Sudanese Communist Party
Contribution to the International Communist Conference
Athens May 1999

Globalization and it's Impact on the Developing Countries

1 / Background and definitions:

Globalization has become a catchword in the 20th century
world. It is now used extensively in any and in every
context by political and business leaders, academic and
journalists and above all by those working in international
organizations. Next to El Nino, globalization, is perhaps
the most widely discussed notion today. Like El Nino,
organization occasionally manifests itself dramatically in
its effects on lives of ordinary people. The recent
financial crises in East Asia illustrate the kind of
devastation that may felt associated with globalization.
Although its effects are felt world-wide in various
degrees, the notion of globalization is still not
universally understood and positions for or against are
often taken on the basis of ideological leanings or simply
gut feelings.
The terms is often used in an adjectival form- �this
globalization phenomenon�- and in the context of
�interdependence� of economies and nations.
The word �phenomenon� is usually used in relation to a fact
or occurrence, something extraordinary, that is observable
but not easily explained.
Used thus, the term is acquiring a connotation similar to a
term like �Gismat� (or fate) something used by peasants and
superstitious people in some developing countries to
explain their present difficult condition of life as
something that has to be borne but can not be changed.
However, even those peasants, it needs to be pointed out,
are no longer accept that their ills and deprived condition
of life are due to fate. They are now beginning to relate
them to those who govern them and the system within which
they function that enables them to do so.
Globalization is also used synonymously for liberation and
greater openness of economies-implying both liberation of
the domestic economy and external liberation. The chairman
of the World Trade Organization (WTO), for example, when
speaking at the Telecom 95 to the heads of the major
telecommunication companies of the G-7 countries, said that
while �liberation of capital and trade flows, is creating a
global economy, the liberalization of telecommunications,
will globalize human society itself.
Globalization, it should be emphasized, is the
international economic system - or world economy - which is
the totality of global production, consumption and exchange
activities undertaken by micro actors working within
national economies and/or the world market. In the words of
John Ohiorhenuan of the UNDP, globalization refers to the
increasing integration of national economies into a global
market through trade, financial flows, technology
spill-over, information networks and cultural
cross-currents. (See, ILA/UNU, Amman, 1998).
Thus, when people talk of globalization in the economic
sector, they are actually talking about economic and
economic related structures knit together and across the
world of nations.
Economic growth and the whole development process, for that
matter, has been made far more interdependent
internationally by the growth of world trade and the
increasing role and transformation of capital and money
markets due to global diffusion of new technology and the
global consequences of environmental change.
Globalization, then, (and the term �integration� often used
with it), is really man made and the outcome of several
elements of politics, economics, industrial processes and
the way human society is organized and run, within
individual countries and across countries and
relationships. It is by no means a natural phenomenon like
an earthquake or hurricane.
An important point to bear in mind also is that notions of
globalization as an irreversible process fail to take
history or its dialectics into account. In fact
globalization has progressed only by fits and starts in the
20th century with some important set-backs. Globalization
in the 1990s develop at different sectoral intensities in
technology, economics, trade and culture. The process is
rooted above all in the increasing role and transformation
of capital and money markets, the global diffusion of new
technology, the global consequences of environmental
change, and the development of global organizations, inter
governmental co-operation regimes and transnational
corporations. A great number of relations have developed in
the global system, linking these different actors in a wide
variety of fields. Some such relations tend to integrate.
Others can lead to disintegration and fragmentation.
Research has revealed three simultaneous, interrelated and
interacting processes. Alongside globalization, there is
regionalisation and fragmentation. All three are shaping
events and the changes in the life of the people, states
and the international community. These processes are not
necessarily developing in a contradictory, mutually
exclusive fashion. At the end of the 20th century, however,
globalization emerges as the strongest and most
comprehensive of the three, representing the greatest
challenge to all regions and countries.
Within the realm of world economic development,
globalization-according to some experts-is acquiring a wide
variety of uses. These are:
The emergence of a new asymmetric international division of
labor along with greater dispersion of economic activity;
directed by corporate strategy planning that has replaced
governmental or state efforts in various countries.
It is also used in terms of the erosion of the post-war US
dominance of the world economy by the rising
competitiveness of Western Europe and of Japan and the rise
of regional spheres of influence.
In the context of the collapse of the centrally planned
economies and the capitalist system dominating most of the
world, the term globalization is also used to describe the
world-wide spread of capitalism.
Today, also globalization according to Charles Oman of the
OECD, is seen to have three effects-heightening perceptions
of growing �interdependence�, of diminishing national
policy sovereignty, and of greater uncertainty and
instability-to which regionalisation is in part a response.
One would like to conclude this section by following two
concrete definitions of globalization.
Professor Simai of Hungary, defines globalization as the
entirety of such universal processes as technological
transformation, interdependence caused by mass
communications, trade and capital flows, homogenization and
standardization of production and consumption, the
predominance of the world market in trade, investment and
other corporate transactions, spatial and institutional
integration of markets, and growing identity or similarity
of economic regulations, institutions and policies. (See
Simai, 1994, P. 223).
Similarly, other writers in the field such as Levitt used
the expression to characterize the vast changes that have
taken place over the past two decades in the international
economy i.e. the rapid and pervasive diffusion around the
world of production, consumption and investment of goods,
services, capital and technology. (See, Theodore Levitt-the
globalization of markets in Kantrow, A. M, 1985, p. p
53-680).

