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There is no alternative to globalisation and free trade.

Discuss
The world we live in today is one where we can notice analogous habits, cultures and politics. Travelling around the developed world is the best example and proof that people become accustomed to certain things that they were not accustomed to before, i.e. quickly grab a take-away coffee at a local starbucks. This phenomenon has seen the light because governments have adopted many policies and regulations that have made this occurring. Be it against their will or voluntarily, most of the time, those governments had no choice but to do so. Developed countries implement those policies in order to remain competitive. Developing countries on the other hand, implement them in the hope of becoming competitive. Those developing countries are also told that it is the only way for them to get into the global market and to become competitive or let alone, to grow. The policies in question are consequences of globalisation and free trade which are the main economic components of neo-liberalism. This theory, which is a strong promoter of capitalism, is one that most countries have adopted, particularly the United States. Often regarded as being the best means to economic growth among other things, they have not always proven to be very effective. Indeed, most of the time, those who advocate for free trade and globalisation are rich economies, which benefit much more than the poor economies. This essay will first explain that liberalism underlies the concept of free trade and globalisation but that so far it has controversially only benefited the developed countries. It will explain how the different agreements and

institutions help implement those benefits. Finally, having brought the imperfections to light, we will see if alternatives are possible and if yes what the obstacles would be.

Let me first enumerate some of the basics of liberalism and neo-liberalism. For the liberal thought, when countries adopt democracy, war in itself does not play a role anymore and is eliminated as a means to an end. The disease of war could be successfully treated with the twin medicines of democracy and free trade. Indeed, when countries adopt the liberal thought, they are less inclined to go to war with each other since they share the same values (Burchill et al, 2005, p. 59). Democracy has conquered the world and is still conquering parts of it that have not yet had a taste of it, like the Axes of Evil the Bush administration is trying to confront. Globalisation makes sure that democracy and consequently free trade are accepted as the new norms. Globalisation tries to impose ideas such as free trade as much as possible through agreements and institutions. The most important for globalisation is the medicine of free trade that falls into the neo-liberal doctrine. With free trade they mean that each country has a comparative advantage to engage in trade with one another instead of only pursuing production for its national economy. What goes with this are the institutions that are needed to organise these trade operations as more and more countries get economically interrelated and the respective governments are also asked to intervene less frequently since free trade demands unregulated international movement of goods, services and capital.

Institutions ensure that each country is treated on a fair basis as they all have to comply with the same rules. Examples of such institutions are the European Union (EU), the World Trade Organisation and the International Monetary Fund which follow a neo-liberal agenda. However, the real picture looks quite different. Free trade is the means, according to those institutions, by which developing countries will be able to grow. It is also a requirement that they open up their economies (e.g. limit tariffs on imports) to the world in order for them to advance and to participate in trade with the developed countries. To achieve hypergrowth, the emphasis is on the ideological heart of the model free trade accompanied by deregulation of corporate activity. The idea is to remove as many impediments as possible to expanded corporate activity (Cavanagh et al, 2002, p. 20). However, there are numerous examples that free trade has not been that beneficial for developing countries but instead has been beneficial for the countries of the North: John Cavanagh reports that the combined sales of the top two hundred firms grew faster than overall global economic activity between 1983 and 1999, reaching the equivalent of close to 30 percent of world GDP and those firms only employ 1 percent of the global workforce. They urge the African countries to open up their capital account and carry out comprehensive financial reforms but it is cheerless to see that the share of Africa in the Foreign Direct Investment (FDI) flows to the developing economies declined from 9 per cent in 1981-85 to just about 4 per cent in 1996-97 (Singh, 2005, p. 24). Corporate expansion has occurred in the North, not in the South. Even where we have clear examples of economic booms this does not mean it levelled down unemployment, e.g. as in India at the moment.

