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The Tyranny of Globalisation

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Chomsky speaks at UCT

Renowned US theorist NOAM CHOMSKY visited South Africa last week, and delivered this speech on "the tyranny of globalisation" at the University of Cape Town.
 

 
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LOBALISATION is not all that it is claimed to be. It is punted to be about the miracles of the markets - and all we can do is submit; we have no choice.

If you consider trade flows, investment flows and other standard measures of global interaction, the global economy is almost what it was in 1913. That's the globalisation paradigm.

Consider the Third World characteristics, particularly in the United States and Britain, but extending elsewhere. These countries are so rich, they don't look like Brazil and Haiti, but the structural characteristics are similar.

In the US, for example, the stock market is booming, benefiting people who own shares. Half the stock is held by the top 1% of the population and virtually all the rest by the top 10%.

Meanwhile, about 80% of the general population has experienced either stagnation or simply decline - in services as well as straight income. They also have longer working hours and Third-World maladies, such as 20% child poverty and about 30-million people going hungry, many literally starving.

What is essentially developing is a Third World in a rich society.

Gross measures of globalisation don't indicate anything dramatically new. There are changes, however. One has to do with free movement of labour - a crucial tenet of free-trade theory. There was a considerable amount of movement of labour in the early part of the century. That's not counted, because it involves people, not profits. But, if we break the rules, there's been a serious decline in globalisation.

What about capital flow? Relative to gross national product (GNP), it's not very different from what it was before World War II. The big change took place in the early 1970s, when Richard Nixon dismantled the UK system of capital exchange. This imposed a 10% surcharge and was harmful to the US economy.

When this was done, about 10% of capital exchanges were speculative. About 90% were related to the real economy, trade and investment. By 1990, those figures had reversed. It was 90% speculative, 10% real-economy related. By the last figures given out by the United Nations for 1994, it was 95% speculative.

The amount has grown astronomically - it's now probably more than a trillion dollars a day, totally overwhelming the combined reserves of all industrial countries. Furthermore, 80% of all those transactions have a round-trip period of a week - meaning you invest and get it right back within a week, and most of that is within one day.

 

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apital has to be allowed to leave the country. Industrial economies have never allowed capital flow until they were very well-established. Japan bartered flatly into the 1970s, and that still remains the case. Countries such as Chile and South Korea still have strong capital controls. In Korea, the restrictions were so strong that you could get the death penalty for circumventing them.

If you look at Latin America and East Asia, they diverged sharply in the 1980s. Up until then they were developing more or less at the same rate. One major factor is that Latin America has no capital controls. So the capital flow out of Latin America in the 1980s was enormous, similar to the level of the Latin American debt.

That didn't happen in South Korea and Taiwan because they don't allow it. There the state is powerful enough to control the rich as well as the poor. And the effect is that they don't have a debt crisis, they maintain capital internally.

These are not exotic methods. There is a major effort under way to eliminate them. That is one of the primary goals of the so-called free trade agreements like the North American Free Trade Agreement (Nafta) or an even more significant one in the wings, which will be hitting us like a sledgehammer in a year or two.

One of the goals of all these agreements is liberalising finance, which means taking financial decisions out of the arena of democratic politics, out of the arena of public policy and placing them in the hands of unaccountable private tyrannies.

The multinational agreement on investments, the most important of all, is now on a dual path, partly at the Organisation for Economic Co-operation and Development (OECD) and partly at the World Trade Organisation.

At the organisation it is being impeded because Third World countries, India and Malaysia particularly, are objecting vociferously. They don't want to become wholly owned subsidiaries of a few foreign corporations. The OECD is different. There it will go through without any interference.

The plan was to have it enacted this May. That was slowed down and it is now aimed at next May. The idea is to make it a treaty. If you lock countries into treaties it is very hard to get out of such arrangements, even if you have the terrible catastrophe of a democratic election or something like that.

The drafts are technically available. The plans are to allow free movement of assets, both productive and financial, without any control. That means that the threat of job flight can be used to undermine strikes and labour organisations.

More than half of union organising efforts in the US are now undermined simply by the threat of movement of production elsewhere, usually Mexico. That's tripled since Nafta, and it also means an attack on social policy, if you can move assets freely.

Local ownership won't be allowed; technology-sharing won't be allowed; neither will local managers, corporate accountability, living wage procedures, preferences for deprived areas, like targeting underdeveloped areas, preferences for minorities, for women; marketing restrictions on dangerous products, small business protection, labour, consumer, environmental protection - all of that is ruled out on grounds of investor rights.

There are no restrictions on investments in countries with human rights violations, like Burma. Corporations and investors are given free reign to sue governments down to the local level. But there are no reciprocal rights. So governments and individuals cannot sue corporations.

That's the main outline for the multilateral agreement on investment. Once the OECD has agreed to it, the Third World has no choice. No country can survive with these markets and economic and military power opposed to them. Well, that's a change from 1913.

Another change is the nature of the transitional corporations that dominate the global economy. About half of what is now called trade is actually intra-firm, meaning internal to a particular single corporation. So Ford moves things across the border to Mexico for re-assembly and moves them back to add more value.

Internal transactions of that kind give many devices for market interference. It's ridiculous to call it trade. So actual trade is probably about half and is itself highly subsidised.

The transnationals rely heavily on their home country for markets, public subsidies, protection from risk and so on. There are international transactions, including the ones that are mislabelled trade. These are overwhelming within the triad - Japan, the US and Western Europe. About 75% of all transactions are internal to the triad and when you look at the strategic alliances now taking place, another major device for undermining trade market principle is the alliance between the major corporations.

 

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o, for example, IBM, Siemens and Toshiba, the three major computer manufacturers in the triad, are now working together to develop chips because it's too costly to compete.

What this means is that the so-called globalisation is taking place overwhelmingly in Europe, the US and Japan. And it's mostly internal to mega-corporations, which are linked to one another and highly dependent on their own states for subsidy, socialisation of risk and for markets.

Within the triad, political measures are available, just by existing devices. Parliamentary devices exist to change anything, without fear of military coups and so on. The purpose of the treaty is precisely to prevent that danger.

Furthermore, the whole system of private tyranny, the existence of corporations, is a very modern development. In the US, it happened early this century. Before that, corporations had no rights. They were partnerships and restricted to particular actions determined by state charter. That changed early in this century, not by legislation but by courts and lawyers - the international community played its role.

These institutions were given extraordinary rights that they never had before. But the point is the whole system is not graven in stone. It can be overturned, just as other forms of totalitarianism have been overthrown by formal mechanisms that are readily available.

Noam Chomsky is a lecturer at the Massachusetts Institute of Technology in Cambridge, Massachusetts

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