H. Lerner Revised Distribution Draft 12/18/2002 Economic Globalization Class

Adult Programs Cedar Lane Unitarian Universalist Church Bethesda Maryland


Adult Programs Cedar Lane Unitarian Universalist Church Bethesda, Maryland


REVISED AND EXPANDED PRESENTATION


Class 6: What Should Our Statement of Conscience Say?



Our subject tonight is “What Should the UUA’s Statement of Conscience Say?” First, I will provide a summary of some of the moral and ethical postures associated with the differing points of view on economic globalization we have been considering in this course. Second, I will discuss eight key issues lying at the foundation of the economic globalization debate. I will then offer my interpretation of where the August 2002 Draft Statement of Conscience fits into the basic framework we have been using during the course and make some brief final comments. [NOTE: The Draft SOC is reproduced as an appendix to this presentation.]

This has turned into a rather long presentation, and I will be raising many questions. Fundamentally, these boil down to:


I of course have my own opinions on these subjects – some of them firm, some of them tentative -- but my objective is to persuade you to make up your minds for yourselves. So I hope you will indulge me as I raise these questions in various ways, and that you will postpone bringing me my cup of hemlock until I finish!

First, a quick summary of the moral messages from the spokespersons we have heard in this class.

Tom Friedman, the Liberal Integrationist Social Safety Netter with whom we visited last week, believes that nations and international institutions have not paid sufficient attention to the needs of those adversely impacted by rapid change. Economic globalization, he says, reflects the generally desirable “democratizations” of finance, technology, and information, but the benefits of globalization could be lost if we fail to pay attention to the needs of the vulnerable and less adaptable. Workers should be provided with assistance in a life-long process of learning and skill renewal. Globalization’s gains also should be shared with those who are permanently marginalized by its volatility or fundamental structural shifts. Friedman denies that a rapacious master force imposes its will through economic globalization. There is no central conspiracy or control. To the contrary, he argues, “No one is in charge.” With globalization, we are dealing with a new kind of liberty, an emancipation that both enables and requires its own set of moral restraints. He says that we should adopt an ethic focused on the responsible use of this new freedom:

For David Korten, the Liberal Separatist Heavy, corporations, pervasive control, and organized greed lie at the heart of economic globalization. Capitalistic domination is the main theme of When Corporations Rule the World. Governance by corporations, according to Korten, is destroying democracy. The movement of goods across long distances, the ruin of indigenous industries and ways of life, and the spread of materialistic values are the work of a manipulative, competitive, self-serving elite. At the foundation of this process lies the doctrine of “materialistic monism,” which subordinates human spirituality to scientific reductionism, technological achievement, and material gain. The answer to these threats, according to Dr. Korten, is to create a localized society based on cooperation and the good of all, and to subordinate corporations to the public good: Civil society, will however, continue to strengthen its global ties. We, in the wealthy nations, will have to cut back on our wasteful, conspicuous consumption, but the gains in terms of personal safety, human welfare, and enlightened values will far outweigh these superficial losses.

Pat Buchanan, in the Conservative Separatist camp, is concerned with threats to the United States of America. He ties free trade to the heresy of “economism,” the belief that man is an economic animal – and nothing else. Buchanan would protect the traditional values as well the jobs of hard-working Americans from the outside assaults of low-wage imports as well as immigrants from alien cultures.

The Libertarian Conservative Integrationists also argue their case on moral grounds. Protectionism, say our friends from the Cato Institute, is immoral at its core: It produces political corruption, economic stagnation, and international conflict, and hinders a nation’s ability to feed, clothe, and house itself. They would protect consumers’ pocketbooks and freedom of choice everywhere in the world.

Not one of the spokespersons to whom we have listened in the past few weeks has held up a hand and said, “I am against the public interest,” “I am for corporate greed,” “I don’t give a fig for the poor.” Each of these voices has spoken in recognizably ethical tones. If you crawl inside their heads, if you walk in the moccasins of each of their tribes, it seems pretty clear that each one holds its beliefs in earnest.

But these groups have little patience with those who differ with them.

When issues of public policy are put on the table for debate, on come the war bonnets. Each tribe charges to the top of the mountain, to claim the high moral ground, and, in the heat of battle to treat those who disagree as moral defectives. Moral condemnation is, I think, a rather tricky business at any time. It is an approach that can come back to whack you like a boomerang, reveal that you yourself face an ethical predicament.

Three weeks ago we heard the voice of Joseph Stiglitz, speaking from the top of the mountain in Globalization and Its Discontents proclaiming the IMF’s conditionality and actions in times of crisis, as ill-conceived and inhumane. He characterized IMF’s actions as guided by narrow institutional concerns, ideological rigidity, and insensitivity to the impact of its imposed measures on vulnerable populations in developing countries.

But, as you may have gleaned from your homework, there is another version of events. In his Open Letter to Joseph Stiglitz, Kenneth Rogoff, Director of Research at the IMF says:

In the middle of a global wave of speculative attacks, that you yourself labeled a crisis of confidence, you fueled the panic by undermining confidence in the very institutions you were working for. Did it ever occur to you for a moment that your actions might have hurt the poor and indigent people in Asia that you care about so deeply? Did you ever lose a night’s sleep thinking that just maybe Alan Greenspan, Larry Summers, Bob Rubin, and Stan Fischer had it right – and that your impulsive actions might have deepened the downturn or delayed – even for a day – the recovery we now see in Asia?

Blame is tricky enough when it focuses on a relatively concrete set of actions, such as IMF financial and policy interventions. But it is particularly problematic when one deals, at a level of summation, with the abstraction of so complex a set of processes as those involved with “economic globalization.”

Just when we think we have identified the malevolent enemy and have that source of trouble in our sights, the image starts to blur and multiply. As we look closely, we become not-so-certain observers of a long line-up of suspects: greed; inefficiency; corruption, capitalism gone wild; Marxism gone wild; unaccountable corporations; incompetent and unaccountable governments; unethical local business practices; poor policy regimes; cronyism; protectionism; polluters who do not pay; population explosion unrestrained; secretive and manipulative Breton Woods institutions; bloated UN bureaucracies; the boring and cold-hearted profession of Economics; the fuzzy-minded irrationality of the Humanities Department; the power-potent elite deciding our fates in their own interests in the Council on Foreign Relations and the Trilateral Commission; the legion of scruffy adolescent protesters led into destructive negativism by power-hungry leaders -- and on and on in endless procession. And just when we have figured out whom to blame and what to demonize – reality breaks in with yet more complications, qualifications, alternative interpretations, and additional candidates for vilification.

Maybe - - just maybe - - finding someone to blame or something to demonize is not a wonderful guide to an ethical public policy or communal spirituality in dealing with economic globalization. Perhaps working ourselves into an attitude of righteous indignation is just what Unitarian Universalists should NOT do when we are trying to formulate a Statement of Conscience on this subject.

Five weeks ago, we began by saying that this was a class primarily intended for persons who have not made up their minds about economic globalization – or at least for persons who have not entirely closed their minds on this subject. At the start, we acknowledged that one of the problems with this subject is its high level of abstraction, a generality so pervasive as to make it vulnerable to the logical fallacy of “reification,” the inappropriate imputation of concreteness to an abstraction. Looked at in another way, “economic globalization” can become a kind of Rorschach test onto which we project whatever ideologically and emotionally colored attitudes we bring to the table. We said that one way to guard against these dangers is to look at contrasting views. Another is to step down a level or two from our mountain-top general inquiry, and tackle the important public policy choices that real people face in the real world.

Well, taking the August 2002 Draft Statement of Witness as our text, what I would like to do next is to address a set of key issues of globalization that I call “The Eight Elephants on the Globalization Table,” and they are listed in Exhibit 18 below.

EXHIBIT 18


EIGHT ELEPHANTS ON THE TABLE









Let’s examine these elephants one at a time.

ELEPHANT #1 poses the issue of whether the United States and other industrialized countries should eliminate tariffs and other trade barriers on their imports from developing countries.

In my view, the issue of eliminating the barriers that wealthy nations maintain against imports from the Third World is the biggest elephant on the table in the globalization debate – by far the largest in its political sensitivity, its potential effects on people, and hence its moral significance. Economic globalization, our main concern here, has its most far-reaching impacts through the medium of international trade.

International trade consists predominantly of the movement of manufactures, agricultural commodities and minerals across national borders. The moral or ethical dimensions of the debate usually refer to the effects of imports and exports on workers, living standards, and environmental conditions. The spotlight is on poor and vulnerable populations, particularly those in developing countries.