2 / Origin and prime mover forces:

A / Technological advances:

An important factor that contributed to and helped this
process, are no doubt the advances in technology. This
includes advances in the technology of transport, in
communication and information technology and with it the
transportation of ideas and information across the globe.
Similarly, the major corporations of the world-mostly those
centered in North America, Europe, and Japan - in pursuit
of their profit - maximization and capital accumulation
objectives, have been exerting their pressures and
influence on their governments to facilitate this type of
integration, through the process of globalization; that is,
the transnationalisation of the world economy.
The current talk, since late 1980s and early 1990s of
globalization and integration is really an effort of
transnational corporations, TNCs, to expand their
activities to the developing countries. The term
�multinational corporations� was or is still used to hide
the reality of TNCs corporations. These are usually based
in one home country with management and control, if not all
share holders from that country-and having branches,
subsidiaries and production units in other countries. Thus,
the word globalization is used to wrap together and hide
the reality of the current stage of activities of the TNCs,
namely their attempt at transnationalisation of the world,
and more so that of the developing countries.

B / The transnational corporations:

The talk of integrating the developing countries into the
world economy and the talk about globalization is really
about the expansion of the TNCs activities to the
developing world and on TNCs terms.
To be sure, of the total of more than 250,000 affiliates of
transnationals, more than 101,000 are located in developing
countries, which account for about 20-25% of the foreign
direct investment (FDI) stock highly concentrated in about
ten of these countries. These transnational centers of
economic power press for constant expansion onto new
markets, and for relatively liberal and uniform rules in
the business environment. It is worth noting that the 200
largest global industrial corporations increased their
share of world product from 17.7% in 1960 to 26.6% in 1980,
and TNCs in aggregate now conduct 70% of international
trade (Gordon 1977: 41; UNDP 1994: 87). Global products
figure prominently in world consumption as, to take one
example, Marlboros are sold and smoked in 1255 countries
(Mattelart 1989: 55). TNCs now also serve as important
instruments for the globalization of markets, by spreading
the information infrastructure, which increases the speed
and reduces the cost of transactions.
Sylvia Ostrey, the former chief economist of the OECD,
wrote prior to the Brussels meeting in 1990 and the Uruguay
Round on Tariffs and Trade GATT negotiations: �The primary
agent of globalization is the transnational enterprise. The
primary driving force is the revolution in information and
communications technology.In a globalizing world,
competition among transnational enterprises in
sophisticated products and services.is also competition
among systemsFor the global corporation competing in the
international economy, it means competing under the same
set of rules that is the same set of domestic rules in
different countries�. (See, The International Herald
Tribune, 19 April 1990).
That plea was for government to act, agree upon a set of
trading rules in the Uruguay Round (UR) negotiations, and
facilitate the globalization of the world economy by the
TNCs. It is a call for governmental and intergovernmental
actions to transnationalise the world economy.
Initially the GATT, through succession rounds of tariff
negotiations embarked on a course of gradual tariff
reductions and liberalization of trade between the US and
Europe, subsequently involving Japan. The rest of the
memberships, mostly developing countries, were an onlooker
gaining no direct rights through trade liberalization in
areas of interest to them.
The industrialized countries in all these earlier
negotiations did not focus on the markets of the developing
world, but rather on each others markets, and because of
the TNCs and their productive activities, trade
liberalization measures were designed to further the
intra-industry trade among themselves. Their more or less
equal technological and other capabilities and production
of goods resulted in intense product differentiation and
intra industry trade as well as intra-firm trade. An
estimated 25% of international merchandise trade now
consists of intra-firm transactions within global companies
(UNDP 1994: 87). But the rise of new competition from newly
industrialized countries (NICs) of the East, began to
change the perception of the North. Also with slower growth
and stagnation in their own countries, and the change of
stance in macroeconomics-that came in the 1980s with
financial assets and their protection taking precedence
over, and to the detriment of manufacturing capital-the
TNCs began to eye the markets of the major developing
countries. Thus, the entire succession of tariff cuts and
other measures were aimed at facilitating this, with the
corporations in effect lobbying their governments.
Moreover as the global factory is mobile, it can fairly
readily relocate in response to shifts in costs of
production. Hence, for example, significant number of
assembly plants, especially in the textiles, automotive and
electronics sectors, have in recent decades moved from
Western Europe and North America to export processing zones
(EPZs) in East and South East Asia, Mexico and the
Caribbean (Grunwald and Flamm 1985).

