil. By this action, it destroys at the same time the

health of the town laborer and the rural laborer. But while

upsetting the natural conditions for the maintenance of that

circulation of matter between man and soil, it imperiously

calls for its restoration as a system, as a regulating law

of social production, and under a form appropriate to the

full development of the human race.13

Marx not only conceptualized the destructive effects of global

capitalist development on the natural environment and the health

of the human race, he saw that this destruction would require the

restoration of the balance between humanity and nature through 13 Ibid., p. 474.

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the development of a new system of social production more suited

to the full development of the human race as well as the

maintenance of the balance between humanity and the natural

environment.

But one does not need to be a Marxist to comprehend the

contemporary nature of the global capitalist system. David

Korten, who certainly is not a Marxist, has correctly pointed out

that the historical nature of capitalism, despite the claims of

contemporary neoliberal ideology to the contrary, has inherently

anti-market tendencies:

Historians have traced the first use of the term capitalism

to the mid-1800s, long after Adam Smith’s death, when it was

used to refer to an economic and social regime in which the

ownership and benefits of capital are appropriated by the

few to the exclusion of the many who through their labor

make capital productive. This, of course, describes with

considerable precision the characteristics of the current

global capitalist regime, which bears no discernible

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resemblance to the concept of market economy as envisaged by

Smith and those who followed in his tradition.14

Rather than create competitive markets and general prosperity as

its advocates constantly proclaim, capitalism creates an economic

system based on monopolies and oligopolies that serve the few at

the expense of the many. Economic, social and political

inequality is created by the capitalist accumulation of wealth as

it is concentrated and centralized in the hands of a relatively

small number of individuals and corporations.

Individual capitalists and capitalist enterprises in their

drive to concentrate and centralize their control over the

accumulation of wealth are motivated to extend capitalism into

every corner of the planet, and destroy all barriers standing in

the way. This aspect of capitalism is acknowledged by Edward

Luttwak in his recent analysis of the winners and the losers in

the contemporary global capitalist economy:

With the possible exception of nuclear weapons, capitalism

is the most powerful of human inventions. As true an

expression of the restless soul of European civilization as 14 Korten, op. cit., p. 39.

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the urge to discover, create, and conquer, capitalism has

now spread to every part of the world. Traditional economies

guided by unchanging practices, communist economies directed

by bureaucrats, closed economies commanded by rulers or

magnates have all been swept away, surviving only in

isolated backwaters.15

As a result of its voracious nature, the agents and forces of

capitalism has increasingly integrated the economies of the world

into a single global economic system. This process is what is

generally referred to as globalization, the “much-celebrated

unification of the puddles, ponds, lakes and seas of village,

provincial, regional, and national markets into a single global

ocean” in which “the once sheltered markets of those puddles,

ponds, lakes and seas are exposed to the tidal waves of change of

global trade and volatile global finance with its massive flows

and backflows of capital.”16

In the last two decades, nearly every major aspect of

contemporary economic, political social and cultural life in the

15 Luttwak, op. cit., p. ix.

16 Ibid., p.39.

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developing countries of the world has been affected by the

accelerating integration of their economies into the expanding

global capitalist system.17 But what is different about the

current globalization process as opposed to previous stages of

globalization (e.g., Western imperialism in the nineteenth

century), is that nearly every corner of the world is rapidly

becoming an integral part of a global economic system that is

increasingly dominated by large transnational corporations. This

important feature of the contemporary global economy is cogently

described by Joshua Karliner in his book The Corporate Planet:

As the world sails into the new millennium, there is no

doubt that transnational corporations are at the helm,

piloting and propelling global geopolitics and the process

of economic globalization. Indeed, many corporations have

more political and economic power than the nation-states

across whose borders they operate. One simple indicator of

the corporative might of corporations and governments is the

economic wealth each generates....Overall, fifty-one of the

17 See the chapter on “Globalization--Poor Nations, Poor People” in United Nations Development Program, Human Development Report 1997, New York, Oxford University Press, 1997, pp. 82-93.

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largest one hundred economies in the world are

corporations.18

These transnational corporations are protected and supported by a

series of international, intergovernmental institutions that

regulate international finance and trade. The most important of

these institutions are the International Monetary Fund (IMF), the

World Bank, and the World Trade Organization (WTO).19 These

entities, along with the transnational corporations and the

governments of the major capitalist countries (the so-called

Group of Seven, led by the United States), are the main actors in

the contemporary global economic system.

Since the 1960s, the transnational corporations, largely

based in the major capitalist countries of the North but assisted

by the local capitalist elites in the South, have increasingly

undermined the national and sub-national organization of economic

relations.20 The number of these transnational corporations has

18 Joshua Karliner, The Corporate Planet: Ecology and Politics in the Age of Globalization, San Francisco, Sierra Club Books, 1997, pp. 4-5.

