Liz

CONTEMPORARY ISSUES IN LAW & SOCIETY

092 Week 10

Costs and Benefits of Globalisation

Assistant Professor Liz Spencer

• ‘What I do changes the world’• True?• More true in a globalized world?• Or less so?

Today’s Agenda – Part One • What are we talking abt?– what is globalization?– What’s it’s significance?– What are some issues it raises?

• Next put it into a context of Int’l law– What is it?– What are some important institutions that affect the

progress & dev’t of these issues (IMF, WB, WTO & some others)

• Finish up 1st half of lecture with some threats & opportunities & some Q’s abt the role of regulation in globalizn

Today’s Agenda – Part Two • Stiglitz, – Globalizn & its Discontents &– Making Globalzn Work

• globalization has been pursued asymmetrically• globalization can be good or bad, but the institutions

have not carried it out properly (esp IMF & WB)• We have global governance w/out global govern’t• It’s time to change some rules

What is Globalization?

http://www.pbs.org/now/politics/globaldebate.html

It is the closer integration of the countries and peoples of the world. It has been brought about by the enormous reduction of costs in transportation and communication….the breaking down of artificial barriers to the flow of goods and services, capital, knowledge and people across borders. Stiglitz

When did it begin?

The pace, scope and scale of globalisation have accelerated dramatically since World War II, especially in the last 25 years.

The role of tradeWorld trade in manufactured goods increased > 100 times (from

$95bn to $12 trillion) since 1955, much faster than the overall growth of the world economy.

Japan, Korea and now China have seen dramatic increases in their standard of living as they increase their role in the world trading system by targeting exports to rich countries

More and more of global production has been carried out by big multinational companies operating across borders. Multinationals locate manufacturing plants overseas to capitalise on cheaper labour costs or to be closer to their markets.

Globalisation is even harder to track now that one-third of all trade is within companies, for example Toyota shipping car parts from Japan to the US for final assembly.

• Share of trade by region– http://news.bbc.co.uk/1/shared/spl/hi/guides/457

000/457022/html/nn2page1.stm– http://news.bbc.co.uk/1/shared/spl/hi/guides/457

000/457022/html/nn2page1.stm– See also

http://www.wto.org/english/res_e/statis_e/its2003_e/its03_byregion_e.htm

Foreign Direct Investment

Service sector globalisation

The services sector, e.g. education, law, accounting, and IT is also increasingly affected by globalisation (outsourcing and offshoring) as global companies try to save money by shifting functions once done internally.

What China has become to manufacturing, India has become to the new world of business process outsourcing (BPO) - everything from payroll to billing to IT support.

The Information Revolution

• The Information Age (Shift Happens repeat)• http://www.youtube.com/watch?

v=4Q75KhAeqJg&feature=related– http://www.youtube.com/watch?v=ljbI-363A2Q

Some Issues• How are the benefits of globalisation distributed?• Who should make decisions on the global economy?• What is the best ‘sequencing’ for developing economies?• What are the pros and cons of multi-lateralism vs bi-

lateralism?• Does the global economy constitute ‘taxation without

representation’?• Should the debts of developing countries be forgiven?• What is the role of law, alongside institutions, in the global

economy?• If capital, profits and foreign exchange can cross borders, what

about people?

China and India have been doing very well, and there is a convergence at that part of the income distribution. One of the things that led to the success of these countries was heavy investments in technology and education. But those at the bottom in Africa typically don't have the resources, don't have the knowledge, to take advantage of these new technologies. As a result, the gap between them and the rest of the world is actually increasing

Global Distributive Justice:Some Statistics:

• World population – abt 6 billion• Living on < $ 2 per day – 40 %• Poorest 20% of population from 2.3% to 1.4% of

wealth in a decade• Increase in numbers in poverty in last decade – 100

million• 220 richest individuals > 2 billion poorest• Soros’s profits in one day - $ 1 billion• OECD agricultural subsidies - $ 1 billion per day

Debt

• http://www.nowandfutures.com/d2/World_value_stocks,real_estate,debt(World-Federation-of-Exchanges,Fed)123.JPG

International Law: A Basic Framework

• Public vs private international law• Hierarchy of sources– Treaties and conventions– Custom– General Principles

• International persons– States– International organizations (IGOs and NGO’s)

Three Institutions that Govern Globalization

1 International Monetary Fund (the IMF) IMF

2 World Bank (WB) World Bank

3 World Trade Organization (the WTO) World Trade Organization

The International Monetary Fund (the IMF)

• Objective – To ensure global economic stability…• Maintains a Surveillance System.