C / New measures:

To protect domestic markets against the new competition
from the NICs, as well as the drive to penetrate those
markets, the TNCs of the North worked both to break down
the trade barriers in the South and establish themselves
within those countries to better compete with domestic
enterprises. This is the real story behind the UR. The US
is very adamant that there should be no more Koreas or
Taiwan to challenge and compete with the US.
Thus the push for ending the special and differential
treatment of the developing countries, for tightening
disciplines in the traditional goods area and ensuring that
they bind the developing countries. Hence the move to
extend the domain of GATT negotiations to include new areas
such as services and agriculture and new issues such as
intellectual property rights IPR (in the parlance of GATT'.
Trade-related Intellectual Property Rights or TRIPs) and
liberalize them.
This liberalization move in services which is currently
being continued through the World Trade Organization WTO,
the successor of GATT, engulfs service sectors such as
financial services and basic telecommunications and is
aimed at facilitating the control by foreign capital of the
key sectors of domestic economies of these developing
countries.
The TRIPs, are designed to establish a secure framework for
TNCs to supply a distant market with their products (on
whose imports they get a monopoly through the intellectual
property rights protection of processes and products) or to
set up production ventures and supply the market or license
a local producer.
Along with the trading rules to promote
trannsnationalisation, the major industrialized countries,
particularly the US which really controls the IMF and the
World Bank, has been pushing these institutions to promote
this goal of globalization through their own policies. They
have been doing this through what became known as the
Washington consensus. It is consensus among the big on the
character of policy reforms that debtor countries should
pursue.
The TNCs, however still do not have unrestrained rights to
invest in the developing world. Hence, the talk by the
North for setting an investment treaty inside the WTO and
enforce the right through trade retaliation.
This is what is known as the Trade Related Investment
Measures (TRIMs) agreement within the WTO framework. The
objective is to further the rights of TNCs through
enforcing the right to establishment and phasing out
measures related to local content which oblige foreign
firms to use at least a specified minimum amount of local
inputs. This, undoubtedly increase foreign control of the
national economy as it will give foreign companies the
right to enter and establish themselves in any sector of
the economy and in all member countries of the WTO. It will
no doubt infringe the sovereign rights of a Third World
State and its people to decide upon and pursue policies
consistent with its stage of development.
The WTO structure is very powerful in terms of obtaining
compliance from member countries. Thus, signing on a WTO
agreement, it should be emphasized is a very serious
business unlike signing onto a UN Declaration, for even a
UN Declaration of over 100 heads of government has little
enforcement possibility and becomes only a moral
commitment. Once signing the UR agreement and enters the
WTO that country is obliged to follow the WTO rules. These
rules will severely restrict or constrain the possible
policy options in many areas. Non compliance of the rules
can bring about heavy penalties and punishment including
retaliation through measures affecting trade and other
activities. At the extreme non-compliance can also lead to
expulsion, and thus the threat of discrimination or trade
boycott from other countries. It goes without saying that
it would be very difficult, if not impossible, for a
developing country's government to change the GATT/WTO
rules, or to escape from compliance of obligations.
Disciplines of GATT/WTO are legally binding to present and
future governments. Once the WTO is entered into, it would
be difficult for the government to change its basic
structural economic policies relating to foreign trade,
investment, sectoral policies in services and agriculture,
or technology policy (vis-a-vis intellectual property
rights). Similarly, it will be difficult for a present
opposition party with a different economic platform to
implement such a program-should it come to power if this
were to contradict the WTO rules.
The only alternative would be to opt out of the
multilateral system, but few present governments or
political leaders have the strength or courage to think
along these lines.

D / Structural Adjustment Programs (SAPs) for globalizing
the national economies:

