Civil society, globalization and sustainable development
AS we look back, not far beyond but over the last century, we find a discernible process of steady evolution from state-dominated development paradigms towards market-driven economies with private enterprise and knowledge as the core. Not only have societies undergone metamorphic transformations in their structural order and governance frameworks, the economies too have witnessed equally dramatic and profound changes spanning a wide array of feudalistic, mercantilist, colonial, communist, capitalist and socialist models.
Of course, globalization is not an entirely ‘new’ concept. Indeed, it stretches back centuries if we recall the vast trading empires built around the world. But the present day globalization is distinct enough. Aided by new markets, new tools, new actors, new rules, shrinking space, shrinking time and disappearing borders, this process is integrating, at an accelerated pace, markets and economies worldwide. Further, it is linking people’s lives more deeply, intensively, immediately, and as we witness today, more disturbingly than ever before.
Today’s globalization, driven by market expansion, is outpacing governance of these markets and their repercussions on people. While globalization has several positive, innovative, dynamic aspects, the overall achievements remain far below the expectations and promises of globalization. It has proceeded with extremely uneven distribution of benefits and costs across nations resulting in marginalization in some cases. The exclusion of countries and people from the benefits of globalization is further compounded by the emerging rules of the game for international economic transactions, which remain asymmetrical in terms of construct and inequitable in terms of outcome.
The past decade has shown increasing concentration of income, resources and wealth among people, corporations and countries. While per capita income increased in some of the developing countries, it either stagnated or regressed in most of them even as poverty remained stubbornly high and income distribution highly skewed. Average annual GDP growth for low income countries dropped to 2.4% in 1990-99 from 4.4% in 1980-90. Among 159 countries with available data, 50 had negative average annual growth in per capita GNP during 1990-98, and another 80 recorded positive growth rate of not more than 3%.
Widespread income poverty persists. Almost half the world’s population lives on less than $2 a day, and there are 1.5 billion people surviving on less than $1 a day. The number of least developed countries rose from 24 to 49 in the last 30 years.
Income inequality, within and across countries, is on the rise. The average income in the richest 20 countries is 37 times that in the poorest 20 – a gap that has doubled in the past 40 years. The combined wealth of the top 200 billionaires hit $1,135 billion in 1999 as against the combined income of $146 billion for the 582 million people in all the least developed countries.
FDI is central to the globalization process. However, the FDI boom has failed to be a global phenomenon. Of the worldwide FDI inflows, over 73% goes to only 10 countries while nearly 100 countries attract, on average, just $100 million of FDI each year.
Developed countries cornered nearly three-quarters of the global FDI inflows in 1999, while the share of developing countries declined from 38% in 1997 to 24% in 1999. The share of 48 least developed countries (LDCs) remains marginal at 0.5%. At the same time, total inflows to the developed countries were more than triple the amount attracted by the developing countries.
Per capita Official Development Assistance (ODA) received by all low and middle income countries declined from $11 in 1990 to $8 in 1998. ODA-GNP ratio for these countries dropped from 1.2% to 0.7% in the same period. Net long term capital flows to the developing countries fell from $344 million in 1997 to $280 million in 1999.
More importantly, globalization has been exerting pressures and squeezing the non-market activities so vital for human development. There is a fiscal squeeze constraining the provision of social services, an incentive squeeze harming the environment, and a time squeeze on caring for labour – the invisible heart of human development.
Globalization is also creating new threats to human security in both rich and poor countries. Dislocations from economic and corporate restructuring, financial volatility, and dismantling of the institutions of social protection, have meant greater insecurity in jobs and incomes. Often, economic crisis rapidly evolves into a social and indeed a human crisis, with sharp decline in real incomes for large segments of the population, rising unemployment, increase in the incidence of poverty, and a deterioration in health and educational services.
Chronic environmental degradation, today’s silent emergency, threatens people worldwide and under-cuts the livelihoods of at least half a billion people. A recent report on toxic waste trade and dumping has alluded to plans of some developed countries to dump 29 million tonnes of toxic wastes in 11 African countries. Growing travel and migration caused the spread of fatal diseases like HIV/AIDS taking a heavy toll on life expectancy, reversing the gains of previous decades.
