The Cadre + 2February 1999

Globalization brings misery and instability

By BRIAN O'NEILL, Programme Co-ordinator for Oxfam Canada in Halifax.

This, the first week in February, is International Development Week. Brian O'Neill argues that the proc- ess of international devel- opment is increasingly be- ing undermined by wealthy investors and their policy- making friends. Not only has this produced devastat- ing impacts on hundreds of millions of people in dozens of countries, but the volatile and fragile nature of this globalized economy threat- ens all of us.

“The world capitalist sys- tem is coming apart at the seams.”

This is not a Cold War rant, dug up from the archives of Radio Moscow. Rather, these are the words of George Soros, global investment fund operator and currency specu- lator, in a presentation to the House Banking Committee of the U.S. Congress on Septem- ber 14, 1998.

George Soros should know what he’s talking about. Worth about $14 billion, he has profited handsomely from eco- nomic globalization.

But Soros knows that the very framework through which he made his fortune has be- come fraught with instability. In short, with the Asian eco- nomic crisis as the catalyst, globalization iscomingundone.

There area host of grow- ing problems with the system, not the least of which is the brutal fact that the crises which emanate from it are killing lit- erally millions of people.

The powerful promoters and defenders of globalization advance a rationale which,

briefly stated, argues that the liberalization of trade and capi- tal flows creates economic growth. And this provides opportunities for everyone to benefit from increased pros- perity.

It’s an attractively sim- ple theory. Problem is, it’s wrong on both counts.

Even though trade and capital liberalization have de- veloped a much greater mo- mentum in the 1990s, world economic growth has slowed considerably, from an annual average of 3.1 per cent in the 1980s to 2.3 percent so far this decade.

Furthermore, the eco- nomic benefits of globalization have clearly favoured the rich and powerful, and not the ma- jority of people. The United Nations Development Pro- gram reports that almost one- quarter of the world’s popula- tion experiences absolute pov- erty, living on less than one dollar aday. And that number is growing by 47 every minute.

While the poor here in Canada and elsewhere are getting poorer, the rich are doing fabulously well by glo- balization. The wealth of the richest 250 people is equal to the annual incomes of the poor- est half of humanity, some 3 billion people. And an April 1998 report by the Wall Street investment firm Merrill Lynch concluded that, the Asian fi- nancial crisis notwithstanding, he wealth of the mega-rich will grow by 10 per cent for each of the next three years.

It is the very nature of this system of economic glo- balization greed, speed and self-serving economic policies that threw East Asia into eco- nomic and social catastrophe in the summer of 1997. It has since spread to Russia, south-

ern Africa and is now starting to affect much of Latin America, via Brazil.

Prior to the collapse of Thailand’s currency in July 1997, that country and its neigh- bouring Asian tigers’ had been doing everything right, accord- ing to reports from the Interna- tional Monetary Fund (IMF), Wall Street banks, the biggest international accounting firms, etc,

So “hot money” — specu- lative investments and short- term loans — kept flowing into East Asia, particularly i- land where much of it went into real estate and property development. This created a $20-billion surplus ofofficeand residential space in Thailand’s capital Bangkok. The loans for these structures could not be paid, creating a crisis of confidence in the Thai economy. Hence, the devalu- ation of the Thai baht in July 1997,

Then the herd of lenders and investors mostly Japa- nese and Wall Street banks took their money out faster than they had put it in. This herd mentality affected not just Thailand, but much of East Asia: the Philippines, Malay- sia, Indonesia and South Ko- rea with the latter two being the most severely affected.

From anet capital inflow of $90 billion to the region in 1996, Ezst Asia experienced a net capital outflow of $100 bil- lion 1997.

When the IMF then went to bail out Indonesia, Thailand and South Korean (with loans of taxpayers’ money from Canada and other developed countries), their first priority was to ensure that the Japa- nese and Wall Street banks got

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