An important feature of globalization, is the globalization
of national economies. Firstly, most developing countries
are more and more subject to the pulls of the world market.
Secondly, important areas of economic policy-making that
were once under the control of national governments in the
South have increasingly come under the domain of Northern
governments and acting in favour of international companies
and banks.
This globalization of national economic decision making has
been boosted by SAPs imposed by the World Bank and the IMF
on indebted developing countries as a condition for debt
rescheduling since the 1980s and by the recent UR agreement
(under GATT auspices) that was signed in April 1994.
Northern government have used the World Bank and the IMF as
tools to maintain control of world financial and economic
system. The debt crisis was an opportunity for these
institutions to impose SAPs on indebted developing
countries that needed debt rescheduling. The debt crisis
has thus been exploited in such a way as to weaken the
South's ability to press ahead with the demand for a New
International Economic Order. In the meantime, the Northern
banks, backed up by their governments and the Bretton Woods
institutions inhumanely devised ways to extract as much
debt repayment (with interest) as possible, rather than
equitably sharing the loan losses between the creditors and
borrowers. Therefore, as globalization and financial
speculation went into high gear in the 1980s, the two
institutions continued their efforts to insure that the
developing countries remained subservient to the needs of
international capital, whatever the cost. They collaborated
to co-ordinate the handling of the developing countries
debt crisis, in which big Western banks recycled
Petrodollars by foisting ill advised loans on developing
countries like Mexico and Brazil. The IMF and the Bank used
their enormous clout to see that countries repaid their
debts to Western capital.
Furthermore these two institutions particularly the IMF,
are entrusted with the protection of US interests. This is
through promoting its post-war open-door policy and
insuring that in periods of economic down turn countries
affected do not resort to measures affecting other
countries. Instead, they should take internal steps such as
reducing production costs by cutting wages or government
expenditures to improve their competitive position in times
of external balance of payments difficulties. Similarly,
the fundamental role of the World Bank - once the
reconstruction of the war torn industrial countries was
completed - was to make loans to developing countries to
pay for investment in large basic infrastructure projects
like dams, power plants, roads etc. These were projects
that private investment was unwilling or unable to carry
out, but which were necessary to lay the basis for private
investment in other sectors, particularly natural resource
exploitation and manufacturing. Their ultimate objective is
to promote private foreign investment in the developing
countries. Hence, laying the foundation for the
internationalization of the world economy.
In our view, SAPs have two roles:
To restructure the economies of the developing countries to
better save foreign exchange to service their debts. And
alter the fundamental macro economic policies of countries
of the South into a single �mono-cultural� Laissez - faire
model that would be compatible with the long-term
requirements of the Northern - dominated world economy.
The inception of the SAPs approach coincided with the
economic reforms of Reagan and Thatcher in the US and the
UK. Structural adjustment was the mechanism for
transferring the Reagan - Thatcher economic model (which
has had such damaging effect on the poorer and middle class
sections of the U.K and the US populations) to the South.
SAPs forced Southern governments to reduce the role of the
state in the economy and in social services.
These governments are forced to take the following drastic
measures:
Cut public spending; especially in the so-called
�non-productive� social sectors such as health and
education and for food subsidies.
Retrench public sector employment, impose a freeze on wages
and free prices from controls, to deregulate and to
liberalize externally (emphasize exports rather than
production for the local market, reduce import tariffs) and
liberalize the terms of foreign investment.
Thus, the adoption of SAPs by a large number of developing
countries, leads to the internationalization of macro
economic policy under the direct control of the IMF and the
World Bank acting on behalf of powerful financial and
political interests, e.g. the Paris and the London Clubs,
the G-7. The main objective of this new form of economic
and political domination is to subordinate the South
through a global economic design i. e. the seemingly
neutral interplay of the market forces. It should be
mentioned that at no time in history has the free market,
through the instruments of macroeconomics operating at a
world level, played such an important role in shaping the
destiny of �sovereign� nations.
The role of Saps, has been complemented by the Uruguay
Round; the Round as explained earlier, leads to a very
significant external liberalization of many sectors and
factors of the domestic economy of all the developing
country members of GATT and its successor, the World Trade
Organization (WTO).

E / Finance:

Perhaps the most important face of globalization is the
rapid integration of financial markets over the last
decade. A number of factors seemed to be involved.
In the late 1960s, there was a relative saturation of the
demand from private consumers in the US and the later in
Europe.
Whereas the boom period was a seller's market for the US,
by 1970 competition from Europe and Japan was becoming
stronger.
Because of these two factors, the high profit rates of the
previous years were beginning to dwindle. Most importantly,
there were no major stimulus for growth, such as major
technological innovations to replace the auto, highway, and
housing investment complex. As a result, the 1970s and
1980s were marked by an enormous growth in financial
investment and transactions of a speculative nature.
Whereas in the mid-1960s bank lending across national
borders accounted for only about 1% of the GDP of the
market economies, by the mid-1980s it reached 20% of the
much higher levels of GDP.
At the same time, the Reagan-Thatcher years of deregulation
and privatization were accompanied by a tilt in government
tax and expenditure policy sharply in favour of the rich.
The result, has been a weakened demand for real goods and
services. Moreover, with the end of the Cold War, the
mainstay of the US economy in the 1980s-military
expenditures- can no longer be justified. Even though the
military budget remains near Cold War levels, it is
difficult to make a case for pursuing a policy of pump
priming through �military Keynesianism�.
The globalization process in the eyes of some, took place
precisely in the post - 1973 era of stagnation, and was
largely a response to the end of the boom period. Thus, the
over-accumulation of productive capital by the end of the
boom period (the other side of the coin of under
consumption) meant increased competition, which put
pressure on profits. This, in turn, puts pressure on
companies to expand aboard and led to an increased
financial investment and speculation.
Innovations in communications and computer-mediated
technology have made possible a vast array of new financial
instruments and risk-management technologies. Coupled with
competitive deregulation of financial markets, the result
has been a spectacular increase in cross-border capital
flows. Cross-border transactions in bonds and equities
which were generally less than 10% of GDP in 1980 for the
major developed economies were generally over 100% in 1996.
The sums involved in international banking, mainly through
electronic payments systems-according to the IMF 1993:
60-70 more than 10 quintupled between 1978 and 1992,
strides ahead of inflation. By the late 1980s more than 10
trillion of securitised funds were moving across state
frontiers each year and in 1992 an estimated 800 billion of
foreign exchange transactions were being conducted around
the world every day, over 600 million per minute (Kirdar
1992: 2; BIS 1993: 196).
Net private capital flows also tended to move away from
bank loans to direct investment and portfolio investment.
The increase in foreign direct investment (FDI) flows,
underscore the enormous role of TNCs in economic activity
world-wide. The value of goods and services produced by
foreign affiliates was estimated at 7 billion US $ in 1995.
Not surprisingly, production by TNCs is becoming the
dominant mode of servicing foreign markets. With the
dramatic fall in transport and communication costs over the
last 40 years, firms are finding it efficient to locate
different stages of production in different parts of the
world. Foreign trade is becoming more and more
intra-industry or intra-firm, especially for the advanced
economies. The TNCs has also become the quintessential
vehicle for knowledge and technology transfer.