While breakthroughs in technological frontiers offer enormous potential for human advance, privatization and concentration of technology have been stretched too far. Corporations define research agenda and tightly control their findings with patents, racing to lay claim to intellectual property under the rules set out in the TRIPS Agreement. On the one hand, traditional medicinal/herbal knowledge and resources of the developing countries are surreptitiously patented with the help of the same agreement. On the other, when millions of people are dying in Africa and elsewhere from HIV/AIDS, TRIPS-provisions are sought to restrain companies from supplying life-saving drugs at affordable prices. Thus, disadvantaged people and countries risk being pushed to the margin in this proprietary regime controlling the world’s knowledge and technology.
So far globalization has been a highly selective process. Developing countries have been pressured to liberalize trade, investment and financial flows. But that liberalizing zeal has been found wanting when it comes to opening up of developed country markets for exports from the developing world, or in the case of enhanced movement of natural persons, or in promoting unfettered access to knowledge. In general, reforms and liberalization in developing countries have failed to deliver their full benefits because they have not been matched by reforms in industrial countries.
There is an urgent need for ensuring effective greater market access for exports of the developing countries. This is needed as the Uruguay Round of negotiations failed to result in the anticipated increased market access for exports from developing and least developed countries. Low average tariffs in the developed world conceal high frequency of tariff peaks and tariff escalations, especially on products of export interest to the developing countries.
Additionally, there are non-tariff barriers as well as anti-dumping and anti-subsidy actions targeted towards exports from the developing counties. Our efforts to augment agricultural exports are severely hit because of unrealistic and unduly stringent sanitary and phytosanitary (SPS) measures adopted by the industrialized countries. In fact, the use of SPS measures by developed countries has registered a sharp increase in recent years. By October 2000, US had notified 341 such measures to the WTO, followed by EU with 170.
Another disturbing fact is the proliferation of free trade areas and regional trading arrangements (RTAs) and the resultant disadvantages faced by non-member exporters in terms of trade diversion costs. It is a matter of serious concern because as of now, there are more RTAs notified to the WTO than its total membership, and nearly 60% of global trade is estimated to be conducted within these RTAs.
Clearly, there is a dichotomy between the objectives of multilateral trade liberalization and the preferential treatments allowed under RTAs. We feel, it is time for a re-look at Article XXIV of GATT, which permits the establishment of RTAs. Also, preferential tariffs should be integrated with the MFN tariffs within a specified time-frame.
There seems to be a growing opinion in the developed world that we must agree to a ‘New Round’ in the WTO negotiations, perhaps at the Doha Ministerial. There are serious concerns about this issue among developing nations. As a result of this New Round momentum, will the mandated agenda fixed for discussion at the Doha Round be shelved or pale into significance – particularly the mandated agenda on agriculture and services?
Will the expected reduction of subsidies to agriculture in the developed world lose its focus in this milieu? Will such an unforeseen event mean another postponement of market access for agricultural products from developing countries to the developed? What will happen to the major interest of developing countries with respect to services and the possibility of human resource movement across borders in the area of trade in services? What will happen to the implementation issues which have been gnawing at the WTO system without reaching fruition? What will happen to the mandated reviews? In other words, would the New Round debate drown the long expected benefits from the WTO system for developing nations in the form of market access in numerous areas?
There is concern that the New Round will bring into focus the social clause and labour issues directly into WTO. The environment too could become a critical part of the rule based global trading. The MAI (Multilateral Agreement in Investment) could well be resuscitated within the WTO framework and competition policy, on which developed countries themselves have deep differences (GE-Honeywell merger case), may become a burning issue. Our concern is that instead of completing the unfinished agenda of the Uruguay Round, the New Round could generate new contentious issues and prolonged debates keeping the hope of major gains from globalization for developing countries in abeyance.
In the Uruguay Round itself, after seven years of implementation of WTO agreements, market access to developing country products in agriculture and textiles remain well below expectations. On the other hand, tariff reductions have been conducted strongly in many developing countries (India’s tariff reduction was the largest). Developing countries have followed the discipline of the Uruguay Round in areas of subsidies, TRIMS and TRIPS, narrowing domestic policy choices, despite the mandate of Uruguay Round negotiations to offer favourable treatment to developing countries and that they would not be expected to offer reciprocity. These concerns are leading to the view in developing countries that issues of the Uruguay Round Agreement be addressed first before venturing into another round.
