Perilous
Times, Globalisation and the New World Order
We can now see the true cost of globalisation -The
worldwide public realises there is something deeply wrong
with today's world economic system
Editorial
The Observer, Sunday 29 January 2012
When Karl Marx called for the workers of the world to unite, it
seems unlikely he had in mind an iPhone boycott. But suggestions
for just such a campaign in the US have thrown the spotlight on
possible abuses at firms producing goods for hi-tech giant Apple,
urging the public to think again about what happens at the other
end of the production pipeline that leads to its swish, minimalist
stores. Stung by the criticisms, Apple boss Tim Cook told his
staff last week: "We care about every worker in our worldwide
supply chain," and the company is now inspecting scores of
factories, providing the latest evidence that the public is no
longer willing to ignore the dark underbelly of world capitalism.
Before the Great Crash, critics of globalisation were isolated on
the loony fringe: tear-gassed in Seattle and whacked with
truncheons in Prague, as the west's leaders gathered to
congratulate themselves on reaping the benefits of unfettered
world trade.
When the Asian financial crises of the 1990s toppled governments
and forced one desperate country after another into mass
impoverishment and emergency bailouts by the International
Monetary Fund, the west's leaders – even many on the left –
explained it away as a result of shoddy governance or poor
economic management, instead of a devastating side-effect of
globalisation.
And even after the financial shock waves rippled out from the
American housing market in 2007 and caused catastrophic collateral
damage in countries across the globe, and the deepest world
recession since the 1930s, many felt that a few tweaks to bank
capital rules, and sharper teeth for financial regulators, would
fix the system.
Yet two things have derailed world leaders' attempts to get back
to business as usual. The first is that in many countries, more
than four years on from the start of the credit crisis, millions
of people still wait for economic recovery to take hold. Growth is
sickly or non-existent; unemployment is rising; the only people
who seem to escape are a tiny, super-rich elite.
And the second reason it is still not business as usual is that
there has been a growing chorus of discontent from far beyond the
corridors of power. From the Indignados in Spain, who have
espoused the cause of the 50% of young Spaniards now out of a job,
to the Occupy movements that have sprung up in New York, London
and scores of other cities around the world, to the villagers in
Guangdong, China, protesting against government land-grabs, many
thousands of discontented citizens are making their anger felt
about the way the system has failed them.
The demands of these inchoate groups may not be fully formed; but
they have noisily identified the fact that there is something
deeply wrong with today's world economic system, which puts
unfathomable riches in the hands of an unaccountable elite, while
millions are trapped in unemployment and poverty.
The focus on youth unemployment and inequality at the annual
talkfest in Davos last week was a clear indication that the
power-brokers in the global economy are finally realising that
something has gone badly awry.
The truth is that the neo-liberal consensus, with its promise of
economic "freedom", has failed to deliver. The opening-up of China
and India over the past 20 years has lifted millions of people out
of poverty. But inequality here and in other developing countries
remains shameful, and shouldn't be left unchallenged.
At the same time, average workers in most of the major rich
economies, including the UK, have seen the real value of their
wages shrivel away, as they have found themselves in competition
not just with their neighbours, but with workers many thousands of
miles away.
Yet if the system fails the average worker in the west, it fails
even in its own terms, because it undermines consumer demand, and
chokes off economic growth. The rich elite who have been the big
winners over the last 50 years may be big-spenders, but they still
park much of their wealth in Switzerland.
A growing body of research suggests that yawning inequality isn't
just a moral and political question – it's an economic one. The
credit bubble of the past two decades helped consumers in the US
and Europe to prop up their quality of life in the face of the
relentless decline in real wages; but that conjuring trick only
works for a while, and the resulting legacy of debt will now take
many years to work off.
So as the plight of workers in faraway places reveals the true
cost of cut-price consumer gadgets, it's also clear that workers
everywhere have been losing out. It would be wrong to think that
the answer is to retreat inwards, and return – even if we could –
to a closed-border economy. But it must no longer be a taboo to
question whether raw globalisation brings the benefits that were
promised.
Domestically, a host of tax and benefit changes could help redress
the balance for those who have lost out in the race towards an
outsourced, privatised, winner-takes-all world economy. The OECD
suggested heavier taxes on properties, pension contributions and
mortgage interest payments for the rich as ways of reducing
inequality while boosting growth by persuading the rich to invest
their money wisely instead of parking it in Park Lane penthouses,
for example. Warren Buffett, the billionaire investor and unlikely
radical, has suggested that forcing rich investors like him to pay
the same tax rate as his secretary might also help.
On an international scale, it should no longer be taboo to propose
limits to foreign takeovers, or to the nonstop, unquestioned flow
of capital around the world.
We should welcome the fact that China's workers themselves are
becoming increasingly restive about their plight. Higher wages and
better conditions for them might push up the price of an iPod in
London or New York, but they would also help the Chinese economy
towards Beijing's aim of a rising middle class and stronger
consumer demand at home, instead of economic growth that depends
too heavily on cheap exports.
Strong, sustainable Chinese growth, and rising labour standards,
would be good for the west too: they should help to narrow
Beijing's yawning trade surplus by opening up vast new markets.
Apple's critics would once have been written off as naive
idealists; but as we sift through the wreckage of the Great
Recession, perhaps it's finally time to heed Marx's words, and
stand up for workers everywhere.