In previous classes, we have heard that international trade has lifted the living standards of hundreds of millions of people, but also that it has had a disrupting influence on the lives of many others. The venerable NGO, Oxfam, whose program we have examined in some detail, has made the elimination of rich countries’ barriers to imports from developing countries the centerpiece of its program for raising living standards in the Third World. Its report, Rigged Rules and Double Standards [at page 5] says:

There is a paradox at the heart of international trade. In the globalized world of the early twenty-first century, trade is one of the most powerful forces linking our lives. It is also a source of unprecedented wealth. Yet millions of the world’s most powerful people are being left behind. Increased prosperity has gone hand in hand with mass poverty and the widening of already obscene inequalities between rich and poor. World trade has the power to act as a powerful motor for the reduction of poverty, as well as economic growth, but that potential is being lost. The problem is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favor of the rich.

The human costs of unfair trade are immense. If Africa, East Asia, and Latin America were each to increase their share of world exports by one per cent, the resulting gains in income could lift 128 million people out of poverty. Reduced poverty would contribute to improvements in other areas, such as child health and education.

In their rhetoric governments of rich countries constantly stress their commitment to poverty reduction. Yet the same governments use trade policy to conduct what amounts to robbery against the world’s poor. When developing countries export to rich country markets, they face tariff barriers that are four times higher than those encountered by rich countries. Those barriers cost them $100 billion a year- twice as much as they receive in aid.

Various polite formulations can be found to describe the behavior of rich-country governments. But the harsh reality is that their policies are inflicting enormous suffering on the world’s poor. When rich countries lock poor people out of their markets, they close the door to an escape root from poverty.

But of course there are other views. Let’s listen to two voices at the hearings held by the United States Trade Deficit Review Commission held in Pittsburgh in late October 1999:

George Meany, President of the American Federation of Labor and Congress of Industrial Organizations:

Working people know from direct experience the tremendous costs borne by families and by communities when imports or outsourcing displace good-paying jobs. A $300 billion trade deficit represents $300 billion worth of goods not produced here in the United States, not supporting families, not contributing to the tax base.

While growth in the trade deficit may have only a small impact on aggregate employment, it clearly affects the composition of employment, causing manufacturing jobs to be replaced by lower-paying service jobs. This trade deficit has been a significant contributor to the loss of over 500,000 manufacturing jobs since March of 1998. This job loss affects not only the workers and communities directly impacted, but also the overall health of the U.S. economy, as the shift from manufacturing employment to service sector jobs contributes to greater wage inequality and slower productivity growth.

Manufacturing employment pays higher than average wages and contributes much to a more equal income distribution. The average hourly wage in manufacturing is 20% higher than the median national wage, and manufacturing jobs are more likely to pay health and pension benefits than the average U.S. job. Manufacturing jobs provide a ladder to the middle class for millions of American workers who don’t have a college degree.

Paul Wilhelm, President of U.S. Steel Corporation:

The question you have to ask is why is the U.S. market the largest place for steel dumping. At first, it’s because the world steel industry has an extraordinary huge excess capacity of approximately 250 million tons, which is largely the result of government policies in subsidies.

Secondly, because most of the world’s steel is subject to private and public restraints on trade. Those are restraints in which our industry in the United States does not participate.

Domestic cartels in major steel markets like Japan, foster dumping. Cartel arrangements between mills in different countries restrict trade flows between national markets and world regions. These arrangements have the effect of channeling dumped steel production into the United States markets. Government restrictions on imports also limit international steel trade flows and access to some of the world’s largest steel markets, including the European Union, China, Japan, and Brazil.
the environment, threaten to undercut support for WTO initiatives in the United States and other countries.

T.N. Srinivasan, Professor of Economics at Yale, is one of several well-known economists of Asian Indian background who view international trade as a potentially constructive force. He has little patience with apologists for wealthy nations’ trade barriers. He castigates:

The unholy alliance of protectionists -- consisting of industrial trade unions in the rich countries, such as the American Federation of Labor and Congress of Industrial Organizations (AFL/CIO), masquerading as champions of the welfare and rights of workers (particularly child and female workers) in emerging markets, naïve do-gooders who may be genuinely concerned with the welfare of children and misguided environmentalists . . . [“Commentary.” Federal Reserve Bank of St. Louis Review, July/August 2000, p. 25.]

So what should be our denominational position on restricting imports from low0\-wage countries into the United States? Yea or nay? The Draft Statement of Conscience in fact says nothing about this largest of all elephants on the table, one that is clearly within the control of our government. The Draft SOC mentions the word, “trade agreements” twice, once in connection with including environmental provisions (discussed under Elephant #2 below) and once in connection with trade agreement intellectual property provisions, but does not connect them to a position on barriers to our imports from the Third World. One might even say that the Draft SOC’s failure to deal with the very tough issue of U.S. restrictions on imports from developing countries denotes a moral predicament of our own.

Let’s turn now to Elephant #2, Using trade mechanisms to raise environmental standards in developing countries. “Trade” is only mentioned once in the Draft SOC. It is contained in a sentence in the section on the interdependent web of all existence that says:

We must advocate for trade agreements that safeguard the natural environment including the air and the oceans.

As we shall see, that short single sentence is quite ambiguous, perhaps even confused. Nevertheless, the idea that environmental conditions in developing countries are being worsened by economic globalization and can be improved by attaching sanctions or other conditions to trade arrangements is an important one. So we will give this single sentence fairly careful scrutiny

In September of 2001 President Bush signed the implementing legislation for the United States-Jordan Free Trade Agreement (FTA). It contains the first environmental provisions ever negotiated into a bilateral trade agreement. Alia Hartough-Boran and John Audley of the Carnegie Endowment for Peace describe these environmental provisions as follows:

The environmental provisions of the FTA . . . obligate both countries to “strive to ensure” that lax environmental laws do not encourage trade, as well as to establish high levels of environmental protection. Commitments like these should be familiar to many businesses, as they mirror language found in environmental management systems like ISO 14000 and Responsible Care.1 Nowhere in the agreement do the countries agree to adopt or enforce standards set by the other – in fact, there is language that explicitly recognizes the right of each country to exercise discretions in setting its own standards for the environment and economic development. What this language implies is that both countries will take into consideration the environmental implications of increased economic activity, and not use the environment as a guise for protectionism. [Carnegie Endowment for International Peace Global Policy Program, http://www.ceip.org/files/Publications/audleyjordan.asp?p=43&from=pubdate ]

Is the U.S.-Jordan trade agreement what the Draft Statement of Conscience has in mind when it says “We must advocate for trade agreements that safeguard the natural environment ,,,”? Or must we advocate something tougher and more intrusive than these provisions? If so, you can expect opposition from the developing countries and those who champion their cause – as well raised eyebrows from advocates of free trade elsewhere.

In Rigged Rules and Double Standards, Oxfam says:

Whatever problems may be associated with the expansion of exports, their contraction would destroy the livelihoods of millions of women workers and small farmers. Nor is trade necessarily damaging to the environment as some critics allege. There is no doubt that badly managed trade can contribute to environmental damage, both locally and globally. But the same applies to any form of production, whether for local or global markets, which fails to take into account the need for environmental sustainability. (page 23)

Serious environmental problems have emerged, posing a threat to public health. Yet these outcomes are a consequence of domestic policy failures, not an inevitable consequence of trade. The case of East Asia demonstrates that it is possible to reap enormous benefits from progressive integration into the world economy, provided the process of integration is well managed. By the same token, there are other developing regions – notably Sub-Saharan Africa which demonstrate the simple truth that it is perfectly possible to combine weak performance on exports with social, economic, and environmental disaster. (page 52)

Globaphobia, authored by senior analysts from the Brookings Institution and the Progressive Policy Institute, says:

. . . one must also honestly confront the reality that insisting that another country adopt tougher labor and environmental standards for its citizens will reduce the likelihood that any agreement is reached. In this light, it is legitimate to ask whether the real purpose of those who favor standards linkage to trade is to help those overseas or protect certain workers at home. (page 124).

Multilateral environmental agreements (MEAs) like the Kyoto Accord on Global Warming and the Montreal Protocol on Substances that Deplete the Ozone Layer (as distinguished from bilateral trade agreements) have been the customary means of handling transnational air and sea issues.

In Globalization, Growth, and Poverty, the World Bank says:

There are various proposals to introduce new issues into [trade] negotiations. These proposals rightly generate concern among developing countries. In particular, they oppose the notion of using trade sanctions to impose labor and environmental standards. There is a real danger these would turn into new protectionist tools. Improving standards and working conditions is at the heart of the development process and requires a legal framework and programs . . . to be developed and expanded. Our assessment is that measures to support these positive programs offer a great deal more than the use of punitive sanctions – especially when the risk of protectionist capture of labor standards is taken into account. (pages 64-65)

Already, more than 200 multilateral environmental agreements (MEAs) have been concluded. The result is a form of environmental globalization – a growing international structure for environmental management reflecting the diversity of issues and interests involved. . . .