F / The State - TNCs linkage:

In the previous sections, it has been establish that
globalization, refers to the explosive growth of huge TNCs
and vast pools of capital that have crossed national
borders and penetrated everywhere. This globalization, in
turn, is seen as largely the result of a parallel
technological explosion in computerization,
telecommunications, and rapid transportation. Now, while
the facts of an accelerated internationalization of capital
and technology are not in dispute, one rejects the argument
that there is a divorce of capital and TNCs from their
states or governments. As these TNCs have become so large
and powerful than their national governments, it does mean
that they are independent of them.
It is true that companies such as Exxon, Bayer, and Toyota
sell and invest all over the world and that their primary
goal is to secure money for their share holders. Yet, this
does not render each of them independent of its home
country in which it is headquartered and in which the great
majority of its capital stock is owned. History has shown
us that the power of the state has always been important to
companies seeking to sell and invest internationally. This
is true whether or not state power is used to pressure
other countries to reduce barriers to the company's exports
or investments.
This important role of state power, whether it be military,
political diplomatic, or economic, is perhaps most noticed
in natural resource sectors like oil where control over
this resource have been settled by war making ability.
Thus, if it were not for the US and British victories in
two world wars, the names of companies like Exxon, Mobil,
British Petroleum and Shell would not have become household
words. On the other hand, leading German and Japanese
national companies - such as Verba and Nippon Petroleum
Refining - are known only to specialists. While oil is a
dramatic example, we would like to argue that in every
industry where companies are struggling for markets or
investment opportunities, the national identity of the
company, can be a very important factor in its success and
failure.
Furthermore, even if the company does not care about the
impact of its actions on its own country, the government of
the home country almost always cares. It is in the interest
of each country's government that its national companies
control important natural resources like oil or key
technology, like computers. This is so, for a variety of
reasons including the profits that will accrue to the
nation's shareholders as well as the national security and
independence that come from their controlling the resources
themselves.
Another reason is that a government has much more control
over companies owned by its citizens than it does over
foreign companies, and can force them to do things it wants
much more easily. For instance, the case of a US company,
Continental Oil, was blocked by the US government from
helping to develop Iran's oil fields while European and
Japanese companies were able to resist US pressure.
An important point to bear in mind is that the significance
of the state-company linkage is greater in area of strong
rivalries among companies. Such rivalries are fiercest when
over-all economic growth is slower or weak. On the other
hand, when economic growth is rapid and business
opportunities are plenty for all competitors, or when the
companies of one country so dominant that there is no
effective foreign rivals, the state-company linkage is less
important.
It is a fact the present, is characterized by slow growth
and stagnation and hence fierce and growing economic
rivalries. Thus the state-company linkage becomes more
important than ever. So, we are of the opinion that the
conventional wisdom that globalization has made the nation
state irrelevant is particularly wrong, today.
To be sure, the micro-economic forces that drive
globalization are facilitated or stimulated by the advanced
country's government policies and behavior - such as the
de-regulation of financial or other markets, the raising or
lowering of barriers to competition, trade, investment,
etc; see, Charles Oman, OECD, 1994.
All these moves which are characterized as globalization
are pushing the theories of free market and free trade-
that have never been practiced before by the advanced
countries- on the developing countries.

3 / The impact of globalization on the developing
countries:

The question that must be raised has globalization achieved
positive results for these countries? The straight answer,
is no.

A / At the political level:

First, with the end of the cold war it was expected that
peace would be achieved which would push development
further. The opposite has actually happened. Furthermore,
the developing countries under the new global power
structure, have lost their function as an ally or proxy in
various East-West conflicts; benefiting from competition
between the two sides to foster their development.
Second, there is now a dwindling political support for the
idea that development is a key issue on the international
agenda.
Third, the North-Align Movement has largely lost its
significance, which has substantially weakened or even
eliminated a major political factor tending to unite the
developing countries of the South in mutual solidarity.
Thus the developing world has lost much of its bargaining
power, and the major powers in the world are redefining
their international policies and attitudes in a number of
areas that affect the global development process.