19 Ibid. pp. 134-143.

20 See Hans-Peter Martin and Harald Schumann, The Global Trap: Globalization and the Assault on Democracy and Prosperity, London, Zed Books, 1997.

15

increased rapidly since the 1970s, as well as their global

economic influence.

The number of transnational corporations jumped from 7,000

in 1970 to 40,000 in 1995. Described by the United Nations

as “the productive core of the globalizing world economy,”

these corporations and their 250,000 affiliates account for

most of the world’s industrial capacity, technological

knowledge, and international financial transactions...They

harvest much of the world’s wood and make most of its paper.

They grow most of the world’s agricultural crops, while

processing and distributing much of its food. All told, the

transnational corporations hold 90 percent of all technology

and product patents worldwide and are involved in 70 percent

of world trade.21

The 350 largest transnational corporations account for 40 percent

of all global trade, and the corporate annual sales of the

biggest transnational corporations exceed the gross domestic

product (GDP) of most developing countries, as the following

table indicates:21 Karliner, op.cit., p. 5

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State and Corporate Power, 1994 (US$ billions)22

Country or Corporation: Total GDP or Corporate

Sales:

Indonesia 174.6General Motors 168.8Turkey 149.8Denmark 146.1Ford 137.1South Africa 123.3Toyota 111.1Exxon 110.0Royal Dutch/Shell 109.8Norway 109.6Poland 92.8IBM 72.0Malaysia 68.5Venezuela 59.0Pakistan 57.1Unilever 49.7Nestlé 47.8Sony 47.6Egypt 43.9Nigeria 30.4

Top 5 Corporations 871.449 Least Developed Countries 76.5Sub-Saharan Africa 246.8

These mega-corporations do not hesitate to use their economic

power and wealth to influence and shape the economic policies and

22 Human Development Report, op. cit., p. 92

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practices of the states where they invest, produce, and sell

their products.

As the transnational corporations (which include

transnational banks and private financial institutions as well as

industrial, extractive, commercial and service enterprises) have

increased their economic influence in the developing countries,

they have shaped the economic, social and political development

of these countries in the following manner:23

they have convinced both the governments of the major capitalist countries (the United States, the larger member countries of the European Union, and Japan) as well as the major international financial and regulatory trade organizations such as the IMF, the World Bank and the WTO to pressure the governments of the developing countries into removing their former restrictions on foreign investments, eliminating most of the trade tariffs and subsidies that previously protected their domestic industries against foreign competition, and opening up their economies to the transnational corporations;

through loans, investments, purchasing agreements, patentcontrols and licenses, the transnational capitalist corporations have gained dominance over the more important economic sectors -- such as agro-exports, mining, petroleum, natural gas, tourism, telecommunications, pharmaceuticals, advertising, and the

23 The following list of effects is based on information found in sources such as: Karliner, op. cit.; David Korten, , When Corporations Rule the World, San Francisco, Berrett-Koehler Publishers, 1995; and Jerry Mander and Edward Goldsmith (eds.), The Case Against the Global Economy: And for a Turn Toward the Local, San Francisco, Sierra Club Books, 1996.

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production of many basic consumer goods -- in most of thedeveloping countries;

the transnational corporations have purchased, gained controlling interest or an important share of the stock in many of the former state enterprises and public utilities that the governments of the developing countries have privatized as part of the package of domestic economic ‘reforms’ they have been forced to undertake in return for the loans they have received fromthe major international lending agencies such as the IMF and World Bank;

they have persuaded the local capitalists in most of the developing countries to join with them in the promotion of export-oriented ventures instead of investing in economic activities directed toward enhancing the internal economic development of their counties;

the transnational corporations have extracted invaluable, non-renewable resources from most of the developing countries, diverted these resources to other parts of the globe and degraded the natural environment of these countries through polluting their land, air and water;

they have depleted the human, social and institutional capital of these countries by maintaining substandard working conditions, breaking up trade unions, holding down wages, uprooting community economies by moving theirplants and facilities without regard to their effects on the local population, and undermining governments and legal systems through bribery, kick-backs and political campaign contributions;

these corporations have generally transferred the local capital and profits they have accumulated in the developing countries to the more developed centers of the

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global economy rather than investing them in the economies of these countries.

Through these and other means, the transnational corporations

have spread the capitalist economic system, according to Korten,

like a cancer “colonizing ever more of the planet’s living

spaces, destroying livelihoods, displacing people, rendering

democratic institutions impotent, and feeding on life in an

insatiable quest for money.”24 As Friedman so admiringly admits,

it should also be noted that “culturally speaking, globalization

is largely, though not entirely, Americanization--from Big Macs

to iMacs to Mickey Mouse--on a global scale.”25

Meanwhile, the international financial and trade

organizations have supported the global expansion of the

transnational corporations and the integration of the developing

countries into an international financial and trading regime that

is dominated by the governments of the major capitalist countries

of the North, particularly the United States, and the

transnational corporations that are based in these societies. The

most important of these organizations, the IMF and the World 24 Korten, When Corporations Rule...., op. cit., p. 12.

