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Review of On the Edge: Living with Global Capitalism, edited by Will Hutton and Anthony Giddens, 2000. Arvind
Panagariya
On the Edge offers a dozen essays on
“global capitalism”, ranging from insightful and incisive to
ill-conceived and ill-argued. The
authors include sociologists, international finance experts, policy
analysts and journalists from the rich countries and a well-known activist
from India. With rare
exceptions, the common message running through the essays is that
globalisation has been a mixed blessing and that it must be tamed along
one or more dimensions. This
view is presented as a superior alternative to the neo-liberal view which
in its unvarnished and crude version always advocates more, not less, open
markets.
The easiest case against globally free
markets is to be found in the area of short-term capital mobility.
The Asian financial crisis indelibly etched in our minds the
qualifications to fully free capital flows that must be considered as also
the need for prudent monitoring, regulation and capital controls in the
course of shifting to capital account convertibility.
The most forceful reminder of this lesson has come from none other
than Jagdish Bhagwati, the foremost modern-day advocate of free trade, in
his much cited article in the May-June 1997 issue of Foreign Affairs.
Contrary to the suggestion by the editors of this volume in the
concluding chapter, this article was not a "concession" by
Bhagwati; instead it was a pointed reminder that, despite similarities,
free trade in widgets and life insurance policies was not the same as free
flow of short-term capital which inevitably gave rise to costly financial
crises.
Not surprisingly, coming from the left, the
influential journalist Robert Kuttner expresses agreement with this view.
More interestingly, even Paul Volcker, a former Chairman of the
Board of Governors of the US Federal Reserve System, admits the role for
“limited efforts to restrain inflows” but argues sensibly that if a
country wishes to participate in open markets for goods and services, it
cannot opt out of financial markets.
Citing the examples of Argentina and Mexico, he favours encouraging
the participation of foreign banks in the domestic banking system as the
key solution. Being large and
diversified, these banks can better shelter the financial systems of
smaller countries against the volatility of global capital markets. When we move from capital flows to free trade, however,
the anti-globalisation critics are on a more shaky ground.
Jeff Faux and Larry Mishel contend that free trade hurts the poor.
While the evidence of increased inequality in the rich countries
during the last two decades is not contentious, its cause is.
The authors argue simplistically that the reallocation of resources
induced by globalisation necessarily hurts the groups at the bottom of the
income distribution. They
ignore much of the recent analysis by international economists which
suggest strongly that, at worst, trade accounts only for a small fraction
of the increased inequality (Paul Krugman) or that it is likely even to
have moderated the decline in real wages caused by other factors
(Bhagwati). It is odd that Faux and Mishel do not even touch on what
most economists regard as the leading explanation of the increased
inequality: technical change that has shifted demand from unskilled to
skilled labour. Even if the
United States had been entirely closed to trade in the 1980s and 1990s,
the reduced demand for unskilled labour would have produced a substantial
part of the income inequality we have observed. Yet another issue that has evoked much passion, especially
in developing countries, is the globalisation of intellectual property
rights (IPRs) under the WTO Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPs).
This agreement requires all WTO members to establish a twenty-year
patent regime for all innovations by the year 2005.
As some of my own work has argued, since innovators are
concentrated in developed countries, this global patents system will
result in substantial income transfers from developing to developed
countries. In her essay “World on the Edge,” from which the book
derives its title, activist Vandana Shiva notes correctly that the TRIPs
Agreement recognizes IPRs as private but not common rights.
As a result, while developed country corporations can reap higher
returns on their innovations everywhere, villagers, farmers and tribes who
generate knowledge and innovations as intellectual commons are unable to
do the same. Instead, with
minor modifications, their ideas are “pirated” and patented by
corporations. On the question of environment, which she also discusses,
Shiva takes a more extreme position.
She deplores globalisation for causing increased pollution (“The
average chicken travels 2,000 km before being eaten”) and for turning
developing countries into the dumping ground for developed country
pollution (“Asia remains the largest dumping ground for West’s
waste.”) But she does not
back these assertions by compelling economic analysis.
What if geographical specialization reduces the pollution generated
prior to the chickens being shipped so that net pollution declines even as
they travel 2,000 miles? And even if pollution does rise, what if the social benefit
from lower chicken prices exceeds the social cost of pollution? The journalist Polly Toynbee offers a fascinating
discussion of “cultural globalisation”.
She makes no apologies if globalisation leads everyone around the
world to drink Coca Cola or watch Basic Instinct on the video.
If people enjoy the drink and the movie, why should they be
deprived of them? She also
sees cultural globalisation as a means of advancing women’s rights:
“Cultural globalization means global feminism, freeing women
everywhere.” But, like other authors in the volume, Toynbee is quick to
draw a line. She sees much
danger in the press and broadcasting being globally controlled by a small
number of individuals. She is
particularly perturbed that Rupert Murdoch controls 41 percent of the
total newspaper readership in Great Britain and uses this power to promote
his political ideas. This would seem to be a legitimate concern and one with even
more serious implications for democratic developing countries, which often
lack the institutions to develop their own media. The sociologist Arlie Hochschild analyses the provocative
phenomenon of global care chains whereby Third World mothers migrate to
take care of the First World children, leaving their own children in the
care of other Third World mothers. She
views this critically, arguing that the poor migrant mother’s “child
may be getting less motherly care than the First World child”, and
favours policies that will discourage such migration. Arguably, this is wrong diagnosis and, hence, wrong
prescription. It is entirely
possible that while the migrant mother brings her loving care to the First
World children, not available from their super-busy mom, her own children
back home are reared under the loving care of her extended family that is
so common in traditional cultures. Moreover,
even when this is not true, one must ask whether the educational and other
opportunities opened up by the migrant mother’s earnings do not outweigh
the cost of the children being reared by someone else. The volume thus offers much food for thought. The icing on
the cake is the introductory chapter, written in a debating format, by the
editors. Here we have two
acute minds, engaged in a lively dialogue.
The reader will surely feel pleasure, while being instructed, at
being given the chance to sit in on the conversation. Times Higher Education Supplement, September 29, 2000, p. 30. |
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