B / At the economic level:

It is possible to establish the following economic effects
of globalization.
The world the developing countries face, displays
increasing globalization of markets and rapid technological
change that bring about high-performance systems in
production and services. This leaves countries at lower
levels of development less able to compete simply with
cheap labor and abundant natural resources.
A number of governments seeking to remedy macro-economic
dis-equiliberia with a structural adjustment program, or in
more general terms, furthering an open economy, have had to
devalue, remove price controls or subsidies, privatize, cut
government spending and increase the openness of the
economy. Such policies, which began to be adopted in the
1980s and became more spread now, have created serious
problems in these countries as will be elaborated later in
this contribution. Even in the cases where there have been
some successes, this has been achieved at the expense of
other economic and social objectives, particularly among
the rural poor.
Slower global economic growth coupled with the structural
changes in the world economy, have weakened the position of
suppliers of primary products. This has raised new market
difficulties, for many countries, especially ones dependent
on a handful of such commodities, where competition has
intensified. According to the IMF, �The world can look for
a year of modest economic growth at best, with the risk of
a slowdown.This languid pace is troublesome for developing
countries, which need global growth to provide buyers
exports that creates jobs and bring in cash that can be
used to modernize their economies�. (See the International
Herald Tribune, p.1, April 21, 1999).
Reducing the significance compared to previous years, of
developing countries �comparative advantage� in low skilled
labor-intensive products and segments of production,
particularly as a means to attract �offshore� production by
OECD-based firms to serve-regional markets.
Globalization does not, of course, eliminate the potential
for low-wage economies to retain a comparative advantage in
such products - as the spectacular recent growth of China's
exports illustrates. Nor does it all together eliminate
OECD based firms potential attraction to offshore Low-wage
production sites. However, more strict requirements for
quality, flexibility and reliability of production and
delivery by suppliers, and hence greater need for physical
proximity, all tend to diminish the strength of that
attraction. Rather, in so far as redeployment of production
from high wage to low-wage sites continue to occur, the
trend strengthened also by globally competitive firms
desire to neutralize the effects of major currency
fluctuations, is for that redeployment to serve regional
rather than global markets. Production to serve the
European market - whether by European or non-European firms
- that moves to low-wage countries from say, Germany or
France, or even from outside the region, is more likely to
move to southern Europe than to Latin America or Africa, or
Asia, compared to previous years. Production to serve the
North American market that relates to low-wage sites is
more likely to move to low-wage areas in the United States
or Mexico than to Asia and another region compared to
previous years.
This is happening at a time when the developing countries
are turning outward and seek to become low-wage sites for
production to serve global markets. It is occurring just as
a chorus of protectionist voices is rising in some OCED
countries accusing OECD firm's redeployment of activity to
low-wage economies of siphoning off good jobs, and of being
a major cause of high unemployment and stagnant or
declining incomes for large segments of the population in
their countries.
Regionalisation of production and protectionist pressures
in OECD countries strengthens pressures in developing
countries to join regional grouping in the North, via
�framework� trade and investment agreements. Another effect
is developing country firms ever growing interest in
establishing inter-firm tie-ups with globally competitive
OECD-based firms.
Globalization, is more demanding in terms of both its
human-resources requirements and its need for well
functioning transportation and communications
infrastructure. Both requirements raise serious questions
about the viability of this new system. The vast majority
of the developing countries, struggling with grave social
and economic problems, have not developed such
capabilities, which has left them increasingly marginalised
in scientific and technological terms.
The shift in, almost, all countries development strategies
from import substitution to export orientation was a
consequence of globalization and a factor behind it. The
change has made external sources of economic growth more
important and had major implications in areas like
technical change, capital flows and income distribution.
The, reciprocal, relationships between trade and industrial
development is also changing as the South becomes more
export oriented. It is becoming more important to raise
global competitiveness through diversification and
technical upgrading. The changes create a number of new
social constraints as well.
The growing interdependence of economic growth and
development on external factors, especially global finance
and world trade. About 1/5 of the income of the industrial
countries and 1/3 of that of the developing countries
depends directly on exports. It is also estimated that
40-45% of the world's jobs in manufacturing and 10-12% of
those in the modern service sector, are directly or
indirectly related to foreign trade. National development
has become more extensively embedded in a global framework.
At the same time it has become more complex, following
several concurrent paths. Changes such as growth and
recession, sudden set backs and break downs are transmitted
much faster than they were, particularly to developing
countries. The episode of Mexico in 1995 and after it of S.
E. Asia, prove both the de-stablishing potential of
globalization and the interest of the advanced countries in
helping to avert a collapse. Trade, moreover, remains a
major channel for redistribution of global income, through,