25 Friedman, op. cit., p. 8.

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Bank, have provided billions of dollars in loans to the

developing countries under conditions which effectively give

these organizations a considerable degree of control over the

economies of the countries that borrow from them. Since the

1970s, these international financial institutions (IFIs) have

provided what are called Structural Adjustment Loans (SALs) and

“stand-by loans” to the developing countries so that the latter

can continue to make payments on the huge loans they owe the IFIs

and the transnational private banks.

The conditions that the IFIs have imposed on the developing

countries in return for SALs and other loans include the

following: 26

removing restrictions on foreign investments so that local industries and banks in the developing countries are no longer favored or protected against foreign companies and banks;

reorienting their economies toward exports so that they can earn the foreign exchange needed to service their foreign debts and participate more in the global economy;

reducing wages so that the exports of the developing countries are more ‘competitive’ in the global market;

26 This list of conditions has been taken from Walden Bello’s chapter on “Structural Adjustment Programs” in Mander and Goldsmith op.cit., p. 286.

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reducing government spending on health, education, and welfare so that in combination with wage reductions these developing countries can control inflation and ensure that all available funds are channeled into increasing the production of exports and paying off their debts;

reducing tariffs, quotas and other trade restrictions on imports so that these economies can be integrated more intothe global economy and buy more imports from the transnational corporations;

devaluing their local currencies against ‘hard currencies’ like the U.S. dollar so that their exports are more ‘competitive’ and foreign investors in these countries can easily transfer their profits into these hard currencies andinvest them elsewhere;

privatizing state enterprises and public utilities so that foreign and local capitalists are given access to investmentin and/or control over these entities;

deregulating their economies to free the export producers, importers and foreign investors in these countries from government controls that protect labor, domestic industries,the environment and their natural resources.

The control exercised by the IFIs over the developing countries

is achieved through what they euphemistically call ‘policy

conditionality’.

These organizations provide financial assistance to the

governments of the developing countries on the condition that

they undertake certain policies which these IFIs want them to

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pursue. The following quote from an official IMF publication

reveals the essential nature of policy conditionality:

In providing financial support to any member country, the

IMF must be assured that the member is pursuing policies

that will ameliorate or eliminate its external payments

problem. Use of the IMF's general resources must be in

accordance with the provisions of the IMF's Articles and the

policies adopted under them. Consequently, the IMF usually

approves financial support on the condition that the member make an explicit

commitment to a set of policy measures [emphasis added] aimed at

correcting its economic and financial imbalances within a

reasonable period of time. This requirement, known as

conditionality, seeks to strike an appropriate balance

between the provision of financing and policy changes.27

By conditioning their “financial support” on the adoption of

certain policies, the IMF and other international lending

agencies are able to shape both the external and domestic

economic policies of the countries that receive loans from them.

27 International Monetary Fund, "Financial Support for Member Countries Complements Economic Policy Changes,'' IMF Survey, October 1993, pp. 13-15.

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Thus, the contemporary economies of most developing

countries are being regulated by the IFIs and are becoming

integral components of a global economic regime that is dominated

by the presence of the IFIs, the WTO, the governments of the

major capitalist countries, as well as the growing number of

transnational corporations. The global expansion of the

transnational corporations and the supporting role played by the

IFIs and the WTO has greatly undermined the former ‘national’

organization of economic relations and promoted the increasing

global concentration and centralization of the capital

accumulation process. This ‘globalizing’ process has led to the

increasing integration of the developing countries into the

global capitalist economy not as equal players but as ‘captive

markets’ and the source of cheap human and natural resources for

the transnational corporations.28

Efforts to develop ‘national capitalism’ (capital

accumulation within the territorial confines of a single nation-

state and in the interests of national capitalist development)

28 David Henwood, “Impeccable Logic: Trade, Development and Free Markets in the Clinton Era, “ NACLA Report on the Americas, 26 (May 1993), pp. 23-28; Robinson, op. cit.; and Magdoff, op. cit.,

24

and improve ‘national competitiveness’ are still possible.

However, such efforts face increasing difficulties since they run

counter to the increasingly global nature of the world economy

and the global interests and actions of the transnational

corporations as well as the international financial and trade

organizations, which promote and protect the interests of these

corporations.29

Many local capitalists have become allies of the

transnational corporations and the international institutions

that serve the global interests of these corporations.30 Their

close ties to the transnational capitalists who invest in or

operate economic enterprises in their countries make it extremely

unlikely these local capitalists will undertake any kind of

national capitalist project or pursue economic activities that

run counter to the interests of the transnational corporations.

Moreover, the only ‘competitive advantages’ these local

capitalists have at their disposal to compete in the global

economy are the cheap labor (maintained by keeping wages low 29 H.Radice, “British Capitalism in a Changing Global Economy,” in Arthur MacEwan and William Tabb (eds.),

Instability and Change in the World Economy, New York, NY, Monthly Review Press, 1989, p. 68.