It is these concerns which have led the civil societies in developing nations and businesses to resist the talk of a ‘new round’ and insist on getting down to the business of mandated reviews and other immediate and incomplete work of the current round.
The downside of globalization illustrates the formidable challenge facing the globalization process to find the rules and institutions for stronger governance – at local, national, regional and global levels. The idea is not to stop the expansion of global markets, but to design a fresh approach to collective action in order to seize the opportunities offered by global markets and competition, and translate them more equitably into all-round advance for the maximum number of world population.
It is necessary to ensure that globalization works for people. We have to endeavour to manage and have globalization with:
* Ethics – less violation of human rights, not more.
* Equity – less disparity within and between nations, not more.
* Inclusion – less marginalization of people and countries, not more.
* Human security – less instability of societies and less vulnerability of people, not more.
* Sustainability – less environmental destruction, not more.
* Development – less poverty and deprivation, not more.
However, the emergence of such a structure of governance is not possible without a collaborative approach with shared values and shared commitments. It is essential that government, private sector and the civil society form a functional coalition across geographical borders to activate and move public policy in ways that meet the common goals and aspirations of a global citizenry.
And here comes the catalytic role and contribution of the civil society in forging an effective alliance to reorient the processes, mechanisms and policies that underpin the functioning of the world economy, to realize more equitable returns and a virtuous integration of developing countries into the global system, and thus avoid a more severe backlash against globalization.
This is already happening. The debris of destruction by wars and the fears about survival wrought by economic calamities was also the birth-place for nobler versions of social thought and more sustainable models of economic development. Institutional frameworks emerged alongside to guide and govern to the extent possible, global interactions between societies and economies.
A closer look at the process of evolution which sometimes took the path of revolution, especially in the social sphere, reveals the significant role that civil societies have played. A key instrument that has helped create the environment for change is communication. Civil societies have tended to become more important with greater advancements in communication.
Communication has not only been the tool for information collection and dissemination, but also the engine of knowledge and the platform for interactive decision making processes. Civil societies have been instrumental in this process. The timeliness with which civil societies have been able to foresee and respond to impending issues have no doubt helped ward off major frictions in economies and societies as well as moderate or mitigate subsequent impacts.
On the economic front, it is hard to disassociate the almost independent and catalytic role played by inventions and commercialization of technologies. Labour movement and environment related activities have been other key areas of civil society action which had considerable impact on societies and economies.
The process of evolution is far from being complete. Globally, democracy is becoming the mode of governance thus assigning greater role for civil societies in societal decision making processes. With the civil societies themselves acquiring increasingly global character, they are becoming even more important.
Indeed, civil society organizations have been and continue to be at the centre of the struggle for democracy in many parts of the world. Civil societies have also become the vehicle for social development activities in many countries. The North South Institute has estimated that there are more than 60,000 civil society organizations in Sao Paulo and Rio de Janeiro alone. India, which has a long tradition and history of citizens’ groups, is estimated to have two million citizens’ organizations. Canada is credited with more than a million civil society organizations. This trend is no doubt sweeping the globe. The analysts describe the emergence of a ‘global civil society’ in the last two decades as a movement of men and women, groups and individuals getting together to do things by themselves to change the societies they live in.
As we have seen, globalization has become a key area of concern in several areas of life. The resistance groups that showed up at Seattle and elsewhere may or may not fully represent the underlying skepticism about globalization. Yet, it is important to recognize the global reflexivity that now clamours for greater transparency as well as democracy in the processes that go with globalization. It is equally important to take note of the fact that neither the impact of globalization nor the capacity of civil societies to respond to the challenges of globalization are evenly spread all over the world. No wonder there is little unanimity in the response of civil societies around the world. Does this mean that there is a problem with the approach to globalization defined by one size fits all?
Nevertheless, organized civil societies have assumed leading roles in meeting the challenges of globalization and fostering sustainable development. As the magnitude of crises widened, many micro-level mobilization and civil society intervention started emerging in increasing number and with growing impact. For example, there is the Developing Countries Farm Radio Network which has been spreading useful messages on agriculture, food preservation and public health for 20 years. Or, take the instance of a small civil society organization operating in the villages of Southern Morocco, which has put the local carpet weavers on the Web and enabled them to get higher prices.