In general, trade restrictions are not the best option to protect the environment. Measures should be designed to affect the primary source of the problem in production, consumption, or waste disposal, regardless of whether the product is internationally traded. Where one country’s production or consumption decisions impose environmental externalities, such as acid rain, global warming, and biodiversity destruction, MEAs should be established to tax unwanted emissions or fund the installation of appropriate technology or institutions. Only if this approach is not feasible may there be a theoretical case for using trade policy. . . .

. . . to force developing countries to adopt OECD-quality environmental standards through trade threats would be an abuse of power by industrial countries. Tariffs would be a form of taxation on poor countries – and in reverse. If rich countries want higher standards than poor countries would themselves choose, they should induce poor countries to adopt higher standards through incentives rather than coercion. (pages 138-139)

The World Bank report also argues that while domestic economic growth has caused environmental problems in developing countries, their exports have not.

During the third [current] wave of globalization, the new globalizers have indeed increased their share of global industrial production. This has increased their share of pollution intensive industries. However, this increased production of pollution-intensive goods was not related to exporting: it largely met domestic demand. Developing countries harnessed their comparative advantage in labor- intensive industries, not in pollution-intensive industries. They have not increased their share of pollution-intensive industrial exports. Indeed, their exports to rich countries are less pollution-intensive than their imports. The rich countries have actually increased their comparative advantage in pollution-intensive industries despite stricter environmental standards. . . . developing countries do face severe problems of industrial pollution, but not as a result of pollution haven effects. Indeed, foreign-owned plants in developing countries, precisely the ones that according to the theory would be attracted by low standards, tend to be less polluting than indigenous plants in the same industry. Most multinational companies adopt near-uniform standards globally, often well above local government-set standards. This suggests that they relocate plants to developing countries for reasons other than environmental standards. Paradoxically, the pollution haven effect may be more important within the national boundaries of a developed country than between rich and poor countries. (pages 132-133)

So, where are we now? It is really not clear whether the intention of the single sentence in our Draft Statement of Witness is to introduce trade sanctions into current multilateral agreements where they do not presently exist, to encourage the more widespread use of the fairly bland environmental provisions of the bilateral U.S,-Jordan trade agreement, or to employ any form of leverage available to us to mandate that the environmental standards in developing countries that more nearly approximate our own.

Should the Statement of Conscience specify the objectives we are pursuing as we advocate including environmental provisions in our trade agreements? Should we be explicit about what kinds of environmental provisions we seek to have governments include in which kinds of agreements? And, if so, is not more than a single sentence on this subject required?

ELEPHANT #3, poses the issue of whether rich countries should be permitted to subsidize agricultural products that compete with the agricultural products of developing countries.

We usually think about barriers to trade as consisting of tariffs and quotas and antidumping procedures that directly restrict imports. Agricultural subsidies have less obvious effects on international trade, but they operate in ways that both defend domestic agricultural producers from imports and attack the markets of foreign producers. They defend the domestic agriculture of a rich country by lowering the price of food below levels that can be matched by imports from abroad. By means of subsidized prices, they also attack markets served by farmers in foreign countries that cannot afford such subsidies - - as most developing countries cannot. Though often put forward on environmental or socio-cultural grounds (“save our country’s family farms and farm communities”), these subsidies often have the effect of tilting the playing field against poor farmers in developing countries.

Oxfam says [at pp. 112-113 of Rigged Rules and Double Standards]:

Farmers in the poorest nations are competing not just against farmers in the industrialized world, but against the financial power of the world’s richest countries . . .

The sheer scale of Northern subsidization, and the resulting unfairness of international trade, can be demonstrated by some simple comparisons:

Total OECD agricultural subsidization exceeds the total income of the 1.2 billion people living below the poverty line.

The program of “emergency” farm payments exceeds the UN’s humanitarian aid budget.

During the Uruguay Round of world trade talks, European and US negotiators reduced the debate on agricultural trade liberalization to a game of semantics. Having agreed in principle to reduce subsidies, they proceeded to change the definition of a subsidy to allow them to continue on a business-as-usual basis.

The World Bank’s position on this issue accords with that of Oxfam, Greenpeace, Friends of the Earth, and several other NGOs. A recent World Bank report, Global Economic Prospects 2002 [http://www.worldbank.org/prospects/gep2002/toc.htm at p. 171] contains a projection showing that removal of all barriers to trade including subsidies could result in additional income to low and middle income countries of $539 billion in 2015. Of this amount $390 billion (72%) represents these countries’ additional income from agriculture and food, $123 billion (23%) would be additional income from textiles and clothing, and $27 billion (5.0%) represents all other sectors. So the potential gains from removing agricultural subsidies far outweigh the gains in other sectors.

These subsidies do, of course, protect the jobs of farm workers in the United States, Europe, Japan, and other high income areas. They ensure the survival of at least some family farms and sustain local enterprises that provide agricultural inputs, storage, transport services, and financial services required by local agricultural production units. Ironically, however, large corporations, rather than individual farm families, are the largest beneficiaries of these subsidies.

Our Draft Statement of Conscience is silent on agricultural subsidies, a public policy that is fully within the control of our own government. Should we take a position on this subject? And, if so, what should this position be?

Up to this point, we have been talking about sectors that produce physical outputs, such as food, garments and petroleum. We now turn to finance. ELEPHANT #4 concerns what should be done about the IMF, its interventions in times of financial crisis, and its policies on opening developing countries’ capital markets as part of a structural readjustment process for highly indebted countries.

In the past, the IMF and the World Bank have encouraged developing countries to open their financial sectors to outside competition. In the case of loans requiring compliance with IMF guidelines, this policy has been mandated. A number of analysts have opined that the premature opening of financial sectors in developing and transition economies were major contributors to the financial crises of the late 1990s.

David Korten’s solution to such problems is to decommission the IMF along with the World Bank and the World Trade Organization [When Corporations Rule the World, Second Edition, p. 281]. Korten would replace the IMF with a UN International Finance Organization. This replacement organization would maintain a central data base on international accounts and facilitate negotiations among trading partners to correct imbalances, but it would have no lending or structural adjustment role. Its main purpose would be to “free national and global finance from the distortions of international debt and debt-based money.”

Joseph Stiglitz says that trying to eliminate the IMF is pointless. If the IMF were abolished, he says, [in Globalization and Its Discontents, at page 215] it would likely have to be recreated.

Stiglitz’ concerns have been with the IMF’s market ideology, its identification with the interests of the financial community, its lack of transparency, its drive to expand of its own role and funding, and its failures during the financial crises of the late1990s. He finds fault with the IMF practice of “bailing in” of private sector creditors, a process which requires these creditors to forgive portions of their loans as the IMF supplies funds to enable developing countries to meet their remaining obligations in times of financial crisis. [page 203-205] He also criticizes the IMF’s opposition to government controls on movement of foreign exchange in and out of developing countries (e.g., restricting inflows or delaying the repayment of short-term dollar loans during periods of capital flight.) He cites Malaysia’s successful defiance of this IMF canon during the crisis of the late 1990s. He compares Malaysia’s record of relative success in dealing with financial turmoil with that of Thailand, a country that followed the IMF’s advice and – Stiglitz says -- came to regret it.

Dr. Stiglitz believes that the IMF should return to its original mission of providing assistance to countries with good economic fundamentals that are experiencing foreign exchange difficulties. He would relieve the IMF of its responsibilities for transitional economies (like those of the former members of the Communist bloc) and for structural adjustment in highly indebted developing countries. The Fund should focus on the task Keynes originally had in mind for the institution: loaning hard currencies to countries with sound economies that experience temporary shortages of foreign exchange, enabling them to maintain employment, production, and imports -- and thus avoid transmitting negative trends to their trading partners.

As we saw in our fifth class on Liberal Integration, Tom Friedman does not share a gloomy assessment of the outcome of the financial crises of the 1990s, nor does he level wrath at the IMF in The Lexus; and the Olive Tree. He says [at pp. 452-453]: that globalization did us all a favor by melting down the economies of Thailand, Korea, Malaysia, Mexico, Russia, and Brazil in the 1990s, because it laid bare a lot of rotten practices and institutions in countries that prematurely globalized. He does not think the money-moving “electronic herd” of lenders and investors can be effectively controlled, without risking serious unanticipated trouble.

Paul Blustein of the Washington Post has written a book entitled The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF (2001). Blustein agrees with Stiglitz on capital controls, but disagrees with him on bail-ins, which he sees as the IMF’s most effective and socially equitable strategy.