30 José Luiz Fiori, “Brazil: Cardoso Among the Technopols,” in Fred Rosen and Deidre McFadyen (eds.,), Free Trade and Economic Restructuring in Latin America, New York, Monthly Review Press, 1995, p. 98.

25

through high levels of unemployment and government policies that

are basically anti-labor) and the valuable natural resources of

their countries. They generally lack the technology, skilled

labor, and financial capital possessed by capitalists in the

major capitalist countries. And since they lack the means to

compete on equal terms with the transnational capitalists, they

have had little choice but to join with them as their local

junior partners. Thus, with the encouragement of the IFIs, the

business and political elites in most of the developing countries

have thrown open the doors of their economies to the

transnational corporations who are interested in the cheap labor,

natural resources, and consumer markets most of these countries

have to offer.31

Neoliberalism and Integration into the Global Economy

Together the IFIs, the governments of the major capitalist

countries, the local political and business elites and the

transnational corporations have promoted major structural changes

(“structural adjustment programs” or SAPs as they are called by

31 James Petras and Morris Morley, Latin America in the Time of Cholera, New York, NY, Routledge, 1992, pp. 16-29.

26

the IMF and the World Bank) in the economies of most developing

countries in order to facilitate the increased integration of

these countries into the global capitalist economy. These SAPs

and the mutual interests of this alliance are cloaked in the

contemporary ideology of ‘neoliberalism’, which has its origins

in the Reagan-Bush administrations in the United States and the

Thatcher-Major governments in the United Kingdom.32

The key concepts in this ideology are ‘the free market’ and

‘free trade’, and the advocates of this ideology use these

concepts like a mantra. As Korten indicates, they believe that

“the victory of capitalism is the triumph of the market, and that

“freed from the oppressive hand of public regulation, market

forces will cause the world’s great corporations to bring

prosperity, democracy, a respect for human rights, and

environmentally beneficial technologies to all the world.”33 They

also believe that “the more you let market forces rule and the

more you open your economy to free trade and competition, the

more efficient and flourishing your economy will be.”34 32, Friedman, op. cit., pp. 86-87.

33 Korten, The Post-Corporate World..., op. cit., p. 37

34 Friedman, op. cit., p. 8.

27

Globalization in this ideology is equated with the “spread of

free market capitalism to virtually every country in the

world.”35

This mantra is usually accompanied by what the advocates of

neoliberalism are convinced is the universal formula for economic

success in the contemporary time period. Luttwak has succinctly

identified this formula in his analysis of the contemporary

global capitalist system, which, as previously mentioned, he

characterizes as turbo-capitalism:

At present, almost all elite Americans, with corporate

chiefs and fashionable economists in the lead, are utterly

convinced that they have discovered the winning formula for

economic success -- the only formula -- good for every

country, rich or poor, good for all individuals willing and

able to heed the message, and, of course, good for elite

Americans: PRIVATIZATION + DEREGULATION + GLOBALIZATION =

TURBO-CAPITALISM = PROSPERITY. Business people all over the

world mostly agree with them -- only a few, in a few

countries have some reservations....Increasingly, political 35 Ibid.

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leaders almost everywhere also accept this simple formula

for economic success, ensuring its ever wider application in

one country after another.36

This formula is part of the contemporary ideology of the

transnational corporations as well as the international financial

and trade organizations and the foreign policies of the

governments of the major capitalist countries -- particularly the

United States, most of the member states of the European Union,

and Japan. It is the ideology of most of the local capitalist

elites and political regimes in the developing countries, and it

has been used to justify the strategy of economic ‘restructuring’

and ‘adjustment policies’ which all these organizations and

elites have insisted that the developing countries follow since

the early 1980s.

Friedman, who won two Pulitzer Prizes for his reporting for

The New York Times as its bureau chief in Beirut and Jerusalem,

argues that once a country adopts this ideology and abides by it,

the country puts on what he calls “the Golden Straitjacket.”

36 Luttwak, op. cit., p. 25.

29

To fit into the Golden Straitjacket a country must either

adopt, or be seen as moving toward, the following golden

rules: making the private sector the primary engine of its

economic growth, maintaining a low rate of inflation and

price stability, shrinking the size of its state

bureaucracy, maintaining as close to a balanced budget as

possible, if not a surplus, eliminating and lowering tariffs

on imported goods, removing restrictions on foreign

investment, getting rid of quotas and domestic monopolies,

increasing exports, privatizing state-owned industries and

utilities, deregulating capital markets, making its currency

convertible, opening its industries, stock and bond markets

to direct foreign ownership and investment, deregulating its

economy to promote as much domestic competition as possible,

eliminating government corruption, subsidies and kickbacks

as much as possible [sic!], opening its banking and

telecommunications systems to private ownership and

competition, and allowing its citizens to choose from an

array of competing pension options and foreign-run pension

30

and mutual funds. When you stitch all of these pieces

together you have the Golden Straitjacket.37

Friedman notes that this ideological straitjacket has a “one size

fits all” quality, and that it “narrows the political and

economic choices of those in power” so that their “political

choices get reduced to Pepsi or Coke--to slight nuances of taste,

slight nuances of policy, slight alterations in design to account

for local traditions, but never any major deviations from the

core golden rules.”