Micro-level success stories of poverty alleviation abound in South Asia, where the participation of civil society has repeatedly shown that community self-governance invariably led to improved utilization and management of resources.
The time has come not only for recognizing weaknesses in the current process of globalization but adopting an integrated policy framework to ensure that the benefits of globalization reach all parts of the world and all social groups. Global interdependence built on global diversity is certainly more sustainable.
The most important challenge is to factor in the differentials in the economic capacity and social compulsions of all the countries participating in the global process. Issues like food and livelihood security are of deep concern to large agrarian economies like India. Elimination of distortions in agricultural production, prices and trade is crucial for the articulation of the natural comparative advantages (Ricardian comparative advantage) of developing nations. In fact, there are great differences even in the capacity of civil societies of developed and developing countries. Domestic labour in developed countries is more successful in resisting and curtailing the developing country exports. The developed countries, being the home of transnational corporations that account for nearly two thirds of the global trade, are also increasingly becoming the major beneficiaries of investment-led international trade.
The large increase in the turnover of global capital especially in foreign exchange markets – the daily transactions of which is estimated to be around $1.5 trillion – give the developed countries enormous power to influence the developing economies in either way. The excessive financial power that the global financial systems offer to the developed countries make the developing countries even more vulnerable. How will the global system insulate developing economies from financial crises originating from external pressures? Equally strong are the reservations expressed by the civil societies in some parts of the developing world about the Structural Adjustment Programmes and the Washington Consensus on precautionary funds.
Globalization will be good for both developed and developing countries only if it lives up to it promise of economic efficiency and international division of labour. In order to achieve the desired results, it will be imperative to look beyond mere capital mobility. Labour mobility is integral to the attainment of efficient international division of labour.
Unequal partnerships and benefits of the globalization process are no doubt the major causes of growing skepticism against globalization and the global frameworks governing it. What civil societies have managed to do is to highlight the fears and concerns. These span both exclusion and vulnerability issues leading some of them to adopt a rejectionist approach.
The challenge before government and business is not to fall prey to a rejectionist approach with regard to the concerns expressed by civil societies but to develop global systems and frameworks that not merely allay the fears but address the issues with earnestness and sincerity. Of course, the responsibility falls on international institutions and governments that are part of it to not only make clear espousals of their strategies for globalization but also involve and sensitize civil societies in the process and outcomes of their global initiatives. The focus needs to be on making them a partner in the process and synergizing their energies for creating a proactive and positive environment for sustainable development.
What are the immediate issues which require the collective wisdom of the civil societies, business and governments to sustainable development in the context of globalization?
One of the major issues confounding rapid globalization is the sharp reduction in import tariffs in developing nations which are burdened with high cost local industries employing millions of workers. If the WTO-led globalization process results in import duty reductions that are not compatible with the domestic cost structures, then enterprises in the developing countries may have no option but to close down. The ramifications will be far more serious in those countries where there are no social security systems to fall back upon. The resulting instability in the political economy will have serious repercussion on the sustainable development of these countries. Civil societies in these countries will come under great stress and may be forced to react vehemently in such a scenario. Both globalization and sustainable development would be at risk.
Enterprises in developing countries also face considerable external cost disadvantages on many counts. Very often cost of production remains high due to incapacity of the reform process to unshackle all the avoidable cost burdens. Developing countries, in general, have inflexible labour markets. India, for one has a strong trade union movement in the organized sector and our labour laws do not permit downsizing of the labour force in response to market forces. Also, domestic enterprises often pay double or triple the price for electricity and bear double the cost of borrowing than their counterparts in the developed world.
Chronic deficiencies in infrastructure and high user charges for ports and roads add to production costs. Transaction costs of doing business (rent seeking legal structures) add heavily to the uncompetitiveness of local industries vis-a-vis imports. Above all, they have to contend with the phenomena of incomplete (not just imperfect) markets. Rapid import duty reduction in an era of globalization in the midst of these acute cost disadvantages can threaten sustainable development and provoke civil society structures to go on a conflicting path.
Abigger issue that prevents the growth of competitive enterprises in the developing countries is unregulated foreign investment. Foreign investors with deeper pockets have occasionally adopted predatory pricing tactics to stymie competition from domestic enterprises. Though the foreign investors incur heavy initial losses and bear them with the help of their deep global pockets, the ultimate result is monopoly price situation due to the closure of domestic competition. Furthermore, ‘transfer pricing’ behaviour by transnationals has also raised the hackles of civil society organizations in developing nations.