Neither does Blustein buy [at page 377] Tom Friedman’s warning about attempts to control the Electronic Herd:

[Friedman] . . . argues against putting “a little sand in the gears” to slow the movement of hot money: “I don’t think it is ever wise to put sand in the gears of a machine when you hardly know where the gears are. If you put sand in the gears of such a fast, lubricated, stainless steel machine, it might not slow down. It could come to a screeching, metal-bending halt.”

One doesn’t have to be anticapitalism, or antiglobalism, to find this sort of faith in markets inordinate. The “longhorns” within the Herd – the Nikes, Hewlett-Packards, and other multinationals that build factories abroad – may indeed convey the blessings of resources and technology, but the fact remains that when the “shorthorns,” or financial investors and lenders, become too ebullient about a country, the excessive amounts of capital they inject may lull the political leadership into ignoring festering problems rather than addressing them. This clearly was a major part of what was wrong in Thailand and Russia in particular.

As for what happens when the shorthorns’ sentiment suddenly turns negative, the human cost of the recent slew of crises is reason enough to question whether the result “did us all a favor.” Even if the Thais, Koreans, and others ultimately gained by having their countries’ rotten practices and institutions exposed, the phenomenon of contagion offers yet another compelling reason for doubting the wisdom of leaving global capital markets unfettered.

Our Draft Statement of Conscience (second dotted paragraph on the second page) says:

The policies and practices of the International Monetary Fund . . . must be reevaluated and realigned, such that the freedom and dignity of individuals in all countries must be the primary consideration in the formulation of economic policy.

What does this statement mean? Do we think the IMF cannot fix itself and that we know what should be done to set matters right? Or is this the platitudinous advice of Polonius given to a Hamlet unable to make hard choices in the face of an ambiguous reality?

David Korten would replace the IMF with a successor that would stay entirely out of the loan and financial restructuring business, its current most important functions. Is this what the SOC means by “reevaluated and realigned”? Joseph Stiglitz would have the institution abandon its liberalization initiatives and return to Keynes’ vision of its role in extending emergency foreign currency loans to enable nations with sound economies to maintain full employment. Tom Friedman offers no criticism of the IMF’s policies and would leave the electronic herd to discipline itself on the basis of experience. However, Friedman would have the IMF or other sources commit funds to maintain minimum social safety nets once “bad-borrowing” countries have set their policies and practices right. Paul Blustein urges an expanded and more interventionist IMF approach, enabling governments to clamp down on outward capital flows and requiring the private sector to cut its own returns in times of crisis. Which of these approaches reflects the dictates of conscience as we see it?

The World economy came very close to a melt-down in the 1990’s, and issues of international financial structure continue to be of very great importance. However, as far as I can discern, our Draft Statement of Conscience gives precious little guidance as to what, if anything, should be done about it.

Intervention in financial markets before and during times of crisis is the rocket science of economic globalization. The International Monetary Fund, the institution primarily responsible for such interventions is controversial and its policies are not easy to understand. If we believe we know enough to take a moral position on the institution and its policies, should we not be clear about what changes we propose?

ELEPHANT #5 concerns whether developing countries should open their own producing sectors to foreign competition by eliminating their barriers to imports

Note that the question of whether developing countries should be encouraged (or required) to dismantle barriers to imports can be viewed as a very different question from whether the rich countries should remove their own. All three Breton Woods institutions -- the International Monetary Fund, the World Bank, and the World Trade Organization – are engaged in giving advice and/or establishing mandatory requirements for developing countries’ trade regimes.

Our Draft Statement of Conscience in fact lumps all three institutions together. To repeat, it says:
The policies and practices of the International Monetary Fund, the World Trade Organization, and other financial institutions advancing globalizatin must be revaluated and realigned, such that the freedom and dignity of individuals in all countries must be the primary consideration in the formulation of economic policy.

In the past, the World Bank, the IMF, and WTO have – with the active support of most of the governments of the industrialized countries -- urged developing countries to open up their economies to international trade in products. In Rigged Rules and Double Standards, Oxfam argues that First World insistence that Third World countries reduce their trade barriers is hypocritical [at page 26]:

During their own industrial development, today’s rich countries insisted on the right to nurture infant industries behind protective tariffs. Countries such as the USA and Germany categorically rejected free trade until they had established themselves as major economic powers. Unfortunately, the analogies are not just items of historical interest. While rich countries keep the door to their own markets firmly closed, they use their control over institutions such as the WTO, the World Bank, and the IMF to open up developing-country markets. The message from the rich countries can be simply summarized: “Do as we say, not as we do.” Unbalanced liberalization is one of the reasons why the benefits of world trade are biased in favor of rich countries.

The World Bank’s Chief Economist has picked up, and perhaps attempted to co-opt, a part of Oxfam’s own argument. Jagdish Bhagwati, Professor of Economics at Columbia University has noted this move, and it is not much to Bhagwati’s liking. In the OECD Observer for November 22, 2002 (“Wanted: Jubilee 2010 for Dismantling Protection”)., Dr. Bhagwati observes:

This view was echoed at a conference in New Delhi, when Nicholas Stern, Chief Economist, World Bank, said it was “surely hypocritical of rich countries to encourage poor countries to liberalize trade and to tackle the associated problems of adjustment, while at the same time succumbing to powerful groups in their own countries that seek to perpetuate protection of their own self-interest.”

Then Bhagwati rejoins:

As a political principle, this seems sound, but in economics, it is an elementary error. As Joan Robinson famously said, if your trading partner has rocks in his harbor, that is no reason to throw rocks in your own. Many western NGOs and some church groups that often echo Mr. Sterns’ argument fail to understand that protection does the poor nations no good. Rather, it adds to the harm.

Dr. Bhagwati (and Joan Robinson) echo Adam Smith’s arguments against mercantilist trade theories and practices. Each of these economists rejects the mercantilist notion that trade is a kind of warfare in which the winning nations are those that maintain the biggest barriers, whilst knocking down those of their trading partners. There may be winners and losers within nations, so the free trade theory goes, but the overall economies of both trading partners come out ahead. From this perspective, international trade is a win-win, not a zero-sum, game -- and unilateral reduction of trade barriers makes good sense for developing countries.

But there is another viewpoint based on the “infant industries” theory. This theory was first developed by Alexander Hamilton, elaborated by Friedrich List, and adopted (and then abandoned) by John Stuart Mill. In order to industrialize, it argues, an underdeveloped nation must first provide a protected learning environment for the infant industries essential to its economy. Given time to develop, the theory runs, these industries will mature to the point that they can face outside competition. If you do not protect your children, your society will have no strong adults, it says.

Industrialization needs the equivalent of a golf handicap, a margin permitting growth that can be reduced as a nation’s competence in production improves. This, its advocates argue, is how the United States grew from an agricultural nation into a great industrial power and how the Tigers of Southeast Asia (Korea, Taiwan, Singapore, Thailand, and Malaysia) got to be tigers.

Others contend that infant industries never grow up. Instead they become skilled at hanging on to their large “handicaps” -- import protection and subsidies. This, say opponents, is why the portions of the Asian Tigers’ economies that have not been opened up to trade remain noncompetitive and inefficient to this day, and why the United States continues to protect steel, textile, and some portions of its agricultural production against “unfair competition” from abroad.

Oxfam has developed an analytical tool called the “Trade Liberalization Indicator” (p. 131) to measure both the speed and depth of import liberalization. It concludes that a number of countries that have been very effective at exporting (e.g., China, Vietnam, and Indonesia) have been slow to liberalize imports, whereas a number of countries that have liberalized imports rapidly (e.g., Haiti, Zambia, Nepal, Peru, and Bolivia), have not done as well at all. (p. 133).

Will Martin of the World Bank’s staff points out that 40% of developing countries’ exports go to other developing countries [World Bank Development Research Group, “Trade Policies, Developing Countries, and Globalization” (October 9, 2001), p. 10, www.worldbank.org/research/global ] and a recent World Bank report [Globalization, Growth, and Poverty: Building an Inclusive World Economy (2002), p. 56.] states that more than 70% of the tariff burden faced by manufactured goods from developing countries is now imposed by other developing countries. This report says that developing countries would benefit a lot by reducing their tariff barriers against each other.

In “Economic Reform and the Process of Global Integration (Brookings Papers on Economic Activity, No. 1, 1995), Jeffrey Sachs and Andrew Warner examine growth rates 1970-1989 for 117 countries, both rich and poor. They conclude that the evidence supports the claim that openness and related reforms are keys to growth for developing economies. They reject the theories of Raul Prebisch (widely adopted by Latin American countries following World War II) that developing nations need early protection in order to develop import-competing industries.


However, Francisco Rodriguez and Dani Rodrik challenge the Sachs/Warner conclusions in “Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence,” NBER Macroeconomics Annual 2000’. They find little evidence that open trade policies, in the sense of lower tariff barriers to trade and non-tariff barriers to trade, are associated with economic growth. [http://papers.nber.org/papers/w7081] Neither, however, do they find credible evidence that trade restrictions are associated with higher growth rates.