As a result of the debt and financial crises experienced by

many of the developing countries during the 1980s and 1990s, the

IMF, the World Bank and the other international lending agencies

such as the regional development banks, have helped put the

Golden Straitjacket on these countries in the form of so-called

free market structural adjustments -- the infamous SAPs -- which

the governments of these countries have been obliged to undertake

in order to refinance their international debts, ensure that they

dedicate sufficient funds to the payment of these debts and open

37 Friedman, op. cit., pp. 86-87.

31

up their economies to direct foreign investment.38 The SAPs

recommended by the IFIs have involved the deregulation of local

(national) capital and commercial markets in the developing

countries so that they will be more attractive to transnational

capital. They have also involved the implementation of unpopular

fiscal ‘austerity measures’ aimed at reducing public services and

privatizing many of the public utilities and state-owned

enterprises in these countries. The objectives of these measures

are to divert public funds from public services for the payment

of the international debt and to sell off the more profitable

public enterprises and utilities to the transnational

corporations and their allies among the local business elites.39

These policies have resulted in the wholesale

denationalization of the major utilities and public enterprises

in these societies, as well as the elimination of the protective

tariffs and other forms of support previously enjoyed by local

industries. National currencies have also been devalued and

38 John Weeks, “The Contemporary Latin American Economies: Neoliberal Reconstruction,” in Sandor Halebsky and Richard Harris (eds.), Capital, Power and Inequality in Latin America, Boulder, Co, Westview, 1995, pp. 109-136.

39 For an excellent case study of the effects of economic restructuring, and privatization in particular, see: Judith Teichman, Privatization and Political Change in Mexico, Pittsburgh, University of Pittsburgh Press, 1995. See also: David Korten, When Corporations Rule...op.cit., chapter 12, “Adjusting the Poor,” pp. 159-172.

32

pegged to hard currencies such as the U.S. Dollar, and the growth

of exports (particularly the so-called non-traditional exports

such as fruit, vegetables, flowers and a limited number of

manufactured goods) have been promoted at the expense of the

production of food crops and essential goods for local

consumption.

Most of the governments in the developing countries have

reduced their expenditures on education, health and other social

services so that they can service the combined private and public

sector debts of their countries. They have also held down wages

and laid off large number of government workers. These measures

have adversely affected the income and living standards of the

lower classes in most of these countries as well as important

sectors of the middle class. As a result, even though the huge

debt burden amassed in the 1970s and early 1980s by most of these

countries was incurred by the upper classes and their government

agents, the lower and middle classes have been saddled with

paying for these debts well into the Twenty-first century.40 In

addition to the human suffering caused by these neoliberal 40 Weeks, op. cit., p.125.

33

economic policies, these measures have also jeopardized the

political democratization of many of these societies.41

These unpopular, neoliberal policies were initially

introduced in most cases by repressive military dictatorships or

authoritarian civilian regimes in the 1970s and 1980s. However,

the more democratic, elected civilian governments that succeeded

many of these regimes in the late 1980s and early 1990s have

continued these unpopular measures. Their continuance of these

measures, along with other factors, has constrained these regimes

from implementing policies aimed at combating the more obvious

inequalities and disparities suffered by the impoverished

majority of the population in these countries.42 The continuance

of these inequalities and disparities over the long run

undermines popular support for political democracy and tends to

undermine political stability in these societies. In this

regard, it is significant that the outgoing head of the U.S.

Government’s foreign aid programs, Brain Atwood, has warned that

the increasing gap between the rich and the poor in the world is

41 See, for example, Jorge Nef, “Demilitarization and Democratic Transition in Latin America,” in Halebsky and Harris, op. cit., pp. 81-108.

42 Nef, op. cit., pp. 101-104.

34

a threat to democracy, and that this growing gap will lead to

more ‘failed states’ and wars.43

A critical examination of the developing countries that have

followed the neoliberal formula and that have experienced the

most rapid rate of integration into the global economy 44 --

countries such as Indonesia, the Philippines, Thailand,

Argentina, Chile, Mexico, Pakistan, India, Tunisia, Morocco,

Gabon, Uganda and Ghana -- reveals that their increased foreign

trade (as a share of their gross domestic product), increased

foreign direct investment (as a share of their gross domestic

product), improved institutional investor ratings and/or increase

in manufactured exports have been accomplished at considerable

human cost. Some of the costs include holding down the real

wages of their work forces, continued high unemployment, the

reduction of social benefits for the poorer sectors of the

population, as well as the rapid growth of the informal sector of

their economies (composed of precariously self-employed street

vendors, workers in small workshops, temporary day laborers,

43 As reported in the USA Today, June 30, 1999, p. 5A.

44 The World Bank, Global Economic Prospects and the Developing Countries, Washington, D.C., The World Bank, 1996. pp. 66-69.