• Member states have to abide by a Code of Conduct in their external monetary relations: – May not borrow or lend at unsustainable levels.– May not engage in protracted one-way interventions in the exchange market.– May not follow unwarranted monetary or fiscal policies for balance-of-

payments purposes.

• Maintains a System of Currency Support. • IMF may provide member states with short term financial resources to

help them correct payment imbalances.

• Maintains a System for Currency Exchange. • Originally this was based

on the value of gold.

International Bank for Reconstruction and Development (IBRD) Aka the World Bank

Original object – provide loans to rebuild Europe after WWII.

1980s and 90s – structural adjustment loans & IMF conditions.

World Trade Organization (the WTO)

Agreement Establishing WTO came into effect January 1, 1995. • WTO supercedes the ad hoc organization that had administered

the General Agreement on Tariffs and Trade of 1947.

• Purpose: to progressively liberalize world trade. – This is done by giving WTO member states:

• Equal access to markets• Reciprocity in trade

concessions.• Transparent and stable

trading conditions.

The Principles Underlying the GATT Rules

– Nondiscrimination– Protection Through Tariffs– Transparency– Simplification

A few other notable IGOs

Organization for Economic Cooperation and Development OECD

UNITED NATIONS International Court of Justice (ICJ) UNCTAD

UN Development Programme See http://www.un.org/aboutun/chart.html

International Labor Organization World Intellectual Property OrganizationBank for International Settlements

More IGO’s

• Hague Conference on the Harmonisation of Private International Law www.hcch.net

• International Institute for the Unification of Private Law (UNIDROIT) www.unidroit.org

• International Chamber of Commerce (ICC) International Court of Arbitration www.iccwbo.org/court/english/arbitration/

Opportunities of Globalization• N/S wealth redistribution • Expands access to new technologies• International cooperation to solve social and environmental

problems• Improved intercultural understanding• Regulation that ensures long-term economic planning• Recognition that economic policies need to be tailored to

local circumstances• Opens up international trade • Expand access to new markets• Creates new industries• Improves foreign aid

Threats of Globalization

• Raise income inequality, e.g. N/S, gender• Reinforce current power distribution• Exacerbate environmental and social problems• Cultural homogenization• Increase economic instability• Economic homogenization• Competitive pressures against regulation and

government spending on environment

Will growing globalisation of the world economy lead to an increase or a decrease in global regulation?

• There is little international regulation of many aspects of globalisation. – OECD attempts to set rules governing foreign investment by

multinational companies collapsed in the 1980s, while the rules for international banking, stock markets and accounting are increasingly being negotiated by international quangos behind closed doors.

– While the rights of workers to organise unions is enshrined in resolutions passed at the International Labour Organization (ILO), it lacks any enforcement powers.

– Is increased or decreased regulation better for world economic growth and equality?

Break!!!

Joseph Stiglitz

• Globalization and Its Discontents (2002) • Columbia University economics professor Served for

four years on President Clinton's Council of Economic Advisors, then three years as chief economist and senior vice president of the World Bank…And won a Nobel prize (in economics, for information theory)

• Part of what we are doing here is talking about ‘bringing ethics into debates about international relations and globalization.’*

‘Virtually every major meeting of the IMF, the World Bank, and the WTO is now the scene of conflict and turmoil.’

• Developing countries have voiced their concerns, but ‘What is new is the wave of protests in the developed countries.’

• ‘It is clear to almost everyone that something has gone horribly wrong.’

international tradehas helped many countries grow more quickly

helps economic development when a country’s exports drive its economic growth.

Many people in the world, now live longer than before and their standard of living is far better.

People in the West may regard low-paying jobs at Nike as exploitation, but for many people in the developing world, working in a factory is a far better option than staying down on the farm and growing rice.

Globalization has reduced the sense of isolation felt in many countries.

has given many people in the developing countries. access to knowledge well beyond the reach of even the wealthiest in any country a century ago.