Thus one set of analysts compares the recent success of openness in Asia with the failures of protection in Latin America and concludes that openness is the proper policy for the developing world. Another group believes that Asia’s recent success could not have occurred had not it been built on a foundation of protection, and attributes Asia’s recent difficulties to openness.

Probably we will never be entirely sure that national economic policy, as distinguished from culture or governance or other variables, provides the most important key to lifting a particular country at the bottom of the scale out of poverty. However, I think it is fair to ask whether an instruction to the effect that “freedom and dignity of individuals in all countries must be the primary consideration in the formulation of economic policy” provides sufficient guidance to determine whether developing countries should or should not maintain barriers to imports.
Let’s turn to Elephant #6, which is concerned with debt relief.

The Draft Statement of Conscience calls for the World Bank and other international institutions to forgive the debts of the most indebted nations. The statement does not provide a rationale for debt relief or describe how the debt relief would be accomplished.

The arguments put forward elsewhere for debt relief include the following:


The IMF and the World Bank presently collaborate in a program, called the HIPC initiative, by means of which heavily [H] indebted [I] poor [P] countries [C] can qualify for the writing down of their external debts to sustainable levels. The objective is to insure that no highly indebted country faces a debt burden it cannot manage. The IMF describes this program in part as follows:

Central to the HIPC Initiative is the country’s continued effort toward macroeconomic adjustment and structural and social policy reforms. In addition, the Initiative focuses on ensuring additional finance for social sector programs – primarily basic health and education . . .

The Initiative is not a panacea. Even if all of the external debts of these countries were forgiven, most would still depend on significant levels of concessional external assistance; their receipts of such assistance have been much larger than their debt-service payments for many years.

The idea of developing a procedure that would enable nations to declare bankruptcy is now being considered by the International Monetary Fund. Presumably, the choice is between debt relief procedures that permit the IMF and the World Bank to prescribe the conditions on which relief will be granted, versus establishing a procedure that will simply wipe the slate clean.

William Easterly of the World Bank argues that relieving the debts of highly indebted countries does not work because the underlying problems are those very similar to the spend-thrift behavior of individuals. Once relieved, he says, many developing countries go right back to accumulating debt. He concludes:

Debt relief is futile for countries with unchanged long-term preferences [behavior patterns]. At best, only governments that display a fundamental shift in their development orientation should be eligible for debt relief. To assess whether governments have made such a fundamental shift in preferences, some track record of development-oriented behavior should be required prior to granting debt relief. There were important steps in the 1996 HIPC initiative, which unfortunately may have been weakened by the 1999 Cologne G-7 proposal that suggests speeding up the process of debt relief. Official lenders should not keep “filling the financing gap” in violation of prudential standards of creditworthiness.”
So, is it to be tough love or a fresh start without conditions? And, if it is to be a fresh start without conditions, who provides the next loan, if there is to be any?

In the first edition of his book, When Corporations Rule the World, David Korten simply proposed shutting down the World Bank and the regional development banks on the grounds that creating indebtedness in the Third World is not a useful function (First edition, p. 323). In his second edition, Korten says that the World Bank should be replaced by a United Nations Insolvency Court that he calls UNIC [at page 281]:

Whereas the World Bank has led low-income countries more deeply into debt bondage that holds their economies and resources hostage to the predators of the global economy, the primary responsibility of the UNIC will be to help countries relieve themselves of this burden . . .

An assessment process would determine how much a country owes and is able to pay over time without compromising its ability to perform essential governmental functions, including the delivery of social services. The Court would also review the country’s debt portfolio to identify odious debts that were not legitimately contracted – which would include many World Bank and IMF loans -- or were used for purposes that yielded no public benefit – such as World Bank designed projects that failed to produce the projected benefits due to faulty design or negligent oversight. The UNIC would sanction the repudiation of such odious debts on the basis of international legal precedents. Repudiation of World Bank and IMF loans would force them to call guarantees from their member countries to cover their own debts, which would in turn build political support to decommission them.

A negotiated debt relief plan would provide for the rescheduling, reduction, and cancellation of the remaining debt on terms that would allow the indebted government to continue necessary functions, including delivery of essential social services. Such plans would ideally take into account the implicit debt owed to the debtor country by creditor countries in the North for the wealth previously extracted without just compensation. Debt relief plans should include a plan for freeing the country of international debt and putting in place mechanisms henceforth to keep its international accounts in balance.

Our draft Statement of Conscience says the following:

The policies and practices of the International Monetary Fund, the World Trade Organization, and other international financial institutions advancing economic globalization must be reevaluated and realigned, such that the freedom and dignity of individuals in all countries must be the primary consideration in the formulation of economic policy. Existing debt of the poorest nations of the developing world needs to be forgiven by the World Bank and other international lending agencies.

What does this language mean? Should the present IMF-World Bank HIPC program be expanded and expedited? Should this program be replaced with an international bankruptcy court for poor countries -- debt relief without conditions? And if there are to be no conditions on debt relief, what should happen next? Will the former debtors simply be hung out to dry if they need to finance new roads, new factories, or the construction of alternative energy facilities? Or is there to be a new round of indebtedness and forgiveness? And if grants are to replace loans, where – given the past behavior of the rich nations of the world -- is the grant money to come from?

Is it enough to state our principles on this subject in general terms? Should we have some idea of whether this statement on debt relief is taking us in David Korten’s direction (eliminating World Bank and IMF lending functions and establishing many ways to wipe the slate clean of developing country debt) or toward the William Easterly’s approach (insisting on evidence of changed behavior before reducing debt) before we sign off on a denominational Statement of Conscience?

Elephant #7 concerns how poor populations in developing countries have been affected as their nations have been integrated into the world economy.

This is about cause and effect, and the interpretation of facts. I want to take some time on this issue because, to my mind at least, it concerns integrity in the presentation and characterization of evidence.

The Summary Statement of Conscience, contained in the boxed first paragraph of the Draft, says the following:

It [economic globalization] has resulted in marginalizing and impoverishing peoples of the developing world and people of color, as well as the destruction of the environment and the depletion of natural resources. [Summary]

Let’s consider that statement in the light of two studies, one done by the World Bank (which is essentially favorable to globalization), the other by The Center for Economic and Policy Research (reflecting a contrasting view.)

In your homework, there is a brief summary of the World Bank Report, Globalization, Growth and Poverty: Building an Inclusive World Economy (December 2001). It concludes that 24 developing countries that increased their integration into the world economy ending in the late 1990s achieved higher growth in incomes, longer life expectancy and better schooling. These countries, representing some 3 billion people, achieved an average 5 per cent growth rate in income in the 1990s as compared with 2 per cent in the industrialized countries. The World Bank report says that many of these countries have adopted domestic policies and institutions particularly well suited to global markets and have increased the share which international trade contributes to their national incomes. These countries, which include China, India, Hungary and Mexico, it says, are catching up with the rich countries.

However, according to the World Bank report, about 2 billion people live in countries that have not successfully integrated into the world economy. These include countries in sub-Saharan Africa, the Middle East and the former Soviet Union. The ratio of trade to national income in these countries has actually declined, most of these economies have contracted, poverty levels have risen, and educational levels have risen more slowly than in other developing countries. The study calls on developing countries to improve both their investment climates and their social protection for poor people. It asks rich countries to open their markets to exports from the developing countries, to cut agricultural subsidies, and to greatly increase foreign aid, particularly in the fields of health and education.

The Bank report uses the cases of China, India, Uganda, and Vietnam to illustrate the potential of global integration to reduce poverty. In Vietnam the income of the poor has risen dramatically, and the number of persons living in absolute poverty has been cut in half within a decade. Child labor has declined and school enrollment has increased.

But there is a striking divergence between the globalizers and the non-globalizers. The number of poor people is falling rapidly in the globalizers and rising in the rest of the developing world. Life expectancy and education is rising in the globalizers to levels close to those prevailing in the rich countries in 1960. And, while the data and methodological approaches used in individual studies has been questioned on occasion, the composite effect of all studies taken together indicates these reported trends can be relied upon.

So says the World Bank. But there is another view.