If we look at the successful economic stories of Japan, China and South Korea it shows that they first controlled their capital accounts. The result is known to everyone. Also, at the beginning of the twentieth century, the UK had a very strong economy due to protective measures the government had put in place to enable the domestic firms to grow and compete. The same story applies to the US after the Second World War. Why is it then that the OECD countries want the developing countries to adopt measures that are known not to be in their advantage? The answer is simple: once you have power, you want to keep it that way and you act in favour of your own interests. Thus neo-liberalism works for the powerful and who are the developing countries to say the contrary? Free trade and globalisation are beneficial for the developed countries once arrived at the stage where it can use the rules of free trade advantageously. Thus, if we can concede that the model of free trade and globalisation seems to be adapted for the developed countries we find that it is not for the south. The power just mentioned the developed countries have is obvious with agreements such as the Trade-related Aspects of Intellectual Property Rights (TRIPS) or the General Agreement on Trade and Services (GATS) which were created in the advantage of the Northern countries. For example, in the TRIPS agreements, developing countries rights and developed countries obligations are unenforceable, while developing countries obligations and developed countries rights are enforceable (Wade, 2003, p.624). They want to put everybody in the same boat by signing these agreements but they are not granting everyone the same rights. Thus, as said above, institutions put everyone on the same level but they voluntarily close their eyes as whether it can be beneficial to all. These institutions do have dispute settlement

mechanisms as in the WTO but they are very costly and few developing countries have been able to use them. Another example is the Shock Therapy (ST) advocated by Professor Sachs. His policy was one of getting all the post-Communist region of Eastern Europe into the western economy. It maintained the medicine of free-trade and supported a more globalised Europe by breaking up the Comecon region. An alternative was to keep the Comecon region and help it with creating new protection rules which could have self-supplied the region and another alternative was to promote export-led initiatives; ST preferred a quick entry of the region into the West which cost less. And once again it favoured EU outcomes: While the Visegrad countries reduced tariffs on most items, the EU did not significantly reduce its Non-Tariff Barriers (NTBs) on the goods that mattered to the Visegrad economies. At the same time, the Visegrad economies were required to get rid of the NTBs by the GATT and the OECD (Gowan, 1999, p.208). The outcome in Russia after six month of ST in 1992 was that real incomes were reduced to 40 per cent of the 1991 levels and production was plummeting. Although the EU also favours free trade some countries were not in complete accord with the policies of ST. Instead they were in favour of keeping the Comecon region united in its own reform project, developing new trade and payment arrangements for that region while letting each government move forward experimentally at its own pace(Gowan, 1999, p. 199-200). But ST was favoured by the United States who strongly promotes free trade. It is also the US who controls most of the institutions like the World Bank (WB). In the WB, votes are weighed according to the amount of money each country subscribes to it. Each member-country has 250 votes plus one additional vote for every share that it holds. Members buy shares by subscribing money to the Bank. Any amendment in

Banks rules requires 85 per cent of the votes. The US being the largest shareholder with over 17 per cent of votes can veto any amendment (Singh, 2005, p. 123). This leaves little space to pass an amendment which would be in the favour of developing countries if the US does not favour it. Developing countries do not have such financial assets which can buy off any amendment. Hence, an alternative that could counterbalance free trade is difficult to achieve since it rests in the hands of the powerful.

However, if alternatives could break through there might be some hope that the current situation might change. The idea is to create sustainable societies of which everybody could take advantage. Today we can notice that the societies we live in are more and more governed by big companies which have a lot of power through the governments which favour corporate interests over civil societys interests. This all operates through the globalisation process and if this is the problem then a return to more local policies might be the solution. It seems that corporations are treated as human beings and whatever the need they might wish to better flourish is regarded as being the most important. What follows is that things like public-health or democracy are being disregarded. But neo-liberal approach would stress this development as a positive change, believing that on the question of allocating resources, markets rather than the governments know what is in peoples best interests (Burchill et al, 2005, p. 77). Hence, the following proposals have been advanced to have a return to more local policies: reintroduce safeguards that were traditionally used to protect domestic economies, i.e. tariffs; put new controls on corporate activity, i.e. site-here-to-sell-here policies; increase direct public participation

in policymaking etc (Cavanagh et al, 2002, p. 112). If corporations ideals need to be restructured surely institutions like the WTO which are pressuring nations to adopt regulations of which people can have little say over need to be reconsidered too. The principle is to create governance systems that give those who will bear the costs the vote when decisions are being made (Cavanagh et al, 2002, p. 57). It should not impose a quick adaptation on all nations if it is only beneficial to some. They would need to provide more transparency to the policies adopted and each country could decide whether it is in its favour or not. But the liberal institutionalists would claim that in an environment of growing integration, states can often discover a coincidence of strategic and economic interests which can be turned into a formalised agreement determining the rules of conduct (Burchill et al, 2005, p. 65). What we notice is that the neo-liberal and liberal approaches always have strong arguments to maintain the situation as it is. Also, these proposals mentioned to avoid such formalised agreements clearly require a return to the past. What they fail to address is how they are going to implement these. They might have found solutions to offset globalisation and free trade but they do not tell us what is required to achieve this. Surely if it is considered, it will take a lot of effort, time and money. Most importantly none of these proposals either ask what is at stake or if this could really work; it does not offer a guarantee. Moreover a big reversal will have to take place to change the liberal and neo-liberal thought as it is already much embedded in the minds of the powerful. Instead we should focus on elements which are already in place to have more rapid outcomes. Resistances like the trade-unions that occurred via the capitalist system to protect the society from capitalist ill-doings. Labour organisations have been pivotal in