Foreign aid, another aspect of the globalized world, for its faults, has brought 'benefits to millions

On the other hand…• Living on < $ 2 per day – 40 %• Increase in numbers in poverty in last decade

– 100 million• Environmental degradation• Corruption• Social dissolution• The GFC

The institutions matter

To understand what went wrong, it's important to look at the three main institutions that govern globalization:

the IMF (the International Monetary Fund)

the World Bank, and the WTO (the World Trade

Organization)

THE INTERNATIONAL MONETARY FUND

Over the years since its inception, the IMF has changed markedly. Founded on the belief that markets often worked badly, it now champions market supremacy with ideological fervor. Founded on the belief that there is a need for international pressure, on countries to ‘have more expansionary economic policies such as increasing expenditures, reducing taxes, or lowering interest rates to stimulate the economy, today the IMF provides funds only if countries engage in policies like cutting deficits, raising taxes, or raising interest rates that lead to a contraction of the economy..

World Bank

Originally made loans only to public sector , then International Finance Corp made to private entities (1956) but played small role

Focus on large infrastructure, transport and power

Criticised for negative environmental and social effects of funded projects

The Washington Consensus, consensus among the IMF, WB & US treasury – about economic policies for the ‘globalised world’

…these policies have informed the ‘conditionalities’ imposed on borrower countries

The Policy and Politics of the Global Economy

• Competitive market ideology• Reduce deficits, balance budgets• Floating and convertible currencies• Low inflation and price stability• Privatisation of state industries• Remove tariffs, other protections on trade and investment• Liberalise capital markets• Enforce intellectual property rights• Reduce the state and recover costs for state services• Structural adjustment programs and aid conditionality

Problems w/ IMF involvement

For many developing countries especially in Latin America and Africa, the IMF requires

(i) Low inflation(ii) Tight monetary policy.(iii) Capital liberalisation(iv) Austerity

Good for trade, but not always good for the local population …Globalisation has and has not lived up to expectations.

The IMF & WB together…

• The two institutions could have provided countries with alternative perspectives on some of the challenges of development and transition, and in doing so they might have strengthened democratic processes.

• But they were both driven by the collective will of the G-7

• The last thing they wanted was a lively democratic debate about alternative strategies.

The WTO

• Stiglitz notes that the WTO is markedly different from the other two organizations. – It does not set rules itself; – rather, it provides a forum in which trade

negotiations go on and it ensures that its agreements are lived up to.

Left with no alternatives, no way to express their concern, to protest for change, people riot.

• ‘Globalization itself is neither good nor bad… It has the power to do enormous good…(but) For many, it seems close to an unmitigated disaster.’

• ‘We have no global government’ (one that is accountable to the people of every country)

Stiglitz’ theme…

• What we have now is:Global governance without global government.

…Ultimately, the question is:– What will/should global governance look like?

• Economic globalization continues to outpace both the political structures and the moral sensitivity required to ensure a just and sustainable world.

• The cost of global instability is enormous; Stiglitz urges that we address the problem.

• He suggests that it is time to change the rules.

Making Globalization Work

• Stiglitz’ most recent book, published in 2006, suggests some ways to address– the indebtedness of developing countries,– international fiscal instability,– worldwide pollution, and– the reform of • global financial institutions, • trade agreements, and• intellectual property laws.

Regional (restrictive?) Trade Agreements

• NAFTA– Special interests dictate the program

• US-Australia– Quarantine– Procurement– Intellectual property– Pharmaceutical Benefits scheme

• US-Korea– Korea’s drug price review policy– Import ban on U.S beef– Car exhaust regulation– Screen quotas

Intellectual Property

• http://www.youtube.com/watch?v=ljbI-363A2Q (Shift Happens)

Protecting intellectual property through patent law

The law locks up the man or woman Who steals the goose from off the common But leaves the greater villain loose Who steals the common from off the goose. The law demands that we atone When we take things we do not own But leaves the lords and ladies fine Who take things that are yours and mine. The poor and wretched don't escape If they conspire the law to break; This must be so but they endure Those who conspire to make the law. The law locks up the man or woman Who steals the goose from off the common And geese will still a common lack Till they go and steal it back.

Anonymous

• ideas and facts belong in the public domain.• Some suggest that both overtly and covertly,

the commons of facts and ideas is being enclosed.*

• Patents are increasingly stretched out to cover "ideas" that twenty years ago all scholars would have agreed were unpatentable.