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research. Using essentially the same basic data as the Bank, he and three colleagues (Dean Baker, Egor Kraev, and Judy Chen) say something quite different. In their report, The Scorecard on Globalization: Twenty Years of Diminished Progress, [http://www.cepr. net/globalization/scorecard_0n_globalization.htm]
They say that the twenty years before globalization (1960 to 1980) were much better years for economic growth and social indicators than the subsequent twenty years (1980-2000) in which globalization has predominated. Rather than attempting to measure the impact of policy on the countries’ success, they do two other things. First, they examine how much improvement for the countries of the world as a whole took place in the first twenty-year period and compared with the second twenty-year period. They conclude that less progress was made in the second twenty- year period than in the first twenty-year period. The authors state [at page 4]:
… by almost every measure, the progress achieved in two decades of globalization has been considerably less than the progress achieved from 1960 to 1980. This finding does not prove that the policies associated with globalization are necessarily the cause of diminishing progress (or even backsliding) in low or middle income countries. Proponents of these policies could argue that other factors were responsible, and without the benefits of globalization, the deterioration in the performance of these countries would be even worse. While this is possible, it would then be necessary to identify what forces in the world economy led the period from 1980 to 2000 to be so much worse for low and middle-income countries than the period from 1960 to 1980. In any case, the data presented here certainly contradict any claims that the last two decades of the twentieth century were a time of extraordinary progress for people living in the less affluent countries – they were not.
Comparing the overall rate of progress over these two twenty-year periods, was the first thing that Weisbrot and his colleagues did. The second thing was to divide countries into five groups for each of several criteria such as GNP, life expectancy, and infant mortality. They placed the countries into five categories as of 1960, and then held the definitions of the categories constant over the period of forty years from 1960 to 2000. Thus, as you can see from Figure 1, the rate of growth of countries in the lowest category of $375-$1,121 per year actually has moved from positive to negative from the first twenty-year period to the second. But note also that the number of countries in this category declined from 30 to 17 as some of the countries in the lowest categories moved up the scale. The number of countries in the two highest categories doubled.
It strikes me that the World Bank and Dr. Weisbrot have looked at the same data and asked two quite different questions about it. Should we be trying to find out what the winners are doing right so others can emulate them? Or should we be asking whether the basic policies and systems now in place have to be radically revised because globalization isn’t solving the problems at the bottom end of the scale and the lagging countries in fact are going backward?
Given the finding that the worldwide growth rate has slowed down over the period of forty years (as it has in the United States as well), I am not sure that the pattern shown in Figure 1 is particularly remarkable. As some countries have moved up the scale, they leave the less fortunate and less effective behind. And, as the more fortunate countries move into higher categories, they tend to bring down the averages of their new locations because they usually start at the bottom of the next higher echelon. Note that Figure 1 shows the absolute number of countries in two highest categories doubled during the period under consideration.
Looking at the bottom group of countries, whose numbers have dwindled over time, and whose fortunes appear to have turned for the worse, I would like you to consider a metaphor. What happens when the more successful members of a community move out of the ghetto or off the Indian reservation to a lower-middle class community? They leave the less affluent behind and lower the average income of their former community. They may also lower the average income of the more prosperous community to which they are moving.
Advocates of globalization would say that it is unfair to blame globalization for the condition of the countries at the bottom -- because the countries that are stuck at the bottom are the very ones that have not installed the reforms necessary to enable them to participate effectively in the world economy. If you don’t do the right things, no wonder you are in trouble, they would say.
Thomas Carothers of Carnegie Endowment for Peace makes the point that the larger part of the poorest of the 40 to 50 poorest countries of the world are not only poor – they are chronically poor reformers as well. [“The New Aid,” Washington Post Op-ed, April 16, 2002.]
So how does it help matters for development institutions to say that policy reform is the key to the salvation of these countries at the bottom? And how is it legitimate for contrarians to blame the troubles of these countries on globalization, rather than on, say population explosion, topographical isolation, centuries-old ethnic strife, external warfare, deep-seated governance issues, chronic natural disasters, and/or a seemingly congenital inability to install policy reforms?
One can look at the events in the former Yugoslavia or Zimbabwe or Burma or Afghanistan, countries that have been sliding backwards over time, and ask whether their difficulties -- and the difficulties of countries like them -- can legitimately be ascribed to globalization.
Should we rhapsodize about the winners, and try to understand what China, India, Hungary, Mexico, and Uganda have done (or are supposed to have done) right? Should we urge every other country to follow the same pattern because these winners seem to be more or less successful? Or should we agonize about the losers -- wherever they are -- and ascribe their chronic difficulties to outside influences, such as globalization or colonialism or capitalism or elitism?
Or should we acknowledge that we not yet know how to fix the problems of the least developed countries at the bottom of the pile, that we simply have to try one thing and then another until something works - - and stop looking for someone to blame?
There is plenty of evidence to indicate that international trade and other dimensions of globalization create both winners and losers. The absence of effective safety nets in most of these countries means that the effects on the lives of individual losers can be devastating. However, I have yet to see a convincing case that the poor in developing countries are losers on balance, and the opposite well may be the case.
In summary, there does not appear to be a sound factual or analytical foundation for the summary statement that economic globalization, has resulted in marginalizing and impoverishing peoples of the developing world and people of color, with its strong implication that the number of losers exceeds the number of winners and economic globalization is somehow responsible for the circumstances of countries that maintain policies contrary to international trade. Given evidence that increasing international trade has been associated with improvements in the lives of many millions of people in some parts of the developing world, a statement of this kind seems intemperate and misleading, if not plainly untrue. That, as I see it, is what Amartya Sen seeks to convey in his mild way when he says “By claiming that the rich are getting richer and the poor are getting poorer, the critics of globalization have, often enough, chosen the wrong battleground.” [“A World of Extremes: Ten Theses on Globalization” (www.globalpolicy.org/globaliz/define/0717amrt.htm)] Would it be better to say that the gains from international trade should be more equitably shared with those who are adversely affected by it, both as a matter of fundamental fairness and in order to better equip such persons to adjust to a changing world?

Now we come to our Eighth Elephant on the table, using doctrine as definition. Here are a few passages from the draft Statement of Conscience:

From the Draft SOC section on “Defining Economic Globalization:”

The underlying theory of economic globalization is the unleashing of unregulated free market competition, driven by self-interest as measured by the accumulation of capital.

And next, from the section on “Benefits and Liabilities:”

The market forces of globalization are driven predominantly by economic imperatives set forth by the United States. Economic globalization is, therefore, increasingly perceived as America’s imperialist colonization.

And next:

The globalization ethic has allowed systematic exploitation of labor and the environment, coercive monopolistic pricing of goods and services, criminal evasion of local legal controls, growing debt among developing nations, widening gaps between economic classes, and devastation of traditional culture in societies marked by urbanization and exploitation.


And finally, from the concluding paragraph:

. . . we are challenged to bring a spirituality of resistance to privilege. Such a spirituality of resistance to globalization would have us turn from fierce individualism firing a self-serving globalization toward a relational sense of ourselves in a globally inclusive community of all living things. [Concluding paragraph]

I think it is fair to say that these characterizations do not waste a whole lot of time emphasizing the positive contributions of international trade, investment, and markets to living standards in the Third World. Nor do they dwell on the failings and limitations of government in Third World countries or elsewhere.

The intractable problems of the least developed countries – the combination of poorly functioning economies, poorly functioning governance structures, and a range of other serious internal difficulties -- seem to disappear in the face of a vision of the onrushing forces of capitalist greed and destruction. This singular threat is to be met through a spirituality of personal resistance and a vision of a different kind of society – yielding a kind of protestors’ credo. In the words of the Reverend Dr. Marilyn Sewell, whom we met in our second class:

We wonder what to do in the face of such insurmountable forces as these that rule our economic lives. Well, we can say no, and no, and no. We can say no, until they hear us. And we can say yes, here is a new way.

But after we say “No and no and no,” the intractable problems of the least developed countries are still there. And I think it is reasonable to ask, “In what new way?”

In our fifth class, Greg Palast (The Best Democracy Money Can Buy, page 74) introduced us to the southern Indian State of Kerala, “a laboratory for the humane development theories of Amartya Sen, winner of the 1998 Nobel Prize for Economics. “As the world’s most literate state, it earns its hard currency from the export of assistance to Gulf Nations.”

Another name for “export of assistance,” however, is “international trade in services.” Rich nations earn hard currency this way, too.

“In what new way?”

Joseph Stiglitz says [Globalization and Its Discontents, page 217]:

But there is not just one market model. There are striking differences between the Japanese version of the market system and the German, Swedish, and American versions. There are several countries with per capita income comparable to that of the United States, but where inequality is lower, poverty is less, and health and other aspects of living standards higher (at least in the judgment of those living there). While the market is at the center of both the Swedish and the American versions of capitalism, governments take quite different roles. In Sweden, the government takes on greater responsibilities for promoting social welfare; it continues to provide better public health, far better unemployment insurance, and far better retirement benefits than does the United States. Yet it is every bit as successful, even in terms of innovations associated with the “New Economy.” For many Americans, but not all, the American model has worked well; for most Swedes, the American model is viewed as unacceptable – they believe their model has served them well. For Asians, a variety of Asian models has worked well and this is true for Malaysia and Korea as well as China and Taiwan, even taking into account the global financial crisis.