contesting the nature of regional integration or pushing for social protection from within, for example, NAFTA or the EU (Veltmeyer, p. 159). They often resist rather than attack the state and form very dynamic actions against capitalist purposes. As their actions are often in the form of strikes which can disrupt economic activities in the country, they are able to grab the attention of the common people and politicians. This in turn is covered in the evening news that can heighten the awareness of people more clearly as to what governments actually do with our interests. The media in turn has also the responsibility to cover the news extensively so as to make the common people understand what the dangers of globalisation are. This in turn could mobilise people from different classes as people find themselves in a society structured in determined ways, they experience exploitation, they identify points of antagonistic interest, they commence to struggle around these issues and in the process of struggling they discover themselves as classes (Thompson, 1978: 149)1. A good example of such classes of resistance is the World Social Forum (WSF). Alterglobalisation has seen the light at the first forum held in 2001 in Porto Alegre in Brazil where different kinds of opposition were united against liberal globalisation. These forums do not ask to stop globalisation but rather to find another kind of globalisation. However, the forum cannot just be a place where people from divergent societies get together to talk about the failures of liberal globalisation. Action need to be taken as well. Therefore they need to create conditions for political actions. Political actions that have a sense and a project for alternatives to the neo-liberal politics and that incorporate the common objectives of North and South. Otherwise, such forums have no logic.

Globalisation and Antiglobalisation Veltmeyer, p. 161

The next forum will take place is in Caracas, Venezuela where it could be particularly intense as the best example of the alter-globalisation movement can be found there. The president of Venezuela, Hugo Chvez has during the IV Summit of the Americas once more been able to stop the American project of the Free trade area of the Americas. He was then accused by the Bush administration of being a threat to the democracy in Latin America. However, Chvez is not afraid of accusing President Bush of being a lunatic who permits himself to interfere rudely everywhere around the world. He is not troubled to say what he thinks because he knows what harms ultraliberal policies caused to Latin America in the 1980s, e.g. in Argentina. Chvez follows a social doctrine domestically which has proven to be very beneficial to his country and which engages in trade with other countries in Latin America. For two years, Venezuela has been able to create 6840 corporations and to distribute lands to village communities. In 2004 almost 4 billions of dollars were spent on numerous social programs. Moreover, he follows a barter program with his neighbours: petrol for GPs and teachers with Cuba or petrol for cement, elevators for hospitals and livestock with Argentina (Jeune Afrique lIntelligent, n 2346-2347, p. 28-29). His goal is to demonstrate that the South can develop without the interference of the American empire and without endangering its debts. Evo Morales has also recently been elected as the first president of Indian origin of the socialist movement in Bolivia. Time will tell us if he will be able to engage in the same kind of policies as Chvez but what is already apparent is that Bolivia has reinforced the opposition camp to the ultraliberal politics of the United States. Considering the Venezuelan reality when can see that free trade is not a fatality but the conditions are to remain faithful to the values of justice

and solidarity, and most importantly not to succumb and have a solid political willpower.

Conclusion
If neo-liberalism is to remain the sole model to the policies of growth, sooner or later more people will begin to question the theory. Because what we have seen is that it works for the rich countries but not especially for the poor countries to become rich. If the politics of free trade would one day affect the businesses in the developed countries, the policies of another kind of globalisation might get greater importance. With the recent developments in Venezuela there is a chance that a different globalisation is possible, one that accounts for the individual. Also, how much longer will the proponents of free trade and globalisation be able to make us believe this is in the advantage of everyone? If more countries get the courage to take on the same policies as in Venezuela and prove to be efficient, there is a chance that the alternative will gain weight and change the face of the world. Or simply wait that developing countries arrive at a stage where they can adopt free trade policies that are enjoyed by the developed countries. However, this essay has shown that the concepts of free trade are so strong that any alternative must be even stronger.

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Jeune Afrique lIntelligent , N 2346-2347, 25th of December 2005 to 7th of


January 2006

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