TRIPS• The Uruguay Round TRIPs Agreement, which is Trade-Related

Intellectual Property, has nothing to do with trade. They just put "trade-related" because they had to put that in there to have it in a trade agreement. That was the real ingenuity.

There was already an intellectual property organization, called WIPO, the World Intellectual Property Organization. But they wanted the trade ministers to do it because the trade ministers didn't know anything about intellectual property, and that meant they were much more vulnerable to the influences of the special interests.

• Making Globalization WorkJoseph StiglitzLecture delivered in Chennai on January 4, 2007http://www.hindu.com/thehindu/nic/stiglitz/index.htm

• Also interview, transcripts and audio at http://www.cceia.org/resources/transcripts/5397.html

• See also ‘Regulating globalization? The reinvention of politics’ by David Held:

‘cosmopolitan’ political approach to economic & financial crises distinguishes itself from both– liberal market solutions (with their

emphasis on deregulation), and– national interventionist strategies

One Person’s Response to Stiglitz• He, along with many other folks, need to remember that the natural state of the

world is not shiny happy and equal creatures all on God's green earth holding hands and whistling show tunes. …The default state of society is to be poor and miserable and to scrape by every waking day just for sustenance. To accomplish what mankind has accomplished in first world countries by raising the standard of living to where it is today is some feat that is probably as random and difficult as finding the proverbial pot of gold at the end of the rainbow. Mankind is not entitled to live in prosperity, it must find it and strive for it and fight for it every day even when it seems plentiful..

• This problem involves many different circumstances and many different issues at every place and every time. There are no blanket solutions and there are no magical elixirs. Top down solutions such as green accounting, debt forgiveness, global greenbacks and international tribunals sound nice and all but don't address any of the "real" problems that people in developing countries face.

• People need the will and power to fight for what’s theirs, to fight the bureaucracy and the tyranny and the oppression that keeps them from being able to achieve better for themselves. When the people in developing countries and those of us who would propose to help them find out how to do that than we'll be well on the way to actually solving their problems.

Another POV

• The International Forum on Globalization is an organization that has proposed some new rules

• Alternatives to Economic Globalization A Better World is Possible – http://www.ifg.org/programs/alternatives.htm– http://www.ifg.org/programs/Alternatives/

WhatYouCanDo.pdf

IFG ‘alternative visions and economic policies’ based on the following principles:

• LIVING DEMOCRACY• SUBSIDIARITY—FAVORING THE LOCAL• ECOLOGICAL SUSTAINABILITY• COMMON HERITAGE• DIVERSITY• HUMAN RIGHTS • JOBS AND LIVELIHOODS• FOOD SECURITY AND SAFETY• EQUITY• THE PRECAUTIONARY PRINCIPLE

A FEW FURTHER RESOURCES:

• Stiglitz lecture on globalisation– http://video.google.com/videoplay?docid=204637612900091118

• Amartya Sen on globalisation and democracy, a lecture at Rice– http://www.blinkx.com/burl?v=7VdNxWaHtYm2WvwVOooEehCmcG0

• Global Economic Governance Programme, Oxford University

• http://www.globalisationguide.org/

• Thomas Friedman – The Lexus and the Olive Tree– The World is Flat

• http://www.pbs.org/now/politics/globaldebate.html

• BBC series on globalisation– http://news.bbc.co.uk/2/shared/spl/hi/guides/457000/457022/html/default.stm– http://news.bbc.co.uk/1/hi/special_report/1999/02/99/e-cyclopedia/711906.stm

• http://www.worldbank.org/ieg/gppp/findings.html

Help, I can’t stop!

• Martin Wolf on Why Globalization Works • Peter Singer on The ethics of globalization in

One World • Deepak Lal on Globalization and Order in

In Praise of Empires • Tyler Cowen on How Globalization Is Changing the

World's Cultures in Creative Destruction • In Defense of Globalization by

Jagdish Bhagwati

Whatever you read, watch, hear…

• Consider who is paying for you to receive the information, and what bias may exist, e.g. here today… and…

• PBS's Globalization Series Fails to Come Clean About Its Underwriters

Summary

Maybe the world is just fine as it is… What do you think?If you think there are injustices that need to be addressed, do you believe that what you do can change the world? If the answer is yes, what will you do?If the answer is no, what will you do?

The end

Thank you