International trade, it should be noted, has played a significant role in the growth of each of the countries cited by Stiglitz as successful models, be they considered capitalist, socialist, communist, or “mixed.”

“In what new way?”

Ralph Nader would withdraw the United States from NAFTA and the WTO. David Korten would eliminate the basic functions of the World Bank and the IMF on the grounds that these institutions do more harm than good as they unleash the unregulated forces of capitalism on the world..

With the Draft Statement of Conscience’ definition of globalization we come back to our first class in which “Beware of where a definition is leading you” was offered as a fundamental lesson. How comfortable should we be with the definition in the Draft Stastement of Conscience that incorporates the statement, “The underlying theory of globalization is the unleashing of unregulated free market competition, driven by self-interest as measured by the accumulation of capital”?

As we saw in that first class, there is not one but instead several theories of economic globalization. In Class 4, we discussed the classical theory of “comparative advantage” as we visited with Conservative Integrationists. And we saw that modifications and limitations of that theory have been suggested by Michael Porter of the Harvard Business School (The Competitive Advantage of Nations) as well as in the work of Dani Rodrik (Has Globalization Gone Too Far?), an economist of the Liberal Separatist Lite persuasion at the Kennedy School on the other side of the river. In this class, we have been introduced to the Hamilton/List/Mill theory of infant industry protection.
We also saw in our first class that there are various socio-political theories of globalization, described in the Oxford Companion to Politics as those of the “hyperglobalists,” the “transformationalists,” and the “skeptics.”
Books such as Globalization in Question (Paul Hirst and Grahame Thompson (London: Blackwell Publishers, Ltd. 1996, 1999) and The Follies of Globalization Theory (Justin Rosenberg, London: Verso, 2000), written by social scientists associated with the skeptical camp, take strong issue with the hyperglobalists and the transformationalists. So there is a big academic debate going on with respect to globalization theory.
Is a statement to the effect that the underlying theory of economic globalization is “the unleashing of unregulated free market competition” intellectually supportable when there appear to be quite a variety of contrasting theories from which to choose and they are presently the subject of vigorous academic debate? When we say “the underlying theory of economic globalization” and “the globalization ethic,” are we engaged in a free and responsible search for truth and meaning? Or are we propounding dogma?
Why not just go ahead and define the phenomenon (globalization) without reference to a theory?

Oxfam [at page 32 of Rigged Rules and Double Standards] says:

In the most general terms, “globalization” describes the growing interdependence of the countries of the world.

Is it necessary to say more than that? Well, Joseph Stiglitz goes a little bit further. He says [at page 10 of Globalization and its Discontents]:

Fundamentally, it is the closer integration of countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, capital, knowledge, and (to a lesser extent) people across borders.

And Amartya Sen goes a bit further still. In Bridges Between Trade and Sustainable Development, [quoted at page 335 in the Second Edition of When Corporations Rule the World] he says:

Opponents of globalization see it as a new folly, but it is neither particularly new nor, in general, a folly. It is largely an intensification of the processes of interaction involving travel, trade, migration, the dissemination of knowledge that have shaped the progress of the world for millennia. The polar opposite of globalization is persistent separatism and relentless autarchy.
That last statement brings forth an energetic disavowal from David Korten. Responding to this passage from Dr. Sen, Dr. Korten says [also at page 335 of the Second Edition of When Corporations Rule the World]:

When corporate globalists say globalization is beneficial and inevitable, most people nod their heads and say “of course.” When protesters say they are against globalization, they sound like xenophobic crazies to those who, like Sen, aren’t aware that globalization is a code word for global corporate rule at the expense of democracy, people and planet. [emphasis added] The resulting miscommunication is a dream come true for the corporate spindoctors.

If we define “globalization” as a “code word for global corporate rule at the expense of democracy, people, and planet,” does that turn a definition into a conclusion? And, when the definition section of our Draft Statement of Conscience says:

The underlying theory of economic globalization is the unleashing of unregulated free market competition, driven by self-interest as measured by the accumulation of capital . . .

. . . does that turn a definition into a conclusion as well?

Well, so much for Elephant #8, and my many rhetorical questions concerning definitions.

I would now like to make some comments about where the August Draft Statement of Conscience fits into our basic framework and then conclude with a few words about a thought experiment.

Let’s start on our final lap by going back to Exhibit 1 from our first class.


EXHIBIT 1


BASIC FRAMEWORK


LIBERAL INTEGRATIONIST CONSERVATIVE INTEGRATIONIST
Persona: James Wolfensohn Persona: Alan Greenspan
Message: Humanize Globalization Message: Efficiency Lifts All Boats
Book: The Lexus and the Olive Tree Book: The Competitive Advantage of (Thomas Friedman) Nations (Michael Porter)

LIBERAL SEPARATIST CONSERVATIVE SEPARATIST
Persona: Ralph Nader Persona: Pat Buchanan
Message: Protect Them Against Us Message: Protect Us Against Them
Book: When Corporations Rule the World Book: Death of the West
(David Korton) (Pat Buchanan) .

“Protect Them Against Us” is the message that seems to me most prominent in the content of the draft SOC. There is none of the explicit nationalist protectionism of the Conservative Separatists (e.g., Pat Buchanan), although some latent ambiguity concerning the protectionism issue may reside within the SOC’s treatment of trade agreements. Neither is there any of the “efficiency lifts all boats” rationale of the Conservative Integrationists Nor does the SOC combine the commitment to free trade with the emphasis on improved safety-nets that are the hallmarks of the Liberal Integrationists.

The Draft SOC certainly contains much of the negative rhetoric on globalization reminiscent of that we have heard from Liberal Separatist Heavies during this course:
At the same time, the Draft SOC does acknowledge that economic globalization (or at least “globalization” stripped of the adjective “economic”) has benefits -- even if it seems to take particular care to link them with liabilities:

Globalization brings with it us many benefits, but the fruits of globalization have been inequitably distributed and many of its costs have been disproportionately paid by the least able. As a community of faith, Unitarian Universalists are challenged to do what we can to reverse the devastation it has created without becoming part of a myopic backlash against it.

Although some people, especially those with access to capital, have enormously benefited from complex economic global transformation, many people have not and are becoming increasingly angry. . . . Often despite the world being more technologically integrated, many so-called “winners” feel increasingly isolated.

I think it is fair to say that the SOC gives faint praise to the “benefits” of economic globalization.

In our second class, I described the differences between the two versions of Liberal Separatism as follows:

What clearly marks the border between Liberal Separatism Heavy and Lite is the difference in their respective assessments of the desirability of external trade. The Heavies prefer to minimize external trade in favor of goods of national or local origin. The Lites view external trade as a potential boon to disadvantaged nations and their needy populations.

The Heavies are inclined to reject economic growth as a strategy for poverty eradication, citing environmental concerns and cultural values as key considerations, and seeing localization as a preferable alternative. . . The Lites see serious current problems with the current international trade regime, but believe lowering some kinds of barriers to trade can help to lift large numbers of people out of poverty.
The Draft SOC reflects none of the Liberal Separatist Lite optimism that properly managed trade is a positive social instrument for relieving poverty in the Third World. The most positive sentence in the SOC in this regard says:

The current expansion of economic growth has contributed mightily to the high standard of living enjoyed by many in the West and by others living and working elsewhere in the world.

But even that sentence conveys the sense that benefits accrue almost exclusively to people who are better off. There is no recognition of international trade’s role in poverty reduction in the Third World, past or potential. That particular lamp of social justice seems to have been hidden under a bushel labeled “others working and living elsewhere in the world.” The Draft’s evocation of a “spirituality of resistance to privilege” well fits the mold of the anti-globalization movement. The reluctance to give Liberal Separatist Lite pro-trade themes their due in the Draft SOC leads me to conclude that it is mostly a Liberal Separatist Heavy document, as shown in Exhibit 19 below.











EXHIBIT 19


LIBERAL SEPARATISTISM AND THE DRAFT SOC




On the basis of what I have observed in preparing and presenting this course, I would guess that the UUs who feel most passionately about the subject of economic globalization are likely to hold Liberal Separatist Heavy views. Many deeply committed persons identify with the anti-globalization movement, even if they may not have been directly involved in it. They share the concerns expressed by David Korten in When Corporations Rule the World, and are inspired by his vision of a better world based on greater local self-sufficiency. They see and feel the pain of the world’s poverty, which they attribute to unrestrained capitalism and corporate control. They recoil from the fearsome onrush of economic globalization described in William Greider’s One World Ready or Not, and do not want that kind of world. They are ready to work for very large changes in our institutions and our public policies. The views of such committed persons, I believe, are embedded in the August 2002 Draft Statement of Conscience.