35

handymen, domestic servants, prostitutes, and the like).45 In

most cases, as previously indicated, the neoliberal economic

reforms undertaken by the governments of the developing countries

have also increased the transfer of income from the lower and

middle classes to the upper classes, and greatly weakened the

position of the working class.46 Thus, in the developing

countries, globalization and neoliberalism have placed large

numbers of workers, peasants and informal sector income-earners

in a precarious situation. As a result, social unrest and

popular resistance to the neoliberal policies of the governments

of these countries have been prevalent in most of these

countries.47

In addition, the neoliberal restructuring of many of the

developing economies, has also placed the natural environment in

increasing danger.48 In order to repay their international debts

and comply with the free market dictates of the international

lending agencies, many of the developing countries have followed 45 NACLA, “A Market Solution for the Americas,” NACLA Report on the Americas, February 26, 1993, p.17.

46 Carlos Vilas, “Economic Restructuring, Neoliberal Reforms, and the Working Class in Latin America,” in Halebsky and Harris, op. cit., pp. 146-150.

47 See Francis Adams, Satya Dev Gupta, and Kidane Mengisteab (eds.), Globalization and the Dilemmas of the State in the South, New York, Saint Martin, 1999.

48 See Joshua Karliner, op.cit.

36

economic development strategies which are antithetical to the

preservation of their natural environment.49 In fact, the so-

called free market strategies advocated by the World Bank and

other international development agencies, despite the lip service

they give to environmental protection, have generally accentuated

the degradation of the natural environment in the developing

countries.

The contemporary emphasis on exports in order to service the

international debt of these countries, the neoliberal policy

reforms that have been aimed at deregulating their economies and

the reduction of government expenditures on environmental

programs such as reforestation have contributed to the already

well-established pattern of environmental despoliation

characteristic of capitalist agriculture, mining and

manufacturing in these societies. To attract foreign investment,

these societies have deregulated their economies and introduced

so-called free market economic policies which attract

transnational corporations to these developing countries that

49 See Wolfgang Sachs, “Neo-Development: “Global Ecological Management,” in Mander and Goldsmith, op. cit., pp.239-252; and Elizabeth Dore, “Latin America and the Social Ecology of Capitalism,” in Halebsky and Harris, op.cit., pp. 253-278.

37

pollute, dispose of wastes, and extract natural resources with

little fear of state interference.50 Thus, most important

environmental crises in the developing countries are the direct

result of the expansion and intensification of global capitalism

and the neoliberal policies that have been advocated by the

international financial institutions and adopted by the

governments of most of these countries. In this regard, it is

clear that what deregulation and globalization create is not

‘free markets’, but ‘free fire zones’ where the transnational

corporations are free to do as they please.51

The increasing global integration and neoliberal

deregulation of the economies of the developing countries are

leading to the almost complete deforestation of many of these

countries. As a result, they are experiencing increasing soil

erosion, soil depletion, falling water tables, and more frequent

floods and droughts. In most of the Southeast Asian countries,

for example, the remaining forests are being logged so rapidly by

transnational paper and wood products corporations that they will

50 See, for example, Mary Kelly, “The Politics of Toxic Waste,” in Rosen and McFadyen, op. cit., pp. 263-271.

51 Korten, op. cit., p.60.

38

soon be almost completely destroyed, as well as the traditional

way of life of the indigenous communities who live in them.

As country after country is logged out, the loggers simply

move elsewhere. In Southeast Asia loggers move to New

Guinea, Laos, Myanmar, and Cambodia, the last countries that

are still forested -- and, significantly, those that have

remained outside the orbit of the world trading system. At

the current rate of forest destruction, these countries will

be deforested within the next decade. Already, Mitsubishi

and Weyerhaeuser are moving to Siberia -- the last major

unlogged forest area on the planet.52

In the neoliberal ‘free market” economic climate of most

developing countries, environmental controls are largely

ineffective or absent. Moreover, in most of the Southeast Asian

countries, members of the political elite or their family members

often own the logging concessions that are being logged by the

transnational corporations.53 So there is little chance that the

logging practices of these corporations will be controlled.

52 Edward Goldsmith, “Global Trade and the Environment,” in Mander and Goldsmith, op.cit., p. 82.

53 Ibid.

39

The expanding cultivation of export crops such as Tobacco,

Coffee, Peanuts and Soya Beans and the overgrazing of large areas

by livestock destined for export are also responsible for

extensive environmental degradation in the developing

countries.54 The export-oriented agricultural practices being

pursued by the developing countries that are following the

neoliberal dictates of the IFIs are responsible, therefore, not

only for widespread deforestation, but also for extensive soil

erosion, soil depletion and the withdrawal of arable land from

more environmentally sustainable forms of local food production.