for example, changes in the terms of trade (which lost
Africa alone 50 billion US $ during the 1980s) or
facilitation of special rents for monopolistic positions.
Recent South-North outflows are very large, in fact
constituting a financial hemorrhage, and at present
probably exceeds 500 billion US $ annually. These outflows
arise from the South's adverse position in the
international structures of trade, finance, technology and
distribution.
A major thread in these developments, is the increasing
power of TNCs and their impact on national and local
economies and politics. Through mergers and acquisitions,
fewer and fewer of these TNCs now control a larger and
larger share of the global market, whether in commodities,
manufactures or services. For instance, the largest 500
global companies now account for 80% of transnational
investment (Myers 1994).
An important question relates to the increasing role of
speculative capital movements. If a growing volume of
savings is moving into this area, as the case now,
countries that depend on the availability of resources for
productive investments will benefit less.
The elimination of the �Cold War� factors from North-South
relations, the mixed past experience with foreign aid, and
new domestic problems in the industrial countries have
combined to produce a kind of public �aid fatigue� and
declining interest in joining international assistance
programs. Even humanitarian aid has become tighter, and the
conditions for giving it delicate policy issues. By 1995
official development assistance had fallen to the lowest
level since relevant statistics were first collected in
1950.
Great asymmetries of interdependence are experienced. Some
80% of global GDP, about 19.2 trillion US $, was accounted
for by 24 high-income countries with 4.5% of the world's
population. 5% only of global GDP, about 1,200 billion US
$, was generated by 45 low-income countries with about 55%
of the world's population. Thus, while per capita income in
the advanced countries is 23,000 US $, it is 324 US $ in
the developing countries.
Furthermore, in the 1960, countries with the richest 20% of
the world' population obtained 30 times more of the world's
aggregate income than countries with the poorest 20% of the
people. An enormous inequality-indeed, it was largely to
reverse this sort of inequality between North and South
that de-colonization was pursued. Yet during the next 30
years the gap actually increased so that in the 1990s the
richest 1/5 of the world's population has 60 times the
income of the poorest 1/5. In 43 countries per capita
income is today lower than it was in 1970; in almost as
many more it has stood still. Some 800 million people (1/7
of the world's population) are today under nourished.
Globalization has in certain respects-especially those that
might improve material welfare-substantially by passed much
of the South. Phenomenon such as global companies, global
products, global information infrastructure, and global
telecommunications have all developed much further in North
America, Western Europe, and the Pacific Rim than in most
of the South.
The rigorous of global market competition have helped to
encourage a decline in concessionaire resource transfers
from North to South.
The average global trade regime has generally perpetuated,
if not increased, embedded disadvantages foe the South in
world commerce. On the whole, barriers to trade in the
North are estimated still to cost the South twice the value
of all aid. World prices of primary commodities in the
1990s are at their lowest level since the Great Depression
of the 1930s. The Uruguay Round Agreements and the WTO will
not reverse these conditions, but will worsen them. A study
by the OECD and the World Bank, concludes, nearly 2/3 of
the income gains from the UR will accrue to the North.
The vastly increased scope of �free trade agreements� has
tremendous significance for the shaping of national
economic and social policies, for distribution concerns,
and ultimately for national sovereignty and human rights.
Failures to take into account the principles of the right
to development in agreements, frustrates the realization of
the rights to development and all human rights.
UR will also result in specific problems. For instance, the
agriculture agreement could have severe negative effects on
many developing countries. Most of them will have to reduce
domestic subsidies to farmers and reduce tariffs on
imported food. Many farmers will have to compete with
cheaper imports and may not survive. Agricultural
liberation will also raise world food prices, which may
benefit food exporters but about 100 developing countries
food importers will face higher food import bill and are
likely to be among the biggest UR losers.
UR also for the first time brought services into GATT and
WTO. In many developing countries, the services sector
is relatively shielded and local enterprises have been able
to develop. With liberalization, the Northern TNCs involved
in services will make further inroads and eventually
dominate the sector.
Similarly, developing countries indigenous technological
development will be hindered by the imposition of the
TRIPs, and IPRs legislation similar to Northern standards.
Most developing countries have exempted agriculture,
medicine and other essential products and processes from
their national patent laws, but with passage of TRIPs,
every thing is subject to IPRs unless explicitly exempted.
The prices of medicine are expected to shoot up in many
countries, and foreign drug sales will increase rapidly at
the expense of local products.
The clever device of linking trade with IRPs, services and
investment through WTO, is used to either further
liberalize developing countries economies or to reduce
their competitiveness in the scramble for world market
shares. The aim also is to use this instrument to shift a
great portion of the burden of future global economic
adjustment (for instance, because of environmental
imperatives) to the developing countries, which presently
has a weak voice in GATT/WTO negotiating forum. Indeed it
is precisely because the developing countries are also so
weak in the GATT/WTO arena and that GATT/WTO carries the
power of �bite� in the form of trade retaliation mechanisms
that this institution has been chosen as a vehicle to