I think that heart and soul of the August 2002 draft SOC lies largely outside of the shaded areas shown on Exhibit 19. The shaded areas on the chart represent the views of those who believe that economic globalization and our existing institutions possess the capacity to make the world a much better place, and that they should be our instruments of choice in dealing with the world’s poverty. The unshaded areas represent the views of those who see economic globalization – particularly imports from low-wage countries -- as destructive of workers’ lives and of the environment.

While those with Liberal Separatist Heavy views are probably among the most active and articulate among us, I would hazard a guess that a considerably larger number of UUs lean toward one of the positions shown in the shaded portions of the Exhibit 19. They are either integrationists of kind or another, or incline to the Separatist Lite position that rich nations should reduce their trade barriers to Third World countries, even as developing nations are permitted to retain their own. Some UUs in this shaded area doubtless represent a generation whose early hopes for a better world embraced the Breton Woods institutions -- and these UUs remain disposed to support these institutions. Some are quite ready to back a certain amount of moving and shaking of the status quo, but do not wish to go beyond the advice of persons and institutions they believe to be knowledgeable and reliable – the likes of Thomas Friedman of the New York Times, senior analysts at the Brookings Institution, Nobel Prize winners, Amartya Sen and Joseph Stiglitz , and the respected NGO, Oxfam. Still others are deeply committed to the principles of free trade as a matter of intellectual conviction or practical experience.

If I am anywhere near to the mark in my assessments, there is something of a disconnect between the terms of the draft SOC (largely Liberal Separatist Heavy, I think) and the larger UU constituency (largely Integrationists of all varieties and Liberal Separatist Lites, I would guess). All this, however, is quite speculative on my part. The basic questions are where you stand on economic globalization and why.

Well, this brings me full circle, and to my final comment on a thought experiment.

Last February I was transfixed by a parenthetical note in the Study/Action Issue Resource Guide on Economic Globalization suggesting that UUs should study globalization. It said we should:

Form a study circle to study globalization, using books such as When Corporations Rule the World by David Korten. (NOTE many UUs have said that this book is more appropriate than the one listed in previous versions, The Lexus and the Olive Tree. They believe that Korten’s book will lead to more creative thinking and reflection.) [emphasis added]

I thought, “How many UUs have even read both books?” “And why wouldn’t those who have done so challenge their fellow Unitarians also to read them both, so that they can size up for themselves the contrasting viewpoints each presents?

I took a ruler to the Study/Action Issue Resource Guide and found an overwhelming imbalance in favor of references reflecting what I now call “Liberal Separatist Heavy” viewpoints. I thought, “How could any but the most ideologically committed be comfortable with such a one-sided foundation document?” I thought, “Why not encourage Unitarian Universalists to understand and discuss all the main viewpoints, and then to make up their own minds about what our Statement of Conscience should say?”

I was told that the League of Women Voters had approached this subject in a remarkably balanced and fair-minded way. I checked out that report, and found that it was so.

I thought, “We Unitarian Universalists ought to be able to deal with economic globalization in a balanced and fair-minded way, too.”

This course has been my experiment with that thought.

APPENDIX

Economic Globalization

Draft Statement of Conscience (August 2002)

Unitarian Universalist Association of Congregations


Summary of the Statement of Conscience


Economic globalization is a complex and dynamic system of connections, facilitating the flow of information and technology and commerce. It is a process of transformation that accelerates the integration of social and economic activities around the world. It has resulted in the marginalizing and impoverishing of the peoples of the developing world and people of color, as well as the destruction of the environment and the depletion of natural resources. As people of faith with respect for the worth and dignity of all creatures and for the interdependent well of all existence, Unitarian Universalists are called upon to bring an ethic of care to our understanding of globalization and to do what we can to reverse the harm it causes without joining a myopic backlash against it. We are challenged to affirm our connection with all life and our responsibility for one another and the planet that sustains us.

Our world is one world:

its ways of wealth affect us all:

the way we spend, the way we share,

who are the rich, who stand or fall?

“Our World is One World” is a prophetic hymn written by Cecily Taylor in 1930. Its verses capture the essence of today’s debate over globalization. Globalization brings with it many benefits, but the fruits of globalization have been inequitably distributed and many of its costs have been disproportionately paid by the least able. As a community of faith, we are challenged to bring an ethic of care to our understanding of globalization and to do what we can to reverse the devastation it has created without becoming a part of a myopic backlash against it.

Defining Economic Globalization


Economic globalization is a complex and dynamic system of connections, facilitating the flow of information, technology, and commerce. It is also an ongoing process of transformation. The underlying theory of economic globalization is the unleashing of free-market competition, driven by self-interest, measured by the accumulation of capital. The fundamental ideas fueling globalization are the same as those that inspired primitive tribes thousands of years ago to trade something of value to another tribe. Unlike primitive tribal communities, modern communities have developed technological advances such as the Internet, which facilitate rapid market integration. By breaking through traditional, national, cultural, and social boundaries that have divided people throughout history, economic globalization has resulted in the near instantaneous exchange of information, the rush of commerce, the massive migration of peoples, thereby integrating economic and social activities around the world. Although the globalization of world markets has reaffirmed the intrinsic ways in which humanity is interconnected, injustice and inequities exist.

Benefits and Liabilities


The market forces of globalization are driven predominantly by economic imperatives set forth by the United States. Economic globalization is, therefore, increasingly perceived as America’s imperialist colonization. The current expansion of economic growth has contributed mightily to the high standard of living enjoyed by many in the West and by others living and working elsewhere in the world. Many Americans, accustomed to our fiercely individualistic and competitive culture, find it difficult to grasp and uncomfortable to bear the crude global realities of abject poverty, hunger, and cultural and environmental destruction.

Although some people, especially those with access to capital, have enormously benefited from complex economic global transformation, many people have not and are becoming increasingly angry. The globalization ethic has allowed systematic exploitation of labor and the environment, coercive monopolistic pricing of goods and services, criminal evasion of local legal controls, growing debt among developing nations, widening gaps between economic classes, and devastation of traditional culture in societies marked by urbanization and exploitation. Often, despite the world being more technologically integrated, many so-called “winners” feel increasingly isolated and disconnected from their immediate communities. Many react to these senses of change and isolation by turning to ideological and religious fundamentalism. Others become myopic and parochial. Still others turn to criminal behavior and international terror.

As people of faith, we have a responsibility to take a stand to make democracy work for all people, locally and globally. We are challenged to find ways to create political and economic democracy and to develop vital egalitarian community life, addressing the needs and fostering the participation and leadership of the disenfranchised.

We are challenged to develop a vision to uphold human rights and to help preserve the identity-based traditions that give meaning and continuity to people’s lives, while empowering them to do what is necessary to thrive in a system of economic globalization.

As Unitarian Universalists, we affirm and promote:

The policies The goal of world community with peace, liberty, and justice for all; and justice, equity and compassion in human relations. and practices of the International Monetary Fund, the World Trade Organization, and other financial institutions advancing globalizatin must be reevaluated and realigned, such that the freedom and dignity of individuals in all countries must be the primary consideration in the formulation of economic policy. Existing debt of the poorest nations of the developing world needs to be forgiven by the World Bank and other international lending agencies. We can become more effective advocates for increased funding for international economic, environmental, and humanitarian assistance as well as the expansion of educational opportunity. We need to work to ensure that intellectual property provisions of international trade agreements do not put profit making over the rights of people to medication, seed, and the ownership of their own cultural and genetic material.

As Unitarian Universalists, we are challenged to bring an ethic of care to our understanding of globalization. The transformation from ignorance to knowledge, from silence into speech, and speech into action, is not easy. If we are to see the world for the interconnected web it really is, we are challenged to build a spirituality of resistance to privilege. Such a spirituality of resistance would have us turn from fierce individualism firing a self-serving globalization toward a relational sense of ourselves in a globally inclusive community of all living things. The privilege now cultivated by unfettered global markets would be replaced by an ethic and practice of constraints serving the common good.
1 The International Organization for Standardization (ISO), a non-governmental organization established in 1947, is a worldwide federation of national standards bodies. ISO’s mission is to promote standardization of goods and services to facilitate the international exchange of goods and services. The U.S. member is the American National Standards Institute, a private non-profit organization with corporate, government, institutional, and international members. ISO’s work results in international agreements that are published as International Standards. ISO 14000 is a set of environmental management standards issued by the ISO for use by public and private organizations. “The industry-driven development of a set of comprehensive standards governing industry’s environmental performance is a critical piece of the enterprise.” (Dr. John Gibbons, Director of the Clinton White House Office of Technology Policy.) Responsible Care is an organization launched by the American Chemistry Council to respond to public concerns about the manufacture and use of chemicals. Its work includes the development of codes of management practices.

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