Similar destructive consequences are taking place as a result of

commercial overfishing in the fishing grounds of the developing

countries.55 Export-oriented shrimp-farming in Asia and parts of

Africa and South America is also responsible for serious

environmental problems. About half the world’s mangrove forests

have been destroyed to make way for shrimp farms, and the effects

have been disastrous for the ecological systems and local fishing

communities that depend upon these mangrove forests.56

54 Ibid.

55 Ibid., p. 83.

56 Ibid.

40

In response to the rise of environmentalist movements in

countries around the world and increasing international concern

about the effects of widespread environmental destruction, the

concept of ‘sustainable development’ has been taken up by the

IFIs and incorporated into the neoliberal agenda. However, it is

not the health of nature that is the real focus of concern on the

part of the IFIs, transnational corporations and the neoliberal

regimes in the North and the South; rather it is their concern

for continued economic growth that underlies their adoption of

the concept of sustainable development. This meaning of the

concept was revealed in the World Bank’s World Development Report

in 1992. In this report, the question is asked “What is

sustainable development?” And the answer given is: “Sustainable

development is development that lasts.”57

In other words, it is not the preservation of the natural

environment that takes priority in this conception of

development; it is the preservation of capitalist economic

development that is given priority -- under the pretense of

protecting the natural environment through exercising better 57 Sachs, op. cit., p. 244.

41

natural resources management. In the neoliberal conception of

sustainable development, environmental protection involves

becoming more effective at managing the environmental constraints

upon, and effects of, capitalist economic development under

contemporary conditions. Thus, the IFIs, the transnational

corporations and the neoliberal regimes in the countries where

they operate, believe that should be given responsibility for

managing the global ecology while they exploit it. To use a

familiar metaphor, this would put the fox in charge of the hen

house. ‘Sustainable development’, ‘global ecological management’

and ‘environmental engineering’ have become part of the

managerial and technocratic fix that neoliberalism offers the

world in response to the escalating environmental destruction

caused by the global expansion of capitalism. 58

The continued growth and global integration of the

capitalist world economic system is the primary goal of the

neoliberal exponents of contemporary capitalism.59 They cannot

envisage any other course of development as a feasible

58 Ibid., p. 245

59 David Korten, “We Are the Capitalists. You Will Be Assimilated.” Tikkun, Volume 14, Number 4 (July/August 1999), pp. 71-76.

42

alternative to the contemporary global expansion of the

transnational corporations and their unrestrained imposition of

‘free market’ and ‘free trade’ capitalism on the world. It was

one of the early gurus of contemporary neoliberalism -- Margaret

Thatcher, who gave globalization the nickname TINA, which is the

acronym for her trademark exhortation: “There is no

alternative!”60 As viewed from the ideological perspective of

the IFIs, the transnational corporations and their neoliberal

allies throughout the world, there is no other alternative to

globalization and neoliberalism. Hence, another formula that is

shared by the advocates of globalization and neoliberalism is:

GLOBALIZATION + NEOLIBERALISM = TINA.

Alternatives to Turbo-Capitalism and Neoliberalism

In response to the TINA mindset of the exponents of

globalization and neoliberalism, Korten asks the question that

many progressive-minded critics of the contemporary global

political economy and neoliberal regimes have been asking for at

least the last decade:

60 Ibid., p. 71.

43

Instead of using our power to impose the dark vision of

turbo-capitalism on the world, why not bring our wisdom and

compassion to bear in creating economic institutions for a

world of rich cultural and biological diversity in which

everyone is assured access to an adequate and satisfying

means of livelihood, individual freedoms are guaranteed,

family and community are strengthened, productive work,

cooperation, and responsibility are rewarded, and a

sustainable relationship is maintained between humanity and

the life-support systems of our planet?61

While the exponents of the current system predictably reply that

there is no alternative to turbo-capitalism, Korten points out

that there are at least two options to the contemporary global

economy, ruled as it is by global financial gamblers and global

mega-corporations who seek to become global monopolies.

In place of the unrestrained and globalizing turbo-

capitalism of the 1980s and 1990s, there is the option of

national capitalist development which Edward Luttwak has termed

“controlled capitalism,” represented by the various forms of 61 Ibid., p. 76.

44

national development that took place between the end of World War

II and the late 1970s in both the North and the South.62 Most of

the more positive accomplishments of twentieth century capitalism

occurred during this period when most national economies were

highly regulated by national governments, international national

trade and finance largely served national interests, and mass

consumption was created in these national economies by a balance

of power between big government, big business and big unions.