The biggest competitive resource that the developing countries possess is their human capital. India is endowed with a rich pool of knowledge workers in a world that is driven more and more by the knowledge industries. True globalization and sustainable development cannot be achieved unless there is global labour mobility, particularly of knowledge and service workers, side by side with free mobility of goods, physical capital and finance capital. In view of the ‘graying’ of a number of European nations with the proportion of older population climbing up and up, movement of labour and professionals will have to be liberalized to sustain the current production level as well as the old-age pension system. This is an issue which requires deeper discourse in global fora.
Undoubtedly, global markets, global technology, global ideas and global solidarity have the potential of enriching the lives of people everywhere. In practice, however, projections of gains from globalization in terms of faster growth, greater employment opportunities and poverty alleviation have proved overly optimistic. It is now clear that the difficulties of harnessing liberalization and globalization for the benefit of all have been underestimated.
And for developing countries, as the UN High Commissioner for Refugees, Sadako Ogata and UNCTAD Secretary General Rubens Ricupero suggest, globalization is not a finished historic product, a fait accompli imposed on us by forces beyond our control, immutable like the heavenly systems; it is rather a ‘work in progress’, an opera aperta, a process in which we are at the same time both actors and subjects.
We must strive to shape the process of globalization in accordance with our development needs at a pace and in line with our own strengths and shortcomings. This process will, of necessity, go hand in hand with the struggle to integrate ourselves successfully into a transformed and more open economic system. But this does not certainly mean the kind of unqualified, unreserved and over-hasty integration into the international trade and financial systems, which has already created occasional confusion and inordinate pain in many parts of the world. In other words, the real challenge is the quality not the quantity and pace of integration into the global economy.
As I have pointed out earlier, this requires good governance built on people’s empowerment. The civil society which has a massive responsibility and a stimulating role to play in the entire process, could build the momentum through, inter alia, spreading and sharing knowledge that inspires people to act; arguing and advocating for global and national policies that help the marginalized help themselves; working with disempowered communities to demonstrate and develop participatory national resource management and regeneration; and convincing the affluent and privileged (countries as well as sections of societies) to respect the disadvantaged, their survival strategies, their own values, resources, technologies, management systems and innate entrepreneurial capabilities spread across gender.
It is only through such imaginative initiatives, active participation and sustained efforts, that it would be possible for globalization to produce widely acceptable results which must include not exclude, integrate not marginalize, and create life that is rich in all its diversity.
* The momentum of opinion in developed countries in favour of a New Round must be tempered by the deep concerns of developing countries, many of whom opine that protracted New Round discussions will lead to the side-tracking of those very rule-based trading measures which could stimulate developing country trade.
* Chambers of Commerce and Industry are an integral part of the civil society matrix and have a crucial role to play in the development of balanced approaches to globalization. Inter-actions between civil societies and chambers of commerce must be stimulated so as to facilitate the emergence of commonly agreed perspectives in dealing with pressing local priorities and the essential requirements of rule based global trading.
* A thorough study must be conducted on the movement of natural persons and the potential for accelerating trade in services and to recommend strategies for progressive liberalization in this domain (on the movement of knowledge workers). The strategies must encompass access to employment and education.
* Investment flows into developing countries will have to be stepped up to enable them to participate in the global trade as equal partners. It will be necessary to create mechanisms to help enterprises in the developing countries to attract larger volume of investments and become globally competitive – this, within their own realities and national priorities.
* Local enterprises, particularly the small and medium units in developing countries, are often unable to cope with the pressures of globalization within the framework of slow progress of internal reforms and sudden and sharp reduction in import tariffs. It will be important to develop programmes that would smoothen the process of transition, as also minimize societal impact arising out of the local distortions due to the pressures of WTO led trade liberalization.
* The global intellectual property regime should be reviewed both to protect the traditional knowledge base of developing countries but equally to ensure that technical barriers are not created for developing countries in utilizing the global knowledge base for addressing local problems such as HIV/AIDS that loom large in many developing countries.
* Co-authored by M.A.J. Jeyaseelan, Senior Secretary, FICCI.