institute reforms favorable to the North.
Global trade with the North has in various cases brought
physical harm to many residents of the developing
countries. For example, a number of global companies
have sold dangerous and/or inappropriate products from
North to South. Nearly a third of pesticides
exported from the North have been banned, unregistered or
withdrawn in the country of manufacture. Global tobacco
companies and global arms traders have more clients in the
South as their markets have tightened in the North.
Finally, environmental degradation in the South has on
various occasions accelerated as governments have
intensified export drives for purposes of debt repayment
and the achievement of structural adjustment targets.
Global relations have often impoverished the South in the
late 20th century through structural adjustment programs
(SAPs) introduced through global economic institutions.
Although the record has not been uniform- and although
programs of the 1990s give more attention to questions of
social security- structural adjustment has so far
frequently left the poor of the South and the East even
more destitute.
Many countries under going SAPs have suffered a drastic
decline in incomes, on average by 15% in most of Latin
America and 30% in Sub-Sahara Africa during the 1980s.
Investment per capita fell 75% in Africa and 40% in Latin
America during the 1980s whilst in the 42 poorest countries
health spending fell by over 50% and education spending by
25%. Infant and child mortality rates rose in many
countries. During the 1980s the numbers of the absolute
poor increased in developing countries as a whole and in
Africa they also increased relative to the total
population. SAPs in the view of a leading expert, the
Canadian Michel Chossudovsky, are conducive to a form of
�economic genocide', which is carried out through the
deliberate manipulation of market forces. When compared to
genocide in various periods of colonial history, its impact
is devastating. SAPs directly affect the life of more than
four billion people.
More generally too, debt problem resultants of global
banking have frequently brought increased impoverishment in
the South. Global loans to South vastly increased in the
1970s, and the borrowed sums have rarely generated
long-term viable enhancement of general welfare. The South
external debt grew fourteen folds between 1970 and 1994;
most increases after 1982 have related to accumulated
unpaid interest rather than new credits. Debt repayments
from South to North have since the mid-1980s generally
exceeded investment flows from North to South. Indeed, the
scale of this net financial capital transfer from North to
South exceeds any thing witnessed during colonial times.
Eurocurrency loans have saddled populations in much of the
South with crippling international debts, now standing at a
total of some 1.4 trillion US $ (World Bank 1994: 200-1).
Global financial markets have allowed the wealthy of the
South- physically resident in the periphery but very much
�located in the core of the supra-territorial� global
political economy- to accumulate surplus at historically
unprecedented levels. At the same time marketisation in
former socialist countries, largely globally generated, has
hugely widened disparities of wealth in Eastern Europe and
the former Soviet Republics.
Growing inequality has been reflected and encouraged by the
reduced power of labor in global capitalism. In the South
as well as in the North, labor has been constrained to
accept concessions in pay and conditions in the name of
global competitiveness. In addition, the supraterritorial
�service industries� have relied substantially on low-wages
�flexible� temporary and part-time workers, who generally
lack welfare benefits and union protection. Globalization
has therefore been integral to the transition to a
�post-Fordist� regime of accumulation (Lipietz 1987: Harvey
1989). The Social Charter of the European Union represents
a rearguard initiative to temper this deterioration in
working conditions, but no such provisions have been
attached to the North American Free-Trade Agreement (NAFTA)
or are even contemplated in the New Industrialized
Countries: NICs.
The costs of both reinforced imperialism and increased
labor exploitation under globalization have tended to fall
significantly (though not exclusively) on women. The
weakened workforce has also been a feminized workforce.
Everywhere, both North and South, waged employment for
women has generally entailed a double burden of continuing
to perform unremunerated house hold tasks at the same time.
Meanwhile structural adjustment in the context of
globalization has brought a general feminization of poverty
in both the South and the former socialist countries. On
the whole women have borne a greater share of job losses,
cuts in education and increased caring duties as state
provisions have been withdrawn (Vickers 1991). In spite of
notable emphasis in some quarters of global governance
during the 1980s to the issue of �Women in Development�, a
recent survey found that only 6 of 96 national governments
in the South made explicit reference to women's issues in
the economic policies (Vickers 1991: x).
Globalization has, through so-called �media imperialism�,
reinforced the subordination of the South vis-a-vis the
North in terms of culture. Through hugely disproportionate
Northern control of global publishing, film production and
distribution, satellite television, websites, and the like,
Southern voices have been largely marginalised in global
communications.

On the whole globalization has reinforced than challenged
the capitalist mode of production and exacerbated
exploitative consequences of surplus accumulation.
Supra-territoriality has increased the mobility of capital,
changed patterns of communication, and accelerated rates of
commodity circulation; heightened fluctuations and
unpredictability attending processes of accumulation.
Global capitalism has substantially weakened the position
of labor. In recent decades a development of a
self-conscious and institutionally organized global
capitalist class has been witnessed, but no substantial
reorientation of this kind has yet emerged amongst labor.
This is the real challenge that faces us all.