The second option, according to Korten, is “a more populist,

community-oriented alternative,” which Korten refers to as “the

mindful market economy.”63 According to Korten, this type of

regulated market economy is “post-capitalist”, and is centered on

small-scale, stakeholder-owned enterprises, economic as well as

political democracy, and forms of production that restore and

sustain the natural environment.

To survive on a living spaceship we must create a system of

economic relationships that mimics the balance and

cooperative efficiency of a healthy biological community. It

62 Ibid., p. 73; See also Luttwak, op.cit., pp. 28-29.

63 Ibid., p. 76; See also Korten, The Post-Corporate World...., op cit., pp. 154-162.

45

must distribute rights equitably and link power to the

consequences of its use. In short, we must commit ourselves

to establish an economic, as well as a political, democracy.

A substantial body of proven experience suggests that such

systems can be built around smaller enterprises functioning

as self-directing members of larger networks in ways that

are efficient, flexible, and innovative and thereby secure

the freedom and livelihood of the individual while nurturing

mindful responsibility.64

This option is clearly more progressive and democratic than the

controlled capitalism of the post-World War II period or the

turbo-capitalism of the 1990s. However, in the present context of

“global mega-corporations engaged in profiteering from sweat

shops and the rape of the earth,” and the willingness of the IFIs

and the governments of the major capitalist countries to use all

the means at their disposal to impose their agenda of global

capitalist integration on the rest of the world, the second

option does require considerable idealistic optimism and what

64 Ibid., p. 181

46

Korten calls “idealistic social movements to challenge” the

present global capitalist system.65

In fact, there is evidence of the emergence of new social

movements and a popular backlash developing across the world in

response to the dysfunctional consequences and ideological

straitjacket of turbo-capitalism and neoliberalism. As Korten

notes:

Indeed, millions of people, unsung heroes of a new era, are

already hard at work constructing the building blocks of a

post-corporate--post-capitalist civilization....These

determined pioneers are creating new political parties and

movements, strengthening their communities, deepening their

spiritual practice, building networks of locally rooted

businesses, certifying socially and environmentally

responsible products, restoring forests and watersheds,

serving as peacemakers between hostile groups, advancing

organic agriculture, directing their investments to socially

65 Ibid.

47

responsible businesses, and demanding that trade agreements

protect the rights of people and the environment.66

In other words, in response to corporate globalization or

‘globalization from above,’ an incipient form of ‘grassroots

globalization’ or ‘globalization from below’ appears to be taking

place across the world.67

In a similar vein and based on his recent research on both

corporate and grassroots globalization, Joshua Karliner concludes

that:

In almost every country, there are broad and diverse

movements that are playing a key role in promoting

alternative visions, pressing in an assortment of ways for a

balancing of power away from corporations toward a new more

democratic and accountable political process. These

movements are made up of labor unionists and scientists,

peasants and small farmers, community leaders, lawyers and

politicians, student activists, parents and teachers,

religious leaders, small business owners, environmentalists

66 Ibid., p. 2-3.

67 See chapter on “Grassroots Globalization” in Karliner, op. cit., pp. 197-223

48

and more...they are organizing locally, nationally and

increasingly on an international level. Although these

incipient forces of grassroots globalization are not yet

nearly strong enough to check corporate globalization head

on, they have triggered many important changes and set forth

a series of challenges that contain the seeds of an effort

that could reverse the negative trends of

globalization...”68

Observers such as Karliner and Korten see these developments as

evidence of the emergence of a “global civil society” and a

“planetary consciousness” based on the fundamental idea that “all

of humanity shares a common destiny inextricably linked to the

living systems of the planet.”69 In other words, creating a

viable post-capitalist alternative to the present global

capitalist system depends upon civil societies at the national

level, as well as at the international level, “mobilizing to

reclaim the power that corporations and global financial markets

have usurped.”

68 Ibid., p. 4.

69 Korten, The Post-Corporate World...., pp. 280-281.

49

Korten dates the emergence of this new global civil society

to the international forum, held in Rio de Janeiro in 1992, that

was attended by approximately 18,000 representatives of non-

governmental organizations (NGOs) from around the world. This

forum took place while the United Nations Conference on

Environment and Development was holding its so-called Earth

Summit in Rio de Janeiro. The representatives of these NGOs

“tackled head-on the issues of consumerism, planetary limits,

abuses of corporate power, and the destructive consequences of an

unregulated global marketplace, all issues that the official

delegations [at the Earth Summit] studiously avoided.” 70

Since the Rio forum in 1992, there have been an increasing

number of local, national, and international forums where

millions of people and organizations are “learning, sharing

information, developing common strategies, and strengthening the

human bonds that are forging the foundation for a new global

civilization.” 71 This incipient form of globalization from below

appears to be giving rise to embryonic forms of social and

70 Ibid.

71 Ibid., p. 279.

50

economic development that are post-capitalist in nature and

genuinely compatible with sustaining the health of the planet’s

biosphere as well as its sociosphere.

51